Contracts and sales Flashcards
Unilateral contract
Offer expressly states it can be accepted only by performing.
Offers made to the public.
Merchant offer
Offer to keep the offer open only up to three months without consideration. Has to be between merchants.
Party must know of offer to accept- crossing offers and rewards
An offer must know of the offer to accept it. If they act without knowledge and learn of the offer later, their acts were not an acceptance.
What if a merchant’s confirmatory memo contains additional terms/
Despite the fact that there is already a K at the same time the memo is sent, the memo is put through the battle of forms provision, such as the material alteration test, as it were an acceptance.
Subcontractor bids: Watch for detrimental reliance and unilateral mistake
Whenever you see a subcontractor’s bid in a question, look for: (1) detrimental reliance by the general contractor, which would make the bid irrevocable, and (2) unilateral mistake by the sub- contractor. Unilateral mistakes arise most com-
monly from a mechanical error in computation. If a subcontractor’s bid was based on a mistake, consider whether the general should have known and the contract may be avoided due to unilateral
mistake.
Contract need only be signed by one party to be enforceable- but it must be the right party
The writing must be signed by the party being sued.
Which circumstances take a goods K out of the Statute of Frauds: SWAP
A mnemonic for remembering when a writing signed by the party to be charged is not required for a sale of goods, even if for $500 or more, is SWAP:
Specially made goods
Written confirmation by a merchant (confirmatory memo)
Admission in court, or
Performance
Destruction of subject matter of construction contract: Build versus
repair or remodel
Destruction of: New building under construction- contractor is still obligated to build and is entitled only contract
price Building being repaired or remodeled-contract discharged and contractor entitled to restitution
for value of work done prior to destruction
Minor breach does not discharge duty to perform
Not all breaches are equal in their effects. Re- member that a minor breach allows the aggrieved party to recover damages, but they still must per- form under the contract. If the breach is a material
one, the aggrieved party need not perform.
Anticipatory repudiation
There must be a clear indication that the other party is unwilling or unable to perform.
Right to demand assurences
Arises when something makes a party nervous that the other will not perform
Vesting of third-party
Third party beneficiaries vests their rights by suing.
- asserting to the K
- materially changing position in justifiable reliance on the promise
Effect of paying the assigning party instead of the assignee
An assignment of a right to payment or performance comes with peril for the person obligated. The obligor doesn’t necessarily know whether an assignment was gratuitous or for value. Suppose the obligor, after notice of the assignment, renders performance to or pays the assignor. If the assignment was revocable, it’s revoked by the assignor’s acceptance of the performance or payment, and the obligor is discharged. But, if the assignment was for value, the obligor isn’t discharged by his performance or payment to the assignor. The obligor remains liable to the assignee.
Quasi-K
One party is unjustly enriched at the expense of the other party, so that the enriched party must pay restitution to the other party equal to the unjust enrichment.
Revocation by Offeror- Limitations on Power to Terminate
Option K, merchant’s firm offer, detrimental reliance, beginning performance on unilateral K
Warranty of Title
Promises title is good, transfer rightful, no liens or encumbrances.
Arises by sale of goods by whom any seller.
Disclaimer can be made by specific language or circumstances showing seller does not claim title
Warranty of merchantability
Promise fit for ordinary purposes. It arises by sale of goods of the kind regularly sold by the merchant. Made by the merchant only.
By disclaimer mentioning “merchantability”.
Warranty of Fitness for a particular Purpose
Promise that the thing is fit for the buyer’s particular purpose. Arises by sale of goods where seller has reason to know of particular purpose and of buyer’s reliance on seller to choose suitable goods. Made by any seller.
Disclaimer can be made by conspicuous written disclaimer.
Express warranty
Arises by affirmation of fact, promise, description, model or sample. Made by any seller.
Extremely difficult to disclaim.
What happens if the seller provide notice that the nonconforming goods were shipped as an accommodation
The shipment is a counteroffer, which buyer may accept or reject.
How does one determine third-party beneficiary status
- Specifically identified in the K
- to receive performance directly from the promisor
- in some relationship with the promisee to indicate an intent to benefit
Unilateral mistake
K is voidable if non mistaken party knew or should have known of mistake
Statute of Frauds- certain Ks must be in writing, signed by the party to chared
Marriage—when marriage is consideration for promise. Example: “If you marry my son, I will buy you a car”
Year—promises that cannot be performed within one year from date of contract
Land—promises creating interests in land. Examples: land sales, leases, easements, fixtures, mineral rights, mortgages
Executors and administrators—promises to pay estate debts from own funds
Goods—contracts for sale of goods for a price of $500 or more. Exceptions: specially manufactured goods, goods accepted or paid for
Suretyship—promise to answer for debt of another
Mutual mistake–
contract is voidable by adversely affected party if:
Mistake concerns basic assumption on which contract was made;
Mistake has material effect; and
Party seeking avoidance did not assume risk
Unconscionable K
Indication of any inequality in bargaining power or any other factors indicative of hardship or oppression exerted against one part.
Frustration of purpose
Requires that, at the time of entering into the K, the parties did not reasonably forese the occurrence of the act or event leading to the frustration.
Mailbox rules
Acceptance by mail creates a K at the moment of posting, properly addressed and stamped, unless the offer stipulates that acceptance is not effective until received, or an option K is involved. IF the offer sends an acceptance and then rejects the offer, the mailbox rule applies; a K is created upon dispatch of the acceptance.
Liquidated damages clause
Enforceable if: 1) damages are difficult to ascertain at the time of the making of the K, and 2) the damages are a reasonable forecast of compensatory damages.
Is a media communication an offer
The broader the communicating media, e.g., publications, the more likely it is that the courts will view the communication as merely the solicitation of an offer. An advertisement in a trade journal generally is construed as an invitation to submit offers, not an offer itself. It is an announcement of the price at which the seller is willing to receive offers.
When can damages may be stipulated in the K
The parties to a K may stipulate that damages are to be paid in the event of a breach if i) damages are difficult to ascertain at the time the contract is formed, and ii) the amount agreed on is a reasonable forecast of compensatory damages in the case of the breach.
Breach of express warranty
Any affirmation of fact or promise made by the seller to the buyer creates an express warranty if the statement is part of the basis of the bargain. For the statement to be a part of the basis of the bargain, it need come at such a time that the buyer could have relied on it when entering into the contract. The buyer does not need to prove that they actually did rely, although the seller may negate the warranty by proving that the buyer did not rely. It is not necessary that the seller intended the affirmation of fact to create a warranty or used the warranty.
A statement relating merely to the value of the goods, or a statement purporting to be only the seller’s opinion or commendation of the goods, does not create an express warranty.
Warranty of fitness for particular purpose
A warranty will be implied in a contract for the sale of goods whenever (1) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment to select suitable goods; and (2) the buyer in fact relies on the seller’s skill or judgment.
Disclaimer of warranty for a particular use
When the buyer, before entering into the contract, has examined the goods as fully as they desire (or has refused to examine), there is no warranty as to defects that a reasonable examination would have revealed.
Warranty of merchantability
merchant who deals in goods of the kind sold there is a warranty that the goods are merchantable. “Merchantable” here means that the goods would pass without objection in the trade under the contract description and that they are fit for the ordinary purpose for which such goods are used. A merchant for purposes of this warranty must be one who deals in goods of the kind sold.
Novation
A novation arises when the parties enter into an agreement to substitute a third party for one of the parties in a contract, releasing the party who was substituted. All parties must agree to the substitution.
Warranty damages
Warranty damages are typically the value of the goods delivered and value of the goods had they been as promised, plus incidental and consequential damages.
Divisible K
If a party performs one of the units of a divisible contract, it is entitled to the agreed-on equivalent for that unit even if it fails to perform the other units. A court may find a contract divisible when: (1) the performance of each party is divided into two or more parts under the contract; (2) the number of parts due from each party is the same; and (3) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party. Here, each lobby was distinctive to the resort it was located at, and each lobby had a separate price that reflected the distinctive features of that particular lobby.
Delegation of a K
As long as the duty under the contract is not personal it can be delegated. However, when a duty is delegated to a delegate, the delegator remains liable should the delegate fail to perform.
Parol evidence rule
Contractual terms that are set forth in a writing intended as a final expression of the parties’ agreement cannot be contradict by evidence of any prior agreement or contemporaneous oral agreement. Although this parol evidence rule prohibits contradiction the writing, the terms of the writing may be explained or supplemented by consistent additional terms, unless the court finds from all the circumstances that the writing was intended as complete and exclusive statement of the parties’ agreement. To determine whether the parties intended the writing to be complete and exclusive statement of the agreement, it must be determined whether parties situated as were the parties t this contract would naturally and normally include the extrinsic matter in the writing.
Independent contractor liability and what is an agent
The general rule is that a principal is not liable for tortious acts of an agent who is an independent contractor. An agent is likely to be an independent contractor if she: i) is engaged in a distinct business of her own; ii) controls the manner and method by which she performs her tasks; iii) is hired to do a particular job; iv) supplies her own tools and materials; v) is paid a given amount for the job; and vi) hired to do a short-term, specific job.
A principal can be held liable for the tortious acts of an independent contractor if:
i) the independent contractor is engaged in inherently dangerous activities; or ii) the principal has a duty that is nondelegable on public policy grounds . Also, a principal can be held liable for his own negligence in selecting an incompetent independent contractor.
A breaching K is minor if-
the non breaching party gets the substantial benefit of the bargain, despite the other party’s defective performance. A minor breach does not relieve the non breaching party of her duty to perform under the K, ahtough she will be entitled to remedial measures for the breach.
F.O.B
he term “F.O.B.” is a delivery term under the UCC, which governs the contract here because it is a contract for the sale of goods. That term means “free on board,” and it obligates the seller to get the goods to the location indicated after the term
