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Bar Exam > Contracts and Sales > Flashcards

Contracts and Sales Flashcards

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1
Q

Love For Dogs, Treat Every Rover Terrifically

A 
Law Applied
Formation
Defenses
Terms
Excuse for Nonperformance
Remedies
Third Party Problem
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2
Q

Which Law Applies

A
  • Common law is default
  • UCC - Sales of goods; goods are anything moveable (tangible personal property)
  • Mixed contracts - All-or-nothing rule based on “Predominant Purpose” test
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3
Q

Overview/Types of Ks

A
  • Default - Legally enforceable agreement created either expressly (in words, oral or written) or implied in fact (by parties’ conduct)
  • Quasi-contract/restitution - Protects against unjust enrichment when contract law yields unfair result; reasonable market value of benefit conferred
  • Bilateral vs. unilateral contract:
    (a) Bilateral - Offer can be accepted in any reasonable way
    (b) Unilateral - Offer expressly seeks performance as ONLY method of acceptance (also rewards/prizes)
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4
Q

Steps of K Formation

A
  1. Offer
  2. Termination of offer
  3. Acceptance
  4. Consideration
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5
Q

K Formation - Offer

A
  • Manifestation of intent to be bound judged by objective reasonable person standard
  • Advertisements - NOT offers unless contains Q and exactly what you have to do
  • Definiteness of terms:
    (a) Common law - ALL terms must be defined
    (b) UCC - Need Q, can leave out price
  • Requirements K - UCC allows buying all of supplier’s output, BUT buyer can’t unreasonably dramatically change Q
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6
Q

K Formation - Termination - Overview

A

(1) Lapse of time
(2) Revocation
(3) Rejection
(4) Death

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7
Q

K Formation - Termination - Lapse of Time

A
  • Lapses after time stated

* If no time, after reasonable time (>1 month is fishy)

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8
Q

K Formation - Termination - Revocation

A
  • Offeror can revoke at ANY time before acceptance
  • Direct - Communicates w offeree
  • Indirect - Offeree is aware of conduct indicating revocation
  • Exceptions:
    (a) Option K - Offeree pays to keep offer open for a specific time
    (b) UCC Merchant Firm Offer - Merchant promises in signed writing to keep offer open; 3 month max
    (c) Foreseeable detrimental reliance (e.g. general and sub-contractors)
    (d) Starting performance under unilateral K offer (doesn’t include mere preparation to perform)
  • Revocations effective upon receipt
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9
Q

K Formation - Termination - Rejection

A
  • Offeree rejects offer
  • Counteroffer (NOT just bargaining/questioning) = rejection
  • Conditional acceptance = Rejection + new offer
  • Purported acceptance adding/changing terms:
    (a) Common law - Rejection bc “mirror image” rule
    (b) UCC - Acceptance if seasonal expression of acceptance, BUT changed terms aren’t incorporated into K; applies if (1) both parties are merchants, (2) no material changes, causing hardship/surprise, (3) no objection in reasonable time
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10
Q

K Formation - Termination - Death

A
  • Death of either party before acceptance terminates REVOCABLE offer, NOT (1) formed K, and (2) irrevocable offer
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11
Q

K Formation - Acceptance - Method

A
  • Offer language controls method
  • Starting performance OK for bilateral, NOT for unilateral (must be complete performance)
  • Improper performance = Acceptance+breach
  • Improper performance + offer of accommodations = Counteroffer
  • Silence NOT= acceptance, UNLESS custom
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12
Q

K Formation - Acceptance - Timing

A
  • Mailbox rule - Effective when mailed
  • Exceptions:
    (a) Offer states otherwise
    (b) Irrevocable offers - effective when received by deadline
    (c) Rejection sent first, then acceptance - Race; if acceptance arrives first, effective on that date
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13
Q

K Formation - Consideration

A

Bargained-for legal benefit or detriment

  • Past consideration is no consideration
  • Courts don’t examine adequacy of consideration; peppercorn
  • Consideration for modifications?:
    (a) Common law - Require new consideration (pre-existing duty rule) UNLESS (1) unanticipated changed circumstances, OR (2) third party enters
    (b) UCC - No consideration needed, just good faith
  • Partial payment of debt NOT= consideration
  • Payment of time-barred debts = consideration
  • Promissory estoppel - (1) Promise made, (2) foreseeable detrimental reliance, AND (3) justice requires enforcement
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14
Q

K Defenses - Overview/Categories

A 
Lack of capacity
Material ambiguity/misunderstanding
Mistake
Unconscionability
Duress
Statute of Frauds
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15
Q

K Defenses - Lack of Capacity

A
  • Minors - Belief of age irrelevant; can still enforce Ks; implied affirmation after turning 18
  • Intoxicated ppl - Includes voluntarily if other party knew and took advantage
  • Mentally incompetent ppl
  • Exception - Necessities - Incapacitated D still liable for necessities; must pay restitution
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16
Q

K Defenses - Material Ambiguity/Misunderstanding

A

No K where no meeting of the minds

  • Exception - 1 party knew or should’ve known
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17
Q

K Defenses - Mistake

A
  • Mutual mistake - Unenforceable if mistake about existence of K subject matter, NOT just value
  • Unilateral mistake - Likely enforceable UNLESS non-mistaken party knew/should’ve known about mistake
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18
Q

K Defenses - Unconscionability

A

At time of K formation, need (1) unfair surprise, AND (2) oppressive terms

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19
Q

K Defenses - Duress

A
  • Economic - Improper/wrongful threat + other party has no reasonable alternative
  • Physical
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20
Q

K Defenses - Statute of Frauds - Applicability

A

MYLEGS:

  • Marriage - Promise made in consideration of marriage
  • Year - Ks not theoretically completable within 1 year
  • Land - Transfer of interest in real property OR leases/easements/etc if >1 year
  • Executors - Promise to pay estate’s debts from funds other than the estate’s debt
  • Goods >= $500
  • Suretyship - Promise to guaranty debt of other person
  • Equal dignity rule - SoF applies to K authorizing someone to act on your behalf if underlying act would be subject to SoF
  • Modifications - Writing required if SoF would apply to K as modified
    (a) UCC - Parties can put writing requirement in original K
    (b) Common law - Parties CAN’T put writing requirement in original K
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21
Q

K Defenses - Statute of Frauds - Writing Requirement

A
  • UCC - Writing needs (1) Q term, and (2) signed by party against whom enforcement is sought
  • Common law - Writing needs (1) all material terms, (2) signed by party against whom enforcement is sought
22
Q

K Defenses - Statute of Frauds - Exceptions

A
  • Leases of real property <=1 year
  • Part performance of real estate K IF have TWO of: (1) payment, (2) possession, (3) improvement/repairs
  • Service Ks w FULL, not partial, performance
  • Sales of goods:
    (a) Acceptance/payment for some of the goods
    (b) Custom-made goods w substantial beginning
  • Merchant Confirmatory Memorandum rule - (1) Both parties are merchants, (2) Writing claims an oral agreement AND has Q term, AND (3) No objection from other party in 10 days
  • Sureties IF “main purpose” is to benefit guarantor, not guarantee
23
Q

K Terms - Parol Evidence Rule

A

Keeps out evidence of PRIOR or contemporaneous agreement if it contradicts a final written integration

  • Exceptions:
    (a) To correct clerical error
    (b) To establish a defense to enforcement
    (c) To add to a partially integrated writing (not the case if merger clause)
24
Q

K Terms - Conduct

A
  • Course of performance - How parties previously acted under THIS K
  • Course of dealing - How parties acted w each other under OTHER Ks
  • Trade usage/custom
25
Q

K Terms - Seller Warranties

A
  • Express warranties - Includes facts re goods/descriptions of goods/showing examples of goods
  • Implied warranties:
    (a) Of Merchantability - Goods are fit for ordinary foreseeable purpose (IF seller is merchant)
    (b) Of Fitness for ParticularPurpose - Goods are fit for buyer’s particular purpose (IF seller knows and tries to fit)
  • Limitations on warranties:
    (a) Disclaim - Seller can disclaim EXPRESS warranties (“as is”)
    (b) Remedies Provisions - Seller can limit remedies for breach of ALL warranties if not unconscionable (e.g. personal injury)
26
Q

K Terms - Risk of Loss

A

Hierarchy of:
(a) If agreement on allocation of risk, that

(b) If breach, breaching party bears risk

(c) If no agreement or breach, but common carrier, risk shifts from seller to buyer upon fulfillment of delivery obligations:
* Shipment K - Seller (1) gets goods to carrier, (2) makes reasonable arrangements for delivery, AND (3) notifies buyer
* Destination K - Seller gets goods to specific destination

(d) If no agreement, breach, or common carrier, risk depends on if seller is merchant:
* If merchant - Bears risk until buyer takes possession
* If not merchant - Bears risk until tends (makes available) goods to buyer

27
Q

K Terms - Performance (Common Law)

A

Substantial, not perfect, performance - Meets “essential purpose” of K

28
Q

K Terms - Performance (UCC) - Perfect Tender

A

Seller must deliver perfect goods in right place at right time

  • Buyer can reject
  • Seller can cure:
    (a) If time still remaining - By perfecting tender
    (b) If time out - Cure only if seller had reasonable grounds to think imperfect tender was OK
29
Q

K Terms - Performance (UCC) - Installment Sales

A

Perfect tender rules DOESN’T apply to Ks requiring seller to deliver in installments; buyer can reject one installment if substantial impairment/something wrong

30
Q

K Terms - Performance (UCC) - Buyer’s Acceptance/Rejection of Goods

A
  • Buyer accepts (expressly or impliedly) - Buyer can get damages if breach, but CAN’T revoke acceptance unless latent defect
  • Buyer rejection = Revocation of acceptance; can (1) return goods at seller’s expense, (2) get a refund, (3) get damages
31
Q

K Excuses - Overview/Categories

A

Other party’s actions
Impossibility
Frustration of purpose
Failure of an express condition

32
Q

K Excuses - Other Party’s Actions (Common Law)

A
  • Breach:
    (a) Excuse only if MATERIAL breach - Undermines substantial benefit of the bargain
    (b) If divisible contract, materiality assessed on unit-by-unit basis
  • Anticipatory repudiation - Provides excuse UNLESS (1) repudiation is retracted, AND (2) no reliance before repudiation
  • Later agreements:
    (a) Rescission - Mutual agreement to cancel K; OK if each party has some remaining performance
    (b) Modification
    (c) Accord+satisfaction - Agreement to accept different performance; existing performance not excused until that occurs
    (d) Novation - Agreement to substitute new party; NO excuse if just unilateral delegation
33
Q

K Excuses - Other Party’s Actions (UCC)

A
  • Imperfect tender - Buyer can reject all, accept some, accept all, AND get damages
  • Failure to give adequate assurance - Insecure party can request adequate assurance in writing; anticipatory repudiation if no response
34
Q

K Excuses - Impossibility/Impractiability

A

Destruction of goods, death or incapacity of essential person, new gov’t regs

  • Increase in cost in performance isn’t excuse unless extreme/unreasonable
  • UCC notes:
    (a) See where risk of loss arises
    (b) Seller excused only if goods identified to the contract
35
Q

K Excuses - Frustration of Purpose

A

(1) Central purpose of K is undermined, AND (2) both parties understood that was the central purpose

36
Q

K Excuses - Failure of Express Condition

A
  • Strict compliance rule - Express conditions must be strictly complied w
    (a) BUT no compliance necessary if person protected by condition (1) fails to cooperate, or (2) waives
  • Satisfaction clauses - Measured by reasonable person standard unless dealing w art/subjective taste
  • Types of express conditions:
    (a) Condition precedent - Event must occur before performance is due
    (b) Condition subsequent - Later event cuts off obligation
37
Q

K Remedies - Overview/Categories

A 
Specific performance
Right to reclaim goods
Money damages
Punitive damages
Liquidated damages clause
Incidental damages
Consequential damages
Avoidable damages
38
Q

K Remedies - Specific Performance

A
  • Equitable remedy only when money damages inadequate
  • Land sales - All land unique, so SP
  • Goods - No SP, unless goods were unique/inability to cover
  • Personal service - No SP, but maybe injunctive relief
39
Q

K Remedies - Right to Reclaim Goods

A
  • Unpaid seller generally can’t get it under UCC, but maybe under bankruptcy
  • Exception - Buyer insolvent when received goods, and seller requests reclamation within 10 days of delivery
    (a) Can reclaim at ANY time if buyer misrepresented solvency within 3 months before delivery
40
Q

K Remedies - Money Damages (Common Law)

A
  • Expectation damages - Default
  • Reliance damages - If profits uncertain
  • Restitution damages - Unjust enrichment, value of benefit conferred
41
Q

K Remedies - Money Damages (UCC)

A
  • Buyer’s damages if seller breaches:
    (a) Cover - Cover price minus K price if buyer covers
    (b) Market - Market price minus K price if buyer doesn’t cover/covers in bad faith
    (c) Loss in value - Value of goods promised minus value of goods delivered if buyer keeps nonconforming goods
  • Seller’s damages if buyer breaches:
    (a) Resale - K price minus resale price
    (b) Market - K price minus market price if seller doesn’t resell/resells in bad faith
    (c) K price - If seller can’t resell
    (d) Lost volume - Lost profits on sale lost if second sale doesn’t replace K sale
42
Q

K Remedies - Punitive Damages

A

None

43
Q

K Remedies - Liquidated Damages Clause

A

Parties decide remedy themselves in K

  • Upheld only if (1) damages difficult to estimate at time of K, AND (2) remedy was a reasonable forecast of probably damages
  • Single lump sums independent of breach severity often NOT enforceable
44
Q

K Remedies - Incidental Damages

A

Costs of transporting/caring for goods after breach - ALWAYS recoverable

45
Q

K Remedies - Consequential Damages

A

Indirect results of breach - Recoverable if reasonably foreseeable at time of K formation

  • NOT available to sellers under UCC
46
Q

K Remedies - Avoidable Damages

A

Subtract them out bc duty to mitigate

47
Q

K Third Party Problems - Overview/Categories

A

Third party beneficiaries
Assignments
Delegations

48
Q

K Third Party Problems - Third Party Beneficiaries

A

Intended beneficiary can enforce K directly against promisor

  • Merely incidental, not intended, beneficiaries CAN’T enforce
  • Promisor+promisee can rescind/modify K until intended beneficiary’s rights vest (when IB learns of K and relies on it)
    (a) BUT can contract around this
49
Q

K Third Party Problems - Assignments

A

Valid assignee can enforce K against obligor, once obligor becomes aware of assignee’s existence

  • Requirements for valid assignment:
    (a) Language of present transfer, not just promise
    (b) NO consideration necessary
    (c) Doesn’t substantially change duties of obligor - money is generally fine; performance rights probs not
  • K language can restrict assignments:
    (a) Prohibition - Assignee can still collect if didn’t know of K prohibition
    (b) Invalidation - Assignee can never collect
  • Multiple assignments:
    (a) Gift assignments - Revokable, so last assignee wins
    (b) Assignments w consideration - First assignee wins UNLESS (1) later assignee didn’t know about first, AND (2) later assignee is the first to a payment from, or judgment against, obligor
50
Q

K Third Party Problems - Delegations

A

Can delegates DUTIES w/o consent of person owed performance UNLESS:

(a) K language prohibits it - Language prohibiting assignments ALSO prohibits delegations, OR
(b) Obligor has special qualities/talents

  • Delegating party always remains liable
  • Delegate is liable if delegation was for consideration (creation of a third party beneficiary)

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