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MBE condensed > Contracts Basic > Flashcards

Contracts Basic Flashcards

1
Q

Define
contract

A

In short: legally enforceable agreement

In long:
Promise / set of promises

for breach of which law gives remedy
OR
performance of which law recognizes as a duty

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2
Q

Bilateral Contract

A

promise for a promise

Offer can be accepted in any reasonable way (including beginning performance, but might req. notice of beginning of performance)

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3
Q

Unilateral Contract

A

Ex: reward offer, or “offer…only by”

promise to pay upon completion of X

Performance begun = offer irrovocable (but not yet accepted so other party not bound to complete performance)

Preparing to perform is not beginning performance, so offer can still be revoked, but can try to use detrimental reliance to recover some.

Act complete = acceptance, contract formed

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4
Q

Void vs. Voidable contracts

A

Void can never be enforced
Voidable = aggrieved party may elect to enforce a voidable K

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5
Q

Mutual Assent

A

Offer + Acceptance

Objective Standard = did words / conduct manifest a present intention to enter into a contract?

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6
Q

Is there a valid contract? (3 steps)

A
  1. Mutual Assent
  2. Consideration
  3. Any defenses to the creation of the contract?
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7
Q

Consideration

A

Bargained for exchange of something of legal value

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8
Q

Substitutes for Consideration

A

Promissory Estoppel, detrimental reliance, good faith modification under UCC

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9
Q

3 elements of an offer

A

1.promise/undertaking/commitment
2. certainly of essential terms
3. communication to offeree

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10
Q

offer: certainty of essential terms

A

Must ID offeree

RE = id land and price
Goods = quantity

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11
Q

Offer: Missing terms

A

Goods, price = reasonable at time of delivery
Time = reasonable time

Generally, if parties intended to form K, court will supply reasonable terms at CL and UCC

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12
Q

Offer Vague Terms

A

Not valid offer if vague terms (reasonable, fair, appropriate, etc.)

Terms to be agreed later too vague if material term

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13
Q

Ways to terminate an offer

A
  1. Lapse of Time
  2. Rejection (incl. counteroffer)
  3. Revocation (includes indirect info to offeree that a real person would see as revocation)
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14
Q

Option contract

A

contact to keep offer open (must be supported by consideration)

only terminated at end of option period (unless offeror detrimentally relied on rejection)

-cannot be revoked
rejection does not terminate
-counter offer does not terminate

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15
Q

Merchant’s Firm Offer

A

no consideration required, IRREVOCABLE for time in offer or reasonable time (either way no longer than 3 months) (BUT if there’s consideration, this is an option K, not a merchant’s firm offer and can be held open as long a parties agreed on)

1)merchant
2) signed writing
3) give assurances offer to buy/sell will be held open

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16
Q

Limitation on offeror’s power to revoke

A
  • option K
    -Merhcan’ts firm offer
  • detrimental reliance (Offeror could reasonably expect that offeree would rely to their detriment and they do so) –> irrevocable for reasonable time
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17
Q

Contract terminated by matter of law

A

Death / insanity of party

destruction of subject matter

supervening illegality

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18
Q

Define Acceptance

A

Manifestation of assent to terms of offer (requires knowledge of offer)

Bilateral K Acceptance = any reasonable manner (incl. promise to perform OR beginning performance)

Unilateral K =

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19
Q

How to accept UCC offer to buy goods for prompt/current shipment

A
  1. promise to ship (this is the acceptance, can’t later try to accommodate w/ different goods, that would be a breach)

OR
2. current/prompt shipping
Note when acceptance is by shipping non-conforming goods: shipment of non-conforming goods w/ reasonable notice that it’s an accommodation is NOT an acceptance, so there’s no contract and no breach if buyer rejects accommodation

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20
Q

Acceptance with additional terms …. ? BATTLE OF THE FORMS

A

CL: not acceptance, but rejection and counter offer

UCC: K still formed and terms are:

if there’s a non-merchant: offer terms win

between merchants: terms in unless
- they materially alter original terms (fact question)
-offer expressly limited acceptance to its own terms
-offeror has already or does in reasonable time object to therms

NOTE: also applies to add terms in merchants memo confirming oral agreement

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21
Q

Acceptance with different terms?

A

CL: no agreement
UCC: agreement, but different terms are either
(1) treated like additional terms
OR
(2) dropped and use UCC as gap filler (knockout rule)

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22
Q

Mailbox Rule and Exceptions

A

Acceptance is effective upon dispatch

Exceptions:
-offer says effective upon receipt
-option k
-oferee sends and rejection and then an acceptance
-offeree sends acceptance then rejection and rejection arrives first and offeror detrimentally relies on it

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23
Q

Consideration (2 elements)

A
  1. bargained for exchange (promise induce detriment and detriment induce promise)
  2. of legal value (benefit to promisor or detriment to promisee)
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24
Q

“past” consideration

A

does not satisfy the bargain requirement therefor it’s not consideration

exceptions:
(1) if past promise is unenforceable on a technical defense (like SoL), new promise enforceable if in writing or partially performed

OR

(2) past act was performed at promisor’s request / in response to en emergency, then a subsequent promise to pay for the act will be enforceable

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25
Q

Promise to perform pre-existing legal duty as consideration?

A

No.
Exceptions:
- new / different consideration
-promise to ratify an otherwise voidable obligation
-preexisting duty owed to 3d party, not promisor
-there is an honest dispute as to the duty
-unforseen circumstances (like would give rise to impracticability); or modern view: modification is fair and equitable in view of unanticipated circumstances

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26
Q

Consideration required for modificaiton

A

CL: new consideration required

modern view: modification w/o consideration ok if (1) fair and equitable and (2) due to unanticipated circumstances

UCC: can modify w/ good faith agreement of new / different terms (no consideration required)

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27
Q

Illusory Promise

A

Need consideration on both sides of the contact, therefore no consideration if there’s an illusory promise (where on party is essentially not bound)

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28
Q

Contract Defenses: lack of capacity

A

Infants
Mental Capacity
Intoxication
Duress / undue influence

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29
Q

Contract Defenses: Absence of mutual assent

A
  1. Misunderstanding (ambiguous K language)
    If both /neither party knew of ambiguity, no k unless they intended same meaning
    If one party aware, binding K based on ignorant party’s reasonable meaning
  2. Mutual mistake (both parties mistaken about fact at time of K formation) Can be voidable by adversely affected party (3 requirements)
  3. Unilateral Mistake (if non-mistaken party knew/should have known other party didn’t know of mistake, voidable by mistaken party (3 requirements)
  4. Mistake of intermediary (as transmitted unless other party knew/should have known of mistake)
  5. Misrepresentation (party can rescind agreement and pursue remedies for breach

–Fraudulent misrep = K voidable by innocent party if they justifiably relied on fraudulent misrepresentation.)
–Material misrep. = K voidable if misrep. was material /
P justifiably relied on it and /
it would induce reasonable person to rely OR maker of misrep. knows this P would rely on that particular. misrep).

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30
Q

Contract Defenses: Public Policy

A

Illegality
Unconscoinability (usually due to some unfairness in bargaining process)

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31
Q

Oral modifications to written contract

A

If K as modified falls within SoF, modification must be in writing

CL: allowed, EVEN when express K provision says no

UCC: if the K has a provision that must be modified by signed writing, that will be enforced under UCC, but if one party is non-merchant, requires them to sign that provision

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32
Q

Part Performance in Sale of Goods K, out of SoF when

A

1) specially manufactured goods
2) goods paid OR accepted

–> if indivisible item is partially paid for, the SoF satisfied for whole item

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33
Q

Exception to SoF

A
  • specialty goods (w/ substantial beginning / commitments for purchase )
  • admissions in pleadings in court
  • merchants confirmatory memo (if not rejected w/in 10 days)
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34
Q

SOF requirements

A

One/more writings
1) reasonably identify subject matter
2) indicate K has been make btw parties
3) state essential terms with reasonable certainty

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35
Q

SoF part performance

A

If part performance takes K out of SOF, aggrieved party may sue on the k for expectation damages (rather than merely in restitution for value of benefit conferred)

36
Q

Parole Evidence Rule

A

Fully integrated written agreement cannot be supplemented by evidence of prior/ contempt oral or written agreement if purpose is to vary terms of agreement

37
Q

UCC and Parole Evidence

A

UCC Assume all writings are partial integrations and writing may not be contradicted but may be supplemented w/ consistent additional terms (unless merger clause or courts find it was fully integrated; regardless, terms my be explained/supplemented by course dealing/ course perform/ usage of trade

38
Q

When evidence falls outside of scope of Parole Evidence Rule

A
  • goes to validity issues (formation, condition precedent to K’s effectiveness, consideration paid or not, mistake entitling him to reformation of agreement)
    -colatteral agreements to the writing (incl. naturally omitted terms)
  • goes to interpretation
    (not varying terms, but interpreting terms)
    -evidene of subsequent modifications
39
Q

UCC gap filler: price

A

reasonable at time for delivers

40
Q

UCC gap filler: place of delivery

A

seller’s ppb

41
Q

UCC gap filler: time shipmment/delivery

A

reasonable

42
Q

UCC gap filler: time for payment

A

time and place buyer receives goods

43
Q

Express warranty

A

by any seller

by affirmation / promise or model

extremely difficult to disclaim

44
Q

Implied warranties

A

Title
fitness for purpose
merchantability

45
Q

Implied title warranty

A

free and clear, transfer rightful, no leins/incumberances

any seller

disclaim by specific language or circumstances showing seller does not claim title

46
Q

Implied warranty of merchantability

A

merchants sellers only
who usually do these kinds of goods

fit for ordinary purposes

disclaimed by disclaimer mentioning “merchantability” (if written must be conspicuous)

47
Q

Implied warranty of fitness for a particular purpose

A

by any seller

who knows buyer is buying or specific purpose

and who knows/should know buyer is relying on seller’s expertise

disclaim if conspicuous written disclaimer (like “as is”)

48
Q

Buyer’s damages for breach of warranty

A

diff btw goods tenders and as warranted

title: rescind contract OR revoke acceptance of goods OR sue for damages (usually value of goods b/c buyer now has nothing if true title holder took goods back)

49
Q

Warranties extend to …?

A

anyone you’d reasonable forsee getting hurt by goods (buyer, family, guests in home)

50
Q

Risk of Loss - non conforming goods

A

risk stays on seller until buyer accepts goods or seller cures (or never in case of buyer’s outright rejection)
(if buyer rightfully revokes acceptance, risk treated as always having been on seller)

51
Q

Risk of Loss, non-carrier cases

A

Merchant seller: tender
Non-Merhcant seller: when buyer takes possession

52
Q

Carrier, (2 kinds) vs non-carrier Cases

A

Carrier: (payment when buyer assumes risk)
(1) shipment K (risk to buyer when goods go to carrier) (article 2 assumes it’s a shipment K unless clearly not)
(2) destination K (risk to buyer when goods tendered to buyer at destination)

Non-Carrier (payment when goods tendederd to buyer) = parties didn’t intend goods to be moved by a common carrier

FOB CITY = risk to buyer when goods at named city

FAS = on a boat and risk to buyer when goods are on delivered to the dock

53
Q

Goods destroyed before risk of loss passes to buyer

A
  1. if goods identified in K, contract is avoided
    2) if goods not identified when k made, seller must prove impracticability
54
Q

Duty to perform under K

A

CL: substantial performance

UCC: perfect tender

55
Q

Promise vs condition

A

When parties bound in K, they may have to perform immediately (promise) or only subject to another occurrence (condition)

  • failure of condition to occur discharges party’s duty under K

Failure of promise is breach giving rise to liability; failure of condition relieves party of obligation to perform

INTERP: look to intent of parties, if depends on third party, likely condition; if unclear, courts go with promise

note: “when…” usually not a condition but just indicating a time for performance if it deals w/ timing and not within control of obligee

56
Q

Effect of failed condition

A

K can’t be enforced b/c of failed condition, but party has fully / partially performed —> can usually recover unjust enrichment

57
Q

Duty rel. to condition

A

Duty not absolute until condition is performed or legally excused

when condition legally excused?
-wrongful party prevents condition
-waiver/estoppel (party to benefit from condition may waive, no consideration required if ancillary to K)
-Actual Breach
-Anticipatory repudiation / unwillingness to perform
-substantial performance
-imposs / impract/ frustration

58
Q

Anticipatory
Repudiaton

A

p. 77

59
Q

Recission

A

Parties can discharge duties by recission
Agreement to rescind is itself a binding agreement; k duties must be executory on both sides
-mutual and supported by consideration
-of unilateral K where one party already performed, recission requires (!) new consideration by non-performing party; or PEstop; OR manifest of intent to gift

60
Q

Novation

A

p. 86

61
Q

Impossibility

A

Objective, from facts arising AFTER k formed, K discharged / each party excused from duties ; either party may sue for recission and receive restitution of goods delivered, payments made, etc.

Ex: death/ incapacity, supervening illegality, subsequent destruction of subject matter of K (won’t discharge building K, but will for remodeling K)

62
Q

Impracticability

A

performance extreme/unreasonable b/c something occurred and its non occurrence was basic assumption upon which the K was made (shortage of raw materials, crop failure, war/emgargo)

63
Q

Frustration of purpose

A

supervening act, not reasonable foreseen, purpose of K has been completely/ nearly destroyed, both parties understood purpose at time of K formation

64
Q

Is breach material?

A

a) benefit received by good guy
b) can good guy adequately be compensated
c) extent of bad guy’s performance/likelhood they will perform remainder
d) negligent /willful behavior of bad guy
hardship to bad guy

65
Q

Minor Breach vs. Material Breach effects

A

Minor: obligee gained substantial benefit of bargain, therefore aggrieved party not relieved of duty to perform (but right to damages for minor breach) (late to perform usually minor)

material: obligee did not receive substantial benefit of bargain (Good guy discharged of any further obligations and may immediately sue for damages / other remedies for breach)

66
Q

Minor Breach + anticipatory reputation =

A

Material Breach

67
Q

Perfect Tender rule, buyer’s options if it’s not perfect

A

1) accept all
2) reject all
3) accept part and reject part (commercial units)

68
Q

If buyer accepts imperfect goods

A

Can accept by indicating to seller that goods conform

can acknowledge imperfections and accept anyway

fail to reject within reasonable time / fail to notify of rejection

any act inconsistent with seller’s ownership

69
Q

After buyer accepts imperfect goods

A

1) usually must pay price minus damages from seller’s breach

2) sometimes can revoke acceptance if
defect substantially impairs value & accepted w/ reasonable belief would be cured and it has not been OR accepted goods b/c hard to inspect and seller said they conformed

70
Q

Revocation of accceptance of imperfect goods requires

A

1)reasonable time after discovers/should have discovered defects

2) before substantial change (not do to defect) occurs in goods

71
Q

Seller’s right to cure imperfect goods delivery

A

can cure w/in original K term and if give reasonable notice of intent to cure

can cure beyond original K term if buyer rejects goods seller reasonably believed would be acceptable (even though imperfect) and seller tells buyer of intent to cure (now seller gets reasonable time)

72
Q

Rule for rejecting in imperfect goods under installment K

A

Can reject installment if it substantially impairs value of installment and cannot be cured

whole K breach ONLY if nonconformity substantially impairs the value of entire K

73
Q

Non Monetary K remedies

A

Specific Performance,

Defense against specific performance action: Equitable Defenses (Laches - too much time; Unclean hands; Sale to BFP)

73
Q

Specific Performance

A

Usually reserved for land (all land unique) and rare/antique goods

never for services but may enjoin person from competing as opposed to compelling them to act

74
Q

Nonmonetary buyer’s UCC remedies

A
  • Cancellation (cancel k when reject non-conforming goods)
    -Replevy (sieze goods)
    –goods must be identified in K, buyer has paid at least partially
    –only ok if (1) seller involvent w/in 10 days of buyer’s first payment; OR (2) goods for personal, family or household purchases OR (3) buyer can’t cover after reasonable try (but not if can get same goods at higher price)
    -Specific performance of unique goods even if goods not yet identified
75
Q

Nonmonetary Seller’s UCC remedies

A

Withold goods, recover goods , demand assurances (if reasonable reasons for insecurity, demand must be in writing) (may suspend while waiting and may treat k as repudiated if no reassurance w/in 30 days)

76
Q

Compensatory Damages

A

Can’t be too speculative

Expectation, Reliance, Incidental, consequential

Normal measure is expectant damages: put non breaching party in position they would be in if promise had been performed
-usually sufficient damages to buy a substitute performance (expectation damages/benefit of bargain)

77
Q

Reliance Damages

A

If expectation damages too speculative, aggrieved party can elect for this. give p back cost of performance, put them in position like K had never been made

78
Q

Incidental damages

A

incurred as a result of the breach, foreseeability doesn’t matter here!

79
Q

Consequential Damages

A

arise b/c of non-breaching party’s particular circumstances; only to extent reasonable person would have foreseen damages a probably result of breach

  • breaching party must have known or had reason to know of special circumstances
    -in sale of goods only buyers can get consequential damages (never sellers)
80
Q

Punitive Damages

A

generally a no no in K cases

81
Q

Liquidated Damages

A

Liq. Damages clause enforceable only if

(1) damages for breach difficult to estimate or ascertain at time of K formation
AND
(2) amount is reasonable forecast of compensatory damages in case of breach

Won’t enforce if it seems like a penalty clause, won’t enforce single lump sum regardless of severity of breach; can recover under valid liq. damages clause even if breach caused no actual damages

82
Q

UCC total breach, Damages

A

If seller does not deliver:
Benefit of Bargain OR Cover
PLUS (incident +foreseeable conseq. - expenses saved)

If buyer doesn’t accept
Benefit of bargain OR Resale OR Lost profit (only for lost volume seller) OR Action for Price (only if buyer has goods or seller can’t resell at reasonable price)

PLUS (incidental damages - expenses saved)

83
Q

If there’s a partially performed contract and BREACHING party is trying to recover

A

Look at
Substantinal Performance
Divisiblity
Restitution (in that order)

84
Q

When breaching party is suing

A

Damages are usually (reasonable value of services provided) - (damages to non-breaching party)

85
Q

Golden rule of K damages

A

Out non-breaching party in position they would have been in had the contract been performed

86
Q
A

MBE condensed (4 decks)

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