Contracts Ch. 8-11 – Defenses & SOF Flashcards
Ch. 8 – Defenses to K Formation Ch. 9 – Defenses to K Formation Ch. 10 – Statute of Frauds Ch. 11 – Statute of Frauds
Warranty
A promise about a term of the contract that explicitly shifts risk to the party making the promise.
Warranties can be disclaimed –e.g., selling “as is”
Express Warranty
A promise that affirms or describes the goods and is part of the basis of the bargain is an express warranty unless it is merely the seller’s opinion.
The use of a sample or model creates an express warranty that the goods sold will be like the sample.
Implied Warranty of Merchantability
Warrants that the goods are fit for ordinary commercial purposes.
This warranty is triggered only when the seller is a MERCHANT dealing in the goods at issue.
Merchant – 1) a person who regularly deals in the type of goods involved in the transaction or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or 2) any businessperson when the transaction is of a commercial nature
Unless the circumstances indicate otherwise, the warranty can be DISCLAIMED by use of “as is,” “with all faults,” or similar language that makes plain that there is no implied warranty. The disclaimer may be ORAL, but it MUST use the term “merchantability” and MUST be CONSPICUOUS if in writing.
Implied Warranty of Fitness for a Particular Purpose
Triggered when a buyer relies on a seller’s expertise to select a special type of good that will be used for a special purpose.
Warrants that the goods will satisfy this special purpose.
Need not be a merchant. Buyer just needs to rely on any seller’s expertise.
Express Conditions
Express conditions are created by language in the K.
Express conditions must be STRICTLY SATISFIED unless the condition is somehow excused.
Magic words – “only if,” “provided that,” “on the condition that,” “only in the
event that,” etc.
What standard is used to satisfy conditions?
Preferred approach—use an objective standard of satisfaction; if most reasonable people would be satisfied, then the condition is met.
Ks involving AESTHETIC TASTE—e.g., art or tutoring services—use a subjective standard.
How can a party waive conditions?
The party receiving the protection of the condition may waive the condition by words or conduct.
A condition will also be waived if the other party WRONGFULLY INTERFERES with or hinders the occurrence of the condition – judged by good faith standard.
7 Defenses to K Formation
MUMMIFIED (no E)
1) Misunderstanding
2) Unconscionability
3) Mistake
4) Misrepresentation/Fraud/Nondisclosure
5) Incapacity
6) Illegality
7) Duress
Misunderstanding
Arises when each party attaches a different meaning to the same words.
Must show: 1) parties use a material term that is open to two or more reasonable interpretations (objective test cannot apply); 2) each side attaches a different meaning to the term; AND 3) neither party knows, or should know, of the confusion.
Mistake
Mutual vs. Unilateral
A mistake is a belief that is not in accord with a PRESENT fact.
Mutual Mistake –allows the adversely affected party to rescind IF: 1) there is a mistake of FACT, existing at the time the deal is made; 2) the mistake relates to BASIC ASSUMPTION of the K and has a MATERIAL IMPACT on the deal; AND 3) the impacted party did not BEAR THE RISK of the mistake.
3 Elements – 1) mistake of fact at time deal is made; 2) basic assumption & material impact; 3) no assumption of risk
Unilateral Mistake – allows the adversely affected party to rescind IF: 1) she can prove all elements of mutual mistake; AND 2) either: a) the mistake would not make the K unconscionable; OR b) the other side knew of, had reason to know of, or cause the mistake.
Statute of Frauds
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Exceptions –
1) Specially manufactured goods
Statute of Frauds Exceptions under UCC
SOF Exceptions
1) Specially manufactured goods – No writing is required if (i) the goods are to be specially manufactured for the buyer, (ii) the goods are not suitable for sale to others, and (iii) the seller has made “either a substantial beginning of their manufacture or commitments for their procurement.”
2) Payment and acceptance by seller –K is outside the UCC SOF to the extent that payment has been made
and accepted. When a portion of the purchase price for a single item has been paid, most courts treat K as enforceable.
3) Receipt and acceptance by buyer – K is outside the UCC SOF to the extent that goods are received and accepted.
Acceptance of a part of a commercial unit is acceptance of the entire unit.
4) Failure to respond to a memorandum (when both parties are merchants) – If both parties are merchants and a memorandum sufficient against one party is sent to the
other party, who has reason to know its contents, and the receiving party does not object in writing within 10 days of receipt of the memorandum, then the K is enforceable
against the receiving party even though he has not signed it. As with the firm
offer rule, a merchant includes not only a person who regularly deals in the type of goods involved in the transaction, but also any businessperson when the transaction is of a
commercial nature
