Contracts flashcards
Applicable Law to Govern Contract
Sale of goods: Uniform Commercial Code
Everything else: common law
UCC v. Common Law: Which interprets contracts more liberally?
UCC
UCC v. Common Law: Which endeavors to find that a contract exists, where possible?
UCC
UCC Definition: Goods
Movable, tangible property
UCC Definition: Merchant
One who deals in goods of the kind
Predominance test
When contract involves sale of both goods and services, law applicable determined by the predominant purpose for the contract as a whole, and use that law to govern entire contract
Requirements for valid contract
Offer, Acceptance, Consideration
Common law: Offer
Manifestation of willingness to enter into a bargain. Requires intent to enter contract, definite and certain terms, and communication to the offerree.
Common law: Intent
Words and conduct of offeror must demonstrate present intent to enter contract. Look at language and context.
Common law: Can rewards and auction bids be offers?
Yes, can be offers if it is clear who can accept/win
Common law: When are advertisements considered offers?
Typically they are invitations to deal, but if they have words of commitment and offeree can be identified with specificity - can be an offer.
Common law: What constitutes “definite and certain terms” for common law offer?
Content of the bargain can be determined and enforced. Required: Subject matter, quantity and parties must be identified. Time of performance can be missing term. For real estate contracts - Price must be stated.
Does offerree have to have knowledge of the offer in order to accept the offer?
Yes.
Under the UCC, how can a valid offer invite acceptance?
Inviting acceptance in any manner, by any medium reasonable. (UCC more liberal. Ex: purchase order typically offer under UCC). UCC will use gap fillers for missing terms EXCEPT subject matter and quantity.
Which terms are required under UCC?
Subject matter and quantity
How is an offer terminated?
Rejection, counteroffer (but not inquiry); revocation; lapse of time; Death or incapacity of either party
When can an ordinary offer be revoked?
Ordinary offer can be revoked anytime before acceptance.
Is direct communication of revocation required?
No, can be indirect
Does revocation have to be in writing?
No, can be any unambiguous words or conduct inconsistent with intention to contract. (e.g., selling the good that’s the subject of the offer to another party)
Does offeree need to made aware of revocation?
Yes, offerree must be aware of revocation conduct or words.
Which offers are irrevocable?
Firm offers, option contract, detrimental reliance/partial performance
What are the requirements for “Firm Offer” under UCC?
Made by merchant, signed writing, assurance held open for specified time. Regardless of time in firm offer, merchant can revoke offer after 3 months.
What constitutes an “option contract” UCC?
Option contract - offeror grants “option” to enter into contract for specified period of time. Promises offer will be held open. Consideration required.
Is consideration required for firm offer? Is consideration offered for option contract?
Firm Offer: None required. Option contract: Consideration required.
What makes an offer irrevocable due to deterimental reliance?
Offeree has made preparations to perform in reasonable deterimental reliance on the offer, or has performed in part.
What is a unilateral contract? When does offer become irrevocable?
Unilateral contract: Acceptance by performance. Offer becomes irrevocable after performance started.
Bilateral contract
Mutual promises to perform
Definition: Acceptance
Manfestation of assent to terms of the offer - words or conduct.
What constitutes acceptance in a unilateral contract? Bilateral contract?
Unilateral: Performance. Offeror’s promise exchanged for offeree’s performance. Bilateral contract: Both parties make promises to perform.
Limitations on acceptance
Reasonable time, only offeree can accept, only in response to offer (offeree must KNOW of offer), accepted in manner required by offer; objective standard.
When is acceptance effective?
Mailbox rule: Upon proper dispatch.
Exceptions to the mailbox rule (acceptance)
Where offer says otherwise
Option contract effective upon receipt.
If both acceptance and rejection sent - depends on which one was sent first.
Acceptance sent first: it’s accepted upon dispatch.
Rejection sent first: acceptance becomes effective if received first.
Rules: Acceptance varying from offer (UCC? Common Law?)
UCC: acceptance ok even with terms “additional to or different from” those in offer.
Common law: mirror image rule. Any conflicting terms count as rejection and counteroffer.
UCC: Additional terms in acceptance (Between merchants? Between 1 or more non-merchants?)
“battle of forms”
if both parties merchants - add’l term becomes part of contract unless offer expressly limits acceptance to its terms; material alteration with added term, objection by offeror within a reasonable time.
If one or more parties is not a merchant: additional terms are just proposals
UCC: Different terms in offer and acceptance
Majority: knock-out rule. UCC will fill in gaps. (reasonable price, buyer picks up goods from seller, time for shipment is “reasonable time”, payment due upon receipt of goods)
Can an offer be accepted by shipment of goods?
Yes. Purchase order to seller is an offer.
Rules: shipment of nonconforming goods as acceptance
If seller does not acknowledge the nonconformity: offer has been accepted and breached simultaneously.
If nonconformity is acknowleded: “accommodation” to buyer and is not an acceptance. It is a counteroffer.
Definition: Consideration
Bargained for exchange of legal detriment. (promise to act, or refrain from taking act entitled to do)
Definition: Illusory Promise
a promise not supported by consideration and therefore not enforceable. (“I promise to buy as many widgets as I want.”_
Requirement/output promise - illusory?
No. Implied obligation of good faith. (I’ll buy all I need from you/I’ll sell you all I make). Must be a specified period of time. “I’ll buy all the tomatoes I need from you this month”
Gift: Consideration?
No. promise to make a gift is unenforceable
Past consideration: Consideration
Generally, promise to pay for benefit receive din the past is not consideration except: 1) New promise to pay debt now barred can provide valid consideration if in writing or partially performed; new promise to pay for benefits previously received at promisor’s request or in emergency can be binding w/o consideraiton.
Promissory estoppel: Consideration?
Substitute for consideration
Definition: Promissory estoppel (contract)
Promise that forseeably induces reliance.
Damages: promissory estoppel
Reliance, not benefit of the bargain.
Defenses to contract formation
Statute of Frauds, Misrepresentation, Fraud (intentional misrepresentation) Unconscionability,Mistake
To what contracts does the Statute of Frauds apply?
Mr. Dog - Marriage (K made in consideration of marriage - prenup) , Real property , Debt of another, One year, Goods $500+
exceptions to SOF:
Mutual promise, real estate - 2/3 (payment, improvement, possession) , pay debt of another where main purpose is promisor’s own economic interest/indemnity; K can’t be done in a year but full performance has occurred; sale of goods 500% where goods accepted/paid for, admission, specially manufactered goods
SOF Writing Requirement
Must be writing with essential terms + signed by party to be charged. Doesn’t have to be sent to the other party or made at time promise is made.
Exceptions to SOF writing requirement:
Merchant, party receives signed confirmation and has reason to know contents, except if recipient objects w/10 days; judicial admission, promissory estoppel
Misrepresentation defense: Does a misrepresentation need to be intentional?
No. Just false statement of material fact, actual reliance, damages
Requirements for fraud
knowingly fraudulent, intent to induce reliance, actual reliance, damagees.
Unconscionability
Court finds so unreasonable no reasonable person would have agreed to it.
Mistake
Mutual mistake: voidable if mistake as to bassic assumption,mistake has material effect on deal, and adverse party did not assume risk. Unilateral mistake: made by only one party to deal- Must show three factors for mutual mistake and other party should have known of mistake.
Define: Conditions
event that must occur before performance of other party is due - express conditions require strict compliance. Can be waived - receiving and keeping benefit or failure to insist on compliance.
Effect of Parol Evidence Rule
limits the extent to which evidence of discussion or writings made prior to or contemporaneous with signed agreement can be admitted and considered as part of the agreement. Depends on whether there is partial or total integration.
Partial Integration
Meant to be final agreement; terms can be added but not substituted
Complete integration
Final agreement, no substitute or adding termsa.
Exceptions to Parol evidence rule
Contract formation/enforcement defects, conditions precedent to contract’s effectiveness, ambiguous terms, usage of trade.
Are oral modifications to contracts allowed?
yes but if SOF required for original K, also required for modification.
Is consideration required for modification of contract?
Common law: Mutual assent and consideration required. UCC: Mutual assent and good faith
Third party beneficiaries, and types
Person who promisor intends to benefit, but is not already party to contract. Intended (credit/donee), Incidental - indirectly benefits.
What type of third party beneficiary can sue to enforce contract?
Only intended beneficiary.
Party assigns right to contract to third party. With or without consideration.
Assignment
What kinds of rights under a contract are assignable?
All rights.
Party appoints 3rd party duties owed.
Delegation
general rule: delegation
all rights can be delegated. Delegator remains liable. Can’t delegate duties of special skill/judgment.
Novation
Party to the contract agrees to accept performance by third party.
Anticipatory breach
Unequivocal expression by party, occuring BEFORE performance due, that she will not perform.
Options for nonrepudiating party when there is anticipatory breach
Sue immediately, suspend performance and wait until performance is due to sue; treat contract as discharged and repudiation as offer to rescind, or urge performance and sue later if efforts futile.
What if conduct of party doesn’t rise to level of anticipatory repudation, but party has reasonable grounds for insecurity?
Insecure party can demand adequate assurances - in writing. Insecure party can suspend own performance until receiving adequate assurances. Repudiation occurs if no response within 30 days
What constitutes material breach under common law? Effect of material breach?
No substantial performance. Factors: Party didn’t receive substantial benefit, extent of any performance, willfulness, time of the essence ONLY if agreed to. Divisible contract - each agreed equivalent operates as a separate contract. Effect of breach - nonbreaching party doesn’t have to perform
Under UCC, is perfect tender required?
Yes. Perfect Tender required - buyer can reject, accept, or accept commercial unit.
Material Breach: UCC - Installment contract - how is right to reject determined?
Right to reject determined by “substantial conformity”
UCC: Seller’s right to cure
Seller must give notice; new tender by original due date (or later if reasonable belief seller would be ok with it)
Types of Warranties
Express, Implied warranty of merchantability, Warranty of fitness for particular purpose, implied covenant of good faith and fair dealing (inherent in every contract)
If there has been an accord, and satisfaction is breached, on what contract can the breached party sue?
Pursuant to either agreement - original or accord.
Is consideration required for Accord and satisfaction?
Yes.
Accord & Satisfication
Accord: parties agree to a substitute performance to discurage duty. Consideration required. Satisfaction is performance of accord, which discharges original agreement and accord. If satisfaction is breached, nonbreaching party can sue pursuant to either one.
Minor breach - duties/rights of non breaching party?
If breach is minor, nonbreaching party party may recover damages but must still perform.
Defenses to enforcement
Impossibility (supervening, unforseeable event makes performance impossible; neither party assumed risk)
Impacticability (intervening occurrence, makes performance extremely and unreasonably difficult, concerning basic assumption of contract; no risk allocation),
Frustration of Purpose (a party’s purpose for entering contrat is destroyed by supervening events; both parties must know contract purpose, total frustration, not reasonably forseeable)
What are the requirements to be awarded damages?
forseeability, duty to mitigate, certainty, causation
Reasons money damages may be inadequate
lack of certainty, property in question is unique
In an employment contract for a term, does the employee have a property interest in the job? Can the contract be terminated without cause?
Yes, property interest. no termination without cause.
Does seller of a residence have a duty to disclose material defects?
Yes
