CONTRACTS LAW Flashcards
Applicable Law: Common Law vs. UCC
USG CCEE
UCC Article 2 applies to contracts for the sale of goods. Common law applies to all other contracts.
Contracts: Legal agreements between parties.
Sale of Goods: Transactions involving the transfer of ownership of tangible personal property.
All Other Contracts: Agreements not involving the sale of goods, such as services, real estate, and employment contracts.
Mnemonic Sentence 1:
UCC Sells Goods, Common Covers Everything Else.
Requirements to Form a Valid Contract
MA(OA)CD
A valid contract requires: mutual assent (offer and acceptance), consideration, and no defenses to formation.
Mutual Assent: Agreement by both parties to the terms of the contract.
Offer: A proposal by one party to enter into an agreement.
Acceptance: The agreement by the other party to the offer’s terms.
Consideration: Something of value exchanged between the parties.
Defenses to Formation: Legal reasons that a contract might be invalid, such as duress, fraud, or incapacity.
Mnemonic Sentence 1:
My Official Contract Details.
Mutual Assent
Offer and Acceptance
Consideration
Defenses to Formation
Modification of Contracts: Pre-Existing Duty Rule and Exceptions
CLNNC UGF
Under the common law, past performance/pre-existing duty is not adequate consideration. Under the UCC, there is no consideration requirement, and a modification is valid if in good faith.
Not Adequate Consideration: Under common law, a promise to do something you are already legally obligated to do is not sufficient consideration for a new contract.
Consideration Requirement: Under the UCC, modifications do not require new consideration.
Valid if in Good Faith: Under the UCC, a modification is enforceable if it is made in good faith.
Mnemonic Sentence 1:
Common Law Needs New Consideration, UCC Gets Freedom.
Common Law: Past performance/pre-existing duty is not adequate consideration.
Needs New Consideration: A new promise must have new consideration.
UCC: No consideration requirement.
Gets Freedom: Modifications valid if in good faith.
Anticipatory Repudiation and Adequate Assurances
PUS UUP U MCPP WAA
Anticipatory repudiation is when a party unequivocally states that they are unable or unwilling to perform unless there has been a material change in the other party’s position.
If there are reasonable grounds for being insecure about performance, a party may request in writing adequate assurances. If the other party does not comply, the requesting party may treat it as an anticipatory repudiation.
Unequivocally: Clearly and without ambiguity.
Unable or Unwilling: Lacking the ability or intent to fulfill contractual obligations.
Perform: Carry out the contractual duties.
Material Change in the Other Party’s Position: A significant alteration affecting the other party’s situation, potentially excusing performance.
Reasonable Grounds: Justifiable reasons to be concerned about the other party’s performance.
In Writing Adequate Assurances: A formal, written request for confirmation that the other party will perform as agreed.
Anticipatory Repudiation: Treating the contract as breached due to the other party’s clear indication of non-performance.
Mnemonic Sentence 1:
Unable Unless Performance Makes Reasonable Assurances.
Unable or Unwilling: Lacking ability or intent to fulfill obligations.
Performance: Carry out contractual duties.
Material Change: Significant alteration in the other party’s position.
Reasonable Grounds: Justifiable concerns about performance.
Adequate Assurances: Written request for performance confirmation.
Statute of Frauds: Contracts Requiring a Signed Writing
S SM CWM AET
If a contract is subject to the Statute of Frauds, the writing must (1) be signed by the party against whom enforcement is sought, (2) identify and describe the subject matter, (3) indicate that a contract was made, and (4) state all essential terms.
Contracts subject to the Statute of Frauds are: (1) marriage contracts, (2) suretyship contracts (promising to pay for the obligations of others), (3) contracts that cannot be fully performed within one year, (4) contracts for the sale of real property or creating an interest in land, and (5) contracts for the sale of goods worth $500 or more.
Signed: The writing must be signed.
Party Against Whom Enforcement is Sought: The individual or entity that the contract is being enforced against.
Identify and Describe: The writing must clearly specify the subject matter.
Subject Matter: The focus or object of the contract.
Indicate: Show or make clear that a contract exists.
Contract was Made: Confirmation within the writing that a contract exists.
State All Essential Terms: Include all necessary terms for the contract.
Types of Contracts Subject to the Statute of Frauds:
Marriage Contracts: Agreements made upon consideration of marriage.
Suretyship Contracts: Promises to answer for the debt or duty of another.
Cannot be Fully Performed Within One Year: Contracts that require more than one year to complete.
Sale of Real Property or Creating an Interest in Land: Contracts dealing with the sale or interests in land.
Sale of Goods Worth $500 or More: Contracts for the sale of goods over a certain value.
Common Ways This is Tested:
Identifying Statute of Frauds Requirements: Exam scenarios often test whether the writing meets all Statute of Frauds requirements. Confirm it is signed, identifies and describes the subject matter, indicates a contract, and states all essential terms.
Determining Applicable Contracts: Fact patterns may involve determining whether a contract falls under the Statute of Frauds. Ensure the contract type matches one of the specified categories.
Exceptions to the Statute of Frauds: Questions may involve exceptions, such as partial performance or promissory estoppel. Understand when these exceptions apply.
Common Tricks on the Exam:
Incomplete Writings: Questions might present a contract missing essential terms or lacking a clear indication that a contract was made. Ensure the writing is complete.
Unsigned Contracts: Scenarios may involve unsigned contracts. Verify that the party against whom enforcement is sought has signed the document.
Misclassification of Contracts: Fact patterns might misclassify contracts under the Statute of Frauds. Confirm the contract type correctly.
Parol Evidence Rule
PCI POC CLW
The parties cannot introduce a prior or contemporaneous agreement that contradicts a later writing.
Prior: An agreement made before the written contract.
Contemporaneous: An agreement made at the same time as the written contract.
Contradicts: Conflicts with the terms of the written contract.
Later Writing: The final written contract that is intended to be the complete and final agreement between the parties.
Common Ways This is Tested:
Identifying Contradictions: Exam scenarios often test whether evidence of prior or contemporaneous agreements contradicts the written contract. Verify if the earlier agreements conflict with the later writing.
Complete and Final Agreement: Fact patterns may involve determining if the written contract is intended to be the complete and final agreement. Ensure the writing is meant to be comprehensive.
Common Tricks on the Exam:
Partial Integration: Questions might present a scenario where the written contract is only partially integrated. Understand when additional terms may be admissible if they do not contradict the writing.
Exceptions to the Rule: Fact patterns may involve exceptions, such as evidence of fraud, mistake, or duress. Recognize when the parol evidence rule does not apply.
Misunderstanding Contemporaneous Agreements: Scenarios may incorrectly categorize contemporaneous agreements. Ensure they are accurately identified and assessed for contradictions.
Defenses to Contract Formation:
“I ❤️ DIMSUM”
Mnemonic: I ❤️ DIMSUM (Incapacity, Duress, Illegality, Misrepresentation, Statute of Frauds, Undue influence, Mistake/Misunderstanding)
Incapacity
Rule Statement:
A contract is voidable if one of the parties lacked the capacity to contract at the time of formation.
Types of Incapacity:
Minority: Contracts with minors are voidable at the minor’s discretion, except for contracts for necessaries.
Mental Incapacity: Contracts are voidable if a party was unable to understand the nature and consequences of the transaction due to mental illness or defect.
Intoxication: Contracts are voidable if a party was intoxicated and the other party knew or had reason to know of the intoxication.
Common Ways Tested:
Fact patterns may involve minors entering into contracts, mentally incapacitated individuals, or intoxicated persons.
Common Tricks:
Scenarios may include minors who misrepresent their age or mentally incapacitated persons who appeared lucid.
Mnemonic:
M.I.T. (“Minority, Incapacity, Intoxication”)
Duress
Rule Statement:
A contract is voidable if one of the parties was forced to enter into the contract through wrongful threats or acts.
Types of Duress:
Physical Duress: Actual or threatened physical harm to a party or a third party.
Economic Duress: Wrongful acts or threats that leave the victim with no reasonable alternative but to agree to the contract.
Common Ways Tested:
Exam questions may involve threats of physical harm, financial ruin, or other forms of coercion.
Common Tricks:
Scenarios might present situations where the threat is subtle or implied, rather than overt.
Mnemonic:
P.E.D. (“Physical, Economic, Duress”)
Illegality
Rule Statement:
A contract is void if its subject matter or performance is illegal.
Types of Illegality:
Contracts to Commit Crimes or Torts: Automatically void.
Contracts Against Public Policy: Includes contracts that restrain trade, are unconscionable, or violate statutes.
Common Ways Tested:
Fact patterns may involve contracts for illegal activities, restraints on trade, or contracts violating public policy.
Common Tricks:
Questions might present seemingly innocuous agreements that violate specific laws or public policy principles.
Mnemonic:
C.A.P. (“Crimes, Against Public Policy”)
Misrepresentation
Rule Statement:
A contract is voidable if one party made a false statement of fact that the other party relied on when entering into the contract.
Types of Misrepresentation:
Fraudulent Misrepresentation: Knowingly false statements with intent to deceive.
Negligent Misrepresentation: False statements made without reasonable grounds for believing them to be true.
Innocent Misrepresentation: False statements made without knowledge of their falsehood.
Common Ways Tested:
Exam questions may involve misstatements about material facts, reliance by the other party, and damages resulting from the misrepresentation.
Common Tricks:
Scenarios might include subtle distinctions between opinions and factual statements.
Mnemonic:
F.N.I. (“Fraudulent, Negligent, Innocent”)
Statute of Frauds
Rule Statement:
Certain contracts must be in writing to be enforceable under the Statute of Frauds.
Types of Contracts:
Marriage: Contracts made in consideration of marriage.
Year: Contracts that cannot be performed within one year.
Land: Contracts for the sale of land.
Executor: Contracts by an executor to pay estate debts from personal funds.
Goods: Contracts for the sale of goods priced at $500 or more (UCC requirement).
Suretyship: Contracts to answer for the debt of another.
Common Ways Tested:
Questions often involve whether a contract falls within the Statute of Frauds and whether any exceptions (e.g., part performance, admissions, reliance) apply.
Common Tricks:
Scenarios might test understanding of exceptions and subtle distinctions in the application of the rule.
Mnemonic:
M.Y.L.E.G.S. (“Marriage, Year, Land, Executor, Goods, Suretyship”)
Undue Influence
Rule Statement:
A contract is voidable if one party exerted excessive pressure on the other, taking advantage of a special relationship.
Elements:
Relationship: A relationship of trust and confidence or dominance and dependence.
Unfair Persuasion: Excessive pressure applied by the dominant party.
Common Ways Tested:
Exam questions may involve relationships such as attorney-client, guardian-ward, or elderly person-caregiver.
Common Tricks:
Scenarios might present undue influence disguised as mere persuasion or advice.
Mnemonic:
R.U. (“Relationship, Unfair Persuasion”)
Mistake/Misunderstanding
Rule Statement:
Mutual Mistake:
A contract is voidable if both parties are mistaken about a basic assumption on which the contract was made, and the mistake has a material effect on the agreed exchange.
Unilateral Mistake:
A contract is voidable if one party is mistaken about a basic assumption, the mistake has a material effect on the agreed exchange, and the other party knew or had reason to know of the mistake.
Misunderstanding:
No contract is formed if the parties have different understandings of a material term, and neither party knows or has reason to know of the misunderstanding.
Common Ways Tested:
Questions often involve scenarios where both or one party is mistaken about a fundamental aspect of the contract, or where terms are interpreted differently by the parties.
Common Tricks:
Scenarios might present cases where one party’s knowledge of the mistake or ambiguity about terms must be discerned from the facts.
Mnemonic:
M.U.M. (“Mutual, Unilateral, Misunderstanding”)
Statute of Frauds
MYLEGS
Statute of Frauds
Rule Statement:
Certain contracts must be in writing to be enforceable under the Statute of Frauds.
Types of Contracts:
Marriage: Contracts made in consideration of marriage.
Year: Contracts that cannot be performed within one year.
Land: Contracts for the sale of land.
Executor: Contracts by an executor to pay estate debts from personal funds.
Goods: Contracts for the sale of goods priced at $500 or more (UCC requirement).
Suretyship: Contracts to answer for the debt of another.
Common Ways Tested:
Questions often involve whether a contract falls within the Statute of Frauds and whether any exceptions (e.g., part performance, admissions, reliance) apply.
Common Tricks:
Scenarios might test understanding of exceptions and subtle distinctions in the application of the rule.
Mnemonic:
M.Y.L.E.G.S. (“Marriage, Year, Land, Executor, Goods, Suretyship”)
Irrevocable Offers
Irrevocable Offers
Rule Statement:
An offer is irrevocable under the following circumstances:
Option Contract: An offer is irrevocable if the offeree provides consideration to keep the offer open for a specified period.
Foreseeable Reliance: An offer is irrevocable if the offeree foreseeably and reasonably relies on the offer to their detriment.
Merchant Firm Offer: Under the UCC, a merchant’s written and signed offer to buy or sell goods is irrevocable for the time stated, or if no time is stated, for a reasonable time not exceeding three months.
Begins Performance (Unilateral Contract): An offer for a unilateral contract becomes irrevocable once the offeree begins performance.
Acrostic and Mnemonic
Acrostic Sentence:
Only Firm Merchants Begin.
Option contract
Foreseeable reliance
Merchant firm offer
Begins performance (unilateral contract)
Mnemonic Visualization:
Visualize a Merchant’s Shop:
Imagine a merchant’s shop with a sign that says “Only Firm Merchants Begin.” Picture four scenarios:
The merchant offers an option contract where a customer pays to keep an offer open (option contract).
A builder relies on a quote for materials to bid on a project (foreseeable reliance).
The merchant signs a document promising to hold a sale price for a specified time (merchant firm offer).
A marathon runner starts running a race, and the prize offer becomes irrevocable (begins performance).
Detailed Breakdown
Option Contract:
Definition: An option contract is a promise to keep an offer open for a specified period in exchange for consideration.
Example: A buyer pays a seller $100 to keep the offer to sell a car open for one week.
Foreseeable Reliance:
Definition: If the offeree foreseeably and reasonably relies on the offer to their detriment, the offeror may be estopped from revoking the offer.
Example: A contractor relies on a subcontractor’s bid to submit their own bid for a construction project.
Merchant Firm Offer:
Definition: Under the Uniform Commercial Code (UCC) § 2-205, a merchant’s signed, written offer to buy or sell goods that assures it will be held open is irrevocable for the time stated, or if no time is stated, for a reasonable time not exceeding three months.
Example: A merchant signs a document offering to sell 100 widgets at a fixed price, stating the offer will be open for 30 days.
Begins Performance (Unilateral Contract):
Definition: In a unilateral contract, once the offeree begins performance, the offeror cannot revoke the offer.
Example: A person offers $500 for finding their lost dog. Once someone starts looking for the dog, the offer cannot be revoked.
Common Ways Tested
Option Contracts: Questions may involve scenarios where consideration is provided to keep an offer open.
Foreseeable Reliance: Fact patterns often test reliance on offers in construction bids or employment offers.
Merchant Firm Offers: Scenarios may test knowledge of the UCC requirements for firm offers.
Begins Performance: Questions may involve offers for rewards or unilateral contracts where performance has begun.
Common Tricks
Option Contracts: Scenarios may include offers that appear to be options but lack consideration.
Foreseeable Reliance: Questions might present facts where reliance was not reasonable or foreseeable.
Merchant Firm Offers: Fact patterns may test the specific requirements under the UCC, such as the need for the offer to be in writing and signed.
Begins Performance: Questions may confuse partial preparation with the actual beginning of performance.
STEP ONE: Identify the Governing Law
STEP ONE: Identify the Governing Law
Threshold Issue: Always determine whether the facts involve a sale of goods or a contract for something other than a sale of goods.
Goods (UCC): If the transaction involves goods, the Uniform Commercial Code (UCC) Article 2 applies. Goods are tangible and movable things.
Services (Common Law): If the transaction involves services, real estate, or other non-goods, common law principles apply.
Hybrid Contracts: If the contract involves both goods and services, apply the predominant purpose test to determine the primary purpose of the contract and apply the relevant body of law accordingly.
Mnemonic: “VIBECHECK”
Verify the type of contract (goods or services)
Identify the relevant law (UCC or Common Law)
Balance the elements to decide the predominant purpose
Establish the governing law
Consider mixed elements (hybrid contracts)
Hybrid contracts apply predominant purpose test
STEP TWO: Identify Issues Triggered by the Facts
STEP TWO: Identify Issues Triggered by the Facts
Analyze the specific issues presented in the fact pattern, which may arise in the following areas:
Requirements of Contract Formation
Offer
Revocation: Determine if and when the offeror revoked the offer and if the revocation was effective.
Option Contracts: Consider whether an option contract exists, making the offer irrevocable.
Firm Offers (UCC): For merchants, the offer can be irrevocable without consideration if it’s in writing and signed.
Acceptance
Counteroffers: An acceptance must mirror the offer. Any variance may constitute a counteroffer.
Mailbox Rule: Acceptance is generally effective upon dispatch, while revocation and rejection are effective upon receipt.
Consideration
Bargained-for Exchange: Both parties must provide something of value.
Pre-existing Duty Rule: A promise to perform a pre-existing duty is not valid consideration.
Promissory Estoppel: Enforceable as a consideration substitute if the promisor reasonably expected the promise to induce action or forbearance, and it does so induce such action or forbearance.
Mnemonic: “OARC”
Offer and revocation
Acceptance and counteroffers
Revocation and mailbox rule
Consideration and promissory estoppel
Defenses to Enforceability
Defenses to Enforceability
Statute of Frauds
Requirements: Certain contracts must be in writing (e.g., contracts for the sale of goods over $500, contracts that cannot be performed within a year, etc.).
Duress and Undue Influence
Duress: Contracts entered under physical threat or unlawful pressure are voidable.
Undue Influence: Contracts entered due to unfair persuasion, typically in relationships where one party has dominance over the other, are voidable.
Mistake and Misunderstanding
Mutual Mistake: Both parties are mistaken about a basic assumption on which the contract is based.
Unilateral Mistake: One party is mistaken about a basic assumption, and enforcement would be unconscionable or the other party had reason to know of the mistake.
Fraud, Misrepresentation, and Non-disclosure
Fraud: Intentional misrepresentation of material fact.
Misrepresentation: False statement that induces the other party to enter the contract.
Non-disclosure: Failure to disclose material information, leading to an unfair contract.
Incapacity, Illegality, Unconscionability, and Public Policy
Incapacity: Minors, mentally incapacitated individuals, and intoxicated persons may lack capacity.
Illegality: Contracts for illegal purposes are void.
Unconscionability: Contracts that are grossly unfair or oppressive.
Public Policy: Contracts against public interest or public policy are unenforceable.
Mnemonic: “DIMMIF”
Duress and undue influence
Incapacity and illegality
Mistake and misunderstanding
Misrepresentation and non-disclosure
Incapacity and unconscionability
Fraud
Statute of Frauds
Statute of Frauds
Requirements: Certain contracts must be in writing (e.g., contracts for the sale of goods over $500, contracts that cannot be performed within a year, etc.).
Duress and Undue Influence
Duress and Undue Influence
Duress: Contracts entered under physical threat or unlawful pressure are voidable.
Undue Influence: Contracts entered due to unfair persuasion, typically in relationships where one party has dominance over the other, are voidable.
Mistake and Misunderstanding
Mistake and Misunderstanding
Mutual Mistake: Both parties are mistaken about a basic assumption on which the contract is based.
Unilateral Mistake: One party is mistaken about a basic assumption, and enforcement would be unconscionable or the other party had reason to know of the mistake.
Fraud, Misrepresentation, and Non-disclosure
Fraud, Misrepresentation, and Non-disclosure
Fraud: Intentional misrepresentation of material fact.
Misrepresentation: False statement that induces the other party to enter the contract.
Non-disclosure: Failure to disclose material information, leading to an unfair contract.
Incapacity, Illegality, Unconscionability, and Public Policy
Incapacity, Illegality, Unconscionability, and Public Policy
Incapacity: Minors, mentally incapacitated individuals, and intoxicated persons may lack capacity.
Illegality: Contracts for illegal purposes are void.
Unconscionability: Contracts that are grossly unfair or oppressive.
Public Policy: Contracts against public interest or public policy are unenforceable.
Contract Content and Terms
Contract Content and Terms
Interpreting Terms
Plain Meaning Rule: Terms are given their plain, ordinary meaning.
Ambiguities: Resolved against the drafter.
Parol Evidence Rule
Integration: Determines whether prior or contemporaneous agreements are admissible to explain or supplement the written contract.
Exceptions: To explain ambiguity, subsequent modifications, fraud, mistake, or to show the contract is void or voidable.
Omitted, Implied, or Modified Terms
Implied Terms: Terms implied by law, such as the duty of good faith and fair dealing.
Mnemonic: “TIP”
Terms interpretation
Implied terms and modifications
Parol evidence rule and exceptions
