Contracts Law for BAR Flashcards
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Applicable Law Formation of Contracts Terms of Contract Performance Remedies for unexcused nonperformance Excuse of nonperformance Third-party problems
Contract is a legally enforceable agreement (not just an agreement)
Quasi K / Quantum Meruit is an equitable remedy (restitution), requires elements of:
P has conferred a benefit on D, AND
P reasonably expected to be paid, AND
D realized unjust enrichment if P not be compensated
Recovery in quasi K is value ob benefit conferred.
Bilateral K…
offer that is open as to the method of acceptance.
offerree can return promise or go out and perform
Unilateral K
offer that expressly requires performance as the only possible method of acceptance
(return promise doesn’t cut it)
usually reward/prize or offer requires performance for acceptance and uses words ‘offer’ ‘only’ ‘by’
Common law applies to..
everything except the sale of goods
Article 2 of the UCC applies to….
sale of goods (tangible personal prop)
IF transaction is mixed, goods and services.. use ‘all or nothing/more important part’ predominant purpose test
Court factors:
1) worth of goods versus service
2) time spent on service portion (less time = UCC)
3) sophistication of service (surgery)
4) typical sales language in the K
In looking for a legally enforceable agreement, look for 3 things:
1) the initial communication (offer)
2) what happens after the initial communication (termination o the offer)
3) who responds and how (acceptance)
basic test for an offer..
whether a reasonable person in the position of the offer would believe that his/her assent creates a K
Sale of real estate requires…..
price and description of land.. or else not an offer
Sale of goods, article 2 has no price requirement, still an offer if the parties so intend
price can be filled in later via gap fillers in UCC (FMV)
Vague or ambiguous material terms not an offer under UCC or common law
3 magic words:
- appropriate
- fir
- reasonble
Requirements/output K’s are valid. Magic words include…
Requirements, All, Only, Solely
But no unreasonably disproportionate increase is allowed. Buyer can increase output requirements so long as increase is in line with prior demands.
An AD is not an offer, but an invitation to deal. 2 exceptions…
1) ad can be an offer it is in the nature of a reward
2) ad can be offer if it is specific as to quantity and expressly indicates who can accept.
Four methods to terminate an offer…
1) lapes of time (time stated or reasonable time)
2) words or conduct of offerror (revocation of an offer)
3) Words or conduct of offerree (rejection)
4) Death of a party prior to acceptance
Lapse of time to terminate an offer
if more than 30 days between offer and acceptance on exam then raise lapse of time rule.
Words or conduct of offeror to terminate an offer (revocation) can be:
- an unambiguous statement by Offeror to offeree of unwillingness or inability to contract OR
- unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of.
Offeree has to know/hear/see about oferorr revocation for it to be effective.
Offer terminated only if reasonable/resliable source informs ofereee. If unreliable source, then possible ofer still open.
Revocation of an offer becomes effective when received.
An offer cannot be revoked after it has been accepted = breach.
Four types of offers that CANNOT be revoked by offeror
1) if the offeror has promised to keep the offer open AND this promise is supported by consideration (OPTION K)
2) Merchant Firm Offer Rule - offer can’t be revoked for up to 3 monhts if (i) offer to buy or sell goods, (ii) signed, written promise to keep offer open, and (iii) party is a merchant.
3 Reliance: an offer cannot be revoked if there has been detrimental reliance by the oferee that is reasonably foreseeable on the offerors part. (using sub’s bid in construction K)
4) The start of performance pursuant to an offer to enter into unilateral K, makes that offer irrevocable for a reasonable time to complete performance. Requires start of performance, not mere prep to perform.
third method of termination: words or conduct of offeree (rejection).
Three methods of indirect rejection (counteroffer, conditional acceptance, and additional terms (common law only)).
1) counteroffer terminates offer and becomes a new offer. Bargaining does not terminate the offer.
2) conditional acceptance operates same as counter offer. terminates the offer and becomes a new offer. Look for phrases such as ‘if’ ‘but’ ‘provided’ ‘ so long as’ ‘on condition that’
3) additional terms to a COMMON law K: Mirror Image Rule. Under Common Law, an acceptance that adds new terms is treated like a counteroffer.
* additional terms still acceptance under UCC (2-207), seasonable expression of acceptance. If BOTH parties MERCHANTS, the additional term is part of the K. Two exceptions: 1) additional term not part of K between merchants if it materially changes the offer. 2) additional term is NOT part of K between merchants if the Offeror objects to the change.
* Knock out rule: conflicting terms deleted.
Fourth method to terminate an offer: death of party prior to acceptance:
death or incapacity terminates the ofer.
2 exceptions…
1) Option: if party dies during option K, it doesn’t terminate. Oferee can still accept.
2) Part performance of offer to enter into unilateral K: if offeror dies while party starts performing - party still has right to complete K and be paid.
An offer can be accepted only by…
1) a person who knows about the offer
2) who is the person to whom it was made
Offers CANNOT be assigned. Options can be assigned unless the option otherwise provides.
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Six methods of accepting an Offer…
1) Oferee fully performs (notice may be required depending on what the offer provides and whether the oferee has reason to believe that offeror will not learn of acceptance.
2) Offeree starts to perform (acceptance in bilateral K, not acceptance in unilateral K. Unilateral K requires completion of performance, start of performance is not acceptance).
3) offeree promises to perform (note, offers that expressly require performance must have performance for acceptance and reward offers required performance.)
4) Offeror and Offeree are at different places and there are conflicting communication between parties.1) Generally communications are effective only when received. 2) Generally acceptance is effective when SENT. 3) If rejection sent first, then ignore rule 2.
5) Seller of goods sends “wrong goods” = acceptance and breach. Note: Accommodation Exception when seller provides an explanation, that is a counteroffer and no breach.
6) Offeree is silent. Silent is not Acceptance. Exception: if custom between parties indicates acceptance is reasonable, or offeree by words or conduct agrees that silence is acceptance then silence is acceptance.
Legal reasons for not enforcing an agreement include
1) lack of consideration or a consideration substitute
2) lack of capacity of the person who made that promise
3) statute of frauds
4) existing laws that prohibit performance of agreement
5) misrepresentation
6) duress
7) unconscionability
8) ambiguity in words of agreement
9) mistakes at time of agreement as to the material facts of agreement