Contracts Law LAST PUSH Flashcards
Unilateral Contract Situations
(1) When the offeror clearly indicates that completion of performance is the only manner of acceptance; and
(2) where there is an offer to the public (such as an award)
Requirements and Output Contracts Cannot Tender
there cant be a tender of or a demand for a quantity reasonably disproportionate to (1) any stated estimate or (2) any normal or otherwise comparable prior output or requirements
Termination by Offeree: Lapse of Time
an offer may be terminated by the offeree’s failure to accept within the time specified by the offer or, if no deadline was specified, within a reasonable period
Termination by Offeree: Express Rejection
an express rejection is a statement by the offeree that they do not intend to accept the offer
Termination by Offeree: Counteroffer
a counteroffer is an offer made by the offeree to the offeror that contains the same subject as the original offer but differs in its terms
Termination by Offeror: Revocation
revocation is the retraction of an offer by an offeror
can be express or implied
Termination by Offeror: Indirect Revocation
an offer may be revoked indirectly if the offeree receives:
(1) the correct information
(2) from a reliable source
(3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer
Limitations on Offeror’s Power to Revoke
(1) Option contract
(2) Merchant’s Firm Offer
Option Contract
an option is a distinct contract in which the offeree gives consideration for the promise by the offeror not to revoke the outstanding offer
Merchant’s Firm Offer Rule
(1) if a merchant offers to buy or sell goods in a signed writing and (2) the writing gives assurances that it will be held open
Detrimental Reliance
when the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time
Termination by Operation of Law
(1) death or insanity of either party
(2) destruction of the proposed contract’s subject matter
(3) supervening illegality
Offers to Buy Goods for Current or Prompt Shipment
an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming goods or nonconforming goods
Unilateral Contract: Notice of Performance
no notice is required if:
(1) the offeror waived notice or
(2) the offeree’s performance would normally come to the offeror’s attention within a reasonable time
Additional or Different Terms and one Party is Not a Merchant
if any party to the contract is not a merchant, the additional or different terms are considered to be mere proposals to modify the contract that do not become part of the contract unless the offeror expressly agrees
Additional Terms and Both Parties are Merchants
if both parties to the contract are merchants, additional terms will be included in the contract unless:
(1) they materially alter the original terms of the offer
(2) the offer expressly limits acceptance to the terms of the offeror OR
(3) the offeror has already objected to the particular terms, or objects within a reasonable time after no-notice is received
Mailbox Rule Applies UNLESS
(a) the offer stipulates that acceptance is not effective until received
(b) an option contract is involved
(c) the offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective
(d) offeree sends acceptance and then a rejection, in which case acceptance is effective unless the rejection arrives first and the offeror detrimentally relied on it
Preexisting Legal Duty Rule EXCEPTIONS
(a) new or different consideration is promised
(b) promise is to ratify a voidable obligation
(c) preexisting duty is owed to a third person rather than to the promisor
(d) honest dispute as to duty
(e) there are unforeseen circumstances sufficient to discharge a party or under the modern view, if the modifications is fair and equitable in view of the circumstances when the contract was made
Modern View on Modification
permits modification without consideration if:
(1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and
(2) it is fair and equitable
Absence of Mutual Understanding - Misunderstanding Ambiguous Contract Language
(a) neither party aware - no contract unless both parties intended the same meaning
(b) both parties aware - no contract unless both parties intended the same meaning
(c) one party aware - binding contract based on the ignorant parties reasonable belief
Mutual Mistake as to Existing Facts
contract may be voidable by the adversely affected party if:
(1) the mistake concerns a basic assumption on which the contract is made
(2) the mistake has a material effect on the agreed upon exchange
(3) the party seeking avoidance did not assume the risk of the mistake
Fraudulent Misrepresentation
if a party induces another to enter into a contract by using fraudulent misrepresentation the contract is voidable by the innocent party if they justifiably relied on the fraudulent misrepresentation
Material Misrepresentation
the contract is voidable by the innocent party if the innocent party justifiably relied on the misrepresentation was material
When is a Misrepresentation Material
if:
(1) it would induce a reasonable person to agree or
(2) the maker knows that for special reason it is likely to induce the particular person to agree even if a reasonable person would not
Exceptions if Consideration or Subject Matter is Illegal
(1) Plaintiff is unaware of the illegality while the defendant knows of the illegality
(2) the parties are not in pari delicto or
(3) the illegality is the failure to obtain a license when the license is for revenue raiding purposes rather than for protection of the public
Unconscionable Contract or Clause
the court may:
(1) refuse to enforce the contract
(2) enforce the remainder of the contract without the unconscionable clause, or
(3) limit the application of any clause so as to avoid the unconscionable result
Sales of Goods Contracts Removed from Statute of Frauds
part performance takes a sale of goods contract out of the Statute of Frauds when:
(1) the goods have been specially manufactured or
(2) the goods have been either paid or accepted
When Writing is Not Required
(a) specially manufactured goods
(b) admissions in pleadings or court
(c) merchant’s confirmatory memo rule
Collateral Agreements and Naturally Omitted Terms
a term would naturally be omitted if:
(1) it does not conflict with the written interrogation; and (2) it concerns a subject that similarly situated parties would not ordinarily be expected to include in the written instrument
Additional Terms Under the UCC
may add additional consistent additional terms UNLESS:
(1) there is a merger clause or
(2) the courts find from all of the circumstances that the writing was intended as a compete and exclusive statement of the terms of the agreement
Conspicuous
it is so written, displayed, or presented that a reasonable person against whom it is to operate ought to have noticed it
Conspicuous Language
language in the body of a writing is conspicuous if:
(1) it is in large type then surrounding text
(2) it is in contrasting type, font, or color
(3) it is set off from the text by marks that call attention to it
Noncarrier Case - Seller is Merchant
if the seller is a merchant, risk of loss passes to the buyer only when they take physical possession of the goods
Noncarrier Case - Seller is Not a Merchant
if seller is not a merchant, risk of loss passes to the buyer upon tender of delivery
Shipment Contract
if the contract authorizes or requires the seller to ship the goods by carrier but does not require them to deliver the goods at a particular destination, it is a shipment contract and risk of loss passes to the buyer when the goods are delivered to the carrier
Seller’s Duties Under Shipment Contract
a seller must:
(1) make a reasonable contact with the carrier on behalf of the buyer
(2) deliver the goods to the carrier
(3) promptly notify the buyer of the shipment and
(4) provide the buyer with any documents needed to take possession of the goods
Destination Contracts
if the contract requires the seller to deliver the goods at a particular destination, the risk of loss passes to the buyer when the goods are tendered to the buyer at the destination
FOB
the seller bears the risk of and expense of getting he goods to the named location
FAS
risk of loss passes to the buyer once the goods are delivered to the dock
Goods Destroyed before Risk of Loss Passes
if the goods were identified when the contract was made are destroyed:
(1) without fault of either party and
(2) before the risk of loss passes to buyer, the contract is avoided
Condition
condition normally means either (1) an event or state of the world must occur or fail to occur before a party has a duty to perform or
(2) an event or state of the world the occurrence or nonoccurrence of which releases the party from their duty to perform
Excusal of Condition
a duty of immediate performance with respect to a conditional promise doesnt become absolute until the conditions:
(1) have been performed or (2) legally excused
Effect of Anticipatory Repudiation
Non repudiating party has four options:
(1) treat the anticipatory repudiation as a total repudiation and sue immediately
(2) suspend their own performance and wait to sue until the performance date
(3) treat the repudiation as an offer to rescind and treat the contract as discharged
(4) ignore the repudiation and urge the promisor to perform
Divisible Contract
three tests must be concurrently satisfied to make a contract divisible:
(1) the performance of each party is divided into two or more parts under contract
(2) the number of parts due from each party is the same
(3) performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party, meaning each performance is quid pro quo of the other
Unilateral Contract Rescission
for an effective rescission in a unilateral contract situation where the offeree has already performed, the rescission promised must be supported by one of the following:
(1) an offer of new consideration by the nonperforming party
(2) elements of promissory estoppel
(3) manifestation of an intent by the original offeree to make a gift of the obligation owed to them
Accord
is an agreement in which one party to an existing contract agrees to accept, in lieu of performance that they are supposed to receive from the other party, some other, different future performance
Satisfaction
is the performance of the accord agreement
Breach of Creditor
if a creditor breaches an accord agreement by suing on the original contract, the debtor has two courses of action available:
(1) raise the accord agreement as an equitable defense and ask that the contract action be dismissed; or
(2) wait until they are damaged and then bring an action at law for damages for breach of the accord contract
Novation
occurs when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract
Valid Novation
(1) a previous valid contract
(2) an agreement among all parties - including the new party
(3) the immediate extinguishment of contractual duties as between the original contracting parties; and
(4) valid and enforceable new contract
Impracticably Test
the test for finding of impracticability is that the party to perform has encountered:
(1) extreme and unreasonable difficulty and or expense and
(2) its nonoccurence was a basic assumption of the parties
Discharge by Frustration
the elements necessary to establish frustration are as follows:
(a) there is some supervening act or event leading to the frustration
(b) at the time of entering the contract, the parties did not reasonably foresee the act or even occurring
(c) the purpose of the contract has been completely or almost completely destroyed by this act or event
(d) the purpose of the contract was realized by both parties at the time of making the contract
Breach Occurs
(1) the promisor is under an absolute duty to perform and
(2) this duty has not been discharged
this failure to perform in accordance with the terms will amount to a breach
Materiality of Breach
(1) amount of benefit received by the nonbreaching party
(2) the adequacy of compensation for damages to the injured party
(3) the extent of part performance
(4) hardship to the breaching party
(5) negligent or willful behavior of the breaching party AND
(6) the liklihood of the breaching party will perform the remainder of the contract
Minor Breach
a breach of contract is minor if the oblige gains the substantial benefit of their bargain despite the obligor’s defective performance
If Breach is Material
if the breach is material, the nonbreaching party may:
(1) may treat the contract as at an end; that is, any duty of counterperformance owed by them will be discharged and (2) will have an immediate right to all remedies for breach of the entire contract, including total damages
UCC Perfect Tender Rule
if goods or their delivery fail to conform to the contract in any way, the buyer generally may reject all, accept all, or accept any commericial units and reject the rest
Right to Reject Cut Off by Acceptance
buyer accepts when:
(1) after a reasonable opportunity to inspect the goods, they indicate to the seller that the goods conform to the requirements or that they will keep the goods even though they fail to conform
(2) they fail to reject within a reasonable time after tender or delivery of the goods or fail to seasonably notify the seller of their rejection OR
(3) the do not act inconsistent with the seller’s ownership
Buyer’s Responsibility for Goods After Rejection
if the seller gives no instructions within a reasonable time, the buyer may:
(1) reship the goods to the seller
(2) store them for the seller’s account or
(3) resell them for the seller’s account in a public sale or private sale after giving the seller reasonable notice of the intent to resell
When Acceptance May Be Revoked
the buyer may revoke their acceptance if the goods have a defect that substantially impairs their value to the buyer and
(a) they accepted the goods on the reasonable belief that the defect would be cured and it has not been; or
(b) they accepted the goods because of difficulty discovering the defects or because of the seller’s assurance that the goods conformed to the contract
When Must Acceptance be Revoked
must occur:
(1) within a reasonable time after the buyer discovers or should have discovered the defects and
(2) before any substantial change in the goods occurs that is not caused by a defect present at the time the seller relinquished possession
Covenant Not to Compete
most courts will grant an order of specific performance to enforce a contract not to compete if:
(1) the services to be performed are unique and (2) the covenant is reasonable
When a Covenant is Reasonable
(a) the covenant must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant
(b) the covenant must be reasonable as to its geographic scope and duration and
(c) the covenant must not harm the public
Buyers Right to Replevy of Identified Goods
if a buyer has made at least partial payment of the purchase price of goods that have been identified under the contract and the seller has not delivered the goods, the buyer may replevy in two circumstances:
(1) the seller becomes insolvent within 10 days after the first payment
(2) the goods were purchased for personal, family, or household payments
Types of Damages
(1) compensatory damages
(2) consequential damages
(3) punitive damages
(4) nominal damages
(5) liquidated damages
(6) incidental damages
Liquidated Damages Enforceable
following two requirements must be met:
(1) damages for contractual breach are difficult to estimate or ascertain at the time the contract is formed AND
(2) the amount agreed on is reasonable forecast of compensatory damages in the case of breach
Where Buyer Repudiates or Refuses to Accept Conforming Goods
when the buyer wrongfully repudiates or refuses to accept conforming goods the seller can:
(i) resell the goods and recover the different between the contract price and the sale price
(ii) recover the difference between the market price and the contract price; or
(iii) if the above measures are inadequate because the seller could have made an additional sale, recover under a lost profits measure and the difference between the contract price and the cost to the seller
Construction Contract Breached by Owner
builder is entitled to profits that would have resulted from the contract plus any costs expended
Construction Contract Breached by Builder
the owner is entitled to the cost of completion plus reasonable compensation for the delay
Quasi Contract Remedy
restitution available when there is no contractual relationship between the parties if:
(1) the plaintiff has conferred a benefit on the defendant by rendering or expending properties
(2) the plaintiff conferred a benefit with the reasonable expectation of being compensated for its value
(3) the defendant knew or had reason to know of the plaintiff’s expectation AND
(4) the defendant would be injustly enriched if they were allowed to retain the benefit without compensating the plaintiff
Grounds for Rescission
(i) mutual mistake
(ii) unilateral mistake if the other party knew or should have known
(iii) unilateral mistake if the hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the contract
(iv) misrepresentation of fact or law by either party as to a material factor in the negotiations that was relied upon
(v) other grounds such as duress, undue influence, illegality, lack of capacity, and failure of consideration
Grounds for Reformation: Mistake
there must be:
(1) an agreement between the parties
(2) an agreement to put the agreement in writing
(3) a variance between the original agreement and the writing
Grounds for Reformation: Misrepresentation
must relate to the content or the legal effect of the record
Third Party Beneficiary Determining Whether Intended or Incidental
consider whether the beneficiary is (1) identified int he contract, (2) receives performance directly from the promisor, or (3) has some relationship with the promisee to indicate intent to benefit
When Beneficiaries’ Right Vest
a third party can enforce a contract only if their rights have vested - this occurs when they:
(1) manifest assent to a promise in the manner requested by the parties
(2) bring a suit to enforce the promise, or
(3) materially change position in justifiable reliance on the promise
EXCEPTIONS on When Rights Can Be Assigned
(1) an assignment that would substantially change the obligors duty or risk
(2) an assignment of future rights to arise from future contracts and
(3) an assignment prohibited by law
Assignment for Value
(1) done for consideration or
(2) taken as security for or payment of a preexisting debt
Exceptions to Revocation of Gratuitous Assignments
irrevocable:
(1) the obligor has already performed
(2) a token chose tangible claim
(3) an assignment of a simple chose that is put in writing or
(4) the assignee can show detrimental reliance on the gratuitous assignment
Methods of Revocation for Gratuitous Assignments
terminated by:
(1) the death or bankruptcy of the assignor
(2) notice of revocation by the assignor to the assignee or the obligor
(3) the assignor taking performance directly from the obligor or
(4) subsequent assignment of the same right by the assignor to another
EXCEPTIONS to Delegation of Duties
(1) the duties involve personal judgment and skill
(2) delegation would change the obligee’s expectancy
(3) a special trust was responded by delgator by the other party to contract and
(4) there is a contractual restriction on delegation
