Contracts MBE Topics Flashcards
What can be delegated?
Most duties can be delegated except those involving special skills
Effects of a Delegation
The duty is fulfilled by the delegee and the original party can be sued for breach of the duty
Effect of an Assignment
The benefit runs to the assignee and the assignee has a claim against the other party
Restrictions on Assignments
Generally interpreted as a prohibition on assigning duties, not benefits
Types of Assignments
Gift assignments and Consideration Assignments
Gift Assignments and Revocation
Freely revocable and trumped by consideration assignments
Consideration Assignments
Made in exchange for consideration
Competing Consideration Assignments
Consideration assignments generally are considered by first in time UNLESS the one raising its rights did not know about the other assignment and sues for it
What’s the difference between the creditor and donee beneficiaries?
Creditor third parties can sue the obligee
Donees can’t the sue the obligee because it was a gift
When can an agreement be modified or canceled where there is a third party beneficiary?
Before it vests
- knowledge of k and assets
- knowledge of k and relies
- knowledge of k and sues to enforce
When there’s a third party beneficiary, who can enforce the contract?
The intended third-party beneficiary can sue the obligor for breach
The obligee can sue the obligor for breach
Incidental beneficiaries cannot sue
When is specific performance available?
Unique goods and land purchases are the most common
Generally not unless money damages are inadequate.
Never for services
Consequential Damages
Only buyers get consequential damages but they have to be foreseeable
Are punitive damages permitted for breach of contract?
Nope
Expectation Damages Purpose
Put the party in the position they’d be in had the contract been fulfilled
Damages Calculation for a violation of Warranty
Value of the Goods Warranted subtracted by the value of the non conforming goods PLUS incidental and foreseeable consequential expenses
Damages using Market Price
Market price at the time buyer learns of breach and places tender minus K price + incidental and foreseeable consequential damages
Damages using cover price
Cover Price minus the K price + incidental and foreseeable consequential
But must be good faith
What damages does a buyer get when they receive nonconforming goods?
If they accept, they get warranty damages. But first they must notify the seller in reasonable time after they discover or should have discovered the defect
Seller Anticipatory Breach of Goods Contract
Damages is market price at time of breach and K price
3 Types of Damages for a Seller of Goods when the Buyer Refuses to Accept Conforming Goods
1) resell and recover difference between resale and K price (and incidental)
2) recover difference between market price at time and place of delivery and the K price (and incidental)
3) If volume seller, tost profits appropriate: the difference between the K price and the cost to the seller (and incidental)
Seller Remedy for when Buyer Accepts Goods and Doesn’t Pay
Action for the price
Remedy for Breach of Sale of Land
Difference between the K price and the fair market value of the land
Construction Contract Breach By Owner Before Completion
The builder recovers expected profit plus costs expended
Construction contract breached by owner after completion
Contract price
Breach by Builder in a Construction contract
Take the costs of completion and damages plus delay and subtract
quasi-contract recovery for the benefit conferred by the builder
Restitution Definition
Equitable remedy is based on their idea of preventing unjust enrichment when one party conferred a benefit on another without gratuitous intent.
When does restitution come into play?
Contract exists and breached
Contract is unenforceable
No contract relationship
Measuring restitution
The value of the benefit conferred
Restitution in a Contract Breach
Restitution can occur when
1) there’s not full performance and the K is breached
2) Losing contract where the value of the good or service is greater than the contract price and so expectation or reliance damages inadequate
3) Breach by the Plaintiff (if intentional, some don’t give it; modern will permit but limit to k price minus damages incurred as result of breach)
4) Advance payment of something and then breaches, can recover some of the payments.
Unless seller can prove greater damage, they may keep advance payment totaling 20% of purchase price or $500 (whichever is less), balance is returned to buyer.
Restitution when No K exists Requirements
Available when quasi contract occurred when
1) p conferred benefit on D with
2) reasonable expectation for compensation for value and
3) D knew or had reason to know of the p’s expectation and
4) would be unjustly enriched if they could keep the benefit
What is a recission?
Recission is where the original k is considered voidable and rescidned and parties are left like no k existed
When must the justification for the recission have occurred?
Either before the K was formed or at the time
Common Grounds for Recission
Mutual mistake of material fact
Unilateral mistake if other party knew or should have known
Unilteral mistake if hardship by the mistaken party is so extreme it outweighs party’s benefit
Misrepresentation of fact or law
Other grounds like duress, undue influence, illegality, lack of capacity, no consideration
Which law applies in sales of goods v. everything else?
UCC applies to sales of goods and common law to everything else
Mixed goods and services law
Whichever is the predominant purpose is the law that applies
What are the three essential elements of a contract?
Offer, acceptance, and consideration
Offer Creation Requirements
1) intent to enter into a contract
2) specific terms (price, quantity) but always identity of parties and subject matter
3) must be communicated to the offeree
Key Terms required for Land, Goods,
Land – identify the land and price terms
Goods – quantity unless requirement/output contract
Requirement for Employment K Offer
Duration (if not specified it is at will)
Nature of the work
Requirements/Output Contracts
K to purchase all that you require from one seller or a k to purchase all of the output from a producer so long as it is in good faith and not an unreasonable deviation
What terminates an offer
Lapse of time (either based on time stated in offer or reasonable time based on content/subject)
Reject – express
Counteroffer
Revocation
Counteroffer Termination
Counteroffers act as rejection
Common law: acceptance must mirror exactly or is a counteroffer
UCC:
if between merchants – new or additional do not terminate and become part of contract if they are not timely rejected, K is conditional on them, or materially alter
between nonmerchant and merchant - new is a proposed addition
Distinguish mere inquiries from counteroffers
Reasonable person test of would you believe the original had been rejected
A mere inquiry is something like “would you consider lowering price” v. counter “I’ll do $5000 not $6000.”
When is a rejection effective?
When received by offeror
Counteroffering an Option Contract
Counteroffers do not constitute a termination of the offer. Can still accept unless the offeree detrimentally relied on the offeree’s rejection
When is a revocation effective?
When it is received by the offeree. If it is by publication, it is when published and the offeree doesn’t need to have actually read it
Indirect Revocation
When the offeree receives
1) correct information
2) from a reliable source
3) acts of offeror would indicate to a reasonable person that the offeror no longer wishes to make the offer
Irrevocable Offers
1) firm offer - by merchant in a writing under UCC. Can be held open for at most 3 months
2) Option contract - promise to hold open an offer in exchange for consideration
3) Unilteral contract if the offeree begins performance (but no obligation to complete)
4) Reasonably foreseeable that there is substantial reliance on the offeror
Type of Contract
Bilateral – accepted by a promise to perform or beginning performance
Unilateral – rewards, prizes, or offers that specify they are unilateral can only be accepted by full performance (most are bilateral)
When is acceptance effective?
When sent (mailbox rule) unless it is an option contract which is valid on receipt
If you reject first and then change mind, the one that reaches first is controls.
Consideration defined
Bargained for exchange
Past consideration rule
Generally, past consideration is no consideration and only creates a gratuitous promise
Termination of an Offer by Operation of Law
Death or insanity of either party, destruction of subject matter or supervening illegality occurs
Can you accept an offer without knowing it exists?
No. To accept you must know the offer exists. (A sends offer to B. B sends an offer to A with same terms. B’s offer is not an acceptance) You need a meeting of the minds
How do you accept a bilateral contract?
Beginning performance or the method stated in the offer
Silence as acceptance
Silence is generally not acceptance but there may be acceptance if it is based on prior dealings or trade practices or commercially reasonable under the circumstances
Acceptance under the UCC
1) by promising to ship or by promptly shipping goods
Shipping of Nonconforming Goods as Acceptance
creates a contract but also a breach unless they are offered with notification as an accommodation. The buyer can accept or reject, but rejection is not a breach.
Merchant Confirmatory Memo Rule
A merchant’s memo confirming an oral agreement that contains different or additional terms is subject to the battle of the forms provisions
Divisible Contracts
A contract is divisible if
1) the performance of each party must be divided into two or more parts under the contract
2) the number of parts due from each party must be the same
3) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party
