Contracts Midterm :skull: Flashcards
1
Q
What are implied in fact terms?
A
Terms agreed upon by the parties of the contract.
2
Q
What are implied by law terms?
A
terms court find should be made as part of the agreement
3
Q
What are implied promises?
A
- promises that are implied from the party’s words or actions
- serve as consideration just as an explicit promise would
4
Q
UCC’s views on sale of goods and “best efforts”?
A
contracts must be executed to both the buyer and seller’s best efforts
5
Q
UCC’s views on performing and enforcing contracts in general?
A
implied obligation of GOOD FAITH
6
Q
is reasonable notification of termination required under the UCC?
A
YES
7
Q
What is a warranty?
A
contractual assurance that goods will meet certain standards
8
Q
Warranty of title?
A
guarantee seller has to title of goods
9
Q
Warranty of Quality?
A
guarantee of a quality of a product for a specified time
10
Q
Express warranty?
A
WRITTEN or ORAL express warranty given by the seller or manufacturer of a consumer product concerning the quality of nature of the goods
11
Q
Implied warranty of merchantability?
A
- seller must be a merchant
- a guarantee that goods sold will be of reasonable quality
- and fit for the ordinary purpose for which such goods are used
12
Q
Implied warranty of fitness for a particular purpose?
A
- seller knows or has reason to know the buyer’s intended, special purpose at the time of sale
- the buyer relies on the seller’s skill or judgment to provide suitable goods
- seller is generally allowed to exclude or modify the warranty through a clear and conspicious disclaimer
13
Q
What are the three ways express warranties are created? (ADS) aim down scope
A
- affirmation of fact or promise
- description of the goods
- sample or model
14
Q
elements of breach in implied warranty of merchantability?
A
- merchant sold goods not merchantable
- the buyer suffered an injury
- the defect in the goods caused the injury
15
Q
elements of breach in implied warranty of fitness for a particular purpose?
A
- seller knew or had reason to know of the buyer’s particular purpose
- the seller was aware that the buyer was relying on the seller’s expertise
- buyer actually relied on the seller’s skill or judgment when purchasing
- the goods were not fit for the buyer’s intended purpose
16
Q
Disclaiming express warranties?
A
- oral express (can be disclaimed)
- written (nearly impossible to disclaim)
17
Q
Disclaiming implied warranties?
A
- written disclaimers must be conspicious
- fitness for purpose: exclusion or modification MUST BE IN WRITING AND CONSPICUOUS
- for merchantability: exclusion or modification MUST USE THE WORD “MERCHANTABILITY”
18
Q
UCC’s views on how to disclaim?
A
- use the language “as is” that clearly communicates no implied warranties
19
Q
Three different types of statuses for contracts?
A
- valid
- void
- voidable
20
Q
Who is capable of entering into a valid contract?
A
- an adult
- of sound and reasonable mental capacity
21
Q
three categories of incapacity?
A
- minority
- mental
- intoxication
22
Q
Minority incapacity elements and status of contract?
A
- under 18 years old
- VOIDABLE
a) minor can choose to disaffirm in a reasonable time or ratify in a reasonable time
23
Q
majority and minority views on restitution required for a minor?
A
- MAJORITY: only return the property remaining without depreciation… EXCEPTIONS:
a) necessaries
b) misrepresentation of age
c) tortious conduct - MINORITY: return property and compensate for use, depreciation or loss in value
24
Q
Mental impairment elements and status of contract?
A
- unable to understand the nature and consequences of their actions
- party claiming mental impairment has burden of proof
- VOIDABLE UNLESS COURT DEEMS THEM INSANE, THEN VOID
25
Two tests for proving insanity?
1. **cognitive** (traditional): did party lack contractual capacity that could not understand the nature and quality of the transaction or grasp its significance
2. **volitional** (modern): person is **unable** to act in a **reasonable** **manner** in relation to the **transaction** AND the other party has reason to know of his or her **condition**. NEED medical evidence or expert testimony
26
Intoxication and status of contract?
- drugs or alcohol, not able to understand the nature and consequences of the transaction
- VOIDABLE
27
Consent in contracts?
- entry into a contract must be voluntary
28
duress?
any **wrongful** **act** or **threat** by one contracting party which **compels** or **induces** the other party through **FEAR** to enter into a transaction **AGAINST HER WILL**
29
factors indicating duress? (p b u d t) think peanut butter and udt
1. acts with no legitimate **purpose**
2. greatly unequal **bargaining** power
3. **unnaturally** large gain for one party
4. financial **distress** to one party
5. **timing**: immediacy asked or required
30
Two types of duress and status of contract?
1. **physical**: VOID
2. duress by **threat**: VOIDABLE
31
Elements of duress?
1. wrongful or unlawful act or threat
2. act or threat deprived the victim of his voluntary will
32
What is undue influence and status of contract?
- special relationship between the two parties of trust or domination
- improper or unfair persuasion by a stronger party to enter into a contract
- VOIDABLE
33
What is misrepresentation and status of contract?
- assertion that is made not in accord with the facts
- expressed by either words or conduct
- misrep that is either fraudulent or innocent but material = VOIDABLE
34
Two types of misrepresentation?
1. Fraudulent: intends her assertion to induce another party to into an agreement
2. Innocent but material: false assertion is made innocently or negligently
35
Opinion vs. Facts in misrepresentation?
- must be a statement of fact as opposed to an opinion
36
Traditional vs. modern rule in misrepresentation?
1. Traditional: opinion is no cause of action
2. modern: exceptions for opinions include:
a) special relationships of trust
b) special skill or judgment
c) susceptibility
37
What is nondisclosure?
a form of misrepresentation, party may be liable for misrep by failing to disclose a material fact when there is a duty to do so
38
What is concealment?
the act of knowingly or intentionally preventing another from learning a fact they otherwise would have learned
39
What is the doctrine of unconscionability?
- agreement is so unfair that it shocks the conscience, so courts step in to weigh consideration of parties
- defense to unfair contracts
40
procedural unconscionability and its elements?
- fairness of the agreement process
1. **lack** of meaningful choice for one party
2. **unequal** bargaining power
3. **insufficient** opportunity to review
4. terms **hidden**
5. take it or leave it **terms**
41
substantive unconscionability and its elements?
- fairness of the terms of the contract
1. terms that are **unfairly one sided**
2. **limitations** on remedies or relief
3. **imbalance** in the bargain
42
Who decides unconscionability, a judge or jury?
a judge, but it's a fact specific inquiry
43
What is the scope of unconscionability? if unconscionability is found, is the whole contract void?
courts can find either the whole contract no good or parts of it no good
44
Advantages for arbitration?
1. faster
2. less expensive
3. more private
4. arbitrators better at grasping commercial realities
5. more apt to get commercially reasonable solution
45
The reality of arbitration?
1. not really faster than small claims
2. lack of guidance favors regular business
3. precluded class actions
46
Arbitration clauses can be considered unconscionable?
YES
47
what happens when there is no legislative cap on interest rates, can courts still find unconscionability?
YES
48
Two types of contracts under public policy that are unenforceable?
1. illegal contracts
2. Against public policy
49
What are the factors in determining whether a contract violates public policy (Reasonableness)?
1. scope of restriction
2. hardship imposed on promisor
3. the public interest
50
Reasonableness defined in public policy?
1. scope of activity
2. geographical reach
3. time duration
51
Court's views on non-compete clauses in contracts?
- invalid UNLESS it protects some legitimate interest beyond the employer's desire to protect itself from competition
52
What is an exculpatory clause?
a contractual provision that releases one party from liability for negligence or other wrongdoing
53
Exculpatory clauses are unenforceable if:
1. attempt to exclude gross negligence or intentional conduct
2. public interest or essential service
3. unequal bargaining power of the parties
4. language not clear and conspicuous
54
What is a mistake and when does it need to happen?
agreement on an erroneous assumption about the facts that existed at the time of contracting
55
Two types of mistakes?
1. mutual mistake
2. unilateral mistake
56
What is a mutual mistake?
- mistake made by both parties, who are in agreement as to what the contract terms should be, but the agreement as written fails to reflect that common intent
57
What is the rule for mutual mistake, how does an adversely affected party avoid contract?
1. parties either possessed
2. different understandings about a material term of the contract OR
3. mutually mistaken about the material facts or circumstances
4. related to a basic assumption about the contract
58
How do parties bear the risk of a mistake in mutual mistake?
1. when the risk is allocated by agreement
2. when the party is aware of limited knowledge but treats it as sufficient
3. when the court allocates the risk to the party on reasonable grounds
59
What is a unilateral mistake?
a mistake made by one party
60
Elements required for a unilateral mistake to be grounds for relief?
1. other party makes material misrepresentation (either intentional or unintentional
2. engaged in fraud or other inequitable conduct
3. mistake occured despite a party's exercise of ordinary deligence
4. other party didn't detrimentally rely on the mistake
5. unconscionable to enforce contract under circumstances
61
How do mistaken parties avoid contract in unilateral mistakes?
1. elements of mutual mistake are present
2. other party had reason to know of the mistake
3. other party caused mistake or enforcement would be unconscionable
62
Fact situations that are unlikely to be excused as mistake?
1. bad judgment or ignorance
2. prediction errors
3. misake of value
4. conscious uncertainty
63
Fact situations where unilateral mistake may be excused?
1. clerical errors
2. mathematical errors
64
what is a changed circumstance?
something happened between the making of the contract and time set out for performance, which the contract does not expressly contemplate
65
Three doctrines that render obligation to fulfill contracts null in changed circumstances?
1. impossibility: literal objective impossibility
2. impracticability: subjective impracticability
3. frustration of purpose: performance loses all value subjective
66
Modification of a contract?
a change to an existing executory contract, such as altering the price, delivery schedule, or other terms
67
Pre-existing duty at the common law and how its interpreted in modification?
pre-existing duty to fulfill a duty is not considered new consideration, NOT GOOD ENOUGH for modification
68
exceptions to the pre-existing duty rule?
- rescission of the contract followed by a new contract
- detrimental reliance
- unforeseen circumstances
- statute allowing modification without additional consideration (like the UCC)
69
when is a modification allowed in contracts?
1. fair and equitable in view of circumstances not anticipated by the parties when the contract was made or
2. extent provided by the statute or
3. justice requires enforcement in view of material change of position in reliance on the promise
70
Modification under the UCC?
no need for new consideration, just GOOD FAITH
71
Express condition definition?
explicitly stated event that must occur before a party is subject to a particular obligation or liability
72
contractual terms fall into one of three categories:
1. promise: commitment to act at a future time
2. condition: event that must occur before performance is required
3. promissory condition: a term that functions both as as promise and a condition
73
If a term is a promise? (seller agrees to sell house for $1 million)
1. only requires substantial performance
2. failure to perform a promise is a breach
3. breach of promise DOES NOT discharge other party of their duty
4. remedy = damages
74
If a term is an express condition? (seller will sell the house for $1 million only if pigs fly)
1. requires strict compliance
2. failure to comply with a condition is NOT a breach
3. if condition does not occur the party whose performance was contingent on condition is discharged from all further obligations
4. remedy = discharge
5. result may be complete forfeiture
75
If the term is a a promissory condition? (buyer agrees to make pigs fly, and if pigs do fly, seller will sell the house for $1 million)
1. non-occurrence of the condition BOTH discharges the injured party from any future performance under the contract AND entitles that party to damages for any loss suffered as a consequence of that breach
76
Which interpretation do courts favor between a promise and an express condition?
NOT BEING AN EXPRESS CONDITION
77
What is a forfeiture?
the denial of compensation that results when the obligee (due to receive performance) loses her right to the agreed exchange after she has relied subsantially, as by the preparation or performance, on the expectation of that change
78
Breach definition?
- party WHOLLY fails to fulfill his or her oblitgations under the contract
79
material breach?
1. failure to perform
2. important enough that it undermines the agreement
3. warrants other party to terminate contract + bring suit for damages
80
total breach?
a material breach not cured that justifies termination of the contract, releases other party from performance, and allows suit for damages
81
five factors for determining if breach is material?
1. extent injured party deprived of expected benefit
2. extent injured party can be adequately compensated for loss
3. extent which breaching party will suffer forfeiture
4. likelihood breaching party will cure
5. extent to which breaching party meets standard of good faith
82
Cure to breach?
breaching party can cure a major defect before deadline to perform
83
Divisible contracts and their effect?
1. agreement that includes multiple promises
2. subject to separate performance and enforcement
84
Doctrine of substantial performance and its effect on the sale of goods?
NOT APPLICABLE
85
UCC and the perfect tender rule?
1. contract for the sale of goods
2. the goods and their delivery must conform to the contract in every aspect
3. if deviate, then breach
4. buyer may elect to reject or accept in entirity or part
