Contracts Review Flashcards
Surety will be responsible for any debt or other obligation of a third party (i.e., the principal) resulting from the principal’s failure to pay as agreed is ____ the SOF
Is Subject to the SOF
Surety - if main purpose of a surety in agreeing to pay the debt of the principal is the surety’s own economic advantage, rather than the principal’s benefit ….
then the contract does not fall within the SOF
and
an Oral Promise by the surety is Enforceable
When a contract is made by an infant / minor –
Voidable by the Infant but not by the other party
- may either disaffirm (void) the contract and avoid any liability under it
~or~ choose to hold the adult party to the contract
Minor Contract for Necessities.
Must pay for them, but - recovery by the person furnishing the necessities is limited to the Reasonable Value
(not the agreed upon price)
SOF - situations
Mr- Marriage S - Surety O - One Year U - UCC R - Real Property
SOF - Property
PIP Possession Improvements Payment -- Need 2/3 --- to enforce oral contract > Part Performance
Fraudulent Misrepresentation requires - Elements
1i) the misrepresentation is made knowingly and with intent to mislead the other party (i.e., it is fraudulent),
2) the misrepresentation induced assent to the contract,
3) the adversely affected party justifiably relied on the misrepresentation.
Fraudulent Misrepresentation - cures the problem
No longer voidable if before the deceived party has avoided the contract - it is CURED to be in accord with the facts that were previously misrepresented.
Price Spike due to unforeseen event - try to renegotiate / refused / refused to fulfill - Result ?
Enforceable - if contract price was reasonable when agreed to it.
Mistake - 1 party made a mistake that induced contract
ex; Female dog instead of male
When one party is mistaken as to an essential element of the contract, Mistaken Party (buyer) = Can Void the contract if she did not bear the risk of mistake and the Non-Mistaken Party (seller) caused the mistake or should have known that the other party was mistaken.
Services and Real Property Contracts deal with ?
Common Law
Goods Contracts deal with ?
UCC
Mixed Contact
- Goods and Services -
Predominant Purposes Rule - whichever plays the bigger roll
How do you analyze a contract (mnemonic)
All Contracts Don't Stink A - Agreement = offer / acceptance C - Consideration = bargained for D - Defenses Stink - SOF
Offeror is the
Master of the offer
Secret intentions when making an offer - mean
> guy at bar w/ signed napkin
Depends on if he made an objectively serious intent to be bound
Specific Terms in the Common Law
Party, Price, Subject, Quantity
Specific Terms in UCC
Only Quantity
- Gap Fillers for the other terms
- Requirements Contract
2. Output Contract
Quantity not an issue
- Will buy everything from that seller
- Will sell whole output to the one buyer
Offer must convey the right to accept
- Invitation to Deal ~ Advertisement
- Reward
- Seen as an invitation to deal - doesn’t convey power unless very specific
- Allowed
Terminating the Offer (squash the caterpillar)
- Express - communication to the offeree
- Constructive - Offeree learns that the offeror has taken action that is absolutely inconsistent with ability to contract
- Offeree Rejects Offer
- Offeree Counter-Offers - not just a counter - inquiry
- Offeror Dies - before formation
- Reasonable Amount of Time Passes
Irrevocable Offer (4)
- Option Contract
- Firm Offer
- Unilateral
- Detrimental Reliance
Option Contract =
Offeree buys option to keep it open
Firm Offer
- Merchant in UCC
- Signed by offeror and
- Promise to Keep Open
- Time - as long as stated or up to 90 days
Unliteral Contract
Cannot be revoked if the offeree started performance
ex: walk across the bridge - halfway
- He doesn’t have to finish ..can quit the contract
Detrimental Reliance
Reasonably and Detrimentally Relies on Contract
- (ex: Contractor / sub-contractor - subcontractor offers the materials for a price and the contractor offers to build ..contractor reasonably relied on subs offer to make his bid)
If ambiguity about whether Unilateral or Bi-lateral
Modern approach = Accept by Either Performance or Return Promise
Shipped the Wrong Goods - UCC
UCC = Rejection + Breach
Reward – do you need to know about it to collect
Yes - must know of the offer in order to collect
Mailbox Rule
Acceptance when Sent - properly addressed / stamped
Mailbox Special Rules – Does NOT Apply
- Offeree sends something back first: like a rejection or counter offer
- Other types of communication must be received not when sent
- Options contracts - paid to keep open
- Unclear w/ email / fax
- Send rejection first / then Acceptance - whichever opened first
Acceptance by Silence
- Unilateral Reward
- Unilateral where the other party can SEE you accepted (ex: Built the house)
- Past history of dealings where silence OK
- Offer states acceptance by Silence
Implied in Fact - silence
Acceptance through silence , gestures , actions
Ex: showing up for classes and payment is due
Counter Offer - Common Law
Common Law = Mirror Image Rule
Acceptance Terms must Match Offer
or
it is a Counter
- conditional acceptance is a counter offer
Counter Offer - UCC
Different Terms on Back of Confirmation
- definite seasonal acceptance or confirmation acts as an acceptance UNLESS CONDITIONAL on acceptance of different terms
Counter Offer - UCC confirming memo
Additional Terms (4 Elements)
– confirming Memo w/ additional terms
Rarely come into contract - Only in if
- Both are merchants
- Doesn’t Materially alter deal
- Initial Offer didn’t expressly limit acceptance to original terms
- Offeror does not reject new terms w/in reasonable time
Counter Offer - UCC - Different Terms
Knockout Rule
- knock out both terms and Gap Fillers
UCC - Offer where both Parties act as if there is a contract but really isn’t one
Only terms they agree on in the writings
Consideration in each contract means -
Exchange of Promises - detriment or benefit
~ not doing something you are legally entitled to do is a detriment
> Gifts and Conditional Gifts do NOT count
Consideration can not be
Nominal - way out of whack
- Past consideration
2. Promising Not to sue
- NOT a contract - save someone and then you comeback for money later // someone needs saving and they promise to pay you $500 f you save them
- Plaintiff needs good faith belief that suit valid to be contract consideration
Modification of Contract - (Common Law)
Promising to do something you are already obligated to do - Pre-existing Duty
Not consideration - agree to lower rent ..landlord can still sue for the remaining amount due
EXCEPT When :
- Change in performance - agree to modify rent for lower amount but then modify lease to extend / now he can’t
- 3rd party promising to pay - sister agrees to pay extra $500 - now he can’t sue you
- Unforeseen difficulties preventing performance
UCC - Modification of Contract -
As long as made in good faith = OK
> > No consideration necessary
Promissory Estoppel - Detrimental Reliance
3 elements
- Promise that would reasonably be expected to induce reliance
- Promisee Takes Action based on promise
- Injustice can only be avoided by enforcing the promise
Quasi Contract (aka - Implied in law)
1 Plaintiff confers a Benefit 2. Reasonably expected to be paid 3. Unfair not to get paid - FAIR VALUE (ex: saving someone from dying by paying for Dr.) >> unfair enrichment
7 Defenses to Contract
- Misunderstanding
- Incapacity
- Mistake
- Duress
- Fraud / Misrepresentation
- Illegality
- Unconscionability
Defense - Misunderstanding
Ship name
Different Meaning to same words (2 ships same name)
- Material Term
- Different meanings
- Neither party knows of confusion
Defense - Incapacity (3 ways)
- Minors
- Crazy - Mentally Ill
- can’t understand the nature of actions
~or~
- cannot act in reasonable manner to transaction - other side knows or has reason to know - Intoxicated
- Voidable -
UNLESS
> Necessities (food etc) = get fair value payment
> Keep benefit after they get capacity
Defense - Mistake
A belief that is not in accord with a present fact
Defense - Fraud / Misrepresentation
Misrepresentation = statement at the Time of Contract that is NOT True (either intentional or accidental)
1) Misrepresentation of a present fact (not opinion)
2) Fact is Material - or - Fraudulent
3) Made under circumstances which is is justifiable to rely on the misrepresentation
(Ex: Shitty car - “it runs great” - intentional / Shitty car but seller doesn’t know - accidental = get out of both)
Defense - Duress
Threat that deprived other party of making a meaningful choice
- Economic Duress - ripped off b/c no choice
- Undue Influence / Intense Pressure
Defense - Illegality
Illegal Contracts are unenforceable
(if pay up front then cannot get money back for the illegal action contract)
- Furtherance of illegal action is OK -
(cab ride to robbery - have to pay for the cab)
Defense - Unconscionability (2 kinds)
- Procedural - defect in the bargaining process itself
- hidden / surprise term / no meaningful other option - Substantive - Rip-off by a term of the contract hidden on pg. 138
Minors Incapacity Defense
Voidable (even if crash car) or
Can Keep Contract and ratify upon 18 yrs.
Exception = Necessities but then Fair Market Value Damages
UCC - 2 merchants w/o contract but act as if they do - How do they from a contract?
Enforceable if
(1) a writing in confirmation of the contract is received within a reasonable time
(2) unless written notice of objection to the contents of the writing is given within ten days.
Defense - Mistake
- Mutual Mistake
- Affects both parties
- Mistake of a fact at the Time of Contracting
- It relates to a Basic Assumption of the contract
- Material Impact
- Impacted Party did not bear the risk (other party made the mistake and you believed them)
Defense - Mistake
- Unilateral Mistake
- One party
[Same elements as Mutual Mistake] - Mistake of a fact at the Time of Contracting
- It relates to a Basic Assumption of the contract
- Material Impact
- Impacted Party did not bear the risk (other party made the mistake and you believed them)
~ PLUS EITHER ~
1) Contract would be unconscionable
2) The other side knew of , had reason to know, or caused mistake
Defense - Misrepresentation in Execution
Trick them into contracting = no go
Defense - Misrepresentation / Nondisclosure
Other party Doesn’t learn about something bad
- you remain knowingly silent -
Applies to = Active Concealment or where Fiduciary Duty to disclose
SOF - Statute of Frauds
*ALWAYS ASK - does SOF apply? Is it Satisfied? *
(Mr. Lemonhead candy)
Mr. - Marriage
S - Surety (Main Purpose exception -paying to for his own benefit)
O - Impossible to perform w/in ONE YEAR from K formation
U - UCC - $500 + Price
R - Real Property
How to Satisfy the SOF -
- Full Performance by either side
- Service (service for service) Contract Falls under SOF and one side fully performed - can other side defend w/ SOF? Nope (Part Performance won’t work) - Writing Signed by the Party Against whom contract asserted (must have = Essential Terms)
- UCC Goods = Quantity is the only term (only enforceable for that amount)
- Confirmation Memo for Quantity = ok
- Real Estate = PIP / Possess, Improve , Pay (2/3)
SOF - Custom Made Items
Exempted as soon as substantial beginning
SOF - UCC / merchants
- Quantity
2. Confirming Memo - failure to object w/in 10 DAYS satisfies SOF if BOTH MERCHANTS
SOF Modification - Parties want to modify
If new deal w/ in SOF then need to satisfy
Parole Evidence Rule
Contract fully in Writing (look for merger clause) - then earlier evidence not allowed to come in
- Can use later statements / modifications
- Can use to define ambiguous terms
- Can use for Defense to Formation
- Can use evidence of Another Separate Deal
Express Warranty
- Describes the goods and is a basis for the bargain unless it’s an opinion
> Sample or Model = Express Warranty
Implied Warranty of Merchantability
MERCHANT SELLER
- Goods fit for ordinary commercial use
> Can Disclaim / does NOT Have to be in writing <
Oral - must use “Merchantability”
Written - Conspicuous, “as is”
Warranty Fitness for a Particular Purpose
Relies on seller’s expertise for specific good used for special purpose that it’ll satisfy that purpose
> Doesn’t have to be merchant seller
** MUST BE IN WRITING **
and Conspicuous disclaimer
Express Condition to Performance
Must be Strictly Satisfied -
- Can be Subjective / custom Contract but the person must reject in Good Faith (Bad Faith = Breach)
- Can be Waived
- Wrongful Interference Also = Waiver
Implied Condition to Performance -
1 party performs - the other must perform
Substantial Performance
Common Law - Only if not willful failure, then get damages
(ex- wrong marble used in construction - will be ok, unless payment expressly conditioned on right one)
> Can be divisible if mini contracts
UCC - Substantial Performance?
NO - Must be Perfect Tender !
- Perfect Goods + Perfect Delivery
Seller’s Right to Cure
If time left on the contract or there was reason to believe that the buyer would accept a replacement, then Buyer Must give time to cure.
UCC Perfect Tender Installment Contract
Buyer can only reject a specific installment where there is Substantial Impairment that can’t be cured.
Delivery - FOB Seller’s place of Business
Shipment Contract
- Goods to Carrier
- Arrange Delivery
- Notify Buyer
Delivery - FOB Buyer’s place of Business
Destination Contract
- Must get goods to Buyer’s Place of Biz
- Notify Buyer
Delivery - Tender at Seller’s
Just hand them over.
Risk of Loss
- In contract ? = ok
- Breach = Breacher bears the risk Always
3 . Shipment Contract = Buyer risk / Destination Contract = Seller risk - Merchant = Merchant until Delivery
- Non-Merchant = When Tendered / avail for pickup
Excuse for Non - Performance
- Impossibility or Impracticability
- Unforeseen even that is a Basic Assumption of the contract .
(i) an unforeseen event occurs;
(ii) the nonoccurrence of which was a basic assumption on which the contract was based; and
(iii) the party seeking discharge is NOT at Fault
> If a party Assumes the Risk of an event happening that makes performance impracticable, then the defense of impracticability will not apply.
Excuse for Non - Performance
- Death
- Frustration of Purpose
- Estate has to perform if it can
- Something happened to undermine the whole reason for the contract (rare)
Excuse for Non - Performance
- Modification / Cancellation
- Both Parties agree to walk away / cancel = ok w/o consideration as long as some performance due by both
- Common Law = Consideration for Modification
- UCC = no Consideration for Modification
Excuse for Non - Performance
- Accord + Satisfaction
Substitute option performance by agreement
- Option to do 1 or other
vs. Modification = only can do new one
(Ex: owes money will accept beer instead / non-performance then can sue for beer or money)
Novation
BOTH Parties agree that a new party will take over one side’s performance
- Original Party = excused from performance
Anticipatory Repudiation - Options for other party
- Treat as Breach and Sue immediately as long as performance not complete
- Ignore +demand performance = then wait and see
Anticipatory Repudiation - can they retract it?
Yes as long as
- they haven’t sued or
- they haven’t materially changed position on reliance of the repudiation
Expectation Damages =
(Default)
- Put party in Position as if contract had been Performed
> Must be reasonably certain of amount
Unforeseeable Consequences Damages (Hadley Rule)
(Guy w/ big hat)
> Not recoverable unless party had a reason to know of possible special damages at time of contract
- Get special if known + Incidental
Damages must do what also
Mitigate
Reliance Damages
Return to as if there never was a contract
Time travel back
Specific Performance Damages (only)
Common Law = Real Estate + Custom Service Provider (Artist painter)
UCC = Custom Goods
3rd Party Beneficiary - right to sue
Intended = Yes
Incidental = No
Donee Beneficiary = Yes
Assignment vs Delegation
Assignment = Benefits
(Prohibit = Breech / Void - No good)
Delegation = Duties
