Contracts & Sales Flashcards
Define offer.
An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.
How is a unilateral offer accepted?
Acceptance of an offer for a unilateral contract requires complete performance.
Note: Once performance has begun, the unilateral offer is irrevocable for a reasonable period of time to allow for complete performance unless there is a manifestation of a contrary intent.
What types of contracts are governed by the UCC?
Any contract involving the sale of goods
Define acceptance.
An acceptance is an objective manifestation by the offeree to be bound by the terms of the offer.
Under the common law, what terms must be covered in order for a contract to be formed?
All essential terms (i.e., the parties, subject matter, price, and quantity)
What is the basic concept of legal detriment?
There must be something of substance, either an act or a promise, which is given in exchange for the promise that is to be enforced.
How is a bilateral offer accepted?
An offer requiring a promise to accept can be accepted either with a return promise or by starting performance.
What are four forms of consideration?
Consideration can take the form of:
- A return promise to do something
- A return promise to refrain from doing something legally permitted
- The actual performance of some act
- Refraining from doing some act
Under the common law, why was something given in the past not considered adequate consideration for a new contract?
Under the common law, past consideration is typically not adequate consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise.
Note: there is a modern trend toward enforcing such promises under the material benefit rule.
What three conditions must be met for the defense of impracticability to be available?
(i) An unforeseeable event has occurred;
(ii) Nonoccurrence of the event was a basic assumption on which the contract was made; and
(iii) The party seeking discharge is not at fault.
What types of contracts are governed by the common law?
Contracts for services or real estate
Under the UCC, what essential term(s) are required for a contract to be formed?
Quantity
Note: The UCC ““fills the gap”” if other terms are missing.
Under the mailbox rule, when is acceptance effective?
An acceptance that is mailed properly (i.e., correct postage and address) within the allotted response time is effective when sent as opposed to on receipt, unless the offer provides otherwise.
What is the main difference between contract modification under the common law and contract modification under the UCC?
At common law, modifications require consideration; under the UCC, they require only good faith.
Who lacks the capacity to make a contract?
(i) Minors (under the age of 18);
(ii) People who are mentally ill;
(iii) People who are intoxicated; and
(iv) People whose property is under guardianship by reason of adjudication.
Define accord and satisfaction.
Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s existing duty.
A “satisfaction” is the performance of the accord agreement; it will discharge both the original contract and the accord contract.
What is a requirements contract?
A requirements contract is a contract under which a buyer agrees to buy all that is required of a product from the other party. There is consideration in these agreements because the promisor suffers a legal detriment.
Under the UCC, what three requirements must be met for an offer to buy or sell goods to be an irrevocable firm offer?
(i) The offeror is a merchant;
(ii) There is an assurance that the offer is to remain open; and
(iii) The assurance is contained in a signed writing from the offeror.
What is an output contract?
An output contract is a contract under which a seller agrees to sell all that she manufactures of a product to the buyer. There is consideration in these agreements because the promisor suffers a legal detriment.
Define the material benefit rule.
Under the material benefit rule, when a party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though, at common law, such a promise would be unenforceable due to lack of consideration.
Under the UCC, when both parties are merchants, an additional term in the acceptance is automatically included in the contract, unless: (Name the 3 exceptions)
(i) The term materially alters the original contract;
(ii) The offer expressly limits acceptance to the terms of the offer; or
(iii) The offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received.
Note: If any one of these three exceptions is met, the term will not become part of the contract, and the offeror’s original terms control.
What is the difference between a void and voidable contract?
A void contract results in the entire transaction being regarded as a nullity, as if no contract existed between the parties; the contract is unenforceable.
A voidable contract operates as a valid contract unless and until one of the parties takes steps to avoid it.
Define fraud in the inducement, and state its effect on a contract.
“Fraud in the inducement occurs when a fraudulent misrepresentation is used to induce another to enter into a contract.
Effect: Contract is VOIDABLE by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement.”
Define incidental beneficiary.
One who benefits from a contract even though there is no contractual intent to benefit that person
Note: An incidental beneficiary has no rights to enforce the contract.
What three factors does a court use to determine if restitutionary recovery is available in a quasi-contract situation?
A court may allow restitutionary recovery if:
- The plaintiff has conferred a measurable benefit on the defendant;
- The plaintiff acted without gratuitous intent; and
- It would be unfair to let the defendant retain the benefit because either (i) the defendant had the opportunity to decline the benefit but knowingly accepted it, or (ii) the plaintiff had a reasonable excuse for not giving the defendant such opportunity.
Define fraud in the factum, and state its effect on a contract.
Fraud in the factum (or fraud in the execution) occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction.
Effect: No contract is formed, and the apparent contract is VOID.
When is the implied warranty of merchantability implied, and how is it disclaimed?
The implied warranty of merchantability is implied whenever the seller is a merchant.
The disclaimer can be oral, but must use the term “merchantability” and must be conspicuous if in writing. Language that indicates there is no implied warranty is sufficient (e.g., “for instance” or “with all faults”).
When is the warranty of fitness for a particular purpose implied, and how is it disclaimed?
The warranty of fitness for a particular purpose is implied whenever the seller has reason to know that (i) the buyer has a particular use for the goods, and (ii) the buyer is relying upon the seller’s skill to select the goods.
A disclaimer must be in writing and be conspicuous.
What doctrine comes into play when an unexpected event arises that destroys one party’s purpose in entering into the contract, but performance of the contract is not rendered impossible?
The doctrine of frustration of purpose.
The frustrated party is entitled to rescind the contract without paying damages.
Note: The event that arises must not be the fault of the frustrated party, and its nonoccurrence must have been a basic assumption of the contract.
What is an implied-in-fact contract?
An implied-in-fact contract is a contract that results when a person’s assent to an offer is inferred solely from the person’s conduct. To be contractual bound, the person must not only intend the conduct but also know or have reason to know that the conduct may cause the offeror to believe the offer was accepted.
Define intended beneficiary.
One to whom the promisor will pay directly to relieve the promisee from a debt or whom the promisee intends to give the benefit of the promised performance
When is the doctrine of anticipatory repudiation applicable, and in what manner must the repudiation be made?
The doctrine of anticipatory repudiation is applicable when a promisor repudiates a promise BEFORE the time for performance is due. The repudiation must be clear and unequivocal, may be by conduct or words, and, if a statement, must be made to the promisee or a third-party beneficiary or assignee of the promise.
