Contracts & Sales Flashcards
Formation Roadmap
(1) Unilatera/Bilateral
(2) Formation
(3) Offer
(4) Revocation
(5) Acceptance
(6) Consideration
Applicable Law
The common law of Contracts applies to all contracts, other than the sale of goods, to which the UCC applies.
“Goods”
Movable at the time they are identified as goods to be sold under the contract
Merchants
Buyer or seller who regularly deals in goods of the kind sold
Unilateral Contracts
mandates acceptance ONLY BY performance
Bilateral Contracts
Exchange of mutual promises
Formation
(1) offer,
(2) acceptance
(3) consideration.
Offer
(1) PROMISE, undertaking, or commitment to enter into a contract (intent)
(2) ESSENTIAL TERMS CERTAIN AND DEFINITE
(3) COMMUNICATION of the promise and the terms to the offeree
“Essential Terms”
(1) the IDENTITY of the offeree,
(2) SUBJECT MATTER
(3) the PRICE,
(4) the TIME of payment/performance,
(5) the QUANTITY, and
(6) the NATURE of the work to be performed.
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INVITATION to make an offer
Direct Revocation
Revocation directly communicated to the offeree by the offeror terminates the offer.
Indirect Revocation
the offeree receives:
(1) 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.
Revocation at Will
The offer can be revoked at will even if offeror promised to keep it open.
However, the power to revoke is limited where:
(1) CONSIDERATION is given to keep offer open and
(2) Merchants Firm Offer
Mailbox Revocation
Effective when received
Acceptance
UNQUALIFIED ASSENT to the terms of an offer, COMMUNICATED to Offeror.
An offer may be accepted by any medium reasonable under the circumstances, UNLESS limited by Offeror.
Mailbox Acceptance
(1) Effective at the moment of dispatch UNLESS offer SAYS otherwise OR
(2) Option contract is involved - acceptance is effective only on receipt.
Conditional Acceptance
A conditional acceptance is not an acceptance, but is a REJECTION.
Counteroffer
REJECTION of the original offer and a NEW OFFER under common law
Consideration
Bargained for exchange
Past/Moral Consideration
Would they have done what was promised anyway, or did the promisor have a pre-existing duty to the promisee?
GO to promissory estoppel.
Defenses to Formation
(1) Mutual/Unilateral Mistake
(2) Fraud
(3) Illegality
(4) Capacity
Mutual Mistake
BOTH parties are mistaken and the mistake:
(1) concerns a BASIC ASSUMPTION on which the contract was made,
(2) has a MATERIAL EFFECT on the agreed-upon exchange, and
(3) the party seeking avoidance DID NOT ASSUME the risk of the mistake.
Unilateral Mistake
(1) the non-mistaken party KNEW OR HAD REASON to know of the mistake
(2) MATERIAL EFFECT
(3) the mistaken party DID NOT BEAR THE RISK of mistake
(4) voidable by the mistaken party.
Defenses to Enforcement
(1) Statute of Frauds
(2) Unconscionability
Statute of Frauds
Contract MUST (1) be in writing and (2) signed by the party to be charged if it involves
(1) debt of another
(2) any interest in land
(3) more than 1 year
(4) sale of goods of $500 or more
SoF Exceptions
(1) admission
(2) full performance if the contract is for the sale of goods/services
(3) if contracts for real property, any 2 of 3: (a) performance by payment (whole or in part), (b) possession. (c) making of valuable improvements
(4) detrimental reliance/promissory estoppel
Unconscionability
(1) One-sided contract at the time it was formed (especially pre-printed).
(2) Unequal bargaining power.
Intended Beneficiary
(1) they are EXPRESSLY designated or identifiable at the time of performance;
(2) performance is MADE DIRECTLY to them;
(3)CONTRACT RIGHTS and
(4) the relationship between the third party and the promisee suggests the promisee wishes the beneficiary to be benefitted.
Creditor Beneficiary
Promisee’s intent was to discharge an obligation to the third party
Donee Beneficiary
Promisee’s intent was to bestow a gift on the third party
Beneficiary Rights Vested
(1) manifests assent (agrees) in a manner requested by the parties,
(2) brings suit to enforce the promise, or
(3) materially changes their position in justifiable reliance on the promise.
Assignment Issues
(1) WHAT rights may be assigned
(2) WHAT is required for assignment
(3) WHEN is it revocable
Assignable Rights
All except those that CHANGE an obligors duty:
(1) personal services contracts,
(2) requirements and output contracts (although assignment may be ok under UCC), and
(3) assignments that substantially alter obligor’s risk
Revocable Assignments
Assignment is revocable except
(1) given for consideration
(2) obligor performed
(3) delivery of tangible claim
(4) assignment of chose in action in writing
(5) foreseeable detrimental reliance
Delegation
TRANSFER of duties, rather than assignment of entire contract. All duties may be delegated, except:
(1) duties involving personal judgment and skill;
Delegate liable to non-delegating party only if: (1) delegate attempts to perform OR (2) delegate promises to perform and promise is supported by consideration.
Parol Evidence Analysis
(1) Is there a written agreement, is there a term they talked about that will contradict, vary, or supplement the terms?
(2) Is it fully or partially integrated?
(3) Apply the rule
Parol Evidence
(1) AGREEMENT in writing signed by both parties, with the intent that it embody the FULL AND FINAL expression of their bargain, means:
(2) any other expressions, written or oral, made prior to the writing, and any oral expressions made contemporaneous with the writing, are INADMISSIBLE to vary the terms of the writing.
Fully Integrated
Prior contemporaneous expressions that VARY the terms are BARRED, as are supplemental terms
Partially Integrated
Supplemental terms are accepted, NOT THOSE THAT VARY
Parol Evidence Exceptions
1) formation defects
(2) condition precedent to effectiveness
(3) ambiguity
(4) true consideration
Parol Evidence UCC
consistent additional terms are admissible UNLESS merger clause
Contract Modification
(1) Need agreement, and then subsequent expression varies terms
(2) Common Law - Additional Consideration
(3) UCC - No additional if in good faith -> SOF?
Types of Condition
(1) Condition Precedent to Effectiveness
Must arise before contract is effective at all
(2) Condition Precedent to Performance
Must arise before particular duty to perform arises
(3) Condition Subsequent
Cuts off duty to perform
Breach Issues
Duty and Failure to Perform
(1) Material/Minor
(2) Anticipatory Repudiation
(3) UCC Demand for Assurances
(4) Implied Covenant of Good Faith & Fair Deaing
Minor v. Major Breach
Did obligee obtain substantial benefit of the bargain despite the defective performance?
(1 If NO – material breach discharging duty to perform
(2) If YES – only a minor breach, non-breaching party must still perform
Anticipatory Repudiation
Party to contract CLEARLY INFORMS the other party before the due date of the performance they do not intend to perform.
Treat as a breach of the contract, and immediately sue.
UCC Demand for Assurances
If the circumstances give rise to reasonable grounds for insecurity with respect to the other party’s performance, a party may demand assurances in writing that performance will be timely forthcoming.
Until that assurance is received, the party may suspend its own performance.
If it is not given within a reasoanble time, the party may treat the contract as repudiated.
Implied Covenant of Good Faith & Fair Dealing
Exists in EVERY contract.
Requires that both parties do nothing to prevent the performance by other party.
Excuse or Discharge Issues
(1) Impossibility
(2) Impracticability
(3) Frustration of Purpose
(4) Accord and Satisfaction
(5) Waiver
Impossibility
(1) must be objective (the duties could not be performed by anyone), and
(2) must arise after the contract has been entered into.
Impracticability
(1) the party to perform has encountered EXTREME and UNREASONABLE difficulty and/or expense, and
(2) the difficulty was not anticipated.
Changes in price are NOT extreme/unreasonable difficulty. Economic conditions, nah.
Frustration of Purpose
(1) the supervening act;
(2) NOT foreseeable at time of contract;
(3) the purpose of the contract has been completely or almost completely destroyed by the act; and
(4) both parties realized the purpose when making the contract.
Accord & Satisfaction
(1) Agreement to accept something different
(2) Consideration
(3) Performance of accord - Satisfaction
Waiver
Party who has the benefit of a condition waiaves it.
