contracts & sales Flashcards
what types of contracts are governed by the common law?
contracts for services or real estate
under the UCC, even if the terms of a written contract for the sale of goods appear to be unambiguous, what evidence can be presented to explain or supplement the contract?
course of performance, course of dealing, and trade usage
how is priority given to evidence presented to explain or supplement inconsistent express contract terms?
if the express contract terms are inconsistent with the course of performance, or trade usage, priority is given to the express terms, followed by course of performance, course of dealing and trade usage
define the parol evidence rule
the parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written
what are consequential damages?
consequential damages arise out of special circumstances unique to the parties to the contract, rather than arising necessarily from the transaction itself
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 bilateral offer accepted?
an offer requiring a promise to accept can be accepted either with a return promise OR by starting performance
what requirements must be met to allow an adversely affected party to void a contract based on mutual mistake? (4)
(i) mistake of fact existing at the time the contract was formed;
(ii) the mistake relates to a basic assumption of the contract;
(iii) the mistake has a material impact on the transaction; and
(iv) the adversely affected party did not assume the risk of the mistake
if a party has substantially complied or performed with a constructive condition, what can the party recover?
in general, the party can recover the contract price minus any amount that it will cost the other party to obtain the promised full performance
if a party does not substantially perform can they recover damages?
a party who has not substantially performed generally cannot recover damages based on the contract, but she may be able to recover through restitution
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
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
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
under the second restatement, can an extrinsic term that would “naturally be omitted” from a writing be introduced?
yes, so long as it does not contradict the writing
how is a unilateral offer accepted?
acceptance of an offer for a unilateral contract requires complete performance
what happens when performance has begun on a unilateral offer?
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
when is the warranty of fitness for a particular purpose implied?
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
how is a warranty of fitness for a particular purpose disclaimed?
the disclaimer must be in writing and must be conspicuous
name the types of contracts that fall within the Statute of Frauds (5)
-marriage: a contract made upon the consideration of marriage;
-suretyship: a contract to answer for the debt or duty of another
-one year: a contract that cannot be performed within one year from its making;
-UCC: under the UCC, a contract for the sale of goods for a price of $500 or more; and
-real property contract: a contract for the sale of an interest in real property
acronym M. SOUR (mr. sour)
under the UCC, what is required by the “perfect tender rule”?
the perfect tender rule requires perfect goods and perfect delivery; “perfect” means in accordance with the contract provisions or in accordance with the UCC if the contract is silent on tender
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
when is a plaintiff entitled to restitutionary recovery?
when a defendant is unjustly enriched by the plaintiff, restitution generally allows the plaintiff to recover on the benefit conferred by the plaintiff upon the defendant
how is restitutionary recovery measured?
generally, the benefit is measured by either (i) the reasonable value of the defendant obtaining that benefit from another source, OR (ii) the increase in the defendant’s wealth from having received that benefit
what are the three events that would cause the rights of an intended beneficiary to vest?
the rights of an intended beneficiary vest when the beneficiary:
(i) materially changes position in justifiable reliance on the rights created;
(ii) manifests asset to the contract at one party’s request; OR
(iii) files a lawsuit to enforce the contract
what are the requirements of a writing for contracts that fall under the Statute of Frauds?
the writing must:
(i) be signed by the party against whom enforcement is sought; and
(ii) contain the essential elements of the deal
define fraud in the inducement
fraud in the inducement occurs when a fraudulent misrepresentation is used to induce another to enter into a contract
what is fraud in the inducement’s effect on a contract?
contract is VOIDABLE by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement
state the common-law mirror-image rule
the common-law mirror-image rule states that the acceptance must mirror the terms of the offer; any change to the terms of the offer, or the addition of another term not found in the offer, acts as a rejection of the original offer and as a new counteroffer
at what point can repudiation no longer be retracted?
repudiation may be retracted until such time as the promisee:
(i) acts in reliance on the repudiation;
(ii) signifies acceptance of the repudiation; OR
(iii) commences an action for breach of contract
define acceptance
an acceptance is an objective manifestation by the offeree to be bound by the terms of the offer
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
what are the rights of the assignee?
an assignee takes all of the rights of the assignor as the contract stands at the time of the assignment, but she takes subject to any defenses that could be raised against the assignor
if a shipment contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?
once the goods are delivered to the carrier
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
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:
(1) the plaintiff has conferred a measurable benefit on the defendant;
(2) the plaintiff acted without gratuitous intent; and
(3) 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 accept it, or (ii) the plaintiff has a reasonable excuse for not giving the defendant such opportunity
[UCC Firm Offer Rule] 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
if a destination contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?
once the goods are delivered to a particular place (specified in the contract)
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
what is a void 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
what is a voidable contract?
a voidable contract operates as a valid contract unless and until one of the parties takes steps to avoid it
define accord
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
define satisfaction
a satisfaction is the performance of the accord agreement; it will discharge both the original contract and the accord contract
when is the implied warranty of merchantability implied?
the implied warranty of merchantability is implied whenever the seller is a merchant
how is an implied warranty of merchantability disclaimed?
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., “as is” or “with all faults”)
when may a nonbreaching party pursue specific performance as a remedy?
when damages are an inadequate remedy, the nonbreaching party can pursue specific performance
note: legal remedies are often inadequate in contracts for land or other unique goods
what is the difference between a gift and valid consideration?
the test to distinguish a gift from valid consideration is whether the offeree could have reasonably believed that the intent of the offeror was to induct the action; if yes, there is consideration and the promise is enforceable
define condition precedent
a condition that precedes the obligation to perform
under the UCC, what key term(s) must typically be specified for a contract to be formed?
quantity
note: the UCC “fills the gap” if other terms are missing
what three conditions must be met fro 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
under the UCC, in what two circumstances does the seller have a right to cure a defective tender?
(i) the time for performance under the contract has not yet elapsed; OR
(ii) the seller had reasonable grounds to believe that the buyer would accept despite the nonconformity
note: the seller must give notice of the intent to cure and make a new tender of conforming goods
what is an illusory promise?
an illusory promise is one that essentially pledges nothing because it is vague or because the promisor can choose whether to honor it; such a promise is not legally binding (i.e., void)
under the common law, if the breach is material, what remedies can be sought by the nonbreaching party?
the nonbreaching party is able to withhold any promised performance and pursue remedies for breach, including damages
note: if the breach is minor, the nonbreaching party may be able to recover damages, but that party also still must perform under the contract
what is the difference between an assignment and a delegation?
an assignment is the transfer of rights under a contract, and a delegation is the transfer of duties and obligations under the contract
define fraud in the factum
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
state fraud in the factum’s effect on a contract
no contract is formed, and the apparent contract is VOID
when a preexisting duty is at issue, what two options does a promisor have to create valid consideration?
the promisor can:
(1) give something in addition to what is already owed
(2) vary the preexisting duty in some way
when is an objective standard used to determine whether a condition is satisfied?
the preferred method is an objective standard based upon whether a reasonable person would be satisfied
when is a subjective standard used to determine whether a condition is satisfied?
when the aesthetic taste of a party determines whether the other party’s performance is satisfactory, satisfaction is determined under a subjective standard
[Battle of the Forms] 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
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.
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 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 is the basic concept of legal detriment?
there must be something of substance, either an act or a promise, which is given exchange for the promise that is to be enforced
define consideration
consideration is evidenced by a bargained-for exchange in legal position between the parties; most courts conclude that consideration exists if there is a detriment to the promisee, irrespective of the benefit to the promisor
define the common-law four-corners rule
under the common law, a court was permitted to look only to the writing itself (within the “four corners” of the document) for evidence of intent (regarding whether there is total, partial, or no integration)
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 are four forms of consideration?
consideration can take the form of:
(1) a return promise to do something;
(2) a return promise to refrain from doing something legally permitted;
(3) the actual performance of some act;
(4) refraining from doing some act
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
what types of contracts are governed by the UCC?
any contract involving the sale of goods
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
define condition subsequent
a condition that excuses the duty to perform after a particular event occurs
what are the three requirements for a promise to be binding under promissory estoppel?
(i) the promisor should reasonably expect it to induce action or forbearance on the part of the promisee or a third person;
(ii) the promise does induce such action or forbearance; and
(iii) injustice can be avoided only by enforcement of the promise
define constructive condition of exchange (CCE)
when a party’s performance can be rendered at the same time as the other party’s performance, each party’s performance is conditioned on the other party’s performance; both parties’ performances are due simultaneously, unless the language or circumstances indicate otherwise
what is the formula for expectation damages?
expectation damages = loss in value + other loss - cost avoided - loss avoided
when is a revocation of an offer, sent by mail, effective?
upon receipt (example: On day 1, A mails an offer to B. On day 2, A mails a revocation to B. If B receives the offer and accepts before receiving the revocation, a contract is formed.)
