Contracts & Sales Flashcards
Common Law
Contracts that deal with real estate and services.
Uniformed Commercial Code Article 2
Contracts that deal with goods.
Contract Formation
Mutal Assent & Consideration
All Contracts Don’t Stink
Agreement - offer and acceptance
Consideration - related to theories for when you have to keep your promise
Defenses to Formation - incapacity, duress, etc.
Statute of Frauds - enforceability
All or Nothing Rule
Cannot have both common law and UCC in a contract
Predominant Purpose Rule
Must ask whether the good or service plays a bigger role?
Mutual Assent
Acceptance of a valid offer
Objective Theory
Intent of a party is what a reasonable person in the position of the other party would believe as a result of that party’s objective manifestation of intent.
Offer
Objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of the offeree to accept.
Intent
A statement is an offer if the individual it is communicated to reasonably interprets it to be an offer - must express present intent of the person legally bound to the contract.
Essential Terms
UCC: quantity
Common Law: parties, subject matter, price, and quantity
Fill the Gaps
If terms are missing, such as time or place for delivery and even the price of the goods.
Bilateral Contract
Asks for a promise in return
Unilateral Contract
Requires an act
Termination of Offers
(1) Lapse of Time in Offer: states when it will expire on a certain date.
(2) Death or Mentally Incapacity: expires when the offeror dies or becomes mentally incapactitated even if the offeree has not learned of it and sends an acceptances after the fact but before knowledge is gained.
(3) Destruction or Illegality: subject matter is destroyed or becomes illegal.
(4) Revocation: offer can be revoked at anytime prior to acceptance by the offeree.
When is revocation received?
Common Law - when it comes into possession of the person addressed.
UCC: (A) it comes to the person’s attention, or (B) is duly delivered in a reasonable form at the place of business or where held out as the place for receipt of such communications.
Invitation to Deal
A preliminary communication that reserves a final right of approval with the speaker - it does not convey a power of acceptance to the other side.
Irrevocable Offer
(1) Option
(2) UCC Firm Offer
(3) Partial Performance (unilateral contracts)
(4) Detrimental Reliance
Firm Offer
(1) must be a merchant
(2) cannot exceed 3 months, regardless of whether a time period is state or implied
(3) signed writing from the offeror
Promissory Estoppel
Offeree reasonably and detrimentally relied on the offer it may be irrevocable
Partial Performance
Cannot revoke a unilateral offer once the performance has begun
Quasi-Contract Elements
(1) plaintiff confers a reasonable benefit on the defendant;
(2) plaintiff reasonably expected to get paid; and
(3) it would be unfair to let the defendant keep the benefit without paying
Defenses to Formation
(1) Mistake (voidable)
(2) Misunderstanding
(3) Misrepresentation, Nondisclosure, & Fraud
(4) Undue Influence
(5) Duress
(6) Capacity to Contract
Mutual Mistake
(1) mistake of fact existing at the time of the contract formation
(2) mistake relates to a basic assumption
(3) mistake has a material impact on the contract
(4) adversely affected party did not assume the risk of the mistake
Unilateral Mistake
(1) mistake would make enforcement unconscionable, or
(2) non-mistaken party caused the mistake, had a duty to disclose or failed to disclose, or knew or should have known the other party was mistaken
Misunderstanding
Both parties believe that they are agreeing to the same material terms, but they are agreeing to different terms
Fraudulent Misrepresentation
(1) misrepresentation is fraudulent
(A) false assertion of fact made knowingly, or recklessly without knowledge of the truth, and
(B) with intent to mislead
(2) misrepresentation induced assent to the contract; and
(3) adversely affect party justifiably relied on the misrepresentation
Nonfraudulent Misrepresentation
Can render a contract voidable by the adversely affected party if:
(1) misrepresentation is material
(2) misrepresentation induced assent
(3) adversely affected party justifiably relied on the misrepresentation
Nondisclosure
(1) disclosure is necessary
(2) disclosure would correct a mistake as to a basic assumption, and nondisclosure would constitute bad faith and unfair dealing
(3) disclosure would correct a mistake of the other party as to the contents or effect of a writing evidencing their agreement, or
(4) other party is entitled to know the fact
Fraud in the Factum
Occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the contract.
Fraud in Inducement
Occurs when a fraudulent misrepresentation is used to induce another to enter into a contract
Undue Influence
Unfair persuasion of a party to assent to a contract
Duress
Improper threat that deprives party of meaningful choice
Capacity to Contract
(1) Infancy
(2) Mental Illness
(3) Guardianship
(4) Intoxication
Infancy
Under the age of majority
Mental Illness
(1) understand the nature and consequences of the transaction
(2) act in a reasonable manner with regard to the transaction and other party has reason to know that fact
Guardianship
A person under guardianship may be liable for the reasonable value of necessities furnished by another party
Intoxication
If the person is unable to understand the nature of consequences of the contract
Defenses to Enforcement
(1) Illegality
(2) Unconscionability
(3) Public Policy
Illegality
Consideration or performance under the contract is illegal or becomes illegal it is void
Exceptions to Illegality
(1) Ignorance of Illegality - one party is justifiably ignorant to the illegal nature that party may recover if the other persona acted with knowledge of the illegality
(2) Lack of Illegal Purpose - the purpose is not illegal but one party intends to use the product or service illegally
Unconscionability
Unconscionable when it is so unfair to one party not reasonable person in the position of the parties would have agreed to it
Public Policy
Unenforceable if it violates a significant public policy, such as contracts that restrain marriage, commission a tort, or unreasonable retains trade
Restitutionary Recovery
(1) plaintiff conferred a material benefit
(2) plaintiff acted without gratuitous intent
(3) unfair to let the defendant off without compensating plaintiff for material benefit
Express Warranty
Can be made subsequent to the sale of goods and no consideration is needed
Implied Warranty of Merchantability
Applies when seller is a merchant and means goods must fit ordinary purpose
Implied Warranty of Fitness for a Particular Purpose
Implied whenever seller has no reason to know that the buyer has a particular use for the goods and the buyer is relying the seller’s skill to select the goods
