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Honors Business Law > Contracts & UCC > Flashcards

Contracts & UCC Flashcards

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1
Q

What law governs contracts?

A

State common law of contracts (appellate court decisions)

Uniform Commercial Code (UCC enacted by all states)
Applies to contracts for
sale and lease of goods

Not law, but trusted secondary source: Restatement of Contracts

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2
Q

What is a contract?

A

an agreement that a court is willing to enforce

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3
Q

What are the four requirements of a valid contract?

A
  1. agreement,
  2. consideration,
  3. capacity
  4. legality
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4
Q

What is the Statute of Frauds?

A

these Contracts must be in writing to be enforced by a court

For example:
-sale of land
-contract which cannot be completed in one year
-Promise to stand behind the debt of another
-Sale of goods greater than $500

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5
Q

What is the Parol Evidence Rule?

A

Oral terms (before or at time of written contract) that contradict the written contract will not be allowed as evidence to alter a written contract.

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6
Q

What is a Bilateral contract?

A

acceptance is a promise, which forms the contract. (two promises creates enforceable contract)

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7
Q

What is a Unilateral contract?

A

acceptance is a completed act, which forms the contract. (one promise followed by one act creates contract)

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8
Q

What does void mean?

A

not a contract, e.g. agreement about an illegal subject

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9
Q

What does voidable mean?

A

may be rescinded or cancelled at the option of one of both parties, e.g. contract by a minor

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10
Q

What is an expressed contract?

A

An express contract is one in which the terms and conditions are spelled out in the contract, either verbally or in writing. Once an express contract has been established and agreed upon, an identical implied contract cannot exist

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11
Q

What is an implied contract?

A

An implied contract is one in which the terms and conditions are inferred by the actions of the parties involved

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12
Q

What is an executed contract?

A

An executed contract is a contract that is fully legal immediately after all parties involved have signed, and the terms must be fulfilled immediately.

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13
Q

What is an executory contract?

A

a contract in which the terms are set to be fulfilled at a future date.

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14
Q

What are the three requirements of an offer?

A
  1. Legal intent——but beware that an advertisement is not an offer; an advertisement is an invitation to make an offer
    Objective Standard
  2. Communicated: offeror —— offeree
  3. Definite terms
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15
Q

Can the offerer revoke the offer?

A

Yes, as long as it is prior to acceptance.

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16
Q

What are the two exceptions to the “revoke anytime before acceptance” rule?

A
  1. The option contract: A makes offer to B, and states that the offer will be held open for 30 days if B will pay A $100. B agrees and pays A $100.
  2. The firm offer rule under the UCC: must be a sales contract, offeror must be a “merchant,” and offer must be in writing!
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17
Q

Prior to acceptance, offer may be terminated by action of the parties in what 3 ways?

A

revocation
rejection
counter-offer

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18
Q

Prior to acceptance, offer may be terminated by operation of law?

A

lapse of time
destruction of subject
death/incompetence of party
supervening illegality

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19
Q

What does the “mirror image rule” mean?

A

It means that when you say “yes” to an offer, that becomes the basis for a contract, so you’re accepting that offer exactly as it is – with no changes or modifications. Therefore, the acceptance must be a mirror image of the offer. If it isn’t, there’s no contract.

20
Q

What does the mailbox rule mean?

A

Acceptance occurs upon dispatch by the accepting party (when it is put in mailbox)

Offer and revocation occur upon receipt by the accepting party (does not matter when it was mailed)

21
Q

What is consideration?

A

A “bargained for” exchange…both sides must give consideration.

Adequacy of consideration? Doesn’t matter; courts don’t require a contract be fair to be enforceable

NOT Consideration (VIDEO)
a. Pre-existing duty (a K already exists)
b. Past consideration

22
Q

What are some examples of not having capacity?

A

-Minors
Voidable by the minor only. Must act while still a minor or within a reasonable time after becoming an adult.
-Intoxicated … maybe drugs (prescription and legal or otherwise) alcohol (some states require intoxication be involuntary
-Mental incompetence (e.g. dementia)

23
Q

What happens when the party lacks capacity?

A

They may cancel or enforce the contract; voidable

24
Q

For legality, what 4 instances would make a contract illegal?

A
  1. Gambling (buying into a game of chance is illegal)
  2. License (illegal if lack regulatory license)
  3. Exculpatory clauses (e.g. a release) sometimes illegal
  4. Covenants not to compete ( to be legal must have 3 “reasonables” or blue pencil)
25
Q

What are 2 kinds of exculpatory clauses?

A

Adhesion contract and unconscionability

26
Q

What are the three “reasonables” necessary for a covenant not to compete to be legal?

A

a) Reasonable business purpose
b) Limited as to time
c) Limited as to area

27
Q

What is privity of contract?

A

a party to a contract may sue to enforce the contract

28
Q

What are third-party beneficiaries?

A

Contract is intended to directly benefit a third party. The intended third-party beneficiary may sue to enforce contract.

29
Q

What are assignees?

A

A party to a contract may assign (transfer) rights to a third-party (who then has the right to enforce the contract).

30
Q

Who may enforce a contract?

A

Privity of contract
Assignees
Third Party Beneficiaries

31
Q

What is fraudulent misrepresentation?

A

i. Misrepresentation of material fact
ii. Intent to deceive
iii. Innocent party justifiably relied on misrepresentation
iv. Innocent party was harmed

32
Q

What is undue influence?

A

One party dominates or unfairly influences another party
e.g. fiduciary relationships (doctor-patient, guardian-ward, parent-child)

33
Q

What is duress?

A

acceptance was forced with threats
-e.g. blackmail

34
Q

What are adhesion contracts?

A

-imbalance of bargaining power
-contract is “take-it-or-leave-it” (absence of meaningful choice)
- and unconscionability if unreasonably favorable terms for the most powerful party

35
Q

What does discharge mean?

A

Termination of contract

36
Q

What does complete performance mean?

A

perfect performance under the contract

37
Q

What are the three requirements of substantial performance?

A
  1. Party performed in good faith (no intentional non-performance)
  2. Variation from contract must not be great (no material breach)
  3. The contract as performed is substantially similar to contract terms

(substantially performing party may have to pay difference in value of contract as promised and as performed)

38
Q

What is a condition precedent?

A

A condition precedent is a stipulation that defines certain conditions that must either occur or be met by either party to ensure progress or execution of a contract.

39
Q

What is discharge of contract by “agreement of the parties”?

A

-Mutual rescission (usually before either side performs)
-Novation (both parties agree to sub 3rd party)
-Accord and satisfaction (parties agree to accept performance different from original contract)

40
Q

What is discharge of contract by “operation of law”?

A
  • Statute of limitations
  • Bankruptcy (contracts may be discharged in bankruptcy proceedings)
  • Impossibility
    -Death/incapacity of party
    -Destruction of subject
    -Supervening illegality
41
Q

What are two common remedies that a non-breaching party may sue for?

A

a) Compensatory damages
b) Consequential damages
- Plaintiff may only recover consequential damages that were foreseeable to the defendant

42
Q

Can you sue for punitive damages for contracts?

A

No

43
Q

What is the mitigation doctrine?

A

a common law doctrine based on fairness and common sense. As a general rule, a plaintiff will not be able to recover losses that could have been reasonably avoided.

In other words, the plaintiff must reduce damages

44
Q

What are equitable remedies?

A

Equitable remedies are actions rather than a financial award. They are often granted when monetary compensation or other legal remedies do not provide an adequate resolution (e.g. specific performance)

45
Q

Article 2 of UCC applies to contracts for ____?

A

Sale of goods (movable, tangible property)

Honors Business Law (4 decks)

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