Exam 2 Flashcards
Contract and Sales Contracts
Define a Contract
A legally enforceable promise (or set thereof) made in exchange for a valuable benefit.
What distinguishes Contracts from promises?
Magic sauce. = consideration
What does valid, unenforceable, and voidable contract mean?
- Valid = meets legal req. and enforceable
- Unenforceable = can meet legal req. but unenforceable due to specific reason
- Voidable = one, or more, parties have the right to terminate
What’s an express vs. implied Contract?
- Expressed = expressed terms (written/oral)
- Implied = non-stated terms
What is a Parol Contract
Any contract not in writing
What is an Option Contract?
A separate contract to hold an offer open for a period of time.
What are right and duties?
- Rights = entitled benefits
- Duties = what is required to give.
What are the elements of a valid Contract?
- Offer
- Acceptance
- Consideration
Define an Offer
Manifestation of a willingness to enter into a contract if the other agrees to its terms.
What does definitive mean?
Offer must state all pertinent terms
What is important about Communication in offers?
Offers must be communicated to the actual parties.
How long do Offers stay open?
- A reasonable period of time
- Explicit offer period within the contract
For acceptance, what is the “Mirror Image” rule?
Acceptance must mirror the offer. Cannot add terms in acceptance.
How does the “mailbox rule” work?
Acceptance is noticed when it is sent.
What is an exception to the “mailbox rule”?
If the contract terms specify otherwise. (ex. Acceptance must be received by [ ] before [ ])
When can silence constitute acceptance?
Only if it is reasonable, such as through Course of Dealing.
Define Consideration
Legal value, bargained for and given in exchange for an act or promise
What is Legal Value?
Doing something you had no prior duty to do (or not to do).
What are pre-existing duties?
- Promise to not commit crimes
- Promises to not pay public officials to do public duties
- Pre-existing contractual duties
What is important about Past Consideration?
It is not consideration
What is a Quasi Contract?
Designed to avoid injustice. One party must have furnished a tangible item/service to the other party with the expectation/implication of payment to be given. The other party accepted it but made no effort to pay for it.
What is Promissory Estoppel?
A promise without consideration that is enforceable because the other party reasonably relied on the promise to their detriment.
How could a Contract be rendered unenforceable?
- Capacity
- Misrepresentation
- Fraud
- Duress
- Undue Influence
- Illegality
- Against public policy
- Statute of Frauds
What does “sui juris” mean?
Means “of one’s own right” or “of age and of mind”
What happen when a minor enters a contract?
Contract is voidable only by the minor
How long does a minor have to disaffirm?
A reasonable period of time after turning 18.
What if a minor misrepresents their age?
They are estopped from voiding the Contract.
What is the Court process to determine capacity?
Guardianship
Is a Court process required to invalidate a contract?
No, Guardianship is just one way.
What happens when the party is incapacitated?
Contract is voidable
What happens when the party is intoxicated?
Modern rule = responsible for contract
What happens when a party misrepresents a fact and the other party relies on the facts in entering into the contract?
Contract is voidable
What are material vs. immaterial facts?
Material = essential to the deal
Immaterial = not significant
What is “Puffery”?
“Sales talk,” more opinion than fact.
Difference between misrepresentation and Fraud?
Fraud requires “scienter.” The intent to deceive.
What does “caveat emptor” mean?
“Buyer beware.” The buyer has a duty to inspect the goods.
What is a Latent Defect?
Defect that could not be discovered by initial inspection and was known by the seller.
What is a classic example of Duress?
“Gun to the head”
Modern rule concerning Duress?
Does not have to be physical. If not physical, harm must be significant.
What is Duress?
Threatening to pursue criminal action
What is Undue Influence?
One party holds authority/trust over another and exerts it over the other party. An inappropriate pressure that forces an uninformed decision by the weaker party.
When is a contract considered illegal?
If it calls for behavior violating a tort or statute
What if only part of the contract is illegal?
Courts may divide the contract to enforce the legal parts, unless the illegal parts taint the whole contract.
What about obscure laws or regulations?
There is an exception if both parties were unaware (did not know) of the illegality. Given a chance to correct the illegality to make it enforceable.
What is the Statute of Frauds?
Contracts that must be in writing.
What kinds of Contracts must be in writing?
- Diseased persons
- Guarantees of debts
- Sale of Land
- Bilateral contract that cannot be completed in 1 year.
- Sale of Goods greater than $500.
What must Contracts under the Statute of Frauds include?
- Essential terms
- Signature by the party for whom enforcement is sought
What is the Parol Evidence rule?
When parties create and integrated, written, and signed contract, parol evidence is not admissible. Courts look only at contract.
How do Assignments work?
Separate contract that substitutes a third-party to the current party that is the obligee.
What kind of Contracts may be Assigned?
All contracts unless:
- It is expressly prohibited in the contract
- The assignment would change the deal
- The assignment would increase the burden
Who are Third-Party beneficiaries?
Parties that benefit from a contract but are not parties to the contract itself.
When are Third-Party beneficiaries able to enforce their rights under a contract?
- Rights have vested
- The rights are more than mere incidental rights
What is Strict Performance and when does it apply?
Strict performance is when performance is explicitly quantifiable. Applies when it is clear to tell when performance is done.
What is Substantial Performance and when does it apply?
When performance is not explicitly quantifiable. Applies when asked “Did the party reasonably perform?” (ex. blades of grass)
What does “discharge” of obligations under a contract mean?
There are no more duties to perform/no more promises.
When is a party discharged?
- Upon performance
- By agreement
- Statute of Limitations
What are the Statute of Limitations applicable to contracts under Georgia law?
- 4 years (parol)
- 6 years (in writing, no seal)
- 20 years (in writing, seal)
Describe the Remedies in Contract law
- Compensatory - make whole as if contract had been completed. Standard goal.
- Consequential - foreseeable consequences of contract breach. Must be foreseeable to complete.
- Punitive (very rare) - Not typically recoverable unless an intervening tort had been committed.
- Liquidated - damages agreed to at the time of contract or breach.
What is meant by “mitigate damages”?
The harmed party has a duty to reduce damages incurred. Cannot just “take it.”
What does UCC stand for?
Universal Commercial Code
Which Article of the UCC applies to the sales of goods?
Article 2.
Define “goods”?
Tangible, personal property
What are Merchants under the UCC?
- Regularly deals with a type of good
- Proports special knowledge of a good
- Employs someone with either [1] or [2]
What does “Good Faith” mean in a sales contract?
Seller is honest in fact.
What does “Course of Dealing” mean?
If a contract does not provide clear terms, look to prior history of dealings.
What is the effect of Course of Dealing?
To fill in the gaps of unclear terms.
What does “Customs of Trade” mean?
Practices that apply to a specific trade.
What is the effect of Customs of Trade?
Fills in the gaps for interpretation.
When can a sales contract be altered by a party’s Failure to Object?
After some reasonable time of sustained partial performance that has not been objected to.
Can a Waiver (Failure to Object) be revoked?
Yes, with a reasonable notice and if the other party has not come to rely on the waiver.
How do Assignments differ in sales contracts?
May be assigned unless:
1. Contract prohibits assignment
2. Assignment changes material of contract
If Sales Contract does not specify, where is a seller required to deliver the sold goods?
- Seller’s place of business
- Where goods are located
How do buyers accept goods?
After a reasonable time to inspect the goods, the buyer can accept conforming goods or reject non-conforming goods.
What right does buyer have to inspect goods?
A reasonable time for inspection
Define Commercial Unit of goods
Goods sold as a group.
Can a buyer reject a portion of a Commercial Unit?
No, the goods are treated as a unit.
When can a buyer revoke Acceptance?
In the case of a Latent Defect
What are the seller’s rights to cure rejected goods?
Can re-ship conforming goods within original deadline
What are the possible remedies for Sellers when a Buyer breaches contract?
- Cancel
- Resell
- Recover lost profits
- Recover purchase price
- Reclaim
What are the possible remedies for Buyers when a Seller breaches contract?
- Cancel
- Cover
- Recover Price Difference
- Recover Value Difference
- Specific Performance’
- Consequential Damages
What are the types of implied Warranties?
- Implied Warranty of Merchantability - product will work for its implied purpose.
- Implied Warranty of Fitness for a Particular Purpose - product will work for a specific additional purpose beyond standard intended purpose (ex. heater with additional cooling function).
- Implies Warranty of Title - seller has right to transfer ownership when goods purchased and good title for buyer.
What is an “unconscionable” sales contract?
A contract so severely one-sided it is deemed unenforceable under the law. The contract “shocks the conscience.”
