Exam 4 - Contracts Flashcards
Basic Requirements of a K
1) Agreement
2) Between Competent Parties
3) Genuineness of assent
4) Consideration
5) Legality
6) In proper legal form
Bilateral K
Promise for a promise
-Promises are not legally binding on their own, but can be consideration
-promise can be express (oral or written) or implied (based on conduct)
-Promise 1 given by A to B is an offer and consideration. Promise 2 given in return from B to A constitutes acceptance of A’s offer and consideration.
Agreement
Offer and Acceptance
Unilateral K
Promise in return for an act
A promises something to B. The nature of the promise is that B must complete some act in return.
The promise by A constitutes the offer and A’s consideration, while b’s acceptance and consideration come from completing the required act.
As a general rule, the act must be completed to create a unilateral K. Significant performance is the exception.
Quasi Contract
Non-contract doctrine enforced by the courts when one party is unjustly enriched. Measure of damages is the reasonable value of what was unjustly received by the party being sued.
-Defense to QC is volunteered work. If the receiver of the value did not know of or consent to receiving the value, they cannot be sued under QC
Quantum Meruit
The reasonable value of a service
Valid K
Good, binding contract meeting all requirements. Will be enforced by the courts.
Void K
NOT A K. There never was, is not, and never will be a contact. Most likely caused by illegality of the attempt at K. Will not be enforced
Voidable K
K that can either be ratified or disaffirmed by at least one of the parties.
Contracts Voidable for Fraud
Elements of Fraud:
1) Misrepresentation
2) Of a material fact
3) with knowledge or reckless indifference to the truth
4) Intent to deceive
5) reasonable reliance
6) Injury
With 1-5, the non-fraudulent party has access to the equitable remedy of recession, and the K is voidable at their behalf.
With 1-6, party also entitled to monetary damages.
Equitable Remedy of Recession
-Asking the court to return both parties to their original positions before the contract was made, and to cancel the contract.
-The right to disaffirm must be exercised within a reasonable time, otherwise, there is implied ratification of the contract.
Executory K
K not completed by either party
Executed K
K completed by both parties
Partially Executory/Executed K
K completed by one party, but not the other
Offer
Can be oral, written, or implied
Must consist of:
1) Present, Serious, Contractual Intent
2) Sufficiently definite subject matter (‘a job’ vs. ‘account’s payable specialist position group #41786’)
3) Communication to the offeree
Things that are not offers
1) A future offer (I will be willing to sell you my car for $15 in 2 years)
2) Offers made in jest (I’d pay a million dollars for that drinking straw)
3) Preliminary Negotiations
4) An invitation (to dinner, a party, etc.)
5) An invitation to offer (What’s your best offer for my pen?)
6) Inquiry (are there any known defects in this product?)
7) Answers to an inquiry (No, there are no known defects)
Offer outcomes
Offeror makes offer, offeree is the one receiving the offer
1) Acceptance (Offeree)
2) Rejection (Offeree - Terminates offer)
3) Revocation (Offeror - Terminates offer)
4) Termination (Accomplished by Rejection, Revocation, or otherwise)
Revocation
General Rule: an offer can be revoked at any time before it is accepted.
Exceptions: Irrevocable Offers
1) Option K - Sales or C/L K
2) Firm Offer - Sales ONLY
Option K
Contract for a specific offer to be kept open for a specific period of time. Made effective by the party receiving the option giving some additional consideration in exchange.
Firm Offer
Only in Sales Law
Consists of:
1) An offer
2) A promise to keep that offer open for three months or less
3) In writing
4) Made by a merchant
Firm offers do not require consideration to be given by the receiving party.
Merchant
An individual or firm whose usual business is trading in goods.
Sales Law
Governed by the uniform commercial code and title 13 of the ORC
-Governs Sales
-Sales: Present transfer of title to goods
–Title: ownership
– goods: Tangible personal property
Common Law of Contracts (C/L K)
Covers everything not covered by sales law
Maintained by the courts.
Things that fall under C/L K:
1) K for the sale of real property
2) K for intangible property
3) K for services
4) K for the acquisition of a business
Is the K Sales or C/L K
Can be purely sales, purely C/L K, or take on elements of both. however, the K can only be governed by one set of laws at a time. If there are elements of both sale and service to the transaction, need to determine whether the actor exists primarily to provide the service or to sell the good.
Rejection of an Offer
Can come in multiple forms:
1) Flat out rejection (No, I don’t want any part of that)
2) Counter offer (I’ll do it if you pay me $1,000 more)
- Terminates the original offer and creates a new offer from the previous offeree to the previous offeror with the roles reversed
3) Qualified acceptance (I agree, if…)
- C/L K considers qualified acceptances to be counter-offers. Under strict reading of C/L K, the offer and acceptance must match exactly to be a valid agreement.
Termination of an Offer
Causes of Termination:
1) Rejection
2) Revocation
3) Lapse of time - (offer automatically terminates after a reasonable amount of time)
4) Condition Subsequent
5) Destruction of the subject matter
6) Impossibility
7) Subsequent Illegality
Offer Effective
On receipt by offeree
Revocation Effective
On receipt by offeree
Rejection Effective
On receipt by offeror
Acceptance Effective
When sent (posted, deposited, etc)
-Even if the notice of agreement is lost in the mail, the acceptance is still effective.
–The rebuttable assumption is that if it was sent, it was received.
Exceptions to Acceptance being effective when sent
1) The offer states otherwise in tits text
2) The implied agency rule (C/L K only)
- If the acceptance is sent by a method that is the same speed or father than the one used to deliver the offer, the acceptance is effective on send
-If a method slower than the one used to deliver the offer is used, the acceptance is effective upon receipt by the offeror.
3) Acceptance following a prior rejection
- In the case where events occur that there is, in sequence: an offer, followed by the sending of a rejection, followed by the sending of an acceptance, the response that arrives to the offeror first is effective.
– if the rejection gets there first, the offeree rejects the offer
– if the acceptance arrives first, the offeree accepts the offer
- Only applies in case of Offer -> Rejection Sent -> Acceptance sent
Consideration
A bargained for legal detriment
Doctrine of Consideration
A promise is not binding unless it is supported by consideration
Exceptions to the Doctrine of Consideration
1) Promissory Estoppel
- if a party relies on a promise to a substantial detrimental degree, the court will enforce that promise even though there is no consideration given. Not effective in all states.
2) Promise to make charitable contributions
3) Composition Agreement - avoids the pre-existing duty rule
- If a debtor with multiple creditors gets all creditors to agree to reduce their collectible amounts, no creditor can sue to recover remaining amount, even though no consideration is given by the debtor.
4) Promises made after the statute of limitations has run do not require new consideration to be enforceable.
5) Promises made after a discharge in bankruptcy
- per the Bankruptcy reform act, debts can be revived if all of the following are tre:
-a) Revival undertaken in court
-b) Revival undertaken in front of a judge
-c) the judge has advised the prospective debtor on their rights
-d) it is in the debtor’s best interest to revive the debt (rent, etc)
6) The unforeseeable difficulties rule: No consideration requirement to modify the contract if all the following are true:
-a) Construction contract
-b) an unforeseeable event ahs occurred (must be truly extraordinary)
-c) there is a promise to pay an additional amount
7) Modification of a sales K
- Both parties must be in agreement
- Only one party need give new consideration (I was going to wash your car, now, I’ll throw in a free a tire rotation)
Pre-Existing duty rule
A promise to do something you are already legally required to do does not constitute consideration
Past Consideration
Something that occurred in the past was not bargained for, and therefore cannot be consideration for a present contract
Illusory promise
A promise that doesn’t actually bind the promisor to do anything:
- I may do XYZ, etc.
Output K
A K for all the product X can produce. Not illusory, as even though the amount is indefinite, X is still giving up their coal output
Requirement K
A K for X to provide Y with all the product Y will need. Again, indefinite in quantity, but not illusory
Forbearance
A promise to not do something that one otherwise has the legal right to do.
- Can be consideration
Analyzing Contract Cases
1) Identify the court (almost always state trial court -> Ohio)
2) Identify the parties in privity of contract
3) Identify the consideration given by each party
4) Determine whether the K is governed by Sales or C/L K
5) Identify plaintiff and defendant
6) identify issues
Liquidated Debt
A debt whose amount is known by both parties
- The full amount is always collectible, unless otherwise settled
Unliquidated Debt
A debt whose amount is genuinely disputed by the creditor and debtor.
-If the creditor accepts and cashes a check marked with “paid in full” and directed towards an unliquidated debt without disputing the “paid in full” nature of the payment, the creditor loses the right to collect the remainder of what they claim is owed.
Genuineness of Assent
Both parties actually meant to enter into the contract as it is written
Defenses to Genuineness of Assent
1) Mistake
2) Misrepresentation
3) Concealment
4) Fraud
5) Duress
6) Undue Influence
7) Unconscionability
Mistake
Unilateral Mistakes: Made by one Party
Bilateral Mistakes: Made by both parties
May be Mistakes of:
1) Fact (Not opinion or value)
2) Law
3) Expectation