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MBE - Contracts - BAR > Formation of Contracts > Flashcards

Formation of Contracts Flashcards

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1
Q

What does a binding K need?

A

It requires
-> manifestation of mutual assent,
-> consideration,
AND
-> lack of valid defenses.

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2
Q

What is an offer?

A

It’s when
-> the offeror objectively shows willingness to enter into an agreement
AND
-> gives the offeree the power of acceptance.

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3
Q

When is a statement considered to be an offer?

A

A statement is an offer only if:
-> person to whom it is communicated could reasonably interpret it as an offer
AND
-> the offeror expresses present intent of a person to be legally bound by a K

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4
Q

What does the offeree need to know in order to accept an offer?

A

Offeree must know of the offer in order to have the power to accept it.

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5
Q

How does a K fail for indefiniteness?

What type of Ks are an exception to this under UCC (don’t need XXX to be held as definite enough)?

A

The terms must be certain and definite or the K fails for indefiniteness.

Requirement Ks
-> buyer agrees to buy all that he requires

Output Ks
-> seller agrees to sell all that she manufactured

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6
Q

What does the CL consider to be an essential term?

How does the CL handle missing terms?

A

Under common law (CL)
-> essential terms (parties, subject matter, price, quantity) must be covered in K
-> if the parties intended to create a K, the court may supply missing terms

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7
Q

What does the UCC consider to be an essential term? Is there a moment when such a term isn’t essential?

How does the UCC handle missing terms?

A

Under UCC
-> only essential term is quantity
-> exception - requirements or output Ks (UCC implies “good faith”)

UCC “fills the gap” if other terms are missing
-> K formed if both parties intend to K and reasonably certain basis for giving remedy

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8
Q

What language must an offer contain?

A

Offer must contain words of
-> promise,
-> undertaking,
OR
-> commitment
AND
-> be targeted to a number of people who could actually accept

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9
Q

Depending on the language of the offer, what kind of K do you get if there is acceptance?

A

-> if a return promise is requested = bilateral K
-> if an act is requested = unilateral K

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10
Q

What is an advertisement originally and when can it become an offer?

A

Advertisements are only an invitation to receive offers

BUT may qualify as an offer IF
-> sufficiently specific
AND
-> limit who can accept;
OR
-> if associated with a stated reward

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11
Q

When does an offer terminate? There are 5 categories.

A

-> Lapse of time
-> Death/mental incapacity
-> Destruction/ illegality
-> Revocation
-> Rejection by offeree

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12
Q

How does an offer terminate via lapse of time?

A

-> specified termination date or reasonable period of time if none stated

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13
Q

How does an offer terminate via death/mental incapacity of the offeror?

Is there an exception to the general rule?

A

Death/mental incapacity
-> general rule - offer terminates, even if offeree does not learn of offeror’s death util after the offeree has sent what he believes to be is an acceptance

Exception - offers for option Ks do not terminate because consideration was paid to keep the offer open

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14
Q

How does an offer terminate via destruction or illegality of the offer?

A

Destruction/ illegality
-> offer terminated immediately

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15
Q

How does an offer terminate via revocation?

When is revocation effective?

A

Revocation
-> offer can be revoked any time prior to acceptance

Effective revocation:
-> not effective until communicated
-> revocation sent by mail not effective until received

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16
Q

Can an offeror terminate via a revocation even if they states it will be open for specific amount of time?

A

Yes, but there are exceptions to this rule (e.g. options K and UCC’s merchant firm offer rule)

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17
Q

How does an offer terminate via a rejection by the offeree?

When is a rejection effective?

What is the nature of a counteroffer in terms of it being a rejection or not?

A

Rejection by offeree
-> offeree clearly conveys to offeror that he no longer intends to accept the offer

Effective:
-> rejection usually effective upon receipt

Counteroffer - acts as rejection of original offer and creates new offer

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18
Q

What are the limitations on revocation?

A

-> Option K
-> UCC Firm offer rules
-> Promissory estoppel
-> Partial performance

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19
Q

What must the offeree do for the option K to be enforceable and thus irrevocable?

A

Option K
-> offeree must generally give consideration for option to be enforceable

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20
Q

How does the UCC firm offer rule work?

Is consideration needed to keep the rule active?

A

UCC firm offer rule - offer irrevocable (for reasonable time but no more than 3 months) IF
-> offeror is a merchant (or any business person),
AND
-> assurances (in authenticated writing) are made that offer will remain open

No consideration needed to keep offer open

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21
Q

How does promissory estoppel make a K irrevocable?

A

Promissory estoppel
-> if offeree reasonably AND detrimentally relies on offer it may become irrevocable

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22
Q

How does partial performance work to stop revocation of a unilateral K and a bilateral K?

A

Unilateral K
-> offeror cannot revoke once offeree has begun performance (still in partial performance territory)

Bilateral K
-> commencement of performance (still in partial performance territory) operates as promise to render complete performance so can’t revoke until enough reasonably time has passed to give party a chance to perform

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23
Q

What is required of offeree for partial performance to be a limit on the offeror’s ability to revoke an offer?

A

Partial performance -
> for all Ks (bilateral and unilateral), offeree must have knowledge of offer when performance begins

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24
Q

How does revocation work for general offers that are given to a large number of people?

Does promissory estoppel apply here?

A

Revocable only by notice given at least same level of publicity as offer

Revocation is effective even if potential offeree acts in reliance on offer, so no promissory estoppel available here.

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25
Q

What is acceptance of an offer?

A

Objective manifestation by the offeree to be bound by the terms of the offer.

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26
Q

How does acceptance work in a bilateral vs unilateral K?

Is starting performance enough to show acceptance in a unilateral K?

A

Bilateral K
-> exchange of promises that render both enforceable

Unilateral K
-> promise to do something by one party in return for an act of the other party

Note:
-> starting to perform is not enough to show acceptance, but it will make offer irrevocable for a reasonable period of time to complete performance

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27
Q

What are the means of acceptance?

Can silence be used as a form of acceptance?

Can shipment of goods be used as a form of acceptance?

A

Unless offeror specifies, offeree can accept in any reasonable manner/means

Silence - is not acceptance UNLESS
-> offeree has reason to believe offer could be accepted by silence
OR
-> previous dealings make it reasonable to believe that offeree must notify offeror if he DOES NOT INTEND TO ACCEPT

Shipment of goods - buyer’s request that goods be shipped is inviting acceptance either by
-> seller’s promise to ship
OR
-> by prompt shipment of goods

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28
Q

What happens to the acceptance of an offer if non-conforming goods are shipped?

A

Nonconforming goods shipped - both an acceptance and a breach,

UNLESS seller seasonably notifies buyer that goods are an accommodation (counteroffer)
-> buyer may then accept or reject the nonconforming goods

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29
Q

What does the mailbox rule apply to?

What does the rule state in the following situations:
-> Acceptance sent via mail
-> Rejection sent after acceptance already sent
-> Acceptance following rejection

A

Applies only to
-> acceptance; almost exclusively applies to bilateral Ks

Acceptance
-> effective when sent (not upon receipt), unless offer provides otherwise

Rejection following acceptance
-> acceptance will control even if offeror receives rejection first (but if offeror detrimentally relies on rejection then offeree estopped from enforcing K)

Acceptance following rejection
-> mailbox rule does not apply; first one received (i.e., in possession of offeror or her agent, or deposited in mailbox) will prevail; offeror need not actually read the received communication

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30
Q

Does the mailbox rule apply to revocations?

What about options and other irrevocable offers?

A

Revocation
-> effective upon receipt

Options and other irrevocable offers
-> mailbox rule does not apply
-> acceptance must be received by offeror by a certain date or before offer expires

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31
Q

When is notice needed under a unilateral K to demonstrate acceptance?

What happens to the offer’s duties if notice is required but it isn’t provided? Are there exceptions?

A

Offeree not required to give notice after completing performance UNLESS;
-> offeror wouldn’t learn of performance with reasonable certainty and promptness;
OR
-> offer requires notice

Notice required but not provided - offeror’s duty is discharged, UNLESS
-> offeree exercises reasonable diligence to give notice
-> offeror learns of performance within reasonable time
OR
-> offer indicates notice of acceptance is not required

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32
Q

When is notice needed under a bilateral K to demonstrate acceptance?

A

Offeree must give notice of acceptance
-> mailbox rule - acceptance valid when sent (even though offeror hasn’t received it)
-> UCC - if acceptance is made by beginning performance, notice is required within reasonable time; failure to give notice results in offeror’s lapse

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33
Q

How does CL deal with additional or different terms (CL mirror-image rule)?

What about a conditional acceptance?

A

CL mirror-image rule
-> acceptance must mirror the terms of the offer, so any change or addition to the terms acts as a rejection and a new counteroffer

Conditional Acceptance terminates the offer and acts as new offer from original offeree

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34
Q

How does the UCC deal with additional or different terms?

A

No mirror-image rule - acceptance containing additional or different terms generally treated as acceptance

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35
Q

How does the UCC deal with new or additional terms when one or both parties are NOT merchants?

How are counteroffers treated under this rule?

A

One or both parties not merchants
-> definite and seasonable expression of acceptance sent within a reasonable time is usually acceptance of original offer, AND new/different terms are treated as proposed additions to the K that must be separately accepted by offeror

Exception - an acceptance expressly conditioned on assent to new/different terms is treated as a counteroffer

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36
Q

How does the UCC deal with new or additional terms when both parties are merchants?

A

Both parties are merchants (battle of the forms)

Additional terms - automatically included in the K, UNLESS:
-> term materially alters original K (i.e., would result in surprise or hardship)
-> offer expressly limits acceptance to terms of the offer;
OR
-> offeror objects to new terms within a reasonable time after notice of new terms is received

If none of the these exceptions are met with regards to additional terms, THEN the original terms of offer control WITH additional terms.

Different terms - (“knock-out” rule) -
-> different terms in offer/ acceptance nullify each other
AND
-> court uses Article 2’s gap-filling provisions to patch holes in K

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37
Q

What happens when the offer and purported acceptance differ too much, but both parties begin to perform as if there was a valid K?

A

Acceptance based on conduct - if offer and purported acceptance differ too much to create a K but the parties begin to perform anyway, then UCC allows for a contract to be recognized with the following terms:
-> any terms actually agreed upon in the parties’ writings, and
-> any supplementary terms filled in by the UCC

38
Q

What does “bargain and exchange” mean in terms of consideration?

How does a bargained-for-legal detriment constitute sufficient consideration?

A

Bargain and exchange
-> there must be a bargained-for legal detriment to the promisee

To constitute sufficient consideration
-> must be bargained-for in exchange for the promise,
-> promise must induce the detriment,
AND
-> detriment must induce the promise

39
Q

Can consideration be return promise to do or refrain from doing something, OR performance of or refraining from performing some act?

A

Yes that is sufficient consideration.

40
Q

What is the test distinguish between a gift and valid consideration?

Is a promise to make a gift enforceable under promissory estoppel?

A

Test to distinguish gift from valid consideration is WHETHER offeree could reasonably believe intent of offeror was to induce the action
-> if Yes, then there is consideration and promise is enforceable

Promissory estoppel
-> if promissor/donor knows that promise to make a gift will induce substantial reliance by promisee
AND
-> failure to enforce it would cause substantial injustice
THEN
-> promise is enforceable

41
Q

In determining whether consideration is adequate, do you take an objective or subjective view on the matter?

A

Subjective value - benefit to promisor need not have economic value; if promisor wants it, giving of it will constitute adequate consideration

42
Q

How does the preexisting duty rule function as adequate consideration under the CL?

Is there an exception to this CL rule with regard to third parties?

A

CL - does not qualify as consideration UNLESS
-> promisor gives something in addition to what is owed,
OR
-> varies preexisting duty in some way

Exception for third party
-> party’s promise to a third party to perform an act the party is contractually obligated to perform for another is sufficient consideration

43
Q

What is the modern trend with regard to past promises being adequate consideration? What rule is being implicated under the modern trend?

A

Modern trend toward enforcing past promises under the material benefit rule

44
Q

What is an executory contract?

What are examples of executory contracts?

Does an executory contract have adequate consideration?

A

An executory contract is a contract whose terms are to be performed by both parties at a later date or in an ongoing manner. For example, a rental agreement that calls for monthly payments over a period of time cannot be performed all at once.

Examples
-> lease agreement (monthly payments for rent)
-> construction agreement where payments are when certain milestones are achieved

Yes, as an exchange of promises is adequate consideration.

45
Q

What does CL require for modifications to be valid?

Under what conditions is an agreement to modify a K enforceable under the CL?

What does the UCC require for modifications to be valid?

A

CL - must be supported by consideration,

Agreement to modify K are enforceable if:
-> rescission of existing K and entering into of new K
-> unanticipated difficulties arise and modification is fair and equitable
OR
-> new obligations arise on both sides

UCC
-> requires only good faith
-> no consideration is necessary

46
Q

What’s an accord?

What does satisfaction of the accord result in?

Is the Original K discharged upon creating of the accord?

A

Accord
-> one party agrees to accept a different performance from the other party to satisfy the other party’s existing duty

Satisfaction
-> performance of the accord agreement will discharge both the original K and the accord K

Original K not discharged until satisfaction is complete of the accord.

47
Q

Can an unliquidated or disputed claim be discharged? In what way?

What happens if the claimant accepts under protest?

A

An unliquidated or disputed claim may be discharged when in good faith the non-claimant tenders a negotiable instrument (e.g. a check with the note “Payment in full”) to discharge the claimant’s claim AND the claimant obtains payment of the instrument.

Accepting the instrument even under protest discharges the claimant’s claim.

48
Q

Is an illusory promise binding? Why?

A

Not legally binding because
-> it is vague
OR
-> promisor can choose whether or not to honor it

49
Q

Can voidable/ unenforceable promises still constitute consideration?

What’s an example of such a type of promise?

A

Yes.

Promise made while one of the parties was under the age of 18 (infancy).

50
Q

What are requirement Ks?

What are output Ks?

Do requirement Ks and output Ks need additional consideration?

A

Requirement Ks
-> buyer agrees to buy all that he requires

Output Ks
-> seller agrees to sell all that she manufactured

There is already consideration because promisor suffers legal detriment each time a transaction takes place underneath the K.

51
Q

How does the covenant of good faith and fair dealing work with regard to requirement Ks and output Ks?

A

Because a covenant of good faith and fair dealing is implied in all Ks (CL and UCC), any quantities under such a contract
-> may NOT be unreasonably disproportionate to any stated estimates,
OR
-> if no estimate is stated, to any normal or otherwise comparable prior requirements or output.

52
Q

Is a promise with regards to a legal claim settlement sufficient consideration?

A

A promise not to assert (or a release of) a claim or defense is not consideration
-> because then people would condition partial payment of K, on other party not coming after them

UNLESS the claim or defense is doubtful or the party promising not to assert (or release) the claim believes in good faith that it is valid

53
Q

What are different types of promises that are binding without consideration?

A

-> Promise to pay a debt barred by statute of limitation
-> Promise to perform prior voidable duty
-> Material benefit rule
-> Promissory estoppel

54
Q

How does the promise to pay a debt barred by statute of limitations work? Does it require new consideration?

A

Promise to pay a debt barred by statute of limitation
-> new promise to pay debt after SoL has run is enforceable without new consideration

55
Q

How does the promise to perform prior voidable duty work? Does it require new consideration?

A

Promise to perform prior voidable duty
-> new promise to perform prior voidable duty is enforceable if it doesn’t suffer from an infirmity rendering it voidable (meaning if underage person reaffirms promise to perform then it’s still voidable as they’re underage, but if they reaffirm promise to perform past the age of majority then enforceable without new consideration)

56
Q

How does the material benefit rule work?

Is there an exception to this?

A

Material benefit rule
-> when a party performs an unrequested service for another party, the modern trend permits the performing party to enforce the promise of payment for material benefits received to extend necessary to prevent injustice

UNLESS party’s intent is donative in nature.

57
Q

How does promissory estoppel work? Does it require new consideration?

A

Promissory estoppel (consideration “substitute”) - a promise is binding IF
-> promisor should reasonably expect it to induce action on the part of the promisee or a third paerson
-> promise does induce such action,
AND
-> injustice only avoided by enforcement of promise

58
Q

Can a K be unenforceable?

How so?

A

Yes.

A defense to formation or a defense to enforcement may render K void, voidable or unenforceable?

59
Q

What does it mean for a:
-> K to be void
-> K to be voidable
-> K to be unenforceable

A

Voids Ks -> entire transaction is null, as if no K existed

Voidable Ks - operates as valid K until/unless one party takes steps to avoid it

Unenforceable Ks - valid K that cannot be enforced if one party refuses to carry out its terms

60
Q

What are the defenses to formation?

A

No “meeting of minds” due to
-> mistake
OR
-> misunderstanding

-> misrepresentation
OR
-> fraud

-> undue influence
OR
-> duress

-> lack of capacity.

61
Q

What is a mutual mistake?

When is K voidable by party that is adversely affected?

When can neither party avoid K due to a mutual mistake?

A

Mutual mistake - both parties mistaken as to essential element.

K generally voidable by party adversely affected IF:
-> mistake existed when K was formed
-> mistake relates to basic assumption of K
-> mistake has material impact on transaction
AND
-> adversely affected party did not assume the risk of mistake

Neither party can avoid K if reformation available to cure mistake.

62
Q

When can a court not reform a K due to unilateral mistake?

A

Court can reform writing except to extend that rights of third parties who relied on K would be unfairly affected

63
Q

What is a unilateral mistake?

When can a mistaken party void K?

Can a unilateral mistake serve as a basis to rescind a K?

A

Unilateral - one party is mistaken as to essential element of K, but either party can enforce K on its terms

K generally voidable by mistaken party IF
-> mistaken party did not bear the risk of mistake AND EITHER
—-> mistake would make enforcement of K unconscionable
OR
—-> non-mistaken party caused the mistake, had duty to disclose or failed to disclose mistake, or knew or should have known the other party was mistaken

Can serve the basis to rescind a K but there must be an absence of serious prejudice to other party to rescind K.

64
Q

When can a court not reform a K due to unilateral mistake?

A

Court can reform writing except to extend that rights of third parties who relied on K would be unfairly affected

65
Q

What is a misunderstanding?

What happens if neither party knows or has reason to know of misunderstanding?

What happens if one party knows or has reason to know K of other party’s misunderstanding?

What happens if both parties know terms are ambiguous at time of K formation?

A

Both parties believe they are agreeing to same material terms, but they in fact agree to different terms.

Neither party knows or has reason to know
-> no K if material term is involved

One party knows or has reason to know
-> K formed based upon meaning of material term as understood by unknowing party

Both parties know terms ambiguous at time of K formation
-> no K unless both parties intended same meaning

66
Q

Can a party waive a misunderstanding?

Is it a subjective or objective analysis to determine if there was a misunderstanding?

A

Waiver
-> one party can choose to enforce K according to other party’s understanding and thus waive the existence of a misunderstanding.

Subjective determination of misunderstanding
-> each party’s knowledge or reason to know of the misunderstanding governs (i.e., not what a reasonable person would know)

67
Q

What is a misrepresentation?

What do you need proof of to claim there has been a fraudulent misrepresentation by one party to the other?

How do you determine when a misrepresentation is fraudulent?

A

An untrue assertion of fact (i.e., present event or past circumstance).

Fraudulent misrepresentation requires proof that:
-> the misrepresentation is fraudulent
-> the misrepresentation induced assent to the K
AND
-> justifiable reliance on the misrepresentation by the adversely affected party

Misrepresentation is fraudulent when:
-> knowing or reckless false assertion of fact WITH intent to mislead

68
Q

What effect does a fraudulent misrepresentation have on the K?
-> fraud in the factum
-> fraud in the inducement

A

Fraud in the factum (execution)
-> fraudulent misrepresentation prevents party from knowing character/ essential term of transaction,
-> SO NO K is formed and apparent K is void UNLESS reasonable diligence would have revealed K’s true terms

Fraud in the inducement
-> fraudulent misrepresentation is used to induce another to enter into a K
-> K VOIDABLE by adversely affected party if she justifiably relied on the misrepresentation

69
Q

What happens if there is a misrepresentation but it’s a non-fraudulent misrepresentation?

A

It’s an innocent or negligent misrepresentation.

Renders K VOIDABLE by adversely affected party who justifiably relied on material misrepresentation and was induced to asset to K because of it.

70
Q

What is the effect of the adversely impacted party’s failure to know or discover misrepresentations before entering a K?

A

A party’s fault in not knowing or discovering facts before entering into the K does not prevent the party’s reliance on the misrepresentation from being justified
-> UNLESS it constitutes a failure to act in good faith.

71
Q

Is cure possible for misrepresentation?

A

K not voidable if facts cured before deceived party has avoided the K.

72
Q

Can you avoid or reform a K for misrepresentation?

A

When content/legal effect of K is misrepresented, deceived party can avoid K or reform it to express what was represented.

73
Q

What is undue influence/unfair persuasion?

What is a common relationship situation in which unfair persuasion is found?

Damages available when unfair persuasion is found?

A

Unfair persuasion of one party seriously impairs the free and competent judgment of other party to assent to a K.

Common relationships that can lead to unfair persuasion
-> relationship between dominant party and dependent party due to lack of expertise or experience
OR
-> diminished mental capacity

Damages - restitution damages are available

74
Q

How does the fact the relationship is confidential between parties impact the undue influence defense to formation?

A

Dominant party has burden of proving K was fair AND dominating party may be held to higher standard of disclosure than non-dominating party.

75
Q

What if there is undue influence from a third-party?

A

Victim may void K UNLESS
-> non-victim party to K gave value or materially relied on K in good faith
AND
-> without knowledge of undue influence

76
Q

What is duress?

When is K void under duress and when is it voidable under duress?

A

Improper threat that deprives party of meaningful choice

Effect on K
-> K is void when duress is through physical compulsion
-> K is voidable in other instances

77
Q

What are the types of improper threats?

What does “deprivation of meaningful choice” mean?

A

Improper threat:
-> threats of criminal - made in either good faith or bad faith
OR
-> threats civil action - made in bad faith
OR
-> threats to breach K would violate duty of good faith and fair dealing

Deprivation of meaningful choice
-> person has no reasonable alternative such that threat induced his assent

78
Q

What are the different ways a K can be challenged under mental capacity?

A

-> infancy (under 18)
-> mental illness
-> guardianship
-> intoxication

79
Q

What are the rules regarding infancy as a challenge under mental capacity?
-> voidable by who
-> voidable by when
-> exception to infancy

What are the rules regarding mental illness as a challenge under mental capacity?
-> when is K void
-> when is K voidable

What are the rules regarding guardianship as a challenge under mental capacity?
-> when is K void
-> exception to guardianship

What are the rules regarding intoxication as a challenge under mental capacity?
-> voidable by who and when

A

Infancy (under 18)
-> voidable by infant but not by adult
-> if infant wants to void K then must do so while under 18 or shortly thereafter, failure ratifies the K
-> except for reasonable value of necessaries, meaning that the infant must pay for necessities sold to them and other party can recover reasonable value of necessities

Mental illness - K is void for one who is adjudicated mentally incompetent BUT only voidable if there has been no adjudication and the individual is UNABLE to:
-> Understand the nature and consequences of the transaction;
OR
-> Act in a reasonable manner with regard to the transaction, AND the other party has reason to know of this fact.

Guardianship
-> K is void for individuals under guardianship
-> except for reasonable value of necessaries, meaning that the infant must pay for necessities sold to them and other party can recover reasonable value of necessities

Intoxication
-> K is voidable by intoxicated party if she was unable to understand nature/consequences of K
AND
-> other party KNOWS of intoxication

80
Q

When is K unenforceable due to illegality?

When is K void due to illegality?

What happens to a party’s duty after K becomes illegal after formation?

A

K is unenforceable if consideration/performance under K is illegal

K is void if it contemplates illegal conduct

Duty to perform is discharged if K becomes illegal after formation

81
Q

When can a party recover damages under a K that is illegal?

Does the above answer change if both parties are excusably ignorant?

Can a party recover under a K isn’t illegal but is done to further illegal purposes?

A

If
-> one party is justifiably ignorant of facts making K illegal
OR
-> lacks illegal purpose
THEN
-> that party can recover damages from promisor
IF
-> promisor acted with knowledge of the illegality.

If
-> both parties are excusably ignorant
THEN
-> the promisee may have a claim with regard to restitution damages

K doesn’t involve illegal consideration or act of illegal nature THEN a party who has substantially performed may recover IF:
-> K does not involve illegal consideration/performance AND the party is unaware of the other party’s illegal purpose
OR
-> K does not involve illegal consideration/performance BUT the party knows of the other party’s illegal use, UNLESS the party furthered the illegal use or the use involved grave social harm

82
Q

How are divisible Ks dealt with when parts of it are legal and other parts are illegal?

A

Divisible Ks -> if K can easily be divided into legal and illegal parts, a party may recover on the legal part(s)

83
Q

How does the type of licensing violation impact a party’s right to enforce K?

A

When a party fails to comply with a licensing or similar requirement and is prohibited from performing an act,
-> the party may NOT ENFORCE the contract IF the requirement has a REGULATORY PURPOSE and the public policy for the requirement clearly outweighs the interest in enforcing the promise.

Where the purpose of the requirement is only to RAISE REVENUE, the requirement does not have a regulatory purpose and so the party who fails to comply can ENFORCE K.

84
Q

When is restitution available to a party, and under what circumstances?

A

Not in pari delicto
-> when parties are not equally at fault, the less guilty party may recover under restitution

Withdrawal
-> a party who withdraws from an illegal K before the improper purpose has been achieved may recover under restitution when the party has not engaged in serious misconduct

85
Q

How does the defense of unconscionability work as a defense to enforcement?

What are examples of this?

A

K is unconscionable when it is so unfair to one party that no reasonable person in the position of the parties would agree to it.

Examples:
-> hidden, complex boilerplate language, adhesion Ks

86
Q

Is public policy a defense to enforcement?

A

K may be unenforceable if it violates significant public policy.

87
Q

What is an implied-in-fact K and a quasi-K?

A

Implied in fact K
-> conduct, not words, indicates assent or agreement

Quasi-K
-> a P confers benefit on a D and the P has reasonable expectation of compensation and court implies K to prevent unjust enrichment of D

88
Q

What are the requirements of a quasi-K?

A

-> Plaintiff conferred measurable benefit on defendant
-> Plaintiff acted without gratuitous intent
AND
-> Unfair to let defendant retain benefit

89
Q

What is an express warranty?

How do you disclaim it?

A

Any promise, affirmation, description, or sample that is part of the basis of the bargain, UNLESS it is merely the seller’s opinion.

Disclaimers - disclaimers that unreasonably negate or limit express warranties are INOPERATIVE.

90
Q

What is the implied warranty of merchantability?

A

Implied whenever seller is a merchant (i.e., seller dealing in goods of the kind sold)
-> Goods must be fit for their ordinary purpose

91
Q

What is an implied warranty of fitness for a particular purpose?

A

Implied whenever seller has reason to know (FROM ANY SOURCE) buyer has particular use for goods and the buyer is relying on seller’s skill to select the goods

92
Q

How do you disclaim implied warranties?

A

Implied warranty of merchantability
-> oral or written disclaimer using the term “merchantability”
AND
-> writing must be conspicuous

Implied warranty of fitness for a particular purpose
-> disclaimer may use general language
BUT
-> must be in writing
AND
-> conspicuous

Other ways of disclaiming BOTH implied warranties
-> language makes plain that there is no implied warranty (e.g., sold “as is,” “with all faults,” or similar language pointing to the existence of no implied warranties);
-> buyer’s inspection of goods (or sample or model) or buyer’s failure to inspect the goods after the seller has requested the buyer to inspect the goods THEN there is no implied warranty as to DEFECTS;
-> implied warranties excluded/modified by course of dealing, course of performance, or trade usage

MBE - Contracts - BAR (8 decks)

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