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Contracts - Complete First Year Law School Review > Governing Law and Valid Contract > Flashcards

Governing Law and Valid Contract Flashcards

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1
Q

When does Common Law govern?

A

Common law governs contracts where the subject matter is services (or real estate).

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2
Q

When does the UCC apply?

A

The UCC applies where the subject matter is goods.

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3
Q

What are “goods” (under the UCC)?

A

Goods are movable, tangible property.

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4
Q

Who is a merchant (under the UCC)?

A

A merchant is one who deals in goods of the kind or otherwise by their occupation has some special skill of knowledge about these goods.

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5
Q

Are there merchants under Common Law?

A

No, merchants only exist under the UCC.

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6
Q

Under the UCC, are merchants generally held to a higher standard?

A

Yes

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7
Q

Under the UCC, who are non-merchants?

A

Anyone who is not a merchant.

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8
Q

What is the predominance test when determining whether a contract is for goods or services?

A

What was it mostly? What did you expect from the contract?

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9
Q

What does a valid contract consist of?

A

A valid contract consists of an offer, acceptance, consideration, and lack of formation defenses.

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10
Q

What is an offer?

A

An offer is a manifestation of present contractual intent, communicated to an identified offeree, containing definite and certain terms.

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11
Q

How is present contractual intent judged?

A

Objectively, not subjectively

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12
Q

What is the best question to ask when determining whether there was present contractual intent?

A

Would a reasonable person under the circumstances believe that the offeror is willing to be bound by the offer?

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13
Q

Advertisements, catalogues, and quotes are generally not offers but are:

A

Invitations to receive offers.

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14
Q

What exceptions apply to advertisements as offers?

A

1) When a person solicits a price and receives a response that would normally not be an offer [catalog, advertisement, etc], or 2) when the item contains all material terms of the offer and identifies the offeree - usually by “first-come first-served”.

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15
Q

Are statements that contain the lowest price a person would sell of the highest price a person would pay offers to sell or buy, respectively, at the stated price?

A

No

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16
Q

Is there an exception to an offer being communicated to an identified offeree?

A

Yes, public offers

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17
Q

Within a public offer, when is the offeree identified?

A

Identification of the offeree and acceptance occur at the same time.

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18
Q

Within a public offer, identification of the offeree and acceptance occur at the same time after:

A

1) Someone knows of the offer; 2) is motivated by it; and 3) accepts the offer by performing the requested act.

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19
Q

For an offer involving services to contain definite and certain terms, what is required under common law (Q-TIPS)?

A

1) Quantity; 2) Time for performance; 3) Interested parties; 4) Price; and 5) Subject matter.

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20
Q

For an offer involving real estate to contain definite and certain terms, what is required under common law?

A

A description of the real property adequate to identify the land and price.

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21
Q

For an offer involving the sale of goods to contain definite and certain terms, what is required under the UCC?

A

Subject matter and quantity.

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22
Q

As long as there is contractual intent by both parties, will a contract for goods under the UCC fail if one or more items are left open?

A

No

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23
Q

Under the UCC, what terms may be left open?

A

Price, time and place of delivery, time of payment.

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24
Q

What is a requirement contract?

A

An agreement by one party to supply all that is required by the other party.

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25
Q

What is an output contract?

A

An agreement by one party to buy all that the other party produces (outputs).

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26
Q

What issue do requirement and output contracts always raise?

A

Definite and certain terms with regard to quantity.

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27
Q

When dealing with requirement and output contracts, how is the issue of definite and certain terms with regard to quantity overcome?

A

The UCC will insert the amounts that occur in good faith.

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28
Q

What is the general rule of revocability with regard to offers?

A

The general rule is that all offers are freely revocable.

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29
Q

What are the four irrevocable offers?

A

1) Option contract; 2) Merchant’s firm offer; 3) Detrimental reliance; and 4) Unilateral contracts once performance has begun.

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30
Q

What is an option contract?

A

An offer supported by consideration.

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31
Q

If no time is specified, how long must an option remain open and irrevocable?

A

For a reasonable time

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32
Q

What is a merchant’s firm offer?

A

A writing signed by a merchant which gives assurance that an offer will remain open for a stated time.

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33
Q

If no time is stated, how long does a merchant’s firm offer remain irrevocable?

A

For a reasonable time not to exceed 3 months.

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34
Q

Under a merchant’s firm offer, after 3 months, is the offer terminated?

A

No, it simply becomes revocable.

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35
Q

What is detrimental reliance?

A

When the offeree relies on an offer and that reliance is detrimental, reasonable, foreseeable and substantial.

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36
Q

How long must an offer remain irrevocable under detrimental reliance?

A

For a reasonable time.

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37
Q

What is a unilateral contract?

A

Promise for performance

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38
Q

When does a unilateral contract become irrevocable?

A

Once performance has begun

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39
Q

Once performance has begun, how long must the offeree be given to complete performance before the offer can be revoked?

A

A reasonable time.

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40
Q

Under a unilateral contract, is preparation for performance considered performance?

A

No

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41
Q

What is a revocation?

A

If the offeror communicates to the offeree that the offeror no longer wishes to be bound by the offer, the offer is revoked.

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42
Q

When does an indirect revocation occur?

A

When an offeree 1) receives correct information; 2) from a reliable source; 3) that the offeror no longer wishes to be bound by the offer, then; 4) the offer is revoked.

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43
Q

Are offers to third parties sufficient for indirect revocation?

A

No

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44
Q

Are rumors sufficient for indirect revocation?

A

No

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45
Q

Must an offer be revoked by the same means in which it was communicated?

A

No, there is no requirement (other than a public offer) that a revocation be communicated in the same or similar fashion as the offer, or any specific fashion at all.

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46
Q

How must a public offer be revoked?

A

Notification to the public by the same or better means in which the offer was communicated.

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47
Q

When are revocations effective?

A

Upon receipt

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48
Q

What is a rejection?

A

If the offeree communicates to the offeror that the offeree is not interested in the offer, then the offer is terminated.

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49
Q

Is a counter-offer a rejection?

A

Yes

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50
Q

Under both the UCC and common law, is a conditional acceptance always a rejection and counter-offer?

A

Yes, always

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51
Q

Can an option contract be revoked?

A

No, even if the offeree communicates a rejection to an option contract, the offer is not terminated and must remain open for the time specified by the option.

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52
Q

When a revocation is communicated by the offeree under an option contract, and the offeror relies on that revocation to change positions with regard to the contract, does the offeror have any recourse?

A

Yes, the offeror may raise estoppel under detrimental reliance as a defense to enforcement if the offeror changed positions.

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53
Q

When is a rejection effective?

A

Upon receipt

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54
Q

Within the operation of law, after how much time will an offer lapse?

A

After a reasonable time

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55
Q

Within the operation of law, how is a reasonable time determined to terminate an offer?

A

1) Market conditions; 2) Nature of the subject matter, and/or; 3) Trade custom and usage.

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56
Q

After face-to-face negotiations (or other substantially instantaneous forms of communication), unless there are words to the contrary, when will an offer terminate under operation of law?

A

When the parties have left each other’s presence.

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57
Q

Will death or incapacity terminate an offer by operation of law?

A

Yes

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58
Q

When will death terminate an offer?

A

At the time of death

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59
Q

When will incapacity terminate an offer?

A

At the time the other party learns of the incapacity.

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60
Q

Can an irrevocable offer be terminated by death or incapacity?

A

No

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61
Q

Will destruction of subject matter terminate an offer under operation of law?

A

Yes

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62
Q

Will supervening illegality terminate an offer under operation of law?

A

Yes

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63
Q

What is an acceptance?

A

An acceptance is an unequivocal assent to the terms of an offer.

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64
Q

Under the common law, an acceptance must be a _______ of the offer:

A

Mirror-image

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65
Q

Under the common law, any additional, different or missing term in an acceptance would result in a:

A

Rejection and counter-offer

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66
Q

What is the Last Shot Rule?

A

The last expression before performance controls.

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67
Q

Under the Last Shot Rule, when do the courts find an “implied” acceptance by performance?

A

1) When parties exchange rejections and counter-offers and 2) one party does not return a rejection and counter offer but performs.

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68
Q

Under the UCC, is an acceptance with additional or different terms still a valid acceptance?

A

Yes

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69
Q

Under the UCC, what is a conditional acceptance?

A

A rejection and counter-offer. A conditional acceptance, under UCC or common law, is always a rejection and counter-offer.

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70
Q

What is a bilateral contract?

A

A return promise to perform

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71
Q

What is a unilateral contract?

A

Promise for performance

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72
Q

If ambiguous as to whether a contract is unilateral or bilateral, what do most courts prefer to consider it?

A

Bilateral

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73
Q

Under UCC 2-206, what three ways can an acceptance occur?

A

1) Promise to ship; 2) shipment of conforming goods; 3) shipment of non-conforming goods.

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74
Q

Without a letter of accommodation, what is the shipment of non-conforming goods considered?

A

Acceptance and breach

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75
Q

With a letter of accommodation stating that the shipment is offered only as an accommodation too the buyer, what is the shipment of non-conforming goods considered?

A

Counter-offer

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76
Q

Can a promise to ship later be converted to a counter-offer via shipment of non-conforming goods with a letter of accommodation?

A

No, once a promise to ship has been issued it is a valid acceptance and any shipment of non-conforming goods - with or without a letter of accommodation - is a breach.

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77
Q

What manner is required for acceptance?

A

The manner required by the offer.

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78
Q

If no manner of acceptance is required by an offer, how might the offer be accepted?

A

In any reasonable manner

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79
Q

What constitutes a reasonable manner of acceptance?

A

Usually a means as fast or faster than that in which the offer was sent (or) the same manner in which the offer was sent (is always considered reasonable).

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80
Q

Under UCC 2-206, what is considered a reasonable manner of acceptance?

A

Any manner and by any medium reasonable under the circumstances.

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81
Q

What is the general rule regarding silence as acceptance?

A

The general rule is that silence is not acceptance and the offeror is not master over this area of the offer.

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82
Q

What are the three exceptions to silence as acceptance?

A

1) Implied in fact contracts where the conduct of the offeree manifests assent to he offer; 2) When the offeree takes the benefit of goods or services that are given with the expectation of payment, and; 3) Certain past dealings among parties.

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83
Q

Do crossing offers that contain identical information form a contract?

A

No

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84
Q

What are the two reasons that crossing offers with identical information do not form a contract?

A

1) There is no mutual assent; 2) the offeree must be aware of the offer to accept it.

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85
Q

What is the mailbox rule?

A

When parties are not dealing face to face (or other substantially instantaneous form of communication), then an acceptance is effective upon dispatch.

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86
Q

What constitutes “dispatch” under the mailbox rule?

A

When the acceptance is put out of the possession of the offeree.

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87
Q

What three things are required for a successful dispatch under the mailbox rule?

A

1) Proper address 2) proper postage 3) correct manner.

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88
Q

Can an offeror contract out of the mailbox rule and make acceptance effective upon receipt instead of dispatch?

A

Yes

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89
Q

What happens if an acceptance is not sent in the manner required by the offer under the mailbox rule?

A

There is no acceptance, no matter how slight the deviation. An example would be acceptance sent by UPS 2-day when UPS one-day was required by the offer.

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90
Q

What happens if an acceptance is sent in an “unauthorized” manner under the mailbox rule?

A

Acceptance is effective upon receipt.

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91
Q

What is the difference between acceptance in the manner required by the offer and an “unauthorized’ manner of acceptance under the mailbox rule?

A

If a manner is required by the offer and is not followed, no matter how slight, there is no acceptance.

If no manner is specified by the offer, and the acceptance is sent in a manner slower (for example) than the offer was sent, this would be unauthorized and result in a valid acceptance but only upon receipt.

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92
Q

Does the mailbox rule apply to option contracts?

A

No, acceptance of an option contract is only valid upon receipt.

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93
Q

What is a post-acceptance rejection?

A

When an acceptance is sent first, then a rejection.

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94
Q

In a post-acceptance rejection, even if the rejection is received first, does the mailbox rule apply and constitute the formation of a contract?

A

Yes, since the acceptance was effective upon dispatch, the contract was formed upon dispatch. The rejection is irrelevant.

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95
Q

If the rejection is received first in a post-acceptance rejection, and the offeror relies on that rejection to change position, does the offeror have recourse should the offeree wish to enforce the contract even though a contract has been formed?

A

Yes, the offeror can raise estoppel to prevent enforcement if the offeror changed positions based on the rejection.

96
Q

What is a post-rejection acceptance?

A

When a rejection is sent first, then an acceptance.

97
Q

Does the mailbox rule apply to a post-rejection acceptance?

A

No, an acceptance sent after a rejection is not effective upon dispatch, only upon receipt.

98
Q

In a post-rejection acceptance, which is valid when sent by mail - the rejection or the acceptance?

A

Whichever gets to the offeror first.

99
Q

What is consideration? (Short version)

A

A legally sufficient, bargained for exchange.

100
Q

What is consideration? (Full version)

A

A legally sufficient, bargained for exchange, which induces current performance, detriment to the promisee, and a binding obligation on both parties.

101
Q

Is a gratuitous promise - a promise to make a future gift - valid consideration?

A

No

102
Q

What constitutes legal sufficiency in consideration?

A

No token or sham amounts that may disguise a gift.

103
Q

Is there a difference in legal sufficiency of consideration and legal adequacy?

A

Yes, only legal sufficiency is required.

104
Q

Is the mere possibility of value sufficient consideration, even if that value is never realized?

A

Yes

105
Q

What is a bargained for exchange?

A

When both parties give something to induce an exchange.

106
Q

Is one purpose of mandating a bargained for exchange to eliminate gifts?

A

Yes

107
Q

Must current performance be induced for consideration to be valid?

A

Yes

108
Q

Is past consideration valid consideration?

A

No

109
Q

What is the exception to the validity of past consideration?

A

When something is done at the request of another party and afterward that party promises something for performing the requested act.

110
Q

Is moral consideration valid consideration?

A

No

111
Q

Does moral consideration normally fall under past consideration?

A

Yes

112
Q

What is the exception to the validity of moral consideration?

A

Debts barred by a technical defense such as bankruptcy, but only if the party reaffirms the debt and only for the amount reaffirmed.

113
Q

What is the Pre-Existing Duty Rule?

A

A promise to perform an existing legal duty is not valid consideration.

114
Q

Is the pre-existng duty rule, in essence, a modification?

A

Yes

115
Q

Does the pre-existing duty rule apply only to common law contracts?

A

Yes, only to common law contracts.

116
Q

What is the exception to the pre-existing duty rule?

A

When the pre-existing duty is owed to third party.

117
Q

What constitutes a detriment to the promisee?

A

Doing something that one is not legally obligated to do or refraining from doing something that one has a legal right to do.

118
Q

Is forbearance to sue considered a detriment to the promisee?

A

Yes, if the promisee had a good faith belief that there was a valid claim at the time of forbearance.

119
Q

What is the requirement to substantiate a binding obligation on both parties?

A

Both parties need to be bound to the terms of the agreement.

120
Q

What is the result if only one party is bound to the terms of the contract?

A

The contract is illusory and is not valid.

121
Q

A conditional promise that is entirely within the control of the promisor is:

A

Illusory

122
Q

Why are satisfaction conditions not illusory?

A

Because the promisor must act in good faith.

123
Q

Why do requirement and output contracts appear to be illusory?

A

Because they raise the issue of a binding obligation on both parties.

124
Q

Why are requirement and output contracts, in fact, not illusory?

A

Because the parties must either require or perform in good faith.

125
Q

Cancellation clauses are not illusory under what condition?

A

That there is some restriction on the time before cancellation.

126
Q

For a contract to be valid, valid consideration must be present. However, must all consideration present be valid?

A

No, there must be some valid consideration but not all consideration that happens to be present must be valid.

127
Q

What acts as a substitute for consideration?

A

Promissory Estoppel

128
Q

What is required for Promissory Estoppel?

A

Reasonable, foreseeable and substantial reliance.

129
Q

What are the enforcement limitations of Promissory Estoppel?

A

Enforcement is limited to the amount that would prevent an unjust result, not the contract amount.

130
Q

Within promissory estoppel, do charitable subscriptions ands marriage settlements require proof of forbearance?

A

No

131
Q

Is promissory estoppel a “real” substitute for consideration?

A

No

132
Q

Does promissory estoppel create a valid contract?

A

No, only an enforceable agreement.

133
Q

Within defenses to formation, a contract may be void, voidable, or unenforceable. What is the difference?

A

A void contract is one without any legal effect from the beginning. A voidable contract is one that a party may elect to avoid (or ratify). An unenforceable contract is a valid contract for which some defense exists.

134
Q

What are the defenses to formation (SI IM DUUM)?

A

Statute of Frauds, Incapacity, Illegality, Misrepresentation/Fraud, Duress, Undue Influence, Unconscionability, Mistake.

135
Q

What does the acronym for Statute of Frauds stand for (MY LEGS)?

A

Marriage, Year, Land, Executor, Goods, Surety

136
Q

What is the Statute of Frauds?

A

Certain contracts must be evidenced in writing to be enforceable.

137
Q

Please explain Marriage under the Statute of Frauds:

A

Promises to induce marriage by offering something of value must be in writing to be enforceable. This does not include a return promise to marry.

138
Q

Please explain Year under the Statute of Frauds:

A

Contracts that cannot be performed within one year must be in writing to be enforceable.

139
Q

How is a Year measured under the Statute Frauds?

A

A Year is measured from the time of formation until the end of performance.

140
Q

Can a contract be taken out of the Statute of Frauds if there is any possibility that it can be performed within one Year?

A

Yes, any possibility of performance within one Year will do.

141
Q

Does the Year requirement under the Statute of Frauds apply even if a contract has already lasted longer than one year?

A

Yes

142
Q

If there is a cancellation clause, does the Year requirement still apply under the Statute of Frauds?

A

Yes, cancellation clauses produce excusable non-performance. This not the same as performance. Therefore, a cancellation clause will not take a contract out of the Statute of Frauds.

143
Q

Please explain the Land requirement under the Statute of Frauds:

A

Contracts for the sale of Land must be in writing to be enforceable. This also includes mortgages and leases/easements for more than one year.

144
Q

Within the Land requirement under the Statute of Frauds, please explain a Principle-Agent Agreement (also known as the Equal Dignity Rule):

A

An agent of the principle may execute a contract for an interest in land.

145
Q

What is the one element of the Principle-Agent Agreement (Equal Dignity Rule) that must be satisfied?

A

The agreement must be in writing and signed by the principle. If it isn’t, it relieves the principle of liability.

146
Q

Under what conditions can the sale of Land be taken out of the Statute of Frauds?

A

If any two of the following are present: 1) Makes a payment; 2) Moves onto the land; 3) Makes improvements.

147
Q

Please explain Executor under the Statute of Frauds:

A

When an executor promises to personally pay for the debt of an estate, it must be in writing to be enforceable.

148
Q

Please explain Goods under the Statute of Frauds:

A

The sale of Goods of $500 or more must be in writing to be enforceable.

149
Q

What are the three conditions in which the sale of Goods of $500 or more can be taken out of the Statute of Frauds:

A

1) When the Goods are specially manufactured and not suitable for sale to anyone other than the buyer; 2) When there has been part or full performance or acceptance of payment; 3) When there has been an admission under oath.

150
Q

Please explain Surety under Statute of Frauds:

A

When one guarantees the payment of the debt of another by saying “If he/she doesn’t pay, I’ll pay”, the guarantee must be in writing to be enforceable.

151
Q

Under Surety within the Stature of Frauds, the promise to pay the debt of another must be collateral and not primary. What is the difference?

A

A principle promise such as “if you agree not to sue him, I’ll pay for his debt” is not a surety. Only a promise offered as collateral “If he doesn’t pay, I’ll pay you” constitutes a Surety.

152
Q

When can a Surety be taken out of the Statute of Frauds:

A

Under the Main Purpose Doctrine.

153
Q

Please explain the Main Purpose Doctrine as it relates to Surety under the Stature of Frauds:

A

If the main purpose of the Surety’s promise was to financially benefit the Surety, rather than the debtor, no writing is needed.

154
Q

The Statute of Frauds requires a “writing”. Whose signature must be on this writing?

A

The party to be charged (sued) - the party against which enforcement is sought.

155
Q

Does this “writing” under the Stature of Frauds ever require the signatures of all parties?

A

No, only (and always) the party to be charged.

156
Q

What is the one exception to the requirement of a signature of the party to be charged in a writing under the Statute of Frauds:

A

A merchant’s confirmatory memorandum

157
Q

What is a Merchant’s Confirmatory Memorandum:

A

If one merchant sends another merchant a written confirmation sufficient to bind the sending merchant, and the receiving merchant has both received it and has reason to know of its contents, and the receiving merchant doesn’t object within 10 days, then it binds the receiving merchant.

An exception that shows up often on the MBE is the merchant’s confirmatory memorandum rule. In contracts between merchants, if one party within a reasonable time after an oral agreement sends to the other party a written confirmation of the oral agreement and if the written confirmation satisfies the Statute of Frauds, then the contract will be enforceable even though the original agreement between the parties was not in writing. The party receiving the memo will now be bound by the contract if that party has reason to know of the confirmation’s contents, and does not object to it within 10 days of receipt

158
Q

Does a Merchant’s Confirmatory Memorandum only exist between two merchants?

A

Yes

159
Q

What is the order in which a contract that may fall under the Statute of Frauds to be evaluated?

A

1) Does the contract need to be in writing? 2) Is there any way to show that it doesn’t need to be in writing? If so, take it out of the statute of frauds and say “but we also have a writing” 3) If it needs to be in writing, and there is no writing, the contract is unenforceable (not void or voidable).

160
Q

What are the three groups that fall under Incapacity within defenses to formation, and with whom contracts are voidable:

A

Minors, mentally deficient, and intoxicated persons.

161
Q

Within Incapacity, under what age constitutes a minor?

A

Under 18

162
Q

Are contracts with minors voidable at the option of the minor?

A

Yes

163
Q

What are three conditions under which a contract with a minor is no longer voidable at the option of the minor?

A

1) If the contract is affirmed by the minor after reaching the age of majority 2) if the contract is not disaffirmed by the minor after reaching the age of majority 3) If the contract was for necessities not provided by someone else.

164
Q

How can a minor affirm a contract after reaching the age of majority?

A

Expressly or impliedly. Impliedly may be accomplished by not disaffirming the contract within 30 days of reaching the age of majority, or by making a single payment on the item after reaching the age of majority.

165
Q

Can a minor affirm a contract before reaching the age of majority?

A

No

166
Q

Can a minor disaffirm a contract at any time before reaching the age of majority?

A

Yes

167
Q

Are contracts with minors voidable even if the consideration was damaged or cannot be returned?

A

Yes

168
Q

When a minor enters into a contract for necessities, what value may be recovered?

A

Only the reasonable value of the necessities.

169
Q

Is a contract with a minor voidable by anyone other than the minor?

A

No

170
Q

What are the statutory exceptions to the voidablity of a contract with a minor?

A

Insurance, school loans, etc.

171
Q

Within Incapacity, what are the three conditions under which a contract with a mentally deficient person is voidable?

A

1) The person does not understand the nature and consequences of the contract 2) the person is unable to act reasonably in relation to the contract 3) the other party knew of the mental deficiency.

172
Q

Is a contract voidable only at the option of the mentally deficient person?

A

Yes

173
Q

Can a mentally deficient person reaffirm and render a contract enforceable if they have a moment of lucidity?

A

Yes

174
Q

Are mentally deficient person liable for the value of necessities to the same extent as a minor?

A

Yes

175
Q

Within Incapacity, what substances can “intoxicate” a person?

A

Alcohol and both legal or illegal drugs.

176
Q

Within Incapacity, what are the three conditions under which a contract with an intoxicated person is voidable?

A

1) The person does not understand the nature and consequences of the contract 2) the person is unable to act reasonably in relation to the contract 3) the other party knew of the intoxication.

177
Q

Can an intoxicated person reaffirm and render a contract enforceable after recovering?

A

Yes

178
Q

Is a contract voidable only at the option of the intoxicated person?

A

Yes

179
Q

Are intoxicated persons liable for the value of necessities to the same extent as a minor?

A

Yes

180
Q

Within defenses to formation, when is a contract Illegal?

A

When 1) the subject matter violates the law, constitution, or public policy 2) restrains employment or trade

181
Q

Within Illegality, what type of subject matter violates the law, constitution or public policy?

A

Agreements to commit a crime, to place a gambling bet, loan shark agreements, bribery.

182
Q

What is the status of Illegal contracts due to a violation of the law, constitution or public policy?

A

The contract is void - the court will not aid either party.

183
Q

When does an Illegal contract restrain employment or trade?

A

Non-complete clauses that unreasonably restrict employment or trade based on geographic location and time.

184
Q

What is the status of an Illegal contract with regard to employment or trade?

A

It can be rewritten by the courts to provide reasonable restriction.

185
Q

Within Illegality, what happens when the subject matter is legal (like renting a car) but the purpose and use is illegal (using the car in a robbery)?

A

The contract is voidable at the option of the innocent party.

186
Q

Within Illegality, what is supervening illegality?

A

When at the time the contract was formed the subject matter or purpose was legal, then became illegal.

187
Q

What is the status of a contract under supervening illegality?

A

The obligation of both parties is discharged. In some cases, relief may be sought under quasi-contract/restitution.

188
Q

Within Illegality, what are the two types of licensing?

A

Licenses that 1) protect the welfare of the public by ensuring minimum competency (law license) and 2) licenses that generate revenue (business license).

189
Q

What is the status of an Illegal contract in which a license was required to protect the welfare of the public?

A

The contract is void and the innocent party may recoup monies paid.

190
Q

What is the status of an Illegal contract in which a license was to generate revenue?

A

The contract is enforceable.

191
Q

Within Illegality, what is In Pari Delicto?

A

When both parties are equally culpable.

192
Q

Within In Pari Delicto, will the courts generally grant any relief?

A

No, however, in exceptional cases the less culpable party may recover in restitution.

193
Q

What is Misrepresentation?

A

Misrepresentation of a material fact that caused reasonable and actual reliance by plaintiff.

194
Q

What is the most important element in assessing Misrepresentation?

A

That the misrepresentation was of a material fact - not an opinion (puffing).

195
Q

Within Misrepresentation, what is the general rule about the duty to disclose?

A

The general rule is that there is no duty to disclose nor liability for non-disclosure.

196
Q

Within Misrepresentation, what are the four exceptions to the duty to disclose?

A

1) Half-truths 2) Active concealment 3) Genuine belief that a statement was true when made but now, before reliance, knowing it is false 4) A statement was actually true when made but now, before reliance, it is false.

197
Q

What are the three types of Misrepresentation?

A

Innocent, Negligent and Intentional (Fraud).

198
Q

What is necessary to establish fraud in Misrepresentation?

A

Scienter - knowledge that the statement was false or a reckless disregard as to its truth or falsity.

199
Q

What type of reliance is required to substantiate innocent and negligent Misrepresentation?

A

Both reasonable and actual reliance

200
Q

What type of reliance is required to substantiate intentional (fraud) Misrepresentation?

A

Only actual reliance

201
Q

What is the status of a contract when there is fraud in the factum?

A

Void

202
Q

What is the status of a contract when there is fraud in the inducement?

A

Voidable at the option of the deceived party.

203
Q

What are the two types of Duress?

A

Physical and Economic

204
Q

What is Physical Duress?

A

When physical force (or threats of physical force) is used to make a party enter into or modify a contract.

205
Q

What is the status of a contract under Physical Duress?

A

Void

206
Q

What is Economic Duress?

A

When wrongful threats are used to make a party enter into or modify a contract.

207
Q

What are some examples of wrongful threats within economic duress?

A

Threat of future crime or tort, threat of criminal prosecution, bad faith use of civil process, threat of wrongful breach of an existing contract.

208
Q

What is the status of a contract under Economic Duress?

A

Voidable at the option of the victim.

209
Q

What are the two types of Unconscionability?

A

Procedural and Substantive

210
Q

What is Procedural Unconscionability?

A

Absence of meaningful choice

211
Q

What is Substantive Unconscionability?

A

When the terms unreasonable favor one party

212
Q

Some adhesion contracts are found to be Unconscionable. What is an adhesion contract?

A

A standard form contract with a take it or leave it proposition and often no real opportunity to scrutinize or understand the contents.

213
Q

Within Unconscionability, is there a duty to read a contract?

A

At common law, yes. In the absence of fraud, one who signs a contract is bound to the terms whether he read it or not or can read to not. Modernly, however, courts will not enforce contracts that are difficult to read or understand (fine print, legalese, unintelligible words).

214
Q

Within Unconscionability, when are contracts against public policy?

A

When they are 1) against the public good, or 2) injurious to the public, or 3) involve an exculpatory clause for injury to a person in the case of consumer goods.

215
Q

For a term to be Unconscionable, when must the term have first been Unconscionable?

A

At the time of formation

216
Q

What are the three remedies for Unconscionability?

A

Courts may 1) refuse enforcement of the entire contract 2) eliminate any unconscionable terms and enforce the remaining contract 3) limit the application of unconscionable terms.

217
Q

What is Undue Influence?

A

When one party unduly influences another (or) asserts their will over the will of another.

218
Q

What are the three elements required for Undue Influence?

A

1) The wrongdoer must be in a position of trust or confidence 2) there must be some type of improper persuasion 3) and the victim must be susceptible to improper persuasion.

219
Q

What is the status of a contract under Undue Influence?

A

Voidable by the victim

220
Q

What is Mistake? What are the three types of Mistake?

A

A mistake as to material fact. 1) Mutual Mistake 2) Unilateral Mistake 3) Ambiguity

221
Q

What is Mutual Mistake?

A

When both parties are mistaken as to a material fact

222
Q

What is the status of a contract under Mutual Mistake?

A

Voidable at the option of the adversely affected party.

223
Q

What is a Unilateral Mistake?

A

When one party is mistaken as to a material fact

224
Q

What two elements are required for Unilateral Mistake to be a defense to formation?

A

1) the non-mistaken party knew (or should have known) about the mistake, and 2) the mistake is one of computation or omission.

225
Q

Under Unilateral Mistake, is a mistake as to judgement a valid defense?

A

No

226
Q

Under Unilateral Mistake, is a party held responsible for the mistake of their intermediary?

A

Yes

227
Q

Under Mistake, what is Ambiguity?

A

When a term is open to various interpritations (and) typically the term is associated with more than one thing. It may also be associated with no one thing.

228
Q

What are the two types of Ambiguity?

A

Patent and Latent

229
Q

What is Patent Ambiguity?

A

When a term is ambiguous on it’s face and is open to interpretation by the court.

230
Q

What is Latent Ambiguity?

A

The ambiguity only becomes apparent after further facts are presented.

231
Q

Under Latent Ambiguity, what happens if neither (or both) of the parties are aware of the ambiguity?

A

There is no contract (unless) both parties attach the same meaning to the ambiguity.

232
Q

Under Latent Ambiguity, what if one party is aware of the Ambiguity and the other party is not?

A

There is a contract (and) the meaning will be that of the unaware party.

233
Q

Who do the courts typically interpret Ambiguous terms against?

A

The drafter

234
Q

Under Ambiguity, if a term has multiple meanings but the recipient is aware of only one of the meanings - and the author knows the recipient is only aware of one of the meanings - but the author goes ahead with the contract anyway, the contract is valid. What meaning, though, is assigned to the contract?

A

The meaning held by the unaware party.

235
Q

Under Ambiguity, what is Scrivener’s error?

A

When there has been a mistake in the writing of a contract which resulted in the terms not reflecting the actual agreement of the parties

236
Q

What may the courts due in the case of a Scrivener’s Error?

A

A court of equity may reform the contract

Contracts - Complete First Year Law School Review (8 decks)

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