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レグ 1 Ethics and Business Law > II-2 Contracts > Flashcards

II-2 Contracts Flashcards

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1
Q

What are 2 sources of contract law? Examples of activities that are under those 2 laws?

A 
Common law (restatements of contract): real estate. Service (include employment).
Uniform Commercial Code (UCC) (Article 2): Sale of goods.
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2
Q

Which law would be used when sales include both goods and service?

A

Depending on the primary purpose: break down cost of goods and cost of services. Which ever is larger will be the law used.

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3
Q

What is the definition of “goods”?

A

tangible personal property.

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4
Q

What are the differences between common law and Uniform Commercial Code?

A

UCC is codified across the country.
Common law is body of cases decisions (majority view of the states is found in the Restatement Contracts) - Contracts require more details to be valid.

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5
Q

What are goals of UCC and Common Law?

A

UCC: moving commerce efficiently and quickly.
CL: make sure people understand what they are doing.

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6
Q

What is the definition of “contract”?

A

An agreement supported by consideration between two or more persons with competent capacity for a legal purpose.

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7
Q

What is express contract?

A

A contract formed wholly by oral and/or written words.

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8
Q

What is implied or implied-in-fact contracts?

A

A contract formed, at least in part, based on the conduct of the parties or based on the factual circumstances.

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9
Q

What is Quasi-contract or implied-in-law contract?

A

A contract imposed by the courts or by law when some performance has gone forward, even though there is no express or implied contract. The law creates a quasi-contract for the parties to prevent unjust enrichment of one party by the other.

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10
Q

What is bilateral contract?

A

Promise for promise by both sides.

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11
Q

What is unilateral contract?

A

Promise for an action by other side. The other side doesn’t have to promise, but take an action (the way it is phrased).

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12
Q

What are executed and executory contracts, partially executed contract?

A

Executed: completed.
Executory: Action not completed yet.
Partial: executed in one side, but executory in other side.

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13
Q

Which one can be enforced: valid or void contracts? What is void contract?

A

Valid.

A contract that lacks a legal purpose or is in violation of the law

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14
Q

What is voidable contract?

A

One party has an option to void.

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15
Q

What is unenforceable contract? Can it be still honored? How?

A

An otherwise valid contract that cannot be enforced because of a statutory or other legal defense.
Yes by both party deciding to honor.

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16
Q

What are the required elements for the formation of a contract?

A

Offer, acceptance, consideration, no defenses.

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17
Q

What contract does one have with defenses?

A

Void, voidable, or unenforceable contract.

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18
Q

What must an offer/acceptance have to be valid?

A

Present intent (not future promise): must have objective intent (serious intent)

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19
Q

How is objective intent measured?

A

by a reasonable person’s interpretation

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20
Q

Offer: What present intent and language must be present under UCC and CL?

A

UCC: Objective intent. Subject matter.
CL: Objective intent. All details.

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21
Q

How is offer terminated? When are these effective?

A

Rejection.
Counteroffer (include conditional acceptance).
Revocation.
Effective upon receipt* If phoned, whoever spoke first: acceptance or revocation.
Death of offeror, bankruptcy, illegality.

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22
Q

What is options? Does death of offeror terminate?

A

A type of offer: asking to keep the offer open for a certain period of time by paying consideration.
1. Paid-for-offers. 2. Consideration required. 3. Irrevocable after offered.
No.

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23
Q

What are requirements for merchant’s firm offer (a form of option under UCC)?

A
  1. Some form of writing or record.
  2. Signed or authenticated.
  3. By a merchant: in the business of selling goods that are the subject matter of the contract.
  4. States that it will be kept open (maximum of 3 months).
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24
Q

Merchant firm offer: If it is non merchants? If the term exceeds 3 months?

A

Must have option in place.

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25
Q

Acceptance: CL requirement?

A

Absolute, unequivocal, and unconditional. Mirror image rule: must respond to the same details. Otherwise, it’s a counteroffer and not an acceptance.

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26
Q

UCC acceptance with additional terms (include this - more of inquiry rather than conditional): in the case of non merchant?

A

Contract is formed, but without additional terms.

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27
Q

UCC acceptance with additional terms: in the case of merchant?

A

If offer is limited, material, or there is objection, contract is formed without additional terms. If those are not found, contract is formed with additional terms.

28
Q

Is conditional acceptance acceptance under UCC and CL? What are they considered to be?

A

No under both.

Counteroffer or rejection.

29
Q

Offer accepted under UCC and CL? - no means given.

A

UCC: Yes, when same or faster method of communication used when it was mailed (mail box rule).
Yes, when slower method used and when received if the offer is still open.

CL: Yes, when same method used when it was mailed (mail box rule).
Yes, when different method used when arrival if the offer is still open.

30
Q

Offer accepted under UCC and CL? - specific means (stipulated).

A

UCC / CL: Yes, when specified means used when mailed (mail box rule).
No, when specific means not used.

31
Q

Offer accepted under UCC and CL? - prompt shipment.

A

UCC: Yes, when proper goods shipped upon shipment.
No, when improper goods shipped - acceptance and breach (you are out).
CL: NA because sale of goods is only under UCC.

32
Q

Consideration (UCC and CL): Is amount specified?

A

No, as long as it’s paid.

33
Q

What distinguishes between consideration and gift?

A

Bargained-for exchange. Promise includes detriment, and detriment includes the promise.

34
Q

What is the definition of consideration?

A

Doing what you are free not to do or not doing what you are free to do.

35
Q

Does charitable subscriptions have detriment on one side? Is it enforceable?

A

No.

Yes.

36
Q

Is agreement for more money for an established contract enforceable? Why?

A

No. because it lacks new detriment.

37
Q

Is unclear output or input enforceable consideration? “I’ll sell all my output” “I’ll buy all I require”

A

Yes because UCC only require subject matter. Enforceable in good faith

38
Q

What is liquidated debt? Can one negotiate?

A

All terms defined clearly. No.

39
Q

What is unliquidated debt?

A

Both parties agree that they owe each other, but disagrees about the amount.

40
Q

What is accord?

A

an agreement to waive legal rights, releasing another party from legal obligations.

41
Q

What is satisfaction?

A

the actual payment of the amounts agreed to in the accord

42
Q

Can both liquidated and unliquidated debt have discharge and complete performance of accord and satisfaction?

A

No, only unliquidated debt.

43
Q

Is a promise to pay obligation that has been discharged enforceable?

A

Yes, if in writing - good faith.

44
Q

Statute of frauds: what are covered? Exceptions?

A

Anything related to land: options, contracts, leases, mortgages.
“Partial performance” (tangible evidence) - the court is willing to enforce even without writing if the land is in possession and/or improvements and payments are made.

Promises to pay debts of another: collateral (NOT original debt), surety, executor (debt of estate), bankruptcy discharge, statute of limitations

Contracts not to be performed or finished within one year, from time of agreement.

Sales: contracts for sale of goods $500 or more.

45
Q

Statute of Frauds: requirements?

A

Record (doesn’t have to be in one), signature/authentication of party to be held reliable, sufficient terms).

46
Q

What is E-Sign Act?

A
  • Federal law that require electronic signatures has parity with written ones.
  • Must show underlying intent to contract (pop-up warnings, notice “you are about to contract”).
  • Must be able to reproduce the agreement.
  • No mean for verification of identity of parties - done by state laws (verification).
47
Q

Statute of Frauds UCC exceptions re: merchants’ confirmation memo?

A

Two merchants, writing (record), signed by one of the merchants, and underlying oral agreement required.

If there is an underlying oral agreement, and one party sends a memo/email, confirming the agreement, without other party signing it, it can be enforceable because other party’s responsibility was to write back if it was not a contract.

48
Q

Statute of Frauds UCC exceptions re: part performance?

A

Even if it is an oral agreement, if goods are actually accepted or payments are actually received, it can be enforceable.

49
Q

Statute of Frauds UCC exceptions re: specially manufactured items and admission in any proceeding while under oath?

A

Enforceable without writing.

50
Q

When does Parol Evidence apply? What does it do?

A

Complete contract, no ambiguities, and final written form.

Once a contract satisfies above requirements, Parol Evidence prevents outside/extrinsic evidence to contradict the contract.

51
Q

Defense to Formation: What is the cut off age for contracts to be valid? If the person is under the age, what happens to the contract? If the person misrepresented the age?

A

18.
Becomes voidable.
Irrelevant.

52
Q

Defense to Formation: right does minor has regarding contract? Exception?

A

Right to disaffirm: anytime during minority or for reasonable time after reaching majority.
Necessaries like clothing, food (contracts are still voidable but seller can try to recover).

53
Q

Defense to Formation: the minor chooses to disaffirm, what must he do?

A

Return only what consideration is left, if any.

54
Q

Defense to Formation: can a minor ratify the contract?

A

No. But he can after reaching the majority by statement or conduct upon reaching majority.

55
Q

Defense to Formation: mental: If declared insane, what happens to the contract and consideration?

A

Void. Consideration need not be returned.

56
Q

Defense to Formation: Run-of-the-mill insane (on and off): what happens to the contract and consideration? What are 2 measurement to determine the mental state?

A

Voidable. Consideration must be returned.

  1. Did not understand nature of contracts.
  2. Did not understand effect of this contract.
57
Q

Defense to Formation: drunken: How drunk one must be? What happens to the contract and consideration?

A

To the point of mental incapacity.

Voidable. Return (strict: if can’t return, may not be voidable).

58
Q

Defense to Formation: is there any defense for unilateral mistake of fact?

A

Yes, if the mistake in computation was big enough that other party should have known. If not, no defense.

59
Q

Defense to Formation: is there any defense for bilateral mistake of fact?

A

Yes, contract can be voided.

60
Q

Defense to Formation: Innocent misrepresentation: What is the remedy?

A

Rescission is the only remedy.

61
Q

Defense to Formation: what is misrepresentation?

A

More than puffing and has basis of bargain that was based on fact or promise.

62
Q

Defense to Formation: what are 3 points to establish fraud? What is the remedy for fraud?

A
  1. Material misstatement/basis of bargain.
  2. Must prove knowledge.
  3. Must prove intent to defraud - hid information.

Compensatory and punitive damages.

63
Q

Defense to Formation: explain undue influence. What happens to contract?

A 
Confidential relationship (need not be fiduciary relationships) - relationship of dependence (party deprived of meaningful choice).
Voidable.
64
Q

Defense to Formation: duress: Does it require subjective or objective test? Require physical force? What is other example?

A 
Subjective test (what the person must have perceived).
No, threat of force is enough. (if physical force involved, the contract is void).
Threat of disclosure of info.
65
Q

Defense to Formation: illegality: Explain interest rate.

A

Usury: Charging of interest in excess of statutory maximum.

66
Q

Defense to Formation: illegality: Examples?

A
  • Public policy.
  • Consumer contracts.
  • Exculpatory/hold-harmless clauses (putting blanket exclusion of liability) - can’t exclude yourself from your won negligence - at least this part is void.
  • Licensing: try charging without necessary license (qualification) - void.

レグ 1 Ethics and Business Law (11 decks)

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