II-2 Contracts Flashcards
What are 2 sources of contract law? Examples of activities that are under those 2 laws?
Common law (restatements of contract): real estate. Service (include employment). Uniform Commercial Code (UCC) (Article 2): Sale of goods.
Which law would be used when sales include both goods and service?
Depending on the primary purpose: break down cost of goods and cost of services. Which ever is larger will be the law used.
What is the definition of “goods”?
tangible personal property.
What are the differences between common law and Uniform Commercial Code?
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.
What are goals of UCC and Common Law?
UCC: moving commerce efficiently and quickly.
CL: make sure people understand what they are doing.
What is the definition of “contract”?
An agreement supported by consideration between two or more persons with competent capacity for a legal purpose.
What is express contract?
A contract formed wholly by oral and/or written words.
What is implied or implied-in-fact contracts?
A contract formed, at least in part, based on the conduct of the parties or based on the factual circumstances.
What is Quasi-contract or implied-in-law contract?
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.
What is bilateral contract?
Promise for promise by both sides.
What is unilateral contract?
Promise for an action by other side. The other side doesn’t have to promise, but take an action (the way it is phrased).
What are executed and executory contracts, partially executed contract?
Executed: completed.
Executory: Action not completed yet.
Partial: executed in one side, but executory in other side.
Which one can be enforced: valid or void contracts? What is void contract?
Valid.
A contract that lacks a legal purpose or is in violation of the law
What is voidable contract?
One party has an option to void.
What is unenforceable contract? Can it be still honored? How?
An otherwise valid contract that cannot be enforced because of a statutory or other legal defense.
Yes by both party deciding to honor.
What are the required elements for the formation of a contract?
Offer, acceptance, consideration, no defenses.
What contract does one have with defenses?
Void, voidable, or unenforceable contract.
What must an offer/acceptance have to be valid?
Present intent (not future promise): must have objective intent (serious intent)
How is objective intent measured?
by a reasonable person’s interpretation
Offer: What present intent and language must be present under UCC and CL?
UCC: Objective intent. Subject matter.
CL: Objective intent. All details.
How is offer terminated? When are these effective?
Rejection.
Counteroffer (include conditional acceptance).
Revocation.
Effective upon receipt* If phoned, whoever spoke first: acceptance or revocation.
Death of offeror, bankruptcy, illegality.
What is options? Does death of offeror terminate?
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.
What are requirements for merchant’s firm offer (a form of option under UCC)?
- Some form of writing or record.
- Signed or authenticated.
- By a merchant: in the business of selling goods that are the subject matter of the contract.
- States that it will be kept open (maximum of 3 months).
Merchant firm offer: If it is non merchants? If the term exceeds 3 months?
Must have option in place.
Acceptance: CL requirement?
Absolute, unequivocal, and unconditional. Mirror image rule: must respond to the same details. Otherwise, it’s a counteroffer and not an acceptance.
UCC acceptance with additional terms (include this - more of inquiry rather than conditional): in the case of non merchant?
Contract is formed, but without additional terms.
UCC acceptance with additional terms: in the case of merchant?
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.
Is conditional acceptance acceptance under UCC and CL? What are they considered to be?
No under both.
Counteroffer or rejection.
Offer accepted under UCC and CL? - no means given.
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.
Offer accepted under UCC and CL? - specific means (stipulated).
UCC / CL: Yes, when specified means used when mailed (mail box rule).
No, when specific means not used.
Offer accepted under UCC and CL? - prompt shipment.
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.
Consideration (UCC and CL): Is amount specified?
No, as long as it’s paid.
What distinguishes between consideration and gift?
Bargained-for exchange. Promise includes detriment, and detriment includes the promise.
What is the definition of consideration?
Doing what you are free not to do or not doing what you are free to do.
Does charitable subscriptions have detriment on one side? Is it enforceable?
No.
Yes.
Is agreement for more money for an established contract enforceable? Why?
No. because it lacks new detriment.
Is unclear output or input enforceable consideration? “I’ll sell all my output” “I’ll buy all I require”
Yes because UCC only require subject matter. Enforceable in good faith
What is liquidated debt? Can one negotiate?
All terms defined clearly. No.
What is unliquidated debt?
Both parties agree that they owe each other, but disagrees about the amount.
What is accord?
an agreement to waive legal rights, releasing another party from legal obligations.
What is satisfaction?
the actual payment of the amounts agreed to in the accord
Can both liquidated and unliquidated debt have discharge and complete performance of accord and satisfaction?
No, only unliquidated debt.
Is a promise to pay obligation that has been discharged enforceable?
Yes, if in writing - good faith.
Statute of frauds: what are covered? Exceptions?
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.
Statute of Frauds: requirements?
Record (doesn’t have to be in one), signature/authentication of party to be held reliable, sufficient terms).
What is E-Sign Act?
- 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).
Statute of Frauds UCC exceptions re: merchants’ confirmation memo?
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.
Statute of Frauds UCC exceptions re: part performance?
Even if it is an oral agreement, if goods are actually accepted or payments are actually received, it can be enforceable.
Statute of Frauds UCC exceptions re: specially manufactured items and admission in any proceeding while under oath?
Enforceable without writing.
When does Parol Evidence apply? What does it do?
Complete contract, no ambiguities, and final written form.
Once a contract satisfies above requirements, Parol Evidence prevents outside/extrinsic evidence to contradict the contract.
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?
18.
Becomes voidable.
Irrelevant.
Defense to Formation: right does minor has regarding contract? Exception?
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).
Defense to Formation: the minor chooses to disaffirm, what must he do?
Return only what consideration is left, if any.
Defense to Formation: can a minor ratify the contract?
No. But he can after reaching the majority by statement or conduct upon reaching majority.
Defense to Formation: mental: If declared insane, what happens to the contract and consideration?
Void. Consideration need not be returned.
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?
Voidable. Consideration must be returned.
- Did not understand nature of contracts.
- Did not understand effect of this contract.
Defense to Formation: drunken: How drunk one must be? What happens to the contract and consideration?
To the point of mental incapacity.
Voidable. Return (strict: if can’t return, may not be voidable).
Defense to Formation: is there any defense for unilateral mistake of fact?
Yes, if the mistake in computation was big enough that other party should have known. If not, no defense.
Defense to Formation: is there any defense for bilateral mistake of fact?
Yes, contract can be voided.
Defense to Formation: Innocent misrepresentation: What is the remedy?
Rescission is the only remedy.
Defense to Formation: what is misrepresentation?
More than puffing and has basis of bargain that was based on fact or promise.
Defense to Formation: what are 3 points to establish fraud? What is the remedy for fraud?
- Material misstatement/basis of bargain.
- Must prove knowledge.
- Must prove intent to defraud - hid information.
Compensatory and punitive damages.
Defense to Formation: explain undue influence. What happens to contract?
Confidential relationship (need not be fiduciary relationships) - relationship of dependence (party deprived of meaningful choice). Voidable.
Defense to Formation: duress: Does it require subjective or objective test? Require physical force? What is other example?
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.
Defense to Formation: illegality: Explain interest rate.
Usury: Charging of interest in excess of statutory maximum.
Defense to Formation: illegality: Examples?
- 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.
