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Contracts/Sales > K Formation > Flashcards

K Formation Flashcards

1
Q

Implied-in-Fact Contract

A

Created by parties’ CONDUCT

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2
Q

Restitution

A
  • Quasi contract
  • Protects against unjust enrichment whenever K law would yield an unfair result
  • Receives reasonable value of the benefit conferred, NOT the K price
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3
Q

Bilateral K

A

Offer can be accepted any reasonable way

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4
Q

Unilateral K

A

Offer can be accepted ONLY by performing

  • Reward/contest/prize
  • Offer stipulates acceptance is only by performance
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5
Q

Requirements K

A

Permissible under Article 2 despite uncertain quantity

-Look for sudden increases/assignments/etc. that are way out of line with prior requests

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6
Q

Open Price Term

A

Does not preclude enforeability

-Court will read in a “reasonable” price EXCEPT in K’s for real property

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7
Q

Types of Irrevocable Offers

A

(1) Options
(2) Firm Offers (Article 2)
(3) Foreseeable Reliance Before Acceptance
(4) Starting Performance in a Unilateral K

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8
Q

General Rule of Revocation

A

Offer can be terminated by the offeror at any time before acceptance

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9
Q

Option

A

A promise to keep an offer open that is paid for

-IN NY: Signed written promise not to revoke is enforceable even without payment

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10
Q

Firm Offer

A
  • Article 2
  • In SOG, if a MERCHANT promises in a SIGNED WRITING to keep an offer open, that offer is irrevocable
  • 3 month time limit
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11
Q

Foreseeable Reliance Before Acceptance

A
  • Rarely succeeds
  • i.e. where subcontractor submitting bids to a contractor knows the bid will be relied upon for the contractor to compute his own bid
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12
Q

Starting Performance in a Unilateral K

A

Must be more than mere preparation (i.e. buying paint to paint a house)
-IN NY: offer for a unilateral K can be revoked up until performance has been COMPLETED

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13
Q

ARTICLE 2 - ACCEPTANCE VARYING OFFER

A
  • Acceptance does NOT have to mirror offer
  • Offeree’s adding or changing a term DOES NOT prevent acceptance, but the offeree’s term is included ONLY IF:
    • (1) Both parties are MERCHANTS and
    • (2) There is no MATERIAL CHANGE (e.g. would cause hardship or surprise to the offeror), and
      - (3) No objection is made within a reasonable time
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14
Q

STARTING PERFORMANCE IN A BILATERAL K

A
  • Starting performance IS acceptance

- Carries with it an implied promise to finish the job

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15
Q

STARTING PERFORMANCE IN A UNILATERAL K

A
  • Starting performance is NOT acceptance
  • COMPLETING performance is acceptance
  • Offeree can walk away once performance has commenced in a unilateral K, but offeror CANNOT revoke

NY –> offeror can revoke until performance is completed

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16
Q

IMPROPER PERFORMANCE UNDER THE COMMON LAW

A

Simultaneous acceptance AND breach

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17
Q

IMPROPER PERFORMANCE UNDER ARTICLE 2 UCC

A

Simultaneous acceptance and breach UNLESS seller is sending non-conforming goods as an accommodation to the buyer and SAYS so specifically

18
Q

ARTICLE 2 - ACCEPTANCE VARYING OFFER

A
  • Acceptance does NOT have to mirror offer
  • Offeree’s adding or changing a term DOES NOT prevent acceptance, but the offeree’s term is included ONLY IF:
    • (1) Both parties are MERCHANTS and
    • (2) There is no MATERIAL CHANGE (e.g. would cause hardship or surprise to the offeror), and
      - (3) No objection is made within a reasonable time
19
Q

STARTING PERFORMANCE IN A BILATERAL K

A
  • Starting performance IS acceptance

- Carries with it an implied promise to finish the job

20
Q

LACK OF CAPACITY

A

= a defense against formation
-Incapacitated D’s may disaffirm the K (voidable)
-UNLESS the incapacitated D retains the benefit after regaining capacity
-EXCEPTION
Incapacitated D’s are still liable for NECESSARIES, for a reasonable value (not the K price)

21
Q

IMPROPER PERFORMANCE UNDER THE COMMON LAW

A

Simultaneous acceptance AND breach

22
Q

IMPROPER PERFORMANCE UNDER ARTICLE 2 UCC

A

Simultaneous acceptance and breach UNLESS seller is sending non-conforming goods as an accommodation to the buyer and SAYS so specifically

23
Q

WHEN IS ACCEPTANCE OF AN IRREVOCABLE OFFER EFFECTIVE?

A

Only effective when RECEIVED

-Exception to the mailbox rule

24
Q

3 EXCEPTIONS TO THE MAILBOX RULE

A

(1) Offer states otherwise
(2) Irrevocable offers
(3) Rejection sent first

25
Q

LACK OF CAPACITY

A

= a defense against formation
-Incapacitated D’s may disaffirm the K (voidable)
-

26
Q

ECONOMIC DURESS

A

3 Requirements

(1) Threat to make an existing K
(2) Buyer only agreed to a 2nd deal to get the 1st deal done AND
(3) There is no reasonable alternative

27
Q

COERCION

A

Arises where a party’s free will is overcome by an unlawful use of force or threats of imminent use of force

28
Q

MISREPRESENTATION/NON-DISCLOSURE OF A MATERIAL FACT

A

Honest misrepresentations and non-disclosures are FATAL FLAWS in the agreement process, as long as they concern a material fact

29
Q

AMBIGUITY/MISUNDERSTANDING

A

If the parties are on different wavelengths, there is no K because of the ambiguity
Ex/ Peerless ship case

EXCEPTION:
-If one party knows or has reason to know that there is ambiguity, then the innocent party’s meaning will prevail and there will be a K on those terms

30
Q

MUTUAL MISTAKE

A

If both parties are mistaken about a material (i.e. essential to the K) fact, the parties are excused from performance
-Does not include mistakes as to value - not deemed amterial

31
Q

UNILATERAL MISTAKE

A

One party’s mistake does NOT excuse performance unless the other party knew or had reason to know about it

32
Q

PAST CONSIDERATION

A

MBE: Past consideration is not consideration at all

NY: Past consideration IS consideration if it is expressly stated in a signed writing, and can be proven

33
Q

MODIFICATION - COMMON LAW

A
  • New consideration is required to modify a K
    • Performing an existing duty is insufficient (Pre-Existing Duty Rule)
    • Pre-existing duty rule is not available to third parties as a defense
  • **NY Distinction
  • Don’t need new consideration for a modification as long as it is in a signed writing
34
Q

MODIFICATION - UCC ARTICLE 2

A

New consideration is NOT required to modify a K, but must show good faith

35
Q

TIME BARRED DEBT

A

A written promise to pay a debt, collection of which is barred by the SOL, is enforceable EVEN WITHOUT CONSIDERATION
-Signed writing serves as substitute for consideration (both MBE & NYS)

36
Q

PROMISSORY ESTOPPEL

A

Foreseeable reliance may make a promise enforceable even without consideration
-Fallback position

37
Q

PUBLIC POLICY ISSUES

A

(1) Covenants not to compete

(2) Exculpatory clauses

38
Q

COVENANT NOT TO COMPETE

A

Courts will invalidate or narrow covenants not to compete that operate as a restraint of trade

 - Scope of covenant (duration and geography)
 - Need for covenant (uniqueness of service)
39
Q

EXCULPATORY CLAUSE

A

Exculpatory clauses can be used to eliminate liability for ORDINARY negligence, but NOT for gross negligence or intentional torts

40
Q

UNCONSCIONABILITY

A

SUBSTANTIVE: terms of the agreement are unfair (i.e. indentured servitude)
PROCEDURAL: the agreement process was unfair (i.e. small print, gross imbalance in bargaining power)

41
Q

8 DEFENSES AGAINST FORMATION

A

(1) Incapacity
(2) Economic Duress
(3) Misrepresentation/Non-disclosure
(4) Ambiguity
(5) Mutual Mistake
(6) Lack of Consideration
(7) Public Policy
(8) Unconscionability

42
Q

PARTIAL PAYMENT OF A DEBT AS CONSIDERATION

A

If the debt is due and undisputed, no consideration for creditor’s promise to forgive the debt - the money owed is not disputed and it is owed right now

IN NY: Don’t need consideration if promise to forgive is in a SIGNED WRITING

Contracts/Sales (7 decks)

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