Kaplan Contract Foundation Slides Flashcards
Contract Formation Coverage Areas
- Offer
- Acceptance
- Consideration
- Consideration Substitutes
- Counter Offer
- Revocation
- Modification
- UCC
- Common Law
- Preexisting Duty Rule
Checkpoint Items
- Contracts involving the Sale of Land
- Contracts containing contingencies
- I will buy if I can get certain financing
- I will sell my house first
- Consideration and substitutes for consideration
- Modification
- Contracts mixing goods and services
Approach to Contracts
- What Law Applies - UCC or Common Law
- What Kind of Contract - Unilateral or Bilateral
- Who are the parties?
- Merchants/Kids-necessities
What is an Offer
An objective manifestation by the offeror of a willingness to enter into a bargain creating the power of acceptance in the offeree
What is an Acceptance
An objective manifestation by the offeree to be bound by the terms of the offer
Termination of an Offer (ways to terminate an offer)
- Death of the offeror
- Revocation
- Verbal
- Written
- Actions inconsistent with the offer
- Can be communicated by a third party
- Rejection
- Counteroffer
- Lapse of Time
Rejection versus Inquiry
Rejection terminates the offeree’s power of acceptance. Inquiry does not terminate the offeree’s power of acceptance. Offeror can renew offer in the face of a rejection
When an offer is made the Offeror can
Revoke
When an offer is made the Offeree can either
- Accept
- Reject
- Counteroffer (Which is a rejection with an offer)
- Inquiry
UCC 2-206: Non Conforming Goods
If non-conforming goods are shipped, the shipment serves as an acceptance and at the same time a breach
Unilateral Contract
Offeror makes an offer that calls for performance; the Offeror is ONLY looking for performance
Bilateral Contract
Offeror and offeree exchange mutual promises; the Offeror is ONLY looking for a promise to perform
UCC 2-205: Firm Offer Rule
A signed writing by a merchant which by its terms gives assurances that it will be held open is not revocable for lack of consideration for the stated period of time not to exceed three months
Consideration
Bargained for Legal Detriment
Consideration – Considerations
- Look for a valid contract
- Is there a bargain the court MUST enforce?
- Bargained for exchange
- Forbearance to sue
- Look for a substitute for consideration
- Is there a bargain the court should enforce?
Implied in Law Contracts
- A quasi-contract is NOT an actual contract, rather a legal substitute for a contract formed to impose equity between two parties
- A contract SHOULD have been formed, even though in actuality it was not
- Implied in law contracts are used when a court faces a situation of injustice to enforce the agreement to ensure fairness
Modification
A subsequent agreement that alters or changes the parties’ duties and obligations under the terms of their original contract
Modification - UCC requires
1- Good Faith
2- NO additional Consideration is required
Modification - Common Law
Preexisting Duty Rule
- New Consideration Required
Preexisting Duty Rule
Performance of an act by which a party is already contractually bound to perform does not constitute valid consideration for a new promise
Defenses and Remedies - Coverage Area
Defenses to Contract Formation
- Infancy
- Mistake
- Statute of Frauds
- Illegality
Remedies
- Specific Performance
- Money Damages
- Injunctions
Parol Evidence
Checkpoint items
- Lots of defenses to formation
- Remedies are a hot area
- Lot of cross over here with state essays
- Also cross over here with landlord tenant
- Statute of Frauds is always a favorite
Contract Defenses - Mutual Mistake
Both parties are mistaken as to a material element that goes to the heart or essence of the bargain.
The Remedy: Rescission of the Contract
Contract Defenses - Unilateral Mistake
Contract is enforceable against the mistaken party, UNLESS the non-mistaken party knew or should have known of the other’s mistake
Anti-Assignment Clause
- The assignor need not consult the other party to the contract
- An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality
- Certain kinds of performance, therefore, cannot be assigned because they create a unique relationship between the parties to the contract
Implied in Law
A legal substitute for a contract formed to impose equity between two parties. A contract should have been formed, even though in actuality it was not
Implied in Fact
An agreement founded upon a meeting of the minds, which, although not embodied in an express contract, is inferred from the conduct of the parties
Contract Remedies in Law
Money Damages
Contract Remedies in Equity
- Injunction
- Specific Performance
- Rescission
- Reformation
- Quiet Title actions
- Partition Proceedings
Specific Performance
A remedy used to enforce a contract for the sale of unique item of personal property or real property
Condition Precedent
An act or an event (other than the lapse of time) that must occur first before a party is under a duty to perform
Contracts with Minors
- Minors are regarded as not having sufficient capacity to comprehend questions involving contractual rights
- A person dealing with a minor does so at his or her peril and subject to the right of the minor to avoid the contract
Certain Contracts with Minors cannot be voided
- Taxes
- Penalties
- Bank Regulations
- Military
- Necessities
Statute of Frauds
Requires certain types of contracts and agreements to be in writing
What is the Mnemonic for the State of Frauds
MY LEGS
M- Marriage Y- Year (1) - Contracts that cannot be performed in L- Land E- Executor G- Guarantor S- Sale of Goods (500+)
Main Purpose Rule
An oral promise to answer for the debt of another is enforceable if the promisor’s main purpose is to further his own economic advantage
Parol Evidence Rule
Once the parties have reduced their agreement to a writing, evidence of any prior oral or written or contemporaneous oral agreements is inadmissible to alter, vary, or contradict the terms of the writing
Parol Evidence Exceptions
- Fraud
- Mistake
- Illegality
- Duress
- Partial Integration
- Conditions Precedent
UCC - Uniform Commercial Code -Coverage Areas
UCC
- Merchant Specific Rules
- Confirmatory Memo
- Firm Offer Rule
- Defenses
- Damages
- Requirements Contracts
- Installment Contracts
- Battle of the Forms
Third Party Beneficiaries
- Intended
- Incidental
- Assignment and Delegation
Checkpoint Items
- Rule specific questions - know it or dont
- Many questions deal with who the parties are
- Students get lost in the details
- Often times identifying who is making the offer and who is accepting is difficult
- Whose terms govern?
Requirements Contract
A contract in which one party agrees to supply as much as a good or service as is required by the other party, and in exchange the other party expressly or implicitly promises that it will obtain its goods and services exclusively from the first party
UCC 2-712: Cover by Buyer
After covering aggrieved buyer may recover:
Price to Cover - Contract Price
+ Incidental and Consequential Damages
UCC 2-615: Impracticability
Delay in delivery or non delivery by a seller is not a breach if the seller’s performance is made impracticable by a contingency whose non-occurrence was a basic assumption on which the contract was made
Impossibility - Subjective
Subjective impossibility will NOT excuse duties of performance under a contract
Impossibility - Objective
Objective impossibility WILL excuse duties of performance under a contract
3rd Party Beneficiary Analysis
- Identify 3rd Party Beneficiary Contract
- Intent to Benefit Test
- Is 3rd Party incidental - then no rights
- Is 3rd party intended - then Step 3
- Has Third Party Vested? (Have Rights?)
- Learned of the contract and assented to it?
- Changed positions in reliance on the contract?
UCC 2-601: Buyer’s Options for Non-Conforming Goods
Buyer has three options:
1. He can accept the whole shipment
2- He can reject the whole shipment
3- He can accept any commercial unit or units and reject the rest
Free on Board (FOB)
Indicates that the seller is responsible for getting the goods to a shipper designated by the buyer. At this point, the risk of loss passes from the seller to the buyer
Incidental Damages
Incidental Damages are: Expenses incurred by the injured party as a result of the other party’s breach of a contract, such as:
- Expenses for inspection, receipt, transportation
- Storage of rejected goods or services
- Expenses associated with buying replacement goods or services, and
- Any other expense related to delay in delivery or non-delivery
Consequential Damages
- Damages which do not derive directly from the breach, but from the result of the breach; they are more “indirect” in direct
- Ex- losses Buyer incurs which the Supplier had reason to know at the time of contracting and which Buyer could not reasonably have prevented
UCC 2-609: Right to Adequate Assurances
- When reasonable grounds for insecurity arise, one party may (in writing) demand adequate assurances from the other that the performance will occur
- Assurances must be provided within a reasonable time (no more than 30 days)
- Failure to provide assurances is a repudiation of the contract
