MBE Contracts Flashcards
What are the elements for a contract?
Offer, acceptance, consideration
Can a person revoke an offer?
Yes
When can a person no longer revoke and offer?
1) Other person has already accepted
2) Irrevocable under option contract
What are the two ways to revoke an offer?
1) Direct revocation
2) Indirect revocation
What is direct revocation?
Telling the other person directly
What is indirect revocation?
Person learns from another source that’s not you
In indirect revocation, when does offeree lose right to accept?
As soon as he learns that offeror made a deal with someone else
Who can reject an offer?
The person who received the offer
What is an option contract?
“Promise to keep this open for you for 5 days”
Is an option contract revocable?
No
Do you need additional consideration for an option contract?
Yes
Who can enter into an option contract?
Lay people (non-merchants)
If no time stated in option contract, what is the duration?
Reasonable time
What is a firm offer?
Promise to keep an offer open, but between merchants
What is the maximum amount of time for a firm offer?
3 months
Does a firm offer need to be in writing?
Yes
Does a firm offer need additional consideration?
No
What is a unilateral contract?
A promise for performance
When is something irrevocable in a unilateral contract?
Once you begin performance
What is a bilateral contract?
Promise for promise
How can someone accept an offer?
In any reasonable manner, as long as manifesting (expressing) intent, unless specifying manner of acceptance
What is the mailbox rule?
As soon as you send letter of acceptance, acceptance is effective when sent
What happens if you send rejection before acceptance?
The letter that arrives first wins
What is consideration?
Bargained for exchange
Does fair market value matter for consideration?
No
Is a promise to give a gift enforceable consideration?
No
Is there consideration if after act person offers you something?
No. Did it on your own so no bargain for exchange
Who is an incidental beneficiary?
Benefit is incidental/by accident
When does an incidental beneficiary’s rights vest?
Never
Who is an intended beneficiary?
Two original parties intended to benefit third person
When does intended beneficiary rights vest?
1) When beneficiary is notified
2) When beneficiary learns of the right and begins to rely
Can you generally assign/delegate rights/duties?
Yes
Is either notice or consent required to assign/delegate?
No
Who can you sue if old party assigned/delegated rights/duties?
Both old and new party, unless novation between original parties
Can new party to an agreement change terms of the original agreement?
No
What if specified that you cannot assign your rights under a contract?
Assignment is still valid but owe damages for breaching that promise
What if the contract says any assignment or delegation is void?
The provision saying void is enforceable. Delegation or assignment is void.
What if contract says you can’t delegate?
Duty cannot be delegated
If contract is for unique skill/talent/service/special, can you give that contract to someone else?
No
When is statute of frauds applicable?
M- Marriage Y- Year or more L- Land E- Executor G- Guarantor S- Sale of goods of more than $500
What is the statute of frauds exception?
If there has been part or full performance already
What is parol evidence?
Oral communications prior to or contemporaneous with the contract
Can parol evidence come in?
Depends if partially or fully integrated
If contract is fully integrated can parol evidence come in?
ONLY to clear up any ambiguity
If contract is partially integrated can parol evidence come in?
Only consistent additional terms admitted. No material alterations allowed or anything that conflicts.
If hypothetical is silent, assume partial or full integration of a contract?
Partial integration
When is parol evidence always going to be allowed in?
1) To show condition precedent
2) To prevent fraud or duress
3) In sale of good, course of dealing/trade/custom
What is course of dealing?
How we have always done business
What is trade/custom?
What happens in the industry
What is a condition?
Something has to occur or not occur that either makes the party perform or discharge
What does it mean to waive a condition?
Remove obligation from meeting terms of condition. Any language saying you don’t have to do that anymore
What is a legal remedy?
Money
What are expectation damages?
Placing a person in the position they were before performing the contract
When can someone get expectation damages?
When damage is foreseeable
What are liquidated damages?
Clause where we decide the amount of damages at the time we entered into the contract
When are liquidated damages enforceable?
Always as long as not acting as a penalty
What is restitution?
Breaching party can recover the reasonable value of work done minus any damages they caused
When is specific performance granted?
When contract is unique
Why do courts grant injunctions?
To prevent irreparable harm
When do you get rescission?
When there is no meeting of the minds (mistake, misrepresentation)
Does a modification need to be written?
No. Can be oral or written
Under common law, do you need additional consideration to modify a contract?
Yes
Under UCC, do you need additional consideration to modify a contract?
No, only good faith
What is a non-conforming good?
Sent you the wrong thing
What happens if sent a non-conforming good prior to the date set out in the contract?
If seller says he can fix it, must give right to cure
What if sent non-conforming good with reasonable belief that buyer would accept the goods?
Must give seller the right to cure (as long as can fix within a reasonable time)
What happens if sent non-conforming goods under an installment contract (periodically/several shipments)?
One non-conforming shipment is not a material breach, but still owe damages. UNLESS that installment impairs the value of the entire contract
For total breach, do you have to sue after agreed upon date?
No, can sue beforehand too
For anticipatory repudiation, when you demand assurances?
If given reason to doubt whether party will perform
When does promissory estoppel come into play?
When there is no contract (one party promises and that promise induces detrimental reliance)
What is detrimental reliance?
Doing something you would not ordinarily do
When is something impossible?
When nobody can objectively perform
What is impracticability?
Can still physically do it, but due to unforeseen circumstances, performance is now so difficult it would be unfair
What is a unilateral mistake?
One party is mistaken
Is unilateral mistake a defense?
Not usually, unless other party knew of your mistake and took advantage
What is a mutual mistake?
Both parties mistaken about a fundamental term in the contract
Is a mutual mistake generally an available defense?
Yes
Is time of the essence?
No, unless the parties make it so
If stipulate that time is of the essence and don’t comply, what results?
Material breach
Is a contractor’s duty to construct a building discharged by destruction of the work in progress?
No. Still have to complete the building
When does contractor have to finish building a building if the destruction of the work in progress was not caused by a contractor, such as by an act of nature?
Courts will extend date of performance beyond the original deadline
When does death or physical incapacity discharge obligations?
Only in personal service contracts where the services involved are unique
Who is responsible for the destruction of the premises under construction prior to completion?
The contractor
When contracted to build a building, when does the risk of loss shift to the owner of that building?
Once the building is completed
What is the remedy if either party has partially performed prior to the existence of facts resulting in impossibility?
Right to recover in quasi-contract for the reasonable value of his performance
What is the preexisiting duty rule?
Performance of an existing legal duty is not consideration
What is one way to avoid the preexisting duty rule?
Modifying the original consideration, even if just slightly
What if modifying contract to the benefit of one party?
Not enough to get it out of the preexisting duty rule and unenforceable under common law
When does preexisting duty rule not apply?
When the duty is owed to a third person
What is the modern view permitting modification w.o consideration?
Only if fair and equitable in view of unanticipated circumstances arising in performance of the contract that makes performance more difficult or expensive
At common law, the statute of frauds requires _____p signed by_____.
A writing reflecting the material terms of the contract; party to be held liable
What is required under the UCC in a writing?
1) Quantity
2) Signed by the party to be charged
In terms of unique/special goods, when is writing under UCC not required?
When the contract is for specially manufactured goods not suitable for resale in the ordinary course of the seller’s business AND the seller has substantially begun manufacturing it
When can seller enforce a buyer’s oral promise to pay for land?
Upon seller’s conveyance of the property to the purchaser
When would an oral agreement for the sale of goods above $500 be enforceable?
If the goods are either received and accepted OR paid for
Under UCC, what happens when a buyer rejects a tender of nonconforming goods that the seller reasonably believed the buyer would accept?
The seller, upon reasonable notification to the buyer, has a further reasonable time beyond the contract time within which to make a conforming tender
What is one way injunctive relief is appropriate to enjoin a breaching party from working with a competitor throughout the duration of a contract?
If the services contracted for are rare or unique
Type of contract where specific performance is unavailable as a remedy?
Specific performance is unavailable for breach of contract to provide services (would amount to involuntary servitude)
When does a defense of laches arise?
When a party delays in bringing an equitable action and the delay prejudices the defendant (mere delay itself is insufficient)
What is required if a party’s willingness to forego the benefit of a condition occurs AFTER the contract is formed but before the condition fails to occur?
Consideration usually required, unless party’s manifestation of waiver induces the other party to change his position in reliance on the waiver
Is a subsequent waiver of a condition binding without consideration if the condition is not a material part of the bargain?
Yes
Under UCC, what may be sufficient to show mutual assent?
Appropriate conduct between the parties to show agreement to a contract (even if an exchange of correspondence between them makes the exact moment of contract formation indeterminate)
What is required to terminate a contract under anticipatory repudiation?
1) notify the other party in writing of the repudiation; or
2) act in reliance and change position (ex: hire someone else)
Until when can you retract repudiation?
Until the other party has:
1) sued for breach;
2) changed his position in material reliance on the repudiation; or
3) stated that he is treating the repudiation as final
When would a contract that violates public policy still be valid/enforceable?
When the contract was intended for the benefit of the contracting party seeking relief
For a requirements contract, under the UCC, what is the quantity?
Actual requirements that may occur in ~good faith~
Essentially, what is a requirements contract?
Type of sales contract that obligates the buyer to purchase all of its requirements of a good EXCLUSIVELY from the seller
What is the normal damage remedy?
Expectation damages
When are liquidated damages enforceable?
If
1) Damages from a breach are difficult to estimate at the time the contract was formed; and
2) The amount agreed on was a reasonable forecast of compensatory damages in the event of a breach
When would an advertisement be considered an offer?
If the language of the announcement is qualified with limiting language like “first come, first served” or “winner of the competition”
In a shipment contract, when does the risk of loss shift from the seller to the buyer?
When the seller duly delivers the goods to the third-party carrier
If a contract is silent, what type of contract should you presume it to be in terms of risk of loss?
Shipment contract
Unless contract specifies otherwise, under the UCC, where is place of delivery and when is payment due?
Place of delivery is seller’s place of business and payment is due at the time and place where the buyer is to receive the goods
When will partial payment of an original debt be satisfied as an accord and satisfaction?
When there is a bona fide dispute about the validity of the claim
In a unilateral contract, how is offer accepted?
Only accepted by performance
What is required in an offer involving realty?
Must identify the land and the price terms
What is the effect of an acceptance made expressly conditional on the acceptance of new terms?
Rejection of the offer
What happens to additional or different terms if any party to the contract is not a merchant?
Not part of the contract, unless the offeror expressly agrees
Does modification need to be in writing?
Yes, if the contract as modified falls within the statutue of frauds
Effect of oral agreement, under common law, if the contract expressly provides that it may be modified only by a writing?
Parties can still orally modify
Remedy if failed to satisfy statute of frauds?
Reasonable value of the services or part performance rendered or the restitution of any other benefit that has been conferred
If an offer says cash only, can you still accept the offer with check?
Yes, but if the seller demands legal tender the seller needs to give you a reasonable time to get the cash
When does a third party beneficiary’s rights vest?
1) manifest assent in a manner invited or requested by the parties;
2) learns of the contract and detrimentally relies on it; or
3) bring lawsuit to enforce its rights
Can you use impractical performance as a defense to excuse delay?
Yes. (Ex: because of storm, shipping company was delayed)
Regardless if debt is evidence in writing, can a creditor’s right to receive money due from a debtor be assigned?
Yes
How can you terminate a gratuitous revocable assignment?
By assignor taking performance directly from the obligor (ex: pay to my nephew, then pays you and you accept)
What is the effect of a contract requiring payment before inspection?
Payment does not constitute acceptance or impair a buyer’s right to inspect or any of the buyer’s remedies
What are conditions concurrent?
At the same time. Alternatively: each condition is a condition precedent of the other
When modifying a contract contract of $400 for an additional $400 is the statute of frauds applicable?
Yes, because the total price is now $800
What if shipper sends non-conforming goods but notifies buyer that it is being offered only as an accommodation to the buyer?
Not a breach of contract. This would be a counter offer
In an installment contract, when can buyer reject the shipment if seller sends nonconforming goods?
If the defect substantially impairs the value of THAT installment or substantially impairs value of the contract
When does an illusory promise become consideration?
Once the period for exercising the right to terminate has passed
When is the promise to surrender a legal claim sufficient consideration?
When the person surrendering the claim had a good faith belief in its validity
When you accept an offer, can you just later expand the offer?
No because seen as a rejection of accepting more broadly and just narrowly accepting the thing
What happens if make a contract under UCC, then send an invoice/statement later excluding consequential damages?
Once there is an acceptance, those terms govern
If contract for services doesn’t have a price, is it enforceable?
No (can be considered too indefinite)
Are construction contracts with progress payments considered divisible contracts?
No. Construction contract with progress payment due as elements of the job are not divisible and the appropriate remedy is restitution
What happens if signed writing forgets to include something the parties agreed on?
If due to natural mistake, the court may reform the writing to be an accurate expression of the agreement
Who cannot avoid a contract for mutual mistake?
The person who bears the risk of the mistake
When is rescission available?
Only when the non-mistaken party knows or should have known about the unilateral mistake
What kind of damages are available if subcontractor pulls its offer that contractor used in making a bid?
Expectation damages (Adaptibar 2406)
When is nondisclosure of a fact equivalent to a misrepresentation?
When a person knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation
What is the difference between concealment and misrepresentation?
Concealment requires an affirmative act
What does FOB stand for?
Free on board
What does FOB [seller’s] store mean?
Seller not obligated to pay costs of shipment beyond shop. FOB obligates seller to get the goods to the location indicated after the term
Is substitution a sufficient novation?
Yes and discharges the party from any duties under the original contract
What is the language for detrimental reliance/promissory estoppel?
Because the interests of justice require it
What is the main purpose exception to surety requirement in the statute of frauds?
If the main purpose of the guarantor in promising to pay the debt of another is to benefit himself, this will take a contract out of the statute of frauds (like main purpose of why the person guaranteeing the loan did it)
What is the effect of a valid accord?
Merely suspends the right to enforce in accordance with the terms of the accord contract (do this instead)
Can you piggyback a statute of limitations defense?
No. Statute of frauds is personal to that person
Can assignments be gratuitous?
Yes
What happens if person deposits a check on an amount that is disputed?
Debt wiped away if check clearly stated that it was for the satisfaction of the debt
If the benefits of a bargain for a party to a contract are unclear or too speculative, what damages will be awarded?
Reliance damages
If both parties are merchants, what happens to additional terms? (Under the UCC)
Will be considered a term of the contract if the party can successfully argue that the provision did not materially alter the parties’ contract
When would the contract price be an appropriate measure of damages?
1) Buyer has accepted the goods
2) Goods lost or damaged within a commercially reasonable time after the risk of loss has passed to the buyer
3) Buyer has returned goods and seller is unable after reasonable efforts to resell
Does payment of a lower amount than agreed upon constitute sufficient consideration?
Yes, when there is a bona fide dispute as to the amount owed made in good faith
When does clock start running for when a party may avoid a contract due to misrepresentation?
When the party either knows or has reason to know of the misrepresentation
Is a contract based on misrepresentation void or voidable?
Voidable
Do you need consideration to modify a contract under UCC?
No
If federal court sits in diversity, what determines whether the part is entitled to a jury trial?
Federal law–not state law
What is a waiver?
Voluntary and intentional relinquishment of a known right
What to say on an essay for acceptance?
Acceptance is a manifestation of assent to the terms of the offer in the manner prescribed or authorized in the offer
What is required for consideration?
For there to be consideration, (1) there must be a bargained-for exchange between the parties and (2) that which is bargained for must constitute either a benefit to the promisor or a detriment to the promisee
What to say on an essay about an offer?
There must be (I) an expression of a promise, undertaking, or commitment to enter into a contract, (ii) certainty and definiteness in the essential terms, and (iii) communication of the offer to the offeree
Why are requirement contracts okay?
Because requirements can usually be determined objectively and therefore are capable of being made certain. The requirements may not be unreasonably disproportionate to any stated estimate or any normal prior requirements
What’s okay in Florida for consideration?
Either benefit to one party or detriment to the other party
What is the definition of a merchant under Article 2?
One who deals in the type of goods involved in the transaction or who through his occupation has specialized knowledge of business practices involved
What is a unilateral rescission?
An option where only one of the parties to the contract desires to discharge its contractual duties and that party must have adequate legal grounds
What is the test for unconscionability?
Whether the contract was the result of one party’s being in a superior bargaining position, resulting in unfair advantage over the other party at the time of execution
What is one kind of illusory promise?
Promisor reserves the right to change his mind, which does not bind the promisor
What happens if promises exchanged with a teenager?
Teenager has voidable right sunder the contract. Once disaffirmed, can only get what is now being offered
What are the three elements to make a contract divisible?
1) Contract divides each party’s performance into at least two parts;
2) Each party has the same number of parts they are obligated to perform; and
3) Each party’s performance on each part is agreed to be the equivalent of a corresponding part for the other party
When is a misrepresentation fraudulent?
IF assertion was made to induce a party to manifest his assent and the maker:
1) knows or believes the assertion to be false;
2) does not have confidence that his assertion is true; or
3) knows that he has no basis for the assertion
When to get consequential damages?
When that person would suffer additional loss, which were dependent upon the contract
What is required for a novation?
Consent to the delegation AND release of the original party
How to justify rescission if claim is based on misrepresentation?
The misrepresentation must go to a material factor in the negotiations. Actual reliance is required
When is quasi-contractual relief appropriate?
If one party conferred a benefit on the other, this person had a reasonable expectation of being compensated for their service, the benefits were conferred at the express or implied consent of the person receiving them, and if the person is permitted to retain the benefit w/o providing compensation, they would be unjustly enriched.
What will courts normally not do regarding consideration?
Courts will normally not inquire into the adequacy of consideration
What is required to comply with the statute of frauds for contracts of the sale of land?
1) description of the property
2) identification of the parties in the contract
3) price and manner of payment
When is contract voidable under mutual mistake?
If the mistake concerns a basic assumption on which the contract is made, mistake has a material effect on the agreed upon exchange, and the party seeking avoidance did not assume the risk of the mistake
When may specific performance be awarded?
If contract is enforceable, all contractual conditions have been fulfilled, the legal remedy is inadequate, enforcement is feasible, mutuality of remedy exists, and no defenses available
How can an offer to the public be terminable?
Either by revocation or by lapse of time
What is suretyship?
Express promise by a third party (the surety) to a creditor to be primarily responsible for the debtor’s obligation to the creditor
A Congressional veto regarding a federal agency’s actions requires what?
A majority vote of both houses and presentment to the President to exercise his veto
When does surety portion of statute of frauds not apply?
When the surety promise was made to the principal and not the obligee (creditor)
When are goods identified to the contract?
When the seller ships, marks, or otherwise designates them as goods to which the contract refers
If contract is silent on an issue, may the court supply a term to the contract?
Yes, one that is reasonable for both parties under the circumstances
When would a party construe a term against the drafter?
When the term is ambiguous, not when it is missing
What is one way in which the preexisting duty rule does not apply?
When the modification is fair and equitable in light of the changed circumstances
