MBE Contracts Flashcards
Offer
an objective manifestation of a present intent to contract
_______________
- a promise, undertaking, or commitment
- definite and certain terms
- communicated to the offeree
- create the power of acceptance in the offeree
_____________
Offer must give offeree a reasonable expectation that the offeror is willing to enter into a K
Acceptance
a clear expression of assent to the terms of the offer
UCC and Common Law Offer
Communication to an Identified Offeree
means that an offeree must:
- know about the offer
and
- have the power to accept it
Unilateral Contract
Offer expressly requires performance as the only manner of acceptance ex: cash reward for finding lost dog
Bilateral Contract
Anything other than a Unilateral K (offer that is open as to the method of acceptance) ex: i promise to pay you $100 if you promise to paint my house
Quasi Contract
Not a contract but an equitable remedy
- Arises when there is an unenforceable agreement, but one side has realized a benefit
Look For:
- P has conferred a benefit to D
- P reasonably + expects to be paid
- D knowingly + accepted the benefit
- D will be unjustly enriched if P is not compensated
Void Contract
Contract never had any legal effect ex: contract for an illegal conduct
Unenforceable Contract
An otherwise valid contract, but a defense applies rending it unenforceable (incapacity, SOF, etc)
Formation Defenses
DUMIIS
duress
unconscionability
misrepresentation/fraud
incapacity
illegality
statute of frauds
Make the K UNENFORCEABLE
Common Law applies to these contracts
governs contracts for services and real estate
NOT SALE OF GOODS
UCC Article 2 applies to these contracts
governs contracts for the sale of goods
Predominant Purpose Rule
K involves both goods and services, apply UCC or Common Law based on whichever plays a bigger role in the contract
called “mixed contracts”
exception: If K terms divide payment between goods & services, apply the UCC to goods and common law to the remainder
Common LAW Offer:
Certain & Definite Terms
1. parties
2. subject
3. price
and
4. quantity
UCC OFFER
Certain & Definite Terms (UCC)
Quantity - must be certain or capable of being made certain
- For requirements/output contracts, cannot unreasonably increase quantity disproportionate to past practice
Subject - should be made clear
Price doesn’t need to be stated.
_______________________________
Missing terms are ok if it appears parties intended to make a K and there is reasonably certain basis for giving a remedy
Common Law Offer
What terms are needed for real estate to be certain and definite?
- price
and
- identification of the land
Advertisements
Usually are not considered offers.
EXCEPT WHEN BOTH:
- highly specific about the quantity #
and
- clearly indicate who may accept
Revocation of an Offer
Terminates:
the offer
and
the offeree’s power of acceptance
Irrevocable Offers
FOODR
Firm Offers (UCC)
Option contracts
Detrimental Reliance by the offeree
How do you revoke an offer?
An unambiguous statement by the offeror to the offeree
Constructive Revocation: offeree becomes aware of the offeror’s conduct or statement indicating an unwillingness or inability to contract
When is a revocation effective?
Upon the offeree’s receipt
When can an offer be revoked?
anytime before the offer is accepted
Limitations on Revocation - Irrevocable Offers
Option Contract
a promise to keep an offer open in exchange for consideration
Limitations on Revocation - Irrevocable Offers
UCC Firm Offer
Under UCC IRREVOCABLE OFFER where:
- Offeror is a Merchant (or any business person) makes
- Written Assurances that offer will remain open
- For reasonable time <em><u>but no more than 90 days </u></em>
-
No consideration needed to keep offer open
* This is similar to Option Contract, but applies only to the UCC*
Limitations on Revocation - Irrevocable Offers
Detrimental Reliance by the Offeree
reliance must be reasonable
Limitations on Revocation - Irrevocable Offers
Unilateral Contracts
START OF PERFORMANCE makes the offer irrevocable for a reasonable time to complete performance
start of performance must go beyond mere preparation
Rejection of Offer
terminates: 1. the offer and 2. the offeree’s power of acceptance
Counteroffer
Serves as a rejection of the offer, terminates the original offer and becomes a new offer
Bargaining vs Counteroffer
Bargaining is not a counteroffer
Bargaining = response to offer is a question
Counteroffer= response to offer is a statement
Conditional Acceptance
Serves as a
- rejection of the offer,
- terminates the original offer
- and
- becomes a new offer.
Look for these terms: “if”, “only if”, “but”, “ “provided” “so long as” “on the condition that”
Acceptance w/ Additional Terms (Common Law)
serves as a rejection b/c common law requires the acceptance to mirror the terms of the offer
Common Law Mirror Image Rule
acceptance must mirror the terms of the offer
UCC Acceptance w/ Additional or Different Terms
Acceptance that proposes additional or different terms is valid, unless acceptance is expressly conditioned on assent to the additional or different terms.
Acceptance can be by made under UCC by:
- Promising to ship goods
- Promptly shipping good
- Acceptance and breach if nonconforming goods sent
- Will be Counteroffer if nonconforming goods sent + an accomodation (we sent these goods instead as an accomodation)
Do the Additional Terms automatically become part of a UCC contract?
Yes, additional terms generally become part of the contract (both parties must be merchants).
UNLESS
- New terms materially alter existing terms
- Offer expresssly limits acceptance
- Offeror rejects in reasonable time
Acceptance By Prompt Shipment
a merchant may accept an offer to buy goods by either
(1) providing a promise to ship goods (usually by written confirmation)
OR
(2) promptly shipping conforming goods
According to the mailbox rule, when are offers effective?
upon receipt
According to the mailbox rule, when are acceptances effective?
upon dispatch unless the offer says something different, then the offer controls.
According to the mailbox rule, when is acceptance effective w/ option contracts?
upon receipt
According to the mailbox rule, what happens when you send an acceptance and a rejection?
the first to arrive is controlling
According to the mailbox rule, when is a revocation effective?
upon receipt
In a Unilateral Contract how do you accept by Performance?
complete performance required to accept an offer
In a unilateral contract is the offeree required to give notice upon starting performance?
No
but must notify the offeror within a reasonable time upon completion
In a bilateral contract, is partial performance considered acceptance?
Yes, partial performance gives rise to acceptance
In a bilateral contract, do you have to give notice of acceptance?
Yes, offeree must make offeror aware of acceptance
Can an offer that requires acceptance by promise be accepted by performance?
Yes, if:
- the offeree begins to perform
and
- the offeror learns that the offeree has started performance and acquieces
Consideration
a bargained for legal detriment incurred by each party to a contract by promise, forebearance, or performance
Legal detriment
obligation to do or refrain from doing something one would not otherwise be obligated to do or refrain from doing ex: stop smoking for a million dollars
Pre-existing legal duty
a promise to perform a pre-existing legal duty is not valid consideration unless there is a <u>new</u>, <u>written promise</u> to fulfill <u>a debt obligation</u>
Consideration Substitutes: reliance/estoppel
courts may enforce a promise if:
- promisor reasonably expects reliance by promisee
- promisee acts or refrains from acting such that his reliance is detrimental
and
- injustice will occur without enforcement of the promise
Consideration Substitutes: UCC modifications to contracts
consideration is not necessary for good- faith written modifications to a contract governed by the UCC
Consideration Substitutes: past debts
if a debt is barred by the statute if limitations, a new written promise to fulfill the debt is enforceable without consideration but only according to the new terms.
incapacity
infants and mentally incompetent persons lack the capacity to contract
Intoxication
intoxicated persons may lack capacity to contract is the other party knows or has reason to know of the intoxication
Consequences of Incapacity
Right to disaffirm - a person who lacked capacity to contract may disaffirm the contract rendering it void
Implied affirmation/ratification - a contract can be enforced against an infant at the time of contract formation if she has since gained capacity and retained the benefits of the contract
Infant liability for necessities: infants are legally obligated to pay for necessities ex: food, clothes, medical care ***liability is based in quasi-k so infant cannot be sued for breach (b/c there’s no enforceable k)
Contracts Within the Statute of Frauds MY LEGS
- Marriage Contracts
- Service contracts incapable of being performed w/in 1 year
- Real estate contracts that transfer interests in land
- Executor promises
- Guarantees/ Suretyship
- Sales of goods of $500 or more
SOF: Service contracts incapable of being performed w/in 1 year
SOF does not apply to lifelong deals or contracts that say nothing about time for performance ***Both are capable of performance w/in one year
SOF: Real estate contracts that transfer interests in land
transfers of property interests including leases for terms greater than one year
SOF: Executor promises
promises of executrors/administrators to personally answer for the debts of the decedent’s estate
SOF: Guarantees/ Suretyship
promises to pay the debt of another
How do you satisfy the Statute of Frauds?
contracts subject to the SOF require special proof of their existence and can be satisfied by:
- Writing
- Signed by the party asserting the SOF defense
- Contain the essential elements of the deal
In a service contract, can performance satisfy SOF?
Yes, full performance satisfies SOF
In the UCC when is a signed writing not required to satisfy SOF?
(1) when both parties are merchants
(2) when the party asserting the SOF received a signed writing memorializing the agreement and failed to respond w/in 10 days
SOF: Custom Made Goods
Specially/Custom made goods generally require a writing under SOF.
Exception to SOF general rule:
- Goods must be specially manufactured for buyer
- Seller must have made a substantial beginning on their manufacture or made commitments for their purchase
- Goods must not be resellable in ordinary course of business
Exceptions where
In a real estate contract, what satisfies SOF?
part performance by the buyer satisfies SOF if buyer does 2 of the 3:
(1) full or partial payment
(2) possession of the property
(3) improvements in the property
Formation Defense: Illegality
look for an:
(1) illegal subject matter: contract is unenforceable or
(2) illegal purpose for the contract: if the subject matter is legal contract is enforceable only by the party who didn’t know about the illegal purpose **legality is based on existing law at the time of the contract
Formation Defenses: Misrepresentation/Fraud
includes false assertions, concealment, or misstatements about material facts before contract formation **contract will be voidable if A induces B into a contract by misrepresentation and B relies on that misrepresentation.
Formation Defenses: Duress
an improper threat that deprives a party fro making a meaningful choice to contract **contracts induced by duress or coercion are voidable
Formation Defenses: Unconscionability
courts may refuse to enforce all or part of a contract that is either:
(1) procedurally unconscionable: usually involves an unfair surprise (ex: a new material term)
(2) substantively unconscionable: usually involves oppressive terms which are often hidden
Misunderstanding
when there’s ambiguity concerning terms of a contract, the contract is voidable if:
(1) the parties use a material term reasonably susceptible to at least 2 different interpretations
(2) each party attaches different meaning to the term
(3) neither party knows or had reason to know about the other’s interpretation
What if a party knows of the other party’s misunderstanding but remains silent?
the contract will be enforced according to the unknowing party’s understanding
Mutual Mistake of Fact
If both parties are mistaken about an underlying factual assumption at the time of contract formation, the contract is void if:
- both parties are mistaken
- mistake concerns a basic assumption of fact
- mistake materially affects the agreed upon exchange
- adversely affected party did not bear risk of the mistake Ex:parties find a rock and mistake it for a diamond
Unilateral Mistake
only one party is mistaken concerning underlying facts of the agreement unilateral mistake will not prevent contract formation except when non- mistaken party knows or should have known of the other party’s mistake
Parol Evidence Rule
evidence extrinsic (outside) to a written agreement is inadmissable to supplement or contradict the written agreement **applies if the writing is a complete integration
Parole Evidence Bars Evidence of:
- negotiations before K becomes integrated
- agreements before k becomes integrated (oral or written)
Complete Integration
parties must intend the writing to express their final agreement
Parole Evidence will be allowed if:
- agreement was only partially integrated or
- additional terms would ordinarily be in a separate agreement
Parole Evidence rule does not apply to or bar admission of:
- evidence of oral agreements made after the writing
- evidence necessary to determine if there was a mistake in the process of reducing an agreement to writing
- evidence concerning a party’s defense based on misrepresentation, fraud or duress
- evidence used to resolve ambiguities about the meaning parties intended to give particular terms in the writing
Express Warranty
when seller makes promises or describes facts about the product or its use warranty will be breached if product falls short of the sellers promise or description **includes samples and models
Implied Warranty of Mechantability
merchant selling goods automatically warrants goods are fit for their ordinary purpose
Implied Warranty of Fitness for a Particular Purpose
seller warrants that goods are fit for buyers purpose if:
- (1) buyer has a particular purpose
- (2) buyer relies on seller to select suitable goods
- (3) seller has reason to know of buyers purpose AND
- (4) buyer relies on seller
Limiting Warranty Liability by contract
(1) Disclaimer: limits liabilty only for implied warranties (ex: as is, w/ all faults) (2) remedy limitation: limits recovery upon breach of warranty
Conditions
Conditions - agreed upon limitations on performance
Express - self-evident
Implied - self-evident
Condition Precedent - Performance is not obligated unless condition occurs; non-occurrence excuses performance.
Condition Subsequent - Condition that occurs after performance has begun and excuses further performance.
Excuse of Condition - if a condition exists it must be strictly complied with but substantial performance of the condition may suffice if it fulfills the conditions purpose. A person who is protected or benefited by the condition may make statements which constitute a waiver of the condition or estop the condition from being enforced.
Insecurity
Options for Insecure Party
excuse by insecurity arises if A gives B reasonable grounds for insecurity or uncertainty regarding whether A will perform under the contract
- demand adequate assurances
- suspend performance until she receives adequate assurance
- treat contract as repudiated if she does not receive adequate assurances within 30 days
Anticipatory Repudiation
arises when one party to a contract
- makes a clear and unambiguous statement or conduct
- prior to when performance is due
- which indicates that he will not perform
Effect of Repudiation: if repudiation occurs the non-repudiating party’s duty to perform is excused **he can treat the contract as breached and sue for damages
Can anticipatory repudiation be revoked?
What if repudiation involves demands for a new bargain or benefit?
Yes, anticipatory repudiation can be reversed or retracted if the non-repudiating party has not materially changed his position
The non-repudiating party is not required to notify the repudiating party of his refusal to comply with the demands
