MBE Contracts MC Flashcards
When a contract for the sale of assorted goods does not specify who will choose the assortment, the UCC imposes a duty on
duty on the buyer to make that selection. If the buyer fails to specify the assortment of goods, then the seller can treat that failure as a breach—but only if the buyer’s failure to specify the assortment materially impacts the seller’s performance.
(When a buyer fails to select an assortment of goods to be shipped, the seller (here, the company) may choose to proceed with the transaction in a commercially reasonable manner (e.g., by selecting the goods). But the seller is not required to do so.)
When does SoF not apply to a sale of goods?
Contracts for the sale of goods for $500 or more are subject to the statute of frauds and therefore typically require a writing to be enforceable. However, the statute of frauds does not apply when payment for the goods has been made and accepted (as seen here).
What is Warranty of merchantability
Goods are fit for ordinary purpose & conform to seller’s representations
when does warranty of merchantability apply?
Implied whenever seller is merchant with respect to goods sold
What disclaims warranty of merchantability?
- Oral statement or conspicuous written statement specifically mentioning “merchantability”
- Oral or written statement specifically mentioning “as is” or “with all faults”
- Buyer’s inspection of goods or refusal to inspect (if inspection would reveal defect)
- Course of dealing, course of performance, trade usage
Termination of offer before acceptance
Offeror’s revocation
- Offeror communicates revocation directly to offeree
- Offeree learns information from reliable source that reasonably indicates offer was revoked (eg, house sold to another buyer)
Offeree’s rejection
- Offeree communicates rejection directly to offeror
- Offeree’s counteroffer serves as rejection & new offer*
Lapse
- Time period specified in offer expires
- After reasonable time if no time period specified in offer
By law
- Either party dies or is adjudicated insane
- Subject matter of offer is destroyed or becomes illegal
Acceptance of the delegation by the delegatee constitutes a promise to perform those duties. That promise is enforceable against the delegatee if:
the delegatee has received consideration or
there is a consideration substitute that makes the promise enforceable.
Delegation not permitted when:
- other contracting party has substantial interest in having delegating party perform (eg, in personal-services contract involving taste or special skill) or
- delegation is prohibited by contract
A written contract is completely integrated if it contains a merger clause - in CL or UCC?
both
When are payments due in installment contracts?
Payment by the buyer is due upon each delivery unless the price cannot be apportioned.
Define installment contract
Under the UCC, an installment contract is defined as a contract in which the goods are to be delivered in multiple shipments, and each shipment is to be separately accepted by the buyer.
What can breaching party recover on a service K?
A party who breaches a contract can recover restitutionary damages for the reasonable value of the work performed before the breach, less any damages suffered by the nonbreaching party due to the breach
CL what does court look at for whether a contract is totally integrated?
Under the common law, a court was permitted to look within the “four corners” of the document for evidence that the parties intended that the writing be a final agreement—e.g., by including a merger clause. (doesn’t apply to UCC)
Buyer’s duty under requirements contract
Buyer’s duty of good faith & fair dealing under requirements contract
- Buyer must purchase goods in question from seller only
- Requirements must approximate reasonably foreseeable figure
- Reasonable elasticity in requirements permitted (so long as any variations are in good faith)
Steps in K analysis
Applicable Law
Formation
Defenses
Terms
Performance
Breach
Remedies
Defenses to Formation
Mistake, misrepresentation, duress, capacity
many models don’t count
Defenses to Enforcement
Illegality, unconscionability, statute of frauds
In a unilateral contract, notice that the offeree will be accepting the offer is not required. And notice of completed performance is not required unless
(1) the offeree has reason to know that the offeror would not learn of performance within a reasonable time or (2) the offer requires notice.
unilateral contract is not formed until
the offeree’s performance is fully completed.
reliance damages definition
foreseeable expenses that the nonbreaching party incurred in reasonable reliance on the promise that the other party would perform
Auction contracts - how are lots of goods sold?
Each lot of goods is sold in separate sale
Type of auctions and definitions
- Reserve (default type) – auctioneer may withdraw goods prior to completion of sale
- No-reserve (special announcement required) – goods cannot be withdrawn after auctioneer calls for bids unless no bid is received within reasonable time
When can seller bid?
Winning bidder can avoid sale, or pay price of last good-faith bid, if auctioneer:
- knowingly accepts bid by or on behalf of seller or
- procures seller’s bid to drive up price of goods
Exceptions – seller can bid:
- at forced sale or
- if seller gives notice reserving right to bid
Accord and satisfaction requires these conditions:
- the obligation is unliquidated (i.e., uncertain in amount) or otherwise in dispute
- the obligor, in good faith, tenders the negotiable instrument (like check) with a conspicuous statement that the instrument is tendered as full satisfaction of the obligation and
- the obligee obtains payment of the instrument (e.g., by cashing the check).
Ways to discharge contractual obligations
Ways to discharge contractual obligations
Full performance of contractual obligations
Impossibility, impracticability, or frustration of purpose
Release (in writing only)
Mutual rescission
Substituted contract
Contract or covenant not to sue
Accord & satisfaction
Novation
FIRM SCAN
Since an accord is a new contract, it must be supported by consideration. Where the new consideration is worth less than what was agreed to in the original contract, it will be sufficient only if:
there is a good-faith dispute as to the amount owed
or
the new consideration is of a different type than what was owed under the original contract (e.g., goods in lieu of cash).
Promises binding without consideration
Pay debt barred by technical defense
-Promise to pay debt that would be enforceable absent technical defense to enforcement (eg, statute of limitations, bankruptcy)
Perform voidable duty
- Promise to perform voidable duty, provided that new promise is not also voidable (eg, minor reaffirms promise to perform contract after reaching age of majority)
Pay for material benefits received
- Promise to pay for material benefits received in the past & not intended as a gift (eg, promise to pay for emergency services previously received)
Promissory estoppel
- Any promise (eg, promise of future gift) if:
….. promisor should reasonably expect induce / promisee to rely on promise
….. promisee reasonable relies on promise to his/her substantial detriment and
….. injustice can be avoided only by enforcement of promise
the jurisdiction’s statute of limitations began to run when the law student failed to pay her uncle back by the original deadline—two years after her law school graduation. Four years later, the law student made a new promise to repay the loan that was not supported by consideration… is it enforceable?
Yes - new promise to pay a debt after the statute of limitations has run is enforceable without any new consideration.
When the new promise is an express promise, most jx require that the new promise be in writing and signed by the debtor to be enforceable.
Essential terms for real estate K
Parties, words of intent, property description, price
When does seller have to hand over possession of real estate?
a seller’s performance is typically due at or within a reasonable time after the closing date—unless the real estate contract contains a “time is of the essence” clause
What happens if seller doesn’t hand over possession of real estate on closing date? is it a breach?
Yes - but not material.
seller’s failure to perform by the closing date is not a material breach that excuses the buyer’s duty to perform—but it is still a breach. The buyer can therefore recover damages—even if the seller acted in good faith
Formula for expectation damages
Loss in value + Other loss - Costs avoided - Loss avoided
Loss in value (what was promised minus what was received) + Other loss (consequential and incidental damages) - costs avoided (by discontinuing performance) - Loss avoided (by mitigating losses)
What happens to new and revised terms if battle of forms (not a mirror image) in UCC and one party is merchant while one is nonmerchant?
if at least one party is a nonmerchant, then the new or revised terms are merely treated as proposed additions to the contract.
CL: ≥1 party is nonmerchant - what happens to acceptance, new terms, and revised terms?
Offer accepted unless reply expressly required assent to new/revised terms
New/revised terms treated as proposed additions to contract
UCC (battle of the forms) - what happens to acceptance, new terms, and revised terms?
Offer accepted unless reply expressly required assent to new/revised terms
New terms become part of contract unless:
- offer expressly required assent to new terms
- new terms materially alter contract or
- offeror objects within reasonable time
Revised terms follow split authority & are either:
- treated as new terms (initial offer controls?) or
- cancelled out under knockout rule (majority)
When is a unilateral contract formed?
A unilateral contract is formed by a unilateral offer being accepted via completion of performance. Thus, prior to completion of performance, no contract has formed.
Does an accord create a new contract?
No - the contract as it was originally written is still in effect until the “satisfaction” occurs.
CL rule for modification
what if consideration is less than original contract?
In general, a modification must be supported by consideration.
In instances where the consideration is less than the bargained-for consideration in the original contract, it will be sufficient if the consideration is of a different type or if the claim is to be paid to a third party.
If the assignor wants to sue for a debt after assigning the right to the assignee, they need…
they need the assignee’s consent to join the lawsuit and must disclose their relationship in the claim statement.
can a range satisfy quantity requirement for UCC K?
Yes
warranty of merchantability
This warranty applies when the seller is a merchant.
It ensures that goods are merchantable, meaning that they are fit for their ordinary purpose and conform to the seller’s representations.
when is warranty of merchantability disclaimed (i.e. waived)
- Oral or conspicuous written statement specifically disclaiming “merchantability”
- Expressions like “as is” or “with all faults”
- Buyer’s inspection of goods OR refusal to do so (for defects inspection would reveal)
- Course of dealing, course of performance, trade usage
Warranty of fitness for particular purpose
UCC. Seller (merchant or not)
- knows buyer has particular use for goods & is relying on seller’s skill
- promises that goods are fit for buyer’s particular purpose
How disclaim (waive) Warranty of fitness for particular purpose
- Expressions like “as is” or “with all faults”
- Buyer’s inspection of goods OR refusal to do so (for defects inspection would reveal)
- Course of dealing, course of performance, trade usage
- Conspicuous written statement
This is same as warranty of merchantability except written statement one
Elements of mutual mistake
Both parties are mistaken (belief not in accord with basic assumption of K that materially affects performance)
- No intent to take risk on mistaken element
AND
- Substantial difference between actual & contemplated deal
Remedies for mutual mistake
Reform K to intended agreement
OR
If unavailable, adversely affected party can void contract
