MBE Contracts & Sales 1-7 Flashcards
when a transaction at issue is a sale of goods, apply:
UCC Article 2
UCC or common law: contracts for services
common law
UCC or common law: contracts for real estate
common law
UCC or common law: sale of goods
UCC
when transaction involves both sale of goods and rendering of services, apply…
the predominant purpose test, to determine whether common law or UCC applies
(predominant purpose test) if sale of goods predominates, apply ___
UCC; but note that other law may apply to aspects of transaction not related to sale of goods
(predominant purpose test) if services dominant, how is CL/UCC applied?
common law, except UCC provisions relating primarily to sale of goods (e.g. warranties, risk of loss, tender of nonconforming goods)
ACCEPTANCE: four exceptions to communication requirement
- unilateral reward offers or contests
- unilateral offer where parties geographically close (such that offeror will see perform occurred)
- past history of silence serving as A (like reg business rel)
- offer itself says acceptance must come by silence, and offeree intends to accept it by silence
unilateral vs. bilateral offer
unilateral accepted by performance of offeror’s term; bilateral requires mutual promise to perform
if an offer states it must be accepted by silence, what if anything is required for acceptance to occur?
silence, with intent by offeree to accept with silence
mirror image rule
(common law) dictates that terms in A must match terms of O exactly; otherwise it is a CO, not an A
What is the difference between the UCC and CL’s treatment of terms of acceptance?
CL: mirror image rule; acceptance cannot deviate from O terms, else it’s a CO
UCC: more forgiving (2-207); counts as A unless made conditional on acceptance of new / different terms
timing requirement for 2-207 UCC
acceptance may contain different or additional terms, so long as it is definite, seasonable, and sent w/in reasonable time
under UCC 2-207, if an acceptance by the offeree includes a new/different term, that term becomes part of the contract if … (4)
only if all are met (which is difficult) -
1. both parties are merchants
2. new term does not materially alter deal;
3. initial offer did not expressly limit acceptance to its terms; AND
4. offeror does not object within reasonable time to new terms
knock-out rule governs ___
when acceptance contains a different term than offer (rather than a new additional term)
only under UCC
what’s a thing to remember when encountering the knock out rule / different terms?
there is no controlling precedent on this - there are majority and minority views
minority vs. majority view of knock-out rule
majority: the different/conflicting terms knock each other out; resolved with UCC gap-filling rules / default terms
minority: unless 2-207(2) test for inclusion of new offeree term met (merchants, nonmaterial term, no express limit to own terms, no reasonable time objection), revert to original offer
if no acceptance occurred under 2-207, but parties still perform(/exchange goods), what, if any, contract applies?
only terms in writings from both parties become part of contract; otherwise, UCC default rules
under 2-207, when an offer is accepted (but acceptance has new terms), the new terms become part of the contract only if -
- parties are merchants
- term does not materially alter contract
- offer does not expressly limit acceptance to terms of the offer, or
- notification of objection not given by offeror
2-207(1) / (2) and 2-207 (3) analyses should not be performed simultaneously because…
(1) describes a scenario in which an acceptance occurs. between merchants, nonmaterial terms (+ no express condition by Or) in A / proposed by Oee will govern
(3) describes scenario when there was no A (e.g. not definite or seasonable, or other reasons). no other analysis - whatever they agreed on in writing, + default rules
if parties agreed early to a contract and then there was a written confirmation with new terms, analyze produced contract by…
applying test in 2-207(2) which governs whether new terms apply (must be merchants, must be nonmaterial, O must not have been conditioned on own terms, no reas-timed objection by Or)
what three questions to ask when assessing consideration?
- who is the promisor?
- is there a benefit to the promisor, OR a detriment to the promisee?
- was this bargained for? (parties thought they were making a deal)
satisfaction contract
promise to pay someone on condition that their output is satisfactory; counts as bargained for consideration
why are output and requirements contracts sufficient for consideration?
there is a way for both parties to breach.
- output: selling product to others
- requirement: requiring product but buying from others
settling a legal claim can be sufficient consideration, but only if…
plaintiff has good faith belief in validity of claim that they are foregoing (legal detriment); OR
reason to doubt validity of claim due to uncertain law
pre-existing duty rule
COMMON LAW: agreeing to do something you already were legally required to do is not consideration
dictates that modifying a contract may require new consideration in order to be valid
your rent is $2000, but you can’t pay it, so you talk to your landlord. you both agree to reduce the rent to $1,500. why can the landlord still sue you for the full amount?
(under common law) the landlord received no legal benefit /forewent no legal detriment. no consideration, so no contract - original contract controls
exceptions to preexisting duty rule (3)
- change in performance (e.g. agree to extend lease, PLUS cost decrease)
- third party promising to pay; or
- unforeseen difficulties that would excuse performance
in determining whether a promise to provide partial payment in exchange for release from debt obligation is valid, consider…
whether debt is -
currently due and
undisputed.
if currently due, modification invalid. (if debtee pays now instead of later, that is a new consideration b/c paying earlier than needed)
UCC standard for assessing modification validity
whether modification made in good faith
if so, binding even if lacking new consideration
promissory estoppel arises when ___
one party makes a promise, and the other party relies on that promise to take some action
three key elements for reliance claim
- promise made that would be reasonably expected to induce reliance;
- promisee does indeed take detrimental action in reliance on promise; and
- injustice can only be avoided by enforcement of the promise
four consideration substitutes
- promissory estoppel (reliance)
- quasi-contract
- moral obligation + subsequent promise
- the seal
quasi-contract / contract implied in law
when you would have made a contract if you could have, but you couldn’t; OR when one party conferred a benefit on another party and it would be fair to pay for that benefit
quasi-contract / CIL elements (3)
- P confers measurable benefit on D
- P reasonably expected to get paid; and
- would be unfair to let the defendant keep the benefit w/o paying (such as D had opp to decline, or good reason why they didnt have that opp)
determining damage amount under quasi contract
often limited, as justice requires, to fair value of benefit conferred
some jxs permit moral obligation + subseq promise to pay to be binding. why do others disagree?
this is viewed as past consideration and thus is not binding (e.g. saving a drowning person and then they say thanks i’ll pay you 1000 for that)
does a seal on a document act as consideration subst in most jxs?
no
____ do not have to prove detrimental reliance when pursuing a reliance theory
charities; they can collect on charitable-gift promises w/o demo that promisee took detrimental action in reliance on promise
what are the 8 ways to discharge a contractual obligation?
- full performance of contractual obs
- impossibility, impracticability, or frustration of purpose
- release (in writing only)
- mutual rescission
- substituted contract
- contract or covenant not to sue
- accord & satis
- novation
(FIRM SCAN)
when a claim amount is unliquidated/subject to dispute, it can be discharged by accord and satisfaction if…
- the perosn against whom claim is asserted tendered a negotiable instrument (e.g. a check)
- the instrument was accompanied by a conspicuous statement indicating that it was tendered as full satis of the claim (e.g. payment in full)
- claimant obtained payment of instrument (deposited it)
how are options Ks treated under the mailbox rule? what other type of K is treated like this?
exception to mailbox rule. A is only valid when received prior to offer expiry date
also applies to firm offer
if a party mails a rejection of an offer and then mails an acceptance to the offer, which one governs?
first comm to be received
when does the duty of good faith and fair dealing apply?
in performance and enforcement of existing K, not prior
exception to the mailbox rule
acceptance of a firm offer, option, or other irrevocable offer effective only when received by offeror; mailbox rule does not apply
if a buyer rejects goods delivered by a seller, what must they do?
A buyer must retain rejected goods for a reasonable time to allow the seller to reclaim them.
In the absence of other instructions, the buyer must sell the goods on the seller’s behalf if the buyer is (1) a merchant, (2) the goods are perishable, and (3) there is no local agent to whom the goods can be returned.
What happens to an open offer if the offeror dies? Are there any exceptions?
An offer terminates when the offeror dies or becomes mentally incapacitated—unless the parties formed an option contract. Then the offer will not terminate because consideration was paid to keep the offer open for a specified period of time.
If a contract is for the purchase of assorted goods, who has a duty to specify the assortment? When can failure to do so be treated as a breach?
The UCC imposes a duty on the buyer of assorted goods to specify the assortment unless the contract states otherwise.
The seller can treat the buyer’s failure to specify the assortment as a breach only if it materially impacts the seller’s performance.
When is payment due by the buyer under an installment contract? if not otherwise specified, how is price due determined?
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.
Payment by the buyer is due upon each delivery unless the price cannot be apportioned.
are there any situations in which the breaching party in an agreement may recover damages based on their performance?
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.
in an auction, what factor determines whether the auctioneer may withdraw goods before the hammer falls?
reserve auction (there is a minimum price that seller would be willing to accept): auctioneer can withdraw. reserve price need not be disclosed
no reserve: goods gen can’t be withdrawn after bids called for
assume that auctions held with reserve unless indication otherwise
statement that an offer can be accepted in a particular way does not foreclose other reasonable means of acceptance
e.g. mailing letter to home address rather than business
if a debtor/purchaser wishes to pay a different amount and delivers a check with a conspicuous payment in full notation, what factors are considered in determining whether doing so was valid?
if a debt is disputed in good faith, the debtor may offer to satisfy the debt by giving the creditor a check with a conspicuous notation
however if the debt is uncertain and disputed, it can’t be satisfied with a check for a lesser amount - even if the creditor cashes it
under an accord and satisfaction, a party can fulfill its contractual obligation by rendering different performance through a check if what conditions are met? (3)
- obligation is unliquidated (uncertain in amount) or in dispute;
- obligor, in good faith, tenders it with a conspicuous statement that instrument is tendered in full satisfaction of the obligation; and
- obligee obtains payment of instrument (e.g. by cashing the check)
what are the rules concerning a new promise to pay an outstanding debt, unsupported by consideration?
after the repayment date, so long as the SoL has not run out, a new promise to pay debt will not be enforceable
if the SoL has expired, however, a new promise to pay the debt–even if unsupported by consideration–is enforceable
since a closing date is not an essential term of a real estate K, seller’s performance is typically due ____, unless…
within a reasonable time after the closing date
unless the real estate K contains a time is of the essence clause
how to measure damages for a contractor’s failure to perform
find cost of substitute performance / continued performance
if would lead to economic waste (when cost to fix or complete is clearly disproportional to econ benefit or utility gained as result), then pay diminution in market value
under the UCC, to what extent is consideration required to modify a contract?
it isn’t
all that is required is good faith - i.e. honesty in fact and fair dealing per reasonable commercial standards
when does a counteroffer not terminate an offer?
if the offeree manifests intent to take an offer under advisement
under the UCC firm offer rule, an offer to buy or sell goods is irrevocable if…
- offeror is merchant
- offeror provides writing that is: (a) signed and (2) contains assurances that offer will remain open
- period of irrevocability cannot exceed three months, UNLESS offeree gives consideration
when there is a K to perform an illegal act, restitution damages may be recoverable if…
claimant conferred a benefit on the other party, and
1. was justifiably ignorant of facts that made K illegal (unless other party also justifiably ignorant);
2. was less culpable than other party
3. withdrew before illegal purpose was achieved and did not engage in serious misconduct
donee vs. creditor beneficiary
*note that most jx collapse this now into incidental beneficiaries
a donee beneficiary is one receiving a gift; creditor is one for whom performance will satisfy a duty of promisee to third party (and not intended as gift)
when there has been mutual mistake, reformation is available if:
- there was a prior agreement between parties
- parties agreed to put it in writing and
- difference btwn prior agreement and writing due to mistake
if A can’t pay a debt by a deadline, can B forego right to sue to collect in return for A’s promise to pay at a later date? explain.
no; under the preexisting duty rule, a promise to do something you are already obligated to do is not consideration
when can a winning bidder void an auction sale? what other remedy might be available? exception?
other remedy: pay the price of the last good faith bid
either available if auctioneer:
1. knowingly accepted by by seller or on seller’s behalf, or
2. procured seller’s bid to drive up the price
winning bidder can’t do this if seller bid at forced sale, OR gave notice reserving right to bid
in a real estate contract requiring delivery of possession, what is the remedy for late delivery?
buyer may receive expectation damages in form of fair market rental value of property for time buyer was denied possession
an assignment of rights make without consideration is a gratuitous assignment and can be revoked unless…
- obligor already performed
- document symbolizing assigned right has been delivered
- written assignment signed by assignor has been delivered
- assignee has detrimentally relied on it
difference between course of performance and course of dealing
course of performance: relates to current transaction - 1. agreement involved repeated occasions for performance by party and 2. other party accepts performance w/o objection
course of dealing: prior transactions
what is an acceleration clause?
clause that allows party to recover entire repayment amount once the other party misses an installment payment
typically included in loan repayment contracts
requirements for consequential damages
- reasonably foreseen consequential damages
- foreseable if: natural and probable conseq of breach, if in contemplation of parties at time K made, or if otherwise foreseeable
- must be causal link between breach and damages
- dollar amount must be proven with reasonable certainty
