MBE Contracts & Sales 8-14 Flashcards
in order for a writing to satisfy the statute of frauds, it must contain ___
the essential elements of the deal
in a services contract, what is the minimum that must be done for contract to satisfy statute of frauds (absent a writing?)
full performance of the K by one party ?
7 defenses to K formation
- misunderstanding
- incapacity
- mistake
- fraud / misrep / nondisclosure
- duress
- illegality
- unconscionability
3 requirements for misunderstanding defense
when each party attaches diff meaning to same words
1. parties use material term that is open to two or more reasonable interps (such that obj test can’t apply to resolve)
2. each side attaches diff meaning to term
3. neither party knows or should know of confusion
which three groups may lack capacity to make K?
- minors under 18
- people who are mentally ill (2 standards)
- very intoxicated person - IF other side has reason to know
if other person has no reason to know of someone’s intoxication, can the K still be binding?
yeah, unless they do in fact know
two standards for incapacity by mental illness
- person can’t understand nature and conseq of actions
- person can’t act in reasonable manner in rel to transaction (if other side knows or has reason to know this)
will incapacity defense apply if person didn’t know offeree was a minor?
yes, still applies
will incapacity defense make K voidable if contractee is mentally ill person who can’t understand nature and conseq of his actions?
yes
will incapacity defense make K voidable if contractee is mentally ill person cannot act in reasonable manner in rel to transaction?
yes, but only if other side knows or has reason to know of the incapacity
will incapacity defense make K voidable if contractee is very intoxicated?
yes, but only if other side knows or has reason to know of the incapacity
what remedy is available when a contract is made with someone who lacks capacity?
K is voidable; incapacitated party may disaffirm
who can disaffirm a contract made with someone who lacks capacity?
the incapacitated person
a mistake is a belief that is not in accord with ____
a present fact
two types of mistake that allow a K to be voided
- mutual mistake
- unilateral mistake
who has the right to rescind if there has been a mutual mistake?
the adversely affected party
under mutual mistake, the ___ may rescind if (4)
adversely affected party
1. there is a mistake of fact, existing at time deal is made
2. mistake relates to basic assumption of K
3. AND has a material impact on deal; and
4. impacted party did not bear the risk of mistake
compromise of conscious ignorance
exception to ability to rescind for mistake; applies when party is deemed to have consciously accepted party’s ignorance of underlying fact rather than exercising ordinary care to ascertain truth about the fact
requirements for unilateral mistake rescission (2)
adversely affected party may rescind if:
1. can prove all elements of mutual mistake AND
2. EITHER mistake would make contract unconscionable; OR other side knew of, head reason to know of, or caused mistake
who can claim unilateral mistake defense?
the adversely affected party only
3 requirements for showing misrepresentation defense
- a misrepresentation of a present fact (not opinion);
- that is material OR fraudulent (intentional); and
- is made under circumstances in which it is justifiable to rely on the misrep
what is fraud in the execution?
tricking someone into signing something that they don’t even know is a K
when you remain quiet about something, and the other party doesn’t learn about it
nondisclosure
do you have to tell the other side about all material facts about a deal? what is this principle?
normally no; this is “buyer beware”. however, check subject area (buyer beware does not apply to sale of residence) &
1. whether fiduciary / special relationship exists
2. whether there was active concealment
what does buyer beware not apply to?
the sale of a residence
what is duress?
an improper threat that deprives a party from making a meaningful choice to contract (or modify a contract)
economic duress
when one party makes threats to induce another party to contract (or modify a contract)
undue influence
when a party puts very intense sales pressure on another party who often seems weak-minded or susceptible to high pressure sales tactics
formation defenses vs. enforcement defenses
enforcement defenses do not impact whether contracting parties will be considered as having had a “meeting of the minds,” which is requisite for contract formation
formation def = no contract
enforcement def = the courts will not enforce the contract
illegal contracts cannot be enforced. what about contracts in furtherance of illegal acts?
no, unless the contract in furtherance is itself illegal
how do courts address claims stemming from an illegal contract?
usually no remedy and parties left where they stand, but modern trend allows the party who is less guilty to recover restitution / get their money back
(e.g. the guy who ‘is’ the hitman and doesnt carry it out, vs. the guy who hired a hitman)
contracts against public policy
not formally illegal, but present some other policy concern (such as a broad exculpatory / waiver agreement). not enforceable
unconscionability
when the contract seems fine but a court looks at the deal and says it’s unconscionable (discretionary reasons?)
two types of unconscionability
- procedural (defect in bargaining process, such as hidden term (surprise) or absence of meaningful choice (no other contracting option), OR
- substantive unconscionability (rip-off, unfairness in some term of K)
what do jurisdictions require to dismiss contracts for unconscionability?
some require both procedural defect AND substantive unfairness in the term - others allow one
four aspects of contract formation
Agreement (offer and acceptance)
Consideration (and related theories for when need to keep promise)
Defenses to formation (incapacity, duress, etc.)
Statute of Frauds (enforceability)
what is the goal of the statute of frauds?
to prevent false assertions about a contract that was never really created - we dont want to be adjudicating certain things
two questions to ask when assessing statute of frauds
does the statute of frauds apply to this transaction?
if so, has SoF been satisfied?
what forms of proof may be acceptable to fulfill SoF? (2 examples)
- writing signed by defendant (to prove person you sued actually agreed to contract - does not have to be signed by you)
- performance on purported deal
5 types of contracts where SoF applies
M. Sour:
1. Marriage (in consid of marriage, like prenup)
2. Suretyship (promising to guarantee debt of another - if you don’t pay, i’ll do it)
3. One year (K that, by its terms, cannot possibly be performed w/in one year of its making)
4. UCC - goods Ks for a price of $500 or more
5. Real property (K for sale of interest in real property)
main purpose exception
if main purpose in agreeing to pay debt of another is for surety’s own econ advantage, not under SoF
(their interest in it attaches them more easily to the transaction)
if a services contract can’t be performed within one year, how might it satisfy the statute of frauds?
writing; OR
full performance by either side (shows there was likely some agreement)
T or F: part performance of a services K satisfies the SoF.
false. (why?)
For a writing to satisfy the SoF, it must be signed by ____, and cover…
the party against whom the contract is asserted
fundamental facts:
1. show that K has been made;
2. ID the parties; and
3. contain essential elements of the deal
what two ways can a real estate K satisfy the statute of frauds?
signed writing; or
part performance of real estate K (so long as 2/3 are met - 1) possession, 2) payment, 3) improvements to the land
how does satisfying SoF for goods under the UCC differ from common law (wrt writing)?
different requirements for what = essential elements of deal
no need to mention price; but
must mention quantity (and is only enforceable for that quantity)
can part performance satisfy the SoF for UCC?
yes; but only for Q delivered and accepted. can’t claim there was an agreed upon transaction for more
how does the SoF treat custom-made/specially-manufactured goods?
they are exempted from the SoF - the maker may satisfy the SoF as soon as it makes a substantial beginning towards the manufacture of the goods (fact of the making is evidence of agreement)
how does the SoF treat confirming memos?
a confirming memo can be a writing for SoF (but would normally need to be signed by opposing party)
if both are merchants, then a confirming memo not objected to within 10 days will satisfy SoF
equal dignity rule
dictates that you need a signed writing to authorize an agent to form a contract that is subject to the SoF - without a signed writing, agent cannot make the K for you (if it is w/in SoF)
how does SoF treat modifications?
if deal with modification would be in SoF, then SoF rqs must be met for the mod. if not, there is no SoF requirement, even though initial deal was subject to it
what does the parol evidence rule do, broadly?
if parties have reduced K to comprehensive writing, earlier statements or writings related to the agreement are not part of the deal. (prevents dispute about earlier agreement versions)
does the PER apply to later written or verbal statements about the deal?
no - that is modification
complete integration
K expresses all terms of agreement; writing is final
partial integration
there is a final writing but some terms not included
what is the most clear thing to look for in determining whether a writing has been integrated (for PER)?
whether there is a merger clause
gateway question for determining whether K mets PER
have parties created an integrated writing?
common law/2nd restatement - if one party claims that the writing was not fully integrated and contained another term, how is that assessed?
courts assess whether the extrinsic term would “naturally be omitted” from a writing
if so, it can be introduced, so long as it does not contradict the writing
how does the UCC approach assessing whether a writing is fully integrated?
presumes that written K is only partial integration;
allows any additional consistent / non contradictory terms,
UNLESS court concludes parties certainly would have included term in written K
under the UCC, it is presumed for PER that written K is only partial integ. thus, UCC allows any additional consistent terms UNLESS…
court concludes parties certainly would have included term in written K
3 areas where PER does not apply to bar earlier evidence introduction
- evidence relevant to formation defense (e.g. duress, mistake, fraud)
- evd relevant to enforcement defense (mistake, etc)
- evidence of separate deal
- evidence of prior communication designed to interpret ambiguous term in final agreement
- condition precedent (e.g. before property can vest)
- trade usage and course of dealing or performance
what is a warranty?
a promise about a term of the K that explicitly shifts risk to the party making the promise
three types of warranty that might arise (UCC)
- express warranty
- implied warranty of merchantability
- implied warranty of fitness for a particular purpose
express warranty
promise that affirms or describes the goods and is part of the basis of the bargain (unless it is merely the seller’s opinion)
what type of warranty is created when one uses a sample or model when selling something?
express warranty
implied warranty of merchantability
triggered only when seller is a merchant dealing in good at issue/that they usually sell; warrant that it will be fit for ordinary commercial use
can warrant of merchantability be disclaimed? how?
yes, but must be very clear. look for very conspicuous language, + term merchantability
can generally be disclaimed by use of “as is,” “with all faults,” or similar (unless circs indic otherwise);
can be oral, but must use term merchantability
implied warranty of fitness for particular purpose
implied in UCC; triggered when buyer relies on seller’s expertise to select special type of good that will be used for a special purpose
do you have to be a merchant for warrant of merchantability to apply?
only the seller must be a merchant, and must be dealing in typical area of dealing / goods
do you have to be a merchant for implied warranty of fitness for partic purpose to apply?
no - a nonmerchant can extend this warranty so long as the buyer relies on any seller’s expertise
does a warrant of merchantability have to be in writing?
no
does an implied warranty of fitness for a particular purpose have to be in writing?
yes; and conspicuous
constructive condition of exchange
one party’s performance is conditions on the other side’s performance
language like “only if,” “provided that, “on condition that,” “only in the event that” suggest an…
express condition
what is a satisfaction condition?
e.g. “make me a painting to my satisfaction” - condition fulfillment relies on being done to someone’s taste
preferred approach for assessing whether satisfaction condition has been met
objective standard of satisfaction - if most reasonable people would be satis, condition met
approach for assessing when satisfaction condition involves aesthetic taste (art, or tutoring)
subjective standard - but party can still breach if claim dissatisfaction in bad faith
a party receiving protection of a contract condition may waive the condition by …. (2). it will also be waived if ___
- words
- conduct
also - if the other party wrongfully interferes with or hinders the occurrence of the condition
major difference between constructive condition of exchange (CCE) vs. express condition fulfillment requirements
CCE need not be strictly satisfied. substantial performance might apply
substantial performance
doctrine stating that a party will satisfy the CCE if there is not a material (big deal) breach. also requires that failure is not willful
difference in treatment of express condition vs. constructive condition of exchange breach
express condition must be satisfied strictly; constructive condition allows substantial performance (so long as breach not willful)
can nonbreaching party recover damages for a substantial performance deficiency? if so, how measured?
yes; measured usually as
1. cost to complete performance OR
2. diminution in market value
can a breaching party who fails to satisfy the CCE due to material breach get paid anything?
not in contract; maybe in quasi-K
can a breaching party who fails to satisfy an express condition get paid in quasi K?
usually not. strict satisfaction
how is a divisible contract handled for purposes of determining whether there has been substantial performance?
will be broken into mini Ks for purposes of determining if there has been substantial performance
substantial performance or material breach will specifically not apply to….
contracts involving goods
the UCC typically requires ___ performance
perfect performance
two exceptions to UCC’s default of requiring perfect performance
- K explicitly changes default rule to permit imperfect performance
- installment contracts
perfect tender: 2 main obligations
- perfect goods
- perfect delivery
what recourse if goods seem ok when delivered, but defect discovered w/in reasonable time?
revocation of acceptance (UCC)
buyer may revoke acceptance of goods if goods seem ok when delivered, but
defect discovered w/in reasonable time
seller’s right to cure
UCC; if seller fails to tender perfect goods and time is left on K or seller has reas grounds to believe buyer would accept replacement, then buyer must give seller chance to correct / try again
under the UCC, if number of deliveries is not specified, the assumption is…
one delivery of goods
installment contract
UCC allows for agreement for delivery in separate lots
under an installment K, buyer may reject a specific imperfect delivery only when there is…
substantial impairment in the installment that cannot be cured
what does FOB Seller’s place of business indicate?
this is a shipment contract, meaning that seller only remains responsible for risk up to point where goods are in hands of common carrier and delivery has been arranged / notified to buyer
what are the three steps to satisfy perfect delivery under a shipment K?
- get goods to common carrier, like UPS
- make arrangements for delivery; and
- notify the buyer
what does FOB buyer’s place of business indicate?
destination contract; seller must get goods to buyer’s business and notify buyer
seller takes responsibility that goods will actually make it to buyer undamaged
risk of loss problem arises when…
there is a goods K followed by damage / destruction of goods before buyer receives them
must determine who will bear loss: seller or buyer
in determining who bears the risk of loss / damage following goods contract before buyer receives them, (4 steps)
- check whether parties already dealt with this in their K (if so, their agreement controls)
- if not in K, ask whether either party has breached (breaching party will bear risk of loss, even if breach unrelated to damage)
- if no breach and goods being shipped, ask what type of delivery K (shipment: RoL rests w buyer; if destination: rests w/seller)
- barring these… is seller merchant? (if y, RoL with seller until buyer receives goods; if n, RoL moves to buyer when seller ‘tenders’ / makes avail/last deliv leg)
