MGMT 311 Exam 3 - FLASHCARDS - Chapter 13 (1)
What is a misunderstanding?
If a term in the contract is subject to more than one reasonable interpretation and the parties each attach materially different meanings to the term, the mutual misunderstanding may allow the contract to be rescinded.
What was Raffles v. Wichelhaus (Engl. 1864)?
Indian farmer of cotton and an american merchant. Telegram says “to arrive pureless”
What is the general rule of unilateral mistakes?
a contract will not be rescinded by the courts
What is an example of unilateral mistakes?
john wants to sell his car for $17,000 but his email on the deal has a price of $12,250
What are exceptions for unilateral mistakes?
1) The other party knew of the mistake or should have known of the mistake and failed to correct the mistake; or
2) The mistake was made because of an inadvertent mathematical error and the mistaken party was not grossly negligent.
What are bilateral mistakes of fact?
a “mutual misunderstanding between both parties concerning a basic assumption on which the contract was made
True or false: both unilateral and bilateral mistakes must be about a material fact?
TRUE
True or false: When both parties are mistaken about the same material fact, the contract can be rescinded by either party?
TRUE
What are mistakes of value?
If a mistake concerns the future market value or quality of the object of the contract. Value is variable, depends on many factors. Value mistaks are never a basis for recission
Sung buys a violin from Bev for $250. Although the violin is very old, neither party believes that it is valuable. Later, however, an antiques dealer informs the parties that the violin is rare and worth thousands of dollars. What type of mistake is this an example of?
Mistake of value. Here, both parties were mistaken, but the mistake is a mistake of value rather than a mistake of fact. Because mistakes of value do not warrant contract rescission, Bev normally cannot rescind the contract
What is the main difference between mistakes of fact and mistakes of value?
Subject of terms
What does a plaintif have to prove about fraudulent misrepresentation in order to win a fraud case?
a. A Misrepresentation of a material fact
b. Made with intent to deceive
c. Innocent party justifiably relies on the misrepresentation
True or false: can be by words or actions?
TRUE
True or false: plaintif has to prove that they were justified in relying on the misrepresentation?
TRUE
Injury/Harm only has to be proven to collect damages; if Plaintiff is only seeking rescission no injury must be proven
.
What is undue influence?
One party has the dominant position and another party depends on the deminant party. The dominant takes advantage of the other. When the dominant party secures an unfair advantage in a contract with the weaker, dominated party, the contract is voidable and may be disaffirmed by the dominated party.
True or false: undue influence can only happen when there is a relationship between the parties?
TRUE
There is a rebuttable presumption of undue influence when the parties are in a familiar or fiduciary relationship based upon trust and confidence, and the contract is extremely unfair to the dominated party. Why?
Because of the relationship, the courts are going to assume the dominant party took advantage of the other party
How might a presumption be rebutted?
The presumption may be rebutted by showing that a full disclosure was made, the consideration that was received was adequate and/or competent, and independent advice was received by the weaker party
What is duress?
if a party is forced into entering into a contract by threatening a wrongful act, the contract is voidable
For duress, must the act threatened be wrongful or illegal?
Yes
What is something that must be fulfilled before a party’s performance can be required?
Condition precedent
What happens if the condition precedent does not occur?
If the condition precedent does not occur, the parties are discharged from their contractual obligations
Letting the insurance company inspect the damages is a condition precedent
.
What does it mean to discharge a contract?
Be finished with contractual duties
To have performed
To have duties terminated
To be no longer required to perform
What is discharge by performance?
Full, complete performance in the manner prescribed by the contract discharges the performing party. The contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised
What does complete performance include?
Complete performance includes strict compliance with any express conditions.
What is an example of discharge by performance?
a buyer and seller enter into an agreement via e-mail for the sale of a Lexus RZ for $63,000. This contract will be discharged by performance when the buyer pays $63,000 to the seller and the seller transfers possession of the Lexus to the buyer.
True or false: failure to comply with an express condition and render the exact performance may discharge the party receiving the defective performance
TRUE
What is an unconditional offer to perform by a party who is ready, willing, and able to do so?
Tender of complete performance
True or false: The tendering party is discharged if his tender is not accepted?
TRUE
What is substantial performance?
When a party to a contract, executes all of the promised terms and conditions of the contract with the exception of minor details that don’t affect the real intent of their agreement.
If the performance is substantial, but not complete, is there a breach of contract
Yes, a minor breach of contract
What must a party have to claim a substantial performance?
a. Performed in good faith.
b. The performance must not significantly differ from the performance promised in the contract. (Minor defects can be remedied by money damages.)
c. The performance must create substantially the same benefits as benefits promised in the contract.
To claim substantial performance, does a party have to perform in good faith?
Yes
If one party’s performance is substantial, does the other party have a duty to continue to perform the contract?
Yes
True or false: Damages may be owed by the party who substantially performs, since their performance is not perfect?
TRUE
What is a breach of contract?
the nonperformance of any contractual duty
What type of breach of contract does substantial performance result in?
Minor breach of contract
What type of breach of contract does less than substantial performence result in?
Material breach of contract
What is a material breach?
When performance is not at least substancial.
when there is a material breach of contract, is the nonbreaching party excused from the performance of contractual duties?
Yes
When there is a minor breach of contract, is the nonbreaching party discharged from performing their contractual duties?
No
If there is a minor, nonmaterial breach of contract, is the breaching party liable for damages if the breach is not cured?
Yes
If there is a nonmaterial breach of contract, is the nonbreaching party required to perform?
Yes
What is Anticipatory Repudiation?
One party refuses to perform prior to the due date of their performance
What is also known as a present material breach of contract?
Anticipatory Repudiation
What can a nonbreaching party do about Anticipatory Repudiation?
Sue immediately or mitigate
What are the rules of time performance?
a. If time for performance is not stated, a reasonable time is implied.
b. If time is of the essence the parties must stipulate.
c. Delay does not destroy performing party’s right to payment.
d. Failure to complain can mean waiver.
What happens if time for performance is not stated?
a reasonable time is implied
If time is of the essence must the parties stipulate?
Yes
Does a delay destroy a performing party’s right to payment?
No
What are the rules of discharge by agreement?
an original contract can state how the contract can be discharged, or parties may form a new contract to discharge the original. (Any new contract must be valid)
What does it mean to discharge?
the extinguishment or release of a legal obligation or duty. For example, a discharge of the payment of a debt means you are no longer legally obligated to pay the debt
What is the most common way for a party to discharge its duties under a contract?
By fulfilling its obligations as specified in the contract
What is mutual rescission?
an agreement between two parties to terminate a contract and discharge all remaining duties of performance
What if the mutual rescission is executory on both sides?
neither party has given the other our consideration that our rescision is valid and enforceable, and discharges the original contract because we are giving out the right to whatever the other side is going to give us
What is discharge by novation?
The third person is substituted for one of the original parties with the consent of the party entitled to receive the performance. The original obligation of the prior party is extinguished and the prior party is discharged
What is discharge by accord and satisfaction?
legal agreement between two parties to settle a contract, tort claim, or other liability with an alternate performance that differs from the original terms. The new performance is called the accord, and the release of the original obligation is called the satisfaction.
What is the accord?
executory contract to perform some act in order to satisfy an existing contractual obligation
What is the satisfaction?
the performance or execution of the accord agreement. Creditor can never go after the debtor for that remaining amount
What is discharge by operation of law?
When a contract ends automatically due to legal principles or events, without any action or agreement from the parties involved. Discharge by operation of law occurs in specific circumstances, such as bankruptcy, impossibility of performance, or situations where the contract becomes illegal
What is a material alteration of a contract?
To be considered an alteration or modification, a change must be material, meaning it must impact the overall meaning of the language, revise the intent of an important section of the contract, or affect the rights of the parties to the agreement.
True or false: A material modification to a contract is a significant change that could affect a reasonable buyer’s decision to enter into the agreement?
TRUE
What happens if there is a material alteration of a contract?
If there is a material alteration of a written contract without consent, the contract is voidable by the party who was unaware of the change
What is a statute that provides that a person who has a cause of action must bring his action or lawsuit within a specified period of time?
Statute of limitations
What happens if you fail to bring an action or lawsuit within the period of limitation under the statute of limitations?
It bars access to judicial remedies but does not extinguish a debt or underlying obligation
What is a discharge in bankruptcy?
operates as a release of a debtor from having to pay most debts and contractual obligations
What is Discharge by Impossibility of Performance?
When an unforseen event makes the contractual duty impossible to perform. More objective than commercial impracticability
What are examples of unforseen events that can make a contract impossible to perform?
1) Death, serious illness, or incapacitation of a party who was to render personal services.
2) Destruction of specific subject matter of contract (hurricane, tornado)
3) Change in law making performance illegal.
What is commercial impracticability?
legal defense that allows a party to avoid fulfilling a contract due to an unforeseen event that makes performance unreasonably difficult or expensive. More subjective than Impossibility of Performance
What is frustration of purpose?
legal doctrine that can excuse a party’s performance under a contract if an unforeseen event makes it impossible to achieve the contract’s purpose.
What is an occurrence or event that makes it temporarily impossible to perform the act in the contract and will suspend performance until the impossibility ceases?
Temporary impossibility
Does temporary impossibility always lead to discharge of a contract?
Temporary impossibility may or may not lead to discharge
Dora has been in a nursing home for 3 years and rarely has visitors. Vanita works at the nursing home and regularly takes care of Dora. Vanita and Dora have become very close, and Dora depends on Vanita to help her with decisions about her finances. Just before Dora dies, Vanita and Dora enter into a contract to sell Dora’s family home to Vanita for $20,000. The home is worth $100,000. If Dora’s children try to void the contract between Vanita and Dora
the children may be able to void the contract based on undue influence.
the children may be able to void the contract based on fraud.
the children may be able to void the contract based on illegality.
the children will not be successful in voiding the contract, because there is valid consideration and the contract is in writing.
the children may be able to void the contract based on undue influence.
Ben and Jerry have an agreement whereby Ben will deliver ice cream for Jerry to all of Jerry’s retail customers for the next 3 years. After delivering ice cream for the first 9 months, Ben decides that this is not how he wants to spend his time. Ben does not want to let Jerry down, though, so he contacts his buddy Baskin about delivering the ice cream. To protect Jerry from liability, the contract that the parties need to form to transfer the rights and duties under the contract to Baskin and relieve Ben from all responsibility should be a(n)
delegation.
accord and satisfaction.
rescission.
novation.
Novation
Danny hires Evelyn to install a swimming pool at Danny’s home for $40,000, to be completed by June 1. Evelyn completes the job on time. When Danny inspects the pool, he discovers that Evelyn used a vinyl lining, and the contract called for a fiberglass lining. Danny refuses to pay Evelyn, stating that Evelyn breached the contract because the contract was not completed according to the specifications stated in the contract. If Evelyn sues Danny for the contract price
Evelyn will probably receive the contract price less the cost to replace the pool liner with a fiberglass liner.
Evelyn will probably receive restitution for any expenses she has incurred.
Evelyn will receive nothing because performance under the contract was not complete.
Evelyn will probably receive the full contract price.
Evelyn will probably receive the contract price less the cost to replace the pool liner with a fiberglass liner.
Evan offers to sell his 2016 John Deere Tractor to Jorge for $30,000. Jorge accepts and promises to meet Evan on Saturday to make the exchange. On Thursday, a fire on Evan’s farm totally destroys the tractor. Jorge is upset, because the price of the tractor was really good, and he knows he cannot get another one for that price. If Jorge sues Evan for breach of contract, the likely result will be that
Evan will have to pay Jorge the difference between the sales price of the tractor and the price Jorge must pay to find a replacement.
Evan’s performance under the contract will be excused due to material alteration.
Evan must find a replacement tractor for Jorge, because the court is likely to award specific performance as a remedy.
Evan’s performance under the contract will be excused due to impossibility of performance.
Evan’s performance under the contract will be excused due to impossibility of performance.
True or false: impossibility of performance is based on objective (the object of the contract)?
True
