Modules 1-3 Flashcards
Definition of contract from Black’s Law
And agreements between two or more parties creating obligations that are enforceable or otherwise recognizable at law
What is a contract?
Promise, or set of promises, the breach of which the law gives a remedy, or the performance of which the law in someway recognizes as a duty.
Contracts controlled by law
Contracts of employment, contracts of insurance, contract of adhesion
What is a contract of employment?
Minimum wages, hours, working conditions, and required social insurance programs
What is a contract of adhesion?
Where the individual doesn’t have much choice or say in the contract but can only take it or leave it. Ie) when buying or selling a vehicle there’s certain paperwork and contracts that are always the same and must be completed by law
What is a bailee?
Person who receives property from another and has possession of but not title to the property
What are five important factors involved in contracts?
A) sovereignty B) moral compulsion C) private autonomy D) reliance E) needs of trade
What does sovereignty mean in contracts?
Individual
What does moral compulsion mean in contracts?
Upholding moral values
What does Private autonomy mean in contracts?
Freedom of the private sector with controls against excesses
What does reliance mean in contracts?
Fairness to the promisee
What does needs of trade mean in contracts?
Economic efficiency
What is the feminist legal theory?
Differences between feminine and masculine perspectives. Women see society and contractual relations with in society in a relational tapestry rather than in sharply defined rights and wrongs. Essentially the law has been imagined, written, and upheld by men from the beginning of time. So it doesn’t really reflect society’s values and ideas, but men’s values and ideas.
What is the critical race theory?
The status of non-whites as outsiders in a society dominated by Caucasians. The law has been envisioned, written, and upheld by white men and even though it claims to be colorblind, obviously it is from that limited Caucasian perspective.
What is common law?
Embodied in court decisions
Contract law is primarily what type of law?
Common-law. Legislatures have concentrated on regulating particular types of context such as insurance policies and employment contracts. This is developed by cases and stare decisis. Common-law is for non-movable items like real estate and service contracts
What is the restatement of contracts?
A document issued by a private organization. It doesn’t have the force of law but it is highly persuasive authority.
What are the two schools of jurisprudence in contacts?
A) positivist
B) realist
What is positivist jurisprudence?
Mechanical jurisprudence. Justice is in a rational idea. It presents the law as it is without defending it by calling it just or condemning it to call it unjust. Once the facts are determined I carefully programmed computer could produce the correct decision
What is realist jurisprudence?
Until the court has passed on the facts, no law on that subject is yet in existence. Courts do in fact and should take into account the moral, ethical, economic, and social situation in reaching a decision.
What is the UCC?
Uniform Commercial Code. The total legal obligation created by a bargain. It has nine articles. This is a statutory body of law that deals with contract principles for specific kinds of contracts like transactions in goods (A.k.a. movable items). The UCC is mostly uniform from state to state. The UCC is for movable objects.
What are the articles of the UCC?
- General provisions applicable to all transactions governed by the UCC
- sale of goods ** most important to contracts
2A. Leasing of goods - Commercial paper
- Bank deposits
- Letters of credit
- Bulk transfers
- Warehouse receipts and other documents of title
- Investment securities
- Secured transactions (sales of accounts and chattel paper)
Why is the UCC persuasive?
It embodies the foremost legal thought concerning commercial transactions
How does the UCC define merchant?
- one who deals in goods
- Holds himself out as having knowledge or skill peculiar to the practices involved in the transaction
- Holds himself out as having knowledge or skill peculiar to the goods involved in the transaction
- Employees and intermediary that holds himself out and having the required knowledge or skill
What is the CISG?
United Nations convention on contracts for the international sale of goods, ratified in 1986
What are the three different types of contracts (A.k.a. classification)?
1) formal and informal contracts
2) void voidable and unenforceable contracts
3) Express and implied contracts (A.k.a. quasi contracts)
What is a formal contract?
This type of contract is not binding unless it is accompanied by searching formalities including:
- Seal
- Recognizances
- negotiable instruments and letters of credit
What is a recognizance?
When the person acknowledges in open court a duty to make a certain payment unless a specified condition is performed
What is an informal contract?
All other kinds of contracts besides ones that are in writing and signed by an authorized officer of the party was commitment is in question
When is a contract void?
When it produces no legal obligation
When is a contract voidable?
If one or more of the parties has the power to elect to avoid the legal relations created by it
When is the contract unenforceable?
When it has some legal consequences but which may not be enforced in action for damages or specific performance
What is an express contract?
When the parties show their agreement by words (either they have written it or spoken it to each other). A.k.a. expressed it. Ie) I say I will sell you my car for $5000 and you say you will buy it for $5000
What is an implied in fact contract?
When one or both of the parties manifest agreement by conduct ie) if you walk into a drugstore, grab a bottle of aspirin, pay for it and don’t say anything, your conduct indicates your assent .
What is an implied in law contract?
Not a contract but in obligation imposed by law to do justice even though no promises ever made or intended. You do not have words or the conduct of a party that show assent, but the circumstances require or indicate that we should impose consent. Ie) if an unconscious victim of an accident is taken to the hospital and needs emergency care, A surgeon is called and saves the victim who then recovers. The victim didn’t assent because he didn’t even know the surgeon was there. The surgeon performed a benefit for the victim, so to avoid unjust enrichment we will call this an implied in law contract to make it fair because the surgeon is entitled to be paid
What is a quasi-contract ?
Prevention of unjust enrichment
What is mutual assent?
You must have an agreement (A mutual manifestation of assent to the same terms) that is usually established by process of offer and acceptance. this may be made in any manner sufficient to show agreement. This is a meeting of the minds
What are objective manifestations of assent?
What a party says and does rather than what they intend or believe. The mental intentions of the parties are irrelevant. The acts manifesting assent must be done either intentionally (to act with intent to do the acts and not necessarily to desire the consequences) or negligently. Should be viewed from the point of view of a reasonable person in the position of the other party. Meaning that the other person is charged with the knowledge of a reasonable person but also with what that party knows or should know because of that party superior knowledge
What is the tentative test?
The parties intention will be held to be what a reasonable person in the position of the other party would conclude the manifestation to mean
What is an offer?
A promise (manifestation of intent to act or refrain from acting in a specified way so made as to justify a promisee in understanding the commitment has been made) to do or refrain from doing some specify thing in the future conditioned on the other party’s acceptance. Offer can also mean an assurance that a thing will I will or will not be done
Is an expression of an opinion of a promise?
No so of course is not an offer
Are statements of encouragement promises?
No
how do courts determine if an offer was made?
Use the reasonable person test
Is an estimate an offer?
No, just saying someone thinks the job can be done for a price or something in that neighborhood is not an offer
Is the question “will you sell me?” an offer?
No this is just an inquiry. The question is not an offer because it seeks information and is not a commitment. This is just an invitation to offer
Are ads offers?
Usually they are only intentions to sell or preliminary proposal inviting offers. Unless the state a quantity and the language of commitment they are not offers
When do ads become offers?
When they state a quantity and the language of commitment. Ie). First come first served. This is promissory language and stayed the quantity of one so that can be an offer. Also if you write “for immediate acceptance” with a quantity - that is an offer
Are goods on the shelf considered an offer?
The theory is that by placing them on a grocery shelf with the unit price you’re showing implied language of promise and the quantity offered is whatever is on the shelf
Does an auctioneer have the power to accept or reject bids?
Yes
Who makes an offer in an auction setting?
The bidder makes the offer, and the auctioneer can either accept or reject that bid.
What is a bid with reserve?
The bidder is the offer and a contract is complete when the auctioneer announces it by the fall of the hammer. The bidder can withdraw a bid before that time. A bid terminate all prior bids and the bidder’s retraction does not revive any prior bids. All auctions are with reserve unless otherwise indicated
What does an auction without reserve mean?
The auctioneer may not withdraw the article from sale after calling for a bid on the article. The auctioneer has made an irrevocable offer.
What is puffing?
Having people related to the seller did up other buyers to encourage price inflation at an auction
What is a forced sale?
An auction that happens because the debtor has defaulted and the property must or maybe sold to terminate the interests of the debtor in order to satisfy the debt
What are preliminary negotiations?
Any communication prior to acceptance. Includes opinion, statements of intention, hopes, estimates, inquiries, invitations to make offers, advertisements, catalogs, circular letters, invitations to make bids, and price quotes
Issue in the Lucy case
The drunks selling the farm. The issue was intent to contract. Just because people are intoxicated during the formation of a contract does not mean they didn’t intends to contract.
What is a unilateral contract?
When one party makes a promise to the other but the promise requires a performance by the other party. This is a promise in exchange for complete performance. Ie) I offer to pay $5000 for you to paint my house. My promise is to pay $5000 but in order for you to form the contract you must complete the painting of the house. In these situations only one party is ever under obligation. If the other party performs the requested performance then a contract is created
What is a bilateral contract?
The contract is formed with mutual promises only. Each person promises something. No one has yet performed but they have a contract formed on promises only ie) I promise to sell you my car, and you promise to buy my car
How do you tell if the contract is unilateral or bilateral?
A) if a promise is requested by the offer it is bilateral
B) if the offer is indifferent and doesn’t say either way it is bilateral
C) if the offeror requests performance expressly it is unilateral
D) public offers are treated as unilateral
How to treat a public offer
An offer made but you’re not sure to whom it is specifically being made is to the public ie) A sign on the bulletin board that says you have lost your watch and will pay $500 to anyone that returns it is always treated unilaterally because your promise in return is the complete performance of finding the watch and returning it
What is an entire contract?
Requires each performance of the contract to be substantially complete to avoid a breach ie) if you have a contract for someone to build your house and it says how much for the roof, interior, flooring etc. if the contractor just pours the foundation and wants to be paid just for that, then he is in breach of contract. You were bargaining to have a house built, not a foundation, so this entire contract must be finished in order to avoid a breach. Substantial completion of each performance is necessary under the contract.
What is a divisible contract?
There are separate divisible performances for separate divisible considerations ie) I will be $500 each for you to paint 10 houses. It could be argued that each paint job is it divisible performance
How do you tell if the contract is divisible or complete?
- Construction contracts are almost always entire contracts
- employment contracts are almost always divisible ie) you work for $10,000 a month for the next 10 months. After you work for what month you are entitled to the $10,000 you already worked. There are separate divisible pay periods
What is an offer?
A way to begin all contracts. The offeror makes an offer to the offerer. The offeree can either reject or accept that offer. An offer is a commitment containing definite terms communicator and identified offeree.
What are the four elements of an offer?
A) commitment
B) definite terms
C) communicated
D) to an identified offeree
What is a commitment?
Whatever is said or done must be a commitment to enter into a contract. Use an objective test to judge whether the words or conduct were a committed procedure. It doesn’t matter what the speaker or actor actually intends all that matters is the outward appearance of behavior.
What is an objective test?
Look at the language and conduct by the standard of a reasonable person. What they, hearing the words spoken, under the circumstances, believe that the speaker intends to enter into contractual relationship?
Things that are not an offer or a commitment:
- Opinions or predictions
- Intentions or hopes
- Invitations or inquiries
- Most advertising (usually just an invitation to deal)
- Course of dealings between parties: special relationships where languages used looks like a commitment but the two people in the relationship know it is not
- Joke or Frolic
- Auctions: The bid being offered by the people is the offer. The acceptance is the fall of the hammer
What are definite terms in a contract?
The offer must contain terms that are certain and not ambiguous. It it must state all material terms (particularly the subject matter). Many important terms can be filled in by the courts or experts.
What does communicated mean with regard to an offer?
The offeree must know about the offer in order to be able to accept it. It doesn’t matter how the offeree learns about it.
What is a crossing offer problem?
When two offers are sent to each party but neither party knows about the other offer ie) each party sends a letter to the other party offering to buy a home $400,000 or sell a home for hundred thousand dollars but neither party knows about the other’s offer. This is not a contract
What is a unilateral offer?
And offer to the public or for anyone to see. The person must know about the offer in order for the contract to be completed ie) offer on the bulletin board to pay $500 to anyone that returned a watch. Person finds the watch and returns it but doesn’t know about the bulletin board.. Not entitled to the reward
What is an identified offeree?
The person or persons to whom you are offering something
Who determines questions of fact?
Jury ie) whether a person said 50 or 100 on a particular occasion. Or whether a reasonable person in the position of the plaintiff would conclude that the defendant had made a commitment
Who determines questions of law?
The judge. Appellate courts almost always only review questions of law
What are the second restatement’s list of important factors to consider with regard to intent to contract?
- The extent to which express agreement has been reached
- whether the contract is a type that is usually put in writing
- how many details are involved
- if the amount is large or small
- if it is a common or unusual contract
- if there is a standard form of contract that is widely used in similar transactions
- if either party began actions for preparation for performance during the negotiation
- if the agreement was reached by correspondence
What is in indefiniteness?
If the content of the contract is unduly uncertain
How does a contract fail for indefiniteness?
- The more terms that are omitted in agreement the more likely it is that the parties did not intend to contract
- if an agreement is it certain about its material terms there’s a fatal in definiteness and the agreement is void
- is the agreements not be offered that must be definite
What are material terms?
Subject matter, price, payment terms, quantity, quality, and duration.
- indefiniteness as to an immaterial term is not fatal
What are the three types of indefiniteness?
A) The parties purport to agree on a material term but leave it in definite ie) “fair share of the profits” is too vague and indefinite to be enforced ie) have a suit made by a tailor but don’t specify the material
Indefinite Material term cured by conduct
For example if you had a suit made by a tailor but you didn’t say what fabric, and the trailer chose the fabric himself and you agreed to it, then the indefinite term was cured by your conduct
Indefinite term cured by agreement
If you were promised a pension that would be “well and enough” and then were given $20 a week and excepted it then the indefiniteness was cured by your agreement or acceptance.
What happens if the parties are silent as to a material term?
The term may be either implied from surrounding circumstances or supplied by a court using a gap filler. This term can be implied from external sources like standard terms, trade or local usages, a course of dealing between the parties, or a course of performance after it. The courts will assume that the parties contracted on the basis of these terms.
What is a gap filler?
This is a term court supply either because the court thinks that the parties would have agreed on the term if it had been brought to their attention, or because it is a term which comports with community standards of fairness and policy. It is assumed that the parties have intended these terms and have only failed to express them. Courts will generally call for reasonable price, or usual price, market price, reasonable time etc.
What do courts consider when deciding a gap filler?
A) The intention of the parties ***
B) The nature and purpose of the contract
C) good faith and fair dealing
D) reasonableness
- if the parties omit the kind or quality of goods or the specifications of the building contract, the court have refused to fill this gap because no objective standard can be found
What happens with duration problems (The parties agree to agree later on a material term)?
- for employment contracts The courts will hold that either party may terminate at will
- usually performance after a specified term means that the contract has been renewed with the same terms for the same duration
- if it is silent as to duration of reasonable time is intended
What is meant by Permanent employment?
Employment is foreseen as steady rather than seasonal. This is still employment at will and both parties understand that the employment is to endure as long as the employee is able to perform the work for which he is hired
How can an employment contract be terminated?
It can be terminated for good cause or for no cost because it would not be good policy to keep the parties locked in a close relationship of employer-employee against the wishes of one of them. An employer may not fire for bad cause or that which violates public-policy
Federal legislation prohibits dismissal of employees for what reason?
- Union activity, racial discrimination, age, corporate whistleblowing, Worker’s Comp. claims, wanting to adhere to the consumer protection legislation, tenant’s complaints to the authorities about building violations, employer trying to avoid paying pension benefits, resisting sexual advances of boss or coworkers
- termination motivated by bad-faith, malice or retaliation constitutes a breach of employment contract
When are employment manuals considered promises?
- if the language contains a promise clear enough that an employee would reasonably believe that an offer has been made
- if the handbook is disseminated to the employee so that the employee is aware of its contents and reasonably believes it to be an offer
- The employee accept the offer by commencing or continuing work after learning of the policy statement
Is an agreement to agree considered a contract?
Yes there is an agreement to negotiate and use reasonable efforts to reach an agreement that is enforceable. This implies a promise to negotiate in good faith.
Is it possible to agree to agree on a material term?
No the material term is too vague and indefinite to be enforced and shows a lack of present agreement
What is the court of equity?
Can decrease specific performance based on the offer of the plaintiff. Can order the parties to negotiate under court supervision
What are the key contract issues under the UCC?
Intent, remedy and breach
- there must be an intense to contract otherwise no contract exists
What is an implied promise, with regard to a bilateral contract?
I promise that is inferred when one party begins to perform the contract. This performance must be communicated to the other person
What is a reverse unilateral contract?
When the offer the makes the only promise ie) if a homeowner pays $500 to an insurance company asking for the companies promise to pay $200,000 if a’s house is destroyed by fire, then a has performed and requested a promise from the Offeree
Who is the master of the offer?
The offeror, and that person is free to indicate in what manner the offer can assent.
- if the offeror asks for a promise and the offeree performs the act instead of promising to perform, a contract is formed if the performance is completed while the offer is still open and notice of performances is given
How can an offer be excepted?
Unless it was crystal clear that the offeror prescribed a way to accept, the offer can be accepted in any reasonable manner
What must the offeree do if she performs?
Give prompt notice
What happens if the seller sends nonconforming goods in response to an offer? Is there a contract?
Yes the shipment is both the acceptance of the offer and at the same time the breach
Rules of the second restatement:
- unless it is clear how to accept the contract performance or promise is fine
- if you begin you’re bound, but you must give notice in order to bind the offeror, otherwise the offer is discharged
What does refusal to perform mean in employment situation?
An employee does not have a right to continue to employment when she refuses to perform her job simply because it contravenes her personal morals. It is the employee’s right to refuse to do the work but she should not expect continued employment
Would a contract exclusively for services be governed by article 2 of the UCC?
No, article to a place to transactions in goods
What is a hybrid contract?
Contact that involves both goods and services.
What is the predominant factor test?
This is how courts determine whether a hybrid contract is predominantly goods or predominantly services.
A) The court determines whether the predominant factor is the rendition of service with goods incidentally involved ie) a contract with an artist for a painting
B) The court determines whether the contract is a transaction of sale with the labor incidentally involved ie) installation of a water heater in the bathroom
How to tell which way a hybrid contract swings?
- look at the language (buyer seller transaction equipment customer purchase purchaser). Any of those terms indicate the contract is for goods
- look at the manner of billing. If the contract price doesn’t include the cost of services or the cost of the goods is more than the services is probably a good contract
Are the official comments of the UCC legally binding?
No they are just persuasive
If an employer contracts with an employee for permanent employment what is the legal effect of this?
The employee is entitled to work so long as the employee is able to do the work and the employer continues in the business for which the employee was hired
