NY Contracts (K!) Flashcards

Question

TERMINATING THE OFFER (Squashing the Caterpillar) 6!

Answer 1

revoke constructive revocation: The offeree learns that the offeror has taken an action that is absolutely inconsistent with a continuing ability to contract. offeree rejects counteroffer (cf counter-inquiry) offeror dies reasonable amount of time

Answer 2

Ordinarily free to revoke at any time, but FOUR power shields! 1. Option [NY if signed writing no need for consideration!] 2. Firm offer: A merchant in the UCC universe can make a firm offer to buy or sell goods (i.e., a binding, free option). o A firm offer must be written, contain an explicit promise not to revoke, and be signed by the Merchant. o How long does it last? Either as long as stated in the offer or for a reasonable time period not to exceed 90 days. 3. [NOT TRUE IN NY!!!!!!!] Offeree has started performanc w/ UNILATERAL K: A unilateral offer to contract cannot be revoked by the offeror if the offeree has started performance. 4. Detrimental Reliance –

Answer 3

The rule: An acceptance sent by mail is valid when the letter is sent Does NOT apply: o If the offeree sends something else first (e.g., rejection, counteroffer). Which opened first? o To other types of communication (e.g., revocations, rejections). o To option contracts. o It is unclear whether this applies to other media (fax, e-mail, etc.). TRICKY: I send you an offer. You mail back your acceptance. You change your mind and call me up BEFORE I receive your letter to reject the offer. Is there a contract? YES, unless I detrimentally relied on the rejection. (JUST AN APPLICATION OF THE RULE!) TRICKY: Example 51: I send you an offer. You mail back a rejection. You change your mind and mail back an acceptance a few hours later. Both letters arrive at my house on the same day. Is there a contract? It depends on WHICH I OPEN FIRST!

Answer 4

Haircut or grocery You can communicate an acceptance without writing or speaking. This communication by gestures or actions is called an “implied-in-fact” contract.

Answer 5

COMMON LAW universe uses the MIRROR IMAGE rule. This means that the terms in the acceptance must match the terms of the offer exactly—or it is not an acceptance, but a counteroffer. Treat conditional acceptance as just another form of counteroffer. (Look for words like “if,” “only if,” “on the condition that,” “but,” etc.) The UCC is more forgiving for acceptances that don’t match the terms of the offer exactly. It replaces the mirror image rule with § 2-207. The main intuition of § 2-207 is that a purported acceptance that does not match the terms of the offer exactly can still count as a legal acceptance in many circumstances. But just because there’s been an acceptance, do not assume that all terms in the purported acceptance will govern the contract. TWO DISTINCT QUESTIONS: IS THERE ACCEPTANCE WILL THEY CONTROL?

Answer 6

The new term in the purported acceptance may control under § 2-207(2), but only if all of the following are true:

Answer 7

COMMON LAW universe uses the MIRROR IMAGE rule. This means that the terms in the acceptance must match the terms of the offer exactly—or it is not an acceptance, but a counteroffer. Treat conditional acceptance as just another form of counteroffer. (Look for words like “if,” “only if,” “on the condition that,” “but,” etc.)

Answer 8

Is there a benefit to the promisor or a detriment to the promisee? (You need just ONE, not both.) Adequacy of consideration (nominal consideration): A pretense of consideration is insufficient; there must be some adequacy of consideration. Past consideration is not consideration. An Illusory promise: A promisor must clearly commit to the deal or there is no consideration. Promising not to sue (settlement of a legal claim) will act as consideration as long as there is an HONEST BELIEF in the validity of the claim and a reasonable basis for that belief.

Answer 9

Preexisting Duty Rule vs. Good Faith! Common law has historically followed the preexisting duty rule, which means that a promise to do something that you are already legally obligated to do (by prior contract or otherwise) is not consideration. (**debt example: currently due and undisputed???) Modification under the UCC - The UCC universe does not follow the preexisting duty rule. Rather, you should simply ask whether a modification is made in GOOD FAITH. If so, it is binding without new consideration.

Answer 10

``` Promissory Estoppel (or Reliance): Reliance can arise when one party makes a promise, and the other party relies on that promise to take some action. THREE key elements for a claim under reliance: o A promise is made that would be reasonably be expected to induce reliance; o The promisee does indeed take detrimental action in reliance on the promise; and o Injustice can be avoided only by enforcement of the promise. **Charities don't need to prove detrimental reliance! But must be IN WRITING! ``` 2. Quasi-Contract Quasi-contract is sometimes called a “contract implied-in-law.” Think of this as a situation in which you would have made a contract if you could have, but you couldn’t. Or, look for a situation in which one party conferred a benefit on another party, and it would be fair to pay for that benefit. (1) The plaintiff confers a Measurable benefit on the defendant; (2) The plaintiff reasonably expected to get paid; and (3) It would be unfair to let the defendant keep the benefit without paying 3. Moral Obligation Plus Subsequent Promise (the “Half Theory”)

Answer 11

``` 1 Minors (under the age of 18) 2 The mentally ill—two standards: ```

Answer 12

Mutual mistake (affecting both parties) lets the adversely affected party rescind: (1) There is a mistake of fact, existing at the time that the deal is made; (2) The mistake relates to a basic assumption of the contract and has a material impact on the deal; and (3) The impacted party did not assume the risk of the mistake. Unilateral mistake (one party) lets the adversely affected party rescind if:

Answer 13

present fact material OR fraudulent justifiable reliance Fraud in the Execution - Fraud in the execution is when you trick someone into signing something that she doesn’t even know is a contract. Nondisclosure - The other party doesn’t learn the truth about something, but now you just remain quiet. Normally, you need not tell the other side about all material facts related to the deal. But watch out for a special (fiduciary) relationship or ACTIVE CONCEALMENT!

Answer 14

Illegal contracts are unenforceable. But, a contract entered in furtherance of an illegal act (that is not itself illegal) will still be enforced.

Answer 15

Duress is an improper threat that deprives a party from making a meaningful choice to contract. Economic duress arises one party makes threats to induce another party to contract (or modify a contract). SUBJECTIVE TEST: did threat induce assent?

Answer 16

Need both PROCEDURAL and SUBSTANTIVE unconscionability

Answer 17

You should always ask two questions here:

Answer 18

**The Main Purpose Exception - If the main purpose in agreeing to pay the debt of another is for the surety’s own economic advantage, then we are not in Statute of Frauds world. The one-year rule is interpreted very narrowly; the question is whether there is NO POSSIBLE WAY the contract could be performed within one year. Example 105: I verbally contract with the mayor of Charlottesville to build an exact replica of the Egyptian pyramids at the edge of town for $50 billion. Are we in Statute of Frauds world? NO! It may be difficult, but it is not impossible to complete the contract within one year. All contracts involving real property are NOT in Statute of Frauds world; only those TRANSFERRING AN INTEREST in the property. Also, leases of less than one year are usually not in Statute of Frauds world.

Answer 19

There are two main ways to satisfy the Statute of Frauds—by FULL PERFORMANCE and by WRITING. The exact requirements differ between our parallel universes. 1. Services Contracts o Full performance of a services contract by either side satisfies the Statute of Frauds. 2. A writing signed by the party against whom the contract is asserted will satisfy the Statute of Frauds. o Do you need both signatures on the writing? NO! o Does the writing have to be a formal contract? NO! o But it must cover the fundamental facts 3. Real Estate - Real estate deals are like other service deals in that a signed writing will satisfy the Statute of Frauds. o But, unlike other service deals, part performance of a real estate contract can satisfy the Statute of Frauds if any two of the following three elements are met:

Answer 20

Signed writing, part performance, custom made, judicial admission, failure to object A signed writing will satisfy the Statute of Frauds, but the requirements differ a little under the UCC: o There is no need to mention the price; o The writing must mention the QUANTITY sold. The contract is only enforceable under the Statute of Frauds for the quantity mentioned. Part performance on a goods contract satisfies the Statute of Frauds, BUT ONLY for the quantity delivered or accepted. Custom-made (or specially manufactured) goods are exempted from the Statute of Frauds. Thus, a maker can satisfy the Statute of Frauds as soon as it makes a SUBSTANTIAL BEGINNING toward the manufacturing of the goods. A judicial admission, such as a statement in a pleading or during testimony, satisfies the Statute of Frauds under the UCC. The failure to object to a confirming memo within 10 days will satisfy the Statute of Frauds—but only if both parties are MERCHANTS

Answer 21

**Ask whether the deal with the alleged modification would be in Statute of Frauds world. If so, the Statute of Frauds requirements must be met; If not, there is no Statute of Frauds requirement, even though the initial deal was in Statute of Frauds world!

Answer 22

A: Breach of contract action requires proof: 1) Valid and enforceable contract exists • Contract requires: o Offer o Acceptance o Consideration 2) Contract was materially breached • Material breach occurs when one party is deprived of a substantial benefit of their bargain. o Employment contracts without a specified duration of employment are employment “at will” contracts and can be terminated by either party with or without cause. o Courts can imply or infer missing terms into a contract where such missing terms are necessary to make the agreement complete. 3) Plaintiff has clean hands.

Answer 23

Contracts for the sale of goods must comply with Article 2 of the Uniform Commercial Code (“UCC”). Pursuant to the UCC, if the goods cost $500 or more, then the contract must also satisfy the Statute of Frauds. In many cases, a writing setting forth the intent of the parties and signed by the party to be charged will satisfy the Statute of Frauds. However, there is an exception to the signature requirement for contracts between merchants. If an oral agreement between two merchants is followed by written confirmation of the agreement and signed by the sender of the confirmation, then the recipient will also be bound by the confirmation if he had reason to know of its contents and fails to object to it within 10 days.

Answer 24

A valid contract requires an offer, acceptance, and consideration. As previously mentioned, Article 2 of the UCC governs transactions involving the sale of goods. At times, the UCC applies different rules to merchants—those who regularly deal in the kinds of goods involved in the transaction—than to non-merchants. Under the UCC, when at least one party to a transaction for the sale of goods is not a merchant, an acceptance that adds additional terms to the contract results in a valid and enforceable contract, but that contract will not include the additional terms. The rule is different when both parties to the transaction are merchants: an acceptance with additional terms creates an enforceable contract and the additional terms will automatically become part of the contract unless: (i) they materially alter the contract, (ii) the offer limits acceptance to the terms as stated, or (iii) the offeror has objected to or objects to the additional terms within a reasonable time.

Answer 25

Implicit in every sale of goods contract in which the seller is a merchant is a warranty of merchantability that promises that the items sold will work in accordance with expectations. Waiving the right to a guarantee that items purchased will work properly is foregoing a significant right under the contract. For this reason, any written disclaimer is required to be conspicuous within the contract. Consequently, a court would conclude that adding such a waiver to a contract by way of a merchant’s acceptance is a material alteration to the contract that is unenforceable.

Answer 26

"Pizza With Crawling Escargot" Four big topics in this chapter:

Answer 27

Gateway Question: Have the parties created an integrated writing?

Answer 28

1. Express Warranties. - Show a sample? 2. Implied Warranty of Merchantability. o This warranty is triggered only when the seller is a MERCHANT dealing in the goods at issue. o The merchant makes an implied warranty (unless disclaimed) that the goods are fit for ORDINARY COMMERCIAL PURPOSES 3. Implied Warranty of Fitness for a Particular Purpose. o This warranty is triggered when a buyer relies on a seller’s expertise to select a special type of good that will be used for a special purpose. Disclaimers must be CONSPICUOUS!

Answer 29

1. Express Conditions o Express conditions must be STRICTLY SATISFIED unless the condition is somehow excused. o The party receiving the protection of the condition may waive the condition by words or conduct o A condition will also be waived if the other party WRONGFULLY INTERFERES or hinders the occurrence of the condition. This will be judged by a good-faith standard.

Answer 30

The Constructive Condition of Exchange (“CCE”) says that one party’s performance is conditioned on the other side’s performance. Doctrine of substantial performance vs. Perfect tender rule 1. Universe 1: Common-Law Universe The CCE need not be satisfied perfectly. The DOCTRINE OF SUBSTANTIAL PERFORMANCE states that a party will satisfy the CCE if there is not a material breach. Note also that substantial performance works to satisfy the CCE only if the failure is not WILLFUL 2. Universe 2: The UCC and Performance The UCC requires PERFECT TENDER. Don’t discuss substantial performance or material breach if the contract involves goods. Perfect tender has two main obligations:

Answer 31

1. Impossibility and impracticability Look for these common fact patterns: o Performance becomes illegal after the contract is formed; o The subject matter of the contract is destroyed; o A services contract with a “special person,” and the performing party dies or is incapacitated; o BUT, something that just makes performance more expensive than expected will not normally excuse. Look for something that hinders the ability to perform, not just the cost to perform. 2. Death after a contract. Dying does not normally excuse liability on a contract that has been made. The estate will normally be on the hook for any contractual obligations. 3. Frustration of purpose Performance can still occur, but something has happened to undermine the entire reason for the creation of the contract. Note that this is very rare, and the event must be extreme and not previously allocated to one of the parties. 4. Performance is excused because the initial contract has been modified or canceled. Consideration? (or good faith if UCC) 5. Accord and satisfaction. The parties to an earlier contract agree that performance will be satisfied instead by the completion of a different performance. o The new performance is called the accord o The excusing of the initial performance obligation is called the satisfaction TRICK: What happens if the accord is not performed? In that case, the other side can sue on either the original obligation or the new promise. 6. Novation This arises when BOTH parties agree that a substitute person will take over the contractual obligations.

Answer 32

1. Expectation damages must be proven with reasonable certainty 2. Unforeseeable consequential damages are not recoverable unless the breaching party had some reason to know about the possibility of these unforeseeable consequential damages (the Hadley rule). 3. The doctrine of mitigation states that a breached-against party must take reasonable steps to reduce damages from breach.

Answer 33

1. Lost volume profits (LVP). o If the paying party breaches, then normally the selling party needs to mitigate by reselling the goods or services to another person. But if the seller is a retailer who sells this type of product all the time, the seller can try to argue for LVP. 2. Incomplete performance o If the paying party breaches in a partially completed building contract, can the builder continue to work on the job? NO, this runs counter to mitigation—it would be “running up the damages.” Accordingly, we need to adjust the recovery price in this special context to take account of the fact that the builder did not need to finish the job. Use this formula: Expectation Damages = Contract Price – Amount already Paid – Amount that Would Be Needed to Finish the Job 3. DMV - Economic waste and diminution in market value damages. The normal measure of expectation damages is the cost to complete the job. But, sometimes using cost-to-complete damages will dramatically overcompensate the plaintiff.

Answer 34

Courts are wary about awarding punitive liquidated damages and will do so only if:

Answer 35

Punitive damages are ALMOST NEVER allowed in contract law. Don’t worry about these unless you see a breach that also seems like a tort (e.g., fraud or some other very extreme situation).

Answer 36

Specific Performance/Injunction Equitable relief, such as specific performance and related injunctions, is the exception—not the norm— in contract law. This remedy is awarded only when monetary damages are considered inadequate for some reason. Specific performance is presumptively available for real estate transactions.

Answer 37

The critical issue in a third-party beneficiary contract is whether the third party is an intended or an incidental beneficiary. To determine whether a given third party is an intended or an incidental beneficiary, ask whether the initial counterparties (promisor and promisee) intended to convey enforcement rights to the third party in the event of breach. "creditor beneficiary" "donee beneficiary"

Answer 38

Depends on whether the third party knows about the promise and has changed her position in reasonable reliance on the promise. If so, the third party may be able to make out a claim under promissory estoppel. A third party will not lose enforcement rights if any of the following facts is true, as these facts cause the right to VEST: o The beneficiary DETRIMENTALLY RELIES on the rights (similar to promissory estoppel); o The beneficiary MANIFESTS ASSENT to the contract/the rights; or o The beneficiary FILES A LAWSUIT to enforce the contract.

Answer 39

An assignment is the transfer of rights under a contract. A delegation is the transfer of duties under a contract. Almost all contractual benefits can be assigned, in whole or in part, unless a contract explicitly prohibits or invalidates assignments. If the contract states that rights are not assignable, you need to decide whether the contract prohibits assignments or invalidates assignments. ("not assignable" vs. "void")

Answer 40

What happens if someone assigns the same rights twice? The answer depends on whether the assignee has paid consideration for the rights: o If the rights are assigned without consideration, then the last assignment controls. o If the rights are assigned for consideration, then the first assignment for consideration will typically hold.

Answer 41

A delegation of duties occurs when a party to a contract “outsources” her duties under a contract to another party. This is generally acceptable, as long as the contract does not prohibit delegation and as long as the other party does not have some special interest in having a specific individual perform. A delegatee is generally not liable for breach unless she receives CONSIDERATION from the delegating party. (painter example)

Answer 42

Yes, as long as a reasonable time period has not passed. UCC: firm offer + REASONABLE TIME thereafter unless expressly revoked.

Answer 43

UCC treats as acceptance + breach If seller seasonably notifies the buyer that the wrong good are being shipped as an ACCOMODATION, then no no acceptance occurs and you have a COUNTEROFFER

Answer 44

no real contract, but parties act as if there's one... gap fillers:

Answer 45

Bid is offer Acceptance at fall of hammer Someone bids exactly when hammer falls? Up to auctioneer, reopen or call it. "no reserve auction" - seller can't withdraw after bid received bidders CAN retract offers, and this DOES NOT revive the prior bid

Answer 46

enforce only as to quantity analog for part performance too

Answer 47

Warranty of title Express warranty (sample, model,eg) Implied Warranty of Merchantability (MERCHANT only) Implied warranty of fitness for a particular purpose

Answer 48

1) Notify the seller of the rejection within a reasonable 2) Notify the seller of the particular defect and 3) HOLD goods for a reasonable time so the seller can get them back. Buyer has security interest if it paid for them. What if the seller fails to give reasonable instructions as to what the buyer should be doing once the bad goods have been delivered? Buyer has three options: 1) Continue to store the goods on the seller’s account; 2) ship the goods back 3) sell the goods for the seller. A buyer may revoke an acceptance of the goods. Goods seem OK at delivery; defect is difficult to detect.

Answer 49

If a seller fails to tender perfect goods and there is time left on the contract or the seller had reasonable grounds to believe that the buyer would accept, then the buyer must give the seller a chance to cure

Answer 50

Agreement authorizes or requires delivery in separate lots

Answer 51

Seller’s place of business - If the goods are tendered at the seller’s place of business, then the seller just needs to give the goods to the buyer. Shipment contract - The seller must take three actions (this is the presumption in the UCC):

Answer 52

1) did parties expressly allocate risk? 2) has either party breached (if so, breacher bears!) ``` 3) which type of delivery contract? o Shipment contract–then BUYER bears risk o Delivery(destination) contract– SELLER bears risk ``` 4) If none of the above rules apply, ask if seller is a merchant - yes: seller bears loss - no: buyer bears loss (Geis's books)

Answer 53

A seller has an insurable interest as long as she has TITLE or a SECURITY INTEREST A buyer has an insurable interest when the goods are SPECIFICALLY IDENTIFIED (potatoes planted, milk truck emblem)

NY Contracts (K!) Flashcards

(80 cards)