R5- Contracts Flashcards
To know all aspects of Contracts
What is a contract?
Contract is a promise that a law will enforce.
What is express contract?
Contract formed by language, oral or written
What is Implied-in fact contract?
a contract formed by conduct
What is Implied-in-law contract or Quasi Contract?
It is not a contract
it is a remedy
that allows a plaintiff to recover benefit unjustly conferred upon the defendent
a remedy to prevent unjust enrichment
What is Unilateral Contract?
there is one promise, given in exchange of performance
What is Bilateral Contract?
Both parties have to do something, exchange of promises
What is executory contract?
if duties remain to be performed,
wholly or partially
What is Executed Contract?
if all the duties have been performed
What are the sources of Law?
- Common Law- RISE Real Estate, Insurance, Services, and Employment
- Uniform Commercial Code- UCC- Sale of goods, moveable
Creation of a contract
What are the three requirements of a legally enforceable contract?
a. Agreement( Offer + Acceptance)
b. Exchange of consideration( something of legal value)
c. lack of defenses( no good reason not to perform)
Note: Writing not req’d
Agreement- Offer+ Acceptance
a meeting of minds
Offer- one party will make a proposal
Acceptance- and the other will agree to it
OFFER
How can an Offer be made?
Express or Implied
OFFER
What are the 3 questions for offer?
Was there an intent to contract?
Was there definiteness and certainty?
Was there communication to the offeree?
OFFER
Are advertisements considered an offer?
No, it is merely an invitation to seek offers
OFFER
When is advertisement an offer?
Exception to general rule
When you specify offeree
when an advertisement limits the scope of the persons who can accept
OFFER
When can offer be definite and certain?
UCC- Quantity only
RISE- all other terms need to be definite and certain
OFFER
Under RISE which terms have to be certain and definite?
WHO- identity of the offeree WHAT- price to be paid WHEN- time of performance WHAT- is the quantity involved HOW- nature of the work to be performed
OFFER
What are the rules for communication of offer?
No communication, No offer
OFFER
How can an offer be terminated?
- Revocation by offeror
- Rejection by offeree
- By operation of law
OFFER
How can offer be revoked by offeror?
Offeror can revoke offer at anytime before acceptance by communicating the revocation to the offeree
Exception: 1. Firm Offer 2. Option Contract
OFFER
In what ways can offer be revoked?
- Oral or Written
- By publication
Either way it is effective when rec’d
When can the offeror not revoke an offer? EXCEPTION
a. Option contract- paid consideration to keep offer open
b. Unilateral Contracts- Offeree begins to perform his promise
c. UCC- Merchant Firm offer-
In what ways can offer be rejected by offeree?
- Express rejection
- Counteroffer
- Different from mere inquiry i.e. a mere question
- Effective when rec’d
- Silence amounts to rejection
How can an offer be terminated by operation of law?
Automatic
- Death or Incompetency of parties
- Destruction of subject matter
- Illegality
ACCEPTANCE
What is Acceptance?
Acceptance is offeree’s assent of enter into contract
Need not be in writing
Implied OK
Is offer assignable?
No, Except Option Contract
What is the method of acceptance?
- in any manner reasonable under the circumstance
- However, if offeror specifies a method, use that
- Using other method is counteroffer
What is Mirror Image Rule?
Common law only i.e. RISE
Cannot change anything from the offer
must accept excatly or it is counter offer
What is the rule for acceptance regarding communication?
-Acceptance effective when mail dispatched
Unlike Revocation, Rejection of Offer, effective when rec’d
What is the Mail Box Rule?
-Acceptance are effective when dispatched
>if properly dispatched
>irrelevant if properly addressed envelope is loss or delayed
What is rules for Method of communication for Acceptance?
If specified, use that
if not specified, use any reasonable means
Can an offeror opt out of mail box rule?
Effective when dispatched, if Yes How?
Yes,
By stating in the offer acceptances must be rec’d to be effective
CONSIDERATION
What is consideration?
Consideration is the price of contracting Both Parties 2 Elements 1. Something of Legal Value 2. Bargained for exchange
What is Element of Legal Value?
-either detriment to the promisee or a benefit to the promisee and not something he/she was already obligated to do - Need not 1. have legal value 2. flow to the party 3. be adequate 4. be sufficient
What is Bargained-for Exchange?
your promise induced by promise
Gift- No Exchange
Past or Moral Consideration- Saving Tim
What is the exception to Bargain-for Exchange?
Donation to Charity
done without any reciprocal benefit
Detrimental Reliance/ Promissory Estoppel?
a promise made by one party
and detrimentally relied upon
by another can be enforced without consideration
Eg. MRI machine at hospital
DEFENSES
WHAT ARE DEFENSES?
Defenses can make a contract unenforceable
DEFENSES
What amount to Fraud?
MAIDS M-Misrepresentation of material fact A-Actual and justifiable reliance I-Intended to Induce the victim to rely D-Damages S- Scienter (defrauding party knew, reckless disregard for the truth)
Rules for Fraud?
- must be material facts, opinions do not count
- Scienter- intention to deceive
- intent to induce
- reasonable reliance- independently check values/ financials
- Damages- Compensatory and punitive for fraud
DEFENSES
Fraud in Execution and Fraud in Inducement
Fraud in Execution- VOID
Fraud in Inducement- VOIDABLE
DEFENSES
Innocent Misrepresentation
MAID No scienter
DEFENSES
Duress
Put a gun
Physical- Void
Emotional/ Economic/ Social- Voidable
DEFENSES
Undue Influence
Taking unfair advantage of a relationship
Abuse of position of trust or confidence
DEFENSES
Mutual Mistake
Both parties are mistaken
Party is loss can avoid
-Does not apply to value, Value are opinion
Non existence of subject matter- Void
DEFENSES
Unilateral Mistake
Not a defense
tough
Exception : if other party knew or should have known Eg. Bids
DEFENSES
Illegality
VOID
DEFENSES
Illegality
Licensing
If license-
a. to protect public- VOID
b. to raise money- enforceable
DEFENSES
Illegality
Promises not to compete
Enforceable if reasonable
Time
Distance req’d to protect
No stealing trade secrets
DEFENSES
Minors may generally disaffirm contracts
Cancel
Disaffirm anytime
must return what he possesses
What is the exception to the rule Minor can disaffirm?
Exception- Contracts for Necessities
What is ratification?
is only when minor reaches majority
a person is bound by the contracts entered as minor when attains majority
Ratify in full not partially
How can a contract be ratified?
- Failing to disaffirm
- Expressly, Oral or Written
- Retaining or accepting the benefits
DEFENSES
Intoxication
prevents the promisor from knowing the nature and significance of his promise
and the other party knew he was drunk
DEFENSES
Mental Incompetency
Incapable of understanding the contract
GR- voidable
If adjudicated mentally incompetent- Void
DEFENSES
Statute of Limitation
- a legal action must commence within a certain time
- if expired, unenforceable
- measured from date of breach
- 4 to 6 yrs
DEFENSES
Statue of Frauds
6 Contracts require in writing MYLEGS M- Marriage Y- More than 1 Yr L- Land E- Executors G- Sale of goods 500 or more S- Surety
DEFENSES
Impossibility
Impossibility is a defense
- Destruction of subject matter
- Death of party to perform services
DEFENSES
Accord and Satisfaction and Substituted Contract
An Accord is to substitute on contract for another and
Satisfaction is the execution of accord
DEFENSES
Novation
is available as defense to a party who has been
released from a contract.
When a new contract substitues a new party for an old party in an existing contract
DEFENSES
Conditions can affect a party’s duty to perform
if condition doesnt happen
cannot perform the promise
DEFENSES
Prevention of performance is a breach
one party prevents other from performing contract duties
DEFENSES
Parol Evidence Rules
Prohibits-
- a party in a lawsuit in written contract
- from introducing evidence at trial of
a. oral or written statements made prior to written contract
b. that seek to vary the terms of contract
What is ok to add as per parol evidence rule?
a. Subsequent Modification- After
b. Evidence to explain ambiguous terms
c. Evidence to show fraud, duress, or mistake
DEFENSES
Unconscionability
is a doctrine used by courts
to enforce a contract
on basis of fairness
REMEDIES FOR BREACH OF CONTRACT
WHAT IS A BREACH?
WHEN A PARTY FAILS TO PERFORM SOMETHING HE IS OBLIGATED TO DO AS PER CONTRACT
REMEDIES FOR BREACH OF CONTRACT
Material or Substantial Breach
RISE- Intentionally pay zero
Minor- Damages
REMEDIES FOR BREACH OF CONTRACT
Anticipatory Repudiation or Early Breach
Anticipatory- In advance
What are the options for the good party for Anticipatory Breach?
a. Immediately sue for damages
b. await the time of performance
c. Cancel the contract
REMEDIES FOR BREACH OF CONTRACT
DAMAGES
Damages intend to put the non breaching party in as good a position as he would have been had there been on breach
DAMAGES
Compensatory Damages
Benefit of the bargain
Personal Service Contracts S in RISE
Consquential damages- foreseeable damages
DAMAGES
Specific Performance- used with land or unique items
money would not be adequate remedy
a. cannot be used for personal service
b. specific performance or compensatory damages
DAMAGES
Liquidated damages- Damages agreed as per contract
as per clause in the contract
i. reasonable in relation to the actual harm done
ii. not a penalty
DAMAGES
Punitive damages
Fraud
not available for breach
DAMAGES
Recission or Cancellation
Original Position
restores the parties to former position
What is the doctrine of substantial performance?
For services only, unintentional breach
DAMAGES
Quasi Contract Restitutional damages
prevent unjust enrichment
DAMAGES
Limitation on monetary damages
Foreseeability-consequential damages
Mitigation- reasonable efforts to avoid damages
THIRD PARTY RIGHTS
third party beneficiaries
need not have privity of contract
Intended vs unintended parties
intended parties- can enforce
unintended parties- cannot enforce
Assignment of Rights
give contract rights to a third party is called assignment
Giving rights is called Assignor
Receiving the rights is called Assignee
Assingment of all rights
Delegation of Duties
if a party wants to have a 3rd party perform the contractual duties is called delegation
What may be assigned or delegated?
contract rights are assigned
duties are delegated
What is the exception regarding assignment?
when the assignment will change the obligor’s risk
(Insurance)
or delegated duties involves specialized personal services
Can you assign offers?
Generally cannot assign offers
but can assign option contracts
What is the effect of delegation?
Both parties are liable
Unless a Novation
What is Assumed Mortgages?
Both parties liable
Compare Assignee taking subject to the mortgage?
assignor liable
Assignment of a creditor’s right to receive money?
Permitted even if contract prohibits assignment
Not effect against Debtor unless debtor receives notice
Implied warranty of Assignor?
Assignor has not knowledge of any fact impairing the value of assignment
