R5, M1-M2 Flashcards
What are the three required elements of a contract?
- offer and acceptance (agreement)
- exchange of consideration
- no defenses to enforcement
What are the two ways to form a contract?
- express contract (written or oral)
- implied-in fact contract (based on conduct)
What is another word for an implied-in-law contract?
quasi contract
What is a quasi-contract or implied in law contract?
This is not a contract at all.
This is just a remedy to prevent unjust enrichment of the defendant.
What’s an example of a quasi-contract based on unjust enrichment?
A cleaner accidentally cleans the wrong house.
The homeowner sees it, lets it happen, and benefits from it.
Even though there’s no contract, the court can require payment to prevent unjust enrichment.
What is a unilateral contract?
A promise is given in exchange for performance.
For a unilateral contract, at what point is the contract formed?
when performance is completed
What is an example of a unilateral contract?
monetary award for finding a lost pet (only form contract once the pet is found aka performance)
What is a bilateral contract?
A promise is given in exchange for another promise.
For a bilateral contract, at what point is the contract formed?
when the promises are exchanged
What are the two sources of contract law?
- common law
- UCC for sales of goods
The UCC Sales Article covers sales of goods (____ ___).
moveable things
What is the acroynm to remember what types of contracts go under the common law?
RISE
What does each letter in RISE stand for (common law)?
Real Estate
Insurance
Services
Employment law
What are two other phrases for an agreement to be made (offer and acceptance)?
“mutual assent”, “meeting of minds”
What is the difference between an offeror and an offeree?
offeror = makes the offer
offeree = receives the offer
Contract law generally follows (objective/subjective) theory, which means …
objective, based on what a reasonable person would think/do
Is an advertisement an offer (general rule)?
No, it is an invitation to make an offer.
When is an advertisement considered an offer?
when it limits the scope of people who can accept, and you can only accept through performance (unilateral)
Is this advertisement an offer: “Free drink to first 100 people in the night club.”
Yes.
What information must be included in an offer for the sale of goods (UCC)?
quantity only
What information must be included in an offer under common law?
offeree, price, time, quantity, nature of work (pretty much everything)
What is generally more strict when looking at the difference between UCC and common law?
common law
In what two broad ways can an offer be terminated? In what three total ways can an offer be terminated?
(1) act of either party
(a) revocation by offeror
(b) rejection by offeree
(2) by operation of law
When can an offeror revoke an offer?
any time before acceptance by communicating the revocation to the offeree
Can an offerror revoke an offer if they promised to keep it open for a certain period of time? Is there any exception to this
Yes, unless the offeree pays to keep the offer open (option contract).
Does revocation of the offer have to be communicated directly to the offeree?
No, it can also be indirect/implied by the conduct of selling the item to someone else.
Offers, rejections, counteroffers, and revocations are generally effective when …
received by the offeree.
If the offeree rejects the offer, can they accept it after that?
No, they must then present a new offer (counter-offer).
A counter-offer is considered to be both a … and a …
a rejection (of the original offer) and an offer (a new offer)
Is asking a question considered to be a rejection or counteroffer?
No.
Is this an inquiry or rejection/counteroffer? “Would you take $450?”
inquiry
Is this an inquiry or rejection/counteroffer? “I won’t pay $500, but I will pay $450.”
rejection/counteroffer
Any time an attempted acceptance is invalid, what is it reclassified as?
a counteroffer
Termination by operation of law is effective on what date?
as soon as the criteria is met (there is no need for communication)
What is the mnemonic to remember the four ways to terminate an offer by operation of law?
DIDI
What do each of the letters in DIDI stand for (termination by operation of law)?
Death
Incompetency
Destruction
Illegality
T/F: An acceptance must be in writing.
False, it can be oral or implied as well.
Who may accept an offer?
only the person to whom the offer was made
Can you assign an offer to someone else?
No.
Can you assign an option contract to someone else?
Yes.
How can you accept an offer? Is there an exception to this?
- in any manner reasonable under the circumstances
- Exception: If the offeror specifies a method of communication to accept, you must use that method.
If you accept using an incorrect method, this is considered a …
counteroffer
What is the mirror image rule? When does it apply?
The acceptance must mirror the offer to be effective.
This applies in common law, not the UCC (minor changes allowed)>
Acceptances are generally effective when … This is called the …
dispatched/sent; mailbox rule
If a properly addressed acceptance gets lost or delayed, what is the date of the acceptance?
It is still the day that it was sent.
How can an offeror opt out of the mailbox rule?
stating explicitly (in writing or oral) that acceptances must be received to be effective
What are the two elements of consideration?
- something of legal value given by each party, and
- there must be a bargained for exchange
An agreement contains legal value if it includes either …
- detriment to the promisee, or
- benefit to the promisor
A detriment exists only if the promisee does something that … or does not do something that …
- do somehting they are not already obligated to do, or
- refrain from doing something they legally could do
T/F: Legal value has to be monetary.
False, it need not have monetary value.
T/F: Legal value exchanged has to be roughly equal on both sides.
False.
If you promise someone that you will refrain from suing them, this is called a …
forbearance to sue
T/F: Legal value must flow only between the parties in the contract.
False, it can go to a third party.
Fairness of consideration is not required as long as (2 AND) …
- the transaction is an arm’s length transaction, and
- it is not unconscionable (grossly unfair)
Carol is under a contract to sing at a concert for Mike. Carol decides she does not want to sing. Mike offers to pay Carol $5,000 more if she will sing. Carol agrees and sings. Is Mike obligated to pay her the $5,000 extra?
No, because she was already obligated to sing. There was no additional consideration.
The price term of a common law contract cannot be modified unless …
consideration is given for the modification
Carol is under a contract to sing at a concert for Mike. Carol decides she does not want to sing. Mike offers to pay Carol $5,000 more if she will sing. Carol agrees and sings. How can this be modified to make the $5000 payment enforceable?
Carol promises to sing for five more minutes.
If there is an honest dispute as to what the original obligation was, is a modifying agreement given effect or no?
Yes, it is given effect.
What is a bargained-for exchange?
“I’ll do this because you agreed to do that.”
What is an exception to the idea that a gift is not an enforceable contract?
A promise to donate to a charity that the charity detrimentally and justifiably relies on is enforceable.
If something had already been given before the promise was made, does this create an enforceable agreement?
No, this fails the “bargain” requirement.
What is the difference between a contract that is void versus voidable?
void = unenforceable by either party
voidable = good guy has to option to enforece or not
A statement of value is not a “fact” (for proving fraud), unless
it is made by an expert.
A defrauded party can (1) ___ or (2) ___, but not both.
- rescind the contract, or
- sue for money damages
What is fraud in the execution?
a party is deceived into signing something that does not look like a contract
Does fraud in the execution result in a void or voidable contract?
void
What is fraud in the inducement?
terms of the contract are materially misrepresented
Does fraud in the inducement result in a void or voidable contract?
voidable
What are the potential damages for an innocent misrepresentation (not intentional, no scienter)?
compensatory only, no punitive damages
Does physical duress result in a void or voidable contract?
void
Does economic/social duress result in a void or voidable contract?
voidable
Does taking advantge of someone else’s economic condition (you know they are poor so they would take any low price to sell something) constitute duress?
No, because you did not create their financial issues.
What is undue influence?
a person in a positition of trust or confidence takes advantage of the other person’s weakness, infirmity, or distress
If parties are related parties, is fairness required?
Yes.
Undue influence makes a contract (void/voidable).
voidable
Does a mutual mistake make a contract void or voidable?
voidable
Is a unilateral mistake a defense?
Yes, only when the other party knew or should have known of the mistake and still let the deal go throuhg.
Does illegality make a contract void or voidable?
void
If work is performed without a license, and the license is required to protect the public, what is the status of the contract?
void
What are examples of licenses to protect the public?
doctors, attorneys, CPAs, electricians, real estate agents, etc.
If work is performed without a license, and the license is required to raise revenue, what is the status of the contract?
enforceable K
What are examples of licenses to raise revenue?
vendor (raises money for the city/state/county)
Minors can disaffirm a contract in what time period? What else must a minor do when they disaffirm?
Time Period: anytime while a minor or reasonable time after becoming an adult
Additionally: must return whatever they possess
What age is someone who is a minor for K law?
under 18
When is being a minor not a valid defense?
necessities (food, clothing, or shelter) already consumed
If the subject matter of the contract gets destroyed, can a minor still disaffirm the contract without returning the item?
Yes, as long as they are still a minor.
A person can become bound on the Ks they entered into while a minor at what point? (In other words, when can a minor ratify?)
after turning 18
What are three ways a minior can ratify a contract?
- expressly (oral/writing)
- fail to disaffirm (never cancelling)
- retaining/accepting benefits
Does intoxication make a contract void or voidable?
voidable
Does adjudicated mental incompetency make a contract void or voidable?
void
When is intoxication a valid defense to a contract (2 AND)?
- prevents the promisor from knowing the nature and significance of his or her promise, AND
- other party knew of the impairment
What acroynm tells you the 5 cases when a contract is voided?
DAPIE
What do each of the letters in DAPIE stand for (void)?
Destruction of subject matter
Adjudicated incompetency
Physical duress
Illegality
E - Fraud in Execution
The statute of limitations starts from …
the date of the breach
What is the range of SoL for contracts?
4 to 6 years
SoL does not make a contract void, but it does …
bar access to judidical remedies
Who needs to have signed a contract that is in writing?
only the person being sued (defendant)
What does the Statute of Frauds tell us?
the six types of contracts that must be in writing
What acronym helps you remember the six types of contracts that must be in writing?
MYLEGS
What does the M in MYLEGS stand for (Statute of Frauds)?
marriage (contracts where the consideration is marriage)
What does the Y in MYLEGS stand for (Statute of Frauds)?
year (if the K cannot be completed in 1 year, it must be in writing)
What does the L in MYLEGS stand for (Statute of Frauds)?
land or leases over 1 year
What does the E in MYLEGS stand for (Statute of Frauds)?
executors agree to pay estate debts out of personal funds
What does the G in MYLEGS stand for (Statute of Frauds)?
goods sold for total K price of $500 or more
What does the S in MYLEGS stand for (Statute of Frauds)?
suretyship and guarantors (agree to pay the debt of another)
To determine whether writing is required for a contract that cannot be performed within 1 year, what date do you start from?
the date that the contract is signed
If you want to make a contract to wash someone else’s car in 2 years, does this have to be in writing?
Yes, because time runs from when you make contract, and you will not complete within 1 year.
Does a contract of an indefinite time period need to be in writing (like employment at will)?
No, because the contract can be cancelled before the 1 year mark.
For the statute of frauds, does the contract need to be formally written?
No, there just needs to be written evidence about the contract (letter or email referring to the K).
If a sale of goods contract has been modified, which price do you use to determine whether writing is required?
the modified version of the contract
Is consideration required to make a modification to a contract enforceable under the UCC?
No, you just need everyone to voluntarily agree to the change and act in good faith.
Does all the information need to be contained in one document to meet the statute of frauds requiements?
No, they can be split among multiple documents.
Does a lack of writing for MYLEGS items mean that the contract cannot be formed?
No, this just means that there will be issues if you end up fighting over this later (it will not be enforceable)?
What are three exceptions to when writing is required to enforce a contract (statute of frauds)?
- already has been performed, or
- admitted in court that K exists, or
- involves specially manufactured goods
What does “accord” mean in an accord and satisfaction?
substitute one K for another
What does “satisfaction” mean in an accord and satisfaction?
exeuction of the accord
Duties under the original contract are discharged at what point in an accord and satisfaction?
satisfaction
A novation results in (new/same) parties, (new/same) agreement.
new parties, same agreement
An accord and satisfaction results in (new/same) parties, (new/same) agreement.
same parties, new agreement
Who needs to agree to the release in a novation?
all parties to the K
What is a condition precedent in contract law?
condition that must occur before the other party must perform
What is an example of a condition precedent?
Buyer must secure financing before buying a house.
What is a simple way to think of a condition precedent?
gateway that must open before the rest of the contract kicks in
What is a condition concurrent in contract law? What is an example?
conditions that require both parties to perform at the same time
Ex: buying a book at a bookstore
What is a simple way to think of a condition concurrent?
simultaneous handshake — both actions happen together
What is a condition subsequent?
if it happens, can end an existing duty or obligation under the contract
What is a simple way to think about a condition subsequent?
deal-breaker that ends the contract after it has already started
What types of contracts does the parol evidence rule apply to?
fully integrated written contracts
What evidence does the parol evidence rule make inadmissible?
oral or written statements prior to or contemporaneous with the written contract, that contradicts the K
What type of evidence is still admissable under the parol evidence rule (3)?
- anything that indicates fraud/duress,
- clarifying something in the K (not contradicting),
- evidence after the contract was signed
Under the common law, what remedy is available for a major breach?
non-breaching party (good guy) can be discharged from the K
Under the common law, what remedy is available for a minor breach?
not discharged, but good guy is entitled to damages
What is the general idea to remember in regards to damages?
intended to put the non-breaching party in as good of a position as if there had been no breach
What are compensatory damages?
award the non-breaching party enough to obtain substitute performance ($ difference only)
What are consequential damages?
reasonably foreseeable damages as a result of the breach (incidental costs)
If money cannot fix the problem, what is an alternative to money damages?
specific performance
Specific performance is used in what two scenarios?
land or unique items
Can specific performance be used for personal service contracts?
No, you cannot force someone to do something. That is involuntary servitude.
Can you get both speficic performance and compensatory damages?
No, you have to pick one or the other.
What is a liquidated damages clause?
a clause in the contract that says what the damages will be in case of a breach
A liquidated damages clause in a contract is only enforceable is what two criteria are met?
- reasonable in relation to actual harm done, and
- not a penalty
When is recission/cancellation used?
when the contract has not been substantially performed
What does the doctrine of substantial performance say?
party cannot rescind or cancel if a contract has been substantially performed
If someone acted in bad faith (major breach) and there was substantial performance, what damages are available?
cancelled K and money damages
If someone acted in good faith (minor breach) and there was substantial performance, what damages are available?
money damages only
If there was no substantial performance, what damages are available?
cancelled K
What does the obligation to mitigate damages say?
You cannot recover for damages that could have been reasonably avoided.
Consequential damages are only awardable for those damages that were ____ ___.
reasonably foreseeable
What defines a merchant?
deals in goods of the kind sold, or has special knowledge about the item
Are rules for merchants generally more or less strict than the other UCC rules?
more strict
Merchant sellers must also observe ___ ___ of ___ __ in the trade.
reasonable standards of fair dealing
