R6 Flashcards
Methods of Contract Formation
- express (oral or written)
- implied-in-fact (conduct)
- quasi-contract (prevents unjust enrichment)
Unilateral Contract
one promise; contract is not formed until the other party has performed
Bilateral Contract
two promises
Executory vs. Executed Contracts
Executory - remain to be performed
Executed - performed all of the duties
Items to which common law pertains
R eal estate
I nsurance
S ervices
E mployment
Three Common Elements in a Contract
- agreement made up of offer and acceptance
- consideration
- no defenses
Offer Requirements
- intent
- definiteness and certainty
- communication to the offeree
Which theory does contract law follow?
Objective theory
Are advertisements considered offers?
Generally, they are considered invitations to make offers; exception when the number of offerees is explicitly mentioned
Terms must be definite and certain. What does this mean for UCC and for Common Law?
UCC - only quantity needs to be definite
Common - all aspects must be definite
If the offeree has no knowledge of the offer, can he/she accept?
no knowledge, no acceptance
Three Methods to Terminate Offer
- rejection
- revocation
- automatic (process of law)
When can an offeror revoke an offer?
any time before acceptance by communicating to the offeree
!*can even revoke an offer when a promise was made to keep it open (unless it is an option)
Limitations on Offeror’s Power to Revoke an Offer
- option contract
- unilateral contracts
- Merchant Firm Offers (rain checks)
Methods to Reject Offer
- express
2. counteroffer
Counteroffer vs. Mere Inquiry
Counteroffer = rejection
Mere inquiry = no rejection and valid offer remains
When is a rejection effective?
when it is received
Is silence taken as acceptance or rejection?
rejection
Termination by Operation of the Law
- death or incompetency
- destruction of subject matter
- illegality
What happens to an acceptance if it is invalid?
it becomes a counteroffer
Does Common Law or the UCC use the Mirror Image Rule?
Common Law
Mailbox Rule
will be on exam
*generally, acceptances are effective when dispatched
EXCEPTION: offeror can opt-out by saying acceptances must be received on a certain date
The Mailbox Rules makes what effective on dispatch?
acceptances ONLY
*revocations, rejections, and counteroffers are effective on receipt
Consideration Elements
- something of legal value given by each party
2. bargained for exchange
Elements of Legal Value
- need not have monetary value
- need not flow to party
- courts will generally not inquire into adequacy
- preexisting legal duties generally do not suffice
When will courts consider adequacy in contracts?
unconscionable and is at arm’s length
How to make modifications enforceable under Common Law and UCC?
Common - give consideration
UCC - good faith and both sides agree
Do gifts count as consideration?
No
EXCEPTION: promissory estoppel
Promissory Estoppel
- promise must be
1. reasonably relied upon
2. detrimental
Are most contracts with defenses void or voidable?
voidable
What type of damages are unique to fraud?
punitive damages
Do opinions count as material facts?
No
*statements of value are usually opinions
Fraud in the Execution vs. Fraud in the Inducement
Execution = void Inducement = voidable
Innocent Misrepresentation
lacks only scienter in comparison to fraud
Duress
Physical = void Economic/Social = voidable
Undue Influence
abuse a position of trust or confidence
Mutual Mistake
voidable
Nonexistence of Subject Matter = void
Unilateral Mistake
*usually is not a defense UNLESS it is a material fact and the other party knew or should have known it was a mistake
Illegality
void
Illegality - Licensing and Non-compete
Licensing
- protect the public = void
- revenue = voidable
Non-compete
- reasonably needed for business purpose
- geographically limited
- limited in duration
Two Actions Minors can Do with Contracts
disaffirm and ratify
Minors and Contract Disaffirmation
- generally must return the items
* cannot disaffirm necessities
Mental Incapacity
incapable = voidable adjudicated = void
Statute of Limitations under Common Law
4-6 years starting from the date of the breach
Statute of Frauds
M arriage Y ear (CANNOT be performed in one year) L and and leases E xecutor to pay estate debts out of personal funds G oods over $500 S urety (pay someone else's debts)
Exceptions to Statute of Frauds
- contracts possible to complete in one year
* full performance by one party
What writing suffices for statute of frauds?
multiple written documents will suffice
Impossibility as a Defense
*destruction of subject matter
Accord & Satisfaction vs. Novation
Accord & Satisfaction = new contract, same parties
Novation - old contract, substituted party
3 Types of Conditions that Can Affect a Party’s Duty to Perform
- conditions precedent
- conditions concurrent
- conditions subsequent
Prevention of Performance is a Breach
*nonbreaching party is excused from performance
Parol Evidence Rule
- prohibits any oral or written statements that are prior or contemporaneous to the written contract and contradict the writing
- subsequent is okay
- fraud, duress, or mistake is okay for all types of evidence (EXCEPTION)
What determines whether or not a contract is subject to the Statute of Frauds?
*the contract as it stands with modifications
Unconscionability as Defense
*substantially superior bargaining power
Type of Breach to Allow Remedies under Common Law
must be material or substantial
Anticipatory Repudiation
- sue immediately
- wait and sue
- cancel the contract
Damages under Common Law
- Compensatory Damages (money to obtain substitute performance)
* *Consequential Damages (reasonably foreseeable) - Specific Performance
* *used with land or unique items - Liquidated Damages
* *must be reasonable and not punitive
Specific Performance OR Compensatory Damages
Are punitive damages available for breach of contract?
No
Rescission or Cancellation
*returns parties to their original positions
Quasi-Contract Damages
*avoids unfair enrichment
Limitations on Monetary Damages
- foreseeability
2. mitigation
Third-Party Rights
- Intended beneficiaries have privity while incidental beneficiaries do not
Examples of Intended Beneficiaries
- Donee Beneficiaries
2. Creditor Beneficiaries
Assignment of Rights and Delegation of Duties
- assignment or rights
- delegation of duties
- assignment of contract (includes both)
Exceptions to what cannot be assigned or delegated
- changes the obligor’s risk or involves specialized personal services
- cannot assign offers but can assign option contracts
Delegation Effects
*both parties are liable unless there is novation
Assumed Mortgages vs Property Subject to Mortgage
- assumed = both parties liable
* subject to = person who too subject to the mortgage is not personally liable
Assignment of a Creditor’s Right for A/R
- can assign even if the contract says you can’t
* not effective unless the debtor receives notice
Implied Warranties of Assignor
*assignor has these rights
Defenses for Assignment & Delegation
*obligor can use defenses they could have used against the assingor
Merchants
*deals in goods or has special knowledge of the goods
Obligation of Good Faith
- everyone = good faith
* merchants = reasonable standards of fair dealing in the trade
Firm Offer Requirements
(rain check) 1. seller must be merchant 2. offer must be in writing and signed 3. offer must give assurances it will be kept open (3 months or 90 days)
Promise to Ship vs Prompt Shipment
Promise - bilateral
Prompt - unilateral
Shipment of Nonconforming Goods
*acceptance AND breach
Notice of Accommodation
*counteroffer
Promise to Ship and Ships Nonconforming Goods
*breach, not an accommodation
Auctions
- bid is the offer
- with reserve
- without reserve
Exception to Rule Requiring only the Specific Quantity
- output and requirements contracts
Modifications to UCC Contracts
*only requires good faith
Statute of Limitations for UCC
4 years from date of breach
Statute of Frauds Exceptions for UCC
S pecially manufactured goods
W ritten confirmation (10 days limitation)
A dmitted to the court
P erformed contracts
Delivery and Risk of Loss are NOT Dependent on
title
How to Determine Risk of Loss
- goods must be identified
- contract states when title transfers
- If not….
* *Noncarrier
* **non-merchant - tender of goods
* **merchant - delivery of goods
* *Carrier
* **Shipment Contract
* **Destination Contract
Types of Shipment Contracts
- FAS - free along side
* CIF - cost, insurance, and freight
Breach and Effect on Risk of Loss
breach = risk remains with the seller
Risk in Sale on Approval
*risk on seller until approval
Risk in Sale or Return
- buyer has risk until returned
* also known as sale on consignment
Insurable Interest
- seller = as long as he owns the goods
* buyer = goods are identified
Title Passing
- pass as parties agree
- upon delivery
- Buyer rejects goods and title revests with seller
Warranties
- express warranties
- implied warranty of title (must SPECIFICALLY disclaim)
- implied warranty of merchantability (easy to disclaim)
- implied warranty of fitness for a particular purpose (easy to disclaim)
Are warranties breach of contract or tort liability?
breach of contract
Warranty protection is/is not limited by privity?
is not limited by privity; anyone injured can sue
Tort Liability under UCC
Negligence
- duty of care
- breach
- causation
- damages
Strict Products Liability
- product was defective
- product was dangerous
- product caused
- damages
Strict Liability Additional Conditions
- privity not required
* negligence no necessary
Remedies under UCC
Anticipatory Repudiation
*sue, wait and sue, cancel contract
Demand Assurances
*refusal = anticipatory repudiation
Duty to mitigate still exists
Seller’s Remedies under UCC
- cancel and sue for damages
- withhold delivery and stop goods in transit (reclaim after 10 days)
- right to resell and sue for damages
- full contract price (special items)
- liquidated damages ($500 or 20%)
Buyer’s Remedies under UCC
- reject any nonconformity (perfect tender rule)
* *seller’s right to cure
* *right to inspect before payment (unless it is Cash On Delivery) - cancel or rescind
- sue for damages
* *for accepted nonconforming goods
* *for rejected or undelivered goods - specific performance
- insolvency of seller: deposit + identified = pay and take goods
Entrusting and Voidable Title
GR: true owner can recover stolen goods from third parties
EXCEPTIONS:
1. Entrusting: watch for repair and accidentally sold
2. Voidable title: accepting a bad check
Copyrights
- author’s life + 70 years
* reproduce, prepare derivative works, distribute copies, perform or display the work publicly
Copyrights and Fair Use Doctrine
- criticism and comments
- news reporting
- teaching
Copyrights and Transferring Rights
must be in writing
Copyrights and Protection
*need not prove fault (can be unintentional) or have used entire work
Copyright Remedies
*civil and criminal
Patents
*20 years
- useful
- not obvious to a person skilled in the area
- novel
Patents and Transferring Rights
must be in writing
Patent Remedies
*only civil
