REQUIREMENTS OF A VALID CONTRACT Flashcards
WHAT MAKES A VALID CONTRACT? UNDER THE UCC, WHAT GAP FILLERS ARE NOT PERMITTED?
For a contract to exist, the terms of the contract must be sufficiently certain and definite for the court to determine if there has been a breach and give an appropriate remedy. The UCC, which governs contracts for the sale of goods (e.g., computers), encourages contract formation by providing gap-fillers for many missing terms, but not for the following:
identity of the contracting parties
subject matter of the contract
quantity of goods to be sold
A contract must therefore specify a quantity that is certain or determinable by reference to objective facts, such as the buyer’s actual requirements or the seller’s actual output in a requirements or output contract. If it does not, the contract fails for indefiniteness.
WHAT IS A CONDITION PRECEDENT?
EXPLAIN THE DOCTRINE OF PREVENTION.
A condition precedent is an explicit contract term requiring a future event to occur before a party becomes obligated to perform. However, under the doctrine of prevention, a condition’s nonoccurrence is excused when the party whose duty to perform is subject to the condition wrongfully prevents or interferes with the occurrence of that condition.
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Contract formation under the common law requires an offer with definite terms and an acceptance with knowledge of that offer. What constitutes a valid contract under the UCC?
But these requirements are relaxed by the UCC, which governs contracts for the sale of goods (e.g., a ring). Under the UCC, a contract is formed if the parties intended to contract and there is a reasonably certain basis for giving a remedy. The contract may be made in any manner sufficient to show agreement—even if the moment of its making is undetermined.
Under the UCC. the only essential term is quantity. And as long as the parties intend to creat a contract, the UCC “fills the gap” if other terms are missing, such as time or place of delivery or even the price of goods.
WHAT IS PROMISSORY ESTOPPEL? WHEN DOES IT APPLY? WHEN IS A GIFT PROMISE ENFORCEABLE?
A contract must be supported by consideration—i.e., a benefit bargained for and received by the promisor from a promisee. Since a promise to make a gift does not involve a bargained-for exchange, it is generally unenforceable. But under the doctrine of promissory estoppel, a gift promise is enforceable if three requirements are met:
- the promisor should reasonably expect the promisee to rely on the promise
- the promisee detrimentally relies on the promise and
- injustice can be avoided only by enforcement of the promise.
The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the final written agreement. In determining whether contracting parties intended for their written contract to be a final agreement, the court must first determine whether the writing is integrated. The writing can either be:
- totally integrated – the writing completely expresses all of the terms of the parties’ agreement or
- partially integrated – the writing sets forth the parties’ agreement about some, but not all, terms.
What is the rule under the UCC?
Under the UCC, which governs contracts for the sale of goods (e.g., furniture), it is presumed that a written contract is only partially integrated
What does contract formation require?
What determines the validity of an offer and acceptance?
Contract formation requires a manifestation of mutual assent, which occurs upon acceptance of a valid offer to contract. The validity of an offer and an acceptance is assessed under the objective theory of contracts. This means that a party’s intent to contract is judged by outward objective facts as interpreted by a reasonable person—not a party’s subjective intent or belief
Nonbreaching parties to a contract may choose between several types of damages, including:
expectation damages – damages that arise naturally and obviously from the breach
reliance damages – foreseeable expenses that the nonbreaching party incurred in reasonable reliance on the promise that the other party would perform
Although the nonbreaching party can pursue reliance damages in lieu of expectation damages, the nonbreaching party cannot recover both for the same breach
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Expectation damages are calculated by comparing the value of performance without the breach (what was promised) with the value of the performance with the breach (what was received).
Explain the UCC special rules for goods sold at auction.
he UCC has special rules for goods sold at auction. If goods are auctioned in lots, each lot represents a separate sale. Whether the goods can be withdrawn once the auctioneer calls for bids depends on the type of auction:
at a reserve auction—which is presumed unless a no-reserve action is announced—the auctioneer may withdraw goods from auction prior to completion of the sale
at a no-reserve auction—which must be specifically announced—goods cannot be withdrawn from auction after the auctioneer calls for bids unless no bid is received with a reasonable time
In either type of auction, a bidder may retract a bid until the auctioneer announces the completion of the sale (e.g., at the fall of the auctioneer’s hammer). However, the bidder’s retraction will not revive any earlier bids.
Contract formation requires both an offer and an acceptance (i.e., mutual assent). The offeror can dictate the manner and means by which the offer may be accepted. But if the offeror does not do so, then the offeree can accept the offer in any reasonable manner and by any reasonable means—e.g., delivering the acceptance by mail. Under the mailbox rule, an acceptance sent by mail or similar means is generally effective upon dispatch, while a rejection is effective upon receipt.
An offeror can dictate the manner and means by which the offer may be accepted. But if the offeror does not do so, then the offeree can accept the offer in any reasonable manner and by any reasonable means—e.g., delivering the acceptance by mail, which is effective upon dispatch.
A contract must generally be supported by consideration to be enforceable. However, there are circumstances in which a promise is enforceable without consideration.
What is one of these circumstances?
For example, a new promise to pay a debt after the statute of limitations has run is enforceable without any new consideration. When the new promise is an express promise, most jurisdictions require that the new promise be in writing and signed by the debtor to be enforceable
A closing date is not an essential term of a real estate contract. Therefore, a seller’s performance is typically due at or within a reasonable time after the closing date—unless the real estate contract contains a “time is of the essence” clause.
Accordingly, the seller’s failure to perform by the closing date is not a material breach that excuses the buyer’s duty to perform—but it is still a breach. The buyer can therefore recover damages—even if the seller acted in good faith
DURATION TERMS: IF A DURATION TERM IS NOT SPECIFIED IN THE AGREEMENT, CPURTS WILL IMPLY THAT THE CONTRACT WILL LAST FOR A REASONABLE PERIOD OF TIME.
FOR AN EMPLOYMENT AGREEMENT THAT IS NOT AT WILL, USE THE TRADITIONAL BREACH OF CONTRACT ANALYSIS.
MISSING TERMS- THE CONTRACT MAY STILL BE FORMED IF IT APPEARS THAT THE PARTIES INTENDED TO CREATE A CONTRACT.
COURT MAY SUPPLY THE MISSING TERM BECAUSE THERE IS A PRESUMPTION THAT THE PARTIES INTENDED TO INCLUDE A REASONABLE TERM. CT MAY INFER A TERM BASED ON THE REASONABLENESS OF A PARTY’S CONDUCT BASED ON THE PARTIES’ COURSE OF PERFORMANCE, COURSE OF DEALNG OR TRADE USAGE.
WHAT IS THE UCC RULE ON MISSING TERMS?
THE UCC “FILLS THE GAP” FOR MISSING TERMS OTHER THAN FOR SUBJECT MATTER AND QUANTITY, SUCH AS TIME (REASONABLE) OR PLACE OF DELIVERY (SELLER’S PLACE OF BUSINESS), THE ASSORTMENT OF GOODS (REASONABLE CHOICE OF THE BUYER) AND EVEN THE PRICE OF GOODS.
PRICE: IF THE PRICE REMAINS MISSING, THE UCC SUPPLIES A REASONABLE PRICE AT THE TIME OF DELIVERY.
WHAT IS A UNILATERAL CONTRACT?
WHAT IS A BILATERAL CONTRACT?
IF AN ACT IS REQUIRED FIRST, BEFORE THE OTHER PARTY’S PERFORMANCE IS DUE, THIS IS A UNILATERAL CONTRACT.
WHERE ONE PARTY PROMISES TO DO X, IF HE GETS A RETURN PROMISE FROM THE OTHER PARTY TO DO Y- A PROMISE FOR A RETURN PROMISE WOULD BE A BILATERAL CONTRACT.
