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Contracts > Restatement and UCC Provisions > Flashcards

Restatement and UCC Provisions Flashcards

1
Q

What’s the difference in a bilateral and unilateral contract?

A

Bilateral Contract = Promise for Promise

Unilateral Contract = Promise for Performance

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2
Q

If it is ambiguous in the terms of the offer, what kind of contract is presumed to be invited?

A

If in doubt, an offer is presumed to be an offer for a bilateral contract (promise for promise) - not a unilateral one (promise for performance). RS1 31

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3
Q

If one party knows that the other does not mean what their words or actions express, can a contract be formed by these communications?

A

No, if either party knows the other does not mean what their words/actions express, the communication cannot operate as an offer or acceptance RS1 71c
Remember the Braunstein Case

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4
Q

What are the grounds for promissory estoppel?

A

1) Promisor should expect TPB or promisee to rely
2) The party does rely
3) Enforcing the promise is the only way to avoid injustice
*Remedy can be limited as necessary, Charities and Marriage Settlements do not require proof of reliance
*Depending on the judge it might matter if it’s a business context
RS2(90) (Chapman v Bowman)

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5
Q

When can a TPB sue to enforce a promise?

A

Only Intended beneficiaries can sue to enforce a promise. If the promise benefitting the TPB is to settle a debt or to provide a gift, the TPB is an intended beneficiary, RS2(302) Lawrence v Fox

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6
Q

Does intent to no the legally bound prevent the formation of a contract?

A

No - Neither subjective or objective intent to create legal effect is necessary for the formation of a contract, but an expression that a promise have no legal effect may prevent the formation of a contract RS2(21)

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7
Q

If an offer is ambiguous as to its preferred means of acceptance, how can it be accepted?

A

It can either be accepted by a promise to perform or by performance (but remember, partial performance in this situation creates a binding contract) RS2(32)

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8
Q

What is the defining feature of an offer?

A

It creates a power of acceptance that is valid until terminated under Sec 36 RS2(35)

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9
Q

What are the different ways to terminate an offer?

A

Rejection/Counter by offer, lapse of time, revocation, death or incapacity RS2(36)

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10
Q

What happens if you mail a rejection or a counter offer before an acceptance?

A

Mailing the rejection or counteroffer first waives the mailbox rule, and the first to arrive becomes effective.

If an acceptance arrives after the rejection or counteroffer, it is interpreted as a counter offer
RS2(40)

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11
Q

When is an option contract created by partial performance?

A

If an offer invites acceptance by performance only, partial performance creates an option. The offeror’s duty only comes due after complete performance. RS2(45)

If an offer invites acceptance by performance or by promise, partial performance creates a binding contract.

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12
Q

When does an offeree accepting by performance have to notify the offeror?

A

1) When the offeror specifies that notice is required
But if the offeree knows the offeror has no way of knowing, then the offeror’s duty does not come due UNLESS the offeror indicates that notice is not required, the offeror actually learns of the performance, or the offeree “exercises reasonable diligence” to alert the offeror RS2(54)

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13
Q

When does partial performance create a binding contract?

A

If the offer allows for acceptance by promise or performance, beginning performance accepts the contract and binds the offeree to complete.

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14
Q

What is the mailbox rule?

A

Unless waived, an offer is accepted as soon as it is put out of the possession of the offeree, regardless if it ever reaches the offeror. Acceptance must be sent through an invited medium RS2(63)

This does not apply to option contracts.

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15
Q

Does the mailbox rule apply over the phone?

A

No - since it is instantaneous, the communication is valid when received (default rule) RS2(64)

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16
Q

When does silence accept an offer?

A

Only when:

1) past dealings justify the offeree in expecting that the offeror would notify him of rejection
2) offeree gives a reason to think silence is acceptance
3) offeree accepts the services with opp. to reject and reason to know they are offered for payment

If the offeree exercises control over property in a way inconsistent with the offeror’s ownership, that is an acceptance unless wrongful against offeror, then must be ratified RS2(69)

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17
Q

If a promisor retains a choice of performances, what has to be the case for that promise to operate as consideration?

A

Either every option has to be consideration if bargained for independently OR at the time the promise is made at least one option would be consideration and it appears to the parties that there is a substantial possibility that the choice of the others will be eliminated before the promisor can pick RS2(77)

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18
Q

If a benefit has been received in the past, is a promise made after the fact in recognition of that benefit binding?

A

Yes (to the extent necessary to prevent injustice) UNLESS the promise is intended as a gift or the value promised is disproportionate to the value received
EX: Webb v McGown (falling hero)

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19
Q

Describe mutual mistake under RS2 (152)?

A

1) Both parties must mistake a basic assumption upon which the contract was based
2) Voidable by the wronged party UNLESS he bears the risk under 154

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20
Q

Describe unilateral mistake under RS2 (153)

A

If one party mistakes a basic assumption upon which the contract was based AND does not bear the risk under 154 AND EITHER
(the effect of the mistake would make enforcement unconscionable OR the other party had reason to know of the mistake or caused it)

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21
Q

When does a party bear the risk of mistake? RS2 (154)

A

1) The contract allocates the risk to one of the parties
2) The party knows their knowledge is incomplete and chooses to contract anyway
3) it is reasonable to allocate the risk to them under the circumstances

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22
Q

What is the court’s options for unconscionable terms?

A

If its unconscionable at the time of the contracting, then the court can enforce as little as needed in order to enforce the unconscionable result.

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23
Q

What is the standard for an integrated agreement?

A

A writing constituting a final expression of one or more terms
Integratedness is determined before interpretation. If the agreement appears to be complete on its face, it is complete unless proven otherwise by extrinsic evidence

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24
Q

Form contracts are presumed integrated, but when can the contract be altered?

A

There is a duty to read, BUT

If the party who provided the form knew the other party would not agree if they knew of a term, then that term is not part of the contract

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25
Q

When is interpretation of an integrated agreement a question of fact?

A

When the interpretation depends on:

1) Depends on credibility judgments of extrensic evidence
2) There is a choice among reasonable alternatives from extrinsic evidence

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26
Q

What is the general parole evidence rule? RS2 (213)

A

Integrated agreements kill all prior contradictory agreements
Fully integrated agreements kill all prior agreements within scope

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27
Q

When are prior or contemporaneous agreements admissible?

A

Extrensic evidence is admissible to establish:

1) integratedness (or lack thereof)
2) meaning of writing (interpretation)
3) illegality, fraud, duress, mistake, lack of consideration, or other invalidaing cause
4) grounds for shaping remedy

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28
Q

When are consistent additional terms admissible?

A

The contract cannot be fully integrated

Collateral agreements and terms that are naturally admitted from the writing

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29
Q

What are the characteristics of an impossibility defense?

A

1) After the contract was made
2) Party’s performance was made impracticable
3) without that party’s fault
4) by the occurrence of an event the nonoccurrence of which the contract was made
5) unless the language or circumstances indicate the contrary

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30
Q

Can the promisor and promisee change a promise that benefits a TPB?

A

Yes UNLESS:

  • The contract prevents such modifications or discharges effecting the TPB
  • The TPB has materially changed is position in justifiable reliance on the promise
  • The TPB has already brought suit on the promise
  • The TPB has manifested assent to the promise at the request of the promisor or promisee

If the promisee has received consideration from a promisor in exchange for modifying the duty to the TPB, the TPB can sue them to recover RS2 (311)

31
Q

What is the limitation on the duty to mitigate damages?

A

RS2 (350)
An injured party can’t recover for loss that could have been avoided without undue risk/burden/humiliation.
If the injured party made reasonable efforts to avoid the loss but was unsuccessful, the party can recover.

32
Q

What is the limit on recovery of consequential damages?

A

The wronged party can only recover for foreseeable consequences of the breach.
Loss is foreseeable if:
A) It follows from the breach in the ordinary course of events OR
B) It follows from special circumstances that the breaching party had reason to know
A court can limit damages by excluding profits, by only allowing recovery for reliance, or any other way it wants.

33
Q

When does the UCC apply?

A

transactions in goods

34
Q

What is the UCC Parole Evidence Rule?

A

Integrated or agreed upon terms cannot be contradicted by evidence of a prior written/oral agreement or contemporaneous oral agreement. BUT can be explained by course of dealing/trade/performance Or consistent additional terms (unless fully integrated and in scope)

35
Q

What is the UCC provision for adding terms to an acceptance?

A

UCC 2-207 - Acceptances create a contract even if there are different terms. Unless acceptance is expressly conditioned on the new terms

The additional/different terms are proposals for changes but if BOTH parties are merchants then the terms are added unless the offer is expressly limited, materially alters, objection to the changes is given

If the parties act like there’s a contract, there’s a contract, regardless of the mirror image rule

36
Q

UCC Definition of unconscionability

A

If a court finds a contract is unconscionable, it can enforce as little of it as it wants in order to avoid the unconsconable result.

If a court is considering finding unconscionability, both parties can present evidence of commercial setting, purpose and effect to aid the court’s decision.

37
Q

What is the UCC provision for a contract with an open price term?

A

The parties can make a contract with an open price term if they want to.
The price is a reasonable time at delivery IF
- The parties say nothing about price
- The price is left to be agreed by the parties and they fail to agree
- the price is a function of a standard and the standard is not set

38
Q

What is implied into exclusivity agreements per the UCC? UCC (2-306)

A

Reasonable efforts to sell (this creates consideration)

39
Q

How does the UCC handle requirements contract? UCC (2-306)

A

Requirements contracts sets the quantity at the requirements/output in good faith UNLESS the requirement/output is disproportionate to history or a stated estimate

40
Q

How does a party create an express warranty? UCC 2-313

A

A seller creates an express warranty that the goods conform to any stated/promised fact, description, or sample/model that becomes part of the basis of the bargain.
Statements creating warranties do not have to use magic words like “warrant” or “guarantee” but the seller’s opinions and commendations don’t create a warranty.

41
Q

When is the warranty of merchantability implied?

A

If the seller is a merchant with respect to that kind of goods

42
Q

What is the scope of the implied warranty of merchantability

A
  1. Goods pass without objection in the trade under the contract description
    1. If the goods are fungible, are of fair and average quality within the description
    2. Goods are fit for their ordinary purpose
      4.Variations in kind/quality/quantity of units are within the range permitted by the agreement
      5.Goods are adequately contained/packaged/labeled as required by the agreement
      6.Goods conform to the promise or affirmations of fact made on the container or label
      PLUS anything else implied by course of dealing/trade/performance
43
Q

When is an implied warranty of fitness for a particular purpose apply?

A

IF a seller knows (or has reason to know):

 1) a buyer plans to use a product in a certain way AND
 2) the buyer is relying on the seller's skill/judgment to select/furnish suitable goods
44
Q

What is the process for waiving the implied warranty of merchantability?

A

To waive the implied warranty of merchantability, the writing must mention merchantability and be conspicuous OR waive all implied warranties with “as is” or “with all faults” OR can be modified by course of dealing, course of performance, usage of trade OR be waived by inspection

The writings are to be construed where possible to be consistent with implied warranties

45
Q

What is the process for waiving the implied warranty of fitness for a particular purpose?

A

Must be in writing and conspicuous OR waive all implied warranties by “as is” or “with all faults” OR be modified by course of dealing, performance, trade OR be waived by inspection

46
Q

What is the UCC Perfect Tender Rule (UCC 2-601)

A

Unless it’s an installment contract or the parties have otherwise agreed, the buyer can reject all/part/none of any non-conforming performance

47
Q

What are the rules for rejecting goods (UCC 2-602)?

A

1) Seasonably notify the seller
2) Don’t exercise ownership since that would be wrongful against the seller
3) if buyer has taken physical possession of the goods, then he must store the goods with reasonable care

48
Q

What are the rules for accepting goods?

A

A buyer accepts goods when:
a) he tells the seller they conform or that he will keep them despite nonconformance
b) he fails to reject them after a reasonable opportunity to inspect
c) he acts in a way inconsistent with the seller’s ownership*
(*but if the act is wrongful as against the seller, it is an acceptance only if the seller wants it to be)

49
Q

When does the burden of establishing a breach pass to the buyer of goods? (UCC 2-607(4)

A

At acceptance

50
Q

What are the requirements for UCC Impracticability UCC 2-615

A

If a seller’s delivery of goods is delayed, prevented, or made impracticable by:
- the non-occurrence of a basic assumption on which the contract was made OR
- good faith compliance with government regulation (regardless if it later proves to be invalid)
the seller has not breached.

51
Q

What are the rules for repudiating the remainder of an installment contract under UCC 2-612

A

An installment contract is one what requires multiple separate deliveries. No opt out

2) The buyer may reject any nonconforming installment IF EITHER:
A) The non-conformity substantially impairs the value of that installment and cannot be cured OR
B) The non-conformity is a defect in the required documents
BUT IF BOTH
a) the nonconformity does not fall within subsection (3) AND
b) the seller gives adequate assurance of his cure
THEN the buyer must accept that installment.
3) IF one installment is defective such that it impairs the value of the whole contract, the whole contract is breached.
BUT IF EITHER:
A) the aggrieved party accepts a non-conforming installment without seasonably notifying of cancellation OR
B) the aggrieved party brings an action with respect only to past installments OR
C) the aggrieved party demands performance as to future installments
THEN the aggrieved party reinstates the contract

52
Q

What can a seller do if they learn that a buyer is insolvent?

A

If the seller learns of a buyer’s insolvency…
BEFORE DELIVERY: Seller can refuse delivery except for cash payment for all goods already delivered and the current delivery.
AFTER DELIVERY: Seller can reclaim goods within 10 days of delivery (or 3 months of buyer misrepresented solvency), but if the seller reclaims, then that exhausts their remedies.

53
Q

What are the seller’s damages for non-acceptance or repudiation?

A

Damages = (CP-MP)+Incidental Damages-Savings b/c Breach+Maybe Lost Profit
You have to reset the seller to the ex-ante and then give them the benefit of the bargain.
The Incidental and savings of breach reset to ex-ante, and then either CP-MP or lost profit give them the benefit of the bargain.

54
Q

What are the buyer’s damages if the seller refuses to deliver or repudiates?

A

If a seller fails to deliver, Buyer’s Damages= MP - CP + Incidental - Expenses Saved b/c Breach + Maybe Profits
MP is determined at the time the buyer learned of the breach

55
Q

What is included in incidental damages?

A

Incidental Damages include:

     - expenses reasonably incurred in inspection, receipt, transportation, care & custody of goods rightfully rejected
     - any commercially reasonable charges, expenses, or commissions to cover
     - any other reasonable expense incident to the delay or other breach
56
Q

What is included in consequential damages?

A

Consequential Damages include:

     - any loss resulting from general or particular requirements/needs which the seller had reason to know at time of contracting AND which could not reasonably be prevented by cover or otherwise
     - injury to person or property proximately resulting from any breach of warranty
57
Q

What can a buyer recover if he covers?

A

A buyer can cover by buying (or contracting to buy) replacement goods in good faith and without unreasonable delay.
The buyer can recover: Cover Price - Contract Price + Incidental Costs - Expenses Saved b/c of Breach

58
Q

What are the terms of an offer if the offer is made to the public at large?

A

Only the terms made known to the public at large are part of the offer, even if one party subjectively knows additional terms

59
Q

What is the tricky part about counter offers?

A

You could respond to an offer with a counter offer (declines the original offer) or respond with a request to modify terms (does not decline the original offer)

60
Q

What is the touchstone for exempting a method of instantaneous acceptance from the mailbox rule?

A

The offeree has instant validation that the offeror has received the acceptance

61
Q

If a seller retains an option to cancel if the buyer becomes insolvent, is the contract invalid for lack of consideration?

A

No (2-702)

62
Q

What is a narrow carveout for a lack of mutuality?

A

If there is one instant where the party could bind the other, then there is mutuality

63
Q

If I quit my job to pursue another one, does my quitting count as consideration?

A

No, non-bargained for reliance does not count

64
Q

How can you modify a contract without new consideration?

A

Mutually tear up the old contract (cancel) and replace it with a new contract, but you have to follow the ritual for the court.

65
Q

How can you tell the difference between a unilateral offer and a contract to supply?

A

The difference is consideration.

66
Q

What are the two ways to look at Impossibility?

A

The British way with the myth of implied in fact conditions

The American way which requires unforeseeability and almost total value loss (per Lloyd v Murphy)

67
Q

What are the requirements for frustration?

A

AFTER a contract was made the party’s PRINCIPLE purpose is SUBSTANTIALLY frustrated without his fault by the non-occurrence of something which was a BASIC assumption ON WHICH the contract was made

68
Q

What are the rules for a temporary impracticability or frustration?

A

It suspends the duty to perform but DOES NOT discharge it UNLESS the performance would be materially more burdensome after the delay than before. RS2(269)

69
Q

What are the rules for partial impracticability

A

Where only part of the performance is impracticable, the remaining part is unaffected IF EITHER it is still practicable to render a performance that is substantial OR the obligee agrees to perform in full and to allow the obligor to retain any performance already rendered

70
Q

What do the Tripple/Kehoe/Behan Rules apply to?

A

Calculating the damages when a performing party is headed for a loss and then the non-performing party breaches

71
Q

If a performing party breaches by completing in a non-conforming way, what is the remedy?

A

It is the cost to correct UNLESS
- it would be wasteful or impossible (per peevyhouse)
(if the wrong performance is a promissory condition, it could also discharge the other party’s duty to pay)

72
Q

What happened in Jacobs & Young v Kent?

A

Performing party breached, and Cardozo construed the promise to pay not to be conditioned on the install of reading pipe. . The remedy was the decrease in value because the cost to correct was massively disparate

73
Q

What is the remedy if a performing party leaves the job incomplete?

A

The damages is the cost to complete minus the cost due under the contract

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