Test 2 Flashcards
Contract Elements
- Agreement/ “Mutual Assent”
- Consideration
- Capacity
- Legality of Object
Contract Defenses
- Assent is Genuine (No uress, undue influence, misrep, or mistake)
- Statute of Frauds - (mus be written)
If contract involves products and other?
Governing law depends on the predominate factor (goods or other)
Classify Contracts
Bi vs Uni
Bilateral - Mutual promises
Unilateral - One party promises, other actions by action or refraining from action
Classify Contracts
Express v Implied
Express – both parties manifest assent by word
• Implied (“Implied in Fact”) – Conduct indicates a
contract.
• Elements:
• The P provided property or services to the D
• The P expected to be paid by the D for the property or services
and did not not provide the property or services gratuitously.
• The D was given an opportunity to reject the property or
services provided by the P but failed to do so.
Classify K
Valid….
Valid – All elements met.
• Void – Essential elements missing – Not a K.
• Voidable – Defective Contract – Still a K, but “may” be
voided by one or both parties.
• Examples: Fraudulent Misrepresentation, Duress
• Unenforceable - It is not void or voidable, but there is a
legal defense to the enforcement.
• Statute of Frauds, Statute of Limitations
Mutual Assent
An agreement between the parties.
Classic: Offer and Accept (Words or Conduct)
Objective Standard!
• Assent, agreement, or intention of a party as it reasonably
appears from words or conduct.
Not Valid if - Duress, Undue, Influence, Fraud, Nonfraud Misrep
Offer Elements
Intent (Joke Excited, or Frustration - RP Obj Std)
Communication - OR to EE (Advertised reward for lost watch - Offeree must know of offer to accept)
Definitiveness
Lucy V Zehmer
Farm case - specific performance because to an RP, this constituted a contract - included revision so that wife could sign it, etc.
Offers, Invitation for Offers, Ads
Valid Offer: •“I will buy your car for $25,000.”
•Invitation for an Offer/Preliminary Negotiations:
•“Would you be interested in selling me your car for $25,000?”
•Frodo tells Sam that he is thinking of selling his textbook and asks if Sam would pay $100 for the book.
Ads - Generally solicitation for offer, unless ULTRA specific. Unilat Offer if includes a reward in the advertisement (fuzzy socks to first 20 in line)
Termination of Offers
Operation of Law (Destroyed, Death, Later Illegal, Lapse of Time)
Parties’ Actions: - Revocation
-Rejection (expressed or implied word, conduct, silence)
-Counteroffer
-Accept (K)
Revocation
Free to revoke anytime b/f accept
even if told by 3rd party
Exceptions:
Option Contract ($$ to OR to keep offer open)
UCC: Firm Merchant Rule (UCC - if merchant says in writing that offer will be held open, must honor offer for RP time)
Irrevocable Offers of Unilateral K - Unilat, can revoke before thy start, but once they start, must give them RP time to complete
Acceptance
Dispatch. - Show willingness to enter K
Unilat - Performance with intent of accept
Bilat - Communication (grumbling accept counts)
Generally silence is not accept, unless you agree (Netflix)
Acceptance Alters Offer
Common Law - Services
Mirror Image Rule - If diff at all, it’s reject and counter
UCC: If essential terms are agreed upon (Price, Quant, Deliv) K is formed unless Acceptance Form must be agreed upon in Entirety
Mailbox Rule
Offer, Rej, Rev: Effective upon receipt
Acceptance: Effective upon dispatch
Three Exceptions where Accept is effective on Receipt:
-OR states such in offer
-EE sends Rej, then Accept. First to arrive wins.
-Sent by unreasonable means
Means of Acceptance
-EE must use means required; if EE uses a diff means it =rejection and counteroffer
If no means stated: Reasonable means - effective on dispatch. Unreasonable - Effective upon receipt.
Consideration and Elements
something of legal value exch for a promise.
- Legal Sufficiency- Value (Money, Promise not to smoke, Promise to put a scholarship in someone’s name)
- Bargained-for Exch - intentionally entering a BFE of promise. (No include Gift promise until transferred, No past consideration)
Legal Sufficiency
-Preexisting legal duty - NO
-Modification - Common Law says mod must have new consid. UNLESS unforeseeable.
UCC says new consid not need, but both in GOOD FAITH
Settlement of Dispute
Undisputed - must have mutual new consideration if discount given (paid a week earlier) to be binding
Disputed - pay less than agreed to (PIF) - If A accepts, it’s binding, both waive right to sue - accord and satisfaction
Legal Sufficiency: Illusory Promise vs. Conditional
Illusory - Not a K, except Satisfaction Clause = Personalized - taste. Other - RP
Conditional - K - based on outside factors, effective K when entered, not when condition is met
Promissory Estoppel / Detrimental Reliance
Promissory Estoppel NEVER MAKES A K.
Exception to Consideration - based on injustice, equitable request to enforce the promise.
Elements:
-OR makes promise to EE
-OR should reasonably expect EE to rely on promise
-EE actually relies on it to their detriment
-Injustice would be caused if promise not enforced
Conduct Invalidating Assent:
Fraud
- Fraud in Inception - don’t know you’re signing a contract, you’re told it’s a petition
- Fraud in induce or Fraud Misrep - VOIDABLE by innocent party if Fraud or Material
Elements of Fraud Misrep
False rep Of Fact Material (Big Deal) Intention to deceive (knew it was a lie) Rep is justifiably relied upon - don't have to investigate Innocent party injured
-Includes denial of knowledge
Doesn’t count as Fraud misrep if the truth is in the K. Watch out for TOO GOOD TO BE TRUE deals - check K
Nonfraud Misrep
-Material, false factual stmt that induces another to justifiably rely - made without scienter ( lacks intent to deceive)
-Voidable because it has to be material
Includes Negligent Misrep (careless in ascertaining truth) and Innocent Misrep (no knowledge of falsity, no carelessness)
K is reversible if FRAUDULENT or MATERIAL. Damages if both.
Duress and Undue Influence
Duress - Blackmail. any wrongful or unlawful act or threat that overcomes free will of a party. Two types
Physical Duress: Gun to head, K is void
Improper threats or act: compel a person to enter K - Duress must be from other party, VOIDABLE, no reasonably alternative. Subjective std - did threat really induce assent?
Undue - unfair persuasion of a person by party in a relationship of trust - VOIDABLE, Subj std, whether submission was induced
Legality
Gambling Statutes are contract, not legal in every state
General Rule - If in illegal K, court will leave you as it finds you, won’t enforce K.
Contrary to Public Policy
Exculpatory Clause
Negligent - must be obvious, prevents being sued
Trade Restraint - Noncompete. enforceable with proper limits (Line of biz, area, time). Sales of biz, During and After Emp (After courts hesitant)
Unconscionable
Usury Statutes - Max rate of int, etc.
Statute of Frauds
K must be in writing for MYLEGS and exceptions:
Marriage (not on test)
Year (when entered, if AT ALL possible to be performed in a year, verbal K is valid, year start at contract date)
Land (Except Part Perf $ AND Detrimental Reliance improved)
Executor
Guarantor/Collateral (Except Main Purpose Doctrine)
Sale of Goods (500 Lease 1000) - Except 1) Admits in litigation or Special Manuf Goods, substantially begun, could not resell
Parol Evidence and Exceptions
Prior written or verbal negotiations and same time verbal agreements that change K are excluded if K is "final" and has integration clause Exceptions: Ambiguous Terms (Bring OUtside Evidence) Typo (8% vs 18%) Undue Influence Modification (After signing)
3rd Parties
Assignment - Assign away the good / benefit
Delegation - delegate the duty
Usually requires permission from both parties
Intentional Ben - stated/intended a 3rd party to ben - Legal rights
Incidental Ben - just so happens that K affects another positively - no legal right
Breach Vs. Condition
Breach - Violation of a duty or covenant under K
Condition - event required to happen before the other party is oblig. under K
Discharge of a K
Agreement
- Mutual Recission
- Substitued K
- Novation (Both parties agree to sub a new party for a current party, all agree)
- Accord and Satisfaction (settle a disputed k)
Discharge of a K
Impossibility
Commercial Imprac
Impossible - Obj, Must show that no one else could have performed the K, HARSH
Commercial - Softens Impossible rule, TEST - Unforeseen and Unjust Hardship can relieve duty
Discharge of a K
Completion
Breach
Comp - All is right in the world.
Breach - Common Rule
Material breach (Inferior performance): Discharges nonbreaching party
Minor/Immat. Breach (Subst. Perf) Does not discharge the nonbreaching party
Can sue for damages with both
UCC RULE - Perfect Tender - Any breach discharges nonbreaching party
Discharge of a K
Anticipatory Repudiation
A tells B they’ll breach, B can sue immediately, but make sure their statement of breach is in writing
Equitable Remedies
Equitable Remedies - recover in equity when damages will not adequately compensate
Reformation - rewrite a contract
Specific Perf - court command a party to fulfill K (Unique Prop and Real Prop, NOT Pers Services - slavery)
Injunction - Stop a party from acting (noncompete, mining, will also stop pers services)
Compensatory Damages
Compensate party for LOSS OF VALUE - COST AVOIDED + INCIDENTAL DMG + CONSEQ DMG
Liquidated Dmg
Two Tests: more challenging to calc dmg AND reasonable amt
Otherwise it’s a penalty = party can seek actual dmg
Damages for Misrep
Benefit of the Bargain vs Out of Pocket
Used in Fraud and Neg Misrep
Awarded dmg based on what you bargain for in contract
Out of Pocket : Innocent Misrep, award dmg based on actual loss
Limits to Legal Dmg
Foreseeability - Parties must know or have had reason to know of damages at time parties entered (let other party know of all possible dmg)
Certainty - Prove dmg with certainty
Mitigation - Non-breaching has oblig to mitigate dmg, dmg that coul dhave been mititgate is deducted from dmg amt
Limits to Legal Dmg
Foreseeability - Parties must know or have had reason to know of damages at time parties entered (let other party know of all possible dmg)
Certainty - Prove dmg with certainty
Mitigation - Non-breaching has oblig to mitigate dmg, dmg that coul dhave been mititgate is deducted from dmg amt
Restitution / Quasi Contract
- Ben conferred to D from P
- D knows of ben
- Accept or retent of ben by D would be unjust without compensating P
Examples:
Rescind a contract
Party injured by breach
Party who cannot enforce a K due to SoF
Party in Default - PROCEEDS
Intentional Interference w contractual Relations Elements
- Valid enforceable K between parties
- 3rd Party Knowledge of K
- 3rd Party inducement of breach (threats or better K)
Fixtures
Formerly pers prop, attached to land or bldg, becomes real prop. Upon sale, all real prop goes to buyer.
1 - K governs, if silent NOT specific enough
2 - Easy removal? No, fixture. Yes, look to next part
3 - Purpose of item - Peculiar? Pers. Unless prop purchased on this basis
Bailment
Borrowing/lending, absolute duty to return prop.
Bailor - Owner. If sole ben, bailee owes low care
Bailee - Borrow. If sole ben, bailee owes high care
Commercial - Mutual ben, RP Standard
Bailor must prove bailment and dmg, then
Presumption of fault is on bailee, must show they used right care.
Leases
Assignment (sell, both have duty to landlord) vs sublease (now, subtenant no duty to LL)
Termination: Adequate notice is full period if less than a year, 6 months if a full year.
Leaseholder must pay rent & not dmg.
LL must allow quiet enjoyment. Constructive eviction - give LL opp to correct breach before abandoning.
Recording
Recordation = delivere executed doc to recorders office in county. If you don’t a subsequent good faith purchaser will acquire the title superior to yours.
Record Deeds, Mortgages, Leases
