The bar-Contracts Flashcards
When does UCC apply?
Sale of goods, any price!
What rule do you apply when you have contract that has both sale of goods and services?
Whichever is more important part UNLESS contract expressly divides payment for each thing.
Offer
Offer is one person’s manifestation of willingness to contract. Basic test is whether reasonable person in the position of the offeree would believe that his or her assent creates a contract.
What terms are required for valid offer of a sale of real estate?
Price and land description
What terms are required for valid offer of sale of good
art 2: do no need price, but do need intent of parties
Vague or Ambiguous Material Terms?
NOT an offer
Requirements Contracts and Offers
A contract for the sale of goods can state the quantity of goods to be delivered under the contract in a term of the buyer’s requirements of seller’s output (all, only, exclusively, solely).
Buyer can increase requirements so long as the increase is in line with prior demands. No unreasonable disproportionate increases.
How to Terminate an Offer
Lapse of time-
Death of party prior to acceptance (except irrevocable offers)
revocation–by unambiguous words, or conduct indicating unwillingness or inability to contract that offeree is AWARE of. (multiple offers is not automatic revocation)
Option contract
irrevocable–option contract cannot be revoked if the offeror has not only made an offer but also promised not to revoke or promised to keep it open and this is supported by payment or consideration
UCC Firm Offer Rule
Under UCC, an offer cannot be revoked for up to 3 months if offer to buy or sell goods, signed written promise to keep it open, party is a merchant.
Reliance and Offers
An offer cannot be revoked if there has been reliance that is reasonable foreseeable and detrimental
Offer, Revokation, and Unilateral COntracts
Once performance has started you cannot revoke a unilateral contract, but this requires more than mere preparation.
Counter Offers-
Counter offers terminate the offer and create a new offer.
- bargaining does not terminate offer
- counteroffers do not terminate options.
Conditional Acceptance–Common Law, UCC
Common Law–Rejects offer and becomes a counter offer—if the recipient responds and acts on the contract than the condition becomes part of the contract and its like he accepted the counter offer.
UCC: rejects offer–even if they respond to initial offer, the new term does not become part of contract
Additional Terms to Contract
Common law—a response to an offer that adds new terms is treated like a counter offer not an acceptance. (mirror image rule)
UCC-2-207–In contract for sale of goods–between 2 merchants– where there is an offer and the other party proposes addition terms—forms a contract/treated like an acceptance. The additional term is not part of the contract unless both parties are merchants, and the additional term is not material.
if they are not merchants, but it is for sale of goods–you have acceptance w/o additional termst6yh
UCC-2207
UCC-2-207–In contract for sale of goods, where there is an offer and the other party proposes addition terms—forms a contract/treated like an acceptance. The additional term is not part of the contract unless both parties are merchants, and the additional term is not material.
Forms of Acceptance
*Express terms in contract
*starting to perform
sending the wrong goods is acceptance and breach.
When is acceptance valid?
When MAILED!
Option contract–must be Received before deadline.
If a rejection is mailed before an acceptance is mailed what happens–neither valid until received.
Consideration
Legal detriment–giving up something you had right to do.
Promise to do something (unless illusory–you have ability to terminate all along)
Past consideration? No! unless expressly requested by promisor and expectation of payment by promisee.
No consideration if one party says they will sell whatever other party chooses to order, bc that party may not order anything–ilusory
Pre-existing contractual or statutory duty rule–common law
Doing what you are legally obligated to do is not new consideration for new promise to pay you more to do the same thing unless there has been an addition or change in performance or an unforeseen difficulty so severe as to excuse performance.
Promises to pay a new person are OK.
Pre-existing contractual duty rule-UCC
New consideration is NOT required to modify a sale of goods contract–Good faith is the test for changes to existing sales of goods.
Part payment as consideration for release (promise to forgive balance of debt
where debt is due and undisputed then part payment is not consideration
But–if it not yet due–valid consideration
Consideration Substitute
A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration=–i.e. if the SOL is run.
Say i owe you 1000 but you cant get it bc SOL is run–and i offer 600–it is enforceable although no new consideration!
Promissory Estoppel
Promise, Reliance that is reasonable, detrimental and foreseeable, and enforcement is necessary to avoid injustice
Youth and Contracts
You can enforce a contract against a minor but they can enforce against you.
Quasi Contract liability for necessaries
A person who does not have capacity is legally obligated to pay for things that are necessary such as food, clothing, medical care, or shelter, but that liability is based on quasi-contract law.
i.e. you cant rip off a disabled person into paying more rent.
Statute of Frauds
A barrier to entry to court–certain things must be in writing otherwise a Plaintiff cannot get her day in court.
in writing and evidence essential terms, signed by party against whom action is brought
What kinds of contracts fall under the SoF?
- Promises to answer for debts of another: a promise to pay another person’s debt if he or she does not pay–narrow–needs to be a guarantee.
- Service Contract not capable of being performed within a year from time of contract.
(if specific time period–SOF, if specific time period but can be terminated–no SOF) **SOF does not apply to life contracts - Transfer of real estate besides leases a year or less
- Sale of goods for 500 dollars or more.
- promise where consideration is marriage (if you m arry my son, i give you 10 dollars)
How is SoF satisfied–Performance
Obj evidence of the contract is needed to satisfy the SoF.
Performance of transfer of real estate: part performance satisfies the SoF in transfers of reasl estate where you have 2 of the 3: improvements on land, payment, possession.
Performance of service contracts: full performance by either party–NOT part performance.
Performance of sale of goods–part performance of a contract for the sale of goods satisfies the SoF only to the extent of the part performance.
—except; part performance of a specially manufactured item satisfied SOF
How is the SoF satisfied?
Performance (or Part–see special rules)
Writing
How is SoF is Satisfied–Writing?
Not Art 2–the writing satisfies the SoF if it satisfies all material terms test–who and what. Must be signed by the defendant (person asserting the defense)
Art 2–contract must indicate that there is a contract for the sale of goods and state a quantity. Must also be signed by the defendant, unless they are both merchants and there is delay in responding.
Merchant to Merchant delay in responding: if you have writing between two merchants, signed by signed by P (not asserter of SoF) and the D did not respond within reasonable time–that will satisfy
SoF also satisified by
Estoppel (reliance), and judicial admission
What happens when an otherwise valid contract for the sale of goods does not state a price?
Price may be left open and if parties cant work it out by later negotiations, court will decide on a reasonable price.
Accord and Satisfaction
Where one party agrees to accept a different performance than that contemplated by the contract, satisfaction is performance of modified accord.
Modified Pre-existing Duty Rule
Modification of valid K without consideration is OK if fair and equitable given change in circumstance
the SoF and authorization to enter into contract for someone else?
neccesary for authorization to be in writing when contract itself would need to be in writing.
Contract Modification and SOF
If deal with alleged change would be within the SoF, then then alleged modification must be in writing.
changing from a 3 year lease to a 1 year least= no writing.
From 1-3 you would need a writing.
Contract provisions requiring all modifications to be in writing
Common law: ignore they are not effective.
UCC-effective unless waived
Ilegaility and Contract Enforcement
Cant enforce ilegal contract, but if purpose is illegal while subject matter is legal–it is OK as long as P did not have reason to know about ilegal purpose.
Public Policy and Contract Enforcement
Courts refuse to enforce
- non compete clauses.
- exemptions from tort liability for intentional or reckless conduct.
Misrepresentation
- statement of fact before the contract by
2. one of parties or agent 3 that is false 4. that is fraudulent and 5 that induces the contract.
Nondisclosure
no duty to disclose unless there is a fiduciary relationship
Duress
can be physical or economic.
you need an improper threat and a vulnerable person who has no reasonable alternative.
Unconscionablity
RARE! unfair procedural surprise–at time of agreement, and oppressive terms.
Ambiguity in Terms
PICK UP HERE PAGE 33
Specific Performance
Is avaiailable when 1) valid contract 2) legal remedy is inadequate (3) enforcement is feasible and 4) mutuality of remedy is present
Available for Sale of goods where good is unique and replacement or money damages will not suffice
When can a promisor assert a promisee’s defence against a creditor?
If promisor has made an absolute promise to pay a third party beneficiary (not a promise to pay whatever the promisee owed_ then the promisor cannot assert the promisee’s defence
Money Damages
Need to be reasonably certain:
I foresee that L-PRINCE is reasonably certain to recover!
Expectation Damages–you get what you would have gotten if contract OK. benefit of bargain damages.
Reliance Damages: if not sufficiently certain, can recover cost of performance–put plaintiff in position should would have been in if no contract had ever been formed.
Consequential Damages: reflect losses over and above standard expectation damages–arise bc of non breaching party’s particular circumstances, mostly lost profits. Recoverable only if breaching party knew or had reason to know of the special circumstances.
Incidental Damages–Contract for Sale of Goods
Consequential Damages:
reflect losses over and above standard expectation damages–arise bc of non breaching party’s particular circumstances, mostly lost profits. Recoverable only if breaching party knew or had reason to know of the special circumstances.
Incidental Damages–Contract for Sale of Goods
available for buyer and seller
expenses reasonably incurred by the buyer in inspection, receipt, transportation, and custody of goods rejected
by seller for storing, shopping, returning, re selling
Liquidated Damages
parties stipulate to ammount of damages, only enforced if 1. at time contract was formed, it would have been difficult to estimate or ascertain and the amount was a reasonably forecast
if it is too high it seems punitive–NOT ok
Buyer damages in sale of goods
where never delivered or rejected
Difference between Contract price and Market price/replacement cost PLUS incidental MINUS expenses saved as a result of breach.
if market price—market price at time buyer learns of breach.
if replace–reasonable replacement in good faith
e.g. contract to buy Beer for 100. doesn’t come, you spend 10 dollars to buy more beer for 110 dollars.
damages = 110-100 (10) + 10 = 20!
same facts but you buy beer for 90, spend 10 doing it.
damages = (100-90) + 10 = 0
Warranty Damages
buyer can recover for value of goods received minus value they would have been if delivered according to contract
Damages when seller breaches contract before due
dif between market price when buyer learned of breach and contract price
Seller of goods liable for consequential damages?
when seller had reason to know of buyer’s particular requirement and subsequent loss resulting could not be prevented by cover.
(seller knows that buyer will lose profits if he knows the goods are to be used in manufacturing, or knows that buyer typically resells)
What can seller recover when buyer breaches, or refuses to accept
- difference btwn market price and contract price (AT TIME OF DELIVERY)
- resell goods and difference between selling and contract price.
- lost profiits—contract price and loss to seller
if seller has unlimited supply then lost profits measure should be used.
Grounds for Recision
remember MUUMO
Mutual mistake of material fact
Unilateral mistake if other party new
unilateral mistake if hardship by mistaken party so extreme that outweighs all else
misrep. of fact/law relied upon
other grounds duress, illegality undue influence tc
How do third party beneficiaries rights vest?
knowledge and:
reliance,
sue
assents
Assigning
intent to immediately and completely transfer rights
recipient of rights is asignee.
person doing something is obligor.
Assignment for Value v Gratuitous
For Value–(consideration or for prexsiting debt) cannot be revoked
gratuitous can unless:
1. obligor has performed
2. reliance
something about choses.
how to revoke?
death of assignor.
notice or revocation assignor
assignor taking performance directly from the obligor.
subsequent assignment of same right
Rejection of Option Contract
rejection or counteroffer does not terminate. They can still accept orig offer within open period, except perhaps if oferreror has detrimentally relied.
Acceptance
A manifestation of assent to the terms of an offer.
Transferability of Acceptance power
Where party pays consideration to keep offer open, right to accept IS transferable. All other times,not. `
Ucc–Shipment of Nonconforming Goods
Construed as acceptance, and breach.
But, if seller sends goods as an accommodation, it is not an acceptance. (ONLY APPLIES WHERE the SHIPMENT ITSELF IS THE ACCEPTANCE)
If a contract has already been formed and accepted, an accomodation is a breach.
merchants confirmatory memo rule
if one party, w/in reasonable time after oral contract is made, sends other party a weitten confirmation of it—this satisifes SOF if 1)had reaosn to know of cotents, 2 does not object w/in writing in 10 days
modern trend of contract modification for non UCC
modification ok w/o consideration if modification due to circumstances unanticipated by parties, and it is fair and equitabl
read lecture notes about PERFORMANCE
START
Frustration of Purpose
There is some supervening act leading to frustration
at time of K, parties did no reasonably forsee
purpose has been destroyed
prpose was realized by both parties wen making contract
(contract for land for a tennis tournament, gets cancled)
Executory Contract
to be discharged by recission, a K must be executory on BOTH sides.
An executory contract is a contract made by two parties in which the terms are set to be fulfilled at a later date. The contract stipulates that both sides still have duties to perform before it becomes fully executed. The contract is often in place between a debtor or borrower and another party.
Both people still have something to do
Recission
Can be oral even if contract says no.
must be written for SOF contracts, or if contarct says it must be written
NOvation
when you had 1. a previous valid contract, 2 agreement among all parties inlcuding new party to new contract 2. immediate extinguising of contractual duties as between the original contracting parties and 4. a new contract
Accord and Satisfaction (2)
accord must be supported by considaration. if new consideration is less than old, must be different/paid by third party etc
an accord will suspend the right to enfroce the original contract.
Satisfaction is performance of the accord. IT DISCHARGES THE ORIGINAL CONTRACT AND THE ACCORD.
What happens if you breach accord agreement, before satisfaction?
If debtor (person who needs to do something) breachese—other may sue on either contract
if creditor breaches accord by suing on original contract–debtor may raise accord as a defense OR wait until creditor wins on the action an then sue for breach of accord.
Breach
when promisor is under an absolute duty to perform, this absolute duty has not been discharged, failure to perform is a breach
minor v substantial breach
minor breach will not relieve aggrieved party of duty to perform–just gives damages for the beach
material breach–not reviece substnatial benefit of bargain–material! non breaching party may treat contract as at an end. right to all remedies including total damages.
Material breach of divisible contract
recovery available for substantial performance of divisiobe party
Timeliness as Breach?
failure to perform on time is not material unless K says it is of the essence, or parties intended it to be
perfect tender rule
UCC
goods must be exact or it is a breach.
right to reject is cut off by acceptance:
After a reasonable opp to inspect you indicate to seller that they confirom, you fail to reject–or do anything inconsistent with seller’s ownership” = accept.
Non monetary remedies
specific performance
–where legal remedy is inadequate.
land or rare/unique goods
covenant not to compete–where legit, reasonable in scope and duration, no public harm
Defence:
unclean hands
laches
sale to BFP
