Yahtzee Flashcards
How do you determine whether an agency relationship exists?
See if consent and control are present. Requirements for an agency relationship include (1) consent by both the principal and the agent that the agent will act for the principal’s benefit and (2) that the agent is subject to the principal’s control. Authority to act for the principal can terminate in several ways, including the principal manifesting a desire to the agent to discontinue the relationship.
When is a principal bound on a contract entered into by an agent?
When the agent had authority to enter the contract (actual or apparent).
What type of authority do partners in a general partnership have?
Actual and apparent authority to bind the partnership in contracts entered into in the ordinary course of business.
What type of authority do members in an LLC have?
Actual and apparent authority to bind the partnership in contracts entered into in the ordinary course of business.
Define actual authority.
Actual authority can be express, where the agent is expressly given authority to act for the principal. It can also be implied. Implied authority is present when the principal’s conduct leads the agent to believe it has authority. This authority can be implied by custom, past course of conduct by the principal, necessity, or an emergency circumstance. This authority terminates after a reasonable time or following a change in circumstances, death, or incapacity of the principal, etc.
Define apparent authority.
The elements of apparent authority are as follows: (1) the person dealing with the agent must do so with a reasonable belief in the agent’s authority and (2) the belief must be generated by some act or neglect on the part of the principal.
What is ratification?
Even if the agent did not have authority to enter into a transaction, the principal can ratify the acts (and thus become liable) by expressly or impliedly affirming or accepting the benefit of the acts, so long as the principal knew the material facts and had capacity.
When is an agent bound to a third party on a contract?
The agent is bound to a third party on a contract he enters into with the third party if the agent had no actual or apparent authority to enter into the contract. The agent is also liable if the principal is undisclosed (i.e., the third party does not know the agent is acting on another’s behalf) or if the principal is “partially disclosed” (i.e., the third party knows the agent is acting on behalf of another but does not know the identity of the principal). The agent is bound to the principal for breach of contract if the agent acts beyond his authority.
What are the ways in which a principal can be liable for his agent’s torts?
A principal can be vicariously or directly liable for the torts committed by his agent. The agent is always liable for his own torts. The principal can recover against the agent for indemnification if the agent acts beyond his authority.
When is an employer vicariously liable?
The employer is liable in tort for the acts of an agent or employee if the agent or employee (mnemonic=SMI)
- was acting in the scope of employment;
- made a minor deviation (a detour) from employment (rather than a frolic); or
- committed an intentional tort only if it was (mnemonic=BAN) for the principal’s benefit, because the principal authorized it, or one that arose naturally due to the nature of employment. The agent is liable too under a theory of joint and several liability.
When is an employer directly liable?
The principal is directly liable for his own negligence if he negligently hired the agent, failed to fire the agent, or failed to properly supervise the agent.
What does an agent owe to a principal?
The agent owes a duty of care and a duty of loyalty (not to engage in self-dealing, not to profit without disclosure, and a duty to follow instructions). The principal may recover losses from and profits made by the breaching agent.
How do you form a general partnership?
Start your essay by stating the following: “A partnership is ‘the association of two or more persons to carry on as co-owners, a business for profit. . . whether or not the persons intended to form the partnership.’”
Profit sharing = presumption: Profit sharing creates a presumption that a person is a partner unless the profits were received in payment of a debt, rent to a landlord, wages, etc. Other indicia of a partnership include capital contributions and mutual agency. Neither a writing nor a certificate needs to be filed for a general partnership to be formed. Note that a general partnership is the default form; sometimes a general partnership is formed because a limited partnership was improperly formed (e.g., the paperwork was not filed correctly).
Note: A partner is not entitled to separate payment for services because a partner is compensted by the profits. (There are some exceptions—e.g., if agreed-upon, or a partner may be reimbursed reasonable compensation if it assists in winding up the business of the partnership.)
What are partners to the partnership?
Partners are agents and comanagers of the partnership.
Partners have equal rights to comanage ordinary affairs (e.g., signing a lease) (even if profits are not shared equally). A majority vote wins if there’s disagreement. Extraordinary matters require a unanimous vote (e.g., admitting a new partner or selling land).
What’s a partner’s liability in a general partnership?
Partners are jointly and severally liable for partnership debts.
An incoming partner is not personally liable for prior debts of the partnership (although his capital contributions can be used to satisfy such debts). Outgoing partners are personally liable for debts incurred during their time at the partnership.
What are a partner’s fiduciary duties?
Partners are in a fiduciary relationship with one another and must act in good faith. They are charged with the duty of loyalty (i.e., they may not usurp corporate opportunities for a personal advantage, engage in self-dealing, or compete with the partnership), the duty of care, and the duty to account (they must account for any profits).
What is the effect of a dissolution?
Dissolution does not end a partnership—it ends once winding up is complete.
Step one—dissociation: The dissolution of a partnership is the change in the relation of the partners. Prior creditors are entitled to personal notice of the dissolution of the partnership. Others who knew of the partnership are entitled to newspaper notice. Note that a partner can withdraw from a partnership by giving notice at any time. This will trigger dissolution in an at will partnership.
Step two—winding up: This is where partnership assets are liquidated and creditors are paid. Note that partners are still liable for any liabilities that occur during the winding up phase.
Step three—termination: this is the true end of the partnership!
What can a creditor get from a partner?
If a creditor has a claim against a partner, the creditor can obtain an interest in the partnership. This includes profits but not management or voting rights. If a creditor has a claim against the partnership, the creditor can try to collect from the individual partners.
Partners are jointly and severally liable for the obligations of the partnership. Even if a partner enters into a contract without actual authority to do so, the partnership and the partners are bound (so long as the partner had apparent authority). The creditor must obtain a judgment against the partners personally to go after each partner’s personal assets. The creditor should attempt to collect from the partnership before seeking the partners’ personal assets.
How do you form a partnership that isn’t a general partnership? What is liability like for the other kinds of partnerships?
Partnerships other than general partnerships must file a certificate with the state to be properly formed. Liability is limited.
Limited liability partnership (LLP): no partner is personally liable for the obligations of the partnership (but partners are liable for their personal torts).
Limited partnership (LP): At least one general partner must be listed on the certificate filed with the state. Limited partners have limited liability (limited to their capital contributions). General partners are liable for all partnership obligations and manage control of the business. If a general partnership converts into an LLP, then partners remain jointly and severally liable for actions that took place before the conversion.
Personal jurisdiction can be _____ or _____.
General (obtained by consent, presence, or domicile) or specific.
Personal jurisdiction has to do with what is fair to the defendant.
How do you start a Civil Procedure essay when the fact pattern discusses a case that takes place in a federal court?
Start your essay as follows: “Federal district courts may exercise personal jurisdiction to the same extent as the courts of general jurisdiction of the state in which the district court sits.”
How do you start a Civil Procedure essay when the fact pattern issue is specific jurisdiction?
State: “State courts of general jurisdiction may exercise personal jurisdiction over nonresident defendants to the extent authorized by both the state’s long-arm statute and the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution.”
Then state: “The Due Process Clause of the Fourteenth Amendment permits states to assert personal jurisdiction over nonresident defendants who have established minimum contacts with the state such that the exercise of personal jurisdiction would not offend traditional notions of fair play and substantial justice.”
Look for “purposeful availment” of the benefits and protections of the state. Then, examine the quality of the contacts with the state.
What is subject matter jurisdiction?
The power of a court to hear a certain type of case.
Federal courts are courts of limited jurisdiction—that is, they can only hear certain types of cases.
What are the three categories of subject matter jurisdiction that are tested?
(1) Federal-question jurisdiction: The federal question must appear on the face of the plaintiff’s well-plead complaint. It cannot appear in the answer. Further, the plaintiff cannot merely anticipate a federal defense in its complaint. (On the MEE, this has virtually always been tested with personal jurisdiction. And, the issue has always been the well-plead complaint rule!)
(2) Diversity jurisdiction: Cases may be brought under diversity jurisdiction only if two requirements are met: (1) there must be complete diversity of citizenship between the plaintiffs and defendants, and (2) the amount in controversy must be over $75,000.00. Note that “complete diversity” is not required for class actions; rather, minimal diversity suffices.
(3) Supplemental jurisdiction: This is an issue when there is a jurisdictional basis for one claim but not the other (e.g., a plaintiff brings a federal question claim and tacks on a related state claim). Remember that a plaintiff cannot use supplemental jurisdiction to add a claim against a nondiverse party if the sole basis for SMJ is diversity.
Where is one domiciled?
A person is domiciled “where it is her permanent home, a place where the person intends to remain indefinitely, and the place to which the person intends to return when temporarily absent.”
A corporation is domiciled both where it is incorporated and where its principal place of business is located.
Note: look to see where the party is domiciled at the time the lawsuit is filed.
When can a defendant remove a case under 1441?
Defendants (but not plaintiffs) may remove an action from state court to the federal court that geographically embraces it if the plaintiff could have initially brought the case in federal court. Generally, if the plaintiff could not have brought the case in federal court, then the defendant cannot remove it either.
Note: A defendant may not remove a case if he is sued in his home state and the only basis for removal is diversity.
Where is venue proper?
Venue is proper in a district where (1) any defendant resides if all defendants reside in the same state, (2) in a district where a substantial part of the events or omissions giving rise to the claim occurred, or (3) a substantial part of property that is subject to the action is situated.
When will a court transfer a case to a more appropriate forum?
Under Title 28, U.S.C. §1404 (2011), the federal court has authority to transfer a case to another federal district for the convenience of the parties and witnesses and in the interest of justice. The new forum must have subject-matter jurisdiction and personal jurisdiction. The court will apply the law of the transferor forum. A motion to transfer to a more appropriate forum should be denied if the case could not have been filed there to begin with. (Note: This is different than “transfer to a proper venue” where a case is filed in the wrong venue, and, if transferred, the law of the transferee court would apply. Transfer to a proper venue has not been tested on the MEE.)
What rule is summary judgment under?
Rule 56
How do you start your essay when dealing with a motion for summary judgment?
Start your essay as follows: “Federal Rule of Civil Procedure 56(a) allows a summary judgment motion to be granted only if there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Note that “a motion for summary judgment may be supported by depositions, documents, electronically stored information, affidavits or declarations, stipulations, admissions, interrogatory answers, or other materials.”
The moving party must produce evidence to show there is no genuine issue of material fact. The burden then shifts to the nonmoving party, which must then produce evidence to show that there is a genuine issue of material fact for trial. The motion is looked at in the light most favorable to the nonmoving party.
What’s a TRO?
A temporary restraining order. A TRO can be issued without notice to the adverse party (but only in limited circumstances and for a limited time). To secure a TRO without notice, the plaintiff needs to show a risk of “immediate and irreparable injury.” The TRO lasts only long enough for the court to consider and resolve a request, but not longer than 14 days (unless the court extends it for good cause or the adverse party consents to an extension). TROs are considered to be stopgap measures and last until the court decides whether to grant a preliminary injunction.
What’s a preliminary injunction?
A preliminary injunction is equitable relief with the objective of preserving the status quo. If it is granted, the matter must be tried within six months unless the parties stipulate or good cause is shown. The court must give notice to the adverse party. There are four factors to consider (mnemonic=HELP): (1) harm: the significance of the threat of irreparable harm to the plaintiff if the injunction is not granted, (2) evaluation of injuries: the balance between this harm and the injury that granting the injunction would inflict on the defendant, (3) likelihood of prevailing: the probability that the plaintiff will succeed on the merits, and (4) the public interest.
What’s work product and why does it matter if statements constitute work product?
Work product is any material prepared in anticipation of litigation. (If it is not prepared in anticipation of litigation, it is not work product!) Written statements given by witnesses might be discoverable even if they are considered work product if the other party can show substantial need and undue hardship. However, an attorney’s mental impressions are never discoverable.
We know that final judgments are generally appealable and nonfinal judgments are generally not appealable. But what are the exceptions?
Exceptions include when there are final orders in cases involving multiple claims and multiple parties and some are still pending—the other parties may be able to appeal their orders; orders involving injunctions, garnishments, and other temporary remedies; interlocutory orders by leave; and orders constituting a final judgment on collateral matters.
Define issue and claim preclusion.
Issue preclusion: issues that were actually litigated and decided and essential to the judgment in a previous case cannot be litigated again.
Claim preclusion: a claim that has been litigated to a final judgment on the merits cannot be re litigated by the parties (or their privies).
When Conflict of Laws is combined with Family Law, what issues are generally tested?
Full faith and credit: a state must recognize final judgments of other states so long as the judgment is on the merits and the other state had jurisdiction.
Recognition of marriage: A marriage which is valid under the law of the state where it was contracted will be valid elsewhere unless it violates a strong public policy of the state that has the most significant relationship to the spouses and the marriage. Some examples of what may violate public policy include incest or polygamy. Examples of what do not violate public policy include blood test requirements, marriage license requirements, and recognition of common law marriage. Common law marriage is virtually always tested when this principle is tested. So, know that if the marriage is recognized by the state where the couple entered into the marriage, it will be recognized by all other states.
Jurisdiction over divorce vs. jurisdiction over spousal support and property division: Personal jurisdiction over both spouses is not necessary to render a divorce decree. The state rendering the decree only needs jurisdiction over the plaintiff spouse. However, personal jurisdiction over both spouses is necessary to issue a binding property division order or support order. (This embodies the concept of a “divisible” divorce decree.)
Recognition of divorce: a divorce decree must be granted full faith and credit by other states if the court rendering the divorce decree had jurisdiction to enter it.
Which state’s law governs premarital agreements? Some states will apply the law of the state where the contract was executed. Other states (probably more numerous) apply the law of the state with the most significant relationship to the parties and transaction.
When Conflict of Laws is combined with Civil Procedure, what’s generally tested?
Generally the Klaxon doctrine is tested (i.e., you should know that a federal district court in a diversity case must apply the choice of law approach of the state in which it sits) or change of venue rules are tested (specifically, you should know that if a case is transferred to a more appropriate forum, the law of the transferor court will apply).
Klaxon doctrine: a federal district court sitting in diversity must apply the choice of law approach prevailing in the state in which it sits.
Change of venue: A court may transfer a case to any district court in which it could have been brought if convenience and the “interest of justice” favor a transfer. When a case is transferred to a more appropriate forum under this rule, then the new (transferee) court must apply the laws that the original transferor court would have applied (including their state choice of law rules). Note that the result is different if the case was initially filed in an improper forum and was transferred to a proper forum: in that case, the transferee court would apply its own law, rather than the law of the transferor court, since the transferor court would not have the power to hear the case in the first place.
For Conflict of Law purposes, how are statutes of limitations classified? What are the exceptions to know for these as well?
Generally, a court will apply its own procedural laws even if the substantive laws of another state are applied to the case. A statute of limitations is generally considered procedural. Generally, a court applies its own statute of limitations unless the claim would be barred by the law of the state with a more significant relationship to the parties.
Exception—borrowing statute: some states have borrowing statutes which indicate that the other state’s statute should be used in certain cases.
Exception—characterization: When a statute of limitations is specific to a particular kind of claim and was created by the law that created the cause of action to which it applies, courts will often characterize the statute of limitations as substantive. (Traditionally, this was applied only when the foreign statute barred an otherwise timely action, not when it extended the time for bringing the action.)
Exception—interest analysis: some states will simply use an interest analysis to resolve choice of law issues, including statute of limitations issues.
What’s the effect of a choice of law clause in a contract claim?
If a contract specifies the state law that it will be governed by, generally that law will apply. The Restatement (Second) of Conflict of Laws provides that the law chosen by the parties will be applied unless (1) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice; or (2) application of the law of the chosen state would be contrary to a fundamental policy of a state that has a materially greater interest than the chosen state in the determination of the particular issue and which, under a “most significant relationship” test, would be the state of the applicable law in the absence of an effective choice of law by the parties.
How do you analyze a Conflict of Law question for a tort claim?
A jurisdiction analyzes a specific tort claim under the “most significant relationship” approach found in the Restatement (Second) of Conflict of Laws. The Restatement lists four factors to determine which state has the most significant relationship to the occurrence and the parties (mnemonic=I Can’t Dance, Really). Picture someone dancing and negligently hitting someone else in the head with his arm, which happened to cross state lines and cause a tort claim to arise: (1) the place where the injury occurred; (2) the place where the conduct causing the injury occurred; (3) the domicile, residence, nationality, place of incorporation, and place of business of the parties; and (4) the place where the relationship, if any, between the parties is centered.
How do you analyze a Conflict of Law question for real property?
A court generally uses the law of the situs for land (i.e., the law where the real property is located). Occasionally, the state will characterize a dispute over real property as, say, a contract dispute, and look at which state has the most significant relationship to the property if it makes more sense in the given case.
When Conflict of Laws is tested with Decedents’ Estates, what’s generally tested?
Validity of a will: At common law, the validity of a will was determined under the law of the state where the testator was domiciled at the time of his death. Under the Uniform Probate Code (UPC), a will is valid if it complies either with the law of the state in which it was executed or with the law of the place where the testator was domiciled when he signed his will or when he died. Many non- UPC states have similar statutes.
Personal property: the postmortem distribution of personal property is governed by the law of the state in which the decedent was domiciled at the time of his death.
Real property: the postmortem distribution of real property is governed by the law of the situs (i.e., the law of the place where the property is located).
Inheritance: Whether a child is entitled to inherit depends on the law of the intestate’s domicile at the time of death. However, this is inapplicable to real property as the law governing real property is the law of the situs.
What can Congress regulate?
Congress has the power to regulate interstate commerce.
Congress can regulate the channels and instrumentalities of interstate commerce, persons and things in interstate commerce, or anything that has a “substantial effect” on interstate commerce—meaning, it can regulate anything economic or anything noneconomic that “substantially affects” interstate commerce (even if it is purely “intrastate”—i.e., within a state).
What can Congress not do?
Congress cannot “commandeer” states and force states to enforce federal laws. Congress will either have to regulate directly (if within its commerce power) or regulate indirectly by threatening to take away funding if the state does not adopt a law (under Congress’s spending power).
What can states not do?
States lack the power to discriminate against interstate commerce or unreasonably burden it. (This is known as the Dormant Commerce Clause or negative Commerce Clause.)
What are the tests to determine if a state law is constitutional?
If a law discriminates against interstate commerce, it is invalid unless the state can show that the law was necessary to serve a compelling state interest and there is no reasonable nondiscriminatory alternative (strict scrutiny). ***A state law that discriminates against interstate commerce is usually unconstitutional.
If a state law is nondiscriminatory on its face (i.e., it imposes the same burden on those in-state and out-of-state) but it still burdens interstate commerce, it is valid only if it serves an important state interest and does not impose an unreasonable burden on interstate commerce. ***A state law that merely burdens interstate commerce is more likely to be constitutional.
What’s the exception to the Dormant Commerce Clause?
The market-participant doctrine (i.e., the state is acting as a market participant or business rather than regulator). If the state is acting as a market participant, it is allowed to favor its own residents.
What gives Congress the power to enforce constitutional rights?
Congress’s powers are limited to those given to it by the Constitution. It has the power to enforce constitutional rights under its enforcement power found in the Thirteenth, Fourteenth, and Fifteenth Amendments, but it does not have the power to expand rights
What’s required in order to sue under the First, Fourteenth, or Fifteenth Amendment?
State action.
General rule: If a plaintiff is suing under the First, Fourteenth, or Fifteenth Amendment (for free speech, due process, Equal Protection Clause issues, or voting rights) the plaintiff needs to find a government actor or action “fairly attributable to the government.” (One cannot sue a business or a private individual for, say, violating one’s free speech rights under the First Amendment.)
State action: state action is present when a state passes a law, when a state permits its officials to take action, when a private actor is performing a traditional and exclusive government function (e.g., conducting elections, or running a company town—this is pretty narrow), or when private action is closely controlled by the state.
What are the three standards to be aware of with the Equal Protection Clause?
Strict scrutiny: The government must prove that the law is narrowly tailored (necessary) to achieve a compelling interest. (The government usually loses under a strict scrutiny analysis.) Strict scrutiny applies to fundamental rights, racial or ethnic discrimination, and alienage when the classification is made by the state (though there are exceptions for alienage where strict scrutiny does not apply—e.g., if the public function doctrine applies or if the law regulates illegal aliens).
Intermediate scrutiny: The government must prove the classification is substantially related to an important government interest. This applies to classifications regarding gender and illegitimacy.
Rational basis: The plaintiff must prove that the law is not rationally related to a legitimate government interest. (The plaintiff usually loses.) This applies to every other classification—poverty, wealth, age, education, etc.
How do you start a freedom of speech essay?
Start your essay as follows: “The First Amendment applies to the states through the Due Process Clause of the Fourteenth Amendment.” Remember, there must be a government regulation of private speech.
What’s the standard used for content-based or viewpoint-based discrimination?
Strict scrutiny means that the government must show that the regulation is necessary to serve a compelling state interest and is narrowly tailored to that end. The government faces strict scrutiny if it engages in content-based discrimination (forbidding communication about certain ideas) or viewpoint based discrimination (forbidding communication about a certain viewpoint).
When is a law regulating symbolic speech constitutional?
A law which regulates conduct and places an incidental burden on speech is constitutional if the regulation is narrowly tailored to an important governmental interest and is unrelated to the suppression of the speech.
What are unprotected forms of speech and what standard must they pass?
A law regulating unprotected speech needs to pass rational basis scrutiny. The following categories of speech are not protected under the First Amendment:
- Speech inciting immediate lawless or violent behavior (“clear and present danger”): speech that is directed at inciting and likely to incite imminent lawlessness.
- Fighting words: words likely to incite an immediate violent reaction.
- True threats or words as conduct: defamation, harassment, and other forms of “words as conduct.”
- Obscene speech: The test for obscenity examines whether the speech appeals to a prurient interest in sex, whether it depicts or describes sexual conduct in a patently offensive way, and whether it lacks serious literary, artistic, political, or scientific value. Obscene speech is not usually tested.
What speech is protected but a little less than fully protected speech?
Commercial speech: the law must meet the Central Hudson test, which states that (1) the speech must be lawful and not misleading, (2) the statute must serve a substantial governmental interest, (3) the statute must directly advance that interest, and (4) the statute must be narrowly tailored.
Sexual or indecent speech: the law must serve a substantial governmental interest and leave open reasonable alternative channels of communication.
Time-place-or-manner restriction: A restriction in a public forum—i.e., one historically associated with free speech rights (e.g., streets, sidewalks, parks), or a designated public forum (e.g., a school that opens its doors to after-school activities) must be content neutral, narrowly tailored to serve an important governmental interest, and leave open alternative channels of communication. A restriction in a nonpublic forum (e.g., airports, government workplaces, etc.) must be viewpoint neutral and reasonably related to a legitimate governmental interest.
What’s the standard for speech in public schools?
Students have free speech rights; however, speech in schools may be regulated so long as the regulations are reasonably related to legitimate pedagogical (educational) concerns.
What types of general speech regulations will be deemed unconstitutional?
There is a presumption against a prior restraint (stopping speech before it happens). If a law is overbroad (prohibits substantially more expression than necessary) or vague (a reasonable person could not tell what is prohibited by the law), it is unconstitutional.
What are the rights of the press and rights of corporations when it comes to speech?
Rights of the press: The press has no greater free speech rights than anyone else. The press may publish information that is lawfully obtained and that is a matter of public concern.
Rights of corporations: independent political expenditures by a for-profit corporation constitutes free speech protected by the First Amendment.
What’s eminent domain and what’s the constitutional basis for it?
Neither the federal government nor the state may take private property for public use without just compensation. This arises from the Fifth Amendment and is applied to the states through the Fourteenth Amendment. A “public use” is defined broadly and may include giving land to a private party for commercial development.
A taking can be physical or regulatory (e.g., an exaction). A physical taking occurs when there is a permanent physical occupation regardless of what public interests it may serve.
When a regulation deprives an owner of all economically beneficial use of her property or destroys all reasonable investment-backed expectations, it is a taking.
An exaction exists when the government enacts a regulation that restricts the owner’s use of a property as a condition to allowing the owner to develop the land. These are takings unless the government can show a legitimate government interest and “rough proportionality” (i.e., the adverse impact of the proposed development is roughly proportional to the loss suffered by the property owner).
What does the Eleventh Amendment do?
The Eleventh Amendment precludes a federal court from exercising jurisdiction over a suit by a private party seeking to recover damages from the state. There are exceptions to this (e.g., if a federal statute properly abrogates immunity).
How do you start an essay dealing with Article 2 of the UCC?
Article 2 of the Uniform Commercial Code (UCC) applies to transactions in goods. Goods are “things moveable” at the time of identification to the contract. A contract under Article 2 may be made in “any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”
What is needed to form a contract?
Offer, acceptance, and consideration.
Define offer.
Offer: A person makes an offer when the person communicates to another a statement of “willingness to enter into a bargain” so that the other understands that “his assent to the bargain is invited and will conclude it.” The terms of an offer need to be reasonably certain (e.g., as to parties, subject matter, price, etc.).
Compare—counteroffer: under common law, a statement is a counteroffer, rather than an acceptance, when the terms of the initial offer are changed—e.g., when a condition is added to the purported acceptance (mirror-image rule).
Promise to hold offer open: Generally, an offer may be revoked before acceptance. A promise to hold an offer open requires consideration in order to be binding (unless the UCC firm offer exception applies).
Define acceptance.
An acceptance is a manifestation of assent to the terms of an offer made in a manner invited by the offer. It is effective upon dispatch (the mailbox rule).
Compare—rejection: A rejection is a manifestation of intent to not accept the offer. It terminates the offeree’s power to accept an offer. It is effective when received by the offeror. Note: if a rejection is sent and then an acceptance is sent, whichever the recipient receives first is effective.
Define consideration.
Consideration: Consideration is a legal detriment or bargained-for exchange. A promise to make a gift does not constitute consideration.
Preexisting-duty rule: Under common law, promising to perform a legal duty already owed to a promisor is not valid consideration. Exceptions include if the duty is changed (even slightly), unforeseen circumstances, etc.
- Material benefit: some states recognize an exception to past consideration limitations in which a promise is made after receipt of a significant benefit (usually the promise arises after a benefit received in an emergency situation).
UCC: under the UCC, only good faith is needed to modify a contract.
Promissory estoppel is a substitute for consideration. If there is (1) a promise, (2) reliance that is foreseeable and justifiable, and (3) enforcement is necessary to avoid injustice, the promise will be enforced.
What’s the difference between performance obligations under common law and Article 2?
Performance obligations: Under common law, a party must “substantially perform” its contractual obligations in order to demand performance (usually payment) from the other party. Courts will look at several factors to determine whether performance was substantial. Note that this is different from UCC Article 2, which requires perfect tender for one-shot deals.
Exception—divisible contracts: A contract is divisible so long as (1) it is apportionable and (2) the parties would have contracted for each part separately. A party that performs one or more parts of the contract may collect payment for those parts even if he does not substantially complete performance of his duties.
What’s the difference between a buyer’s ability to reject goods versus his revocation of acceptance of goods?
Rejection of goods: A buyer can generally reject goods for any reason under the perfect-tender rule. (There are exceptions to this—e.g., installment contracts.)
Revocation of acceptance of goods: If a buyer accepts the goods, he can no longer reject them. However, in certain circumstances a buyer can revoke his acceptance of the goods. The buyer can do this when: (1) the nonconformity substantially impairs the value to him; (2) he accepted the goods because he had a reasonable belief that the nonconformity would be cured (and it was not), or he did not discover the nonconformity because the nonconformity was difficult to discover, or because of the seller’s assurances; (3) he revokes within a reasonable time after he discovers or should have discovered the nonconformity; and (4) he revokes before any substantial change in condition of the goods which is not caused by their own defect. A buyer who revokes acceptance of goods may recover the purchase price that has been paid.
What’s the difference between anticipatory repudiation and prospective inability to perform?
The difference between anticipatory repudiation and prospective inability to perform is truly one of degree.
Anticipatory repudiation: This occurs when there is an unequivocal manifestation by one party to the other that the party cannot or will not perform its obligations under the contract (a mere expression of doubt is not enough) and this statement is made before the repudiating party’s performance is due. The other party may wait for a reasonable time for performance or resort to any remedy for breach of contract.
Prospective inability to perform: This occurs when a party has reasonable grounds for insecurity that the other party is unable or unwilling to perform. This is merely doubt, it does not rise to the level of an anticipatory repudiation. Under the UCC, the party may then, in writing, demand adequate assurance of performance, and until she receives such assurance, may suspend her performance. If such assurance is not given within a reasonable time, not exceeding 30 days, the other party may treat it as a repudiation.
Retracting a repudiation: the party who has repudiated can retract his repudiation unless the other party cancelled the contract, materially changed his position in reliance on the repudiation, or indicated that she considers the repudiation to be final.
