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79 Cards in this Set
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Contract
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1) An exchange of promises or an agreement
2) Creating a duty of performance 3) Enforceable at law Includes: Offer - Acceptance - Consideration |
3 parts
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Offer
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1) A communication to an offeree; which
2) Proposes certain and definite terms; and 3) Expresses a present intent to enter into a binding contract. |
Communication
Definite & Certain Terms Intent to be Bound |
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Contract Formation
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A valid contract requires an offer, acceptance, and mutual consideration.
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Definite and Certain Terms
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QTIPS
Q - Quantity T- Time I - Identity of Parties P - Price S - Subject Matter |
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Communication of Offer
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Offeree must be aware of the offer. Where someone returns a lost item without knowledge of the reward, there is no contract. If knowledgeable of reward, there is a unilateral contract.
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Revocation
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A revocation is words or conduct by an offeror, revoking an offer, which is effective when received by the offeree.
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Words conduct
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Indirect Revocation
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Acts which are inconsistent with a continued willingness to maintain the offer, and the offeree receives this information from a reliable third party.
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Limitations on Power of Revocation
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UCC Merchant's Firm Offer
Option Contract Offeree Detrimental Reliance - where offeror could reasonably expect offeree would rely on the offer Part Performance on Unilateral Contract |
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Rejection of Offer
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An express rejection or counter offer. Rejection is effective when it is received.
Lapse of time - reasonable amount of time. |
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Acceptance
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An acceptance is a manifestation of assent to the terms of the offer as authorized in the offer.
An acceptance is judged by an objective standard - would a reasonable person think there was an acceptance. |
manifestation of assent
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Mirror Image Rule
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At common law, an acceptance must mirror the offeror's terms or it is a counter offer.
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Mailbox Rule
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If an acceptance is by mail or similar means and properly addressed and stamped, the acceptance is effective on dispatch.
Exceptions include stipulations in offer, option contracts or crossing or conflicting acceptance/rejections. |
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Consideration
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A bargained for legal detriment between parties.
Elements are (1) bargained for exchange and (2) legal value. |
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Mutuality
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Consideration must exist on both sides of the contract. The promise to act without definiteness is illusory, and not consideration.
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Promissory Estoppel (or detrimental reliance) elements required for substitute as consideration:
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Promissory estoppel (or detrimental reliance) is a sufficient substitute for consideration, but requires these elements:
1) A promisor should reasonably expect her promise to induce forbearance or action (as in subcontractor/contractor bid). 2) Action must be of a substantial or definite character 3) Such action or forbearance is in fact induced. |
Promise of train in bedroom
1) I reasonably expected my promise to induce action by O to sleep / forbearance to stay awake 2) Action / promise was substantial and definite- train running around room cieling 3) O did in fact fall asleep (action / forbearance induced) |
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Unconscionability
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A contract is voidable where the clauses are so one-sided as to be unconsionable (shocks the conscience).
Tested as of the time of contracting, and includes contracts of adhesion with unequal bargaining power. |
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Statue of Frauds - Contract Enforcement Defense
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MY LEGS
M - Marriage - promises made in consideration of marriage. Y - Year - contract not capable of being completed within one year L - Land - promises creating an interest in land require writing E - Executor - promises to pay estate debts out of their funds G - Goods - goods for sale over $500, with certain exceptions. S - Surety debt - promises to answer for debt of another. |
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Contract Memorandum Requirements
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A written memorandum must show the following items. It can be more than one document, or can be correspondence.
1) Quantity 2) Time 3) Identity of parties 4) Price 5) Identification of contract Subject Matter 6) Recital of Consideration 7) Signature of the party to be charged (or agent). |
QTIPS + ROC & SIG
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Parol Evidence Rule
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Where a contract is reduced to a writing, it will be only admissible evidence of that agreement. All prior or contemporaneous agreements regarding the contract are inadmissible to alter the contract.
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prior or contemporaneous
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Specific Performance
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Cha Cha Is My Favorite Dance
C - Contract C - Certain and definite terms I - Inadequate legal remedy (inadequate to protect the injured party). M - Mutuality of remedy not required, only performance. F - Feasibility - it must be feasible for the court to order and enforce it. D - Defenses - must not be any (Laches and Unclean hands) |
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Accord
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A contract in which an obligee agrees to accept a stated performance in satisfaction of the obligor's existing duty.
Satisfaction occurs when the stated performance is rendered. |
Obligor's existing duty.
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Rule of Substantial Performance
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Where performance of duties is almost complete, but a party has breached in some minor way, the rule of substantial performance avoids forfeiture of the return performance.
The breaching party must still pay damages for completion of performance. |
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Frustration of Purpose
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Discharge of duties under a contract where the purpose of the contract no longer exists. Requires:
1) A supervening event 2) The event was not reasonably foreseeable at the time of contract 3) Purpose of the contract was understood by both parties (renting a balcony to watch a parade which is cancelled). |
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Compensatory Damages
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The standard measure of damages for breach of contract. They are awarded to place the plaintiff in the position she would have been in had the contract been performed.
"The benefit of the bargain." |
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Liquidated Damages
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Damages provided for in the contract by the parties.
Only enforceable if, at the time of contracting, the actual damages would be extremely difficult to ascertain AND the amount stipulated was a reasonable forecast of the actual harm. Must not amount to a penalty. |
At the time of contracting - actual damages extremely difficult AND reasonable forecast.
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Consequential Damages
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Damages as a consequence of a material breach of the contract. They are disfavored in contract, and generally not awarded without:
1) Foreseeability - such damages would be a natural result of breach of contract, or where specific notice was given. 2) Damages must be reasonably certain. 3) Where possible, there must be mitigation of such damages. |
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Implied in Fact Contract
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An agreement which is reached by parties actions rather than words. Example: Dr. visit and payment.
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Unilateral Contract
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A contract where only one party makes a promise to perform, and the other party is free to act or not in order to form the contract.
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Acceptance Sent, Then Rejection
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Acceptance is effective on dispatch, unless the rejection arrives first AND the offeror detrimentally relies.
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Rejection Sent, Then Acceptance
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Whichever arrives first is effective.
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Breach
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If the promisor is under an absolute duty to perform, and the duty is not discharged, then failure to perform in accord with the contract is a breach.
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Material Breach
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The nonbreaching party does not receive the SUBSTANTIAL BENEFIT OF THE BARGAIN.
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Contract Approach
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A ll - Applicable law (moveable goods v. real property and services)
F earless - contract Formation - offer, acceptance, consideration, defenses S tudents - Statute of frauds defense? P lan - Performance issues - duty to perform, discharge, breach T heir - Third party issues R esponses - Remedies? - Expectancy, consequential, liquidated, nominal |
Fearless
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Mutual Assent
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One party must accept the other's offer - did words or conduct manifest a present intent to contract?
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Contract Formation
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Requires an offer, acceptance and consideration.
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Voidable Contract
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One party may elect to avoid a contract or avoid ratifying a contract (e.g., a minor).
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Contracts for Real Estate
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They require an identification of the land and a price.
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Contracts for Sale of Goods
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The quantity must be certain or be capable of being made certain.
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Contract for Employment
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The duration of employment must be specified.
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Option Contract Termination
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Offeree purchases the time to think about making the deal. The offer is therefore irrevocable for the stated time.
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Offer and Detrimental Reliance
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Where the offeror could reasonably expect offeree would rely on the offer to her detriment, it will be held open as irrevocable as an option contract for a reasonable time.
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Part Performance on Unilateral Contract
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Once the offeree has begun performance on a unilateral contract, the contract will be implied for a reasonable time. The offeree is given a reasonable time to complete performance during which time the offer is irrevocable.
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Contract Termination by Law (Excuses)
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Infancy - K is voidable by child under 18.
Insanity - under guardianship or adjudicated insane Intoxication - voidable if other party knew of intoxication. Illegality - no enforcement of illegal contracts unless contract is divisible. |
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Objective Theory of Contract
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An acceptance must be communicated to the offeror. Such acceptance is objective in that the evaluation is whether a reasonable person would think there was an acceptance.
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Offeror Sends Offer and Then Revocation
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Mailbox rule applies - revocation is effective only on receipt. If revocation is received first then there is no contract.
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Offers Crossing in the Mail
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No contract since an offer cannot be accepted if there is no knowledge of the offer. This is true even where the offers are the same and there is an apparent meeting of the minds.
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Silence of Acceptance
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Silence is not an acceptance. However, where the offeree silently takes a contract benefit, courts will usually find acceptance, especially where there is prior dealings or trade practices.
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Unilateral Contract
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A unilateral offer is contemplated where an offer makes acceptance conditional on a stipulated act.
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acceptance conditional on a stipulated act
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Bargained for Exchange
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Parties in a contract must exchange something. In a bilateral contract, they exchange promises. In a unilateral contract, they exchange a promise for an act.
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Preexisting Legal Duty
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Promising to do something one is already obliged to do is insufficient consideration.
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Forbearance to Sue - Consideration
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If a claim is valid or claimant believes in good faith and reasonably that it is valid, forbearance of the legal right to have a claim adjudicated is a detriment and constitutes consideration.
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Requirement Contract
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A promise to buy "all that I require." It is an enforceable promise.
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Output Contract
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Promises to sell "all that I manufacture" is an enforceable promise.
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Defenses to Enforcement of Contract
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1) Unconscionability
2) Statute of Frauds |
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Rules of Contract Construction
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A contract is construed as a whole, and according to the ordinary meaning of words. Ambiguities are construed against the party preparing the contract.
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Merger Clause
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A clause which states that the contract is a complete expression of the parties agreement. This strengthens the presumption of contract finality.
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Total Contract Integration
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Enhanced by presence of a merger clause.
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Parol Evidence Exceptions
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1) Formation defects - fraud, duress, mistake, illegality
2) Existence of a condition precedent 3) Parties' intent regarding ambiguous terms 4) Consideration problems 5) Prior valid agreement which is incorrectly reflected in the writing. 6) A collateral agreement if it does not contradict or change the main contract. 7) Subsequent modifications |
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Basic Questions of Performance
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1) Has a present duty to perform arisen (all conditions met or excused).
2) Has the duty to perform been discharged (either performance or pay damages unless performance excused). |
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Anticipatory Repudiation
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Anticipatory repudiation is a definite and unequivocal expression of intent by a party to a contract that they intend to not perform on the contract.
If the promisee has completely finished his part of the bargain, he can't sue under anticipatory repudiation. |
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Alternative Responses to Anticipatory Repudiation
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1) Treat contract as totally repudiated and sue immediately
2) Suspend own performance and wait until performance is due to sue 3) Ignore the repudiation and urge performance and request adequate assurances. |
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Duty to Performed Discharged
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1) Impossibility - no one can perform under the contract.
2) Impracticability - extreme and unreasonable difficulty or expense that was not anticipated by the parties. 3) Frustration of purpose - a supervening event which completely or almost completely destroys the purpose of contract. |
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Alternatives of Material Breach
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1) Treat the contract at an end
2) Immediate right to all remedies for breach. |
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Timeliness of Performance and Breach
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Failure to perform by the time stated in the contract is generally not a material breach if performance is rendered in a reasonable time. However, if time is of the essence, then a material breach.
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Compensatory Damages
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AKA legal damages.
1) Expectancy damages (general damages) - the benefit of the bargain. 2) Consequential damages (special damages) - Hadley v. Baxendale - foreseeability. 3) Reliance damages - money paid out by non-breaching party. 4) Liquidated damages - only reasonable estimates reasonably anticipated. 5) Nominal damages - not really compensatory but only for recognition of breach. |
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Restitution
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Nonbreaching party may rescind the contract and sue for damages at law or equity. If a benefit was provided by non-breaching party while attempting to perform, nonbreaching party is entitled to restitution of benefit transfered.
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Quasi-Contract
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Where no contractual relief is available under the rules. Usually involves a failed contract or no contract at all.
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Impracticability of Performance
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A party encounters 1) extreme and unreasonable difficulty or expense that was 2) not anticipated. An unforeseen change which fundamentally alters the nature of the performance, due to extreme cost or time required to perform.
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extreme an unreasonable
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Impossibility of performance
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An unforeseen change which FUNDAMENTALLY alters the nature of the performance, due to extreme cost or time required to perform.
1) Unforeseen difficulty 2) Fundamentally alters performance due to extreme cost or time required to perform. |
1) Supervening event
2) Unforeseen 3) Resulting in extreme and unreasonable difficulty in performance |
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Mistake
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A defense to contract formation.
1) Both parties mistaken 2) A basic assumption of the K 3) Mistake has a material effect on the K. 4) Adversely affected party did not assume the risk. |
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Damages must be ...
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Causal, Foreseeable, Certain and Unavoidable (CFCU)
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Replevin in Contract
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1) Property must be sufficiently identified in the contract
2) Plaintiff must not be able to cover despite reasonable attempts to do so. |
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Partial Integration
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No evidence of prior or contemporaneous agreements or negotiations may be admitted if the evidence would contradict a term of the writing
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Total Integration
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No evidence of prior or contemporaneous agreements or negotiations may be admitted which would either contradict or add to the writing
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Contradict or Add
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Contract Modification
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At C/L it requires:
1) Mutual assent 2) Consideration UCC Requires: 1) SOF 2) Mutual Assent 3) Good Faith |
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Battle of the Forms - Additional Terms
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The UCC rule for new terms in the acceptance.
1) Additional terms okay if: a) Offer does not exclude them b) Do not materially alter agreement c) Offeror does not object w/in 10 days |
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Battle of the Forms - Different Terms
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The UCC rule for different terms operates under split in authority:
1) Some courts treat as additional 2) Knockout rule - conflicting terms knock each other out and term is provided by UCC as a gap filler. |
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Battle of the Forms - Additional Terms
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The UCC rule for new terms in the acceptance.
1) Additional terms okay if: a) Offer does not exclude them b) Do not materially alter agreement c) Offeror does not object w/in 10 days |
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Battle of the Forms - Different Terms
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The UCC rule for different terms operates under split in authority:
1) Some courts treat as additional 2) Knockout rule - conflicting terms knock each other out and term is provided by UCC as a gap filler. |
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