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118 Cards in this Set

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Quasi Contract
Not a contract' legal jargon created by courts to prevent unjust enrichment of a defendant by allowing the plaintiff to seek restitution of a benefit conferred upon the defendant
Implied Contract
one formed by an indication of assent other than specific words; using water and light indicates acceptance of utility services
Void Contract
an agreement that had no legal effect and was invalid from the start, such as an agreement to commit murder
Voidable Contract
One or both parties may chose to avoid or may ratify; applied to contracts of minors
Unenforceable contract
One that cannot be enforced because of the defenses to the contract; ex. statute of limitations
Executory Contract
one in which some obligation or duty remains to be done by one or more parties
Executed Contract
A contract in which all parties have fully performed their obligations
Three criteria to create a valid, enforceable contract
1) existence of MUTUAL ASSENT
2) existence of CONSIDERATION
3) absence of DEFENSES that would prevent enforcement of the contract
Criteria for "mutual assent"
The terms of the offer must be DEFINITE and CERTAIN (identify of offeree and and a definite subject matter). It must also be communicated to the offerree. There must be an offer and acceptance
What are things that constitute a termination of an offer
1) Revocation
2) Rejection
3) Lapse of Time
4) Termination of Operation of Law
Name the types of limitations on revocation powers
1. Option
2. UCC Firm Offer
3. Detrimental Reliance
4. Part Performance of a Unilateral Contract
What is an OPTION?
It is an independent contract in which the offeror received separate consideration from the offeree to keep an offer open for a stated period of time.
What is a UCC FIRM OFFER?
A firm offer by a merchant to buy or sell goods, represented by a signed writing that promises to hold the offer open for a stated time, cannot be revoked for lack of consideration during that time.
What is DETRIMENTAL RELIANCE?
Detrimental reliance prevents revocation of an offer for a reasonable time when the offeror should expect that the offeree would rely on the offer to his or her detriment.
What is PAST PERFORMANCE OF A UNILATERAL CONTRACT?
Where a performance has been started but is not complete, it would be unfair to allow the offeror to revoke the offer
3 Common Law Rules regarding acceptance of a contract
1. Statements by the offeree that make implicit terms explicit do not prevent acceptance

2. A grumbling acceptance is valid

3. A request for clarification does not necessarily indicate a rejection and counteroffer
UCC rules regarding acceptance
1. Consistent terms - the additional terms proposed in the offerree's acceptance become terms of the resulting contract (do not materially alter the contract)

2. Inconsistent terms - the additional terms proposed materially alter the contract

3. Either party can avoid effects of 2-207 - Either offeror or offeree can respond with clear rejection and counter-offer
What is UCC 2-207?
Unlike common law rules, this says that a proposal of additional terms by the offerree does not constitute a rejection
How ACCEPTANCE is communicated
1. Common law
2. UCC and Second Restatement
3. Mailbox rule
4. Acceptance by Unauthorized Method
5 Crossing offers
How can someone accept a contract without communication?
1. Express waiver
2. Silence as acceptance
How can you accept a contract with silence?
1. the offerree had a reasonable opportunity to reject them

2. offerree should have known that the offeror expect to be compensated
What is an express waiver?
An offer, by its terms, may waive any communication of acceptance.
What is the mailbox rule?
Acceptance by mail or by a similar medium creates a contract at the moment of posting, properly and stamped
unless

1) the offer stipulates that acceptance is not effective until received

2) An option contract is involved (acceptance under an option contract is effective only upon receipt)
How can one accept a contract under common law?
Whether an acceptance became effective upon dispatch or upon receipt depended upon whether the offeree use an authorized method of communication under common law rules
How can one accept a contract by unauthorized method?
If an acceptance is sent by an unauthorized method (or improperly sent by an authorized method), it still may be effective if it is actually received by the offeror while the offer remains open.
How can one accept a contract through UCC and Second Restatement rules?
Under UCC, an offer may be accepted by any "medium reasonable in the circumstances." The offeror still may limit acceptance to a particular method but must do so clearly.
How can one accept a contract through crossing offers?
If offers containing exactly the same terms cross in the mail, they do not create a contract despite the apparent mutual assent. An offer cannot be accepted until there is knowledge that is has been made
What are the two requirement for consideration?
1. There must be a bargained-for exchange between the two parties

2. The bargained-for exchange must provide some benefit to the promise or must provide some detriment to the promisee
When is a promise supported by consideration?
1. The promise gibes up something of value or restricts his liberty in some way (suffers a legal detriment); and

2. The promisor makes the promise as part of a bargaining process; he makes the promise in exchange for the promisee's giving of value or restriction of liberty
Types of BARGAINED-FOR EXCHANGES that lack consideration
1) Gift
2) Past Consideration or Moral Obligation
Bargained-for exchanges that may be enforceable
1) Technical Defense - if the past obligation would be enforceable except that a technical defense stands in the way, many courts will enforce the new promises if it's in writing or has been partially performed

2) Promise to Pay for Past Requested Act - both requested and unrequested acts
Preexisting legal duty
The traditional rule has been that the promise to perform (or the performance of a preexisting legal duty is not sufficient to create a contract
What are the three exceptions for preexisting legal duty's inability to possess consideration?
1. New or different consideration - if the promisee gives someting new in return for the promise she now seeks to enforce or agrees t ovary her preexisting duty in some way, there is consideration

2. Honest dispute as to duty - if the scope of the legal duty owed is the subject of honest dispute, then a modifying agreement relating to it will be given effect

3. UCC Exception
Types of legal value
A. Exceptions fo preexisting to legal duty

B. Existing Debts

C. Forbearance to Sue
What are the components of consideration?
1. Bargained-For Exchange
2. Legal Value
3. Mutuality of Consideration
What are substitutions for consideration?
1. Promises under seal
2. Promises in writing
3. Promises to pay obligation barred by law
4. Promissory Estoppel
Promise Under Seal
Substitute for Consideration

Common law recognized the seal (a wax impression of notary's mark) as a substitute for consideration
Promise In Writing
Substitute for Consideration

A promise in writing may be enforced despite the absence of consideration in a few states simply because it is in writing,
Promise to Pay Obligations Barred by Law
Substitute for Consideration
Promissory Estoppel
Substitute for Consideration
What are the three criteria to enforce a claim of promissory estoppel?
1) the promisor reasonably should have expected to induce action or forbearance on the part of the promisee 2) of definite and substantial character; and 3) the action or forbearance occurs
Mutuality of Consideration
1. Requirements and Output Contracts
2) Conditional Promises
3. Right to Cancel or Withdraw
4. Best Efforts Implied
5. Voidable Promises
6. Unilateral or Option Contracts
7. Choice of alternative contracts
What are contract defenses?
1. lack of capacity
2. lack of consent
3. Mistake
4. Illegality
5. Unconscionability
6. Statute of Frauds
7. Third Party Beneficiary Contracts
8 Assignment of Rights
9. Assignment Requirements
10. Delegation of Duties
11. Attack on validity
12. To Clarify ambiguity
13. To refute consideration
14. Subsequent Modifcation
15. UCC Rule
What constitutes "lack of consent"
Type of contract defense

1. Finding of duress
2. Undue influence
3. Misrepresentation
4. Fraud
Types of mistakes
A type of contract defense

1. mutual mistake
2. unilateral mistake
3. mistake in transmission
4. mistake in value
What is a mistake (as a contract defense)?
An assumption that is different from the facts.
What is undue influence?
A type of lack of consent

It results when the will of the dominant person is substituted for the will of the victim. Undue influence exists when a confidential relationship is used to create and unfair bargain for the victim.
What is misrepresentation?
A type of lack of consent

The innocent or negligent misstatement of a material fact made by one party and relied upon by the other party as is basis for entering into an agreement to his or her damage.
What is fraud?
type of lack of consent

an element of scienter required; if a defendant knows that what she says is false or if she recklessly disregards the truth or falsity of what she says
What is unconsionability?
A contract defense

It is an equitable theory applied to contracts which are so unreasonable that they offen the conscious of reasonable people
What constitutes unconscionability?
1. Hidden, Risk-shifting Provisions
2. Adhesion Contracts
What are types of Statutes of Fraud?
1. Executor or Administrator
2. Debts of Another
3. In consideration of marriage
4. Interest in Land
5. Performance within one year
6. Goods Priced at $500 or more
7. Satisfaction of the Writing Requirement
8. Effect of Noncompliance
What is a Statute of Fraud?
It is a statute enacted in most states that requires certain types of contracts to be in writing to be enforceable, even though all other elements of contract may be present.
What is an adhesion contract?
Type of unconscionability

Adhesion contracts are those that contain unconscionable provisions concerning procurement of necessary good, such as a car, when the buyer is unable to purchase similar items from any other seller without agreeing to a similar provision. Has no choice.
What are hidden, risk-shifting provisions?
Type of unconscionability

1) add-on clauses that subject all property of the buyer to repossession if the buyer fails to pay for a newly-purchased item

2) unreasonable liquidated damage provisions

3) disclaimers of warranty provisions

4) confession of judgment clauses, which are illegal in most states
Executor or Administrator
Statute of Frauds

An agreement by an e, a, or personal representative to pay the debts of the estate out of his own funds must be in writing
Debts of Another
Statute of Frauds

A promise to answer for the debt of another must be in writing, such as a guaranty for a loan
In Consideration of Marriage
Statute of Frauds

A promise made in inconsideration of marriage, as an inducement to marry, much be in writing
Interest in Land
Statute of Frauds

A promise creating an interest in land must be in writing
Performance within one year
Statute of Frauds

A contract which, by its terms, cannot be performed within one year must be in writing
Goods Priced at $500 or more
UCC 2-201 requires that contracts for the sale of goods of $500 or more be in writing
Satisfaction of the Writing Requirement
To satisfy the requirement of a writing there must be the following: 1) identity of the parties; 2) identity of the subject matter ; 3) the essential terms; 4) recital of the consideration; and 5) signature of the party to be charged
Effect of Noncompliance
Noncompliance with the Statute of Frauds may render the contract unenforceable.
What is an assignment of rights?
When a contract has been created and when one of the parties subsequently seeks to transfer the rights under the original contract to a third party, this transfer is accomplished by assignment
What are four exceptions of rights that cannot be assigned?
1. Obligor's Duty Changed - if assignment of rights would alter the obligor's duty substantially, assignment would be prohibited

2. Obligor's Risk Changed - when assignment would alter the obligor's risk substantially, assignment will be prohibited without the obligor's consent

3. Assignment Prohibited by Law - a right cannot be assigned if the assignment is prohibited by law

4. Assignment Prohibited by Contractual Provision - the power to assign cannot be limited by contract; however, the right to assign can be.
Types of assignment that are required to be in writing
1. assignments of wages
2. assignments of interest in land
3. assignments relating to sale of goods of $500 or more
4. Assignments of security interests under UCC's Article 9.
Partial Assignments
Contract rights may be transferred to one assignee or they may be divided and transferred to more than one assignee.
Revocability (with respect to assignments)
If an assignment is given in exchange for consideration, it is irrevocable
Effect of Assignment
The effect of assignment is to establish privity of contract between the obligor and the assignee. The assignee replaces the assignor as the real party in interest; and the assignee is entitled to performance under the contract, subject to any defenses that the obligor may have against the assignor
Successive Assignments
When the first assignment is revocable (gratuitous); a subsequent assignment will revoke the first one.
Promise versus Condition
Promise - a commitment to do or to refrain from doing an act. A promise may be unconditional or conditional. When the promise is unconditional, the failure to perform will constitute a breach of the contract.

A condition is an event, other than the passage of time, the occurrence of which will create an absolute duty to perform and the nonoccurrence of which will extinguish any cuty to perform.
What is a constructive condition?
A particular contract term may be a promise for one party and a condition for the other.
In which situations is a party's duty to perform excused?
1. Hindrance
2. Breach
3. Anticipatory Repudiation
4. Substantial Performance
5. Divisible Contracts
6 Waiver or Estoppel
What is an "excuse of condition"?
If a party's duty to perform is conditional, there is no duty to perform until the condition occurs. However, there are situation that may exist that require performance even though the conditional has not occurred. In these situations, the condition is excused>?
HINDRANCE -as excuse of condition
If a party's duty is conditioned on the occurrence of an event and that same party wrongfully prevents the event from occurring, the occurrence of the event may be excused.
BREACH - as excuse of condition
A material breach of the contract when performance is due will excuse the non-breaching party's duty to perform.
ANTICIPATORY REPUDIATION -as excuse of condition
Anticipatory repudiation occurs when a party, prior to the time required for performance indicated that he or she will not perform when performance is due
SUBSTANTIAL PERFORMANCE as excuse of condition
The condition of full performance often may be excuse if a party gives substantial performance.
DIVISIBLE CONTRACTS - as excuse of condition
Where a party performs one of the units of a divisible contract, she is entitled to the agree equivalent for that unit even if she fails to perform the other units.
WAIVER OR ESTOPPEL - as excuse of condition
One who is to receive the benefit of a condition may manifest words or conduct to waive the condition. If the condition is waived and if the other party changes her position in reliance upon the waiver, the waiver will be binding (estoppel).
What are some reasons for discharge of contract duties?
1. Performance
2. Illegality
3. Impossibility
4. Impracticability
5. Frustration
6. Rescission
7. Modification
8. Substituted Contract
9. Novation
10. Accord and Satisfaction
11. Account Stated
12. Lapse
13. Operation of Law
Performance
reason for discharge of contract

A "tender of performance" made according to contract terms will discharge a party's duty to performance when the tendering party has the present ability to perform but the other party refuses to accept it.
Illegality
reason for discharge of contract

if subject of contract becomes illegal after the contract is formed, the contract will be discharged
Impossibility
reason for discharge of contract

must be objective (could not be performed by anyone) & must occur after the contract is formed

temporary impossibility suspends contract duties but doe not discharge them. Death or physical incapacity may discharge it.
Impracticability
reason for discharge of contract

the party requires to perform must encounter extreme and unreasonable difficulty or expense that could not have been reasonably anticipated.
Frustration
reason for discharge of contract

Something that happens that could not have been foreseen reasonably when the contract was formed (hurricane at Myrtle Beach; whole place a disaster area)
Rescission
reason for discharge of contract

both parties give up the right to performance by the other (have to be executory duties on both sides)

UCC says that the rescission of a contract for the sale of goods must be in writing when the original contract so requires

when one party wants to rescind and the other does, the other needs adequate legal grounds like mistake, duress, failure of consideration
Modification
reason for discharge of contract

If a contract is modified, the modification discharges those terms of the original contract that are the subject of the modification
Accord and Satisfaction
reason for discharge of contract

An accord is an executory promise by one party to give a substituted performance and by the other party to accept the substituted performance as discharge of an existing duty.

alone, it does not discharge the prior contract. rahter, it suspends the right to enforce the original contract in deference to the terms of the executory accord agreement.
Account Stated
reason for discharge of contract

an account stated is an agreement between parties concerning a final balance due from one party and payable to the other
Substituted Contract
reason for discharge of contract

A contract may be discharged by substituting a new contract in its place
Novation
reason for discharge of contract

when a new contract substitutes a different party to receive benefits and assume duties under the terms of the original contract
Lapse
reason for discharge of contract

When the duty of each party is a condition to the duty of the other party, contractual obligations may lapse if neither party performs when his performance is due
Operation of Law
reason for discharge of contract

when a party to a contract obtains judgment against the other for breach of contract, the contractual duty of performance is merged in the judgment, which discharges the contract.
What is a breach of contract?
1) a promisor is under an absolute duty to perform
and when
2) the duty of performance has not been discharged
What are different types of breaches of contract?
Material breach - if the promisee does not receive the substantial benefit of her bargain as a result of the promisor's failure to perform or as a result of the promisor's defective performance

Minor breach - if the promisee receive the substantial benefit of her bargain the promisor's defective perfomance

Timely Performance - when the defaulting party has a duty to perform immediately, her failure to perform is a breach
When can you get a remedy for a contract?
when a plaintiff hows both 1)material breach by the defendant and 2)no material breach by the plaintiff, a remedy is available to redress the breach
What are different types of contract remedies?
Damages
Specific Performance
Rescission
Reformation
Quasi-Contract
Tort Action
What are different types of damages?
Compensatory (general) damages
Consequential (specific) damages
Punitive Damages
Nominal Damages
Liquidated Damages
Compensatory damages
Awarded to a plaintiff to put her where she would have been if the contract had been performed by the other party.
Consequential damages
a plaintiff may be able to recover other losses incurred as a consequence of the breach provided that they were reasonably foreseeable at the time the contract was made; must prove a causal relationship
Punitive damages
Used to punish the defendant for bad conduct above and beyond a simple breach of contract.
Nominal Damages
May be awarded when the defendant has breached the contract but no monetary loss is proved.
Liquidated Damages
Damages agreed upon at the time the contract was formed.
How does one measure damages when it involves a sale of goods.
The UCC prescribes the remedies available to seller and the buyer
How does one measure damages regarding the sale of goods for the seller
If the buyer wrongfully rejects goods or fails to pay etc, there are six things they can do;

1) withhold delivery of the goods
2)stop delivery of the goods in the hands of a carrier
3) resell the goods and recover the difference from the defaulting buyer
4) cancel the contract
5) recover the contract price from the defaulting buyer under two conditions
6) recover ordinary contract damages for nonacceptance
Expansion of seller's remedies #5
You may recover the contract price from the defaulting buyer if 1) the goods have been accepted or, if conforming goods have been lost or damaged, within a reasonable time after the risk of loss passes to the buyer; or (b) the goods have been identified to the contract and the seller is unable to find another buyer
Expansion of sellers' remedies #6
You may recover ordinary contract damages for nonacceptance, measure as the difference between the marker price at the time and place for tender and the contract price, together with any consequential damages
What are buyer's remedies for a sale of goods contract breached?
1. cancel;
2. "cover" the purchasing substitute goods on the open market and recover from the seller the difference bw that and the contract price
3. recover specific goods identified to the contract if the buyer has paid all of a portion of the purchase price
4. Recover damages for nondelivery
5. Obtain specific performance in limited circumstances
In regards to the buyer's remedy for a sale of goods breached, how does one recover damages for non-delivery?
You measure the difference between the market price at the time when buyer learned of the breach and the contract price, together with any consequential damages.
Measure of damages: Contracts for Sale of Land
the difference between the contract price and the fair market value of the land at the time when the land was to have been conveyed
Measure of damages: Construction Contracts (owner breaches)
before it begins - builder receives profit she would have made on contract

during construction - builder receives the profit plus any costs that she incurred to date

after construction completed - builder receives the full contract price plus interest
Measure of damages: Construction Contracts (contractor breaches)
before - owner receives the cost of completion (the amount over the contract price that it will cost to complete the construction)

during - owner receives the cost of completion unless completion would entail economic waste

by late completion - Owner receives damages for loss of use (rental value) until construction i completed
What is specific performance?
An equitable remedy by which a party is ordered by a court to fulfill his or her contractual obligations. Plaintiff must demonstrate that there is no adequate remedy at law before it can be granted
What are rescission and restitution?
When a breach occurs, the non-breaching party may elect to rescind the contract

Restitution damages focus on the gains of the defendant; compensatory damages focus on the losses of the plaintiff
What is reformation?
Used in equity to correct errors in the document which contains the written terms of the parties' agreement. Cannot be used to change the terms to which the parties agreed.
What is a quasi contract?
Not a contract. It is a legal fiction created by equity courts to prevent unjust enrichment of a defendant at the expense of a plaintiff. Remedy to obtain the reasonable value of services or other performance when no contract exists.
What is a tort action?
Improper performance of a contract may results in tort liability of the injured party as well. ex: product liability; professional liability; and emotional distress