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152 Cards in this Set
- Front
- Back
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Overview: "Armadillos From Texas Play Rap, Eating Tacos"
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1. Applicable law
2. Formation 3. Terms of contract 4. Performance 5. Remedies for unexcused nonperformance 6. Excuse for nonperformance 7. Third-party problems. |
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Types of Contracts:
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1) UNILATERAL
2) BILATERAL 3) QUASI CONTRACT |
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What is a Unilateral Contract?
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Results from an offer that expressly requires performance as the only possible method of acceptance
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What is a Bilateral Contract
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All contracts UNLESS 1) reward, prize, contest; 2) offer expressly requires performance for acceptance.
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What is a Quasi Contract?
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This is an equitable remedy (contract law doesn't really apply).
Elements: 1) P has conferred benefit on D; 2) P reasonably expected to be paid; 3) D realized unjust enrichment if P not compensated. |
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What is the measure of recovery under Quasi Contract?
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The value of benefit conferred (NOT the contract price, although contract price is the ceiling if P is in default)
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A: What is the Applicable law?
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1) Common law (general rules)
2) Article 2 of the UCC (applies to sale of goods) |
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A: How to determine if UCC applies?
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Applies if it is a sale of goods (not real estate or services contract)
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A: what if it's a mixed deal?
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Apply the "All or Nothing" & "More Important Part" rules.
However, if contract divides payment, then UCC applies to sale of goods and CL applies to the rest. |
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F: Overview of formation:
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A contract is an agreement that is legally enforceable. Look first for agreement and then at whether or not it's enforceable (offer, acceptance, consideration)
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F: What is an offer?
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A manifestation of an intention to contract -- words or conduct showing commitment.
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F: What is the test for determining if an Offer was made?
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Whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract.
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F: What are the requirements of an offer to sell Real Estate?
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Must have:
1) Price AND 2) Description of the land |
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F: What are the requirements for a sale of goods offer?
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No price terms necessary. (If absent, there is an inference that parties will decide it later).
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F: What if terms are vague or ambiguous?
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No offer (Ex. "appropriate", "fair", "reasonable")
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F: What are the Requirements for a Requirements contract/Output contract?
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A contract for the sale of goods can state the quantify of goods to be delivered under the contract in terms of the buyer's requirements or seller's output.
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F: May a buyer increase his requirements?
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Yes, so long as the increase is in line with prior demands (Not unreasonably disproportionate)
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F: Is an advertisement an offer?
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General Rule: NO
Exceptions: may be an offer IF -- 1) it is in the nature of a reward; OR 2) it specifies quantity and expressly indicates who can accept. |
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F: What happens if an offer is terminated?
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The offer cannot be accepted.
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F: How is an offer terminated?
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1) Lapse of time (time stated or reasonable time)
2) Death of party prior to Acceptance (Exception: Irrevocable Offers) 3) Revocation (Words or Conduct of Offeror) 4) Rejection (Words or conduct of Offereee) |
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F: How is an offer REVOKED?
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1) Unambiguous statement by offeror to offeree of unwillingness or inability to contract; OR
2) Unambiguous conduct by offeror indicating unwillingness or inability to contract that the offeree is aware of |
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F: How is an offer REJECTED?
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1) Counteroffer (But NOT bargaining)
2) Conditional Acceptance (look for "if," "only if," "so long as," etc.) 3) Additional Terms to a Common Law Contract (Mirror Image rule) |
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F: What about additional terms to a UCC contract?
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1) Generally considered to be an acceptance.
2) Additional terms will be part of the contract ONLY IF: a) both parties are merchants; b) additional term is not material; AND c) the additional term is not objected to by offeror. |
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F: Which Offers are irrevocable?
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1) Option
2) UCC Firm Offer Rule 3) Detrimental Reliance 4) Start of performance in a Unilateral Contract |
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F: What is an Option?
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An offer that includes:
1) promise to keep it open AND 2) that promise is supported by payment or other consideration. |
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F: What is the UCC Firm Offer Rule?
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Offer cannot be revoked for up to 3 most IF:
1) offer to buy or sell goods; 2) signed, written promise to keep offer open; AND 3) party is a merchant |
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F: What is Detrimental Reliance?
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1) Reliance that is
2) Reasonably Foreseeable and 3) Detrimental |
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F: What is the method of acceptance?
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1) The offer can control the method of acceptance
2) If silent there are several possible acceptance fact patterns. |
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F: Acceptance Pattern #1 -- what if the offeree starts to perform?
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General rule: start of performance is an acceptance of bilateral contract.
Exception: Start of performance is NOT acceptance in unilateral conract |
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F: Acceptance Pattern #2 -- what if there is distance and delay in communications?
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MAILBOX RULE:
1) all communications other than acceptance are effective only when received 2) Acceptance is generally effective when mailed. 3) if a rejection is mailed before an acceptance is mailed, neither is accepted until received 4) cannot use mailbox rule to meet an option deadline |
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F: Acceptance Pattern #3 -- The seller sends the wrong goods?
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General Rule: acceptance and breach.
Exception: Accommodation = counter offer, no breach. |
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F: Who can accept?
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1) A person who knows about the offer at the time it is accepted
2) Who is the person to whom the offer was made. NOTE Offers cannot be assigned, but options can be assigned (unless expressly limited) |
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F: What is Consideration
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1) Bargained for exchange
2) that benefits the promisor or is a detriment to the promisee |
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F: Will a promise count as consideration?
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Yes, unless illusory
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F: Is past performance consideration for a new promise?
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Generally no, BUT if the past performance was expressly requested by promisor and there was an expectation of payment by promisee = consideration
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F: What is the Preexisting Contractual or Statutory Duty Rule?
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General Rule: doing what you are already legal obligated to do is not new consideration for a new promise to do what you are already doing (CL: new consideration is required for contract modification)
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F: What are the exceptions to the Preexisting duty rule?
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1) If there is an addition to or change in performance
2) If there is unforeseen difficulty so severe as to excuse performance 3) If there is a 3rd party promise to pay. NOTE: UCC does not have this rule, so new consideration is not required to modify a sale of goods contract (just good faith) |
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F: Will part payment count as consideration for release of balance of debt?
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1) If debt is due and undisputed = NO
2) if not yet due or disputed = YES |
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F: What are consideration substitutes?
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1) A WRITTEN promise to satisfy an obligation for which there is a legal defense is enforceable w/out consideration.
2) Promissory Estoppel (Detrimental Reliance) |
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F: What is Promissory Estoppel?
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Elements:
1) Promise 2) Reliance that is reasonable, detrimental and foreseeable 3) Enforcement necessary to avoid injustice. |
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F: When will Promisor's lack of capacity offer defense to enforcing contract?
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1) Infancy (under 18)
2) Mental Incompotence 3) Intoxicated persons (IF other party had reason to know0 |
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F: What are the consequences of Incapacity?
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1) There is a right to disaffirm by person w/out capacity
2) RATIFICATION: There is implied affirmation by retaining benefits after gaining capacity 3) Quasi contract liability for necessaries. |
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F: What is the Statute of Frauds defense?
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Certain kinds of contracts must be supported by (1) a writing signed by the person challenging the agreement OR (2) by performance.
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F: which types of contracts fall under the SOF?
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MY LEGS --
Marriage; Year or more (contract can't be performed within that time) Land (transfers of) Executor (or administrator) Goods (of $500 or more) Surety |
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F: How is SOF satisfied by Performance on a transfer of real estate?
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Requires 2 of the 3:
1) possession of land; 2) part payment 3) improvements on the land. |
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F: How is SOF satisfied on a services contract?
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FULL performance by either party. (Part performance will NOT satisfy SOF in a services contract)
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F: Will Part performance in a Sale of Goods contract satisfy the SOF?
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TWO RULES:
1) Seller's part performance, Ordinary Goods: satisfies SOF only to the extent of performance. 2) Seller's Part Performance, Specially manufactured Goods: SOF satisfied as soon as seller makes a "Substantial Beginning") |
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F: What are the requirements for a WRITING to satisfy the SOF?
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1) Non UCC: "All Material Terms Test" -- must include who & what (also look at who signed the writing)
2) UCC SOF: Writing must indicate that there is a contract and contain the QUANTITY term NOTE : generally writing must be signed, BUT if both parties are Merchants there is an exception where person failed to respond to signed writing w/in 10 days. |
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F: What is the Judicial Admission exception to the SOF?
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If party admits in pleading or testimony that he entered into an agreement, SOF will be satisfied.
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F: How does SOF apply to authorization to enter into contract for someone else?
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If contract to be signed is within SOF, authorization must also be in writing.
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F: What are the SOF rules for contract modification?
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If the deal with the alleged change would be within the SOF, then the alleged modification agreement must be in writing.
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F: What if the original agreement is in writing and requires that all modifications be in writing?
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Under CL such provisions are NOT effective.
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F: Is an contract for an illegal subject matter enforceable?
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No
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F: Is a contract for an illegal purpose enforceable?
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Only by the person who did not know of the illegal purpose.
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F: May courts refuse to enforce an agreement based on public policy?
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Yes
Ex: exculpatory agreements, covenant not to compete |
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F: Can a contract be set aside for Misrepresentation?
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Yes. Elements:
1) sate of fact before contract 2) by one of the parties or agent 3) that induces the contract 4) that is false NOTE: no wrongdoing for material misrespresentation |
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F: Can a contract be set aside for Nondisclosure?
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Generally no, unless there has been wrongdoing (by a fiduciary or an act of concealment)
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F: Can a contract be set aside for Duress?
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Yes (physical or economic). Elements of economic:
1) Improper threat ("bad guy") 2) No reasonable alternative ("vulnerable guy") |
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F: Can a contract be set aside for Unconscionability?
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Yes. Two tests:
1) Procedural: Unfair surprise AND 2) Substantive: oppressive terms NOTE: tested at time agreement was made. |
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F: What is the effect of ambiguity in words of an agreement
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There is no contract IF:
1) parties use material term that is open to at least two reasonable alternatives; 2) each party attaches a different meaning to the term; AND 3) neither party knows or has reason to know the term is open to at least two reasonable interpretations |
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F: When will a Mistake of Fact be grounds for not enforcing a contract?
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1) Mutual Mistake of MATERIAL Fact (and not assumed risk) = NO contract
2) Unilateral Mistake of Material Fact = courts reluctant to set it aside unless other party had reason to know of mistake. |
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T: Overview of Terms issues;
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1) Look first for information about words used by people making the contract
2) Then look also for information about past or similar deals 3) Then think about UCC warranty, delivery and risk of loss terms if it's a sale of goods |
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T: What is the Parol Evidence Rule?
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When parties express agreement in writing w/ intent that it's the full and final expression of bargain, other expressions (written/oral) made prior to writing are inadmissible to vary the terms of the writing.
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T: How to perform PE analysis:
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Look at purpose for which the evidence is being admitted
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T: What does Integration mean?
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Written agreement that court finds is the final agreement (this triggers PE)
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T: What is Partial Integration?
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Written and Final, BUT not complete
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T: What is Complete Integration?
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Written, Final, and Complete (only matters if PE is being offered to add to written deal)
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T: What is Parol Evidence?
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Oral or written words of a party before integration (before agreement was put into written form)
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T: PE Pattern #1 -- Changing/Contradicting terms in the written deal:
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Rule: NO PE allowed
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T: PE Pattern #2 -- Mistake in Integration:
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Rule: Court may consider evidence of such terms for the limited purpose of determining whether there was a mistake in integration
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T: PE Pattern #3 -- Getting out of a written deal (showing of defense to enforcement):
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Rule: PE IS admissible
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T: PE Pattern #4 -- Explaining ambiguous term in a written deal:
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Rule: PE IS admissible
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T: PE Pattern #5 -- Adding to a written deal:
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Rule: PE rule prevents ct from admitting evidence UNLESS:
1) the written agreement was only a partial integration OR 2) the additional terms would ordinarily be in a separate agreement. |
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T: Comparison of PE Rule and SOF --
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1) PE Rule often triggered by "writing" in fact pattern
2) SOF of triggered by "oral" in fact pattern |
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T: What other sources (besides words of the parties) exist for contract terms?
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1) Course of Performance: same people, same contract
2) Course of Dealing: same people, different but similar contract 3) Custom and Usage: different but similar people, different but similar contract. |
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T: What are the default terms of a UCC contract relating to Delivery of goods if by common carrier?
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Depends on whether its a
1) Shipment contract ("FOB followed by city of Seller") OR 2) Destination Contract ("FOB followed by any other city") |
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T: What if it's a shipment contract?
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Seller meets delivery obligations once it:
1) gets goods to a common carrier; 2) makes reasonable arrangements for delivery; AND 3) Notifies buyer |
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T: What if it's a Destination Contract?
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Seller does not complete delivery until goods arrive where buyer is.
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T: What is a Risk of Loss problem under UCC?
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Arises where after the contract has been formed but before buyer receives the goods, they are damaged/destroyed by no fault of either party.
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T: What are the four Risk of Loss rules?
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1) Agreement: if one exists, it controls
2) Breach: breaching party is liable for any uninsured losses 3) Delivery by common carrier other than seller: Risk shifts from seller to buyer when seller completes delivery obligatoins 4) No agreement, breach, or delivery by carrier: If seller is MERCHANT, risk shifts on buyer's RECEIPT of goods. If NON Merchant, risk shifts when seller tenders goods. |
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T: What are the Warranties of Quality under the UCC?
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1) Express
2) Implied Warranty of Merchantability 3) Implied warranty of fitness for a particular purpose |
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T: What is an express warranty?
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Look for words that promise, describe or state facts or for use of sample or model.
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T: What is the Implied Warranty of Merchantability?
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When goods purchased from any MERCHANT, this warranty is automatically added to the contract.
Warranty = goods are fit for the ordinary purpose for which such goods are used. |
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T: What is the Implied Warranty of Fitness for a Particular Purpose?
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When BUYER has a particular purpose AND is relying on SELLER to select suitable goods AND SELLER has reason to know of purpose and reliance, there is a warranty that goods are fit for a particular purpose.
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T: Can warranties be disclaimed by contractual limitations?
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EXPRESS: NO, cannot be disclaimed.
IMPLIED: can be disclaimed by -- 1) conspicuous language of disclaimer, mentioning merchantability OR 2) "as is" or "with all faults" |
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T: What is the effect of limitations on remedies?
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Does not eliminate warranties, simply limits or sets recovery for breach.
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Performance: Sale of Good Concept #1 -- Perfect Tender Rule
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1) Only applies to sale of goods
2) Performance must be perfect: perfect goods, perfect delivery 3)less than perfect tender by seller gives buyer option of rejection |
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P: Sale of Goods Concept #2 -- Rejection of Goods
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If Seller doesn't meet perfect tender standard, they buyer may:
1) retain and sue for damages OR 2) reject all or any units and sue for damages NOTE: this is limited by Sellers ability to CURE. |
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P: Sale of Goods Concept #3 -- Cure
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Seller has opportunity to cure imperfect tender IF:
1) He had reasonable ground to believe improper tender was OK (ex. based on prior dealing) OR 2) The time for performance has not yet expired |
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P: Sale of Goods Concept #4 -- Installment contracts
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Installment Contract: requires/authorizes (1) delivery of goods in separate lots (2) to be separately accepted.
RULE: B has right to reject installment only if Substantial Impairment can't be cured. |
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P: Sale of Goods Concept #5 -- Acceptance of Goods
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1) Acceptance of goods prevents later rejection
2) Payment w/out opportunity to inspect does not = acceptance 3) Buyer keeps goods w/out objection = Implied Acceptance |
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P: Sale of Goods Concept #6 -- Revocation of Acceptance of Goods
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Buyer can later cancel acceptance IF:
1) nonconformity substantially impairs value of the goods; 2) Excusable ignorance of grounds for revocation OR reasonable reliance on seller's assurances AND 3) revocation w/in reasonable time after discovery of nonconformity. |
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P: Sale of Goods Concept #7 -- Payment terms
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1) Open Price Term: means reasonable price at time of delivery
2) Price to be fixed by buyer or seller: means that price must be fixed in Good Faith |
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P: Common Law Performance Concepts --
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Substantial Performance is the governing standard (NOT Perfect Tender Rule)
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REMEDIES: What are the Non Monetary remedies?
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1) Specific Performance/Injunction: (Equitable remedies -- look for inadequacy of remedy at law or unclean hands)
2) Reclamation: Unpaid seller gets the goods back |
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R: When is Specific Performance available as a remedy?
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1) Contracts for sale of real estate
2) Contract for Sale of Unique Goods NOTE: NO specific performance for services contract, but possible injunctive relief |
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R: What are the elements for Reclamation?
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1) The buyer must have been insolvent at the time of receipt
2) Seller demands return of goods w/in 10 days of receipt 3) the buyer still has goods at time of demand |
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R: What are the types of Money Damages?
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1) Expectation
2) Reliance 3) Incidental 4) Consequential 5) Punitive 6) Nominal 7) Liquidated |
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R: What is the general approach for the Measure of Damages?
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Rule: Protection of expectation (place non breaching party in position in which they would have been w/out breach)
1) Determine dollar value of performance without breach 2) determine dollar value of performance with breach 3) compare the two to determine damages |
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R: What other damages are available in addition to Expectation?
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1) INCIDENTAL: (always recoverable) costs incurred in dealing with the breach (ex. finding replacement goods)
2) Foreseeable CONSEQUENTIAL: (special damages) Limited to damages arising from P's special circumstances of which D had reason to know. |
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R: How are Avoidable damages treated?
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No recovery for damages that could have been avoided w/out undue burden on P
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R: What is the Reasonable Certainty Test?
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In a situation involving a services contract where P is engaged in a new business or activity, RELIANCE RECOVERY is an alternative to expectation based on reasonable certainty.
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R: What are Liquidated Damages provisions and are they enforceable?
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These are provisions which fix the amount of damages.
Enforceable IF: 1) damages were difficult to forecast at the time of contract AND 2) provision is a REASONABLE forecast |
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R: Method for calculating damages for Sales of Goods
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1) Look at who has breached
2) Look at who has the goods |
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R: What if Seller breaches, Buyer has the goods?
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(Fair Market Value IF Perfect) minus (Fair Market Value as Delivered)
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R: What if Seller breaches, Buyer has the goods?
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(Market price at time of discovery of the breach) minus (contract price) OR (replacement price) minus (contract price)
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R: What if Buyer breaches,m Buyer keeps the goods?
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Contract Price
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R: What if Buyer Breaches, Seller has the goods?
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(Contract Price) MINUS (Resale Price) PLUS (in case of Lost Volume Seller)( Provable Lost Profits)
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R: What is a Lost Volume Seller?
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If seller's supply of goods is unlimited.
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EXCUSE: Overview of analysis
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Look for fact pattern about
1) nonperformance of contract AND 2) something happened after the contract |
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E: What is the standard for evaluating improper performance under the Common Law?
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The material breach rule
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E: What is the Material Breach Rule?
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1) Damages can be recovered for ANY breach
2) only a MATERIAL breach by one party excuses the other party from performing 3) Whether breach is Material is a fact question 4) if there was SUBSTANTIAL PERFORMANCE the breach was not material |
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E: What counts as material?
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Generally, less than half performance IS material
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E: What is the Divisible Contract exception?
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In a divisible contract, there can be a contract law recovery for substantial performance of a divisible part even though there has been a material breach of the entire contract
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E: What is the standard for evaluating improper performance under the UCC?
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Perfect Tender rule (you should also look at installment contracts)
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E: Can non performance be excused because of non occurrence of an express condition?
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YES
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E: What is an Express Condition?
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A mutually agreed upon promise modifier from language in the contract (not merely a response to an offer)
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E: What is the standard for determining whether an express condition has occurred?
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Strict compliance is required for satisfaction of a condition
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E: How can an express condition be eliminated?
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1) by Waiver/Estoppel by person meant to benefit from the express condition
2) Prevention of the occurrence by the protected party |
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E: What is Anticipatory Repudiation?
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An unambiguous statement or conduct indicating
1) that the repudiating party will not perform 2) made prior to the time that performance is due |
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E: What is the effect of Anticipatory Repudiation?
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1) Excuses other party's duty to perform
2) Gives rise to an immediate claim for damages for breach UNLESS claimant has already finished her performance. |
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E: Can Anticipatory Repudiation be reversed or retracted?
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Yes, so long as there has not been a material change in the position of the other party
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E: What is Insecurity?
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When words or conduct make performance uncertain. (Applies ONLY in sale of goods)
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E: What is the effect of Insecurity?
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Where words/conduct give reasonable grounds for insecurity other party can:
1) make demand for adequate assurance IN WRITING and 2) If commercially reasonable, can suspend performance until receipt of assurance |
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E: Can performance be excused by a later contract?
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Yes. By:
1) Recission (cancellation) 2) Accord and satisfaction 3) Modification (substituted agreement) 4) Novation (substituted person) |
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E: When is Recission a valid excuse for non performance?
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If performance is still remaining for each party = recission valid
If performance completed by either party = recission not valid |
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E: What is Accord and Satisfaction?
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An agreement by parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation.
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E: What is the effect of Accord and Satisfaction?
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1) if new agreement (accord) is performed (satisfaction) then performance of the original obligation is excused
2) If accord is not performed, then the other party can sue on either the original agreement or the accord |
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E: What is a Modification?
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An agreement by parties to an existing obligation to accept a different agreement in satisfaction on the existing obligation.
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E: Who is liable after Novation?
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The new party. The previous party is excused
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E: What is Novation?
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An agreement between BOTH parties to an existing contract to the substitution of a new party
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E: May performance be excused by a later, unforeseen event?
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Yes IF
1) something happens after formation but before completion 2) that something was unforeseen 3) that something makes performance impossible or commercially impracticable or frustrates the purposes of the agreement |
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What happens if a subsequent law or regulation affects the contract?
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1) If later law makes performance of contract illegal = excuse by impossibility
2) Later law makes MUTUALLY UNDERSTOOD PURPOSE of contract illegal = excuse by frustration of purpose |
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What happens if subject matter of a contract is damaged or destroyed AFTER contract?
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Do risk of loss analysis first to determine who may sue for damages
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What is the difference between Impossibility and Impracticality?
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Impossibility = objective (CAN'T be done.
Impracticality = subjective (Can only be done with EXTREME and UNREASONABLE difficult and expense) |
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E: Does death AFTER a contract excuse nonperformance?
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Generally no, Unless the party to the contract is a "special person" like a celebrity
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THIRD PARTY: Can a person enforce a contract he did not make?
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Yes, if an intended third party beneficiary (usually donees or creditors)
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T: When can a 3rd party enforce a contract?
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When her rights have VESTED, which means she:
1) knows of AND 2) has relied on or assented to the contract. |
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T: Who can sue whom in a 3rd party situation?
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1) Beneficiary can recover from promisor
2) Promisee can recover from Promisor NOTE: Generally a beneficiary CANNOT recover from promisee, unless it is a creditor beneficiary trying to recover on preexisting debt. |
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T: What defenses does a Promisor have against a 3rd party?
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All defenses he would have had against the Promisee
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T: What is an Assignment?
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When a party to a contract (assignor) later transfers his contract rights to another (assignee). The other party to the original contract (obligor) remains.
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T: What are the limitations on Assignment?
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A contract provision may
1) Prohibit Assignment (more likely to be on exam) OR 2) Invalidate it |
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T: What is the effect of a Prohibition?
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Takes away the right to assign but NOT the power to assign, so assignor is liable for breach BUT assignee who doesn't know about the prohibition can still enforce the assignment
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T: What is the effect of invalidation?
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Takes away both the right AND power, so there is a breach by assignor and no rights in the assignee
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T: Are there any limits on Assignment?
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Even where contract is silent on the issue, CL bars an assignment that "substantially changes" the duties of the obligor
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T: What are the requirements for assignment?
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Generally, consideration is NOT required but gratuitous assignments can be revoked
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T: What are the rights of parties in an assignment?
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1) Assignee can recover from obligor
2) Assignor for consideration CANNOT recover from obligor 3) Obligor has same defenses against assignee as it would against assignor 4) Payment by ogligor to assignor IS effective until obligor knows of assignment |
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T: What implied warranties are made by an assignor in an assignment for value?
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1) the right assigned actually exists
2) the right assigned is not subject to any then existing defenses by the obligor 3) the assignor will do nothing after the assignment to impair the value of the assignment |
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T: What is the effect of multiple assignments?
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If ALL gratuitous assignments, the last assignee generally wins
If assignments for consideration, the FIRST assignee for consideration wins. |
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T: What is Delegation?
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When a party to a contract transfers work under that contract to a 3rd party.
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T: Which duties are delegable?
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Generally contractual duties are delegable. Permitted UNLESS:
1) contract prohibits delegations or assignments OR 2) personal services contract calls for VERY SPECIAL skills |
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T: What happens if delegate fails to perform?
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1) Delegating party always remains liable.
2) Delegatee liable ONLY if she receives consideration from delegating party. |
