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178 Cards in this Set

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Offer
A promise to do or refrain from doing somee specified thing in the future conditioned on the other party's acceptance
Promise
a "manifestation of intent to act or refrain from acting in a specified way, so as to justify a promisee in understanding that a commitment has been made"
Offer (Restatement 2nd)
a "manifestation of willingness to enter into a bargain so made as to justify another person in understanding that assent to that bargain is inivited and will conclude it"
What is the legal significance of determining that a particular expression is an offer?
It creates a "power of acceptance" in the person to whom the expression was made
If the expression constitutes an offer, what can the offeree do?
the offeree has the power to conclude a bargain and bind the offeror by giving assent in the appropriate manner
What constitutes an offer?
An offer is an expression of present willingness to enter a bargain, made in such a way that a reasonable person in the shoes of the person to whom the expression is addressed would believe that she could conclude a bargain merely by giving assent in the manner required by the expression
Two essential elements of an offer
1) Intent to enter into a bargain
2) Definateness of terms
Intent to enter into a bargain (2 situations)
1) Offer v. Invitation to deal
2) Words suggesting an offer
Offer v. Invitation to Deal
the fact that an expression looks toward a bargain does not make the expression an offer if it is clear from the language or circumstances that the expression reflects merely an intent to begin negotiations
Words suggesting negotiations
Are you interested...Would you give...I quote...I would consider...these words suggest only preliminary negotiations or invitations to deal
Words suggesting an offer
words such as (i will sell...i offer...suggest that an offer is intended)
Definiteness of Terms
generally an expression will not be considered an offer unless it makes clear the essential terms
Definitness of Terms
(intent determinative)
even the ommision of one of the essential terms does not necessarily preclude an expression from being an offer if 1) the expression otherwise evidences an intent to conclude a bargain, 2) the omission does not indicate a lack of such intent, 3) the court can fill in the omitted implication (gap filler)
Advertisements
The general rule is that advertisements are normally deemed to be invitations to deal rather than offers because 1) advertisements are usually indefinate as to quantity and other terms, 2) sellers ought to be able to choose whom they will deal, 3) advertisements are typically addressed to the general public
Exceptions to the general rule that Advertisements are not offers
If the advertisement is definite in its terms, ,and either, 1) circumstances clearly indicate an intention to make a bargain, 2) the advertisement invites those to whom it is addressed to take a specific action without further communication, or 3) over acceptance is unlikely
Example of Avertisement that is considered an offer
A department store runs the following advertisement "Saturday, 9 a.m. sharp, 3 brand new fur coats worth up to 1000 dollars, 100 dollars each. First come, First served. This is an offer because it is definite in terms, and invites those to whom it is addressed to take an action (being first in line, without further communication). Since the number of available coats is specified, there is no significant problem over acceptance
Rewards
an advertisement that a reward will be paid is normally construed as an offer if the person had knowledge of the reward beforehand
Offering Circulars
are normally construed as invitations to deal, but they may be construed as offers in a given case
The test to determine if Offering Circulars should be treated as an offer
whether a reasonable person in the shoes of the addressee would think think the communication had been addressed to him individually (in which case it will be treated as an offer) or only as one of a number of recipients (in which case it will be treated as an invitation)
Expressions of Opinions and Words of Reassurance
Expressions of opinion and words of reassurance are not promises, and therefore, not offers
Statements of Intentions, Hopes, or Desires
A mere statement of intention, or of hopes and desires does not constitute an offer
Example: Statements of Intention, Hopes, or Desires
A says to B, "I am going to sell my car for 500. This is not an offer but a statement of intention.
Inquiries or Invitations
A mere inquiry or an invitation to the other party to make an offer does not constitute an offer
Ads, Catalogs and Circular Letters
Advertisements, catalogs, and ciruclar letters for the sale of goods are not ordinarily considered to be offers because they do no contain express language of promise and do not spell out the quantity term. Quantity, unlike a terms such as price, can never be filled in by a court. Rarely, a quantity term can be implied from the facts
The offer at Auction
An auction is "with reserve" unless it is stated to be "without reserve"
The offer at Auction
"with reserve"
"with reserve" means that the seller reserves the right to set a minimum price on the property to be sold. The reserve price may be secret. Each bid is an offer and the auctioneer is free to reject offers
The offer at Auction
"without reserve"
In an auction without reserve the auctioneer may withdraw the goods only until the first bid is made, provided it is made within a reasonable time. Thereafter, the auctioneer must sell to the highest bidder.
Offers distinguished from preliminary negotiations
the term preliminary negotiations covers any communication prior to an operative offer.
Distinction Between Unilateral and Bilateral Contracts
An offer looking to a bilateral contract looks to a promise on the part of the offeree. An offer to a unilateral contract looks to an acceptance by performance, except in the unusual case of a reverse unilateral contract
How may an offer looking to a bilateral contract be accepted?
An offer looking to a bilateral contract may be accepted by an express promise or an implied promise. In addition, an offer may designate an act that will serve as a promise
How may an offer looking to a unilateral contract be accepted?
By performance
What if the offeror does not make it clear how the offeree is to accept?
The offer is indifferent and the offer can be accepted by promise or by commencing performance. The contract will be defined by the way it is accepted
What does an offer create?
the power of acceptance in the offeree
What is the definition of acceptance?
a voluntary act of the offeree wherby the offeree exercises the power conferred by the offer and thereby creates the set of legal relations called a contract which terminates the power of revocation that the offeror ordinarily has
Who may an offer by accepted by?
An offer may be accepted only by the person or persons to whom it is made, or a duly authorized human or electronic agent
How is the identity of the offerees determined?
By the reasonable person test
Must an offeree know of an offer in order to accept?
If the offer looks to a unilateral contract, the offeree must know of the offer and manifest an intent to accept. If the offer looks to a bilateral contract, it is quite possible to have a contract without an intent to accept because of the objectve theory of contracts
Must acceptance be communicated to the offeror?
Yes, to create a bilateral contract, the offeree's promise must be communicated to the offeror, unless the offeror dispenses with the communication requirement
Must notice of performance be given to the offeror in a unilateral contract?
3 Views
1) Notice is not required unless requested by the offer
2) Same as the first view except, the offeror's obligation will come to an end if notice of performance is not given within a reasonable time in a limited set of circumstances. If the offeree has reason to know that the offeror has no adequate means of learning of performance with reasonable promptness and certitude, the duty of the offeror is discharged unless the offeree exercises reasonable diligence to nitify the offeror, or the offeror otherwise learns of performance within a reasonable time, or the offeror expressly or by implication indicates that notice is not necessary
3)Sames as the second view except, if notice is required, no contract is consummated until notice of performance has been sent
Can a bilateral contract be accepted by silence?
Silence ordinarily does not give rise to an acceptance of an offer or counteroffer, but when silence would be deceptive, there is a duty to speak
When does silence act as acceptance in a bilateral contract?
1) the offero has given the offeree reason to believe that silence will act as an acceptance and the offeree intends by silence to accept
2) the parties have mutually agreed that silence will operate as assent
3) there is a course of dealing whereby silence has come to mean assent
4) someone takes offered services with a reasonable opportunity to reject them, and it is reasonable for the person to understand that the services are offered with expectation of payment
May acceptance of a bilateral contract be achieved by conduct?
yes, if a reasonable person whould understand by the offeree's conduct that the offeree has accepted the offer. Also acceptance can be implied if the offeree exercises of a dominion of control over offered property
If the offeree exercises a dominion of control over an offered product, what theories of law may the offeror take?
The offeror has the option of proceeding either on a contract, quasi-contract, or tort theory
What if the offeror proscribes a method of acceptance?
The the offeror prescribes an exclusive method of acceptance, a contract does not arise if the offeree uses another means of acceptance even if it comes to the attention of the offeror. In this event, the defective acceptance is treated as an offer
Mail Box Rule
An acceptance of a bilateral contract comes when the letter is sent (deposited) into the mail
What if a rejection is sent first?
An acceptance dispatched after a rejection has been sent can be effective if and only if the acceptance is received prior to the rejection
Rejection sent
Acceptance sent
Rejection received
Acceptance received
There is no contract and the acceptance is regarded as a new offer
Rejection sent
Acceptance sent
Acceptance received
Rejection received
There is a contract on the receipt of the acceptance
Acceptance sent
Rejection sent
Rejection received
Acceptance received
2 Views, Depends on the Jurisdiction
1) The Restatement 2nd states that a contract is formed because courts don't want someone accepting an offer and then trying to find a better deal by rushing a rejection order to beat the acceptance order if they found a better deal
2) Other courts have held that there is no contract because the offeror received the rejection first so he is not relying on any promise by the offeree
Does the mailbox rule apply in every case?
No, when the offeror prescribes the exclusive place, time, or medium of acceptance the offer controls
Mail Box Rule
(Adams v. Lindsell)
Acceptance of a bilateral contract is effective when the letter is sent (deposited) in the mail
Acceptance by telephone
Acceptance is effective when it is heard
When two parties are speaking to each other, when is acceptance effective?
The acceptance is effective only if the offeror hears it or is at fault in not hearing
--not consistent with the mailbox rule
partial performance of a unilateral contract
(classical view)
if you haven't fully performed then you haven't accepted and the offer could be revoked at any time
Partial performance of a unilateral contract
(2nd View)
when someone starts to perform on a unilateral contract then it transforms it to a bilateral contract and the contract is binded back to the person performing
Partial Performance of a unilateral contract
(modern view)
Once the offeree starts to perform, then the offeror cannot revoke it
Partial Performance of a unilateral contract
(exception to modern view)
when the offeror prevents the offeree from performing most courts would find that the preparation to perform by the offeree is enough to have formed a contract. (question of fact to determine when preparation has been enough to form a contract)
What if the acceptance varies from the offer?
acceptance that adds qualifications or conditions operates as a counter-offer and thereby a rejection of the offer
What is the effect of Late Acceptance?
3 Views
1) Classical View - the late acceptance is an offer which can be accepted by the original offeror
2)2nd View - the offeror may treat the late acceptance as an acceptance by waiving the lateness. Calls time a condition
3) 3rd view - if acceptance is technically late, but falls w/in a reasonable time, the original offeror has a burden to reply with reasonable time. Failure of the offeror to formally reject the offer would mean that a contract has been formed
When is an offer terminated because the offeror dies?
Under the majority view, the offer is terminated when the offeror dies even if the offeree is unaware of the offeror's death
What effect does incapacitation (insanity) have on an offer?
It terminates the ability of the offeree to accept the offer
Revocation
a manifestation of intent not to enter into the proposed contract
When may a revocable offer be revoked?
At any time prior to acceptance
When is revocation effective?
Most states say that revocation is effective when received
How may an offer be revoked if it was made to a large group of people whose identity is unkown?
The revocation must be made by the same medium which the offer was made. The revocation must continue for as long as the offer did, and in as prominant a location, and in at least the same size ad
Indirect revocation
if the offeree receives reliable information that an offer that was made to them has been accepted by someone else, then the person should treat that information as meaning the offer has been revoked
What does rejection of an offer mean?
that acceptance has been terminated
Rejection/Counteroffer
A rejection terminates the offeree's power of acceptance. A counteroffer is a rejection of the original offer and a new offer made by the person making the counteroffer
When does a rejection or counteroffer terminate the power of acceptance?
When it is received
I will buy for...and will you consider...
there is a strong legal difference between the two phrases. The first is a counter offer and the second is a negotiation which does not reject the offer
grumbling acceptance
an acceptance that expresses dissatisfaction at some terms, but stops short of dissent
Examples: "I accept your offer but I would appreciate it if you gave me the benefit of a 5% discount"
this would be an acceptance that requests a modification of the contract
"i accept you offer and I hereby order a second object"
this is an acceptance coupled with a separate offer
How does common law treat an acceptance that adds conditions
a puported acceptance that adds qualifications or conditions operates as a counter-offer even if the qualification or condition relates to a trivial matter
option contracts
synonymous with irrevocable offers
Elements of Consideration
1) the promisee must suffer a legal detriment
2) The detriment must induce the promise
3) the promise must induce the detriment or benefit
What is the promisee's legal detriment?
The promisee must do or promise to do something that he was not legally obligated to do
What does it mean that the detriment must induce the promise?
The promisor must have made his promise becauase he wishes to exchange it, at least in part, for the detriment to be incurred by the promisee
What does it mean that the promise must induce the detriment?
It means that the promisee must know of the offer and intend to accept it
consideration
a legal detriment to the promisee or a legal benefit to the promisor, that has been bargained for by the promisor, and exchanged by the promissee in return for the promisor's promise
Past consideration
Past consideration is not consideration. Consideration is essentially an exchange and the parties cannot bargain or exchange for something that has already occurred
Motive (Consideration)
Motive is not consideration. Ex. In consideration of the fact that you are not as wealty as your brothers, I promise to pay you 50 within thirty days" The promisor has not requested anything not induced anything in exchange
Adaquacy of Consideration
As a general rule, the courts will not review the adequacy of the consideration. The parties make their own bargains
Is a gift consideration?
No (Kirksey v. Kirksey)
Sham Consideration
two views
1) Minority View - consideration is consideration and the court should not look to determine if it was adaquate. The pretended exchange is accepted as if it were real
2) Restatement - adopts the view that a token or nominal consideration should not be effective
Mixture of a Gift and Bargain
The detriment to be surrendered by the promisee need not be the sole or even the predominent inducement, but it must be enough of an inducement so that it is in fact bargained for.
Mixture of a Gift and Bargain Example
A, motivated by friendship, sold a horse worth 5000 for 1000, to B. The promise will be enforced even though A's primary motive in entering the agreement was friendship, there still is an element of exchange
How does one determine if there is a mixture of bargain and gift or whether any named consideration is not in fact bargained for?
It is a question of fact, unless reasonable jurors could reach only one reasonable conclusion
Is surrendering a valid claim consideration?
Yes, a promise to surrender a valid claim constitutes a detriment and if bargained for, constitutes consideration...if i have a right to sue you, and i give up that right for money, it is valid consideration
Is surrendering an invalid claim valid consideration
Traditional View - if a person isn't really giving up something then ther is no consideration
Modern View - The surrender of an invalid claim serves as consideration if the claimant has asserted it in good faith and a reasonable person could believe that the claim is well founded
Where does the pre-existing duty rule apply
applies to a modification of an existing contract and also a duty which is not contractual but imposed by law
Pre-existing duty rule
an agreement modifying a contract is not supported by consideration if one of the parties to the agreement does or promises to do something that he is legally obligated to do or refrains or promises from doing something he is not legally privileged to do
Exception to the Pre-existing duty rule
If both parties agree that an unanticipated difficulty arises during the contract it can be held as new consideration
Ways to get around the Pre-existing duty rule
1) Rescind the old contract and make a new one
2) Make more detriment
3) Modern Exception (Restatement)
Elements for the Pre-existing duty exception (if both parties agree that an unanticipated difficulty arises during the contract it can be held as new consideration if:
1) both parties voluntarily agree that an unanticipated difficulty has arisen
2) the promise modifying the original contract was made before the contract was full performed
3) the underlying circumstances which prompted the modification were unanticipated by the parties
4) the modification is fair and equitable
Hold up game
When a party to an existing contract uses coercion or durress to obtain a new contract (Ex. A contractor who refuses to complete work under an unprofitable contract unless he is awarded additional compensation
In order to get around the pre-existing duty rule, can rescission be presumed?
No, rescission must be expressed by the parties. The old contract cannot be continued with modifications, it has to be ended and a new one made
Accord
is an offer to give or to accept a stipulated performance in the future in satisfaction or discharge of the obligor's existing duty plus an acceptance of that offer (I'll pay you 50 dollars and that will wipe our whole debt clean)
Satisfaction
the performance of the stipulated performance of an accord
To determine if there is a binding accord and satisfaction ask:
1) Have the parties gone through a process of offer and acceptance (accord)
2)Has the accord been carried out (satisfaction)
3)Whether the offer and acceptance is supported by consideration
If the answers are yes, there is a binding accord and satisfaction.
If the answers are no, there is no accord and satisfaction
What must an offer of accord make clear?
an offer of accord must make it clear that the offeror is seeks a total discharge. If this is not done, any payment made and accepted will be treated as part payment
How may an accord be accepted?
An acceptance of an accord may take place by verbal assent or by conduct including the cashing of a check sent "in full payment" or according to some authorities by the retention of such check. Still other courts hold that retention of a check does not amount to an acceptance
Mutuality of Obligation
the theory of mutuality of obligation is commonly expressed in the phrase that in a bilateral contract "both parties must be bound or neither is bound"
Unilateral Contracts and Mutuality
In a unilateral contract there is no mutuality of obligation. At no time has the offeree been bound to do anything and, even if the offeree starts to perform, the offeree is not bound to complete the performance
Voidable and Unenforceable Promises and Mutuality
A voidable and unenforceable promise is consideration for a counter promise and thus there is mutuality of consideration even though one or both of the parties' promises is voidable and unenforceable
Illusory Promises
an expression cloaked in promissory terms, but which, on closer examination, reveals that the promisor is not committed to any act or forbearance
Curtis Definition: Promises where it looks like a promise, but noboy is really committed to doing something
Modern Trend of Illusory Promises
The modern tendency is against lending the aid of the courts to defeat contracts on technical grounds of want of mutuality
Consideration Supplied by Implied Promises if an express promise is lacking
A express promise may be lacking, and yet the whole writing may be "instinct with an obligation imperfectly expressed....If so there is a contract"
Illusory promises that are valid
When the promisor make a good faith reasonable effort
Requirements and Output Contracts
the buyer expressly agrees to buy all of the buyers requirements of a stated good from the seller who agrees to sell that amount to the buyer
Typical Output contract
the seller agrees to sell all of its output of a certain item to buyer and the buyer agrees to buy that output from the seller
Requirement Contract
the buyer agrees to buy all of its requirements up to a specified amount from the seller
Where is the consideration for a requirements contract
consideration is found in the surrender of the parties rights to go elsewhere
Requirement/Output Contract Changes (3 Views)
1)According to some courts, the buyer was free to go out of business so that it has fewer or no requirments
2) The buyer is held liable if it went out of business or changed its method of doing business in bad faith
3)If the buyer went out of business or changed the way of doing business with the effect of lessening its requirements, it had to respond in damages
What is moral obligation
substitute for consideration
Moral Obligation (Majority View)
Majority of courts will hold that it is not a substitute for consideration
Moral Obligation (Minority View)
Past consideration is sufficient to osupport a promise
Cases that accept moral obligation divide themselves into five catagories
1) Where the promise relates to a prior contractual or quasi-contractual debt that still exist as an enforceable obligation
2) where a material benefit was previously received by the promisor
3) where ther was a prior legal obligation that was discharged by operation of law
4) where there is a promise not to avoid an avoidable duty
5) where there is a promise based upon a previous unenforceable obligation under the Statute of Frauds
Promise to pay Pre-Existing Debts
Most modern authorities take the position that, if the past debt is still existing and enforceable, a promise to pay the debt is enforceable provided that the promise does not exceed the amount of the pre-existing debt
Promises to Pay for Benefits Received
Today, it is clear that if A requests B to perform services, or A accepts services offered by B, unless the services were understood to be gratuitous, A will be liable on the implied promise to pay the reasonable value of the services
Corbin's view of Promises to pay for Benefits Received
the promise willbe enforced only to the extent that it is not disproportionate to the value of the services
Williston's view of Promises to pay for Benefits Received
the weight of authority supports the validity of a subsequent promise defining the extent of the promisor's undertaking, even if the promise is disproportionate to the value of the prior acts
Promissory Restitution (Restatement Second)
The restatement 2nd has accepted the minority view that a receipt of a material benefit with or without a prior request, followed by the receiver's promise to pay for the benefit, is enforceable without consideration
Promissory Estoppel Section 90 of the Restatement
A promise which the promisor should reasonably expect to induce action or forbearance of a definate and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise"
Elements of Promissory Estoppel
1) There must be a promise
2) The Promisor must reasonably expect to induce an action or forbearance (to give up something)
3) Action has to be of a definate and substantial character
4) The promise actually induces reliance
5) If the promise is not enforced, would we have an injustice?
Modern version of Section 90 does not examine #3 (you don't have to list it on the test but could get a bonus if you do mention it and say the courts no longer use it)
Moral Obligation
Webb v. McGowin
Minority Rule: The court said that it is well settled that a moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor
Moral Obligation
Harrington v. Taylor
Majority Rule: No bargained for exchange. He received unrequested services. Her only motivation was that it was the right thing to do. The promise came after.
Moral Obligation
Majority rule
considers past consideration not enough to support a promise
Moral Obligation
Minority rule
past consideration is sufficient to support a promise
Charitable Donations
A charitable subscription/donation is binding without consideration or proof that the promise induced action or forbearance and without injurious reliance
Are option contracts and Promissory estoppel revocable?
No, they are both irrevocable
Option - supported by consideration
Estoppel - there was reliance which substitutes for consideration
Anticipatory Repudiation
means that before a party was supposed to perform, they backed out and didn't perform
condition
a condition is an act or event that qualifies a promised performance
condition precedent
an act or event, other than a lapse of time, which must exist or occur before a duty to perform a promise arises. If the condition does not occur and is not excused, the promised performance need not be rendered.
Concurrent conditions
concurrent conditions exist where the parties are to exchange performances at the same time. Concurrent conditions principally occur in contracts for the sale of goods and contracts for the conveyance of land
Definition of Condition (Hornbook)
a condition is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a contractual promise arises (condition precedent), or which discharges a duty of performance that has already arisen (condition subsequent)
Is lapse of time treated as a condition?
No. Ex. A promises to pay B 100 dollars on July 15th. A's promise is unconditional because the duty to perform arises after the time stated has elapsed, the lapse of time is not treated as a condition because it is looked on as an event certain to occur.
Two ways to sort conditions
1) Express & Constructive (Parties make conditions)

2) By time: Condition precedent, condition concurrent, condition subsequent (Courts construct the conditions)
Example of concurrent condition
S agrees to sell and B agrees to buy a certain book at a fixed time and place. In the absence of an agreement to the contrary, payment and delivery are concurrent conditions. As a result, if B fails to tender the price, S must make conditional tender of the book or show that tender is excused, to put B in default. In order for B to put S in default, B must make conditional tender of the price or show that tender is excused.
Conditions Subsequent
any event the existence of which, by agreement of the parties, discharges a duty of performance that has arisen.
Example of condition subsequent
Of an insurance company promises to pay up to 1 million to the insured if a fire occurs and if the insured files proof of loss within 60 days after the loss. The occurance of the fire and the filing of the proof of loss with the insurance company are conditions precedent to the insurance company's performance of its promise to pay
When is someone liable for a breach of contract?
When they breach a promise
Express conditions must be _________ _________.
strictly performed
Constructive Conditions
are conditions implied in law (constructed by courts). They have no line or phrase in the contract that you will be able to find. The court implies the condition into the contract simply because it is fair.
Expressed Conditions v. Promises
failure to perform a promise, unless excused, is a breach, failure to comply with a condition is not a breach. Ex. A says to B "if you walk across the bridge I will pay you 100 dollars. B's walking the Bridge is an express condition precedent to A's obligation to pay. If B does not fully perform, A will not have to pay. If B does not walk the Bridge, B will not be liable because B did not promise to walk.
General contractor agrees to pay a subcontractor "as money is received from the owner". the subcontractor completes the work, but the owner fails to pay the general contractor. Does the term of the contract create an express condition or merely set the time of payment?
Most of the modern cases lean to the view that this is not an express condition and as a matter of law, a clause of this kind refers merely to the time of payment. The notion of the modern view is that when personal services are rendered it will not lightly be assumed that payment is contingent on the happening of an event outside the control of the party rendering services
Is "when someone is paid" an essential term of the contract?
When someone is paid is not going to be considered an essential term of the contract
What are some words or phrases that create conditions?
on condition that, provided that, if, subject to,
Promissory words
I will, I promise, I warrant
CONSTRUCTIVE CONDITIONS AND IMPLIED IN FACT CONDITIONS.
Courts prefer to find constructive conditions rather than implied in fact conditions. The reason is that, implied in fact conditions are treated the same way as express conditions in that they must be strictly performed. Constructive conditions need only be substantially performed. This is a more flexible instrument for justice than a rule that requires literal compliance.
Effect of Failure of Condition
Liability for breach of contract attaches to breaches of promises, not for failures of condition
**Failure of condition may result in the inability to enforce a promise made by the other party, but it imposes no liability, unless the party protected by the condition has promised that the condition will occur
Express & Implied in Fact conditons must be ________ ________.
strictly performed
If a Breach is Material...what can the party do?
1) Repudiate the contract and sue for total breach
2) Continue the contract and sue for partial breach damages
If a Breach is Immaterial....what can the party do?
1) Continue the contract and sue for partial breach damages
Factors to be considered as to whether a breach is material
1) to what extent is, if any, the contract has been performed at the time of breach (the earlier the breach, the more likely it will be regarded as material)
2)Was the breach willful? (A willful breach is more likely to be regarded as material)
3)a quantitatively serious breach is more likely to be considered material
4) the degree of hardship on the breaching party
5) the extent to which the agrieved party has or will receive a substantial benefit from the promised performance
5) the adequacy with which the aggrieved party may be compensated by damages for partial breach
6) the type of contract involved
2)
Factors a court weighs for Substantial Performance
1. Reasonable expectation of the benefit the non-breaching party gotten (Was that he got a strong pipe) Court said that he essentially got the same quality of pipe
2. How great is the forfeiture by breaching party? (it was great because they would have to rip up the whole house)
3. Will damages alone compensate? (yes, the homeowner can be compensated for any difference in price between the pipes)
4. Was the breach done in good faith or bad faith? (court said that the mistake was innocent)
5. What would the economic waste to fix be? (The fact that the house would have to be torn down and rebuilt is a waste of time and money)
What case does the doctrine of substantial performance not apply?
A contract for the sale of goods
What can a party who substantially performs collect from the contract?
The party who substantially performs is limited to the contract price minus the cost of completing the omissions and correcting defects
What if a party has less than substantially performed?
"lancellotti v. Thomas"
If a party has less than substantially performed, but they have conferred a benefit to the other party, they are entitled to recover to the extent of the benefit
When is a contract divisible?
A contract is divisible if the performances of each party are divided into two or more parts and the performance of each part by one party is the agreed exchange for a corresponding part by the other party. If a divisible portion is substantially performed, recovery may be had for that portion despite a material breach of the overall contract.
When is a promise Independant?
A promise is independant (unconditional) if it is unqualified or if nothing but a lapse of time is necessary to make the performance of the promise presently enforceable. the promisee may enforce an independant promise without rendering substantial performance of the promisee's part of the bargain
Dependency of Separate Contracts
Where the parties have entered into two written contracts at substantially the same time, the question arises whether they ar part of the same exchange. If they are not, a breach of one will have no effect on the other. If they are part of the same exchange, the question will be the materiality of the breach. This is a question of intention, but the making of two separate contracts ordinarily indicates an intent that a failure to perform one contract will have no effect on the other
Excuse of Conditions
(Prevention)
A condition is excused by wrongful prevention, substantial hinderance, or the failure to cooperate. Moreover, in every contract there is a constructive condition that one will not wrongfully prevent or substantially hinder the other party's performance
What does it mean when a condition is excused because of prevention?
It means that even though the condition did not take place, the plaintiff may recover on the contract provided that the plaintiff would have been ready, willing, and able to perform but for the prevention
How do the courts determine if conduct constitutes wrongful prevention?
The courts rely on their instinct for the commercial setting, the ethical position of the parties
Estoppel in pais (equitable estoppel)
Applies when a party 1) misrepresents or conceals facts 2) on which the other party justifiably relies, 3) injuriously
** Under modern cases misrepresentation of fact is not necessary for the doctrine to apply, and fraud, bad faith, or intent to deceive are not essential
Effect of Estoppel
The party is estopped from denying the utterances or acts to the injury of th other party. Ex. If a party promised before the breach to accept a late payment, the promisor would be estopped from asserting the lateness of the payment, unless the promise was withdrawn in time
waiver
a party expressly or impliedly excusing a condition which would benefit them
election
when a party does not enforce a condition after it was supposed to be performed
3 Important rules of waiver
1) only a immaterial part of the agreed exhange may be waived
2) the waiver may be reinstated if it is reasonalbe and does not operate unfair
3)the condition being waived must be soley for the benefit of the party waiving it
How does a waiver differ from a modification?
A modification requires mutual assent and consideration
How may an election be made?
By express promise or conduct
Examples of election made by conduct
1) the innocent party continues to perform after failure of condition
2) the innocent party allows the other party to continue to perform after a material breach
Election
"excuse of condition after the condition has failed." or not enforcing a condition that has already passed
Excuse of Conditions involving Forfeitures
A condition may be excused if 1) it involves an extreme forfeiture, 2) its occurence is not a material part of the agreed exchange and 3) if one of the foundations for equitable jurisdictions exists
Excuse of Conditions because of Impossibility
Impossibility excuses a condition if it becomes impossible for it to occur, it is not the fault of the party, the condition is not a material part of the agreed exchange, and a forfeiture would otherwise occur
If there is an anticipatory breach, what can you do?
1. Sue for material breach immediately (most common scenario)
2. Urge performance, then sue if not performed
3. Wait until the date, if you mitigate the damages
You Can NOT elect to excuse the fact that someone told me I'm not going to perform
Conditions of Satisfaction
2 cases
1) those which involve taste, fancy or personal judgment, the classical example being a commission to paint a protrait. In such cases the promisor is the sole judge of the quality of the work, and his right to reject if in good faith, is absolute and may not be reviewed by court or jury.
2) Those which involve utility, fitness, or value, which can be measured against a more or less objective standard. In these cases, although there is some conflict, the performance need only be reasonably satisfactory and if the promisor refuses the performance, the correctness of his decision is up for review