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121 Cards in this Set

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Express Contract
Oral or written
Implied Contract
formed by manifestations of assent or other than oral or written language (by conduct)
Quasi-Contract
Not contracts. Constructed by court to avoid unjust enrichment.
Bilateral Contracts
Promise for a promise
Unilateral Contracts
Offeror promises to pay upon completion of requested act.
Void Contract
Totally without any legal effect from the beginning (agreement to commit a crime)d
Voidable Contract
One or both parties may elect to avoid or ratify (infants or mentally ill)
Unenforceable Contract
Agreement that is otherwise valid, but may not be enfrceable due to various defenses extaneous to contract formation (statute of frauds)
Mutual Assent
Offer and acceptance; meeting of the minds.
Offer (generally)
Must create a reasonable expectation in th eofferee that the offeror is willing to enter into a contract on the basis of the offered terms.
Requirements for an offer
1. Promise, undertaking or commitment to enter contract
2.Certainty and definiteness in essential terms
3. Communication to the offeree.
When are advertisements offers?
Language of the ad can be construed as containing a promise, where the terms are certain and definite, adn the offeree(s) is clearly identified.
To be an offer, ad's must include:
1. Identity of offeree
2. Subject matter
3. Price
4. Time of payment, delivery, performance
5. Quantity
6. Nature of Work to be performed.
Requirements for offer of real estate
1. Identify the land
2. Price
Communication of Offer
To have the power to accept, the offeree must have knowledge of the offer.
Revocation of Offer
Must be communicated before acceptance.
*If offer by publication, revocation must be by the same means.
*Effective when received or published
Revocation by Indirect Communication
1. Correct Information
2. Reliable Source
3. Acts of the offeror that would indicate to a reasonable person that he no longer wishes to make the offer.
When can offeror revoke?
Anytime the offer is not supported by consideration or detrimental reliance.
Limitations on Revocation
1. Options
2. Firm Offers
3. Detrimental Reliance
4. Part Performance
Options
Offeree gives consideration for a promise by the offeror not to revoke an outstanding offer.
Firm Offer
Offer by a merchant to buy or sell goods in a signed writing that gives assurances that it will be held open.
Detrimental Reliance
Offeror could reasonably expect that the offeree would rely to her detriment on the offer.
*could be irrevocable for a reasonable length of time
*At very least, offeree is entitled to relief to the extent of her reliance.
Part Performance (when contract requires complete performance)
UCC - irrevocable once performance has begun for a reasonable time.
Traditional Rule - Offeree was at the mercy of offeror: must complete performance, and offeror could revoke at anytime prior to completion.
Termination of Offer by Offeree
1. Express Rejection
2. Counteroffer as Rejection
*rejection is effective when received
*Offeree must accept within a reasonable time.
Counteroffer
1. Offer made by offeree to the offeror taht contains the original offer, but differs in terms.
2. Not mere inquiry
Termination of Offer by Operation of Law
1. Death or Insanity of Parties
2. Destruction of Subject Matter
3. Supervening Legal Prohibition of Proposed Contract.
Who may Accept?
Party to whom offer is directed
*power to accept cannot be assigned.
Common Law Acceptance
Any different terms make the response a rejection and counteroffer (mirror image)
*unless the terms are implicit in the contract ("as long as i get marketable title")
*Request for clarification doesn't necessarily amount to rejection
UCC Acceptance
Changing terms is still valid acceptance.
*If not both merchants, new terms are just proposals to modify; not part of K
*If both merchants, additional terms automatically become part of the K unless they materially alter, expressly limit acceptance, or offeror objects w/in reasonable time.
When is Acceptance Effective?
UCC: May be accepted by any "medium reasonable in the circumstances"
Mailbox Rule
Acceptance by mail creates a contract at the moment of dispatch if properly addressed and stamped
Exceptions to Mailbox Rule
1. Offer stipulates that acceptance is not effective until received
2. Option contract effective only upon receipt.
*If offeree dispathes an acceptance before a revocation is received, a contract is formed
Offeree sends both acceptance and rejection
1. If offeree sends rejection, then acceptance, Mailbox Rule doesn't apply
2. Offeree sends Acceptance, then rejection - Mailbox rule applies
*if offeror receives rejection first, and changes his position in reliance on it, offeree is estopped from enforcing contract
Acceptance w/o Communication
1. Express waiver of offer (mail order form)
2. Act as acceptance
3. Silence as acceptance.
Unilateral Contract Acceptance
Only by contract performance. The contract is unilateral if at formation only the offeror has unperformed duties. To accept, offeree must act w/ knolwdge of the offer and be motivated by it.
Bilateral Contract Acceptance
Offeree need only promise to do an act; offer is accepted by communicating the required promise.
Shipment of Nonconforming goods
Both an acceptance and breach of newly formed contract, unless shipper accompanies tender with noteice that shipment is offered only as an accommodation. If buyer rejects, shipper is in breach and may reclaim the accommodation goods.
Duty to notify acceptance of unilateral contract
Only if offeror requests nitice or act would not normally come to offeror's attention.
Intent to Accept
Bilateral contract is formed when an offeree w/ knowledge takes steps that a reasonable person would consider an acceptance. (Internal intent is irrelevant)
Elements of Consideration
1. Must be a bargained-for-exchange.
2. Must be considered of legal value (benefit to promisor or detriment to promisee)
Preexisting Legal Duty
Promise to perform an existing legal duty is not sufficient consideration.
Exceptions to Preexisting Duty Rule
1. New or different consideration promised.
2. Duty owed to third party.
3. Impractibility
Illusory Promise
Consideration must exist on both sides; promises must be mutually obligatory
Requirements and Output Contracts
These ARE enforceable
1. I promise to buy all that i will require
2. I promise to sell all that I manufacture
*quantites may not be unreasonable diprportionate toa ny stte estimate or to any comparabe prior requirement.
Conditional Promises
Enforceable, no matter how remote the contingency, unless the "condition" is entirely w/in the promisor's control
Right to Cancel or Withdraw
If it is right to cancel ANYTIME, may be illusory. Valied if it includes any restriction
Suretyship Promises
Promise to pay the debt of another. Not enforceable unless supported by consideration.
Timing of Surety
*If Surety makes promise before creditor perfoms or promises the perform, there is sufficient consideration
*If surety promises after creditor performes, generally no consideration. Exceptions:
1. Obtaining surety is a condition precedent
2. Creditor gives additional consideration.
Right to Choose Among Alternative Courses
Illusory, unless EVERY ALTERNATIVE involves some legal detriment to the promisor. If power to choose rests with teh promisee or some third party, the promise is enforeable as long as one alternative involves legal detriment.
Substitutions for Consideration
1. Promissory Estoppel or Detrimental Reliance
2. Promise in Writing
3. Promises to Pay Legal Obligations barred by law
4. Reaffirmation of Voidable Promise
Elements of Promissory Estoppel
Promise is enforceable to the extent necessary to prevent injustice if:
1. Promisor should reasonably expect to induce action or forbearance;
2. Of a definite and substantial character;
3. And such action or forbearance is in fact induced.
Promise in writing w/o consideration
1.Valid for good faith written modification of a contract
2. Firm Offers by Merchants
Defenses to Formation
1. Absence of Mutual Assent
2. Absence of Consideration
3. Public Policy
Mutual Mistake
If both parties are mistaken to facts, K voidable by advesely affected party if:
1. Mistake concerns a basic assumption on which contract was made.
2. Mistake has material effect on agreed-upon exchange
3. Party seeking avoidance did not assume the risk of the mistake
*mistake in value generally not a defense
Unilateral Mistake
One party is mistaken of facts will not prevent formation. If nonmistaken party knew or had reason to know of mistake, he will not be ermitted to snap up the offer
Mistake by Intermediary
The prevailing view is that the message as transmitted is operative unless the other party knew or should have known of the mistake.
Latent Ambiguity Mistakes
K could be interpreted two ways.
1. If neither party is aware of ambiguity, no contract unless both parties intended the same meaning.
2. Both parties aware: no contract unless intended same meaning
3. One party aware: contract enforced according to the intent of unaware party.
Fraudulent Misrepresentation
If party induces other to enter contract by fraud, contract is voidable by innocent party if she justifiable relied (Fraud in the inducement)*innocent party need not wait until she is sued on the contract-true also for nonfraudulent misrepresentation.
Nonfraudulent Misrepresentation
Voidable by innocent party if they justifiably relied and the misrepresentation was material. Material if:
1. info would induce a reasonable person to agree
2. The maker of the misrepresentation knew the info would cause a particular person to agree.
Illegality Defense
If either the consideration or teh subject matter is illegal, this is a defense.
Generally the contract is void. If just the purpose of the contract is illegal (contract to rent plane to smuggele drugs), contract is voidable.
Lack of Capacity
Contract is voidable. Infants, Mental, Intoxication
Lack of Volitional Consent
Contract is voidable if duress or coersion.
Defenses to Enforcement
1. Statute of Frauds
2. Unconscionability
Statute of Frauds
Must be in writing if:
1. Promise to pay debt of another
2. Promises in consideration of marriage
3. Interest in Land (includes leases or easements for more than a year and fixtures)
4. Performance not w/in a year
5. Goods $500 or more
Performance not w/in a year
Date runs from date of agreement. Exceptions:
1. Possibility of completion within a year
2. Right to terminate within a year.
3. Lifetime contracts.
Goods $500 or more
Exceptions:
1. Specially Manufactured Goods
2. Written confirmation between merchants
3. Admissions in pleadings or court.
4. Partial payment or delivery (to the extent that payment or goods are received and accepted)
Requirements of Writing for Statue of Frauds
1. Identity of parties
2. ID of subject matter
3. Terms and conditions
4. Consideration
5. Signed by party to be charged (or agent)
Noncompliance with Statute of Frauds
Unenforceable.
Exceptions to Statute of Frauds
Performance
Promisorry Estoppel
Unconscionability
Clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time the contract was formed. One party has substantially superior bargaining power.
Who is a Third Party Beneficiary
Creditors: promisee's primary intent in contract was to discharge an obligaion
Donee Beneficiary: promisee's primary intent in contract was to confer a gift or create a right to 3rd party
When do rights of 3rd party beneficiary vest?
Vest when beneficiary:
1. Manifests assent to the promise ina manner requested
2. Brings suit to enforce promise.
3. Materially changes position in justifiable reliance on promise.
Rights of the Promisee and Third Party Beneficiary
3rd party can sue promisor on the contract. Promisor can raise any defense he could against promisee.
Creditor Beneficiary
Can sue promisee and promisor, but only receive one satisfaction.
Donee Beneficiary
May not sue promisee, unless promisee tells beneficiary about the contract and should foresee reliance and the beneficiary reasonably relies to her detriment.
Promisee Recovery w/ Third Party Beneficiary
Donee - promisee has a cause of action against promisor
Creditor - may recover against promisor; can compel specific performance
What rights CANNOT be assigned
1. Rights substantially change obligor's duty.
2. Rights substantially alter obligor's risk
3. Assign. of future rights (future rights already existing in contract are assignable)
4. Assign. prohibited by law.
5. Express contractual provisions against assignment
Change of Obligor's Duty
Cannot assign rights if:
1. Personal services are unique.
Requirements for Effective Assignment
Must be in writing if:
1. wage assignments
2. interest in land
3. action more than $5,000.
4. intended as security interest
Present Words of Assignment
Assignor must manifest intent to transfer his rights completely and immediately.
*No consideration required for assignment
When does assignment vest and become irrevocable?
1. Includes consideration
2. Performance by Obligor
3. Delivery of token chose
4. Estoppel
Revocation of Assignement
Revocable before it vests, or by:
1. Death of assignor
2. Bankruptcy of assignor
3. Notice of revocation by assignor
4. Assignor takes performance directly from obligor
5. Subsequent assignment
Rights of Assignee
Can enforce rights against obligor directly. Obligor can only use defenses inherent in the contract itself
What duties cannot be delegated?
1. Duties involving personal judgement and skill
2. "Special trust" in delegator
3. Change of obligee's expectancy.
4. Contractual Restrictions
Effective Delegation
may be oral or written; delegator must manifest a present intention to make the delegation. Delegator will remain liable on his contract.
Parole Evidence Rule
If express contract in writing, any other expressions, written or oral, made prior to or during the writing, are inadmissible to vary the terms.
Exceptions to Parol Evidence Rule
1. Attacking validity
2. Interpretation
3. Showing of True Consideration
4. Reformation
Promise or Condition?
Look at intent of the parties. Words, prior practice, custom, etc.
Condition Precedent
Condition must occur before an absolute duty of immediate performance arises in the other party. Plaintiff has burden to prove the condition precedent.
Conditions Concurrent
Capable of occurring together, and parties are bound to perform at the same time
Conditions Subsequent
Occurence that cuts off an already existing absoute duty of performance. Defendant has burden to prove condition subsequent.
When are conditions excused?
1. Hiderance or failure to cooperate
2. Actual Breach
3. Anticipatory Repudiation
4. Inability or Unwillingness to perfom
5. Substantial performance
6. Divisibility of Contract
7. Waiver or estoppel
Anticipatory Repudiation
Promisor says, before time of performance, that he is not going to perform.
*Must be bilateral contract
*Other party can sue immediately, or wait until performance date.
Substantial Performance
Generally, the condition of complete performance may be excused if the party has rendered substantial performance. Only where constructive (implied by law) condition is involved. Not express condition.
*inapplicable where breach is willful
Substantial Performance and Sale of Goods
Perfect tender rule gives the buyer the right to refect goods that do not conform to the contract in any manner
Exceptions to Perfect Tender Rule
1. Parties agree
2. Rejection under installment contract only if substantial impairment of value.
3. Failure of seller to make a reasonable K with carrer or not give buyer prompt notice of shipment, and there is material delay or loss.
4. Buyer accepts goods
5. Bad faith rejection
6. Seller has right to cure, if time is appropriate.
Rule of Divisiblity
Where a party performs one of the units of a divisible K, he is entitled to the agreed-on equivalent to that unit even though he fails to perform the other units.
Divisible Contract
Three tests must be satisfied
1. Performance of each party is divided into tow or more parts.
2. Number of parts for each party is the same
3. The performance of each part by one party is agreed on as the equivalent of the coresponding part from the other party.
Installment Contracts
Deliveries in separate lots.
1. price may be demanded for each lot unless a contrart intent appears.
2. Buyer may reject only if defect substantially impairs value of that installment and cannot be cured
3. Buyer can only declare breach if defect substantially impairs value of entire contract.
Discharge by Impossiblity
1. Must be objective (cannot be performed by anyone)
2. Must arise after K
3. Each party is excused from duties
4. Temporary impossibility suspends duties
Examples of Impossiblity
1. Death or physical incapacity
2. Supervening illegality
3. Subsequent destruction of subject matter (only if necessary to complete contract)
Test for Impracticability
1. Extreme and unreasonable difficulty and/or expense.
2. Difficulty was not anticipated.
Discharge by Frusteration
exists if the purpose has become valueless by virute of some supervening event not the fault of the party seeking discharge.
Elements of Frusteration
1. Supervening Act
2. Not foreseeable
3. Purpose of K is destroyed
4. Purpose of K was realized by both parties at formation
Discharge by Rescission
Mutual: express agreement to rescind. May be oral or written (no oral for sale of goods or under statue of frauds).
Unilateral: one of the parties ot the K desires to rescind (must have adequate legal grounds) - mistake, duress, etc.
Discharge by Novation
1. Previous valid contract2 2. Agreement among all parties
3. Immediate extinguishment of contractual duties between original parties
4. Valid new contract.
Accord and Satisfaction
One party agrees to accept, some other performance from other party than originally promised. Must have consideration. Satisfaction of this accord discharges original contract
Breach
1. Promisor is under an absolute duty
2. this absolute duty has not been dishcarged
3. failure ot perform duty.
Material v. Minor breach
Look at:
1. Amount of benefit received
2. adequacy of damages
3. extent of part performance
4. hardship to breaching party
5. negligent or willful behavior.
6. likelihood of full performance.
Nonbreaching party's duty
Must show he is willing and able to perform but for breaching party's failure to perform.
Compensatory Damages
put the nonbreaching party wehre she would ahve been had the promise been performed
*Expectation damages
*Reliance Damages - put plaintiff in position as if the contract never been formed.
Consequential Damages
Any further losses that any reasonable person would have foreseen would occur from breach. Plaintiff has burden.
Punitive Damages
Generally not awarded in contract cases
Nominal Damages
may be awarded where a breach is shown but no actual loss is proven ($1)
Liquidated Damages
have been agreed to by both parties at time of contract. If not punitive, they are enforceable.
Remedies of Seller
1. Withhold delivery of goods
2. Stop delivery
3. Resell goods and recover difference
4. Cancel Contract
5. Recover price
6. Recover ordinary contract damages
When can Seller recover price
1. Goods have been accepted or conforming goods were lost or damaged within a reasonable time after risk of loss passed to buyer.
2. Goods have been identified to the contract and seller is unable to resell
Remedies of Buyer
1. Cancel
2. Cover
3. Recover goods identified by K if buyer has paid part or all of price.
4. Recover goods contracted for if unable to cover adn goods were in existence when contract made or were later identified to contract.
5. Obtain specific performance if unique
6. Recove damages for nondelivery.
Remedy of Buyer who Keeps nonconforming goods
may recover difference between the value the goods would have had if they had been as warranted and the actual goods.
Construction Contracts Breach by Owner
Before construction started: builder entitled to the profits he would have derived
During Construction: entitled to any profit he would have derived plus any costs he hs incurred to date
After Construction: full contract price plus interest.
Construction Contracts
Breach by Builder
Before Construction: owner gets cost of completion (amount above k price it will cost to complete pluse compensation for delay)
During Construction: Same
Breach by Late Performance: damages for any loss incurred by not being able to use the property when performance was due