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193 Cards in this Set
- Front
- Back
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Contracts checklist
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- Common law or UCC? (UCC: sale of goods & certain merchant transactions)
- legal relationship between the parties - defenses to contract? - conditions precedent? have they been fulfilled? - duty to perform been discharged? - duty to perform been breached? - third party beneficiaries, assignment, or delegation issues? - REMEDY |
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contract formation
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- offer (termination)
- acceptance - consideration - DEFENSES |
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offer: requirements
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- INTENT: would a reasonable person believe his acceptance would create a contract?
- TERMS: - parties - price - subject matter - time - place - quantity UCC: reasonable time & place can be implied if consistent with parties' intent - COMMUNICATION: would a reasonable person consider it to be a communication? |
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termination of an offer
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+ Revocation is allowed unless:
- option contract supported by consideration - reasonable detrimental reliance by offeree - UCC firm offer + rejection by offeree + operation of law: - illegal contract - subject matter destroyed - insanity/death of offeror - reasonable lapse of time + indirect revocation: unaccepted offer terminates when offeree learns of acts of offeror inconsistent with offer! |
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acceptance
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requirements:
- knowledge of the offer - communicated to the offeror - unequivocal - accepted by offeror's terms (UCC: any REASONABLE medium) UCC: modifications viewed as proposals for additions to K! |
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MAILBOX RULE
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Where offer expressly authorizes acceptance by mail:
- acceptance effective upon dispatch - revocation/rejection effective upon receipt if mode of acceptance used is not authorized: effective upon receipt |
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when is consideration NOT required?
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- promise to pay barred legal obligation
- promise to perform voidable preexisting duty - promise to pay for past services where promisee expects payment - promise to modify pre-existing K in good faith if both parties agree (UCC) - promisor's full performance of illusory K |
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defenses to contract
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- illegal
- fraud - lack of consent - statute of frauds - capacity - unconscionable - mistake |
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statute of frauds
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following K's must be in writing:
- guaranty K's unless for promisor's benefit - interest in land + sale of goods over $500 unless : - goods already delivered/accepted - payment already received/accepted - goods specially manufactured and production begun - intangible rights over $5,000 - cannot be performed within one year - prenuptial K's - if injustice would result - part or full performance rendered by 1 party if K violates statute of frauds: MAJORITY: voidable! MINORITY: void! |
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PAROL EVIDENCE RULE
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where parties have reduced their agreement to a final integration, parol evidence is not admissible to vary terms.
EXCEPTIONS: - clarify ambiguous terms - show defense to K formation - show existence of condition - show no final integration |
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conditions: how to analyze
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IDENTIFY CONDITIONS:
- express conditions - implied conditions - constructive conditions CONDITIONS EXCUSED? - prevention of performance - anticipatory repudiation - waiver - disablement - impossibility - estoppel |
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express conditions: issues
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+ is it a condition or promise?
- acting party: it's a promise - non-acting party: it's a condition - courts prefer promise + intent of parties + express language + strict compliance required! |
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express conditions: types
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- condition precedent
- condition concurrent - condition subsequent |
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implied conditions
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would a REASONABLE person believe that parties contracted with the implied understanding that certain facts would exist?
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constructive conditions
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created by law.
either CONCURRENT or PRECEDENT. only SUBSTANTIAL compliance required! |
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things that can excuse conditions
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- prevention of performance
- anticipatory repudiation - waiver - disablement - impossibility - estoppel |
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promisee prevents performance: how to analyze
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did the promisee intentionally or negligently hinder satisfaction of condition upon which his duties depends?
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anticipatory repudiation
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would a REASONABLE person consider the statement as a present, absolute & unequivocal renunciation of the obligation?
IF SO, promisor can: (1) reject repudiation--he still expects performance (2) sue for breach! |
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excusing the conditions: waiver
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if you knowingly accept defective performance, you can't turn around and sue
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voluntary disablement
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implied repudiation by promisee!
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excusing the conditions: impossibility
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OBJECTIVE - no one could perform! Subjective impossibility not enough!
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excusing the conditions: estoppel
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promisee leads promisor to believe that he won't insist on satisfaction--BEFORE it's due
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duty to perform been discharged: impossibility
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must be objective!
UCC: neither party can be at fault. Risk transfers when: - specific location: when carrier gives goods to buyer - no specific location: when seller gives to carrier - no shipment: when seller gives to buyer (or merchant) - FOB - FAS - CIF |
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Free On Board (FOB) [place]
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risk passes to buyer when goods reach named spot (usually when put on train)
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Free Along Side (FAS)
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risk passes to buyer when goods are alongside vessel
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Cost of goods, Insurance, Freight (CIS)
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risk passes to buyer at point of shipment
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duty to perform been discharged: frustration of purpose
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unforeseeable supervening act frustrating or destroying known contract purpose
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duty to perform been discharged: subsequent agreement of parties (list)
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- mutual rescission
- subsequent modification - UCC good faith modification - novation: substitute new party - substitute new contract - accord & satisfaction a.k.a. account stated - unilateral discharge by obligee |
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duty to perform been discharged: impracticality
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- impractical with original consideration
- unforseeable circumstance (UCC doesn't mind) - obligor did not assume the risk |
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condition subsequent
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occurrence releases D!
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duty to perform has been discharged: possible situations
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- impossibility
- frustration of purpose - subsequent agreement of parties - impracticality - condition subsequent |
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types of breaches
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- material
- minor |
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material breach: aggrieved party
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aggrieved party:
- gets all foreseeable damages - can rescind K - must mitigate damages |
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minor breach
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aggrieved party
- can recover damages - must still perform! |
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delegation: how to analyze
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- identify the issue
+ label the players - delegator - delegatee - obligee - is this a delegable duty? - what is the effect? - if delegatee does not perform |
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is it a delegable duty?
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only if:
- ordinary commercial obligation - delegatee has same reputation/competence |
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delegation: must obligee accept?
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If delegatee performs, then obligee must accept it. Duty is satisfied.
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if delegatee does not perform: who is liable to whom?
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- delegator is secondarily liable to obligee
- delegatee is liable to delegator - delegatee is liable to obligee only if obligee is a 3rd party beneficiary! |
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assignment: how to analyze
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- identify issue
+ label the players - assignor - assignee - obligor - is it a valid assignment? - what is the effect of the assignment? - if obligor breaches - rescission/revocation of assignment |
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assignment: is it valid?
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- did assignor INTEND?
- does assignment INCREASE obligor's duty? (if so, they can refuse assignment!) - did assignee give NOTICE to obligor? |
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assignment: what is the effect of a valid assignment?
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Once the obligor receives notice, he must render performance to the assignee
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assignment: if obligor breaches
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- obligor liable to assignee
- assignor liable to assignee: breach of implied warranty! |
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rescission/revocation of assignment: can you do it?
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Can you revoke?
- assignments for consideration: NO - gratuitous assignments: yes--UNLESS: - detrimental reliance - obligor performs - written assignment delivered to assignee UCC allows good faith modification. |
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third party beneficiaries: how to analyze
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+ identify issue
+ label the players - promisor - promisee - 3rd party beneficiary + valid 3rd-party beneficiary K? + effect of valid K? + if breach? |
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third party beneficiaries: is it valid?
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Valid if parties INTENDED that 3rd party benefit from K.
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third party beneficiary: effect of contract (what are his rights?)
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3rd party beneficiary has a direct, personal action to remedy breach of promised performance.
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third party beneficiary: if there's a breach--who's liable to whom?
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- promisor liable to promisee
- promisor liable to 3rd party. Promisor cannot assert promisee's defenses against beneficiary! - promisee not liable to 3rd party! |
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contract remedies: issues
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- common law vs. UCC?
- what damages are recoverable? - what limitations? - what is the measure of damages? - restitution, rescission, or reformation available? - specific performance? - land sale, construction and personal service contracts |
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contract remedies: damages
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- standard measure
- consequential - incidental - nominal - punitive - limitations - liquidated damages clause - UCC |
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contract remedies: standard measure damages
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Market Price - Contract Price
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contract remedies: consequential damages
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special needs or position of buyer. Recoverable IF:
- damages naturally arose from breach - reasonably within the contemplation of both parties at time K was entered into |
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contract remedies: incidental damages
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REASONABLE costs of reselling or repurchasing goods & shipping, storing or inspecting
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contract remedies: nominal damages
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clearly been a breach, but no proof of actual damage
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contract remedies: punitive damages
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never, unless breach is malicious or intentionally harmful
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contract remedies: limitations on damages
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damages must be:
- foreseeable - unavoidable - causal - certain |
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contract remedies: liquidated damages clause
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only valid if:
- damages difficult to determine - reasonable forecast - cannot be a penalty |
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contract remedies: UCC seller's remedies
BEFORE BUYER'S ACCEPTANCE |
- withold goods or stop transit
- resell to another in good faith & recover the difference - if $ damages inadequate: sue for K price RECOVER: Contract Price - Market Price if no difference, then: Net Profit Lost - Expenses Saved |
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contract remedies: UCC seller's remedies
buyer accepts but doesn't pay |
- sue for K price
- reclaim goods if buyer is insolvent (10 day limit--but only if seller didn't already know!) |
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contract remedies: UCC buyer's remedies
BEFORE BUYER'S ACCEPTANCE |
- if $ damages inadequate: demand goods
- cancel K, buy from another, recover damages - withhold amount equal to damages |
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contract remedies: UCC buyer's remedies
AFTER BUYER'S ACCEPTANCE |
- accept nonconforming goods and recover consequential/incidental damages
- substantial breach: revoke K! |
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UCC: buyer accepts by . . .
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- telling seller goods are acceptable
- failing to reject within reasonable time - doing any act inconsistent with seller's ownership of goods |
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contract remedies: UCC duties
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- aggrieved party must notify breacher following prompt inspection of goods
- seller has chance to CURE if time for performance has not passed! - duty to mitigate |
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contract remedies: restitution / quasi-contract
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can recover for unjust benefit received where:
- mistake - fraud - material breach - illegal - statute of frauds violation - impossibility - incapacity - frustration of purpose |
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contract remedies: rescission / cancellation
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can recover for unjust benefit received where:
- mistake - fraud - material breach - illegal - statute of frauds violation - impossibility - incapacity - frustration of purpose - can't affirm and later seek rescission EQUITABLE DEFENSES APPLY |
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contract remedies: when is reformation allowed
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only allowed where:
- prior valid unambiguous K - writing fails to conform thereto as a result of MISTAKE or FRAUD DEFENSES: - parol evidence rule: no! - statute of frauds: no! (majority) |
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contract remedies: specific performance - requirements
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Requirements:
- inadequate legal remedy - definite & certain terms - feasible - mutuality - defenses |
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specific performance: inadequate legal remedy
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- damages speculative / too small
- multiplicity of suits - irreparable injury - unique chattel/land (contracts) |
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specific performance: feasibility
list of situations |
- personal service K: NO
- land sale K: if court has PERCEIVED jx over the parties, then YES - construction K: YES |
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specific performance: mutuality
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only need mutuality of PERFORMANCE; court must be able to secure Plaintiff's performance too
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specific performance: defenses
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+ Statute of Frauds
+ Unclean Hands + Hardship + Inadequate consideration: only if - grossly inadequate - unconscionable K or sharp practices - tested at date K was signed |
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land sale contract remedies: upon death of seller
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Title passes to heir as personal property.
Buyer may seek specific performance. |
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land sale contract remedies: death of buyer
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Interest in land passes as real property. Seller may seek specific performance.
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land sale contract remedies: who bears risk of loss due to accident/destruction?
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MAJORITY & COMMON LAW: Risk passes to buyer when the contract is entered into.
MINORITY & CALIFORNIA: Risk doesn't pass to buyer until he has possession. |
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land sale contract remedies: buyer's remedy for breach of executory contract
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* (out of pocket or benefit of bargain) + consequences for delay
* specific performance with abatement * restitution |
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land sale contract remedies: after conveyance
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- damages for breach of covenant: YES
- restitution for overpayment: YES - specific performance: NO - quasi-contract: NO |
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specific performance of contract for sale of land: what does abatement mean?
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Seller can't do full performance so the purchase price is ABATED as a result. Breach must be immaterial. Can't do it if breach is so large that it would be like making a new contract.
EXCEPTION: contracts based on income from the land; if the income isn't affected then no abatement. |
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land sale contract remedies: defaulting seller
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can still get specific performance with abatement, as long as breach is immaterial!
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land sale contract remedies: seller's remedy for breach of executory contract
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* market value - contract price + consequential damages
* specific performance * rescission & restitution (partial payment - damages) * quiet title action |
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land sale contract remedies: defaulting buyer
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can get: restitution (seller's damage)
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land sale contract remedies: fraudulent seller
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TORT DAMAGES: K price - actual value + punitive
CONTRACT DAMAGES: expected value of land - actual value + NO punitive |
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construction contract: builder's remedies
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before performance: lost profits
after partial performance: K price - cost of completion after full performance: price, or restitution under quasi-contract |
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construction contract remedies: what can builder get if he defaults?
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Builder may obtain restitution for: work performed - owner's damages
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construction contract: owner's remedies
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Part performance: cost of completion + consequential damages
Substantial performance: pick one - cost of repair - replacement - diminution in value Restitution/Specific Performance usually denied |
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personal service contract: employer's remedies
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cost of replacing employee's services - mitigation
- or - rescission + restitution (wages) No specific performance! But court may imply covenant not to compete. |
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personal service contract: employee's remedies
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- price of contract
- mitigation - restitution for part performance Mitigation: need not take substantially different or inferior employment |
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personal service contract: implied negative covenant not to compete
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- legal remedies are inadequate
- unique service - least drastic means are employed - CALIFORNIA: must be worth at least $6,000 |
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acceptance: intent
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would a reasonable person believe his acceptance would create a contract?
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contract formation: content
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- parties
- price - subject matter - time - place - quantity |
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contract formation: UCC
Do time & place have to be specified |
No - reasonable time & place can be implied if consistent with parties' intent
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contract formation: communication
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would a reasonable person consider it to be a communication?
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termination of an offer: operation of law (list)
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- illegal contract
- subject matter destroyed - insanity/death of offeror - reasonable lapse of time |
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termination of an offer: indirect revocation
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unaccepted offer terminates when offeree learns of acts of offeror inconsistent with offer!
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if K violates statute of frauds:
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MAJORITY: voidable!
MINORITY: void! |
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possible conditions - list
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- express conditions
- implied conditions - constructive conditions |
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have the conditions been excused?
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- prevention of performance
- anticipatory repudiation - waiver - disablement - impossibility - estoppel |
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is it a condition or promise?
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- acting party: it's a promise
- non-acting party: it's a condition - courts prefer promise |
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Under UCC, can your duty to perform be discharged by a foreseeable circumstance that makes performance impractical?
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YES - it's ok if it was foreseeable.
(Common law: no) |
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delegation: label the players
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- delegator
- delegatee - obligee |
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assignment: label the players
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- assignor
- assignee - obligor |
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can you revoke an assignment for consideration?
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no
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can you revoke a gratuitous assignment?
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yes--UNLESS:
- detrimental reliance - obligor performs - written assignment delivered to assignee |
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third party beneficiary: label the players
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- promisor
- promisee - 3rd party beneficiary |
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contract remedies: UCC seller's remedies
BEFORE BUYER'S ACCEPTANCE what can seller recover? |
Contract Price - Market Price
if no difference, then: Net Profit Lost - Expenses Saved |
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is the parole evidence rule a defense to reformation?
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no
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is the statute of frauds a defense to reformation?
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Majority: no
Minority: yes |
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will the court grant specific performance for a personal service contract?
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NO - 13th Amendment prohibits involuntary servitude
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will the court grant specific performance for a land sale contract?
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yes - if court has PERCEIVED jx over the parties
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will the court grant specific performance for a construction contract?
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yes
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when is inadequate consideration a defense to specific performance?
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only if
- grossly inadequate - unconscionable K or sharp practices tested at date K was signed |
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land sale contract remedies: after conveyance
can you get damages for breach of covenant? |
yes
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land sale contract remedies: after conveyance
can you get restitution for overpayment? |
yes
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land sale contract remedies: after conveyance
can you get specific performance? |
no
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land sale contract remedies: after conveyance
can you get quasi-contract? |
no
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construction contract: builder's remedies
before performance |
lost profits
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construction contract: builder's remedies
after partial performance |
K price - cost of completion
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construction contract: builder's remedies
after full performance |
price, or restitution under quasi-contract
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construction contract: owner's remedies
Part performance |
cost of completion + consequential damages
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construction contract: owner's remedies
Substantial performance |
pick one
- cost of repair - replacement - diminution in value |
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construction contract: owner's remedies
Restitution/Specific Performance |
usually denied
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Can a grantee enforce a gift if they acted in reliance?
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Yes!
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If you promise to give a reward after getting your dog back is it an enforceable contract?
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No - no consideration.
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Damages for breach of contract:
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Market price - contract price + efforts to mitigate + incidental & consequential damages
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If market price - contract price doesn't give adequate compensation (ie. lost volume)
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Contract price - cost to the dealer
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Does Statute of Frauds apply to a promise to repay a loan that really benefits you?
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No - Statute of Frauds does not apply
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"I will sell to George if he pays within 10 days." What is it?
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An offer for an unilateral contract
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If you assign away a contract does that assign away liability?
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NO. (Exception: under UCC you can contract out liability for goods lost during shipping.)
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Once an offer is rejected can the offeree later accept?
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NO.
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Agreement to forgive debt if you do something else instead. Is the original debt discharged?
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NO; it is only SUSPENDED until the new debt is discharged!
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If you fail to pay a third party is it a defense to argue that the contract price changed/was a mistake?
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YES - partial defense!
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In a personal services contract is performance excused by illness?
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Yes!
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If someone owes you a debt can you orally assign that to someone else?
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Yes
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If debtor's debt to creditor is past the statute of limitations and debtor assigns third party's debt to creditor can third party assert the statute of limitations defense?
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NO; third party's own debt has not passed the statute of limitations so he's still liable!
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If one party is mistaken on a fact and the other party knows better can they take advantage of that?
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NO.
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If one party knows the other party's offer is too low can they accept anyway?
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NO - can't take advantage of other side's mistake of fact.
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Ask for more money for the same contract. Enforceable?
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NO - preexisting duty to fulfill the contract!
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Original offer in writing. Oral counter-offer with new term. Is the new term enforceable?
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NO - not written.
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UCC: Is an offer to keep open for more than three months enforceable?
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Yes but only for the first three months!
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Shipment of nonconforming goods: is that an acceptance?
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NO - it's a counter-offer. Must be accepted or rejected in whole!
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If seller delivers an imperfect shipment what are buyer's options?
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Reject entire shipment accept conforming part of shipment and reject nonconforming part or accept the entire shipment and sue for damages
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Lost volume rule:
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Seller has unlimited supply and limited volume. If buyer breaches seller can sue for lost profits. (Even though he found another buyer that means only one sale whereas if buyer had not breached he would have had TWO sales.)
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Define condition subsequent in a contract:
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When it occurs it cuts off an already existing absolute duty of performance.
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Can a contractual duty be delegated?
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Yes but only as long as performance by the delegate won't materially change the obligee's expectancy under the contract!
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Is an oral modification of a written contract valid under the parol evidence rule?
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NO.
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Can the contract include a clause for liquid damages?
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NO. Can only contract for actual damages! (Liquid damages only available under very limited circumstances.)
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Silent acceptance of a contract?
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- offeree silently takes the benefit of offered services - reasonable opportunity to reject - reason to know that they were offered with the expectation of compensation
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When can impossibility be used as a defense for not fulfilling a contract?
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Only after the contract has been entered into.
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Is impossibility objective or subjective?
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OBJECTIVE - no one could fulfill the contract!
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Unilateral mistake
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- one party is mistaken about material facts relating to the contract - the mistake adversely affects that party - the other party knows of the mistake!
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Is a new promise to pay an expired debt enforceable?
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YES! Even though the original debt isn't!
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Does the parol evidence rule apply to subsequent modifications?
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NO.
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parol evidence rule
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forbids the introduction of extrinsic evidence that would change the terms of a later written contract
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what counts as parol evidence?
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words of party before integration oral or written
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define "merger clause"
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"This is the complete & final agreement."
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complete vs. partial integration:
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don't worry about it; it's the wrong answer.
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functions of parol evidence (including inadmissible)
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contradicting: NO (court won't consider EARLIER statements) getting out: YES explaining: YES adding: YES - only if not a complete integration!
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Anticipatory repudiation: do you have to wait until the due date to sue?
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NO. That's the whole point of anticipatory repudiation. If you have a reasonable belief that the other party won't perform, you can sue BEFORE the due date.
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Does a minor have capacity to enter into a contract?
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NO.
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If a minor enters into a contract and then disaffirms, what result?
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The contract is voidable by the minor! If he disaffirms, he discharges any liability he might have had!
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UCC: Can a merchant recover incidental damages?
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YES.
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Are advertisements generally construed as offers or invitations?
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General rule: invitations. Even if the terms are fairly specific. At least you can make the argument (even if it's a grey area).
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Does a gratuitous assignee have a cause of action for revocation of assignment?
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NO.
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Promissory estoppel (Restatement)
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Promise is binding IF:
- promisor reasonably expects it will induce action - it does - injustice can only be avoided by enforcement |
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Can a commercial catalog constitute an offer?
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Not usually, but sometimes. Look at SURROUNDING CIRCUMSTANCES (eg. reply to inquiry, adding delivery terms & conditions of sale)
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UCC: To modify an existing contract, do you need consideration?
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NO - all you need is good faith!
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UCC: Can acceptance add additional terms?
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Yes - IF:
- contract between two merchants - additional terms don't materially alter contract - offer doesn't expressly limit acceptance - offeror doesn't object within reasonable time |
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UCC: Acceptance adds new terms, but offeror objects to the new terms within a reasonable period of time. Result?
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Contract is formed according to the original terms!
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Counteroffer vs inquiry
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Inquiry: Question about additional terms or matters. Does not reject original offer!
Counteroffer: rejects original offer! Test: whether a reasonable person would believe that the offer is being rejected! |
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Mailbox Rule: revocation
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There is no mailbox rule for revocation! Revocations are effective only upon receipt.
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Revocation: what if you get the letter but don't read it?
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Doesn't matter! Receipt only requires possession of the revocation, not knowledge.
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Assignment: If there is a clause prohibiting assignment of "the contract," does that prohibit assignment of payment? (Restatement)
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NO - you can still assign right to payment.
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If you ship part of the right order and part something else, is that an acceptance + counteroffer?
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NO - that is an acceptance + breach.
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Non-conforming goods are lost during shipment. Who bears liability? (UCC)
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The seller! If the goods are so defective that the buyer has a right to reject them, the risk of loss does not pass until the defects are cured or the buyer accepts the goods.
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UCC: Goods are shipped and the contract does not specify liability. Who bears liability for loss during transit?
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The BUYER. Default rule: Risk of loss passes to the buyer when the goods are duly delivered to the carrier.
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UCC: Remedy for nonconforming goods
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- K price - price of conforming goods
- incidental damages - consequential damages |
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Can you delegate a personal service?
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NO
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Service of a skilled negotiator: is it delegable (to another negotiator
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NO - it's a personal service
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Assignment supported by consideration: what result?
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It forms a second contract! Obligee is a third-party beneficiary of the second contract and can sue for performance.
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When the buyer seeks damages for nonconforming goods, may he sell the nonconforming goods to pay seller's debt?
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Yes!
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Mutual mistake: terms vs. reason for entering
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Mutual mistake is only a valid defense to contract for mistake of terms. If you were mistaken in your reasons for entering into the contract, that's not a valid excuse.
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Promise to forbear on a lawsuit even though you don't have a valid cause of action. Does that count for consideration?
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YES, as long as you HONESTLY AND REASONABLY believe the claim is good, even if it isn't really.
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Does the Mailbox Rule apply to options?
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NO. Acceptance of an option is only effective when received by the offeror.
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Land sale contract: is a mere description of the property enough to satisfy the Statute of Frauds?
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Yes! Does not need to be a complete "legal" description. (Who needs all that legal bullshit anyway?)
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UCC: Does the merchant have a chance to cure even if the deadline has passed?
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YES - seller has a reasonable chance to cure even if it goes past the deadline. (Reasonableness!)
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Divisible contract
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- performance of each party is divided into parts
- number of parts from each party is the same - parts match up This must be explicit agreement! |
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Does a "bonus" need consideration?
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YES.
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Unilateral mistake
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Can only be asserted if the other party knew of the mistake!
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Time of the essence clause: is simply having a deadline enough?
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NO - simply having a deadline is not enough to indicate that time is of the essence. You must specify!
Otherwise failure to meet the deadline will be considered a minor breach, as long as still performed within a reasonable time. |
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Are employment contracts divisible?
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YES - so the employee can get partial payment for the work he actually did.
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Contract remedy for full performance
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Damages for breach
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Constructive condition precedent
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One party's obligations will take time (eg. photography), the other party's obligation is instantaneous (eg. payment). The obligation that takes time must be substantially completed before the other party must render performance. Thus, the obligation that takes time is a constructive condition precedent.
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Consideration: legal detriment
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You must do something you did not otherwise have a legal obligation to do.
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Implied promise of prevention
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If you impede the other party's performance, you are in breach!
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Parol evidence rule: does it apply to actions for misrepresentation?
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NO - misrepresentation is essentially a tort action so the Parol Evidence Rule doesn't apply.
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