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48 Cards in this Set
- Front
- Back
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UCC
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1. The UCC governs sale of goods contracts.
a. Goods are all things movable when they are identified as the goods to be sold under the contract. i. Doesn’t apply to sale of real estate, services, or intangibles. ii. If a sale involves goods and services, look at which aspect is dominant and apply governing law to entire contract. Predominate purpose test b. Special rules apply to merchants c. Merchants are individuals who regularly deal in goods of the kinds involved in the transaction or have specialized business practices knowledge. |
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Common Law
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1. Common law governs non-UCC contracts.
2. The common law governs contracts for services and land. |
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Formation
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A valid contract has an offer, acceptance, and consideration.
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Offer
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An offer is 1) a communication to an identified offeree, 2) which sets forth definite and certain terms (QTIPS) and 3) manifests a present intent to enter into a binding contract.
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Termination of Offer
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An offer not supported by consideration or detrimental reliance can be revoked at any time. The power of acceptance created by the offer ends when the offer is terminated.
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Revocation
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A revocation occurs when the offeror manifests an intention to terminate the offer and it is received by the offeree.
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Irrevocable offers
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Option contract-An option contract is where the offeree gives consideration in exchange for the offeror’s promise not to revoke an outstanding offer for a specified period of time. If someone partially performs, they have an option not to perform.
Firm offer-A firm offer is a merchant’s promise (offeror) in a signed record not to revoke the offer for a specified period or, if unstated, for a reasonable time < three months. A firm offer does not require consideration. Detrimental reliance-Where the offeror may reasonably expect that the offeree would detrimentally rely on her offer, it will be held irrevocable as an option contract for a reasonable time period. |
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Rejection
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i. Rejection can occur by words or conduct by the offeree indicating she does not intend to accept the offer, and it is effective upon receipt.
ii. A counteroffer is a rejection coupled with a new offer. |
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Termination by operation of law
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i. (Red Rover Does Laps During School)
ii. Rejection, Revocation, Death, Lapse of time, Destruction, Supervening illegality |
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Acceptance
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1. An acceptance is an agreement to be bound by the terms of the offer.
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Mirror Image Rule
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Under the common law, an unqualified acceptance that exactly mirrors the offer.
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UCC Acceptance
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b. Under the UCC, an acceptance which adds terms to the offer is valid.
i. Between merchants, the additional terms 1) become part of the contract unless they 2) materially alter the contract, 3) the offeror objects within a reasonable time, OR 4) acceptance is limited to the terms of the offer. (Make sure to discuss Merchants) |
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Under 2-207, what happens to different terms?
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A. Split of authority
1. Treat like additional terms and apply 2-207 rule 2. Knock-out rule-Conflicting terms in offer and acceptance are knocked out of the K and terms instead are provided by UCC gap-filler. |
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Method of acceptance
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a. Acceptance can occur by performance or by promise to perform.
i. Promise to perform ii. Commencing performance iii. Complete performance |
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Mode of acceptance
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a. Acceptance may be by any reasonable manner or by any means authorized by the offer.
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Acceptance effective upon dispatch
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a. Mailbox rule
i. Acceptance by mail or similar means creates a contract when dispatched UNLESS: i. the offer stipulates that acceptance is not effective until received OR ii. An option contract is involved (an acceptance under an option contract is effective only upon receipt). ii. Rejection followed by acceptance which ever arrives first wins iii. Acceptance followed by rejection If rejection arrives first and there is detrimental reliance, then offeree is estopped from asserting there is a K. b. Limitations on mailbox rule i. Offeree sends rejection, then acceptance. i. Whichever one received first is effective. ii. Offeree sends acceptance, then rejection. i. Dispatch of acceptance creates contract, but if offeror receives rejection first and changed his position in reliance on it, offeree will be estopped from enforcing the contract. |
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Consideration
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1. To be valid, a contract must be supported by consideration.
2. Consideration is a bargained-for exchange of legal detriment or benefit. a. Bargained-for exchange b. Legal detriment or benefit i. Adequacy generally irrelevant ii. Past consideration iii. Pre-existing duty iv. Part payment to settle existing debt v. Payment to settle legal claim vi. Payment of debt barred by statute of limitations |
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Promissory estoppel or detrimental reliance as substitute for consideration.
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a. Consideration is not necessary where the facts indicate the promisor should be estopped from not performing.
i. Promisor should reasonably expect to induce action or forbearance AND such action or forbearance is in fact induced. 4. Illusory promise-Output and requirement contracts do not fail for lack of consideration because promisor suffers a legal detriment – the legal right to buy or sell goods from another source. a. UCC requires a duty of good faith and fair dealing between the parties. |
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Defenses to Formation
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I FILM US
Illegality, Fraud, Intervening Illegality, Latent Ambiguity, Fraud, Unconscionability, Statute of Frauds |
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Mistake
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a. Mutual Mistake
i. When both parties entering into a contract are mistaken about facts relating to the agreement, the contract may be voidable by the adversely affected party if: the 1) mistake concerns basic assumption on which contract is made; 2) mistake has material effect on agreed-upon exchange; 3) party seeking avoidance did not assume the risk of the mistake. b. Unilateral Mistake i. Where only one of the parties is mistaken about facts relating to the agreement, the mistake is not a defense to formation unless the nonmistaken party knew or had reason to know of the mistake. c. Mistake by Intermediary i. Where an intermediary makes a mistake in the transmission of an offer or acceptance, the message as transmitted is operative unless the other party knew or should have known of the mistake. |
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Latent Ambiguity
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a. A latent ambiguity occurs where the expression of the parties’ agreement appears perfectly clear at the time the contract is formed, but because of subsequently discovered facts, the expression may be reasonably interpreted in two ways.
i. If neither party is aware of ambiguity, there is no contract unless both parties intended same meaning. (reform to reflect their agreement) ii. If both parties are aware of ambiguity, then there is no contract unless both parties intended same meaning. iii. If only one party is aware of the ambiguity, then there is a contract which will be enforced according to intention of ignorant party. |
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Illegality (MBE)
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a. If either the consideration or the subject matter of a contract is illegal, this is a defense to enforcement.
i. Agreements in restraint of trade; gambling contracts; usurious contracts; agreements obstructing administration of justice; agreements inducing breach of public fiduciary duties; agreements relating to torts or crimes. b. If the consideration and subject matter are legal, but the purpose is illegal, then the contract is voidable by the party who did not know of the purpose. |
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Fraud (Misrepresentation)
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(Probably a remedies question)
a. Fraud in the Inducement i. If a party induces another to enter into a contract by asserting untrue information, the contract is voidable by the innocent party if she justifiably relied on the fraudulent misrepresentation. b. Fraud in the Factum i. If one of the parties was tricked into giving assent to the agreement under circumstances that prevented her from appreciating the significance of her action, the agreement is void. c. Non-Fraudulent Misrepresentation i. If non-fraudulent misrepresentation, then voidable by the innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentation was material. i. Material means information would induce a reasonable person to agree OR maker of the misrepresentation knew the information would cause the particular person to agree. |
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Incapacity
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Individuals in certain classes are legally incapable of incurring binding contractual obligations and any contract made by that person is voidable.
i. Exception for necessities. A. Infants-A K between an infant and adult is voidable by infant but binding on adult. i. Infant may affirm contract upon reaching age of majority. B. Mental incapacity-Where person incapable of understanding nature and significance of contract. i. May affirm during lucid intervals. C. Intoxicated persons-Intoxicated person does not understand nature and significance of contract and voidable if other party had reason to know of intoxication. |
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Statute of Frauds
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MYLEGS
Marriage, Year, Land, Executor, Goods, Sale of goods > $500 |
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Unconscionable (adhesion contracts)
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A court may refuse to enforce a provision or an entire contract where in light of the commercial background and needs of the particular parties under the circumstances existing AT THE TIME the contract was formed, one party has substantially superior bargaining power and that party dictated the contract’s terms.
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Terms of the Contract
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Interpretation of terms
Mistaken and ambiguous terms Parol evidence rule Modification |
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Interpretation of terms
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Terms are interpreted according customary usage within the industry and course of dealing between the parties.
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Mistaken and ambiguous terms
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1. Mutual mistake, unilateral mistake, mistake in transmission
2. Awareness of ambiguity |
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Parol evidence rule
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1. Evidence of PRIOR OR CONTEMPORANTEOUS negotiations and agreements that contradict, modify, or vary contractual terms is inadmissible if the contract is written and intended as a complete and final expression by the parties.
2. Exceptions: Parol evidence is admissible to explain the terms of the contract where there is ambiguity or to reform a writing where there is a typographical error. |
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Modification
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1. Common Law
a. Consideration is required unless the modification is fair and equitable in light of the circumstances unforseen at the time or where there is deterimental reliance. 2. UCC a. Good faith modifications under the UCC are valid between merchants without consideration. i. May need to satisfy SOF. 3. Under UCC, terms will almost always be allowed in. |
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Performance
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Conditions
Satisfaction Discharge |
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Conditions (Promisor modifier)
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1. A condition is an event, other than the passage of time, the occurrence or non-occurrence of which will create, limit, or extinguish the other contracting party’s absolute duty to perform.
2. Types: Precedent, Concurrent, Subsequent 3. Excused: a. one party hinders b. fails to cooperate c. actual material breach i. minor breach only suspends d. anticipatory repudiation: 1) sue 2) ignore, and urge to perform OR 3) await breach (repudiator loses rights) 4. Waiver of condition a. Beneficiary of a condition who can waive anyways, b. Course of dealing-if you act as if a condition has been waived, it is waived i. Retraction of waiver * Installment K-Where condition is waived, a party can retracts its waiver if you give notice * Divisible K- Where condition is waived, a party can retracts its waiver if you give notice |
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Discharge
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1. Impossibility-An unforeseeable future event which causes an objective failure (no one can perform) and neither party assumed the risk expressly or impliedly.
b. Types 1) Death or physical incapacity 2) Illegality 3) Destruction of subject matter 2. Impracticability-The occurrence of an event which the parties assumed would not occur and it makes performance extremely and unreasonable difficult/expensive i. It must be an unanticipated difficulty which is extreme and unreasonable. 3. Frustration of purpose a. An 1 unexpected subsequent event that 2 destroys the 3. mutually known K's objective. |
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3d Parties
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A. 3d party beneficiaries
B. Assignment of rights C. Delegation of duties |
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3d party beneficiaries
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1. When does a 3d party beneficiary contract arise?
a. Direct undertaking by the promisor to the 3d party. b. An intent on the part of the promisee to benefit the 3d party 2. Have the rights vested? 3. Who can sue whom? a. 3d party beneficiary v. Promisor b. Promisee v. Promisor c. 3d party beneficiary v. Promisee |
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Assignment of rights
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1. Assignments are generally valid unless they materially alter the obligor’s duty or risk or prohibited by law.
2. Does obligor have defenses against assignee? 3. What happens when there is more than one assignment of the same right? |
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Delegation of duties?
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1. Delegation of duties is permitted except where prohibited by the contract, where the duties involved personal judgment and skill, or where the delegation would change the obligee’s obligations.
2. Obligee may sue delegor and delegate. |
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Breach
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A breach occurs when one of the parties to a contract unexcusedly fails to perform.
1. Minor breach a. A breach of contract is minor if the obligee gains the substantial benefit of her bargain despite the obligor’s defective performance. 2. Material breach a. A breach of contract is material if the obligee does not receive the substantial benefit of her bargain as a result of failure to perform or defective performance. |
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Damages
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1. Causal
2. Certain-Always when talking about profits, new business difficult to prove 3. Foreseeable-at time of formation 4. Unavoidable-Duty to mitigate |
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Remedy Types
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a. Compensatory damages
i. Expectation damages (“benefit of the bargain”) ii. Consequential damages available only if foreseeable b. Liquidated damages i. A liquidated damages clause is enforceable where i. Damages for contractual breach was difficult to ascertain at the time the contract was formed AND ii. Amount agreed upon is a reasonable forecast of compensatory damages in the case of breach. c. Punitive damages i. Punitive damages are not available in a commercial contract, but may be available under limited circumstances in a noncommercial contract. |
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Specific performance
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Cha Cha Is My Favorite Dance
Certain and definite K Inadequate legal remedy Mutuality (can make both parties perform) Feasibility (Can court enforce? Too much work or JX middle of the ocean), Defenses) 1. Specific performance may be available there is no adequate legal remedy, such as when the subject matter of the contract is rare or unique. |
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Rescission and Restitution
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1. Rescission is available where the parties entered into a contract as a result of mistake or misrepresentation.
2. Where the nonbreacher has conferred a benefit to the breacher in an attempt to perform, she is entitled to restitution of that benefit. |
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Reformation
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A court can reform a contract where clear and convincing evidence of mistake exists.
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Replevin
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The writ or procedure of such an action to recover UNIQUE personal property said or claimed to be unlawfully taken.
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Equitable defenses
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1. Unclean hands-The unclean hands defense arises when the party seeking specific performance is guilty of some wrongdoing in the transaction upon which suit was brought.
2. Laches-The equitable defense of laches arises when the plaintiff delays in bringing an equitable action and the delay prejudices the defendant. |
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Quasi-contractual relief
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(where no relief under a contract)
A. A quasi-contract (restitution) is a legal fiction that creates a contract where the plaintiff has conferred a benefit on the defendant with an expectation of being compensated and the defendant is unjustly enriched. 1. This prevents unjust enrichment of the defendant to the detriment of the plaintiff. |
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Approach Mnemonic
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Armadillos From Texas Play Rugby Every Tuesday
Area of law Formation Term of K Performance Remedies for non-performance Excuse for non-performance Third-party issues |
