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140 Cards in this Set
- Front
- Back
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What is an offer? What is the test?
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An offer creates the power of acceptance in the offeree. To be valid, an offer must include (1) a manifestation to presently contract, demonstrated by a promise, undertaking, or commitment, (2) certain and definite terms, and (3) a communication to an identified offeree.
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Must there be a price term in order for there to be an offer to sell real estate?
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Yes
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Must there be a price term in order for there to be an offer to sell goods?
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No. There is an offer if the parties so intend.
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What are the three words indicating a vague or ambiguous material term in an offer?
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1) Appropriate
2) Fair 3) Reasonable |
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What is a requirements/outputs contract?
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A sale of goods situation in which the amount is not described in numerical terms, but rather in terms of the buyer's requirements or seller's output.
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What are the key words indicating a requirements/outputs contract?
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1) All
2) Only 3) Exclusively 4) Solely E.g. A offers to buy all of its grits from B for five years. |
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Are requirements/outputs contracts a valid offer?
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Yes.
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S offers to sell B all of the grits B might require for five years. Offer?
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No, because "require" is a vague or ambiguous material term.
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When may the buyer increase his requirements under a requirements/outputs contract?
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So long as there is not an unreasonably disproportionate increase (i.e. increase is in line with prior demands).
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What are the exceptions to the general rule that an advertisement is not an offer?
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1) If the advertisement is in the nature of a reward, OR
2) If it is specific as to quantity and expressly indicates who can accept. |
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What are the three stages to the agreement process?
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1) The initial communication (offer)
2) What happens after the initial communication (termination of the offer) 3) Who responds and how she responds (acceptance) |
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What are the three ways an offer terminates?
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1) Lapse of time (time stated or reasonable time)
2) Death or incapacity of a party prior to acceptance 3) Revocation by offeror |
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How is an offer revoked?
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1) Unambiguous statement by offeror to offeree of unwillingness or inability to contract, OR
2) Unambiguous conduct by offeror indicating an unwillingness or inability to contract that the offeree is AWARE of |
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Does the making of multiple offers result in revocation of earlier offers?
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No.
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When does a revocation sent through the mail become effective?
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When it is received.
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What are the four situations in which an offer cannot be revoked?
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1) Option (promise to keep offer open in exchange for consideration)
2) UCC Firm Offer Rule 3) Reasonably foreseeable detrimental reliance 4) Start of performance pursuant to a unilateral contract (reasonable time) |
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Can you accept an offer after the option period has expired?
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Yes, as long as it has not been revoked.
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What is the UCC Firm Offer Rule?
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An offer cannot be revoked for up to three months IF
1) It is an offer to buy or sell goods 2) Signed, written promise to keep the offer open, AND 3) The party is a merchant NOTE: No consideration required. |
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Who is a merchant?
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Any person in business or with described business experience.
Exception: ADD |
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What is the mere preparation rule in contracts?
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Mere preparation does not make an offer to enter into a unilateral contract irrevocable (contra start of performance).
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What are the three major ways for the offeree to indirectly terminate an offer?
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1) Counteroffer
2) Conditional acceptance 3) Additional terms (CL only) |
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Does bargaining terminate the offer?
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No. Hint: Bargaining statement will end in question mark (e.g. Will you take $10?).
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What is the Mirror Image Rule?
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In order for a response to be an acceptance under COMMON LAW, it must mirror the offer (e.g. no additional terms).
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When there is an offer to buy or sell goods--and a response with additional terms--what two questions are raised?
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1) Is there a contract? (yes, as long as it's not conditional acceptance), and
2) Is the additional term part of the contract? |
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Under the UCC, when is an additional term that accompanies a response to an offer part of the contract?
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If at least one party is NOT a merchant, the additional term is merely a proposal that may be separately accepted or rejected. If BOTH parties are merchants, the additional term is part of the contract UNLESS
1) The additional term materially changes the offer, OR 2) The offeror objects to the change |
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When there is an improper response to an offer (e.g. conditional acceptance) but later conduct indicating a contract:
(1) Is there a contract? (2) Is the additional term part of the contract? |
CL
(1) Yes, there is an acceptance of the counteroffer (2) Yes UCC (1) Yes (contract based solely on the conduct of the parties) (2) No |
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Is full performance acceptance?
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Yes, always. But, notice of performance is required if:
(1) The offer requires notice, OR (2) Whether the offeree has reason to believe that the offeror will not learn of the acceptance |
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Is the start of performance acceptance?
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Yes for bilateral contract; no for unilateral contract.
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In a unilateral contract where performance has started (but not completed):
(1) May the offeror revoke? (2) Is the offeree contractually obligated to complete performance? |
(1) No
(2) No |
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What are the mailbox rules?
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1) All communications other than acceptance are effective only when received
2) Acceptance is GENERALLY effective when mailed 3) If a rejection is mailed before an acceptance is mailed, neither is effective until received 4) You cannot use the mailbox rule to meet an option deadline |
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When the buyer offers to buy goods and the seller sends the wrong stuff with no explanation, what result?
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1) Acceptance
2) Breach |
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When the buyer offers to buy goods and the seller sends the wrong stuff with an explanation, what result?
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1) Counteroffer
2) No breach |
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Are offers assignable?
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No
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Are options assignable?
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Yes, unless the option agreement otherwise provides.
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What are the eleven legal reasons for not enforcing an agreement?
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1) Lack of consideration
2) Lack of capacity 3) Statute of frauds 4) Laws prohibiting performance 5) Public policy 6) Misrepresentation 7) Nondisclosure 8) Duress 9) Unconscionability 10) Ambiguity 11) Mistake at the time of the agreement as to material facts |
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What are the four types of consideration?
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1) Performance
2) Forbearance 3) Promise to perform 4) Promise to forebear |
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What is the three-step analysis for consideration?
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1) Identify the promise breaker
2) Did that person ask for something in return for the promise 3) Did the person trying to enforce suffer a new legal detriment? |
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What are the exceptions to the general rule that doing what you are already legally obligated to do is not new consideration?
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1) Unforeseen difficulty so severe as to excuse performance
2) Third party promise to pay 3) UCC - no new consideration is required (only good faith) |
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Under the UCC, is consideration required to modify the sale of goods?
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No (subject to good faith).
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Is part payment on a debt consideration for a release?
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Not if the debt is DUE and UNDISPUTED.
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When is a promise to satisfy an obligation for which there is a legal defense enforceable without consideration?
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When the promise is in writing.
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What are the elements of promissory estoppel?
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(1) Promise
(2) Reliance that is reasonable, detrimental, and foreseeable (3) Enforcement is necessary to avoid injustice |
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Who lacks capacity?
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1) Persons under 18
2) Mental incompetents 3) Intoxicated persons if the other person as reason to know |
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What are the consequences of incapacity?
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The person without capacity has a right to disaffirm.
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May a plaintiff who lacks capacity sue to enforce the contract?
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Yes
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What is the applied affirmation rule for capacity?
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A person ratifies the contract (it becomes enforceable) if she retains the benefit after gaining capacity.
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What is the necessities rule for capacity?
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A person who lacks capacity is legally obligated to pay for necessities such as food, clothing, medical care or shelter. BUT, that liability is based on quasi-contract law, not contract law (thus recovery is limited to the benefit conferred, not the contract price).
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What kinds of contracts are within the Statute of Frauds?
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1) Promises to answer for (guarantee) the debts of another
2) Promise by executor to answer for personally (guarantee personally) the debts of the deceased 3) Promise in consideration of marriage 4) Service contract not capable of being performed within a year from the time of the contract 5) Transfers of interest in real estate 6) Sale of goods for $500 or more |
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What is the exception to the promise to answer for the debts of another provision of the Statute of Frauds?
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If the main purpose of the obligation allegedly guaranteed was to benefit the guarantor, then the guarantee is not within the SOF.
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Does the possibility of early termination take a contract out of the SOF?
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No. All that matters is whether full performance can be achieved in less than a year.
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What is the analysis for leases under the SOF?
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Leases for one year or less are not within the SOF.
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Hypo: Employment contract for three years. P works for 2 years and then D fires her. Has the SOF been satisfied?
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No. Part performance of a service contract does not satisfy the SOF (even if the performance was for more than a year).
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What is the general rule for part performance for sale of goods contracts under the SOF?
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Part performance of a contract for the sale of goods satisfies the SOF, but only to the extent of the part performance.
E.g. (1) SOF has been satisfied for the goods seller has delivered, but not for undelivered goods. (2) SOF has been satisfied for the goods buyer has paid for, but not for the remaining goods. |
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What is the rule for a seller's part performance for specially manufactured goods under the SOF?
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The SOF is satisfied as soon as the seller makes a substantial beginning (enough work that it is clear that the good is custom made).
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Hypo: Oral agreement for the sale of one cow for $600. P pays $50 as a deposit, but D later returns the money and calls off the deal. SOF satisfied?
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Yes. The buyer's part performance (partial payment) satisfies the SOF.
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What must a writing include to meet the all material terms test under the SOF?
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CL: Who and what.
UCC: That there is a contract for the sale of goods and the quantity (no requirement that the writing state the price!). |
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What is the signature rule for the SOF?
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The writing must be signed by the person who is asserting the SOF defense.
UCC exception: Merchant failure to respond rule. Where: (1) Both parties are merchants (2) The party claiming the SOF defense received a signed writing (3) Claiming that there is a contract (4) With a quantity term, and (5) She failed to respond within ten days Then the SOF has been satisfied even though the person asserting the defense did not sign anything. |
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What is the judicial admission rule for the SOF?
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If the person asserting the SOF defense admits under oath that there was an agreement, the SOF has been satisfied.
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What is the equal dignity rule?
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Written authorization is required to
execute a contract for someone else if the contract itself is subject to the SOF. |
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When does a modification of a written contract fall under the SOF?
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When the agreement with the alleged change (i.e. new agreement) falls under the SOF.
Note: This holds true even if the original agreement WAS under the SOF. |
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What is the effect of a written contract provision that provides that all modifications must be in writing?
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CL: No effect (we ignore it)
UCC: Effective unless waived |
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What is an exculpatory contract? What is the significance?
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A contract in which a person seeks to contract away future liability. A court may refuse to enforce on public policy grounds, especially if the agreement applies to liability for intentional or reckless conduct.
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Is an honest, innocent misrepresentation grounds for recision?
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Yes
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Is innocent nondisclosure grounds for recision?
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No. The nondisclosure must be wrongful (e.g. affirmatively hiding the fact).
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What are the elements of economic duress?
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(1) Bad guy must make an improper threat (e.g. threat to breach an existing contract), and
(2) The vulnerable guy must have no reasonable alternative |
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When is unconscionability tested?
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As of the time the agreement was made.
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Who makes the unconscionability determination?
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The judge
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What is the unconscionability test?
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1) Unfair surprise (procedural), or
2) Oppressive terms (substantive) Note: This defense is only applied where there is substantial asymmetry in bargaining power. |
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When is ambiguity a reason not to enforce a contract?
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1) Parties use a material term that is open to at least two reasonable interpretations,
2) Each party attaches different meaning to them, and 3) Neither party knows or has reason to know the term is open to at least two reasonable interpretations |
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When is mutual mistake a reason not to enforce a contract?
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1) Both parties mistaken
2) As to a basic assumption of fact 3) That materially affects the agreed exchange, and 4) The mistake does not involve a risk that the party trying to get out of the contract bears |
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What is parol evidence?
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Words (oral or written) of a party or parties before the agreement was put in written form.
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What is an exculpatory contract? What is the significance?
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A contract in which a person seeks to contract away future liability. A court may refuse to enforce on public policy grounds, especially if the agreement applies to liability for intentional or reckless conduct.
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Is an honest, innocent misrepresentation grounds for recision?
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Yes
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Is innocent nondisclosure grounds for recision?
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No. The nondisclosure must be wrongful (e.g. affirmatively hiding the fact).
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What are the elements of economic duress?
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(1) Bad guy must make an improper threat (e.g. threat to breach an existing contract), and
(2) The vulnerable guy must have no reasonable alternative |
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When is unconscionability tested?
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As of the time the agreement was made.
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Who makes the unconscionability determination?
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The judge
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What is the test for unconscionability?
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1) Unfair surprise (procedural), OR
2) Oppressive terms (substantive) |
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When is ambiguity a reason not to enforce a contract?
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1) Parties use a material term that is open to at least two reasonable interpretations,
2) Each party attaches different meaning to them, and 3) Neither party knows or has reason to know the term is open to at least two reasonable interpretations |
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When is mutual mistake a reason not to enforce a contract?
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1) Both parties mistaken
2) As to a basic assumption of fact 3) That materially affects the agreed exchange, and 4) The mistake does not involve a risk that the party trying to get out of the contract bears |
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What is parol evidence?
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Words (oral or written) of a party or parties before the agreement was put in written form.
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What are the triggering facts for the Parol Evidence Rule?
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1) Written contract that the court finds is the final agreement (integration), and
2) Oral statement made at the time the contract was signed OR earlier oral or written statements by the parties to the contract |
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What are the four possible uses of parol evidence?
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1) To contradict the written deal (not allowed)
2) To get out of the written deal/establish a defense (allowed for this limited purpose) 3) To resolve ambiguities in the written agreement (allowed for this purpose) 4) To add to the written deal (allowed only if the court finds that there was a partial integration or that the additional terms would ordinarily be in a separate agreement). |
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What is the mistake in integration exception to the Parol Evidence Rule?
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Parol evidence may be considered for the limited purpose of determining whether there was a clerical error in putting the agreement in writing.
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How does partial integration affect the application of the Parol Evidence Rule?
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Only where parol evidence is being used to ADD to the deal.
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May parol evidence be used to add terms to a written deal?
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Generally no, unless the court finds:
1) That the written agreement was only a partial integration, OR 2) That the additional terms would ordinarily be in a separate agreement |
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What are the three forms of conduct that can be the source of contract terms?
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In order of strength:
1) Course of performance (same people, same contract) 2) Course of dealing (same people, different but similar contract) 3) Custom and usage (different but similar people, different but similar contract) |
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What is the seller obligated to do under a shipment contract?
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1) Get the goods to a common carrier
2) Make reasonable arrangements for delivery, and 3) Notify the buyer Note: Seller's delivery obligations are complete before delivery is complete. |
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What is the seller's obligation under a destination contract?
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The seller does not complete its delivery obligation until the goods arrive where the buyer is.
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What does it mean if the contract provides for FOB (seller's city)?
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It's a shipment contract. If it says FOB (any other city) it's it destination contract.
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What are the risk of loss rules?
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Go through these in order:
1) Agreement of the parties control 2) Breaching party is liable for any uninsured loss even though the breach is unrelated to the problem 3) Risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations 4) Catch all: If the SELLER is a merchant, risk of loss stays with the seller until the buyer is in physical possession of the goods Note: If seller is not a merchant, risk of loss shifts to buyer upon tender (seller tells buyer how to get the goods). |
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When do risk of loss issues arise?
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1) After the contract has been formed but before the buyer receives the goods
2) The goods are damaged or destroyed, and 3) Neither the buyer nor the seller is to blame |
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What is the implied warranty of merchantability?
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When a person buys goods from a merchant (defined here as person who normally deals in goods of that kind), a term is automatically added to the contract (by operation of law) that the goods are fit for the ordinary purpose for which such goods are used.
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What is the implied warranty of fitness for a particular purpose?
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Where
1) Buyer has a particular purpose 2) Buyer is relying on seller to select suitable goods 3) Seller has reason to know of purpose and reliance |
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When can a disclaimer eliminate a warranty?
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Only IMPLIED warranties can be disclaimed when:
1) Conspicuous language language of disclaimer, mentioning merchantability, OR 2) "As is" or "with all faults" is used |
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When can a seller cure an imperfect tender?
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(1) When the seller has reasonable grounds to believe that improper tender would be acceptable (e.g. prior transactions), or
(2) Time for performance has not yet expired |
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What is an installment contract? What is the test for rejection by the buyer?
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A contract that requires or authorizes:
(1) Delivery of goods in separate lots (2) To be separately accepted Test: Buyer has a right to reject an installment only where there is a substantial impairment in that installment that can't be cured (contra perfect tender rule). |
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When can a buyer revoke an acceptance of goods?
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If the defect substantially impairs the value of the goods, the buyer may reject within a reasonable time after discovering the defect IF:
(1) B accepted on the reasonable belief that S would cure and S did not, (2) B accepted because of the difficulty in discovering the defect, OR (3) B accepted because of S's assurances that the goods conformed |
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What are the primary situations when specific performance is appropriate?
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1) The sale of real estate. Exception: where there is a BFP.
2) Unique goods (antiques, art, custom made). |
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When is specific performance an available remedy for breach of a service contract?
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Never! Involuntary servitude.
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When is reclamation available as a remedy?
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1) Buyer must have been insolvent at the time it received the goods
2) Seller must demand return within ten days of receipt 3) The buyer still has goods at time of demand |
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How is P compensated under an expectation damages approach?
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Place P in the same economic position as if the contract had been performed.
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How is P compensated under a reliance damages approach?
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Place P in the same economic position as if the contract had never happened.
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What is the general measure of damages for the sale of goods?
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Expectation damages.
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What is the measure of damages for a lost volume seller?
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Provable lost profits.
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When should the lost volume seller analysis be applied?
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When the goods are part of the seller's normal inventory (e.g. has large or unlimited supply).
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What is the major difference between rejection and revocation by a buyer?
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1) Rejection: before acceptance, perfect tender standard
2) Revocation: after acceptance, substantial impairment standard |
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What are incidental damages?
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The costs incurred in FINDING replacement performance.
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What are consequential damages? When are they recoverable?
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Special damages unique to the plaintiff's circumstances. When the defendant had reason to know of these special circumstances at the time of the contract.
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What is the analytical progression for damages?
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(1) Liquidated damages? If no:
(2) Add: a) expectation damages (subject to reasonable certainty test) b) incidental damages c) consequential damages d) reliance damages (3) Subtract avoidable damages |
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What is the test for liquidated damages?
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1) Damages were difficult to forecast at the time of the contract, and
2) The provision is a reasonable forecast |
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What are the elements for quasi contract?
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1) P has conferred a benefit on D
2) P reasonably expected to be paid, and 3) D realized an unjust enrichment if P not compensated |
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What is the measure of recovery under quasi contract?
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Value on the benefit conferred (with the contract price as the ceiling if P is in default).
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What is the divisible contract exception?
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In a divisible contract, there can be a contract law recovery for substantial performance of a divisible part even though there has been a material breech of the entire contract.
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(1) What is a condition? (2) What is the significance of a condition?
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(1) Language in a contract that limits obligations created by other language in the contract. (2) The nonoccurrence of a condition excuses performance.
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What is the test for whether a contract condition has been satisfied?
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Strict compliance
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Who can waive a condition?
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The person who benefits from it.
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How can a condition be excused?
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1) Waiver/estoppel
2) Prevention (person protected by the condition hinders the occurrence of the condition) 3) Avoidance of forfeiture |
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What is an anticipatory repudiation?
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An unambiguous statement or conduct indicating that
1) The repudiating party will not perform 2) Made prior to the time that the performance was due Note: AR generally gives rise to an immediate claim for damages (i.e. prior to the contract date), unless plaintiff has finished her performance. |
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Can an anticipatory repudiation be retracted?
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Yes, as long as the other party has not materially changed her position.
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What are the reasonable grounds for insecurity rules?
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In the sale of goods context:
1) If the words or conduct of one party gives reasonable grounds for insecurity (that the party will not perform) 2) The other party may demand in writing adequate assurance, 3) And if commercially reasonable can suspend performance until it gets adequate assurance |
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When can parties validly rescind an old contract under a new contract?
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As long as there is performance remaining from EACH of the contracting parties under the old contract.
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Where there is an accord--but not satisfaction--which contract may the non-breaching party recover under?
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Either, but NOT both.
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What is a novation?
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An agreement between BOTH parties to an existing contract to the substitution of a new party (i.e. same performance, different party).
Note: the substituted party is no longer liable for performance. |
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What is the difference between a novation and a delegation?
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Novation requires the agreement of BOTH parties, delegation does not.
But, the substituted party is still on the hook for non-performance under a delegation. |
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Does death excuse performance?
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No. Exception: the dead guy is a "special person" that cannot be replaced.
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Whom does a third party beneficiary have contract rights against?
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Promisor (person making the promise that benefits the third party).
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Does language of prohibition take away the power to assign?
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Not if the assignee was unaware of the prohibition provision. Thus, the assignee can still recover against the obligor, but the obligor can recover against the assignor for breach.
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Does language of invalidation take away the power to assign?
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Yes (e.g. "all assignments of rights under this contract are void").
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When is an assignment of the right to payment a substantial change in the duties of the obligor?
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Never!
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What is the CL limit on the right to assign?
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No assignment if it would substantially change the duties of the obligor (even if the contract is silent on the right to assign).
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What are the implied warranties of an assignor in an assignment for value?
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The assignor warrants
1) The right assigned actually exists 2) The right assigned is not subject to any defenses by the obligor, and 3) The assignor will do nothing to impair the value of the assignment |
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What happens when there has been multiple gratuitous assignments?
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Last in time (i.e. last assignee) wins.
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What happens when there has been multiple assignments for consideration?
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First in time (i.e. first assignee) wins.
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What's the difference between an assignment and a delegation?
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Assignment: transfer of contract rights
Delegation: transfer of contract duties |
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What are the limitations on delegation?
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Delegations are permitted unless:
1) The contract prohibits delegations or prohibits assignments 2) Contract calls for very special skills 3) Person to perform contract has a very special reputation |
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If a delegatee fails to perform, who is liable?
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1) Delegator is always liable
2) Delegatee is liable only if she received consideration from the delegator |
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When can an oral contract for the sale of non-specialty goods over $500 be enforced?
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1) When the goods have been delivered and accepted OR paid for
2) When the party invoking the SOF has admitted under oath that a contract was made |
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Whom does a third party beneficiary have contract rights against when the promisor assigns the contract to another?
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The promisor AND the assignee.
Note: this is a delegation, so the promisor remains on the hook. |
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Hype: Contract for sale of goods between A & B, with F.O.B. (A's house). Who has to pay the shipping from A's house to B's store?
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B
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