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110 Cards in this Set
- Front
- Back
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What does article 2 of the UCC cover? |
The sale of goods (any goods, any price) "goods" are moveable, personal property |
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Does Art. 2 cover services? |
No, just goods |
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Does Art. 2 cover real property? |
No, just goods |
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Does Art. 2 or the common law apply for a contract that includes goods and services? |
Depends on if the goods or services are more important. |
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What is an implied-in-fact contract? |
A contract created by conduct |
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When someone performs a service, and must try and recover in restitution, what can they recover? |
the reasonable value of the benefit conferred
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How can a bilateral contract be accepted? |
in any reasonable way |
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How can a unilateral contract be accepted? |
only by completing performance Merely starting performance is not an acceptance, but it can prevent revocation |
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What types of contracts are unilateral contracts? |
When the offer says it can be accepted only by performance, or a reward, contest, or prize |
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Are advertisements an offer? |
No, unless the specify a quantity
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What happens if a contract is vague about the price term? |
The Court will read in a "reasonable" price term unless the contract is involving real property |
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What is a requirements contract? |
Where the quantity to be sold is based on the buyers need |
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Can a buyer, under a requirements contract, dramatically change the suddenly dramatically increase the quantity required? |
No, even if the buyer is ordering in good faith, he cannot take the seller by extreme surprise |
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What is the general rule for when an offer lapses? |
Either after a stated term or after a reasonable time as passed |
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What is the general rule for revocation of an offer? |
An offer can be revoked any time before acceptance |
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What are the two ways an offeror can revoke? |
1) direct revocation: the offeror indicates directly to the offeree that he has changed his mind about entering the deal 2) Indirect revocation- the offeror engages in conduct that indicates he's changed his mind AND the offeree is aware of the conduct |
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What are the four exceptions for when an offer cannot be revoked? |
1) Option Contract 2) Firm Offer under Art. 2 3) Foreseeable reliance before acceptance 4) Starting to perform a unilateral contract |
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What is an option contract? |
A promise to keep an offer open that is paid for An option contract can last indefinitely |
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What is a firm offer under Art. 2? |
If a merchant promises in a signed writing to keep an offer open, the offer if irrevocable. NOTE: "Merchant" and "Signed" are very broadly defined |
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How long can a firm offer under Art. 2 last? |
no more than 3 months. If the firm offer claims to last longer, it will still be seen to end at 3 months. |
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What is the most common situation where there will be foreseeable reliance prior to acceptance? |
Whens subcontractor makes an offer to a contractor that he knows the contractor will rely on to make his own bid for a project |
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Does preparation to perform a unilateral contract make it irrevocable? |
No (although it maybe could be considered foreseeable reliance) |
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When is a revocation effective? |
On receipt (Mailbox Rule) |
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What is the effect on an offer if an offeree rejects it? |
The offer terminates |
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What is the effect on an offer if an offeree makes a counteroffer? |
The original offer is terminated BUT mere bargaining does NOT terminate the offer |
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What is the effect of a "conditional acceptance"? |
This is not seen as an acceptance at all, but instead a rejection and counteroffer |
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What is the common law rule for when the terms of an offer and acceptance do not match? |
Common law uses the Mirror Image Rule- changing any term from the offer in the acceptance is a rejection and counteroffer |
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What is the Art. 2 rule for when the terms of an offer and acceptance do not match? |
The offeree's term is included ONLY IF: 1) Both parties are merchants; 2) The change is not material; and 3) No objection by the offeror within a reasonable time |
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Under Art. 2, is adding a disclaimer to the contract in your acceptance considered a material change?
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YES |
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Under Art. 2 Battle of the Forms, if the acceptance adds change that is customary in the industry, will it be considered a material change?
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No |
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How does the death of a party affect an offer? |
It terminates a revocable offer, but not an irrevocable one |
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What is the consequence of beginning performance on a bilateral contract? |
It constitutes acceptance and carries with it an implied promise of finish the job |
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Are you bound to complete performance on a unilateral contract if you have started performance? |
No, because I have not yet accepted. |
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What is improper performance? |
Simultaneous acceptance and breach |
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If a buyer orders a good from a seller, but they send back a slightly different good, with a note saying they are sending the different good as an accommodation, has the seller accepted the buyers offer? Have they breached the contract? |
NO, if they explicitly say they are sending the wrong goods as an accommodation, then they have not accepted the offer and thus there is no breach. |
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When is an acceptance effective? |
When it is mailed (Mailbox Rule) |
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If an acceptance gets lost in the mail, how does t his effect the acceptance? |
The acceptance is still valid, because the burden of loss is on the offeror |
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What are the 3 exceptions to the Mailbox Rule? |
1) The offer states otherwise 2) It's an irrevocable offer (acceptance must be received by the day the irrevocability terminates) 3) The rejection of the offer was sent first* |
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What happens when a rejection to an offer is mailed, then the offeree changes his mind and mails an acceptance? |
Its a race! Whichever one gets there first will be effective. |
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What are the main defenses against contract formation? |
1) Lack of Capacity 2) Ambiguity/Misunderstanding 3) Mistake 4) No Consideration |
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What categories can deem someone as lacking the capacity to make a contract? |
Minors, intoxicated, mentally incompetent |
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What is the general rule for lacking capacity to make a contract? |
An incapacitated D has the right to disaffirm the contract (BUT he does not have to) |
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Can a party that lacks capacity enforce a contract against the party that does have capacity? |
YES, the contract just can't be enforced against the incapacitated party |
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If an incapacitated party does not disaffirm a contract, and then becomes no longer incapacitated, can the contract be enforced against them? |
Yes, this is called implied affirmation |
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When is an incapacitated party still liable for a contract? |
When it deals with necessities (food, shelter, clothing, or medical care), but only for the reasonable value, not the contract price |
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When can a misunderstanding about the meaning of a contract still be enforceable? |
If one party knew or had reason to know of the other party's meaning. In this case, the meaning of the innocent party controls |
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If there is a mistake regarding a material fact of a contract, is the contract enforceable? |
No |
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What if there is a mistake as to the actual value of the goods in a contract, is the contract still enforceable? |
Yes, this kind of mistake is generally not considered material |
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What happens if theres a unilateral mistake about a contract? |
This is generally not a successful defense to contract formation, unless the other party knew or had reason to know about the mistake |
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What things can be bargained for an considered consideration for a contract? |
a promise, performance, or forbearance |
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Can "past consideration" be used for a contract? |
no, you can't bargain for anything that has already been done |
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What is the common law rule for contract modification? |
NEW CONSIDERATION is required to modify a contract; performing a preexisting duty is not enough UNLESS the modification is fair in light of unanticipated change in the circumstances |
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Can a 3rd party use the preexisting duty rule as a defense to enforcing a contract? |
No, because the preexisting duty was not owed to them |
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What is the Art. 2 rule for modifying a contract? |
Consideration is NOT required to modify a contract for the sale of goods, but you must have good faith |
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Can an agreement to partially pay off a debt be enforced? |
No, not without some kind of consideration (like paying it off early), otherwise, the full debt must still be paid |
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If collection of a debt is barred by SOL, can a new promise to pay off the debt be enforced? |
Yes, if the promise is in writing it can still be enforced even without consideration |
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When can promissory estoppel be substituted for consideration? |
When there is foreseeable reliance that makes the contract enforceable, even without consideration |
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When does the statute of frauds say that a contract is only enforceable if its in writing? |
1) Contracts for interests in real property 2) Contracts where performance cannot be completed in 1 year 3) Sale of goods for $500 or more 4) Lease of goods for $1,000 or more (TX ONLY) 5) Suretyship 6) Contract modification if it will be covered by Sof |
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Does the SoF apply to giving an agent authority over real property? |
Yes, an agent's authority over real property must be in writing under the Equal Dignities Rule |
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Are lifetime contracts within the SoF? |
No, because a person could theoretically die within a year |
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What is a suretyship? |
a promise to "answer for" the debt of another |
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How is the modification of a contract affected by the SoF? |
the contract must be in writing ONLY if the contract as modified (not the original contract) is within the SoF |
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Can a contract explicitly require modifications to be in writing even if the SoF doesn't? |
Yes if for the sale of goods, but NO if under the common law |
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What is considered a satisfactory writing under the SoF for a sale of goods? |
Must contain a quantity and be signed by the party to be charged with breach |
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What is considered a satisfactory writing under the SoF for a non-Art. 2 contract? |
Must have all material terms and be signed by the D |
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What are some exceptions to the application of the SoF? |
1) Leases of real property for one year or less 2) Part performance 3) Full performance of a contract for over 1 year 3) Sale of goods for over $500 that the buyer has already accepted or paid for 4) Custom made goods 5) judicial admission 6) Merchant's Confirmatory Memo 7) Suretyship "main purpose" exception |
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What is the test for part performance that allows an exemption to the SoF's application to real property? |
Must have two of the three following elements: 1) some payment 2) possession 3) improvements |
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What is the SoF exemption for goods sold for $500 or more if buyer accepts or pays for goods? |
Any of the goods that the party has already accepted or paid for can be exempt from the SoF If the goods can't be apportioned based on the price, the entire good is excluded from the SoF |
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What makes a custom made good not subject to the SoF if it is bought for more than $500? |
If seller has made substantial beginnings on the custom made good, and it is not suitable for sale |
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What is the Merchant's Confirmatory Memo exception to the SoF? |
One party can use its own signed writing against the other party to satisfy the SoF against the other party if: 1) both parties are merchants 2) Writing claims agreement/has quantity; and 3) Theres no written objection within ten days |
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What is the Surety "Main Purpose" Exception to the SoF? |
applies when the surety's main purpose is to benefit himself. |
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What is the parol evidence rule? |
Keeps out evidence of a prior or contemporaneous agreement (either oral or written) that contradicts a later writing (ALL ABOUT TIMING) |
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Can the PER apply to an oral contract? |
NO! It only applies to writings |
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What are some exceptions to the PER? (evidence gets in) |
1) Correct a clerical error 2) To establish a defense against formation 3) To interpret a vague or ambiguous term 4) To add to a partially integrated writing |
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How can you get an exception to the PER when defending against formation? |
If you're not trying to rewrite/modify the contract, just seeking total rescission of the contract. |
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What does it mean for the PER to not apply to a partially integrated writing? |
That there is a writing with the final statements of the terms included, but not a complete statement of all the terms |
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What is a merger clause? |
A clause in a contract that says that the contract is "limited to the terms herein". The fact of this is that that contract may not be supplemented with parol evidence |
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How does the PER relate to later events, occurring after the lease is signed? |
PER is irrelevant to later events, it only looks backwards |
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How can conduct be used to explain term/fill in gaps in a contract? |
1) Court of performance (most important)- how parties performed under this particular contract 2) Course of Dealing- what parties did under prior contracts with each other 3) Usage of trade (least important)- what other in the trade do in similar contracts |
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What type of warranty is it when a seller used a sample or model? |
This is an express warranty under Art. 2 |
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What are the two types of implied warranties under Art. 2? |
Implied warranties of merchantability Implied warranty of fitness for a particular purpose |
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What is the implied warranty of merchantability? |
That the goods are fit for there ordinary purpose. The person who sells the goods must be a merchant who deals in goods of the kind (aka, has special knowledge about the particular goods being sold) for this warranty to apply |
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What is the implied warranty for fitness for a particular purpose? |
The goods are fit for the buyer's particular purpose. The seller knows the buyer has a special purpose and is relying on the seller to select suitable goods. NOTE: Neither party has to be a merchant |
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How does a disclaimer affect a warranty on a sale of goods? |
A seller can disclaim implied, but not express, warranties |
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What happens if a disclaimer conflicts with an express warranty? |
The express warranty wins |
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What are the "magic phrases" that can disclaim all implied warranties? |
"as is" or "with all faults" |
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How can you waive an implied warranty without using the magic words? |
Without a magic phrase, a disclaimer must be conspicuous and must actually use the term merchantability |
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How can a seller limit a buyer's remedies for breach of warranty? |
A buyer can do this so long as the limitation is not unconscionable (at the time of the contract) EXCEPTION: limiting buyers remedies for personal injury in the car of consumer goods is presumed unconscionable |
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When goods are damaged before the buyer gets them, and neither buyer not seller is to blame, who bears the risk of loss? |
1) If the contract explicitly says, this controls 2) If a party breaches the contract, breaching party bears the risk of loss 3) If the goods are being delivered by a common carrier, the risk of loss shifts to the buyer when the seller completes its delivery obligations a. If its a shipment contract (presumed unless otherwise stated), the seller must get the goods to a common carrier, make delivery arrangements, and notify the buyer to fulfill its delivery obligations b. If its a destination contract, the seller must get the goods all the way to a specific destination (usually where the buyer is located) to fulfill its delivery obligations 4) If the goods aren't being delivered via common carrier: a. If the seller is a merchant, the seller bears the risk of loss until buyer take physical possession of the goods b. If the seller isn't a merchant, the buyer bears the risk of loss once the seller "tenders" the good (makes them available to the buyer) |
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Who bears the risk of loss if the contract provides for delivery "Free on Board"? |
The term "free on board" will be followed by the name of a city. The risk of loss passes to buyer at the named location. If the location is where the seller is located, its a Shipment contract. If the location is any other city, the contract is a Destination contract. |
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What is the general rule under Art. 2 for performance of the contract? |
Perfect Tender Rule Seller must deliver perfect goods in the right place at the right time. If tender is not perfect, buyer has the right to reject the goods |
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What is the "option to cure" under Art. 2? |
A seller who fails to make perfect tender may have an option to cure. Whether the seller has an option to cure usually depends on whether the time for performance has expired. If time HAS NOT expired, the seller has an option to cure. If time HAS expired, the seller does NOT have an option to cure unless, based on past dealings, the seller believed that the buyer would accept the non-perfect tender of goods. |
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What is an installment contract? |
Requires or authorizes delivery in separate installments (otherwise goods have to be delivered in a single delivery) |
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How does the perfect tender rule apply to an installment contract? |
The Perfect Tender Rule does not apply to installment contracts, so they are harder to reject (but just because you can't reject, doesn't mean you can't get damages) A buyer may only reject if the non-perfect tender is a substantial impairment. |
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Under Art. 2, what is implies acceptance of goods? |
A buyer keeps the goods after having an opportunity to inspect them. Even if its to late for him to reject them though, he can still sue for damages for breach |
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What is the general rule under Art. 2 for buyer's revocation of acceptance of goods due to non-conformity? |
The general rule is that a buyer cannot revoke acceptance of goods, UNLESS the non-conformity substantially impairs the value of the goods AND was difficult to discover. In that case, the buyer may return the goods to the seller at the seller's expense, the buyer can get their money back, and the buyer can get damages for breach of contract. |
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Can a seller refuse a payment by check? |
Yes, but rejection of a check allows for a reasonable amount of time for the buyer to get cash, even if the payment deadline has passed |
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Under common law, what is the general rule for performance of contracts? |
Performance does not have to be perfect. Substantial performance is all that is required (i.e.- a party cannot commit material breach |
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Under Art. 2, what options does a party have if the seller's performance does not live up to the Perfect Tender Rule? |
1) Buyer may reject all of the goods, not just the non-perfect goods 2) The buyer may accept all the goods 3) The buyer may accept some of the goods and reject the rest No matter what the buyer chooses, he can still get damages |
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When can you recover damages for breach of contract under common law? |
For ANY breach of contract, material or not. But only material breach provides an excuse togged out of the contract. |
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What is anticipatory repudiation? |
When a party repudiates a contract BEFORE performance is due (different than breach, which occurs with non-performance when performance is due) Anticipatory repudiation is always material breach. BUT you can retract an anticipatory repudiation so long as the other party has not relied on it. |
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What is failure to give adequate notice under Art. 2? |
If a buyer of goods is nervous about the quality/delivery of goods, he may, in writing, ask the seller for adequate assurance about the goods in order to give him peace of mine. If the seller fails to give the buyer adequate assurance, the buyer can treat it as an anticipatory repudiation. However, a buyer cannot use the adequate assurance provision to rewrite the contract or demand a particular kind of assurance. |
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What is a rescission? |
An agreement to cancel the contract while both parties still have some performance remaining |
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How can an existing contract be modified after performance has begun? |
If the agreement to replace the existing contact with a new one happens immediately |
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What is accord and satisfaction? |
An accord is an agreement to accept performance in future satisfaction of an existing duty. The duty is suspended by the accord, but is not excused until the accord is satisfied. Know the difference between this and a later term modification- the distinction is based on timing. If the underlying obligation is excused right now, its a modification. If its excused later on, its an accord/satifaction. |
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What is a novation? |
An agreement to substitute a new party for an existing one. |
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What is an impossibility for a contract? |
A later unforeseen event that makes performance impossible and may provide a seller with an excuse Under Art. 2 this is called impracticability |
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What happens if something necessary for performance is destroyed? |
Under Common Law, destruction provides an excuse for nonperformance. Under Art. 2, its the same, but the seller is only excused if the damaged/destroyed goods had been "identified by the contract" |
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What happens if there is death or incapacity of an essential person to the contract? |
Then performance is excused, but the person has to be essential |
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Is an increase in the cost of a sellers performance an excuse for performing the contract? |
Almost never for the MBE, but for the TX test, the vendor MAY be excused depending on how big the increase in price is |
