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46 Cards in this Set

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What is the definition of a Contract?
A contract is a promise or set of promises, the breach of which the law provides a remedy, and the performance of which the law recognizes a duty.
What is the definition of "Sale" as defined in Article 2 of the U.C.C.?

U.C.C. 2-106(1)
A contract in which title TO GOODS passes from the seller to the buyer for a price. U.C.C. 2-106(1)
What is the definition of "Goods" as defined in Article 2 of the U.C.C.?

U.C.C. 2-105(1)
All things that are movable at the time that they are identified as the goods to be sold under the K. U.C.C. 2-105(1)
What are examples of "Goods" that Article 2 of the U.C.C. would apply to?
Applies to most TANGIBLE things.

Does not apply to:

(1) SALE of real estate
(2) services (e.g., a health club membership)
(3) intangibles (e.g., a patent)
(4) construction K
What law would you apply for a K involving goods and nongoods (i.e. hybrid K)?
Ex. A K to paint a portrait

A court will determine which aspect is DOMINANT and apply the law governing that aspect to the whole K.

*If K divides payment, then Article 2 will apply to sale portion and common law will apply to the services portion.
How is "merchant" defined in Article 2 of the U.C.C.?

U.C.C. 2-104(1)
(1) one who REGULARLY deals IN GOODS of the kind sold.

(2) one who by his profession holds himself out as having special knowledge or skills AS TO the practices or goods involved.
What are the 3 types of K as to FORMATION?
(1) Express K - formed BY LANGUAGE, oral or written

(2) Implied in Fact - formed by manifestations of assent other than written language (i.e. by conduct)

(3) Implied in Law (aka quasi K) - formed by court to AVOID unjust enrichment; allows P to bring an action in restitution to recover the amount of the benefit conferred on the defendant.
What are the 2 types of K as to ACCEPTANCE?
(1) Bilateral K - consists of an exchange of MUTUAL PROMISES (I.e., a promise for a promise, in which each party is both a promisor and a promisee)

(2) Unilateral K - offeror requests a performance rather than a promise in return.

Offeror promises to pay upon the COMPLETION of the requested act by the promise.

Once the act is completed, a K is formed. Starting performance does not create the K. It is revocable by offeror at any time prior to completion.

There is only one promisor and one promisee.
Are most K bilateral or unilateral?
Most Ks are bilateral.

(1) Under Article 2 and the Restatement of K, all offers are "doubtful" or "indifferent" offers, which means that they may be ACCEPTED by promising or beginning performance.
What are the two situations in which a traditional unilateral K (i.e., a K formed only by FULL performance) is formed?
(1) where offeror clearly indicates that the completion of performance is the only manner of acceptance.

(2) where there is an offer to the public (e.g., a reward offer)
What are the 3 types of K as to VALIDITY?
(1) Void K - No K has been formed. Without any legal effect from the beginning SO NO DUTY to perform under it (e.g., a K lacking consideration or a K to commit a crime.

(2) Voidable K - a K that one or more parties have the right to RATIFY or AVOID (e.g., by raising a defense -- duress, infancy, or mental illness)

(3) Unenforceable K - Not enforceable due to various defenses that are extraneous to K formation (e.g., the Statute of Frauds or the Statute of Limitations)
When a suit is brought in which one party seeks to ENFORCE a K or to OBTAIN DAMAGES for breach of K, a court must first decide whether there was in fact a K.

What are the 3 questions to ask?
(1) Was there mutual assent?

(2) Was there consideration?

(3) Are there any defenses to creation of the K?
What is the OBJECTIVE THEORY of K?
It says that whether or not there has been an offer or acceptance is determined by how a reasonable person in the other party's shoes would INTERPRET a party's INTENTIONS.

It doesn't matter what the party's ACTUAL intention is if it is contrary to the intent he MANIFESTED and the other party doesn't know or have reason to know what his true intention was.
What is mutual assent?
Mutual assent is an AGREEMENT on the "same bargain at the same time" - "a meeting of the minds".

The process by which parties reach "a meeting of the minds" is by form of negotiation, during which, at some point, one party makes an offer and the other accepts it.
What the definition of "offer"?
An offer is:

(1) A communication by the offeror;

(2) which creates a reasonable expectation in the
offeree;

(3) that the offeror is willing to enter into a K;

(4) on specified terms;

(5) such that offeree need only accept in order to form a K.
What are 4 criteria you should look for in determining if an offer was or was not intended?
(1) the offeror must MANIFEST an INTENT TO BE PRESENTLY BOUND;

(2) Offer must have language of a PROMSIE, COMMITMENT, or UNDERTAKING ("I offer" or "I promise"); VS "I quote," "I'm asking," and "I'd consider" are typical words of negotiation.

(3) Definiteness and CERTAINTY as to ESSENTIAL TERMS; and

(4) and be communicated to the offeree.
What are some criteria that the court will look at to determine if an offer contain language of a PROMISE, COMMITMENT, or UNDERTAKING?
(1) Language used - "I offer" or "I promise" vs. language of preliminary negotiation;

(2) Surrounding circumstances - where a statement is made in jest, anger, or by way of bragging;

(3) Prior practice and relationship of the parties;

(4) Method of communication - broader communication, more likely it is a solicitation of an offer;
ads, catalogs, circular letters are usually mere invitations for offers; and

(5) Industry Custom
In determining whether enough essential terms have been provided so that a K including them would be capable of being enforce, what do the courts look to?
(1) Identity of the offeree or a class to which she belongs to;

(2) Duration

(3) Subject Matter must be certain

a) Real Estate transactions - must identify land
and price terms

b) Sale of goods - must identify quantity

c) Services

(4) Quantity

(5) Quality

(6) Work to be done

(7) Price

(8) Payment terms
Can part performance be used by the court to enforce a K?
YES! A court might enforce a K that has been partly performed even though it might have held the same K too indefinite if the K had not been partly performed.

Rationale:

(1) Part performance shows the parties believed that they had completed a bargain, and were not still in preliminary negotiations;

(2) Greater the extent to which performance has already occurred, the more unjust it is to let one of the parties off the hook, and therefore the more ready the court will be to imply missing terms; and

(3) Performance may fill a gap left in the K by showing what the parties believed the relevant term was.
How would you apply the objective standard to determine whether an offer has been made?
Ask: "Would a reasonable person in the offeree's shoes assume that the power of acceptance had been created in him?"
Under common law, does the fact than an agreement leaves gaps render it fatally indefinite?
No. For the agreement to be unenforceable on the ground of indefiniteness:

(1) show that the parties did not regard themselves as having completed a bargain (just engaged in preliminary negotiation); and

(2) court must be unable to fill the gaps through implication.
What does the common law say as to an omission as to price?
Under many modern cases, if the k is TOTALLY SILENT as to price, a reasonable price can be implied, PROVIDED the court is satisfied that the parties intended to conclude a K and there is some objective standard (e.g., fair market value) for determining a reasonable price.

Please note: A court will not enforce the bargain UNLESS it determines that the parties INTENDED to conclude a K.

If parties attempt to DEFINE the price through a standard that is itself indefinite, the courts tend to refuse enforcement.
What does the common law say as to omission of time for performance?
A gap as to time of performance is rarely fatal. Instead, the courts will usually fill the gap by implying that the K is to be performed within a reasonable time.

What is deemed "reasonable" will depend on the nature of the K, custom and usage in the community, and prior dealings between the parties.
As to common law re an EMPLOYMENT K that does not specify a duration, what is the rule?
The K is terminable at will by either party.

Please note that a statement of pay period is deemed only to set the employee's rate of pay while the employment continues.

Agreement for "permanent" employment "for life" or "for so long as the employee chooses" are usually interpreted to be terminable at the will of either party.
How does the U.C.C. and common law differ when it comes to a K with MISSING TERMS?
Common Law - If a term is missing, it can be reasonably implied by the court - except quantity.

U.C.C. 2-204(3) - More liberal than common law. Even if one or more terms are left open, a K for the sale of goods does not fail for indefiniteness if:

(1) Parties must manifest their intent to be bound; and
(2) There appears that there is a reasonably certain basis for giving a remedy.
(3) Only essential term under the U.C.C. is quantity.

Note: Terms will only be supplied where they are consistent with the parties' intent. The more terms that the parties leave open, less likely parties intended to form a K.
What does the U.C.C. say as to the omission of price?
Under U.C.C. 2-305(1), if the parties "so intend" they can conclude a k for sale even though the price is not set settled.

The price is a REASONABLE PRICE AT THE TIME FOR DELIVERY if:

(1) nothing has been said as to price;
(2) the price is left to be agreed by the parties and they failed to agree; or
(3) the price is to be fixed in terms of some standard set by a third person or agency, and it is not so set.
What does the U.C.C. say as to the omission of place of delivery?
Under U.C.C. 2-308, the place of delivery is the seller's place of business.
What does the U.C.C. say about the omission of the time for shipment or delivery?
Under U.C.C. 2-309, the time for shipment or delivery is not specified, delivery is due in a reasonable time.
What does the U.C.C. say about the omission of duration in a K?
Under U.C.C. 2-309, if a K provides for successive performances, but is indefinite in duration, the K is valid for a reasonable time but either party may terminate the K at any time unless otherwise agreed.
What does the U.C.C. say about the omission of the time for payment?
Under U.C.C. 2-310, if the time for payment is not specified, payment is due at the time and place at which the buyer is to receive the goods.
What does the common law say about situations in which parties do not fix a material term in the K, but do set a method for fixing the term? Are they enforceable?
Yes, if the K makes reference to an objective standard that is used to fix the missing term.

(1) Requirement K and Output K are enforceable if they can be objectively determined.

(2) If a K references local custom or usage
When parties make an agreement in which they explicitly reserve some essential term to be determined in the future by their future agreement?
AGREEMENTS TO AGREE
What is the rule at common law for "Agreements to Agree?"
If the term involved is material, the agreement is unenforceable (i.e. gives rise to no legal obligation).

Rationale:
(1) Courts can neither force the parties to agree nor determine what they would agree upon.

(2) Agreement usually will not be enforced if a term is "to be agreed upon."

(3) However, where the term "to be agreed upon" is a MINOR one, the K will generally not be rendered unenforceable.
What does the U.C.C. re "Agreements to Agree?"
As in cases where the parties simply leave a gap, the U.C.C. is very liberal as to the effect of an agreement to agree.

Requirement: Provided the court finds that the parties manifested an intent to conclude a K.
What does the common law say about bargains in which one party has reserved some power concerning performance?
At common law, if either party retains an unlimited power to decide the nature or extent of his performance, his promise is considered "illusory" and thus, unenforceable.

Ex. A will pay B "such wages as I wish."

Ex. A agrees to buy services from B at a price "solely within our discretion."
What does the U.C.C. say about bargains in which one party has reserved some power concerning performance?
Requirement: If it appears that the parties intended to be bound, then K will be rendered enforceable.

The party who is to fix the price does not have unlimited discretion; the price must be fixed in GOOD FAITH. U.C.C. 2-305. If the party doesn't fix in good faith, the other party can either cancel the K (voidable) or set a reasonable price himself.
What does the common law say re a bargain that reserves a party the right to CHOOSE which of two or more performances? Will it be rendered too indefinite?
No. Each performance must constitute consideration taken alone.

Ex. A sells to B "my horse or my cow, whichever you choose, for $100." - enforceable

Ex. A says to be "my horse or my cow, which I choose, for $100." - enforceable

Ex. A agrees to pay B "as soon as I am able." - enforceable because A's financial ability to pay is capable of objective determination.
Must a statement sufficiently identify the offeree to constitute an offer?
YES! It must create in the offeree an immediate power of acceptance.

Offeree is normally one person, but it can be a class of persons and even the general public, as long as terms are sufficiently definite and the offeree is clearly identified.

NOTE: No one except the offeree can accept an offer! If you are at a bar and you overhear an offer being made to someone else, you can't turn around and accept that offer because you are not the offeree.
In determining whether an offer to enter into a K has been made, is the context of the communication relevant?
Yes. Where the relationship itself is not definite, the relationship between the parties, prior practices, and method of communication, can determine whether an offer has been made.
What are examples of words of negotiations, or invitations to deal?
"Are you interested?"

"Would you give...?"

"I would consider..."
What is the general rule for advertisements?
Advertisements are normally deemed to be invitations to deal, rather than offers.

Rationale:

(1) Ads are usually indefinite as to quantity;

(2) Sellers should be able to choose with whom they will deal;

(3) Ads are typically addressed to the general public, so that if ad was considered an offer, a seller might find the offer "over-accepted."
What is the exception for advertisements?
An ad may be construed as an offer if it is:

(1) definite in its terms; and either

(2) a clear intention to make a bargain, the ad invites those to whom it is addressed to take a specific action without further communication, or

(3) over-acceptance is unlikely
Is an ad that a reward will be paid normally construed as an offer?
Yes if the act is specified, there is a clear intention that those who see the ad will rely on it, and no problem of over-acceptance.
Are offering circulars (general mailings sent out by merchants to a number of potential customers) offers or invitations to deal?
Generally they are considered invitations to deal, but they MAY be construed as offers in a given case.

Test:

(1) Whether the a reasonable person in the shoes of the addressee would think the communication has been addressed to him individually (if yes, then it will be treated as an offer) OR only as one of a number of recipients (if yes, then it will be treated as an invitation to deal).
What is the difference between an auction with reserve and an auction without reserve?
Auction with reserve is considered an invitation to make offers:

(1) putting an item on the block is not an offer. A bid by a member of the audience is not an acceptance (but rather, an offer). Thus, if the auctioneer does not get the price he wants, he needn't "accept" via fall of the hammer.

(2) bids may revoked before the auctioneer accepts via fall of the hammer.

Auction without reserve - Auctioneer is the offeror. Once a bid is made, the offer can't be withdrawn.
What is the general rule for contracts "out for bid?"
Putting out a K for bids usually is not deemed to be an offer. However, the bids submitted IN RESPONSE to such a submission usually are considered offers.

Ex. General contractors might solicit bids from subcontractors (this request is not an offer to the subcontractors). However, bids by the subcontractors are offers to the general contractors.