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118 Cards in this Set

  • Front
  • Back
What do you need to ask yourself to see if there is a contract?
1. was there mutual assent

2. was there consideration

3. are there any defenses
What is needed for mutual assent?
1. meeting of the minds

2. offer--objective manifestation of the intent to enter into an agreement

(i) must be intent into enter not a mere invitation.

(ii) language more specific likely to be an offer.
When are advertisements considered an offer?
when an advertisement when there are certain and definite "first come, first served"
What is the rule for auctions without reserve?
No offer seller may withdraw the goods
What is the rule for reserve auction?
1. offer is made by a potential bidder

2. acceptance

3. with reserve seller the right to withdraw the goods if bid is not high enough before the hammer falls
What does certainty and definiteness of terms mean?
the more definite the terms the more reasonable the receiver's exepctation that the sender has expressed an intention to contract
What is needed for the terms to be definite and certain?
1. identity of the offeree and the subject matter

2. price

3. time of payment

4. quantity

5. nature of the work to be performed.
How is an offer terminated?
1. direct communication

2. revocation by indirect communication

(i) correct information

(ii) from a reliable source

(iii) acts of the oferor that would indicate to a reasonable person that the offeror no longer wishes to make the offer
What are the exceptions of an offeror revoking an offer?
1. Option contract where the offeree gives consideration
What is a firm offer?
General Rule an offer by a merchant, signed by the merchant gives assurances that the offer will be held open for a reasonable time.

Note: if not time stated, it cannot exceed 90 days
What is detrimental reliance?
where the offeror could reasonably expect that offeree would rely to her detriment on the offer, it it will be irrevocable as an option contract for a reasonable length of time
What is the general rule for general contractor and subcontractor?
once the subcontractor submits the bid, he becomes bound when the general contractor uses the bid in his proposal. General contractor's reliance must be reasonable.
When can a unilateral contract be revoked?
unilateral contract can be revoked at any time prior to acceptance.

Note: once the offeree begins perfomrance the offer is irrevocable and must stay open for a reasonable amount of time.
What is the NC rule for revocation of a unilateral contract?
The North Carolina rule permitting the offeror to revoke the offer after performance begins but allowing the offeree to recover his reliance interest
What is the traditional rule for unilateral contracts?
the traditional unilateral contract was one in which the offeror requested performance rather than a promise
How does an offeree reject an offer?
1. Express rejection

2. counteroffer-offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms.

Note: Mere inquiry is not a counter offfer.
What is revival of an offer?
if the offer is rejected, the offeror may restate the same offer and create a new power of acceptance
What is the rule for rejecting an option contract?
rejection or a counteroffer to an option contract does not terminate the original offer. Offeree can come back later and accept if the time period hasn't lapsed.
What is a lapse of an offer?
if the offeror doesn't accept within the specified or within a reasonable time the offer lapse
What is termination by operation of law?
1. Death or insanity of either party termiantes the contract

2. termination by destruction of subject matter

3. termination by supervening legal prohibition of proposed contract
What is the mailbox rule?
acceptance by mail is effective upon dispatched provided its properly address and stamped unless

there is a rejection that is sent first and the rejection is recieved first

Note: not applicable if the offer stipulates that accpetance is not effective until received or an option contract is involved.
What is the exception to the mailbox rule?
If rejection is sent and then an accpetance is sent, whichever is reaches the offeror first prevails
What is a grumbling acceptance?
an acceptance that is effective as long as its not a dissent
What are the exceptions to the rule that one cannot accept a contract by silence
1. express waiver in offer--offer may expressly waive any communication of acceptance

2. act as acceptance--offer may specify that an act be done,once the act is done a contract is formed

3. Silence as acceptance-if the offeree silently takes offered benefits, the courts will often find acceptance (look at prior dealings and trade practices)
What is a unitlateral contract?
a promise exchanged for performance
What is a bilateral contract?
a promise in exchange for a promise
What is the rule for reward?
offeree must have knowledge
What are the elements of consideration?
1. there must be bargained for exchange between the parties and that which is bargained for must be considered for legal value

2. must constitute a benefit to the promisor and the detriment to the promise

Note: bargained-for-exchange the promise must induce the detriment and the detriment must induce the promise

Note: act or forebearance by promisee must be of benefit to promisor-the test is whether the act or forbearance by the promisee would be of any benefit to the promisor

Note: if the promisor's motive was no more than to state a condition of a promise to make a gift, there is no consideration

What is the rule for past or moral consideraton?
General Rule-not sufficient consideration something already given or performed before promise was made, will not satisfy the bargain requirement
What are the exceptions to past or moral consideration?
1. debt barred by a technical defense-past obligations that would be enforceable but for a defense statute of limitations are enforceable if its in writing or has been partially performed

Note: promise to pay for past requested act-if acts have been previously performed by the promisee at the promisor's request, a new promise will be enforceable
What is the pre-existing duty rule?
The rule holds that a promise to perform an act that the party is already obligated to perform is not consideration for a return promise
What is legal value for consideration?
adequacy of consideration--a pepercorn could be sufficient.
What is legal benefit and legal detriment?
must be a detriment to the promisee
What is legal detriment to the promisee?
occurs when the promisee does something he is under no legal obligation to do or refrains from doing something that he has a legal right to do
What is the legal benefit to promisor?
the forebearance or performance of an act by the promisee which the promisor was not legally entitled to expect ro demand but which confes a benefit on the promisee
What are the exceptions to the pre-existing duty rule?
1. new or different consideration is promised

2. promise is to ratify a voidable obligation

3. pre-existing duty is owed to a 3rd person rather than to the promisor

4. there are unforeseen circumstances sufficient to discharge a party
Is forebearing to sue, adequate consdieration?
forbearance to sue-if the claim is valid, the forbearance to sue is consideration. if the claim is invalid, if the claimant reasonably and in good faith believes its valid, its consideration
what is the consideration for output contract?
promisor suffers a legal detriment by parting with the right to buy or sell the goods from another source

Note: unreasonable disproportionate quanties, any stated estimates, in the absence of any stated estimate, what's normal in prior output/requirments contracts
What is the rule for suretyship?
Must be supported by consideration. If the surety is paid consideration is met.

Exception: obtaining surety is condition precedent--when surety is obtained and promises to pay the contract is binding if the creditor performs in reliance on the Surety's promise
What is the Main Purpose Doctrine?
if the surety's main purpose is for his benefit, no consideration will be found
What are the elements of promissory estoppel?
1. the promisor should reasonably expect to induce action or forbearance

2. Person to whom promise was made reasonably relies on it to his detriment

3. injustice can be avoided only by enforcing the promise and

4. remedy may be limited as justice requires

Note: NC doesn't recognize promissory estoppel
In NC what is the rule for contracts under seal?
seal raises a presumption of consideration that must be rebutted by clear and convincing evidence.
What is the rule for mutual mistake?
contract may voidable by the adversely affected party if:

1. the mistake concerns a basic assumption on which the contract was made

2. the mistake has a material adverse effect on the agreed-upon exchange and

3. the adversely affected party did not bear the risk of the mistake.
What is the rule for unilateral mistake?
where only one party is mistaken in will not prevent formation of k, if the nonmistaken party knew or had reason to know of the mistake, he will not be permitted to accept
What is the rule for mistake in transmission?
the message as transmited is operative unless the other party knew or should have known of the mistake.
What is the general rule for minors entering into contracts?
ks entered into by minors are voidable

Note: NC minor can still void a k even if there is misrepresentation of age.
What is the exception to the defense of infancy?
cannot avoid contracts for necessities
What is the sef-off rule in NC for contracts with minors?
NC law allows a set-off from what the seller gives to the minor.

Hypo:c. Property in minor’s possession must be returned to other party

1.If minor disaffirms K for sale of Camry. Minor gives me back car and I give him back $10,000. If car has been in a wreck and been totaled and is now worth $50, then gen. rule is that minor gives me the car and I give back the $10k

2.NC – Set off Rule – NC law reaches the same result but allows me to set-off from what I return to the minor. So minor gets $9,950 and keeps the $50 car for a total of $10,000

3.NC Rule for minors who are artists, creators of intellectual property, athletes, or performing extras
What is the rule for mental incapacity as a defense for formation of a contract?
one whose mental capacity is so deficient that he is incapable of understanding the nature and significance of a k may disaffirm when lucid or his legal representative.
What is the rule for duress as defense to formation of a contract?
ks induced by duress and coercion are voidable and may be rescinded as long as not affirmed
What is the statute of frauds?
certain agreements must be in writing
What is covered under the statute of frauds?
M.Y. L.E.G.S


contracts performed later than a year

interest in lands

executor promises personally to pay estate debts

Sale of Goods over $500.00

What is the exception for the statute of frauds and the interest of land?
part performance doctrine

1. payment of all or part of the purchase price

2. purchaser in possession of the land

3. purchaser made improvements on the land

Note: NC doesn't recognize part performance
What is the rule for covenants not to compete?
must be reasonable restraints on employee: look at time of restriction, territory and type of employment
In NC, what is the rule for covenants not to compete?
In an agreement restricting a person's right to compete, made either ancillary to a contract for the sale of a business or a contract of employment, is valid if it is in writing, based on a valuable consideration, reasonable as to time and territory, fair to the parties, and not against public policy

Note:Moreover, employers frequently attempt to prevent such competition without giving anything in return for the employee's promise not to compete. However, if the employment relationship is already established without a covenant not to compete and the employer thereafter requests the employee agree to such a restriction, the employer must furnish new consideration in order for the restriction to be valid
What is the test for the intended beneficiary versus incidental beneficiary for third party beneficiary?
Did the parties intend to give a benefit to a 3rd party
What are the factors determining intent for third party?
1. 3rd party expressly designated in the contract

2. is performance to be made directly to 3rd party

3. Does the 3rd party have any Rights under the k

4. Does the 3rd party have such a relationship with the promisee that one could infer that the promisee wished to make an agreement for the benefit of a 3rd party
When do the Rights vests under a 3rd party beneficiary?
a beneficiary can enforce a contract only after his rights have vested. Their rights vests when the beneficiary.
What are the rights of promisee and the 3rd party?
Promisor's defenses

(i) any defense that he would have againt the promisee

(ii) any defense the promisee would have against 3rd party if the promise to pay absolute.
What is the rule for a Third Party beneficiary versus Promisee?
a 3rd party creditor may sue promisee.
What are the promisor's defenses under the 3rd party?
Any defense that he would have against the promisee (lack of assent no consideration)

Note: any defense the promisee would have against the 3rd party if the promise to pay was absolute
What is the rule for 3rd party in regards to promisee versus promisor?
a promisee may sue the promisor both at law and in equity for specific performance if the promisor is nto performing for the 3rd person
What is an assignment?
a transfer of a right under a contract is called an assignment

Note: need not be inwriting
What is the general rule for third party beneficiary?
It is well-settled in North Carolina that where a contract between two parties is intended for the benefit of a third party, the latter may maintain an action in contract for its breach . In determining whether one is an intended beneficiary, court should consider: (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right of performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance
what assignments need to be in writing?
1. wage assignments

2. assignments ininterest of land

3. choses in action worth more than 5k

4. assignments intended as security interests
What is the difference between revocable or irrevocable assignments?
assignment for consideration

assignment not for consideration--generally revocable
What are the exceptions of irrevocable assignments?
1. obligor has already performed

2. a token (tangible claim) of assigned rights have been delivered to the assignee

3. if the assignment is in writing

4. estoppel-when assignor should reasonably foresee tha the assignee will rely on assignemnt
What are the methods of revocation for an assignment?
1. death of assignor

2. bankruptcy

3. notice of revocation

4. assignor takes performance directly from the obligor

5. subsequent assignment of the same right by the assignor to another
What are the rights of an assignee versus an obligor?
assignee may enforce her rights against the obligor
What are the defenses of the obligor?
any defense he had against assignor
What happens to the modification of contract between the assignor and obligor, after it has been assigned?
1. no effect on rights of assignee

2. UCC modification of an assigned right to payment that hasn't been fully earned is effective against assignee if made in good faith
What is a typical asignment situation?
X(obligor) contracts with Y (the assignor). Y assigns his right to X's performance to Z (the assignee)
What rights may be assigned?
Generally, all contractual rights may be assigned
What are the exceptions of the rights that can be assigned?
1. an assignment that would substantially change the obligor's duty of risk (personal service ks where the service is unique, requirements and output ks where the assignee will substantially vary quantity)

2. an assignment of future rights to arise from future ks (not future rights in already existing contracts) and

3. an assignment prohibited by law

What is the outcome for assignee vs assignor?
the assignee can sue the assignor for wrongfully exercising the power to revoke in an irrevocable assignment situatiojn.

Note: an action by the assignee against the assignor may also lie where the obligor successfully aserts a defense against the assignor in an action brought by the assignee against the obligor to enforce the obligation.
What are the problems if there have been successive assignments of the same rights?
Revocable assignments-where the 1st assignment is revocable, a subsequent assignment will serve to revoke the fist

Irrevocable assignments

(a) first assignee has priority
What are the exceptions under successive assignments for irrevocable assignments?
1. if subsequent assignee gets the 1st judgment against the obligor she will prevail

2. if the 2nd assigneee gets 1st payment

3. if 2nd gets 1st delivery of a token chose

4. if 2nd gets novations

5. Estoppel 2nd assignee can proceed against 1st assignee on estoppel.
What are the excpetions to a delegation of duty?
1. duties involving personal judgment and skill

2. delegation that would change the obligee's expectancy

3. a special trust was reposed in the delegator by the other party to the contract and

4. a contractual restriction on delegation
What are the rights and liabilities under delegation?
1. obligee -must accept performance from the delegate that may be delgated

2. delegator remains liable

3. delgatee obligee cannot compel delgatee to perform, unless assumption-where the delegatee promises perform because of consideration.
What is the parol evidence rule?
where the parties to a k express their agreement in writing with the intent that it is the full and final expression of their bargain (integration) any written or oral expressions made prior to or contemporaneous with the writing are inadmissible to vary the terms of the writing.
What is the analysis for parol evidence?
1. is the writing integrated?

2. If yes, no parol evidence

3. if no, the oral and extrinsic evidence is permissible
What is the parol evidence rule in NC?
inconsistent with a written contract ... or which tends to substitute a new or different contract ... is incompetent ... where the writing totally integrates all the terms of a contract or supersedes all other agreements relating to the transaction ... [but] where it is shown that the writing is not a full integration ... the terms not included in the writing may then be shown by parol
What is a condition precedent?
must occur before an absolute duty of immediate performance arises in the other party.
What is a condition current?
those capable of occurring together and that the parties are bound perform at the same time
What is a condition subsequent?
the occurrence of which cuts off an already existing absolute duty of performance
What is an accord?
an accord is an agreement in which one party to a contract agrees to accept performance different from that originally promised.

Note: consideration less than that of the original contract will be sufficient if it is of a different type or is to be paid to a 3rd party
What is the effect of an accord?
1. effect does not discharge a contractual duty. It merely suspends the other party's right to enforce it

2. Partial payment of original debt-payment of a smaller amount than is due is valid consideration if its made in good faith and there is a bona fide dispute as to the claim. This is often accomplished by tendering a check conspicously marked 'payment in full'
What is satisfaction?
the performance of the accord. It discharges effect of the accord
What is the rule in NC for accord and satisfaction of a disputed debt?
Consistent with the pre-existing duty rule is the widely accepted proposition that payment of a lesser amount is consideration for a discharge of the whole debt only when the debt is disputed or unliquidated. Under those circumstances a valid compromise exists. Where the debt is liquidated and undisputed, payment of a lesser sum given in satisfaction of the whole debt is not consideration sufficient to support an accord and satisfaction unless the debtor also gives some new or additional consideration.
What is the rule for a undisputed debt?
Often a debtor who owes an undisputed, liquidated debt promises to pay all or part of his debt if his creditor promises to do something in return. Such an agreement lacks consideration under the pre-existing duty rule and the debtor cannot enforce the creditor's promise
What is material breach?
if the obligee does not receive the substantial benefit of the bargain as a result of the failure to perform or defective performance. The non-breaching may do the following:

1. may treat the k as an end and

2. will have an immediate right to all remedies for the breach of the entire k, including damages
What are compensatory damages?
to put the nonbreaching party where she would have been had the promise been performed
What are expectation damages?
sufficient damages for so the non breaching party can buy a substitute performance
What are consequential damages?
in additon to standard measures of damages imposed on the breaching party, he will be held liable for any further losses resulting from the breach that any reasonable person would have foreseen at the time of entry of the k
What are the damages for a breach of k for the sale of land
difference between k price and the fair market value of the land
What are the damages for construction contract when the owner breaches.
before construction started--builder is entitled to the profit he would have derived from the k

breach during construction builder is entitled to the full k price plus interest
What are the damages for construction contract when the contractor breaches.
before construction started--owner gets cost of completion plus reasonable compensation for any delay

during construction--cost of completion plus reasonable compensation for any delay
What is the rule for mitigation of damages in employment ks?
in employee k where the employer breaches, the employee has a duty to use reasonable care in finding another job of the same type
What is the rule for mitigation damages for sale of goods?
Buyer is in breach--if seller doesn't resell goods, his damages would be limited to the difference betwen the k price and the market value at the time of the time of set performance

Seller in breach-if buyer doesn't cover, she is limited to the difference between the k price and the market value and cannot recover and consequential damages that could have been avoided

Manufacturing ks--if the person for whom the goods are being manufactured breaches, the manufacturer is under a duty to mitigate by not continuing work after the breach, unless not continuing would increase the loss

Construction ks--builder no duty to avoid the consequencees of an owner's breach but does have a duty not to continue working unelss not continuing will increase the loss
When is specific performance available
land ks and rare unique goods

note: not available for service ks
What are the defenses for service under specific performance?
laches--the party delayed bringing an equitable action which prejudices the defendant

unclean hands

sale to a bona fide purchaser
Under 2-207, when do additonal terms of acceptance become part of the agreement?
Additional terms contained in an expression of acceptance or wirtten confirmation become part of a k between merchants unless:

1. an expression of acceptance was made conditonal on assent to the additional terms

2. the offer explicitly limited acceptance to its terms

3. the additional terms materialy alter contract or

4. notification or objection to the additional terms is given within a reasonable time after notice is received
What is the UCC excpetion to the pre-existing duty?
k involves the sale of goods, modifications of it in a manner which benefits only one of the parties is enforceable without consideration, if the modification was obtained in good faith.
What is an illusory agreement?
1. has assumed no obligation to the other, or

2. can unilaterally avoid his obligations to the other
What is the rule for specially manufactured goods under the UCC (statute of frauds)
oral k is enforceable for specially manufactured goods, not suitable for sale to others in the ordinary course of the seller's business.
What is the perfect tender rule?
the seller's performance must ordinarily strictly conform to the agreement, or the buyer may reject the items seller is in material breach of the k if his tender is not perfect
When are consequential damages recoverable?
consequential damages are only recoverable when the breaching party had knowledge or reason to know that the nature of the consequential damages actually suffered
What are the rules for cross mailing?
mailbox rule applies--accetance mailed before revocation notice = k

mailbox rule applies acceptance before rejection = k

mailbox rule does not apply first to receive notice wins

rejection followed by acceptance 1st to arrive controls
Under common law, what are the rules for unilateral contract?
offer can be revoked anytime before the acceptance

modern-offer irrevocable once offeree begins performance
Under the UCC what are the rules for buyer receiving goods?
if seller notifies byer of non-conforming goods and claims goods are merely an accomodation, buyer does not have to accept but if he does-seller is not the breach

2. offeree elects to begin performance as a mode of accpetance, the offeree must notify seller within a reasonable time or offeror can treat offer as lapsed before acceptance.
Under UCC what is revocation of an offer?
Expressed in writing within reasonable time

GR-once acceptance of goods--cannot reject goods
Under UCC, what are the exceptions to revocation?
Exception--if buyer discovers non-conformity within reasonable time and

(1) non-conformity substantially impairs the value of the goods

(2) non-conformity was difficult to discover (latent defect)
What is a firm offer?
signed promise given by a merchant (buyer or seller) to keep offer open but can be no longer than 3 months
Under common law, what is anticipatory repudiation?
if there is a definite and unyielding renunciation of any intention to perform, he commits a present material breach of k

1. immediately sue for material breach of repudiated k or

2. affirm k and wait for date of performance
Under the UCC, what is repudiation?
a repudiating party may retract repudiation anytime before performance would be due unless:

1. other party changed their positioning detrimenta reliance or

2. the other party accepted repudiation as final

Note: can only wait to sue for commercially reasonable time--if not, can only recover for what could not have been mitigated.

1. given written demand for adequate assurances

2. suspend his own performance until reply is given

3. if no response within 30 days-treat as repudiation.
Under the UCC, what can be assigned?
assignment that would materially alter k duties of non-consenting party is not effective

can assign output/requirement k as long as there is no unreasonable fluctuation of sending goods

no assignment clause = no delegation of duties unless expressly stated.
What is F.O.B?
destination where the buyer buyer is located
What is the rule for liuidated damages as a penalty in NC?
It is the general rule that the amount stipulated in a contract as liquidated damages for a breach thereof, if regarded by the court as liquidated damages and not as a penalty, may be recovered in the event of a breach even though no actual damages are suffered