Contracts Review

Front 1

Checklist for bar review - Armadillos from Texas play rap, eating tacos.

Back 1

1. Applicable law
2. Formation of Contracts
3. Terms of Contract
4. Performance
5. Remedies for unexcused nonperformance
6. Excuse of nonperformance
7. Third-party problems

Front 2

What is a unilateral contract?

Back 2

Result from an offer that expressly requires performance as the only possible form of acceptance.

Front 3

What does the common law apply to?

Back 3

Service contracts

Real estate

Front 4

What does Article 2 of the UCC apply to?

Back 4

the Sale of Goods

Front 5

Mixed deal exception?

Back 5

If a contract divides payment, apply the UCC to the sale of goods and the common law to the rest.

Front 6

Define contract

Back 6

Agreement that is legally enforceable

Front 7

Offer

Back 7

Manifestation of intent to contract

Front 8

Is there an offer if there is a missing price term in sales contract?

Back 8

Common law = no (price and description required)

Sale of goods (UCC) = no price requirement

Front 9

Is there an offer if there are vague or ambiguous terms?

Back 9

NO

Front 10

Requirements/outputs contract

Back 10

A contract for the sale of goods can state the quantity of goods to be delivered under the contract in terms of the buyer's requirements or seller's output.

Front 11

Can a buyer increase requirements in a requirements contract?

Back 11

Yes, so long as not unreasonably disproportionate limitation on increases.

Front 12

When can an advertisement be an offer?

Back 12

1. Advertisement in the nature of a reward

2. Advertisement that specifies quantity and expressly indicates who can accept.

Front 13

How can an offer be terminated?

Back 13

1. Lapse of time
2. Death of a party prior to acceptance.
3. Revocation of offer
4. Rejection of offer

Front 14

How can an offer be revoked?

Back 14

a. Unambiguous statement by offeror to offeree of unwillingness or inability to contract

b. Unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of

Front 15

Requirements for an option

Back 15

1. promise to not revoke
2. promise is supported by payment or other consideration

Front 16

Firm Offer Rule

Back 16

UCC Rule: offer can't be revoked for up to THREE MONTHS if:

1. Offer to buy or sell goods
2. signed, written promise to keep the offer open
3. party is a merchant

Front 17

How can an offer be rendered irrevocable?

Back 17

1. option
2. firm offer rule
3. detrimental reliance
4. start of performance of unilateral contract

Front 18

Detrimental reliance

Back 18

1. reliance that is
2. REASONABLY FORESEEABLE and
3. detrimental

Front 19

What are the methods of indirect rejection?

Back 19

1. Counteroffer
2. Conditional acceptance
3. additional terms to a common law contract.

Front 20

Conditional acceptance under the common law vs. UCC

Back 20

Both rejects and replaces the original offer under the common law.

Under the UCC Article 2, it simply rejects.

Front 21

Mirror image rule vs. UCC article 2 (2-207)

Back 21

Mirror image rule: Under common law a response to an offer that adds new terms = counteroffer

Article 2: A response to an offer that adds new terms (but does not make them a condition of acceptance) is generally treated as an acceptance.

New term is part of the contract if:
1. both parties are mechants AND
2. additional term is not material
3. additional term is not objected to by offeror

Front 22

How does performance affect acceptance?

Back 22

Start of performance is acceptance except in a unilateral contract.

Front 23

Rules when offeror and offeree are at different place and there are delays in receipt of communications.

Back 23

1. All communications OTHER THAN ACCEPTANCE are effective when received
2. Acceptance is generally effective when mailed
3. If rejection is mailed before an acceptance, then NEITHER is effective until received
4. CANNOT use the mailbox rule to meet an option deadline

Front 24

Is there acceptance when a seller sends the wrong goods?

Back 24

Yes, but there is now a breach of the contract formed. EXCEPT if the seller adds an explanation (accommodation) as to why the wrong goods are sent then it's a COUNTEROFFER and no breach since there is no contract.

Front 25

Requirements for a person to accept an offer

Back 25

1. a person who knows about the offer AT THE TIME she accepts AND
2. Person to whom the offer was made. EXCEPTION: options can be assigned unless option otherwise provides (Offers can't be assigned)

Front 26

Reasons for why an agreement may not be legally enforceable

Back 26

1. lack of consideration
2. lack of capacity
3. Statute of Frauds
4. Existing laws that prohibit perfromance of agreement
5. Public policy
6. Misrepresentations
7. Nondisclosure
8. Duress
9. Uncontrollability
10. Ambiguity in words of agreement
11. Mistakes at the time of agreement as to the material facts affect the agreement.

Front 27

steps in analyzing consideration

Back 27

1. Look for the promise breaker
2. As whether they asked for something in return for their promise
3. Look at the person who is trying to enforce the promise and ask what requested legal detriment that person sustained

Front 28

Can a promise be consideration?

Back 28

Yes, UNLESS it is an illiusory promise.

Front 29

When does the general rule that past consideration is no consideration, NOT apply?

Back 29

Expressly requested by promisor and expectation of payment by promisee

Front 30

What is the preexisting contractual or statutory duty rule?

Back 30

Under the common law , doing what you are already obligated to do is not new consideration for a new promise to pay you more to do that.

EXCEPT:
1. if there is an addition to or change in performance
2. Unforeseen difficulty so severe as to excuse performance
3. third party promise to pay

Front 31

Does Article 2 have a pre-existing legal duty rule?

Back 31

No, just need good faith to change an existing sale of goods contract

Front 32

Can part payment be consideration for a release?

Back 32

Yes but ONLY IF debt is NOT BOTH DUE AND UNDISPUTED

Front 33

What are the substitutes for consideration?

Back 33

1. A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration
2. Promissory estoppel

Front 34

What are the elements of promissory estoppel?

Back 34

1. Promise
2. reliance that is reasonable, detrimental, and foreseeable
3. Enforcement is necessary to avoid injustice

Front 35

Who lacks capacity to contract?

Back 35

1. Under 18
2. Mentally incompetent
3. Intoxicated

Front 36

What are contracts within the statute of frauds?

Back 36

1. Promises to answer the debts of another
2. Service contract NOT "capable" of being performed within a year from the time of the contract
3. Transfers of interest in real estate (with exception for leases of year or less)
4. Sale of goods for $500 or more

Front 37

How can part performance satisfy the Statute of Frauds?

Back 37

1. Real estate transfers when their are two of the three: a. improvements on land, b. payment, c. possession

2. Full performance by either party satisfies the Statute of Frauds (PERFORMANCE AND SERVICE CONTRACTS)

3. PART performance of a service contract does not satisfy the Statute of Frauds.

4/5. Part performance of a contract of the sale of goods satisfies the Statute for Frauds but only to the extent of part performance.

6. Statute of frauds is satisfied as soon as the seller makes a "substantial beginning" if the contract is for the sale of goods that are to be SPECIALLY Manufactured.

Front 38

Writing requirement for Statute of Frauds others than the UCC

Back 38

All Material terms test
1. who and what
2. Writing is signed by the person who is asserting the Statute of Frauds defense

Front 39

Writing requirement for the Article 2 Statute of Frauds

Back 39

1. Indicate that there is a contract for the sale of goods
2. contain quantity term
3. Signed by the person asserting the Statute of Frauds.
EXCEPTION: Person fails to respond to signed writing. Both parties must be merchants and the person who receives a signed writing with a quantity term that claims there is a contract fails to respond within 10 days of receipt. (Person asserting the defense's signature is replaced by their failure to respond).

Front 40

When does the Statute of Frauds require that an authorization to execute a contract for someone else be in writing?

Back 40

When that contract to be signed is within the Statute of Frauds.

Front 41

When do the RULES OF LAW REQUIRE written evidence of modification of a written contract?

Back 41

If the deal with the alleged change would be within the Statute of Frauds, the the alleged modification agreement must be in writing.

Front 42

What if the agreement is in writing an requires that all modification be in writing?

Back 42

1. Common law: Contract provisions requiring all modification be in writing are not effective- ignore contract language.

2. UCC: Contract provisions requiring written modifications are effective unless waived.

Front 43

illegal subject matter vs. illegal purpose

Back 43

subject matter is illegal= agreement not encorceable

illegal purpose ONLY= enforceable ONLY by the person who did not know of the illegal purpose

Front 44

Elements of misrepresentation

Back 44

1. statement of fact before contract
2. by one of the contracting parties or their agent
3. that induces contract
4. that is false

Front 45

Misrepresentation vs. nondisclosure

Back 45

Wrongdoing required for nondisclosure

Wrongdoing IS NOT required for misrepresentation

Front 46

Elements of economic duress

Back 46

a. Bad guy: improper threat which is usually threat to breach existing contract

AND

b. Vulnerable guy: No reasonable alternative

Front 47

Unconscionability

Back 47

a. Unfair surprise (procedural)
b. Oppressive terms (substantive)
c. Tested at the time agreement was made

Front 48

Ambiguity in words or agreement

Back 48

No contract if:
1. Parties use material term that is open to at least two reasonable interpretations
2. each party attaches different meaning to tern, and
3. Neither party knows or has reason to know that the term is open to at least two reasonable interpretations.

Front 49

Mistake of fact existing at time of contract

Back 49

Breach if:
a. Mutal mistake of fact and not assumed risk
b. Unilateral mistake of material fact- other party had reason to know of mistake

Front 50

How can conduct be a source of contract terms?

Back 50

1. Course of performance
2. course of dealing
3. custom and usage

Front 51

What are the delivery obligations of a seller go goods if delivery by common carrier?

Back 51

1. Shipment contract: a. gets goods to a common carrier, b. makes reasonable arrangements for delivery, and c. notifies the buyer

2. Destination contracts: delivery not complete until goods arrive to where the buyer is

Front 52

Risk of loss rules

Back 52

arise where
a. after contract has been formed but before buyer receives the goods
b. the goods are damaged or destroyed
c. neither buyer nor seller is to blame

1. Agreement of parties controls
2. Breaching party is liable for uninsured loss even though breach is unrelated to the problem
3. Delivery by common carrier other than seller= risk of loss shifts from seller to buyer at the time that the seller completes delivery obligations
4. No agreement, no breach, no delivery by carrier. Risk of loss shifts from merchant-seller to buyer on the buyer's receipt; risk of loss shifts from non-merchant seller when she tenders the goods.

Front 53

What are the warranties of quality?

Back 53

1. Express warranty
2. implied warranty of merchantability
3. implied warranty of fitness for particular purpose

Front 54

What are the requirements for revocation of acceptance of goods?

Back 54

1. nonconformity substantially impairs the value of the goods, and
2. excusable ignorance of grounds for recovation or reasonable reliance on seller's assurance of satisfaction, and
3. revocation within a reasonable time after discovery of nonconformity

Front 55

Effect of acceptance of goods vs. Effect of Payment

Back 55

acceptance of goods= can't reject them later

payment = payment without opportunity to inspect is not acceptance

Front 56

When can specific performance/injunction possibly be a remedy?

Back 56

1. Contract for sale of real estate
2. Contract for sale of unique goods (antiques, art, custom-made or other appropriate circumstances)
3. Contract for service: ONLY POSSIBLE INJUNCTIVE RELIEF

Front 57

What are the requirements for reclamation?

Back 57

Right of unpaid seller to get its goods back:

1. the buyer must have been insolvent at the time it received the goods, AND

2. the seller demands return of goods within 10 days of receipt (10 day rule becomes a "reasonable time rule" if before delivery there had been an express representation of solvency by the buyer), AND
3. The buyer still has goods at time of demand

Front 58

How to determine expectation damages

Back 58

1. determine the dollar value of performance w/o breach
2. then determine dollar value of performance w/ breach
3. compare the two to determine the amount of damages

Front 59

Damage rules for sales of goods

Back 59

1. Seller breaches, buyer keeps the goods = FMV if perfect- FMV as delivered

2. Seller breaches, seller has the goods =
[market price at time of discovery of the breach - contract price]
OR
[replacement price - contract price]

3. Buyer breaches, buyer keeps the goods = contract price

4. Buyer breaches, seller has the goods = contract price -- resale price and, in some situations, provable lost profits.

Front 60

Incidental damages

Back 60

Costs incurred in dealing with the breach such as costs of storing rejected goods in a sale of goods or finding a replacement in a services contract.

ALWAYS RECOVERABLE

Front 61

Consequential damages

Back 61

1. Limited to damages arising from P's special circumstances
2. Limited to situations in which D had reason t know of these special circumstances at the time of contract

Front 62

Avoidable damages

Back 62

No recovery for damages that could have been avoided without undue burden on plaintiff. Burden of proof on the defendant.

Front 63

Material Breach Rule

Back 63

COMMON LAW

1. DAMAGES can be recovered for any breach
2. Only a MATERIAL BREACH by one guy excuses the other guy from performing.
3. Whether a breach is material or not is a fact question
4. If there is substantial performance then the breach is not material.

Front 64

Material Breach Rule - divisible contract exception

Back 64

There can be a contract law recovery for substantial performance of a divisible part even though there has been a material breach of the entire contract.

*Check if price is on a per performance basis

Front 65

Disclaimer of Warranty

Back 65

EXPRESS WARRANTIES CANNOT BE DISCLAIMED

Implied warranties CAN be disclaimed by:
1. CONSPICUOUS language of disclaimer OR
2. "as is" or "with all faults"

Front 66

Perfect Tender

Back 66

1.Applies to SALE OF GOODS

2. Mean's seller's performance must be PERFECT

3. Less than perfect tender generally gives the buyer the OPTION OF REJECTION of delivered goods.

Front 67

Rejection of goods

Back 67

1. Rejection of goods and rejection of offer are NOT the same

2. If less than perfect tender Buyer has option to retain OR ALL OR ANY COMMERCIAL UNIT, can also so for damages either way (limited by installment contract and acceptance cure)

Front 68

Cure of less than perfect tender

Back 68

Seller has option to cure even AFTER DELIVERY DATE:
Seller must have reasonable grounds for believing that the improper tender would be acceptable. (look at prior deals)

Front 69

Installment contracts

Back 69

Installment contract REQUIRES or AUTHORIZES:
1. Delivery of the GOODS in separate lots
2. to be separately accepted

Buyers has the right to reject an installment only where there is a SUBSTANTIAL IMPAIRMENT in that installment that can't be cured.

Front 70

Perfect tender rule (Excuse)

Back 70

If less than perfect tender Buyer can reject goods and will be excused from performing (paying) UNLESS installment contract.

Front 71

Express condition

Back 71

Mutually agreed upon promise modifier IN THE CONTRACT

General rule: Strict compliance is required

Non-occurrance of an express condition is an excuse UNLESS ELIMINATED by:
1. Waiver/ estoppel OR
2. Prevention

Front 72

Anticipatory Repudiation

Back 72

Unambigious STATEMENT OR CONDUCT indicating:
1. the repudiating party will not perform
2. made prior to the time that performance was due.

Nonrepudiating party has 4 Alternatives:
1. Sue immediately unless claimant has already finished performance
2. suspend performance and wait to sue until performance date
3. treat repudiation as offer to rescind and treat the contract as discharged
4. Ignore the repudiation and urge the promisor to perform (THIS IS NOT A WAIVER OF THE RIGHT TO SUE FOR BREACH)

Gives rise to an immediate claim for damages for breach unless the claimant has already finished her performance

Can be reversed or retracted UNLESS there was a material change in position by the other party

Front 73

Adequate assurance

Back 73

1. Reasonable grounds for insecurity
2. written demand for adequate assurance
3. commercially reasonable to stop performance

Can suspend performance until adequate assurance is provided

Front 74

Rescission

Back 74

Can only cancel contract if both agree and each performance is still not complete

Front 75

Accord and Satisfaction (substituted performance)

Back 75

Agreement by the partieis to an already existing obligation to accept a different performance in satisfaction of th eexisting obligation.

Performance of the original obligtion is only excused IF the new agreement is performed. If it is not performed, then the other part can sue on EITHER the original obligation OR the accord.

Front 76

Modification (substituted agreement)

Back 76

Agreement by parties to accept a different agreement in satisfaction of the existing obligation

Front 77

Novation (substituted person)

Back 77

Agreement between BOTH parties to an existing contract to the substitution of a new party.

Novation excuses the contracted for performance of the party who is replaced.

Front 78

Impracticability/ impossibility

Back 78

1. something happens after contract formation but behfore the completion of contract performance, and
2. something that happens makes performance impossible or commercially impracticable or frustrates the purpose of performance

a. damage or destruction of subject matter after contract
b. death does NOT make a persons' contract obligations disappear EXCEPT if party to contract is a "special" person
c. Later law makes performance of contract illegal
d. later law makes mutually understood PURPOSE of contract illegal

Front 79

Third party beneficiary

Back 79

a. Rights of third party beneficiary have vested when the party knows of AND HAS RELIED ON OR ASSENTED. CONTRACT CANNOT BE CANCELED OR MODIFIED W/O HER CONSENT (UNLESS CONTRACT OTHERWISE PROVIDES)

Front 80

Third party beneficiary- who can sue

Back 80

1. Beneficiary CAN recover from Promisor
2. Promisee CAN recover from promisor
3. Beneficary CANNOT recover from promisee
4. Creditor beneficiary can recover from promissee BUT ONLY on pre-existing debt.

Defenses: If the beneficiary sues the promisor, the promisor can assert any defense that he would have had if sued by the promisee

Front 81

Limitations on assignment

Back 81

a. prohibition: Assignor is liable for beach of contract but an assignee who does not know of prohibition can still enforce the assignment

b. invalidation: Breach by the assignor and no rights in the assignee

c. Assignment can't substantially change the duties of obligor (assignments of rights to contract performance other than right payment)
d. No consideration required and can be revoked

Front 82

Rights of assignee

Back 82

1. Assignee CAN recover from the obligor
2. Assignor FOR CONSIDERATION cannot recover from obligor
3. Obligor has same defenses against assignee as it would have against assignor.
4. Payment by obligor to assignor is effective until obligor knows of assignment.

Front 83

Implied warranties of assignor in an assignment for value

Back 83

1. the right assigned actually exists and
2. the right assigned is not subject to any then existing defenses by the obligor and
3. the assignor will do nothing after the assignment to impair the value of the assignment

Front 84

Multiple assignments

Back 84

If all assignment are gratuitous = last assignee wins

If there is even 1 assignment for consideration = first assignee FOR CONSIDERATION wins

Front 85

Delegation

Back 85

1. Delegations are permitted UNLESS a) contract prohibits delgation or assignment b0 person service contract calls for VERY SPECIAL SKILLS

Delegating party always remains liable

Delegatee only liable if FOR CONSIDERATION

Front 86

Signed writing not required for sale of goods $500 or more - SWAP

Back 86

Specially made goods
Written confirmation by a merchant
Admission in court
Performance

Front 87

Buyer accepts under the UCC when:

Back 87

1. after opportunity to inspect the goods, she indicates to seller that goods conform or that even though they don't she will still keep

2. Fails to reject withing a reasonable time or fails to seasonably notify seller of rejection

3. Does any act inconsistent with seller's ownership

Right to reject for violating perfect tender rule cut off by acceptance. Obligated to pay contract price less damages resulting from seller's breach.