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51 Cards in this Set
- Front
- Back
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Contract
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Legally enforceable agreement Bilateral contract: offer open to method of acceptance Unilateral contract: offer that expressly requires performance as the only possible method of acceptance |
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Quasi Contract
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Equitable Remedy 1) P has conferred a benefit on D 2) P reasonably expected to be paid 3) D will be unjustly enriched if P not paid Value of recovery = value of benefit conferred Not contract price - although recovery cannot be greater than contract price |
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Common law
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Governs every contract other than sale of goods
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Article 2 UCC
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Applies to contracts for sale of goods (does not apply to sale of services - that is still common law) |
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Mixed deals
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If contract is for sale of good plus service - apply UCC as long as primary purpose of deal is sale of good Ex: Guitar + guitar lessons = UCC Exception: If contract divides payments then only apply UCC to sale of goods and CL to the rest |
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Formation of contract
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Offer + acceptance
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Offer
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An offer is a manifestation of an intention to contract - words or conduct showing commitment. Test: Would a reasonable person in the position of the offeree believe that his assent creates a K |
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Requirements of offer - Price
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CL: Sales K must include price - if no price then not an offer UCC: No price requirement - however if vague or ambiguous terms included about price then no offer b/c appears parties are still negotiating |
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Requirements of offer - Quantity
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UCC: Sale of goods K can state quantity of goods in terms of buyers needs or sellers output If K states buyer will purchase "all seller output" buyer can increase requirement as long as the increase is in line w/prior demands |
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Advertisements
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General Rule: An advertisement is not an offer Exception: (I) If it is presented as a reward for performance (ii) If it is specific as to quantity and expressly indicates how to accept |
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Termination of Offers - 4 Methods
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1) Lapse of time: if a reasonable time has lapsed offer is dead 2) Revocation of offer: (I) unambiguous statement by offeror to offeree of unwillingness to contract ,OR (ii) unambiguous conduct by offeror indicating an unwillingness to contract that offeree is aware of 3) Rejection: Words or conduct or offeree 4) Death of a party prior to acceptance |
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Revocation of Offer
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Mailbox Rule: Revocation of an offer sent thru mail is not effective until received Offer cannot be revoked after it is accepted Making same offer to multiple parties does not indicate an unwillingness to contract If offeree learns of unambiguous conduct thru rumor is only kills offer if from a reliable source |
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Situations when offer cannot be revoked
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Option Contract: (I) If offeror has promised to keep the offer open AND (ii) the promise is supported by consideration Merchant Firm Offer Rule: An offer cannot be revoked for 3 months if (I) offer to buy or sell goods - UCC only, (ii) signed written promise to keep offer open, and (iii) party is a merchant (person in business selling goods of that kind Reliance: An offer cannot be revoked if there has been detrimental reliance by the offeree that is reasonably foreseeable The start of performance pursuant to an offer on a unilateral K makes that offer irrevocable for a reasonable time to complete performance |
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Rejection - 4 methods
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Express rejection Counteroffer terminates the offer and becomes a new offer Conditional acceptance terminates the offer and becomes a new offer Mirror image rule: an acceptance that adds new terms is treated like a counteroffer rather than an acceptance - ONLY CL |
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Termination of offer - Death of party prior to acceptance
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General rule: Death or incapacity of either party terminates offer Exceptions: 1) Option Contract: (I) If offeror has promised to keep the offer open AND (ii) the promise is supported by consideration 2) The start of performance pursuant to an offer on a unilateral K makes that offer irrevocable for a reasonable time to complete performance |
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Acceptance
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An offer can be accepted only by (1) a person who knows about the offer, or (2) who is the person to whom the offer was made An offer cannot be assigned - unless its an option contract |
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Methods of acceptance
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1) Offeree fully performs - unless offer requires notice of acceptance 2) Start of performance on bilateral K - not on unilateral K which requires performance (b/c performance = completion of performance) 3) Offeree promises to perform - promise good enough unless offer expressly says "only performance to accept" 4) Acceptance is mailed - effective when sent (opposite of mailbox rule - offer effective when received) 5) Seller of goods ships goods in response to offer - shipment of goods = acceptance - if wrong goods are shipped = breach - if seller sends substitute goods = counter offer which buyer is free to accept or reject 6) Silence by offeree - Silence is not acceptance - unless custom indicates silence is acceptance |
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Even if there has been offer and acceptance a K can still be invalid:
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1) Lack of consideration 2) Promisors lack of capacity 3) SOF 4) Laws prohibiting K 5) Misrepresentations 6) Duress 7) Unconscionability 8) Ambiguity in words of K 9) Material mistakes at time of agreement |
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Unenforceable K - Lack of consideration
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Consideration = bargained for exchange - performance - forbearance - promise to perform - promise to forebear Doing what you're already legally required to do is NOT consideration - Does not apply to UCC - change allowed to K if made in good faith - Performance before agreement is not in exchange therefore not valid - past consideration is not consideration - Addition or change to agreed performance can justify change - Obligation extended to new additional party can justify addition pay Courts do not enquire into adequacy of consideration - but nominal consideration shows a sham transaction which is not valid - past consideration is not consideration Promissory Estoppel - can save contract that lacks consideration if: (I) Promise (ii) Reliance that is reasonable, detrimental and foreseeable (iii) Enforcement necessary to avoid injustice Ex: L tells T he will renew lease. T paints building. L refuses to renew lease. - painting not consideration but promissory estoppel |
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Unenforceable K - Promisor's Lack of Capacity
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Lacks capacity: - Infant (under 18) - Mental incompetents (cant understand agreement) - intoxicated person if other party has reason to know Consequence of incapacity: - right to disaffirm held by person w/incapacity - implied affirmation by retaining benefits after gaining capacity - remains liable for necessaries (only to fair market value not to K value) |
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Unenforceable K - SOF
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Contracts w/in SOF 1) promise in consideration of marriage - not merely a promise to marry - must be promise to do / refrain if we marry (prenups) 2) promise by executor to pay obligation of estate from his own funds - promise of personal payment - not that estate will pay 3) Promises to answer for the debts of another - promise to pay if someone else does not 4) All service Ks not capable of performance w/in 1 yr from time of K - Specific time for full performance more than 1 yr - If start of performance for 1 yr K is delayed at all after offer then full performance cannot be w/in 1 yr of offer = SOF - Tasks are never covered by SOF 5) Transfer of interest in real estate for term of more than 1 yr - must be transfer of interest - not the same as K to build a house where no interest is transfered - Sale = transfer of title = SOF - Easement for more than 1 yr = transfer of interest - Lease exceeding 1 yr 6) Sale of Goods for $500 or more - $500 exactly enough to trigger SOF |
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Requirements of SOF
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CL categories can be satisfied by writing or performance: - performance satisfies b/c assumption is parties would not have performed in no agreement existed Writing requirements: 1) Agreement must be in writing 2) Contents must include all materials terms - including parties and promises 3) Must be signed by party being charged (D) Performance Service K: full performance by either side - cannot be only partial performance Real estate sale - part performance can satisfy SOF if 2 of 3 are done: (1) payment in full (2) possession and/or (3) improvements
UCC sale of goods $500 or more - can be satisfied by writing or performance Writing requirements: 1) Agreement must be in writing 2) Contents must include all materials terms - including quantity 3) Must be signed by party being charged (D) Performance - Part performance of K satisfies SOF but only to the extent of part performance (cannot prove existence of agreement for undelivered goods0 - If K for goods specifically manufactured then SOF satisfied as soon as seller makes a substantial beginning of making or obtaining |
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When does a person need written permission to execute a contract for someone else |
Equal Dignity Rule: The authorization must be in writing if K is w/in SOF Otherwise authorization may be oral |
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Unenforceable K - Illegality - Misrepresentation - Duress |
Illegality: If subject matter of agreement is illegal = void - if subject matter legal but purpose is illegal the agreement is enforceable only by the person who did not know of illegal purpose Misrepresentation: False assertion of facts or concealment of facts - even an honest misrepresentation voids K Duress: Physical or Economic - economic: improper threat + vulnerable party w/no reasonable alterative |
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Unenforceable K - Unconscionability
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Test: Unfair surprise and oppressive terms Considered at time agreement was made - long term K that now looks one sided = not unconscionable |
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Unenforceable K - Ambiguity in words of agreement
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There is no K if: 1) parties use a material term that is open to at least two reasonable interpretations, and 2) each party attaches a different meaning to the term, and 3) neither party knows or has reason to know the term is open to at least two reasonable interpretations Ex: Many ships w/same name |
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Unenforceable K - Mistake of existing fact at time of K
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Mutual mistake of material fact = K void 1) both parties mistaken, and 2) basic assumption of fact, and 3) materially effects the agreed exchange NB/ Does not apply if mistake is to subject matter (EX: both parties think painting is genuine but it is a fake = K enforceable at agreed price) Unilateral mistake of material fact Rule: Courts have been reluctant to allow a party to avoid a K for mistake made by only 1 party Exceptions: 1) If other party knows or should have know of mistake (b/c it was obvious) 2) mistakes discovered before significant reliance by other party than CT may grant relief if it would be unconscionable to enforce |
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Terms of K - Parol evidence rule
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Only applies to evidence being presented to prove a change of terms from the written K General Rule: A final writing supercedes prior negotiations and agreements - integration = written agreement that court finds is the final writing triggers parol evidence rule - partial integration = written and final but not complete - complete integration = written, final, and complete Parol evidence requirements: 1) Limited to express words of parties 2) Evidence can be of oral or written words 3) Evidence comes before integration |
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Parol Evidence - fact patterns
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Change in written deal: - Rule: regardless of whether writing is complete or partial integration court cannot consider earlier agreements as source of terms that are inconsistent w/written K - Exception: court can consider evidence of earlier negotiations for limited purpose of determining whether there was a clerical error made when reducing the agreement to writing Determining if K unenforceable: regardless is partial r complete integration court may consider earlier words of parties to determine if agreement is unenforceable due to misrepresentation, fraud, duress, etc. Explaining term in written deal: earlier agreements can be considered to resolve ambiguities in the written k Adding to the written deal: parol evidence rule prevents a court from considering earlier agreements as a source of additional terms unless court finds agreement was only a partial integration |
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Terms of K - Conduct
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The words of parties are not the only source of contract terms Courts also look to: 1) course of performance (same people + same K) 2) course of dealing (same people but different K) 3) custom & usage (different people & different K) |
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UCC Terms - delivery
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General delivery obligations: Absent agreement place of delivery is sellers place of business (unless both parties know goods are someplace else) Common Carrier delivery obligations: If agreement is delivery by common carrier then two possible options: 1) Shipment K: FOB + Seller City Seller completes delivery when it (I) gets goods to common carrier (ii) makes reasonable arrangements for delivery, and (iii) notifies buyer 2) Destination K: FOB + City other than seller Seller does not complete delivery until the goods arrive at buyer location |
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UCC Terms - risk of loss
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Applies when goods are lost or damaged w/o fault of either party If agreement allocates risk it controls If either party breach (late delivery) they are liable for loss even if breach unrelated to problem If delivery was by common carrier risk shifts at time seller completes delivery - Shipment = risk shifts to buyer when placed w/carrier - Destination = risk shifts to buyer once goods arrive If direct delivery by merchant risk shifts to buyer on buyers receipt - irrelevant whether buyer is also a merchant If direct delivery from non merchant seller to buyer risk shifts when seller tenders goods (provides means for seller to take possession) |
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UCC - Warranties
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VA: Warranties also apply to lease of goods Express warranty: words from seller that promise, describe or state facts about goods Implied Warranty of Merchantability: When any person buys goods from a merchant a term is automatically added to the K by operation of law - that goods are fit for the ordinary purpose for which such goods are use - seller must be a merchant (deals in goods of that kind) - warranty: goods are fit for ordinary purpose - VA: also applies to used goods sold by merchant Implied Warranty of fitness for a particular purpose: Buyer has a particular purpose and relied on seller to select suitable goods. Seller knows of purpose and reliance. - warranty: good for special purpose |
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Contractual limitations on warranty liability
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Express warranties cannot be disclaimed Implied warranties of merchantability and fitness can be disclaimed - must be written so people would notice disclaimer language (must be conspicuous) Ex: "there are no warranties" "as is" "with all faults" |
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UCC Terms - Seller can limit remedies
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Seller can limit remedies for both express and implied warranties - exception: cannot limit remedies for personal injury EX: Upon breach buyer can only recover a replacement Limitation must not be unconscionable at time of agreement - prima facie unconscionable if breach of warranty on consumer goods causes personal injury |
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UCC - Performance concepts
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NB/ CL performance look at terms of K UCC Rule 1: Seller is obligated to deliver perfect goods (Perfect tender rule) Rule 2: If goods are less than perfect buyer has the option to reject (must reject before acceptance occurred) - VA: buyer must give notice to seller that tender was problematic Rule 3: in some situations a seller who fails to make perfect tender will be given an option of curing - seller does not always have opportunity to cure - look for information suggesting seller was allowed to cure in prior deals w/buyer - TEST: whether the seller has reasonable grounds for believing that improper tender would be acceptable, perhaps w/a money allowance - buyer cannot compel seller to cure Rule 4: In an installment k situation (delivery in separate lots to be separately accepted), buyer only allowed to reject an installment where a substantial impairment in that installment cant be cured - ask can seller cure defect w/subsequent installment Rule 5: If buyer accepts the goods he cannot later reject them - payment w/o opportunity to inspect is not acceptance - implied acceptance once buyer retains goods after opportunity to inspect w/o objection Exception to rule 5: in limited circumstances a buyer can cancel K by revoking his acceptance of goods. Only allowed when: 1) nonconformity substantially impairs the value of goods, and 2) excusable reasn for buyer ignorance of nonconformity or reasonable reliance on sellers assurance of satisfaction, and 3) revocation w/in a reasonable time after discovery of nonconformity |
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Comparison: rejection of goods / revocation of goods |
Rejection: before acceptance + perfect tender Revocation: after acceptance + substantial impairment Both require: 1) buyer notify seller 2) hold the goods for seller to retake 3) follow reasonable seller instructions Both result in returning goods to seller and no payment obligation |
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UCC - Payment methods
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Cash unless otherwise agreed - but buyer can pay by check and seller does not have to take check but must give buyer an additional period of time to get cash |
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Remedies for nonperformance - Equitable remedies (nonmonetary)
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Specific Performance: courts grant SP only if legal remedy inadequate - always give SP on k for sale of land (all land is unique) - only give SP on sale of goods if they are unique - never SP for personal service K (may be able to get injunction to prevent employee performing for competitor) Reformation: court changes (reforms) K - clerical error in written k - also available when 1 party's mistake about what is in writing is due to other party's fraudulent misrepresentation Reclamation: right of unpaid seller to get his goods back. Requires: (i) buyer was insolvent at time he received goods (ii) seller demands return w/in 10 days of receipt (not date of sale), and (iii) buyer still has goods at time of demand Good faith purchaser in entrustment: If owner leaves her goods w/a person who sells goods of that kind and that person wrongfully sells the gods to a 3rd party - such a good faith purchase from dealer cuts off rights of original owner |
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Money damages for breach of K
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Purpose: To compensate P - not to punish Options for calculating damages: Expectation interest: put P in same economic position as if K had been performed (expectation - actual cost = damages) (ex: K for $1000, P paid in advance, D breached, P substitutes at $1400. Damages = $1400. If P had not paid in advance would only be $400) Reliance interest: put P in same position as if K had never happened (damages = limit to $ already spent nothing more) Restitution interest: put D in same position as if K had never happened (damages = value of work already done, not limited to $ spent) |
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UCC - Damages
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UCC reflects general contract damages policy of putting innocent party where it would have been had K been performed. Look at: 1) Which party breached? 2) Which party has goods? If seller breaches but buyer keeps goods and sues for breach of K = damages = fair market value if perfect - fair market value as delivered If seller breaches and seller keeps goods = damages = replacement price - contract price If buyer breaches and buyer keeps goods = damages = contract price If buyer breaches and seller has goods = damages = contract price - resale price - seller may also sue for provable lost profits - if seller resells for K price then no damages b/c contract law about compensating not punishing |
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General rules governing damages
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COSTS INCURRED IN DEALING W/BREACH ARE ALWAYS RECOVERABLE- even if not forseeable - however, damages arising from Ps special circumstances are only recoverable if D had reason to know at time of K Duty to mitigate: no recovery for damages that could have been avoided w/o undue burdenDamages cannot be speculative |
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Contract provisions regarding damages
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Allowed if (1) damages were difficult to forecast at time K was mad, and (2) provision is a reasonable forecast - if amount set looks too high (like a penalty) then do not enforce - if amount set limiting recovery - generally enforceable unless unconscionable |
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Excuse of performance - due to breach of K by other party
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Common law = material breach rule - damages can be recovered for any breach - only a material breach by one party excuses non performance by the other party - whether a breach is material is a question of fact UCC = perfect tender rule - buyer has right to reject all goods if any are non conforming |
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Excuse of performance - Performance Condition - failure to satisfy condition gives excuse for non performance |
Condition in K not forfilled - EX: B contracts to buy painting if gallery certifies its genuine - NOT: S offers to sell and B responds "I will buy if genuine" = conditional acceptance = new offer not K Rule: Strict compliance w/express conditions Reasonable person exception: condition based on approval of one party is treated as satisfied if reasonable person would approve (unless art or other matter inherently discretionary) Express condition can be excused if party benefiting from condition made a statement to other party before condition performed giving up benefits and protection of condition (estoppel - reliance on statement) Waiver: based on statement by the party benefiting from condition after the conditioning event already occured |
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Excuse of performance - Other party's anticipatory repudiation or inability to perform
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Anticipatory repudiation: An unambiguous statement (i) that the repudiating party will not perform (ii) made prior to the time that performance was due - excuses the other party's duty to perform - gives rise to an immediate claim for damages for breach (don't have to wait until performance would have been due) Repudiation can be retracted so long as there has not been a material change in position by the other party - if repudiation is timely retracted the duty to perform is re-imposed but performance can be delayed until adequate assurance is provided Inability to perform: If performance by one party becomes impossible the other party is excuse from starting or continuing performance |
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Excuse of performance - by reason of later contract between same parties
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Both parties mutually agree to rescind K - each party can sue to recover for work already performed Accord and Satisfaction Accord: an agreement by the parties to an already existing obligation to accept a different performance in satisfaction of existing obligation Satisfaction: that different performance - only valid if agreement to do something different (ex: not A owes B $1k on K and B agrees to excuse debt if B pays $700) - if the accord is not performed than the other party can sue on either the original obligation or the accord Modification: An agreement by parties to an existing obligation to accept a different agreement in satisfaction of existing obligation Novation: An agreement between both parties to an existing contract for the substitution of a new party - same performance, different party excuses the performance of party who was replaced - different from delegation - one party can delegate performance to a 3rd party w/o consent of other party but will still be fully liable |
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Excuse of performance - later unforeseen event
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Performance of duties can be excused under impossibility, impracticability or frustration of purpose (i) something that happens after K formation but before completion of performance (ii) that was unforeseen (iii) that makes performance impossible or commercially impracticable or frustrates of purpose Death of party only excuses performance if the person was a special person and cannot be substituted Subsequent law or regulation which makes performance illegal = excuse by impossibility Later law that makes mutually understood purpose illegal = excuse by frustration of purpose |
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Third Party Beneficiary
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Person trying to enforce contract they were not a party to Only able to enforce contracts made for his benefit - only intended beneficiary can enforce - person benefiting incidentally cannot If 3rd party beneficiary knows of and has relied on the contract - his rights have vested and the contract cannot be cancelled or modified w/o his consent (unless express provision in K) Donee beneficiary can only sue promisor Creditor beneficiary can sue both promisor and promisee - promisor can assert any defense he would have had against promisee |
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Assignment of Rights
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3rd party trying to enforce contract based on assignment of rights Assignment: transfer of rights under K to 3rd party - Assignor: party to K who later assigns rights to another - Assignee: nonparty who gains transferred rights and can then enforce K - Obligor: other party to k A assigns the right to B - no consideration needed - promise to assign not valid assignment Multiple assignment: 1) Gratuitious assignments (gift) - last assignee wins 2) Assignment for consideration - first assignee for consideration wins CL: Bars any assignment that substantially changes the duties of the obligor Limitations: 1) Prohibition: language in K takes away right to assign but not power to assign (rights hereunder are not assignable) - means assignor liable for breach but assignee who does not know of prohibition can still enforce the assignment 2) Invalidation: language in k takes away both right and power to assign (all assignments of rights are void) - assignor liable only to obligor - assignee w/o rights |
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Delegation of duties
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Delegation: Party to K transferring work under K to 3rd party - transferring duties or burdens under K Delegations are permitted unless (i) K prohibits delegations or assignments or (ii) K calls for very special skills or (iii) person to perform K has very special reputation - provision for no assignments is read to also prohibit delegation - delegating party always remain liable - delegate liable only if he receives consideration from delegating party |
