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99 Cards in this Set
- Front
- Back
What is the test for an offer?
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Whether a reasonable person in the position of the offeree would believe that his assent creates a contract
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What is the rule of thumb for when an offer terminates?
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1 month
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How is an offer revoked?
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Unambiguous statement by offeror to offeree, or unambiguous conduct by offeror that offeree is aware of
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When is a merchant's offer irrevocable (firm offer)?
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A signed, written promise to keep the offer (to buy/sell goods) open for up to 3 months
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When is a unilateral offer irrevocable?
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When performance has started pursuant to an offer to enter into a unilateral K, the offer is irrevocable for a reasonable time to complete performance
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What 3 ways serve to reject an offer?
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-Counteroffer
-Conditional acceptance -Additional terms (under common law) |
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What is the effect of additional terms under the UCC?
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A response w/ additional terms is generally an acceptance. For the additional terms to be part of the K: (1) both parties must be merchants, (2) additional terms must not be "material", and (3) offeror must not object to them
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What is the general rule if the seller sends the wrong goods?
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This is acceptance + breach of K
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What if the seller sends the wrong goods with a note explaining why?
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It is treated as a counteroffer, and thus there is no breach of K
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What is the mailbox rule?
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Acceptance is generally effective when mailed.
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How is the mailbox rule affected by an option contract?
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The Mailbox Rule cannot be used to satisfy an option contract.
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What happens if a rejection is mailed before an acceptance?
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The one that is received first is effective.
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Who can accept an offer?
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-A person who knows about it at the time she accepts
-The person it was made to |
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Can an offer be assigned?
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No, but an option can be assigned (unless it says otherwise)
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What is consideration?
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A bargained for legal detriment (or benefit in VA)
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Is a preexisting obligation consideration under common law?
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Doing what you are already legally obligated to do is not consideration, unless: (1) addition/change to performance, (2) unforeseen difficulty so severe as to excuse performance, or (3) a third party promises to pay.
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Is a preexisting obligation consideration under the UCC?
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Yes. As long as there is good faith, new consideration is not required to modify a sale of goods contract.
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When is part payment consideration for release of debt?
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Only if the debt is disputed or not yet due
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What are the consideration substitutes?
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-A written promise to satisfy an obligation for which there is a legal defense.
-Promissory estoppel -In VA, a seal may be sufficient |
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Who lacks capacity to enter into a contract?
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-Children under 18
-Mental incompetents -Intoxicated persons if other party has reason to know |
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Is a contract for necessities enforceable against a person who lacks capacity?
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Not under contract law, but there is liability under quasi-contract law.
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What types of Ks fall under the Statute of Frauds?
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-Suretyship agreement
-Service K not capable of being performed within 1 yr -Transfers of interest in real estate (including leases for more than a year) -Sale of goods for $500+ -Lease of goods for $1,000+ |
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When is a K not required for sale of goods for $500+?
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-Specially made goods (and substantial beginning made)
-Written confirmation by merchant (no objection in 10 days) -Admission in court -Performance (accepted/paid for) |
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How is the Statute of Frauds satisfied (2 ways)?
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Performance or a writing (or a judicial admission).
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When does performance in a real estate K satisfy the Statute of Frauds?
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When 2 of the following are satisfied:
-Improvements to the land, -Payment, or -Possession |
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When does performance in a services K satisfy the Statute of Frauds?
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Full performance by either party.
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When does performance in a sale of goods K satisfy the Statute of Frauds?
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Seller's part performance, but only to the extent of the part performance.
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How does a writing satisfy the Statute of Frauds at common law?
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Signed by person asserting defense AND contains all material terms.
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How does a writing satisfy the Statute of Frauds under the UCC?
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It is signed by the person asserting the defense and indicates that it is for the sale of goods in a quantity.
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What is the effect of a K stating that all modifications must be in writing?
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-At common law it is ignored.
-Under the UCC it is honored. |
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What happens if a K is illegal?
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-If the subject matter is illegal, it is unenforceable.
-If the purpose is illegal, it is enforceable only by the person who did NOT know of the illegal purpose. |
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When will a misrepresentation render a K unenforceable?
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If there is a false statement of fact by a party that induces the K (no wrongdoing required).
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When is a K unenforceable due to nondisclosure?
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When there is concealment or a fiduciary relationship.
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How does economic duress make a K unenforceable?
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If there is an improper threat to breach an existing K AND the other party had no reasonable alternative.
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When does ambiguity in words render a K unenforceable?
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-Material terms open to 2+ reasonable interpretations and each party attaches different meaning to them not knowing of the 2 interpretations.
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What happens if 1 party knows of multiple interpretations of a K?
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The K will be enforced under the terms as understood by the other party.
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When does a mistake of fact render a K unenforceable?
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Only if there is mutual mistake of material fact and risk is not assumed OR a unilateral mistake of a material fact.
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When is the parole evidence rule an issue?
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There is a written K that the court finds is the final agreement AND statements where made at or before the time K was signed.
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What does the parole evidence rule do?
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It is an evidentiary rule that excludes evidence of earlier agreements for purpose of contradicting terms of a written K.
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What is the effect of the parole evidence rule when there has been a mistake in integration (clerical error)?
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Court can admit earlier evidence as to whether there was a mistake in reducing the agreement to writing.
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Can the parole evidence rule be used to bar evidence of defenses to enforcement?
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No. The court can admit earlier words to determine whether there is a defense (e.g., fraud, duress, misrepresentation).
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What is the effect of the parole evidence rule on ambiguities in a written K?
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It does not bar evidence of earlier agreement when used to resolve ambiguities in a written K.
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When can a court admit evidence of an earlier agreement as a source of consistent additional terms?
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Only if the written agreement was a partial integration AND the additional terms would ordinarily be in a separate agreement.
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What types of conduct are a source of K terms?
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-Course of performance (same people, same K)
-Course of dealings (same people, different K) -Custom and usage |
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What is a shipment K?
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Most Ks with delivery obligations are shipment Ks. Seller completes delivery obligation when it gets goods to a common carrier, makes reasonable arrangements for delivery, and notifies the buyer.
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What is a destination K?
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Seller does not complete delivery obligation until goods arrive where buyer is?
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What does FOB mean and do?
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FOB = "free on board"
FOB (seller's city) = shipment K FOB (buyer's city) = destination K |
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When does the risk of loss shift from S to B in a carrier K?
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When S completes its delivery obligations (unless seller is a common carrier).
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In a non-carrier K, when does the risk of loss shift from S to B?
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-If S is a merchant: when B takes possession.
-If S is not a merchant: when S "tenders" delivery. |
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What is the implied warranty of merchantability?
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If the seller is a merchant in that type of goods, the goods are impliedly warranted as fit for the ordinary purposes for which such goods are used.
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What is the implied warranty of fitness for a particular purpose?
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If B has a particular purpose that S has reason to know of, and if B reasonably relies on S to select suitable goods, the goods are warranted as fit for that particular purpose.
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What is an express warranty?
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Any affirmation of fact or promise by S to B, any description of the goods, or any sample or model that is part of the basis of the bargain.
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Can an express warranty be disclaimed?
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No, to the extent that it is unreasonable (hard to do).
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How can implied warranties be disclaimed?
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-Conspicuous language of disclaimer (mentioning merchantability), OR
-Goods so "as is" or "with all faults" |
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Who has the risk of loss for a lease of goods (UCC 2A)?
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The lessor has the unallocated risk, unless there is a finance lease (financial intermediary).
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What can B do if S does not make perfect tender?
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-Reject all goods and sue for damages
-Retain goods and sue for damages |
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When does B have right to reject an installment K?
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Only where there is substantial impairment in that the installment can't be cured.
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If S fails to make perfect tender, when may he be able to cure?
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-S has reasonable grounds for believing that improper tender would be acceptable, OR
-Time for performance has not yet expired. |
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When can B cancel K by revoking his prior acceptance of goods?
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(1) Nonconformity substantially impairs value of goods, (2) reasonable reliance on S's assurance of satisfaction, & (3) revocation is w/in reasonable time after discovery of nonconformity.
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What is the UCC rule for when B must pay?
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If S makes perfect tender then B must pay.
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What is the common law rule for when B must pay?
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If S substantially performs then B must pay.
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When is specific performance an appropriate remedy?
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-K for sale of real estate
-K for sale of unique goods (e.g., antiques) (It is never appropriate for an employment K) |
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When is an injunction an appropriate remedy?
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K for services.
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When does an unpaid S have right to get his goods back from B?
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(1) B was insolvent at time he received goods, (2) S demands return of goods within 10 days of receipt, & (3) B still has goods at time of demand.
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What is the purpose of money damages?
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To compensate P (not to punish D).
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What is the measure of a party's damages?
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Want to put the party in the place he would have been in without the breach.
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What will a lost volume seller recover for lost profits?
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K price - Resale price + Provable lost profits
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What happens if P does not take action to prevent avoidable damages?
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No recovery for damages that could have been avoided without undue burden on P.
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When will a liquidated damages be honored?
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(1) Damages were difficult to forecast at time K was made, & (2) Provision is a reasonable forecast.
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Will a single set number for liquidated damages be honored?
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Probably not; it is much more likely to be honored if the amount varies depending on the nature of the breach.
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At common law, when will breach justify non performance?
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Only when the breach is material (but quasi K law may still require payment). In either case, damages can be recovered.
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What is an express condition and how is it satisfied?
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A mutually agreed upon promise modifier that is part of the K ("on condition that"); it is only satisfied with strict compliance.
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What is the effect of anticipatory repudiation?
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An unambiguous statement/conduct indicating that repudiating party will not perform that is made prior to the time that performance was due will excuse performance by the other side.
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When will anticipatory repudiation give rise to a claim for damages?
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Immediately upon the repudiation, unless the claimant has already finished performance.
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When can anticipatory repudiation be retracted?
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If there has not been a material change in position by the other party, the duty will be re-imposed (but performance may be delayed until adequate assurances are made).
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What can a party do if the words/actions of another party give rise to reasonable grounds for insecurity in performance?
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The party can demand in writing adequate assurances (and if it is commercially reasonable he can suspend performance until he gets them).
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When can a K be rescinded?
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If neither party has completed performance.
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What is a novation?
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An agreement between both parties to an existing K to the substitution of a new party (excuses old party from liability).
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What is accord and satisfaction?
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If a new agreement is performed, the performance of the original obligation is excused. If the new agreement is not performed, the claimant can sue on the old or on the new K (but not both).
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What is delegation?
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An agreement to substitute a new party that is not between both parties to the existing K (will not excuse old party from liability).
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When will performance be excused by impossibility, impracticability, or frustration of purpose?
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(1) Something unforeseen happens after K formation but before K performance, & (2) that thing makes performance impossible, commercially impracticable, or frustrates the purpose of performance.
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What is the definition of impracticability?
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Can only be done with extreme and unreasonable difficulty and expense.
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Will a party's death excuse K performance?
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Generally no, unless the person is special (e.g., very famous).
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What happens if the goods are destroyed after K is made?
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For sale of goods, do a risk of loss analysis. But even if the risk of loss has already transferred to B, S will have to obtain new goods for B unless they are somehow unique or irreplaceable.
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What happens if a building is destroyed while under construction?
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The contractor is still obliged to build and he is not entitled to anything other than the K price.
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When can a third party prevent a K from being modified or cancelled?
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If a third party knows of and has relied on/assented as requested, his rights have vested (must be an intended beneficiary).
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What happens if there is a K provision that is a "prohibition" on assignment?
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It takes away the right to assign but not the power to assign (i.e., assignee who does not know of prohibition can still enforce the assignment).
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What happens if there is a K provision that is a "invalidation" of assignment?
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It takes away both the right and the power to assign (i.e., the breach is by the assignor and there are no rights in assignee).
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If the K does not mention assignment, when does common law bar assignment?
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When assignment would substantially change the duties of the obligor.
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Who can recover if the third party's rights had vested?
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The beneficiary or the promisee (bot not both) can recover against the promisor (beneficiary generally can't recover against promisee).
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Can an assignment be revoked?
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Yes, if it is gratuitous.
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Who can recover for breach in an assignment?
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Assignee and a gratuitous assignor can recover from the obligor.
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When will an obligor's payments to the assignor be effective?
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If obligor makes payments to the assignor, they are effective until the obligor knows of the assignment.
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In a sale of goods in VA, what happens if S remains in possession of goods?
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In VA, a sale of goods where possession is allowed to remain with S is void as against lien creditors and BFPs without notice.
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What happens if there are multiple assignments?
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The first assignment for consideration wins. If all assignments are gratuitous, the last assignee wins.
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When will a later in time assignee for consideration take priority over an earlier in time assignee for consideration?
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Where the subsequent assignee does not know of the earlier assignment and he is the first to obtain (a) payment, (b) a judgment, (c) a novation, or (d) indicia of ownership.
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What is the difference between a delegation and an assignment?
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A delegation transfers duties/burdens to a third party. An assignment transfers rights/benefits to a third party.
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What happens if the third party in a delegation fails to perform?
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The delegating party always remains liable. The delegatee is only liable if he received consideration for the delegation.
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What contractual duties are delegable?
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Contractual duties are generally delegable, unless the K prohibits delegation or if it is a personal services K calling for very special skills.
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