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99 Cards in this Set

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