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169 Cards in this Set

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  • Back
what is a contract?
a promise that the law will enforce
what is an express contract?
a contract formed by language, oral or written
what is an implied-in-fact contract?
a contract formed by conduct
what is an implied-in-law contract or quasi-contract
not a contact at all. remedy that allows a plaintiff to recover a benefit unjustly conferred upon the defendant.

remedy to prevent unjust enrichment
what is a unilateral contract?
there is one promise, which is given in exchange for performance. not a contract until performance is completed
what is bilateral contract?
two promises--a promise is exchanged for a promise. contract is formed as soon as the promises are exchanged
what is an executory contract?
duties remain to be performed under the contract
what is an executed contract?
all of the duties under the contract have been performed
what is common law?
derived from courts. contracts involving real estate, insurance, services and employment.
what is uniform commercial code (UCC)?
statutory law which governs contracts for sale of goods (moveable things)
what are the three requirements of a legally enforceable contract?
1. an agreement made up of an offer and an acceptance
2. an exchange of consideration
3. a lack of defenses
in what manner can an offer be made?
express - oral or written
implied - based on conduct
to be an offer, the communication must:
create a reasonable expectation in the offeree that the offeror intends to make a contract
what are the three questions to be considered about an offer?
1. was there an intent to make a contract?
2. were the terms definite and certain?
3. was there communication to the offeree?
are advertisements offers?
generally no. they are usually considered only to be invitations seeking offers.
how can an advertisement be an offer?
if it specifies the offeree. an advertisement that limits the scope of the persons who can accept (like first five customers to call)
terms are definite and certain in a UCC contract offer if they include:
quantity
terms are definite and certain in a common law contract offer if they include:
1. identity of the offeree and the subject matter
2. the price to be paid
3. the time of performance
4. the quantity involved
5. the nature of the work to be performed
what are the three ways to terminate an offer?
1. revocation by offeror
2. rejection by employee
3. termination by operation of law - automatic
when can an offeror revoke his offer?
generally any time before acceptance by communicating the revocation to the offeree (three exceptions: option, unilateral, firm offer)
what is a direct and indirect way for an offeror to communicate the end of an offer?
1. call them
2. sell to someone else
how are offers made by publication revoked?
same manner they were offered.
when is a revocation of an offer by offeror effective?
when received by the offeree. when published.
what are the three exceptions to the general rule on an offeror's power to revoke an offer?
1. option contract
2. unilateral contracts
3. firm offer
what is an option contract?
distinct contract in which the offeree gives consideration to keep the offer open
what are the ways an oferee can terminate the offer?
1. rejecting it
2. counter offer
3. silence
how to distinguish between a counteroffer or an inquiry?
counteroffer is both a rejection and an offer. an inquiry is just feeling the other party out by questioning
when is a rejection of an offer by an oferee effective?
when received
what time period must an offeree accept an offer?
within the time specified, or if no time period is specified, whithin a reasonable time
what are the ways an offer an be terminated by operation of law
1. death or insanity of parties
2. destruction of subject matter
3. illegality
who is allowed to accept an offer?
only the person to whom the offer was made. only option contracts are assignable
if the offeror specifies a method of communication, that method must be used. a purported acceptance utilizing another method is a ______
counteroffer
offers, rejections, revocations, and counteroffers effective when ___
received
what is the mailbox rule?
acceptances of an offer are effective when they are dispatched (mailed, telegraphed,etc) if properly addressed
what is the mirror image rule?
common law contracts require an acceptance to mirror the offer to be effective. (change anything and it's a counteroffer)
how can an offeror opt out of the mailbox rule?
by stating in the offer that the acceptances must be received to be effective
what are the elements of consideration:
there must be something of legal value given by each party and there must be a bargain for exchange
when is something of legal value?
if it constitutes either a detriment to the promisee or benefit to the promisor. [promisee agrees to do something he is not already obligated to do]
does consideration need to have monetary value?
no. as long as promisee is promising to do something that he is not already obligated to do or promising to refrain from doing something that he legally could do
does consideration need to flow to one of the parties?
no, it could go to a third party
does consideration have to be fair?
no
is promising to performance existing duty sufficient consideration?
no
is forbearance to sue a valid consideration?
yes
what does a "bargained for exchange" mean?
something is not consideration unless it was given in exchange for other consideration
what is detrimental reliance/promissory estoppel
a promise made by one party and detrimentally relied upon by another can be enforced without consideration.
what are some types of defenses?
fraud, innocent misrepresentation, duress, undue influence, mutual mistake, illegality, minors, intoxication, mental incompetency, statue of limitations, statute of frauds, impossibility, substituted contract, novation, contions, prevention of performance, prol evidence, unconscionability
what are the elements of fraud?
1. misrepresentation of material fact
2. actual and reasonable reliance by the plaintiff on the misrepresentation
3. intent to induce plaintiff's reliance on the misrepresentation
4. damages
5. scienter (knowing that the statement was false or made with a reckless disregard for the truth
regarding elements of fraud, what does it mean to have a misrepresentation of material fact?
must be a material fact - opinions or statements of value do not constitute facts unless made by experts
regarding elements of fraud, what does it mean to have actual and reasonable reliance
the plaintiff relied on the misrepresentation
regarding elements of fraud, what does it mean to have an intent to induce reliance?
the purpose in making the misrepresentation was to induce reliance
regarding elements of fraud, what does it mean to have damages?
the defendant is liable to anyone who suffers a loss. the defrauded party may rescind the contract or sue for money damages, but not both.
regarding elements of fraud, what does it mean to have a scienter?
intent to deceive. must make it knowingly or intentionally. could be reckless disregard for the truth (constructive fraud or gross negligence)
when does fraud in the execution occur?
when a party is deceived into signing something that he does not know is a contract. void - no meeting of the minds.
when does fraud in the inducement occur?
the defrauded party is aware she is making a contract, but terms are materially misrepresented. voidable
what is an innocent misrepresentation?
has all the elements of fraud except scienter. misrepresentation is made innocently, not intentionally
what is duress?
arises when a party's free will to contract is overcome by an unlawful use of a threat of harm.
in duress, if the harm threatened is physical force, the contract is ___
void
in duress, if the harm threatened is economic or social force, the contract is ___
voidable
what is undue influence?
a party's free will to contract is overcome by the defendant's abuse of a position of trust or confidence
in defenses, what is a mutual mistake?
if both parties to a contract are mistaken as to a material fat regarding the contract, the adversely affected party can avoid the contract. [does not apply to mistakes of value bc that is an opinon]
in a mutual mistake, if the subject matter of the contract is not in existence when the contract is made and neither party knows this, the contract is ___
void
is a unilateral mistake generally a defense to a contract?
no
a unilateral mistake as to a material fact is a defense if ________
if the other party knew or should have known of the mistake
failure to have a license required to protect to public makes a contract ___
void
failure to have a license required to raise revenue makes a contract _____
still enforceable
most promises not to compete are _______
illegal because they violate antirust law
promises not to compete in employment contracts and in the sale of a business are enforceable if they meet 3 tests of reasonableness:
1. reasonably needed to protect a legit bus interest
2. reasonable in duration
3. reasonable as to distance (geographically)
when can a minor disaffirm a contract?
anytime while a minor or even within a reasonable time after becoming an adult. the minor must generally return whatever she possesses when she disaffirms
when will a minor be bound on his or her contracts?
if they are for necessities of life, including food, clothing, and shelter
a person can become bound on the contracts he enters into as a minor upon reaching the age of majority by ____
ratifying the contract
for minors who are now of age, a contract may be ratified by:
1. failing to disaffirm within a reasonable time after reaching age
2. expressly ratifying the entire contract orally or in writing
3. retaining or accepting the benefits
intoxication is a defense to a contract only if it prevents __________
the promisor from knowing the nature and significance of his promise AND the other party knew of the impairment
a contract made by a party whose mental capacity is so deficient that he is not capable of understanding the nature and significance of the contract is
voidable
a contract made by a party after she is adjudicated mentally incompetent is
void
statute of limitations provide that a legal action must be commenced within what period of time for common law agreement?
four to six years from date of breach
what does "statue of frauds" mean
six contracts requiring a writing (only needs to be signed by the party trying to avoid the contract)
what are the six contracts that require writing?
contracts where:
M Marriage is consideration
Y cannot be performed in a year
L interests in Land (including leases of real property)
E by executors (to pay estate debts out of personal funds)
G - sale of goods $500+
S surety (assuming debt of another)
in determining if a writing is required, the one-year period runs from the ____
date of the contract, not from when performance begins
what are the exceptions to the year requirement for writing a contract?
if it is possible to perform in a year, or if one party has fully performed the contract.
what are the exceptions for the land requirement for writing a contract?
1. leases of land for less than a year
2. full or partial performance
[two of the following:
a. payment in whole or in part
b. making valuable improvements on the land
c. possession of the land
what writing is necessary for the statue of frauds?
the whole contract doesn't need to be in writing. just need a writing that provides evidence of material terms of contract and a signature of the person being sued. doesn't need to be in one single document
what happens if you fail to satisfy the statue of frauds?
could still have a contract--it's just not enforceable
what happens if the subject matter of the contract has been destroyed?
contract may be avoided due to impossibility
what happens if there is death or incapacity of a person to perform a personal service?
contract will be discharged due to objective impossiblity
what does "accord and satisfaction and substituted contract" mean?
accord - agreement to substitute one contract for another
satisfaction - execution of the accord
until the accord is satisfied a party may sue under ____
may sue under the original contract or the accord.
a substituted contract is very similar to an accord and satisfaction case, but ____
but the duties under the original contract are discharged immediately
what is novation?
when a new contract substitutes a new party for an old party in an existing contract. all parties must agree to the release
what is a condition precedent?
a condition that must occur before the other party must perform
what is a condition concurrent?
conditions that must occur simultaneously (example: payment of money and exchange of goods)
what is the parol evidence rule?
prohibits a party in a lawsuit involving a final agreement from introducing evidence at trial of statements made prior to or contemporaneously with the written contract that seek to vary the terms of the contract
what is unconscionability?
based on notions of fairness. used when a clause or a contract is extremely unfair and the party having the benefit of the unfair term had substantially superior bargaining power
at common low, if there has been a material or substantial breach, the non breaching party can _______. if the breach is only minor, the nonbreaching party is not discharged, but is ________.
discharged from the contract.
but is entitled to damages
what are the options when there is an anticipatory repudiation?
1. immediately sue for damages
2. await the time for performance
3. cancel the contract
what is the intention of damages payments?
to put the nonbreaching party in as good of a position he would have been if there were no breach
what can specific performance damages be used for?
land or unique items - not services!
can a party receive specific performance and compensatory damages?
no, one or the other.
what is a liquidated damage clause?
clause that specifies what damages will be if there is a breach. HAS TO BE REASONABLE - not a penalty!
when are punitive damages available?
for fraud
what is the doctrine of substantial performance?
under common law, can't rescind a contract if it has been substantially performed. only remedy would be monetary damages for the minor breach.
what are quasi-contract (restitutional) damages?
if parties are discharged from a contract and one party has already bestowed a benefit on the other, they can get it back.
what are the limitations on monetary damages?
forseeability and mitigation
what is the general rule for third-party beneficiaries?
only the parties to the contract have rights under the contract. an exception exists for INTENDED third-party beneficiaries.
what does it mean to be in privity of contract?
only the parties to the contract have rights under the contract
who can enforce, intended or incidental beneficiaries?
only indended
what is the minimum requirement for a third party?
must be named or specifically described in the contract
what is a donee beneficiary in regards to third-party
receive their interest as a gift
what is a creditor beneficiary in regards to third-party
receive their interest because a party owes them something
who can a third party beneficiary sue?
can sue the promisor if the promisor fails to perform
what is an assignment of rights?
if a party wants to give contract rights to a third party
what is a delegation of duties?
if a party wants to have a third perform contractual duties
the general rule is that any contract right may be assigned and any contract duty may be delegated. what are the exceptions?
if it will change the obligor's risk or the duty involves specialized personal services
what is the effect of delegation?
both parties are liable unless there is a novation
when a mortgage is assumed, who is liable?
both the assignor/mortgagor and the assignee are personally liable
who is liable if you assume a mortgage? what if you take subject to the mortgage?
assumed mortgage - both assignor and assignee are liable

subject to the mortgage - only assignor is liable
when does a creditor have the right to assign their receivable money to someone else?
always, even if the contract prohibits assignment. just have to give notice
is the UCC limited to merchants?
no. it applies to all contracts for the sale of goods
how to qualify as a firm offer?
1. seller must be merchant
2. offer must be in writing and signed by merchant
3. must give assurances it will be kept open for a certain time
how long are firm offers good for?
time stated, but no longer than 3 months
does the mirror image apply under the UCC?
no
under the sales article, new or different terms are ignored unless _____
the contract is between merchants
under the UCC, a shipment of nonconforming goods is _______
both an acceptance and a breach of contract
the accommodated shipment rule applies only when _______
shipment is used as the means of acceptance. (not promise to ship)
what are the ucc's rules for auctions?
1. the bid is the offer and the fall of the hammer is the acceptance
2. unless otherwise stated, all auctions are "with reserve"
3. in "without reserve" the goods must be sold to the highest bidder
in a UCC contract, you have to specify the quantity, unless
it's an output and requirements contract
how do you modify a contract under the ucc?
don't have to give extra consideration....everyone just has to agree on the new change
what is the statute of limitations under the ucc?
4 years
what are the four exceptions for the written contract requirement for sale of goods over $500?
s - specifically manufactured goods
w - written confirmation between merchants. if you don't object in 10 DAYS, doesn't matter if you didn't sign!
a - admitted in court
p - performed
for a defense for the UCC, the contract need not be impossible to perform. it only needs to be ____
impracticable.
under the ucc, what is the sellers duty to the customer?
get the goods and give them notice that it's ready. don't have to deliver!!
title and risk of loss cannot pass until the goods are first ____
identified. meaning they are marked, segregated or in some manner identified as goods for the specific buyer
when there is no contract term specifying when the risk of loss passes, you have to determine if it is ______
a carrier case or a non-carrier case
what is a carrier case?
parties contemplate a common carrier will be used to ship the goods (like UPS)
what is a non-carrier case?
buyer will pick up the goods at the sellers place of business
if unknown, do you assume a seller is a carrier or non carrier?
non-carrier. general rule is seller has no duty to deliver.
if there is no common carrier involved, then you need to know what about the seller?
if it is a merchant or not
when does the risk pass for a noncarrier nonmerchant seller?
risk passes on tender of delivery of goods to the buyer.
when does the risk pass for a noncarrier merchant seller?
risk passes on actual delivery (when the buyer takes physical possession)
if there is a common carrier involved, what do you need to know about the contract?
if it is a shipment contract or destination contract
when does the risk pass for a carrier shipment contract?
when the goods are delivered to the carrier. on a truck bed.
when does the risk pass for a carrier destination contract?
when the goods reach the destination and seller tenders delivery
what does FAS Free along side mean?
requires seller to deliver goods along side of a specific vessel. risk of loss passes to the buyer when the seller gets the goods
what does CIF Cost Insurance Freight mean?
the contract price includes the cost of goods, insurance, and freight. risk of loss is on buyer during shipment
what does f.o.b. free on board mean?
specifies what city in which the risk of loss passes
when does title pass under UCC?
whenever the parties agree. if there is no agreement, title passes on delivery. (shipment vs. delivery)
if the buyer rejects the goods, who owns the goods?
title reverts back to seller
to fulfill the requirement of perfect tender under the UCC, the goods must conform to all the four warranties:
1. express warranties
2. the implied warranty of title
3. implied warranty of merchantability
4. implied warranty of fitness for a particular purpose
what is the implied warranty of title?
the seller implicitly warrants that they had the right to sell the goods. good title, no stated encumbrances, and no infringements
the warranty of title and the warranty against encumbrances are made automatically by every seller unless disclaimed. only ______ automatically make the warranty against infringements.
merchant sellers
can a general disclaimer disclaim title? "merchandise is sold as is" "with all faults"
no. can only be disclaimed by specific language
what is the implied warranty of merchantability
the goods are fit for ordinary purpose. made only by merchants.
can a general disclaimer disclaim merchantability? "merchandise is sold as is" "with all faults"
yes
"we hereby disclaim any and all warranties"
claim means nothing! can't do that
what is the implied warranty of fitness for particular purpose?
buyer relies on any seller to select goods for the buyer's particular purpose.
can disclaimer disclaim the implied warranty of fitness for particular purpose? "as is" "with all faults?
yes
under the UCC, is warranty liability limited by privity?
no
does a disclaimer of merchantability have to be written?
no
does a disclaimer of fitness have to be written?
yes
what is a tort?
wrongful act, could be intentional or negligent
those injured by goods can sue negligent sellers. they must prove:
1. seller owed them a duty of care
2. seller breached the duty by failing to use due care
3. damages
4. causation
what is strict products liability
those injured by goods can sue. focus is on the product and not on the seller's conduct. has to be a merchant
when youre suing for tort, does privity matter?
no
under the UCC Sales Article, if one party has reasonable grounds to believe the other party will not perform when required, what can she do?
make a written demand for an assurance of performance from the other. failure to give this assurance is an anticipatory repudiation
who has the duty to mitigate in the UCC?
both buyer and seller
if an insolvent buyer has already received the goods, the seller may reclaim them within ___ days after the receipt
10
liquidated damages - if the buyer has made a down payment and breaches, the seller may keep the lesser of _____
lesser of $500 or 20% of the price
what is replevin?
the right to recover goods wrongfully in the hands of the seller. may be used if the goods are identified and the buyer cannot reasonably cover
can a true owner recover stolen goods from a 3rd party?
yes
what are the exceptions to the general rule that a true owner can recover stolen goods from a 3rd party?
1. entrusting. if the owner of goods entrusts them to a merchant
2. voidable title. tricked - bad check