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141 Cards in this Set

  • Front
  • Back
What is a K?
A legally enforceable agreement.
What is quasi-contract?
An equitable remedy, ordinarily used where application of K law produces a questionable result.
Bilaterial K is presumed unless
1. a contest, reward, or prize, OR
2. The offer expressly requires performance for acceptance.
What law applies in a mixed transaction for goods and services?
Predominant purpose test --> If sale of goods is substantial component of transaction, then article 2 applies to ENTIRE transaction.

NOTE --> This is DE approach.

Exception --> Where K divides payment for goods and services.
What is an offer under K law?
A manifestation of an intent to contract.
What must an offer contain?
1. All material terms are not necessary.
2. Must give rise to a reasonably certain basis for determining the existence of a K and a remedy for breach.
3. CL requires a PRICE term
4. Vague or ambiguous material terms (e.g., "fair," "reasonable," "appropriate") do NOT give rise to an offer.
Article 2, quantity term, and offers
1. Offer MUST contain quantity term under Article 2.
2. Quantity term may be expressed as outputs or requirements
Article 2 & increase in a B's requirements
Cannot be UNREASONABLY DISPRPORTIONATE. Will be compared with prior demands or needs for requirements.
Is an ad an offer?
No. Ads include signs inside a store.
4 methods of terminating an offer
1. Lapse
2. Death of either party
3. Revocation of the offer
4. Rejection of the offer
Lapse of an offer under CL
Offers stay upon for time expressly stated or, if no express time is stated, a reasonable time. Reasonable time? If more than 1 month, usually offer has lapsed.
Methods of revocation of an offer?
NOTE --> only offeror can revoke offer.
Methods:
1. Unambiguous statement to offeree
2. Unambiguous conduct that offeree is aware of
contracts -- When is revocation of an offer effective?
When received. NOTE --> revocation impossible after acceptance.
What offers are irrevocable under CL?
1. Options -- An offer plus (1) promise to keep open and (2) supported by payment.
2. Where there is detrimental reliance -- no revocation if there is (1) reliance that is (2) reasonably foreseeable and (3) detrimental.
3. Unilateral K & performance has started --> offer is irrevocable for a reasonable time to complete performance. NOTE --> Distinguish start of performance from mere preparation to perform.
What offers are irrevocable under Article 2?
1. options
2. Firm offers -- Offer irrevocable for up to 3 months if:
(a) An offer to buy or sell goods
(b) Signed, written promise to keep offer open (not just a promise to sell)
(c) Offeror/signor is a merchant
Methods of indirect rejection under CL
1. Counter offers
2. Conditional acceptance ("if," "only if," "so long as")
3. Mirror Image Rule
Additional terms in an acceptance under article 2?
General Rule: A response containing additional terms still operates as an acceptance.

1. If at least one party is NOT a merchant --> additional term is a proposal.

2. If both parties are merchants --> additional term becomes part of K unless: (a) additional term materially alters the offer, OR (b) the offeror objects to the additional term.
Offer; improper verbal acceptance; conduct indicating a K.

What are terms of K?
1. CL --> essentially a conditional acceptance operating as a counteroffer, which is then accepted by the subsequent conduct.

2. Art. 2 --> K is based solely on conduct. Terms appearing for first time in conditional acceptance will not be part of K.
Full performance as acceptance?
ALWAYS operates as an acceptance.

NOTE --> failure to give notice of performance may excuse other party's failure to perform if performing party cannot reasonably believe other party will learn of performance.
Start of performance as acceptance?
Generally, start of performance constitutes an acceptance.

Exception --> unilateral Ks.
Promise to perform as acceptance?
Sufficient.
Relevant "mailbox rules" under CL
1. In general, the date of reception rules.

Exception --> Effective date of acceptance = date acceptance is SENT.

2. If rejection is mailed first, then date of reception of any communication is determinative.
3. Mailbox rule cannot be used to meet an option deadline. That is, response must be received by option deadline
Article 2 & acceptance by shipment of goods
1. Shipment of goods, even nonconforming goods, operates as an acceptance UNLESS non-conforming goods are offered as an accommodation.
contracts -- Who can accept an offer?
1. Party to whom offer is made.
2. Accepting party must have knowledge of the offer.
3. Offers are not assignable

NOTE --> Options are assignable unless otherwise provided.
What is "consideration"?
1. Bargained for exchange
2. A promise to do or not to do something.
Is there consideration? A 3 step analysis:
1. Identify the promise breaker
2. Determine whether the promise breaker asked from something in exchange for making the promise.
3. Determine whether the party attempting to enforce the promise sustained a legal detriment.
contracts -- Illusory promises and consideration
An illusory promise ("I will do X unless I change my mind") is NOT consideration. Reservation of an unqualified right to cancel or withdraw from a contract at any time may amount to an illusory promise. However, the promise is not illusory, and there is a valid consideration, if the right to cancel is restricted in any way.
Is past consideration sufficient?
In general, NO. Things happening before a promise cannot be consideration for that promise.
The Pre-Existing Duty Rule
Under the CL, Promising to do what you are already obligated to do is not new consideration for a new promise. In other words, new consideration is necessary to support a K modification.

Exceptions -->
1. Where there is addition to or change to the performance
2. Unforseen difficulty so severe as to excuse performance
3. Third party makes new promise, not original party to K.
Article 2 & The pre-existing duty rule
Article 2 abolishes it. Good faith modifications to Ks need not be supported by consideration.
Partial payment as consideration for release from a debt?
Not sufficient consideration if the debt is (1) undisputed and (2) due.
contracts -- Seals as a consideration substitute
Not a valid substitute in most states. It IS a valid sub in DE.
Elements of Promissory Estoppel
1. a promise
2. reliance that is reasonable, detrimental, and foreseeable.
3. enforcement of the promise is necessary to avoid injustice
Who lacks capacity to enter into a K under CL?
1. minors
2. mental incompetents
3. intoxicated persons
Effect of incapacity on K?
Person lacking capacity has right to disaffirm K if other party seeks to enforce.
contracts -- Implied affirmation/ratification by incapacitated party to a K
1. K or agreement made when party was without capacity
2. Individual lacking capacity now has capacity
3. Same individual continues to retain benefits of K without objection
Quasi-K, individuals lacking capacity, and necessities
An individual cannot disaffirm a K for necessities on grounds of incapacity.
What is the statute of frauds?
1. A statute designed to prevent fraudulent claims pertaining to the existence of a K.
2. A barrier to court access. Can cause P to lose; but does not guarantee a win.
What Ks are subject to requirements of SOF under the CL?
1. A promise to answer for the debts of another
2. Promises by executor to guarantee ("answer for personally") the debts of the decedent.
3. Promises in consideration of marriage
4. Service K not capable of being performed within 1 year from time of contracting
5. Transfers of interest in real estate
contracts -- Main purpose exception to SOF
Alleged agreements to guarantee obligations, the main purpose of which were to benefit the guarantor, are NOT within the SOF.
When is a service K capable of being performed within a year (and therefore not subject to SOF requirements)?
"capable of being performed within a year" = that which is theoretically possible with unlimited resources.
Are lifetime Ks subject to SOF?
No. individual could die within a year.
Exception to CL rule that transfers of interests in land are subject to SOF?
Leases of one year or less.
Article 2 & SOF -- What Ks are subject to SOF under article 2?
1. Ks for the sale of goods of $500 or more
2. Leases totaling $1K or more
Exception to bar against past consideration qualifying as sufficient consideration
When a past obligation would be enforceable except for a
technical defense to enforcement, a new promise in writing will be enforceable even in the
absence of any new consideration.
contracts -- Promissory Estoppel as basis for an irrevocable offer?
Promissory estoppel renders an offer binding as an option contract even without consideration if the offeror should reasonably expect it to induce action or forbearance of a substantial character by the offeree before acceptance, and such
action or forbearance is in fact induced.
contracts -- Is there consideration where one party agrees to allow another party to be the "sole and exclusive" distributor?
Yes. in a case where someone is to be the exclusive distributor, the court will imply a promise to use best efforts to sell the product. This
implied promise is valid consideration both under the common law and the Uniform Commercial Code
Satisfying SOF without a writing?
3 ways to do:
1. Full performance by either party.
2. In a real estate transfer, SOF satisfied where 2 of following 3 is satisfied: payment, improvements, or possession.
3. Part performance satisfies SOF but only to the extent of that performance.
4. Admission of existence of a K by a party in deposition, testimony, or response to interrogatories.
5. In an article 2 transaction, SOF satisfied where seller makes a "substantial beginning" on specially-manufactured goods.
contracts -- Satisfying SOF with a writing under the CL?
1. All Material Terms Test -- Contents of writing or writings must contain all material terms to satisfy SOF.
2. Writing MUST be signed by person asserting SOF defense (the defendant)
Satisfying SOF with a writing under article 2
1. For sales of goods of $500 or more --

(a) K must indicate it is a for the sale of goods and
(b) contain a quantity term
(c) Must be signed by person asserting SOF defense (defendant)
Article 2's confirmatory memoranda exception to SOF satisfaction requirements?
1. Both parties are merchants (in business)
2. One party receives a signed writing with a quantity term claiming there is a K.
3. Receiving party fails to respond within 10 days.
Satisfying SOF with a writing under Article 2A
1. writing must indicate it is a lease
2. describe what is being leased, and
3. state duration of lease
agency/contracts - Equal dignity doctrine & SOF
Where K is subject to SOF requirements, proof of authorization to act must also be in writing.
Does SOF require that modifications be in writing?
If K, as modified, would be subject to SOF, then written evidence of the modification is required.
How to handle K provision requiring all modifications to be in writing?
1. CL -- Ignore it. General CL rule applies.
2. Art. 2 -- Effective unless waived.
Illegality as a basis for non-enforceability of a K?
1. Illegal subject matter --> ALWAYS precludes enforcement of a K (e.g., K ot murder someone).
2. Illegal purpose --> K is enforceable by the person who does not know of the illegal purpose (e.g., Train ticket bought to travel to kill someone).
When will public policy bar enforcement of a K?
1. Cannot contract away liability for intentional or reckless conduct. (Exculpatory K will not be enforced in such situations)
2. Covenants not to compete unenforceable without a reasonable business need or reasonable time and place limits
contracts -- Standard for misrepresentation as a bar to K enforcement?
Need a false assertion of fact that induces the K.

NOTE --> Statement maker's state of mind is irrelevant.
Standard for non-disclosure as a bar to K enforcement?
Failure to make a statement must be wrongful to justify cancellation of a K.

NOTE --> Look for one party making it difficult for other party to lear info.
Duress as a bar to K enforcement?
Need:
1. An improper threat, and
2. No reasonable alternative
contracts -- Unconscionability
1. Procedural unconscionability -- unfair surprise; unequal bargaining power; etc.

2. Substantive unconscionability -- oppressive, unduly favorable terms
Ambiguity as a bar to K enforcement
K is unenforceable if:
1. Parties use a material term open to at least 2 reasonable interpretations

2. Each party attaches differement meaning to each term, and

3. Neither party knows or has reason to know term is open to at least two possible interps.
Mistake of fact as a bar to K enforcement
1. A basic, material, and mutual mistake of fact is a bar to K enforcement

2. A unilateral mistake of fact is a bar to K enforcement if the other party had reason to know of the other party's mistake.

NOTE --> Distinguish from a mistake in judgment or uncertainty.
What is parol evidence?
Oral or written statements of parties to a K made before integration.
What is an integrated writing?
A written agreement intended to be the final expression of the parties' intent as to the terms contained in the writing.

NOTE --> a "complete" integration is the final statement of the ENTIRE agreement of the parties. A "partial" integration is the final statement of the parties as to those particular terms.
When is parol evidence admissible to contradict the terms of an integrated writing?
NEVER.

Exception --> Mistakes in integration: Courts may consider contradictory evidence of prior statements for purpose of determining whether there was a mistake in reducing the agreement to writing.
When is parol evidence admissible to contest the enforceability of an integrated writing?
ALWAYS.
When is parol evidence admissible to explain the terms of an integrated writing (i.e., resolve ambiguities)?
ALWAYS.
When is parol evidence admissible to add additional terms to an integrated writing?
If the writing is NOT a complete integration.

Put another way--> If the writing is a partial integration.

Put another way --> If the terms ordinarily would be contained in a separate agreement.
What is Course of Performance evidence?
Conduct of parties under this K.
What is Course of Dealing evidence?
Conduct of same parties to this K under prior Ks.
contracts -- What is Usage of Trade evidence?
Conduct of other parties under similar Ks. Industry standards.
Article 2 & S's delivery obligation under a shipment K?
S must:
1. Get goods to a common carrier

2. Make reasonable arrangements for delivery

3. Notify buyer of delivery arrangements
Article 2 & S's delivery obligation under a destination K?
S's delivery obligation fulfilled when B receives goods at its location.
Delivery K v. Shipment K?
1. Shipment K = FOB [seller's city]; FOB [city where goods are]

2. Destination K = FOB [any other city]
Article 2's 4 basic Risk of Loss Rules
1. agreement of the parties as to ROL controls

2. If no agreement as to ROL, then the breaching party--if there is a breach--is liable for any uninsured loss even though breach is unrelated to the problem.

3. If no agreement as to ROL and no breach --> If delivery is by common carrier, ROL passes from S to B at the time S fulfills its delivery obligations.

4. No agreement, no breach, and no delivery by common carrier?
(a) If S is a merchant, ROL shifts to B upon B's receipt of the goods.
(b) If S is a non-merchant, ROL shifts to B upon S's tender of the goods.
What is an express warranty under article 2?
Words that describe, state facts, or promise; or Use of a model or sample
What is the implied warranty of merchantability under article 2?
(1) Goods purchased from (2) a merchant are impliedly warranted to be fit for the ordinary purposes for which such goods are used.

NOTE --> merchant = a regular seller of goods of this type.
What is the implied warranty of fitness for a particular purpose under article 2?
1. B has a particular purpose
2. B is relying on S to select suitable goods
3. S has reason to know of purpose and reliance
What warranties does a lessor make under Article 2A?
Same as a seller under article 2.

Exception --> Finance lessors make no warranties.
Disclaiming warranties under article 2?
1. Express warranties cannot be disclaimed.

2. IWOM can be disclaimed with:
(a) conspicuous language of disclaimer mentioning "merchantability, OR
(b) language such as "as is," "with all faults"

3. IWOFFPP can be disclaimed with:
(a) conspicuous language of disclaimer, OR
(b) language such as "as is," "with all faults"
contracts - Limiting remedies for a breach of warranty
1. Available for all warranties, even express warranties

2. can NOT be unconscionable.
Standard for S's tender under article 2?
Perfect Tender Rule
Effect of S's non-perfect tender under article 2?
1. B may reject all goods and sue
2. B may reject some goods and retain some goods (commercial units) and sue for damages
When does S have the option to cure under article 2?
1. S had reasonable grounds to believe that improper tender would be acceptable.

2. Time for performance has not yet expired
What is an installment K under article 2?
The K requires or authorizes delivery of the goods in separate lots to be separately accepted.
When can B reject a shipment in an installment K under article 2?
Where there is a substantial impairment in that installment that cannot be cured.
Effect of B's acceptance under article 2?
B can no longer reject.
When has B accepted under article 2?
1. Payment does NOT equal acceptance unless B has had a reasonable opportunity to inspect.

2. B keeps goods without objecting and a reasonable time for inspection passes.
When can B revoke acceptance under article 2?
3 requirements:

1. Nonconformity substantially impairs value of goods,

2. Excusable ignorance of grounds for revocation OR reasonable reliance of S's assurance of satisfaction

3. Revocation within a reasonable time after discovery of nonconformity.
Price term issues under article 2
1. Open price term means reasonable price at time of delivery

2. Price to be fixed by B or S = price fixed in good faith

3. Price payable in goods means that each party is seller of goods it provides
When is remedy of specific performance available?
1. CL --> It's a limited equitable remedy; need money damages to be inadequate, unclean hands, etc. Ordinarily, only applied in real estate cases.

NOTE --> Cts will not apply SP remedy where subject of the K has been transferred to a bona fide purchaser for value.

2. Article 2 --> goods must be unique
When is remedy of reclamation available under article 2?
3 requirements:
1.B is insolvent at time it received goods

2. S makes demand for return of goods within 10 days of receipt, and

3. B still has goods at time of demand.
Expectation damages analysis
Damages = value of performance without breach - value of performance with breach
What are restitution damages?
Damages measured by the breaching party's gain.
2 relevant facts in calculating damages under article 2?
1. who breached
2. who has the goods
Damages under article 2 when S breaches and B keeps the goods
FMV of perfect tender (as warranted) - FMV of goods as delivered
Damages under article 2 when S breaches and S has the goods
1. Market price at time of discovery of breach - K price
2. Cover price - K price
Damages under article 2 when B breaches and B keeps the goods
K price
Damages under article 2 when B breaches and S has the goods
1. K price - FMV at time and place for delivery + lost profits, OR
2. K price - resale price + lost profits
Who is a lost volume seller under article 2?
Seller's making sales out of regularly-held inventory; a seller with ability to make both the K sale and the resale.
What are incidental damages?
The cost of finding replacement performance.

ALWAYS recoverable.
What are consequential damages?
Limited to (1) damages arising from the loss or injury sustained by P because of his special circumstances and (2) D has reason to know of these special circumstances at the time of contracting.
Limitation of K damages for avoidable damages
A defense --> No recovery for damages that could have been avoided without an undue burden on P.
Limitation of K damages for certainty
K damages must be reasonably certain.

Alternative where damages cannot be proven with reasonable certainty --> reliance damages aiming to put P in same position as if P never happened
Requirements for liquidated damages provision?
1. Damages were difficult to forecast at time K was made, and
2. Provision is a reasonable forecast
When is performance excused under CL b/c of improper performance by other party?
Material Breach Rule --> Only a material breach excuses performance.

NOTE --> If a party substantially performs, it has not materially breached.
Determining material breach/substantial performance where K has numbers-based performance
less than 50% complete = material breach.

Exception --> Divisible Ks: Where performance is number based and payment term is expressed on a per performance basis (as opposed to a lump sum), material breach test is applied on a per performance basis
Excuse b/c of improper performance under article 2?
Perfect tender rule
What is an express condition in a K?
Language in a K that does not create a new obligation, but merely limits obligations created by other language in the K.

Look for key language: "if" "only if" "provided that" "so long as" "subject to" "unless" "when" "until" "on condition that"
contracts -- Excuse of performance for failure to satisfy an express condition?
Strict compliance of express conditions is required
contracts -- Elimination of an express condition?
1. non-occurrence of the condition

2. Waiver/estoppel: (1) Is there a condition? (2) Who benefits/is protected by the condition? (3) Has that party made a statement giving up protections/benefits?

3. Prevention of occurrence of the condition by the party protected by/benefiting from the condition
What is anticipatory repudiation?
An unambiguous statement or conduct indicating that the repudiating party will not perform made prior to the time that performance was due.
Effect of anticipatory repudiation?
1. other party's performance is excused
2. other party has an immediate claim for damages
Can anticipatory repudiation be retracted?
Yes, so long as no material change by other party.
Requirements for insecurity and adequate assurance
1. If words or conduct of one party give "reasonable grounds for insecurity"
2. Other party may make written demand for adequate assurance, and
3. May suspend performance if commercially reasonable
Mutual recission of a K
There must be some performance owed by each party.

Agreement to rescind is itself a binding K supported by consideration.
What is an accord?
An agreement by parties to an already-existing obligation to accept a different performance in satisfaction of the existing obligation.
What is accord and satisfaction?
If the new agreement (the accord) is performed (the satisfaction), performance of the original obligation is excused.
What is a novation?
An agreement between both parties to an existing K for the substitution of a new party.

Effect? Replaced party's performance is excused.
Distinguishing novation from delegation?
1. agreement of both parties to K not required for delegation.

2. Delegating party still liable for non-performance by delagatee.
When is a later, unforeseen event an excuse from performance?
1. Something happens after K formation but before performance, and
2. It was unforeseen, and
3. It makes performance impossible or commercially impracticable or frustrates purpose of performance

NOTE --> focus is ability to perform, NOT increased cost or difficulty of performance
When does a K have a 3rd party beneficiary?
WHere 2 parties contract with intent/understanding to benefit a 3rd party.
contracts -- 3rd party beneficiary vocab
Promisor - Party making promise that benefits 3rd party.

Promisee - Party obtaining promise that benefits 3rd party.
When can a 3rd party beneficiary K be modified or cancelled?
1. Whether 3rd party beneficiary knows of promise benefitting her

2. whether 3rd party beneficiary has relied on that promise OR assented to the cancellation or modification.
Who can sue whom in a 3rd party beneficiary K?
1. 3rd party can sue promisor

2. promisee can sue promisor

3. 3rd party canNOT sue promisee unless 3rd party is a creditor attempting to recover on a preexisting debt.
What is an assignment?
A transfer of all or some rights under a K.
contracts -- Assignment vocab
Assignor -- Party assigning its K rights
Assignee -- 3rd party acquiring K rights
Obligor -- non-transferring party
Is consideration required for an assigment?
No.

NOTE --> A gratuitous assignment may be revoked
Contract provision PROHIBITING assignment
1. Takes away right to assign but not the power to assign --> e.g., "rights hereunder are not assignable"
Effect of an assignment where K provision prohibits assignment
1. It's a breach
2. BUT assignee can enforce the assignment if it had no knowledge of the prohibition provision
Contract provision INVALIDATING assignment
1. Takes away both the right and power to assign --> e.g., "all assignments are void"
Effect of an assignment where K provision invalidates assignment
1. It's a breach
2. Assignee cannot enforce the assignment
When does CL bar an assignment?
Where the assignment substantially changes the duties of the obligor --> Usually where there is an assignment of a right to K performance other than right to payment.
Who can sue whom when there is an assignment?
1. Assignee (3rd party) can recover from obligor (non-transferring party).

2. Assignor for consideration (transferring party receiving consideration from 3rd party) cannot recover from obligor.

NOTE --> Obligor has same defenses against 3rd party/assignee as it would against assignor.
Implied warranties of an assignor for value
1. Right assigned actually exists

2. Right assigned is not subject to any defenses by obligor

3. Assignor will do nothing to impair the value of the assignment.

NOTE: assignor does NOT warrant what obligor will or will not do.
Who prevails if the assignor makes multiple gratuitous assignments?
The last assignee unless an earlier assignee has received some indicia of ownership
contracts -- Who prevails if the assignor makes multiple assignments and at least one is for consideration?
First assignee for consideration wins.

Exception --> Subsequent assignee takes priority if he both (i) does not know of earlier assignment and (ii) is the first to obtain (a) payment, (b) a judgment, (c) a novation, or (d) indicia of ownership.
contracts -- What is a delegation?
Parties make a contract; one of those parties transfers work under that K to a 3rd party.
What K duties are delegable?
General contract duties are delegable?

Limits on delegation --> (1) K prohibits delegations or assignments; (2) K calls for special skills; (3) Person to perform has a very special reputation.
Who is liable if delegatee fails to perform?
1. Delegator is ALWAYS liable.

2. Delegatee may be required to perform by non-delegating party if it promised to perform and promise was supported by consideration