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99 Cards in this Set
- Front
- Back
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Damages Formula |
Fair Market Value (FMV) - Contract Price (K-price) _________________________ Damages |
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Restatement of Contracts (the definition of a contract) |
A promise or a set of promises for the breach of which the law gives a remedy
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Remedy Definition |
What the law provides in the event someone has been wronged |
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Expressed Contract |
A contract there terms of the contract are stated/expressed |
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Contract Implied In Fact |
Implied from facts and circumstances surrounding you |
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Ex: Leaving a known amount of money at a convenience store counter for a frequent purchase is an example of what? |
Implied In Fact contract |
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Contract Implied In Law AKA: Unjust Enrichment |
Not a contract but a remedy and is also known as quasi-contract |
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An unjust enrichment requires: |
1) A benefit conferred 2)Accepted/retained 3)Unfair/unjust circumstances |
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Enforceable/Valid Contract |
Means that a court will enforce the contract |
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Void Contract |
A contract of no legal effect |
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Breaching a contract involving crime is an example of what type of contract |
Void Contract |
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Voidable Contracts |
Enforceable (or not) at the option of one of the parties |
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A contract with a minor is an example of what type of contract |
Voidable Contract |
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Unenforceable Contract |
A contract may become unenforceable as a result of the statute of limitations |
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Unilateral Contract |
A promise for an act |
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Bilateral Contract |
A promise for a promise |
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Person A promising to pay person B back $11,000 if B lends A $10,000 is an example of what type of contract? |
Unilateral Contract |
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Person A promising to pay Person B $1,000 per month if B loans A $10,000 on a later date is an example of what type of contract? |
Bilateral Contract |
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A bilateral contract exists when: |
A promise is given for a returned promise NOT when the act occurs or $$ is paid |
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Wholly Execution |
When neither side has performed in a bilateral contract after the date promised |
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Partly Executed/partly executory |
when the loan is made in a bilateral contract |
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Article II (Uniform Commercial Code) applies to contracts for: |
The sale of goods |
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Common Law applies to: |
All other contracts besides for the sale of goods (Article II) |
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What is defined as the Sale of Goods |
Tangible personal property. Does it make a noise when you drop it? |
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Real Property Definition |
Land and permanent improvements to the land |
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Real Property Includes: |
Surface, Subsurface, buildings, silos, up to a reasonable height of airspace, subsurface, etc. |
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Personal Property Definition |
Everything else besides Real Property |
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Definition of Goods |
Tangible personal property |
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Mixed goods/services contract |
Use the predominant purpose test |
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Predominant Purpose Test |
whichever predominates (tangible or not) ex: paint/painter |
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Enforceable Contract |
Lawsuit in a court |
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An agreement consists of: |
1)An offer 2)Acceptance |
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An offer must: |
1) Be a valid offer - manifestation of serious contractual intent (objectively determined) 2) Have reasonable definite/certain terms 3)Must be communicated to offeree (person to person) |
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An offer ____ be revoked anytime before accepted, even when promised not to revoke |
can |
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Offeror vs Offeree |
Offeror- Person presenting the offer Offeree- Person the offer is being presented to |
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Firm Offer (Under Article II) is irrevocable if: |
-Written -Signed |
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Difference between an Option in a contract and a Firm offer |
Option- An option is a contract by whichthe offeror is bound to hold open an offer for a specifiedperiod of time. It must comply with all of the requirementsof a contract, including the offeree’s giving of considera-tion to the offeror. Firm Offer- A firm offer is a writtenoffer signed by a merchant offeror to buy or sell goods |
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A valid Acceptance Requires |
1) Manifestation of willingness to be bound-intent to accept (objective theory) 2)Terms- where an acceptance cannot deviate from the terms ofthe offer 3) Must be communicated to Offeror |
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If there are additional terms in acceptance for a common law contract: |
There is no agreement. 1)Terms of an acceptance must be the mirror image of the terms of the offer. Any change in terms means there is no agreement. 2)Additional or different terms in a contract means no agreement has been reached. |
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If there are additional terms in acceptance under an Article II contract (contract for the sale of goods) -- Between Merchants: |
Additional terms become a part of the contract unless: 1) The offer prohibits 2)They materially change it 3) It is promptly objected to |
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If there are additional terms in acceptance under an Article II contract (contract for the sale of goods) -- Not Between Merchants: |
The additional term not in the proposal for inclusion must be discussed between the parties before an addition is made. |
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Silence considered acceptance only if: |
1) There is a prior agreement 2) There has been a prior dealing between the two parties |
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Genuine Agreement- Conduct invalidating assent Under Duress-- Duress includes: |
1)Physical Force- occurs when one party compels another to manifestassent to a contract through actual physical force,
2) Improper Threats- include economic and social coercion, to compel a person to enter into a contract |
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Example of Physical Force Duress: |
Pointing a gun at a person or taking a person’s hand and compelling him to sign a written contract |
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Example of Improper Threats: |
If Ellen, a landlord, induces Vijay, aninfirm, bedridden tenant, to enter into a new lease on thesame apartment at a greatly increased rent by wrongfullythreatening to terminate Vijay’s lease and evict him, Vijaycan escape or avoid the new lease by reason of the duressexerted on him. |
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Genuine Agreement- Conduct invalidating assent Under Fraud (tort) - 2 distinct types of fraud |
1) Fraud in the execution (extremely rare) - occurs whena person does not know, or does not have reasonable opportunity to know, the character or essence of a proposedcontract because the other party misrepresents its character or essential terms. Renders the contract void 2) Fraud in the Inducement - an intentional misrepresentation of material factby one party to the other, who consents to enter into acontract in justifiable reliance on the misrepresentation. Renders the contract voidable |
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Fraud (Tort) Definition |
Fraud prevents assent frombeing knowingly given. |
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Example of Fraud in the Execution: |
Melody delivers a package to Ray,requests that Ray sign a receipt for it, holds out a simpleprinted form headed ‘‘Receipt,’’ and indicates the line onwhich Ray is to sign. This line, which appears to Ray to bethe bottom line of the receipt, is actually the signature lineof a promissory note cleverly concealed underneath thereceipt. Ray signs where directed without knowing that heis signing a note. This is fraud in the execution. The note isvoid and of no legal effect, for, although the signature isgenuine and appears to manifest Ray’s assent to the termsof the note, there is no actual assent. The nature of Mel-ody’s fraud precluded consent to the signing of the notebecause it prevented Ray from reasonably knowing whathe was signing. |
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Example of Fraud in the Inducement: |
Alice, in offering to sellher dog to Bob, tells Bob that the dog won first prize in itsclass in the recent national dog show. In truth, the doghad not even been entered in the show. However, Alice’sstatement induces Bob to accept the offer and pay a highprice for the dog. There is a contract, but it is voidable byBob because Alice’s fraud induced his assent. |
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The requisites (necessities) for fraud in the inducement: |
1) False presentation 2) Material fact 3) Intend to deceive (knowledge of falsity) 4) Reasonable reliance 5) Damages - Punitive Damages (damages designed to punish the seller) |
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Scienter occurs when both: |
Fraud (tort) & Intent to deceive |
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Innocent/Negligent Misrepresentation: |
-Both render a contract voidable -Include all fraud elements except Scienter -No punitive damages (damages designed to punish the seller) |
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Bilateral/Mutual Mistake: |
occurs when both parties are mistaken asto the same set of facts - There is no agreement and contract is voidable |
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Unilateral Mistake: |
Ok- One party was mistaken |
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Fact vs Opinion (value) |
The basic element of fraud is the misrepresenta-tion of a material fact. A fact is an event that actuallytook place or a thing that actually exists. Actionable fraud rarely can be based on what is merelya statement of opinion. A representation is one of opinionif it expresses only the uncertain belief of the representeras to the existence of a fact or his judgment as to quality,value, authenticity, or other matters of judgment. |
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Example of a misrepresentation of fact: |
Dale induces Mike to purchase shares in a companyunknown to Mike at a price of $100 per share by repre-senting that she had paid $150 per share for them dur-ing the preceding year, when in fact she had paid only$50. |
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Example of a misrepresentation of Opinion: |
Dale induces Mike to purchase shares in a companyunknown to Mike at a price of $100 per share by repre-senting that she had paid $150 per share for them dur-ing the preceding year, when in fact she had paid only$50.-- if Dale said to Mike that theshares were ‘‘a good investment,’’ she was merely statingher opinion; and normally Mike ought to regard it as nomore than that. |
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Definition of consideration: |
Bargained for exchange of something which has legal value something- act or promise to act |
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Something holds legal value IF EITHER: |
1) A benefit is conferred (granted) -- obtaining something to which one had no prior legal right OR 2) Detriment (damage) is incurred (the result)-- doing an act one is not legally obligated to do or not doing an act that one has a legal right to do |
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Doctrine of Promissory Estoppel (what it does) |
-Prevents someone from doing something based on their promise. -The courts will enforce non-contractual promises under this doctrine |
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3 Elements of Promissory Estoppel: (A substitute for consideration) |
1) The promise is reasonably expected to induce action 2) The promise does induce action 3) It will avoid injustice only by enforcement of the promise (If all 3 elements exist the agreement may be enforceable and is a substitute for consideration) |
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Promises to make gifts to nonprofit organizations are enforceable without _____________ |
Consideration |
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Article 2 states that modification of existing contracts for the sale of goods is enforceable ____________ |
without new consideration |
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If K1 is created for a non-tangible item and is enforceable and K2 is created with no additional considerations, K2: |
isn't enforceable |
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Adequacy of consideration "peppercorn theory" meaning |
Something as insignificant as a peppercorn can qualify for consideration |
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Unconscionable Contract |
Originated in Article II & applies to the common law If court or matter of law find the contract unconscionable, the court may refuse to enforce the contract |
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Unconscionable Definition |
A contract is deemed unconscionable if it is so one-sided as to shock the conscience (of the judge) |
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Exculpatory Clause |
A clause that attempts to cut off liability |
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"Quid Pro Quo" translates to and means: |
"This for that" Is an exchange of goods or services, where one transfer is contingent (depending) upon the other. |
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Modification of an existing contract- Disputed Definition |
If Accepting less than full amount you claim is owed and prevents you from seeking full amount you thought is owed
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The promise to pay debt is barred(secured) by the: |
Statute of Limitation (a certain amount of time after an event within which legal proceedings may be initiated) |
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Valid Purpose meaning |
A legal objective is essential for a promise or agreement to be binding. When the formation or performance of an agreement is illegal it is unenforceable |
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Illegal Bargains include: |
- Crimes including gambling - Usury (the maximum amount of interest a contract can charge - Licensing Statutes - Restraint of Trade (any contract or agreement that eliminates or tends to eliminate competition or otherwiseobstructs trade or commerce) - Exculpatory Clause (excusesone party from liability for her own tortious conduct) |
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Suppose 18% is the maximum amount of interest a lender or borrower can contract legally, if the contract created has a 28% interest rate included in the contract the contract with regard to the interest is not upheld, why: |
Due to Usury |
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Licensing Statutes- Definition/Examples |
A license for thosewho engage in certain trades, professions, or businesses.Common examples are licensing statutes that apply tolawyers, doctors, dentists, accountants, brokers, plumbers,and contractors. |
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Restraint of Trade - Covenant not to compete extent enforceable |
One type of restraint oftrade is a covenant not to compete, which is an agreementto refrain from entering into a competing trade, profession, or business. It is enforceable to extent reasonable: 1) In time 2) In scope |
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Exculpatory Clause |
A clause that attempts to cut off liability from one party for his or her tortious conduct |
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Modification of an existing contract - under Article II |
enforceable without consideration |
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Disputing an amount owed |
If you DO NOT accept amount owed you can dispute that amount |
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Liquidating/Undisputing an amount owed |
If you DO accept amount owed you can't dispute |
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Test for incompetence or capacity for intoxicated is: |
Did the person understand the nature and consequences of the transaction? |
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Incompetent/ Incapacitated Definition (Mental Incapacity) |
Resulting from a mental disease or defect |
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3 categories of people who may be mentally incapacitated |
1) Adjudicated (Guardianship) 2) Non-adjudicated 3) Infants/Minors |
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Adjudicated (Guardianship) |
If a person has had a guardianship initiated with them and a guardian appointed to them, any contract that that person has entered in is VOID and cannot be held for or against them |
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Non-adjudicated |
Ex: After a person enters into a contract someone enters in on their behalf and says that they are incompetent. At that point the test of intoxication is used. In this scenario, ONLY the incapacitated has the option to void the contract. |
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Infants/Minors |
Contracts enters into by minors are voidable at the option of the minor anytime during minority and a reasonable time after minority. In most states all the minor has to do is return the consideration to the other party. |
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Execution for contracts with minors |
Necessaries- Food, Clothing, Shelter With necessaries minors are liable for the FMV |
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Statute of Frauds (What its purpose is) |
A doctrine aimed at trying to reduce fraud and perjury. Specifically aimed at trying to prevent people from claiming there was an oral agreement when there wasn't. |
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Statute of Frauds (What it says) |
Says that contracts are not enforceable unless evidenced by a written memorandum signed by the party to be charged. (Doesn't require signature of both parties) |
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5 Kinds of contracts the Statute of Frauds applies to: (4 Common Law; 1 Art II) |
I. Contracts for the transfer of an interest in real property a) an interest includes more than just the land itself (i.e. Mineral rights, apartment lease, easement, mortgage) b) a lease is real property and the exception is a lease for < 1 year
II. Contracts not to be performed within one year a) The test is whether performance is possible within one year not probable III. Contracts to answer for debts of another a) If a surety/guarantor/cosigner says "if borrower doesn't pay I will" IV. Promises based on the consideration of marriage a) ex. prenuptial agreement V. Article II Statute of Frauds regarding Contracts for the sale of goods greater than or equal to $500 Exceptions (where oral contract is enforced): a) Part performance- to the extent performed b) Specially manufactured goods (goods manufactured according to buyers specification that aren't suitable for resale c) Confirming memorandum - Between merchants - Unless the other party promptly objects the other party is bound
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Parole Evidence Rule |
Evidence of prior or contemporaneous (same time as) oral agreement which alters/contradicts later written agreement is not admissable However, An oral agreement entered into after the written agreement can be upheld in court and is not subject to the Parole Evidence Rule. |
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Remedies (Damage$) for a breach of contract |
1) Compensatory/Actual Damages 2) Nominal Damages 3) Liquidated Damages 4) Punitive Damages 5) Specific Performance |
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Compensatory/ Actual Damages |
Intended to put the Plaintiff in the same position he or she would have been in if the contract had been performed Your actual damages would be the amount you would've been compensated if the contract had been performed Consequential damages- lost profits only if reasonably forseeable |
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Nominal Damages |
When damages are $0 but the plaintiff wants to sue the defendant anyway Ex: suing not for damages but to protect reputation |
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Liquidated Damages |
-When damages are specified in the contract -Most commonly used in construction contracts Liquidated damages are enforceable if: 1) The actual damages are difficult to estimate AND 2) The liquidated damages clause in the contract must be a reasonable estimate of the actual damages that are difficult to estimate |
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Punitive Damages |
- Intended to punish - Almost never available in contract law except for fraud |
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Mitigation of Damages |
Having an obligation to hold down you damages ex: if you are fired from a job that you were original contracted $1000 a month for 12 months and they fired you at month 3 you are responsible to try and find a job to mitigate you damages. However you only have to do what is REASONABLE. If you are a financial advisor you don't have to take a job as a dishwasher, but you do have an obligation to try and find reasonably comparable employment |
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Specific Performance |
When damages are an inadequate remedy. When the subject of the contract is unique, specific performance may be available |
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Injunction Definition |
An order of court to do or not to do something |
