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130 Cards in this Set
- Front
- Back
Offer - Generally |
to be valid, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on teh basis of teh offered terms
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Offer - Determination of Reasonable Expectation
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(1) was there mutual assent (offer and acceptance)?
(2) was there consideration or some substitute for consideration (promissory estoppel)? (3) are there any defenses to creation of the contract? |
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Acceptance - Generally
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FL follows the general rules for acceptance - only parties to whom an offer has been addressed may accept
whether or not a valid acceptance has occurred depends on what law governs the contract |
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Acceptance - Common Law
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mirror image rule
acceptance must be identical to the offer...otherwise, no contract is formed |
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Acceptance - UCC - Generally
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contract is foremd even if the acceptance contains additional or different terms |
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Acceptance - UCC - Status of Parties
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(1) one of the parties isnt a merchant, the terms of the offer control |
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Negotiations - Generally/Things to Look For
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(1) look for valid offer (not merely an invitation to deal) |
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General Rules for Effectiveness
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(1) offers are effective when received
(2) rejections are effective when received (3) revocations are effective when received (4) under the mailbox rule, an acceptance is generally effective when sent (5) when an offeree sends a rejection and then an acceptance, the mailbox rule doesnt apply, and te 1st communication to be received is effective (6) when an offeree sends an acceptance and then a rejection, the mailbox rule generally applies unless the offeror receives the rejection 1st and changes her position in reliance on it |
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Revocability of Offers - Generally
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an offer is revocable UNLESS:
(1) consideration was paid to keep the offer open for a certain period of time (option contract) (2) it was a merchant's firm offer under the UCC (the offeror is a merchant who signs a written offer giving assurances that it will be held open) (3) the offeror could reasonably expect that the offeree would rely to his detriment on the offer (the offer will be irrevocable for a reasonable period of time) (4) the offer was for a unilateral contract in which performance has begun (the offeree has a reasonable time in which to perform) |
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Consideration - Generally
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a promise must be supported by consideration to be enforceable
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Consideration - Requirements
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(1) bargained-for-exchange between the parties
(2) of something of legal value ***there must be a benefit to the promisor OR a detriment to the promisee*** Note: most moral consideration usually is NOT enough |
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Consideration - Common Law
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if one of the parties has a pre-existing legal duty to perform, and then attempts to modify the contract, the modification isn't enforeable UNLESS:
(1) new or different consideration is given (2) the promise ratifies a voidable obligation (a promise to pay a debt barred by the statute of limitations) (3) the promise is made to a 3rd party (4) there is an honest dispute as to whether a duty is owed |
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Consideration - UCC
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a modification can be enforceable without consideration if it was sought in good-faith
the pre-existing legal duty rule doesn't apply |
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Consideration - Promissory Estoppel
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if one party makes a promise that will foreseeably be relied upon and there is such reliance, the contract may be enforced to the extent necessary to remedy the detrimental reliance despite the lack of consideration
promissory estoppel may also be used to defeat a statute of frauds defense |
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Statute of Frauds - Generally
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to be enforceable, a contract within the SoF must be memorialized in a writing signed by the party to be charged and must contain the essential terms of the contract
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Statute of Frauds - Signature
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the UCC is very liberal about what will constitute a signature
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Statute of Frauds - Writings
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Note: the "contract" need not be in writing...there need only be some written and signed proof
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Statute of Frauds - Contracts within the Statute
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Among others:
(1) promises creating an interest in land (possession plus valuable improvements may take the contract out of the SoF) (2) promises that by their terms cannot be performed within 1 year (3) agreements for the sale of goods for $500 or more, EXCEPT where: (a) the agreement is for specially manufactured goods, (b) the agreement is between merchants and one sent a confirmatory memo (c) a party admits the contract in court or pleadings, OR (d) part payment or acceptance has been made, which makes the contract enforceable to that extent |
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Unconscionability - Generally
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a contract may be voidable where its clauses are extremely one-sided or unfair when made
this includes contracts with inconspicuous risk-shifting provisions (eg hidden disclaimers warranty) AND contracts of adhesion (eg "take it or leave it" contracts where the parties dont have equal bargaining power) |
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Unconscionability - When do you Test for it?
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unconscionability is tested at the time the contract was made, not after (the contract must have been unfair at the time of execution)
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Unconscionability - Unequal Bargaining Power
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the defense is often applied where one party has substantially superior bargaining power
it is often a "wrong answer" that shoudl be discussed in an essay when a change of circumstances arises after a contract is made such a change might be grounds for discharge through impossibility or frustration of purpose |
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Mistake - Generally
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a mistake by BOTH PARTIES is a defense IF:
(1) the mistake concerns a basic assumption on which the contract was made, (2) the mistake has a material adverse effect on the agreed-upon exchange, AND (3) the adversely affected party didn't assume the risk of the mistake |
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Mistake - Ambiguous Term
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NEITHER party aware: NO contract is formed UNLESS both parties intended the same meaning
BOTH parties aware: NO contract is formed UNLESS both parties intended the same meaning ONE party aware: a binding contract exists based on what the ignorant party reasonably believed to be the meaning of the ambiguoug words |
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Parol Evidence Rule - Generally
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the rule prohibits introduction of evidence of prior or contemporaneous oral statements (and prior written statements) that seek to vary the terms of a fully integrated written contract (a contract that appears to reflect the entire agreement of the parties)
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Parol Evidence Rule - Exceptions (4)
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(1) attacks on validity - oral testimony IS admissible to show that the written contract never came into being because it was subject to a condition precedent that never was satisfied or was obtained through fraud (because such evidence doesnt seek to vary the terms of the contract)
(2) reformation: a party may use parol evidence to establish the right to reformation due to mistake or the like (3) common law: if a common law contract's terms are ambiguous, parol evidence IS admissible to prove the intended meaning (you are seeking to explain what the terms mean rather than seeking to vary the terms) (4) UCC: whether or not the terms seem ambiguous, any contract may be supplemented by any evidence of: (a) usage of trade (b) course of dealing between the parties, and (c) course of performance betwen the parties |
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Conditions - Generally
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a condition is an event other than the passage of time that must occur or fail to occur, unless excused, before perfomance comes due (a condition precedent) or that will release a party from an existing duty to perform (a condition subsequent)
Note: conditions can also be concurrent |
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Conditions - Waiver
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a party to whom a duty is owed may waive the duty
one having the benefit of a condition may indivate by words or by conduct that she wont insist on it the courts, in certain circumstances, will enforce this expression on the basis that the party has "waived" the condition or is "estopped" from asserting it |
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Impossibility - Generally
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impossibility excuses a party's performance
it is measured by an objective standard (nobody could perform according to the terms of the contract) the impossibility must arise AFTER the contract was entered into |
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Impossibility - Examples (3)
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(1) death or physical incapacity of a person necessary to perform the contract
(2) a subsequently enacted law rendering the contract illegal (3) subsequent destruction of the contract's subject matter or means of performance IF the promisor wasnt at fault and it is truly impossible to fulfill the terms of the contract at ANY price |
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Impossibility - Destruction of a Building
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doesnt relieve a builder of the duty to build because he MAY rebuild
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Impracticability - Generally
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the UCC excuses performance on a showing of something less than impossibility
impracticability requires that a party encounter extreme and unreasonable difficulty or expense that wasnt anticipated a mere change in the difficulty or expense due to normal risks that could have been anticipated (increase in price of raw materials) isnt enough |
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Frustration of Purpose - Generally
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can also excuse a party's performance IF
(1) a supervening event (2) that wasnt reasonably foreseeable at the time of entering into the contract (3) that completely or almost completely destroys the purpose of the contract, AND (4) the purpose was understood by BOTH parties Note: frustration isnt an argument that performance is impossible, it is an argument that it is pointless |
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Discharge by Substituted Contract - Generally
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discharge by substituted contract occurs where the parties to a contract enter into a second contract that immediately revokes the 1st contract
the 2nd contract may revoke the 1st either expressly or impliedly the 1st contract will be impliedly revoked if the second contract's terms are inconcistent with the terms of the 1st contract |
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Discharge by Substituted Contract - Determination
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whether a 2nd contract will constitute a substituted contract depends on whether the parties intend an immediate discharge or a discharge only after performance of the 2nd contract
if an immediate discharge is intended, there is a substituted contract |
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Discharge by Divisibility - Generally
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discharge by divisibility is designed to achieve equity between the parties, avoiding unnecessary hardship to one party or the other
a contract is divisible IF: (1) the performance of each party is divided into 2+ parts under the contract (2) the number of parts due from each party is the same, AND (3) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party (each performance is the quid pro quo of the other) |
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Breach - Generally
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a breach of contract occurs when there is an absolute duty to perform and the duty hasnt been performed or has been performed inadequately or improperly
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Breach - Material Breach
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a material breach discharges the nonbreaching party's duty to perform
Courts will examine: (1) the extent to which the nonbreaching party recieves the substantial benefit he could have anticipated from full performance (2) the extent to which the nonbreaching party can be adequately compensated in damages, (3) the extent to which the breaching party has completed performance or made preoparation therefor, (4) the hardship upon the parties should the contract be terminated, (5) the negligent or willful behavior of the breaching party, AND (6) the likelihood that the breaching party will complete performance |
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Breach - Substantial Performance - Generally
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Common Law: if a breach of contract is deemed minor (the nonbreaching party received the substantial benefit of the bargain), the nonbreaching party isn't discharged but can recover or deduct damages for the breach
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Breach - UCC Perfect Tender Doctrine - Buyer's Rights
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under the UCC, the buyer is said to have the right to a perfect tender and can reject goods for any nonconformity - even a minor one
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Breach - UCC Perfect Tender Doctrine - Seller's Rights
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the seller has a right to cure IF:
(1) there is time left under the contract to perform and the seller gives notice of the intent to cure and does cure (2) after the time for performance has passed if the seller had grounds to believe that te nonconforming goods would be acceptable but the buyer reject |
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Damages - Things to Consider (8)
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(1) Risk of Loss
(2) Expectation Damages (3) Incidental Damages (4) Consequential Damages (5) Specific Performance (6) Punitive Damages (7) Unjust Enrichment (8) Duty to Mitigate |
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Damages - Risk of Loss
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the contract may specify which party bears the risk of loss (in an FOB contact, risk passes when the goods reach the specified destination)
IF NOT SPECIFIED: Shipment Cases - if the goods are being shipped, risk passes to the buyer when the seller turns the goods over to a common carrier unless the contract specifically provides otherwise (in an FOB contract, the seller has the risk until the goods reach the FOB destination) Nonshipment Cases: if the goods aren't shipped, if the seller is a merchant, risk passes on delivery to the buyer...if the seller is a non-merchant, risk passes on tender of the goods |
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Damages - Expectation Damages
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give a party the benefit of her bargain...they attempt to put the non-breaching party into the position she would have been in had the contract been performed
MEASURE: a seller's normal damages are for the difference between: (1) contract price -- market price, or (2) contract price -- resale price if the seller has an unlimited supply of goods and has lost volume in sales by the buyer's breach, the seller can recover lost profits |
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Damages - Incidental Damages
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the expenses that a nonbreaching party incurs in responding to a breach (the costs of finding substitute performance)
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Damages - Consequential Damages
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any damages that are a reasonably foreseeable result of breach
they are recoverable only if they are: (1) reasonably foreseeable by the parties when the contract is made, (2) unavoidable through reasonable efforts, AND (3) provable with reasonable certainty |
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Damages - Specific Performance
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can be awarded in equity if the contact is for something rare or unique (land, one-of-a-kind goods, or goods in short supply)
cannot be granted to force someone to perform under a personal service contract, because that would be tantamount to slavery the breaching party CAN be enjoined from performing services for someone else during the term of the contract |
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Damages - Punitive Damages
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generally are NOT awarded in contractual situations
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Damages - Unjust Enrichment
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if there is no contract OR if the contract fails, consider awarding quasi-contractual relief
this is a remedy imposed by courts to disgorge unjust enrichment usually measure by the gain to the defendant, but it can be measured by the loss to the plaintiff if the normal measure wouldnt provide an appripriate remedy the damages can exceed what could have been recovered in a contract action |
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Damages - Duty to Mitigate
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the nonbreaching party has a duty to mitigate damages, generally by seeking substitute performance (similar goods, similar job, etc)
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Damages - Duty to Mitigate - Employment Situation
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in an employment situation, an employee who is discharged in breach of contract has a duty to mitigate damages by making reasonable efforts to obtain a position of the same rank and type of work in the same locale
the burden is on the employer to show that such positions were available |
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Warranties - UCC Generally (3)
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(1) implied warranty of merchantability
(2) implied warranty of fitness for a particular purpose (3) express warranty |
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UCC Warranties - Implied Warranty of Merchantability
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in every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantible
they key question is: are the goods fit for the ordinary purpose for which such goods are used? the implied warranty of merchantability can be disclaimed through the use of a conspicuous disclaimer mentioning "merchantability" if in writing |
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UCC Warranties - Implied Warranty of Fitness for Particular Purpose
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this implied warranty arises when any selller, merchant or not, has reaosn to know the particualr purpose for which the goods are to be used and that the buyer is relying on teh seller's skill and judgment to select suitable goods
this implied warranty can be disclaimed through a conspicuous written disclaimer no specific words are necessary |
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UCC Warranties - Express Warranty
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arise by any affirmation of fact, promise, descrition, model or sample which is part of the basis of the bargain (the buyer could have relied on it)
they are extremely difficult (but not impossible) to disclaim since the language limiting express warranties must be read consistently with the waranty and to the extent they are inconsistent, the disclaimer isn't given effect |
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Third-Party Rights - Who is a Third Party Beneficiary?
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a 3rd party beneficiary is a person who isn't a party to the bargain and who gives no consideration to support it, but who will benefit by a contract's performance
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Third-Party Rights - Types of Third Party Beneficiaries (3)
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(1) creditor beneficiary - a person is a creditor beneficiary if the promissee's primary intent is to discharge an obligation owed to the fiduciary
(2) donee beneficiary - a person is a donee beneficiary if the promissee's primary intent was to make a gift to the beneficiary (3) incidental beneficiary - other beneficiaries (persons who benefit but whom the donee didnt specifically intend to benefit) are incidental beneficiaries (if a promisee provides that the promisor must use American Standard brand plumbing fixtures, the American Standard company benefits from the contract, but it is doubtful that that was the parties' intent) |
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Third-Party Rights - Rights of Third Party Beneficiaries
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generally, a creditor or donee beneficiary (but not an incidental beneficiary) can enforce the contract against the promisor directly, but is subject to any defense that the primisor could have raised against the promissee
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Third-Party Rights - Changing the Contract
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the promisor and promissee are free to change the terms of the contract until the 3rd party beneficiary's rights vest
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Third-Party Rights - Vesting
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RIghts of a creditor beneficiary or donee beneficiary will vest when the beneficiary:
(1) assents to the contract (2) brings suit to enforce the contract, or (3) materially changes position in justifiable reliance on the contract |
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Third-Party Rights - Enforcement of Contract
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if the promissee doesn't perform, a 3rd-party creditor beneficiary generally can sue the promissee on the obligation that was supposed to have been discharged by the promisor's performance, but a 3rd-party donee beneficiary generally cannot sue the promissee (because as between the promisee and the 3rd-party beneficiary, all that exists is a failed gift)
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Assignment of Rights/Declaration of Duties - Generally
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general rule: any contractual right may be assigned and any contractual duty may be delegated UNLESS the duty involves personal judgment or skill
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Steps for analyzing a contracts question:
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1) Has there been proper formation?
2) If so, do any defenses exist? 3) What remedies are available? |
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What is necessary for proper contract formation?
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1) Offer
2) Acceptance 3) Consideration |
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For an offer to be valid, it must create...
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A reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.
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How can you tell if a reasonable expectation has been created?
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1) Was there mutual assent? (offer and acceptance)
2) Was there consideration or some substitute for consideration? 3) Are there any defenses to creation of the contract? |
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What rule does the common law follow for acceptance?
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Mirror image rule – acceptance must be identical to offer
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When is the UCC used instead of common law for determining acceptance?
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Contracts for sale of goods
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What rule does the UCC follow for acceptance?
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Contract formed even if acceptance contains additional or different terms.
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Under the UCC, if one of the parties isn't a merchant, what happens if the acceptance contains new terms?
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The terms of the offer control
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Under the UCC, if both parties are merchants, what happens if the acceptance contains new terms?
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Additional terms become part of the contract unless 1) materially alter contract; 2) offer expressly limits acceptance to terms of offer, or 3) offeror objects to terms w/in rsnble time
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If acceptance contains terms conflicting with offer, what might happen?
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Court may treat conflicting term like additional terms.
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What do you look at when determining valid offer and acceptance?
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1) Is the first statement a valid offer, or merely an invitation to deal?
2) Is there a valid acceptance? 3) Has the acceptance been barred by revocation or rejection? |
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Offers are effective when...
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received.
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Rejections are effective when...
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received.
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Revocations are effective when...
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received.
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Acceptance is generally effective when...
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sent. (mailbox rule)
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Offeree sends rejection and then acceptance. Which is effective?
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The first one to be received.
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Oferee sends acceptance and then rejection. Which is effective?
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The acceptance, unless the offeror receives the rejection first and changes their position in reliance on it.
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Offer is revocable unless...
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1) Consideration paid to keep offer open
2) Firm offer 3) Detrimental reliance reasonably expected 4) Unilateral contract in which performance has begun |
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Requirements for consideration:
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1) Bargained–for exchange
2) Something of legal value |
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Is moral consideration sufficient to support a contract?
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Generally no.
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If one party has a pre–existing legal duty to perform contract and tries to modify, modification not enforceable unless:
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1) New/different consid given
2) Promise ratifies voidable oblig 3) Promise made to 3rd party 4) Honest dispute as to whether duty owed |
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Modification can be enforceable without consideration if...
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sought in good faith.
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What is promissory estoppel?
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Party makes promise foreseeably relied upon.
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To be enforceable under the Statute of Frauds, a contract must be...
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1) Memorialized in writing signed by party to be charged
2) Must contain essential terms of contract (doesn't have to be the whole contract) |
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Examples of contracts within the Statute of Frauds
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1) Creating interest in land
2) Cannot be performed within one year 3) Sale of goods for >= $500, except where (i) for specially manufactured goods; (ii) agreement between merchants and one sent confirmatory memo; (iii) party admits contract in court or pleadings; (iv) part payment or acceptance has been made, making contract enforceable to that extent |
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When is unconscionability tested?
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When contract is made
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When is mistake a defense?
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Must be by both parties.
i) mistake concerns basic assumption on which contract made ii) mistake has material adverse effect on agreed–upon exchange; and iii) adversely affected party didn't assume risk of mistake |
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If neither party was aware of an ambiguity...
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no contract formed unless both parties intended same meaning.
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If both parties aware of an ambiguity...
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no contract formed unless both parties intended the same meaning.
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If one party is aware of an ambiguity...
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binding contract exists based on what ignorant party reasonably believed to be the meaning.
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What is the parol evidence rule?
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Four–corners rule.
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Exceptions to parol evidence rule:
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1) Attacks on validity (contract never happened because condition precedent or fraud)
2) Reformation (right to reform due to mistake/etc.) 3) Common Law (can prove intended meaning of ambiguous terms) 4) UCC (can supplement with i) trade usage; ii) course of dealing; iii) course of performance) |
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Examples of impossibility
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1) Death/physical incapacity
2) Law rendering contract illegal 3) Destruction of subject matter such that it is impossible to fulfill the terms of the contract at any price |
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Impracticability
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Extreme and unreasonable difficulty or expense that wasn't anticipated
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Frustration of purpose
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1) Supervening event
2) Not reasonably foreseeable 3) Completely/almost completely destroys purpose of contract 4) Purpose understood by both parties |
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Discharge by substituted contract
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Enter into second contract, revokes first. Can be express or implied.
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Discharge by divisibility possible if:
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1) Performance of each party divided into two or more parts
2) # of parts due from each party is same 3) Performance of each part by one party is agreed as equiv of corresponding part from other party |
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Material breach does what?
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Discharges nonbreaching party's duty to perform
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Factors of materiality of breach
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1) Extent to which nonbreaching party receives benefit could've anticipated from full performance
2) Extent to which nonbreaching party can be adequately compensated in damages 3) Extent to which breaching party has completed/prepared to complete performance 4) Hardship on parties if contract terminated 5) Willful/negligent behavior of breaching party 6) Likelihood that breaching party will complete performance |
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Perfect tender doctrine
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Buyer can reject goods for any nonconformity.
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Seller has right to cure under perfect tender doctrine if:
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1) Time left under contract to perform
a) Seller gives notice to cure b) Seller cures or 2) After performance has passed, seller had grounds to believe nonconforming goods would be acceptable but buyer rejects |
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Risk of loss in shipment cases falls on which party?
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Passes to buyer when seller turns goods over to common carrier unless contracted otherwise
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Risk of loss in nonshipment cases falls on which party, if seller is merchant?
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Passes on delivery to buyer.
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Risk of loss in nonshipment cases falls on which party, if seller is nonmerchant?
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Risk passes to buyer on tender of goods.
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Expectation damages
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Put nonbreaching party into position would have been in had contract been performed.
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Incidental damages
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Expenses nonbreaching party incurs in responding to breach
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Consequential damages
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Damages that are a reasonably foreseeable result of breach.
Only recoverable if: 1) Reasonably foreseeable 2) Unavoidable through reasonable efforts 3) Provable with reasonable certainty |
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Specific performance
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Awarded if contract for something rare or unique, but not for service contracts (can enjoin breacher from performing for someone else, tho)
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Are punitive damages awarded?
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Generally no.
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If no contract or failed contract, what relief can be sought?
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Quasi–contractual relief (oft for unjust enrichment)
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Duty to mitigate?
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Yes.
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Types of warranties
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1) Implied warranty of merchantability
2) Implied warranty of fitness for particular purpose 3) Express warranties |
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Implied warranty of merchantability:
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Goods are fit for ordinary purpose for which such goods are used.
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Implied warranty of merchantability disclaimable?
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Yes, through conspicuous statement mentioning merchantability.
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Implied warranty of fitness for particular purpose:
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Seller has reason to know particular purpose for which goods to be used, buyer relying on seller's skill/judgment to select.
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Implied warranty of fitness for particular purpose disclaimable?
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Yes, through conspicuous written disclaimer.
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Express warranties:
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Affirmation of fact, promise, description, model, or sample that is part of basis of bargain
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Express warranties disclaimable?
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Rarely. Difficult to disclaim. Language limiting warranties must be read consistently with warranty, and disclaimer not effective where inconsistent.
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Can disclaim warranties after sale?
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No.
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Normal measure of damages:
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= value warranted – value of accepted goods
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Types of third–party beneficiaries
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1) Creditor beneficiary
2) Donee beneficiary 3) Incidental beneficiary |
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Creditor beneficiary:
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Promisee's primary intent is to discharge obligation owed to fiduciary.
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Donee beneficiary:
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Promisee's primary intent is to make gift to beneficiary.
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Incidental beneficiary:
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Beneficiaries promisee didn't specifically intend to benefit.
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What kinds of third–party beneficiaries can enforce the contract against the promisor directly?
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Creditor and donee beneficiaries
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When do third–party beneficiary rights vest?
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1) Beneficiary assents to contract
2) Beneficiary brings suit to enforce contract; or 3) Beneficiary materially changes position in justifiable reliance on contract |
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Can a third–party beneficiary sue the promisor?
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Yes.
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Can a third–party beneficiary sue the promisee?
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No.
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What contractual rights can be assigned/duties delegated?
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Any contractual right may be assigned and any duty delegated unless duty involves personal judgment or skill. |