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69 Cards in this Set

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Steps for analyzing a contracts question:
1) Has there been proper formation?
2) If so, do any defenses exist?
3) What remedies are available?
What is necessary for proper contract formation?
1) Offer
2) Acceptance
3) Consideration
For an offer to be valid, it must create...
A reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.
How can you tell if a reasonable expectation has been created?
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?
What rule does the common law follow for acceptance?
Mirror image rule - acceptance must be identical to offer
When is the UCC used instead of common law for determining acceptance?
Contracts for sale of goods
What rule does the UCC follow for acceptance?
Contract formed even if acceptance contains additional or different terms.
Under the UCC, if one of the parties isn't a merchant, what happens if the acceptance contains new terms?
The terms of the offer control
Under the UCC, if both parties are merchants, what happens if the acceptance contains new terms?
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
If acceptance contains terms conflicting with offer, what might happen?
Court may treat conflicting term like additional terms.
What do you look at when determining valid offer and acceptance?
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?
Offers are effective when...
received.
Rejections are effective when...
received.
Revocations are effective when...
received.
Acceptance is generally effective when...
sent. (mailbox rule)
Offeree sends rejection and then acceptance. Which is effective?
The first one to be received.
Oferee sends acceptance and then rejection. Which is effective?
The acceptance, unless the offeror receives the rejection first and changes their position in reliance on it.
Offer is revocable unless...
1) Consideration paid to keep offer open
2) Firm offer
3) Detrimental reliance reasonably expected
4) Unilateral contract in which performance has begun
Requirements for consideration:
1) Bargained-for exchange
2) Something of legal value
Is moral consideration sufficient to support a contract?
Generally no.
If one party has a pre-existing legal duty to perform contract and tries to modify, modification not enforceable unless:
1) New/different consid given
2) Promise ratifies voidable oblig
3) Promise made to 3rd party
4) Honest dispute as to whether duty owed
Modification can be enforceable without consideration if...
sought in good faith.
What is promissory estoppel?
Party makes promise foreseeably relied upon.
To be enforceable under the Statute of Frauds, a contract must be...
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)
Examples of contracts within the Statute of Frauds
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
When is unconscionability tested?
When contract is made
When is mistake a defense?
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
If neither party was aware of an ambiguity...
no contract formed unless both parties intended same meaning.
If both parties aware of an ambiguity...
no contract formed unless both parties intended the same meaning.
If one party is aware of an ambiguity...
binding contract exists based on what ignorant party reasonably believed to be the meaning.
What is the parol evidence rule?
Four-corners rule.
Exceptions to parol evidence rule:
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)
Examples of impossibility
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
Impracticability
Extreme and unreasonable difficulty or expense that wasn't anticipated
Frustration of purpose
1) Supervening event
2) Not reasonably foreseeable
3) Completely/almost completely destroys purpose of contract
4) Purpose understood by both parties
Discharge by substituted contract
Enter into second contract, revokes first. Can be express or implied.
Discharge by divisibility possible if:
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
Material breach does what?
Discharges nonbreaching party's duty to perform
Factors of materiality of breach
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
Perfect tender doctrine
Buyer can reject goods for any nonconformity.
Seller has right to cure under perfect tender doctrine if:
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
Risk of loss in shipment cases falls on which party?
Passes to buyer when seller turns goods over to common carrier unless contracted otherwise
Risk of loss in nonshipment cases falls on which party, if seller is merchant?
Passes on delivery to buyer.
Risk of loss in nonshipment cases falls on which party, if seller is nonmerchant?
Risk passes to buyer on tender of goods.
Expectation damages
Put nonbreaching party into position would have been in had contract been performed.
Incidental damages
Expenses nonbreaching party incurs in responding to breach
Consequential damages
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
Specific performance
Awarded if contract for something rare or unique, but not for service contracts (can enjoin breacher from performing for someone else, tho)
Are punitive damages awarded?
Generally no.
If no contract or failed contract, what relief can be sought?
Quasi-contractual relief (oft for unjust enrichment)
Duty to mitigate?
Yes.
Types of warranties
1) Implied warranty of merchantability
2) Implied warranty of fitness for particular purpose
3) Express warranties
Implied warranty of merchantability:
Goods are fit for ordinary purpose for which such goods are used.
Implied warranty of merchantability disclaimable?
Yes, through conspicuous statement mentioning merchantability.
Implied warranty of fitness for particular purpose:
Seller has reason to know particular purpose for which goods to be used, buyer relying on seller's skill/judgment to select.
Implied warranty of fitness for particular purpose disclaimable?
Yes, through conspicuous written disclaimer.
Express warranties:
Affirmation of fact, promise, description, model, or sample that is part of basis of bargain
Express warranties disclaimable?
Rarely. Difficult to disclaim. Language limiting warranties must be read consistently with warranty, and disclaimer not effective where inconsistent.
Can disclaim warranties after sale?
No.
Normal measure of damages:
= value warranted - value of accepted goods
Types of third-party beneficiaries
1) Creditor beneficiary
2) Donee beneficiary
3) Incidental beneficiary
Creditor beneficiary:
Promisee's primary intent is to discharge obligation owed to fiduciary.
Donee beneficiary:
Promisee's primary intent is to make gift to beneficiary.
Incidental beneficiary:
Beneficiaries promisee didn't specifically intend to benefit.
What kinds of third-party beneficiaries can enforce the contract against the promisor directly?
Creditor and donee beneficiaries
When do third-party beneficiary rights vest?
1) Beneficiary assents to contract
2) Beneficiary brings suit to enforce contract; or
3) Beneficiary materially changes position in justifiable reliance on contract
Can a third-party beneficiary sue the promisor?
Yes.
Can a third-party beneficiary sue the promisee?
No.
What contractual rights can be assigned/duties delegated?
Any contractual right may be assigned and any duty delegated unless duty involves personal judgment or skill.