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135 Cards in this Set
- Front
- Back
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what is a contract
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an agreement that is legally enforceable
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necessary elements of an agreement to form a contract
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1. offer
2. acceptance 3. consideration |
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terms that are too vague and will not be an offer
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1. appropriate
2. fair 3. reasonable |
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increasing a requirements contract
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must not be unreasonably disproportionate to prior orders
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methods of revocations
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1. Unambiguous statement to the offeree of unwillingness of inability to contract
2. Unambiguous conduct by the offeror of unwillingness of inability to contract that offeree is aware of |
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methods of rejection
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1. counteroffer
2. conditional acceptance 3. additional terms 4. express rejection |
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mere preparation in a unilateral contract
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- can still revoke until performance actually starts
- look for detrimental reliance |
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mailbox rule for an option contract
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mailbox rule cannot be used to meet the deadline, acceptance must be received, not sent, by the deadline
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consideration
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bargained for benefit and detriment to both parties to the K- asked for by the promisor in exchange for the promise
A promise can be consideration for another promise |
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past consideration exception
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1. an act was expressly requested by the promisor and
2. there is an expectation of payment by the promisee |
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contract modification consideration
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1. common law- requires new consideration
2. UCC 2- does not require new consideration as long as done in good faith |
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contract modification consideration exceptions
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1. addition or change in performance
2. unforeseen difficulty enough to excuse performance 3. third party promise to pay |
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promise to forgive debt
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if due and undisputed then part payment will not be consideration for release of the remaining debt
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Effect of additional terms in a sale of goods
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New terms does NOT disturb the fact that a K is created, SO LONG AS the new terms are NOT stated as a conditional
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consideration substitute
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1. a written promise to satisfy a legally unenforceable obligation
2. promissory estoppel |
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When do additional UCC 2 terms become part of the K
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ONE party is a merchant:
- Add'l term is mere proposal BOTH parties are merchants: - Add'l term IS part of K, UNLESS: - - Martially changes - - Offeror objects |
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promissory estoppel
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1. promise
2. reasonable reliance that was detrimental and foreseeable 3. enforcement is necessary to avoid injustice |
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individuals who lack of capacity
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1. infant- under 18
2. mentally incompetent 3. intoxicated- if other party knows |
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consequences of incapacity
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right to disaffirm the contract by the person without capacity
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Define Acceptance
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Objective manifestation of intent to be bound
MAY be shown by conduct |
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implied affirmation by one who lacked capacity at time contract was made
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after gaining capacity, a person can affirm a contract specifically or through acts in accordance with the contract
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quasi-contract for necessities
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one who lacks capacity can enter a promise to pay for necessities- price will be FMV of the good or service
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contracts within the SoF
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1. suretyship
2. service not capable of being performed in 1 year from the time of the contract- tasks are assumed capable or being performed 3. real estate 4. goods for $500 and up |
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Result when offeror makes an offer and offeree is SILENT, but begins to perform. Is there acceptance and therefore a K?
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DEPENDS.
Bilateral Ks: is a K -- Start of performance is acceptance Unilateral Ks: is NOT a K -- Can only accept by FULL performance (BUT - start of unilateral performance make the offer irrevocable for a reasonable time for person to complete performance) |
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How is SoF satisfied
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1. performance
2. writing 3. judicial admission |
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Result when person merely promises to perform, but has not begun performance yet. Is there acceptance and therefore a K
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There IS a K: Promise for a promise
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performance to satisfy the SoF
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1. part performance- real estate, goods contract
2. full performance- service contracts |
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part performance for real estate
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must meet 2 of 3
1. improvement to the land 2. payment 3. possession |
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Result when sale of goods and seller sends nonconforming/wrong goods. Is there an acceptance, making a K
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YES - Serves as BOTH as an acceptance AND a breach
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performance to satisfy the SoF for service contracts
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full performance by either party satisfies the SoF- part performance is not enough
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Result when sale of goods and seller sends nonconforming/wrong goods, but includes an explanation that the good are an accommodation. Is there an acceptance, making a K
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NO - there is NOT an acceptance, and therefore there CANNOT be a breach
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performance for goods contract to satisfy the SoF
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ordinary goods- part performance by the seller will satisfy SoF to the extent of the performance
specially manufactures goods- SoF is satisfied once there is a substantial beginning on the item |
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SoF writing requirement
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must contain all material terms- who and what (UCC is quantity)
must be signed by the person against whom it is being enforced |
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signature exception for the SoF
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both parties are merchants and the person who receives the writing fails to respond within 10 days of receipts
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writing requirement when entering into a contract for someone else
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a writing is only required when the contract is within the SoF
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writing requirement for modification of a contract
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if the deal based on the change is within the SoF, then a writing is required for the modification
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illegal subject matter contract
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not enforceable
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illegal purpose contract
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enforceable only by the person who did not know of the illegal purpose
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misrepresentation requirements
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1. statement of fact before the contract
2. by one of the parties 3. induces the contract 4. false statement |
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nondisclosure in a contract
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generally not required unless there is active concealment
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mistake of fact
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mutual mistake of fact- no contract
unilateral mistake of fact- valid contract unless the other party knew of the mistake |
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partial integration
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written and final, but not complete
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complete integration
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written, final, and complete
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merger clause
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clause that states the written contract is final and complete- persuasive but not conclusive
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parol evidence for changing or contradicting terms
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not permitted ever
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Test for Unconscionability
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- Lack of understanding
-Unfair surprise / one-sided -Oppressive terms -Tested as of the time of the agreement NOTE: determined by the court - NOT a jury |
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parol evidence for mistake in the written contract
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always allowed
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parol evidence for fraud, misrepresentation, duress, etc.
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always allowed
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Define Mistake of Fact
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-Both parties mistaken
-Basic assumption of fact -MATERIALLY affects agreement, AND -Does not concern a risk that that one of the parties bears |
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parol evidence for explaining an ambiguity
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always allowed
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parol evidence for adding consistent terms to the writing
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allowed in partial integration
not allowed in complete integration |
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conduct to explain a contract
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1. course of performance- same people, same contract
2. course of dealing- same people, different but similar contract 3. custom and usage- different but similar people and contract |
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shipment contract
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seller satisfies delivery when
1. gets the goods to a common carrier 2. makes reasonable arrangements for delivery 3. notifies the buyer |
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destination contract
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seller satisfies delivery when the goods are actually delivered to the buyer
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When does a risk of loss issue occur
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When there is a destruction of goods in shipment w/o fault of the buyer or seller.
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order of risk of loss
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1. agreement
2. breaching party- even if unrelated to problem 3. seller completes delivery obligation- risk switches 4. merchant - merchant seller- risk switches when buyer receives goods - non-merchant seller- switches when seller tenders (makes available) the goods |
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implied warranty of merchantability
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all goods from a merchant have a warranty that they are fit for ordinary purposes
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What is an express warranty
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Promise that describe facts regarding the good or service -- NOT mere puffery ("top quality")
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merchant
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a person who deals in that kind of good
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implied warranty of fitness for a particular purpose
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warranty that good will be fit for the particular purpose when
1. seller knows or has reason to know of a buyers particular purpose and 2. buyer is relying on the seller to select a suitable good |
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perfect tender rule
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1. only applies to goods
2. perfect delivery, perfect goods 3. less than perfect buyer can reject some or all goods and sue for damages |
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How to disclaim warranties, and are they effective
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Disclaim either by:
-CONSPICUOUS language, OR -"As is" Effective as to implied warranties of merchantability and fitness for purpose, but NOT for express warranties |
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perfect tender rejection of goods
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1. buyer can reject all or any units and sue for damages
2. buyer can keep and sue for damages |
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perfect tender rejection of goods limitations
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1. cure
2. installment contract 3. acceptance |
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ability to cure less than a perfect tender
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1. the seller has reasonable ground to believe the less than perfect tender would be acceptable to the buyer
2. the time for performance has not yet expired |
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installment contract
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1. delivery of the goods is in separate lots
2. each delivery is to be accepted separately |
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rejection of an installment
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can only reject when there is a substantial impairment that cannot be cured
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acceptance of goods and later rejection
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cannot later reject goods once acceptance has been made
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effect of payment on acceptance
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- payment without an opportunity to inspect the goods is not acceptance
- acceptance will be presumed if the buyer keeps the goods without objection (1 month) |
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revoking an acceptance of the goods
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1. nonconformity substantially impairs the value of the good
2. excusable ignorance of grounds for revocation or reasonable reliance on seller's assurance 3. revocation within a reasonable time after discovery of the nonconformity |
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open or not specified price in contract
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reasonable price at time of delivery
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What is the test for performance obligations under common law?
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Where the other party has substantially & materially breached, do not have to complete your end of the K.
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If a buyer successfully revokes, what must he do with the goods he still has
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Buyer must hold the goods and await instructions from the seller
IF seller doesn't make any instructions, then seller may: -Sell the goods for the benefit of the seller, AND -Withhold reasonable expenses AND a commission |
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price to be fixed by buyer or seller
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price must be set in good faith
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remedy of specific performance
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1. real estate
2. unique goods (antiques, art, custom made) 3. services- only an injunction not to compete |
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reclamation
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right of an unpaid seller to get the goods back
1. buyer was insolvent at the time it received the goods 2. the seller demands the goods within 10 days of receipt 3. the buyer still has the goods |
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purpose of money damages
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- money damages are to compensate, not to punish
- done to protect the expectation interest of the non-breaching party |
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damage for seller breach and buyer keeps the goods
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FMV if perfect – FMV as delivered
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damage for seller breach and seller has the goods
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1. FMV at time of breach – contract price
2. replacement price – contract price |
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damage for buyer breach and buyer keeps the goods
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contract price
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damage for buyer breach and seller keeps the goods
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contract price – resale price and provable lost profits (if lost volume seller)
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incidental damages
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costs incurred in dealing with the breach- always recoverable
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consequential damages
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damages special to the non-breaching party due to the breach
recoverable only when breaching party knew of the special circumstances at the time of the contract |
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avoidable damages
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continuing to perform and turning down other opportunities after a breach is already known will reduce recovery
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liquidated damages test
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1. damages were difficult to forecast at the time
2. provision is a reasonable forecast (a set value is not a reasonable forecast) |
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Definition of a unilateral K
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Promise for performance
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List the only 2 ways a K is unilateral
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- Reward/prize/contest
OR - Offer EXPRESSLY REQUIRES performance for acceptance |
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Definition of offer
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Objective manifestation of intention to K (showing of commitment)
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What term MUST be part of the offer
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Who and what
UCC 2- Quantity |
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EXCEPTIONS to advertisements not being offers
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- Rewards
- Ads that expressly indicate quantity and who can accept |
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Four categories of terminations of offers
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- Lapse of Time
- Death of either part - Revocation (revocation means offeror has terminated his offer) - Rejection (rejection means offeree was terminated his ability to accept) |
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Exceptions to termination of an offer by death
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- Option K
- Part performance of a unilateral K |
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What are the situations that will still require K to be fulfilled, even where a specified condition was not satisfied? (Exceptions to the strict compliance with conditions rule)
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1 - Estoppel: Arises when detrimental reliance on other party not requiring condition be met BEFORE condition was to be satisfied
2 - Waiver: Arises when detrimental reliance on other party not requiring condition be met AFTER condition was to be satisfied 3 - Prevention: Party to be protected by the condition hinders or prevents the occurrence of the condition |
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situations when an offeror CANNOT revoke (4)
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- Option K
- UCC Firm Offer - FORESEEABLE detrimental reliance - Start of Unilateral K performance |
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What is anticipatory repudiation
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Arises when a party makes and UNAMBIGUOUS statement or conduct indicating that:
-they will not perform, -PRIOR to time performance was due Result: Other party's duty to perform is EXCUSED, and may IMMEDIATELY sue for damages BUT NOTE: anticipatory reputation can be RETRACTED, if the other party hasn't made a material change in position. ... However, the party that did NOT repudiate can delay until there is adequate assurance |
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Elements of an option K
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-Promise not to revoke
-Supported by consideration |
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What is Insecurity
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Where one party makes performance UNCERTAIN (less than anticipatory repudiation)
Result: -Other party can DEMAND ASSURANCE |
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Elements of a UCC 2 firm offer
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- Offer to buy goods
- Signed, WRITTEN promise - Explicit STATEMENT will not to revoke - Offering party is a MERCHANT *** No payment is required *NOTE: Max firm offer period is 3 months |
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What is rescission
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When both parties agree to back out of the contract
BUT, this requires that BOTH of the parties have not completed performance |
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What makes a unilateral K irrevocable
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- Performance started
AND - is NOT mere preparation (actually starts working) |
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What is accord and satisfaction
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It's when there is a substituted PERFORMANCE
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Who can accept an offer
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Only a person:
1 - to whom the offer was made, AND 2 - KNOWS about the offer at the time of "acceptance" (ex: can't get reward if didn't know about it) NOTE: CAN become aware of offer DURING performance and therefore accept |
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What is an accord
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Accord is the terms of the substituted agreement with the new performance to be done
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When can you assign an offer
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Generally, NEVER -- except you can assign an OPTION
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What is satisfaction
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Satisfaction is when the accord (new performance) is performed, RESULTING IN EXCUSE of the original K
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pre-existing duty rule
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ONLY applies to common-law Ks (services)
Rule: Not sufficient consideration to do what you're already required to do |
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What result if an accord is made, but not satisfied
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The party that did perform may sue the non-performing party on EITHER the original K -OR- recover on the accord --- BUT NOT BOTH
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What is the EXCEPTION to the writing requirement for a surety
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If the main purpose of K was to benefit the guarantor, then SoF doesn't apply
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What is a modification
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Substituted AGREEMENT, whereby the MERE MAKING of the new agreement excuses the old agreement
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validity of clause that states all modifications MUST be in writing
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common law- a requirement in a contract stating that all modifications be in writing is invalid
UCC- requiring written modifications is valid unless waived |
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What is novation
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- Substituted PERSON to the contract performance, FULLY excuse the original contracting party
- requires BOTH parties agree to the substitution |
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Elements of fraud
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-false material assertion
-knowledge of falsity -Intended party to rely on false assertion -Other person did reasonably rely -Damages |
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What are the three terms for types of things that will excuse performance b/c of later events?
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-Impossibility
-Impracticability -Frustration of Purpose |
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What are the prerequisites to getting ANY of impossibility, impracticability, or frustration of purpose
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1 - Something happens AFTER K, but before completion of K performance,
2 - Unforeseen 3 - Without fault of either party |
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death of party to contract and exception
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Death does NOT excuse (not impossibility b/c someone else can perform)
EXCEPT in Ks with person of special talents (specific actor, etc.) |
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Result when later law makes performance of K illegal
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Excuse by IMPOSSIBILITY
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Result when later law makes mutually understood purpose of K illegal
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Excuse by FRUSTRATION OF PURPOSE
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In 3rd party beneficiary cases, who is the promisor and who is the promisee
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Promisor: Person who is making the promise that BENEFITS the 3rd party. (the guy buying life insurance)
Promisee: Person who obtains the promise that is to benefit the 3rd party (Ex: the insurance company) |
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When have 3rd party beneficiary's rights vested
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Vesting occurs when EITHER:
-Beneficiary assent in a manner provided in K, OR -Beneficiary brings suit to enforce promise, OR -Beneficiary has detrimental reliance on K |
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Who can sue whom in a 3rd party beneficiary contract
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-3rd party can sue promisee (insurance company)
-Promisor (guy who bought life insurance) can sue promisee -3rd party CANNOT sue promisor - guy who bought the insurance |
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What are the promisee's defenses to a 3rd party beneficiary?
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Promisee can assert ANY defense he may have had if the promisor had sued
(Ex: promisor never PAID the insurance bill) |
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What is an assignment
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a party transfers their RIGHTS under the K
(Ex: right to $) |
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effect of assignment PROHIBITION in a K
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Assignee who does not know of the prohibition can STILL ENFORCE the assignment
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effect of assignment INVALIDATION in a K
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Even if assignee does not know of the clause, CANNOT enforce the assignment
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bars to assignment
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Substantial change of the duties of the obligor will bar assignment
Change of WHO is paid is NEVER a substantial change |
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What consideration requirements are there for assignment?
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Generally, there are NONE
BUT .. a gratuitous assignment CAN BE REVOKED |
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What happens when a party (assignor) assigns his/her right to all benefits to an assignee
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ONLY the assignee can now sue the obligor.
The Assignment has PERMANENTLY relinquished his rights to the benefit -- so he can't sue for them. |
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What are the Obligor's defenses to an assignee?
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Obligor can assert ANY defense he may have against the assignor
(Ex: assignor didn't complete the job, so you don't get paid) |
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Does the obligor breach when it continues to pay the assignor instead of the assignee
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NO, if the obligor doesn't know of the assignment
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What implied warranty exists when an assignor makes an assignment for value (for consideration) to an assignee?
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Assignor warrants that:
1 - Right assigned ACTUALLY exists, 2 - Right assigned are NOT subject to any defenses by the obligor, AND 3 - the assignor will do nothing to impair the value of the assignment |
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Who wins when there are multiple GRATUITOUS assignments?
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The LAST in time- treat earlier ones as revoked
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Who wins when there are multiple assignments for consideration?
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FIRST in time unless
later party didn't know of earlier assignment, AND is the FIRST to obtain EITHER: 1-payment from obligor 2-judgment 3-a novation, OR 4-Indicia of ownership |
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What is a delegation
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Occurs when party to K transfers DUTIES under the K to a third party
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Limitations on what can be delegated
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Delegations permitted unless either:
1- K explicitly prohibits delegations OR ASSIGNMENTS, 2- K calls for SPECIAL SKILLS, OR 3- Person to perform K has SPECIAL REPUTATION |
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Who is liable if delegatee fails to perform?
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- Delegating party ALWAYS REMAINS secondarily liable
- Delegatee is liable ONLY IF he received consideration from delegator |
