Mbe Contracts 2015

Front 1

Three Questions to keep in mind always, esp. if you get lost.

Back 1

1. Has an enforceable K been formed?

2. Has the K been performed (or is performance excused)?

3. What are the remedies for breach?

Front 2

Topics for has an enforceable K been formed? Name mneomic too.

Back 2

All Contracts Don't Stink.

1. Agreement (offer and acceptance(

2. Consideration (and related theories for when someone must keep promises)

3. Defenses to formation

4. Statute of Frauds

Front 3

What's an offer? (give definition)

Back 3

An offer is an objective manifestation of a willingness to enter into an agreement (by the offeror) that creates apower of acceptance (in the offeree).

Front 4

How specific must an offer be?

Back 4

2 answers.

common law - all essential terms, typically: parties, subject, price, quantity,

UCC - more forgiving and likely to find agreement. usually need parties, subject, quantity. PRICE NOT AN ESSENTIAL TERM.

Front 5

How many ways can an irrevocable offer arise? Name them.

Back 5

four ways.

1. Option

2. Firm offer (UCC universe, merchants only--written, explicit promise not to revoke, and signed by offeror merchant.)

3. Offeree has started performance (unilateral Ks)

4. Detrimental reliance (offeree reasonably and detrimentally relies on the offer in a foreseeable manner)

Front 6

How long does a firm offer last?

Back 6

EITHER: As long as stated in the offer, or for a reasonable amount of time (not to exceed 90 days)

Front 7

Consideration?

Back 7

A deal in which the parties exchange promises involving a legal benefit or detriment.

Front 8

MBE tricks for consideration

Back 8

1. inadequate consideration (e.g. I promise to sell you my jeep for $1)

2. past consideration (counts in MD but not MBE, e.g. promising to pay me $1000 after I rescue you from sharks..no bargained for consideration.)

3. illusory promise - (i'll buy this, if i feel like it.)

4. gift promises and conditional gifts

Front 9

Name the Consideration Substitute Theories

Back 9

1. Promissory Estoppel (or reliance)

2. Quasi Contract/Contract implied in law

3. Moral obligation + subsequent promises (MINORITY RULE)

Front 10

Contract implied in law elements?

Back 10

1. P confers a measurable benefit on D

2. P reasonably expected to get paid, AND

3. it would be unfair to let D keep benefit without paying. (look for opportunity to decline or a good reason why there was not opportunity)

e.g. teacher's heart attack, student hires a doctor, student asks teacher to pay him back for doctor's fee. YES!

Front 11

How many defenses to contract formation? Name them.

Back 11

Seven. (All Contracts Don't Stink!)

1. Misunderstanding

2. Incapacity

3. Mistake

4. Fraud/misrepresentation/nondisclosure

5. Durress

6. Illegality

7. Unconsciability

Front 12

Misunderstanding defenses?

Back 12

elements:

i) parties use a material term that is reasonably open to two or more interpretations

ii) each side attaches a different meaning to the material term, AND

iii) neither side knows or should know of a confusion

e.g. selling my bike for twelve-fifty (I think 12.50? you think $1,250?)

Front 13

Incapacity. (who does this apply to?0

Back 13

1. minors

2. mentally incompetent

3. very intoxicated persons (when other side knows)

Front 14

Mistake

Back 14

defense to formation.

a mistake is a belief that is not in accord with a present fact.

Front 15

mutual mistake

Back 15

Mistake affects both parties, but adversely affected one can rescind K if he can show:

1. mistake of fact exists at the time deal is made

2. mistake relates to a basic assumption of K that has a material impact on the deal,

3. impacted party (P) did not assume the risk of the mistake.

Front 16

Unilateral mistake

Back 16

adversely impacted party can rescind, if:

mutual mistake elements +

-mistake would make K unconscionable

-other side knew of, had reason to know, or caused mistake.

Front 17

What contracts does statute of frauds apply to?

Back 17

Mr. SOUR!

1. Marriage (consideration of marriage, e.g. prenup)

2. Surety (promise to guarantee the debt of another)(main purpose exception)

3. One year (K that can't be performed in a year)

4. UCC (goods with price more than $500)

5. Real estate property interest

Front 18

Has contract been performed? What are the main topics in this area?

Back 18

Four. Pizza With Crawling Escargot

1. Parole Evidence Rule

2. Warranties

3. Conditions

4. Excuse of performance obligations (impracticability, frustration of purpose, etc.)

Front 19

Excuses for not performing K? Name 'em

Back 19

1. impracticability and impossibility

2. death after contract

3. frustration of purpose

4. excused perf. bcs initial K has been modified or cancelled

5. accord and satisfaction

6. novation

Front 20

What are the 3 main remedies for breach?

Back 20

anticipatory reputation

money dmgs

equitable relief (rare) - e.g. specific perf. or injunction, right of reclamation (UCC)

Front 21

What's the difference between Assignment and Delegation?

Back 21

assignment = transfer of rights under a K

delegation = transfer of duties under a K

Front 22

when does delegation occur?

Back 22

when a party to a K "outsources" her duties under a K to another party. hence delegation of duties.

generally allowed, as long as K doesn't prohibit it and as long as other party doesn't have some special interest in having a specific individual perform

Front 23

Is a delegatee liable for beach?

Back 23

Generally no, unless she receives consideration from the delegating party.

e.g. I agree to pay you $1000 to paint my fix my car. You delegate that obligation to your boy Tim and promise to pay Tim $800. Tim does a bad job. Can I sue tim? Yup bcs he got consideration to do the job ($800).

Front 24

When will courts award punitive liquidated dmgs?

Back 24

only if

-amt of liquidated dmgs was reasonable at the time of contracting, AND

-actual dmgs from breach would be uncertain in amt and difficult to prove

e.g. liquidated dmgs for botched nose job for movie star. 750,000 (yes), 75 million (no, too much a penalty)

Front 25

What are the limitations on expectation dmgs?

Back 25

Three major limits.

1. expectation dmgs must be proven w/ reasonable certainty

2. Hadley Rule (unforeseeable consequential dmgs are not recoverable unless breaching party had some reason to know about the possibility of these unforeseeable consequential dmgs)

3. doctrine of mitigation requires the breached-against party to take reasonable steps to reduce dmgs from breach

Front 26

distinguish general dmgs from consequential dmgs

Back 26

consequential dmgs - losses that are unique or special to this plaintiff (e.g. lost profits from selling superbowl tickets that fedex knew i was shipping)

general dmgs - type of losses that almost anyone would suffer from breach (e.g, cost of storing rejected goods, finding a new buyer, finding a replacement vendor)

Front 27

Name different types of warranties

Back 27

1. express warranties

2. implied W of merchantibility (only for merchants of type of good at issue)

3. implied W of fitness for a particular purpose

Front 28

Unconscionablity

Back 28

A contract (or part of a contract) is unconscionable when it is so unfair to one party that no reasonable person in the position of the parties would have agreed to it. The contract or part of the contract at issue must have been offensive at the time it was made.

MD requires both procedural and substantive unconscionability to be present in order to refuse to enforce a contract on the grounds of unconscionability.

Front 29

Duress

Back 29

Duress is an improper threat that deprives a party of meaningful choice. (formation defense)

e.g, threatening criminal possession, a tort threat,

Front 30

Recission

Back 30

Rescission is the cancelling of a K so as to restore the parties to their positions before the K was made. Parties may seek to rescind a K for a variety of reasons, including mutual mistake, misrepresentation, or even unilateral mistake, if the other party knew or should have known of the mistake. The grounds for rescission must have existed at the time the contract was made.

Front 31

Can both parties mutually rescind a K?

Back 31

Yes. Rescission can also occur by the mutual agreement of the parties. The surrender of rights under the original K by each party is consideration for the rescission by mutual agreement.

However, In cases of third-party beneficiaries, a K is not discharged by mutual rescission if the rights of the third-party beneficiary have already vested.

Front 32

What is a release?

Back 32

A release is a writing that manifests intent to discharge another party from an existing duty.

Front 33

Is there any difference btwn release under the UCC and common law?

Back 33

For common-law contracts, the release must generally be supported by consideration to discharge the duty.

Under the UCC, however, a claim or right can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party. No consideration is needed to support the release.

Front 34

Third party beneficiary Ks

Back 34

A third-party beneficiary contract results when two parties enter into a contract with the understanding and intent that the performance by one of the parties is to be rendered to a third person.

Front 35

Statute of Frauds

Back 35

Contracts that fall within the Statute of Frauds are unenforceable unless they are evidenced by a writing. The writing must:

i) Be signed by the party to be charged (i.e., the person against whom enforcement is sought); and

ii) Contain the essential elements of the deal.

Front 36

what types of Ks are within SOF? (hint: Mr.SOUR)

Back 36

Marriage - A contract made upon consideration of marriage;

Suretyship - A contract to answer for the debt or duty of another;

One year - A contract that cannot be performed within one year from its making;

UCC - Under the UCC, a contract for the sale of goods for a price of $500 or more; and

Real property contract - A contract for the sale of an interest in real property.

Front 37

When, if ever, do suretyship Ks not need a writing?

Back 37

1) Indemnity contracts

An indemnity contract (i.e., a promise to reimburse for monetary loss) does not fall within the Statute of Frauds as a suretyship provision.

2) Main purpose exception

If the main purpose of the surety in agreeing to pay the debt of the principal is for the surety’s own economic advantage, rather than for the principal’s benefit, then the contract does not fall within the Statute of Frauds, and an oral promise by the surety is enforceable.

Front 38

Parole Evidence Rule

Back 38

PER prevents introduction of prior extrinsic evidence that contradicts terms of written K

The rule is concerned with whether any of the earlier oral or written terms are part of the parties’ K, even though they are absent from the parties’ written agreement.

*PER applies only to integrated documents.

Front 39

When is PER inapplicable?

Back 39

does not apply to communications occurring after the execution of the written K and when parties are:
1. Raising an excuse
2. Establishing a defense
3. Proving condition precedent to existence of the K
4. Interpreting/clarifying ambiguity in K
5. UCC—supplementing even apparently unambiguous terms by evidence of trade usage or course of dealings

Front 40

What is a Condition? How is it different than a promise?

Back 40

A condition is a future and uncertain event that must take place before a party’s contractual rights or obligations are created, destroyed, or enlarged.

By contrast, a promise constitutes a party’s obligation to act or refrain from acting.

Front 41

How are conditions and promises handled differently when broken/not satisfied?

Back 41

(FYI, Ambiguity as to whether a statement creates a promise or a condition is usually resolved in favor of a promise over a condition. )

EXAM Note: Failure of a condition relieves a party of the obligation to perform; the failure of a party to perform a promise constitutes breach.

Front 42

What are the different types of Conditions?

Back 42

A condition may be express (clearly stated in the agreement/K) or implied (presumed based on the nature of a transaction).

Front 43

What are expressed conditions?

Back 43

Express conditions are expressed in the contract. Words in the contract such as “on condition that” or “provided that” are typical examples of express conditions. Express conditions must be complied with fully; substantial performance will not suffice.

Front 44

What is required to satisfied an implied condition?

Back 44

Substantial performance is all that is required to satisfy an implied condition.

Most common scenario: construction and employment contracts. A court will imply that the builder or employee must perform first (at least “substantially”) before the other side’s performance (the payment of money) becomes due.

Front 45

What is a Quasi-K? And what are its requirements?

Back 45

Quasi-Ks—a plaintiff confers benefit on a defendant and the plaintiff has reasonable expectation of compensation and court implies K to prevent unjust enrichment

• Requirements

o P conferred measurable benefit on D

o P acted w/out gratuitous intent, and

o Unfair to let D retain benefit

Front 46

When does an implied in fact K occur?

Back 46

Implied-in-fact—conduct indicates assent or agreement

Front 47

What are the UCC exceptions for the Statute of Frauds?

Back 47

Exceptions – Writing not required under UCC for
o Specially manufactured goods
o Part payment
o Receipt and acceptance
o Judicial admission, or
o Failure to object to memo w/in 10 days (when both parties are merchants)

Front 48

How are satisfaction conditions examined?

Back 48

If aesthetic taste of individual is a condition of satisfactory performance and work is not satisfactory (in good faith), then person not liable on K. (satisfaction of non-aesthetic performance examined against reasonable person standard)

Front 49

What is an express warranty in sale of good Ks?

Back 49

• Any promise/affirmation that is part of the basis of the bargain, unless it is merely the seller’s opinion

Front 50

Implied warranty of merchantibility in sale of good Ks?

Back 50

• Implied whenever seller is a merchant,

• Goods must be fit for their ordinary purpose, and

• Warranty can be disclaimed by use of “as is,” “with all faults,” or similar language (oral or written)

Front 51

Implied warranty of fitness for a particular purpose in sale of good Ks?

Back 51

• Implied whenever a) seller has reason to know buyer has particular use for goods and b) buyer is relying on seller’s skill to select the goods

• Can be disclaimed by general language that must be in writing and be conspicuous

Front 52

When do 3rd party beneficiary Ks occur?

Back 52

when two parties contract with the understanding and intent that performance by one of the parties is to be rendered to a third person.

Front 53

What are the non-breaching party's options for anticipatory repudiation at common law?

Back 53

Non-breaching party’s options
o Treat repudiation as a breach or
o Ignore repudiation and demand performance of promisor, but suspend any performance by promisee if it would increase promisor’s damages.
o If date of performance has not passed, must wait for actual breach before filing suit.

Front 54

When does anticipatory repudiation occur in the UCC universe?

Back 54

When there has been an unequivocal refusal of buyer/seller to perform

OR,

when party fails to provide adequate assurances w/in 30 days of demand for them

Front 55

Does the UCC permit a retraction of repudiation?

Back 55

Yes, it's permitted if other party has not cancelled the K or materially changed position

Front 56

What are expectation dmgs? How do you calculate them?

Back 56

*Intended to put injured party in same position as if K had been performed

o Expectation damages = market value of performance – K price
(Must be foreseeable and proven with reasonable certainty)

Front 57

How are expectation dmgs calculated for defective performance in construction and sale of good situations?

Back 57

Defective performance
o Construction Ks—difference between K price and cost of construction by another builder
o Sale of goods—difference between the value of the goods as warranted and the actual value of the tendered nonconforming goods

Front 58

In the UCC universe, when is specific performance most likely to be the relief ordered for D's breach?

Back 58

In the UCC –specific performance may be granted when goods are rare or unique

Front 59

For UCC Ks, what are the Buyer’s remedies when seller fails to perform/tender goods? (non-conforming goods is separate card)

Back 59

o Damages—market price minus K price as well as incidental and consequential damages
o Cover—buyer may purchase similar goods elsewhere and recover replacement price minus the K price
o Specific performance—for unique goods
o Replevin—buyer can obtain undelivered goods from seller if at least partial payment is made or unable to effect cover

Front 60

What are the Buyer's remedies when the seller makes a non-conforming tender of goods?

Back 60

Nonconforming tender— buyer has right to accept or reject all or part of the goods (and the right to inspect before making that decision)
o Rejection—buyer can reject goods if he gives notice to seller w/in a reasonable time and before acceptance, and is entitled to a return of any payments made or to seek same remedies as if no tender was made
o Acceptance—buyer accepts goods by expressly stating acceptance, using the goods, or failing to reject the goods
o Right to cure—seller has right to cure defective tender if time of performance under K has not yet elapsed or seller had reasonable grounds to believe that buyer would accept despite the nonconformity

Front 61

What are the sellers UCC remedies?

Back 61

* Right to price upon acceptance—price due after goods are physically delivered to the buyer and buyer has had opportunity to inspect
• Right to reclaim goods—from insolvent buyer if he makes a demand w/in 10 days after buyer receives goods
• Stoppage of goods in transit—permitted if buyer breaches or is insolvent
• Wrongful rejection by buyer—seller can collect damages, resell the goods, or recover the price, and also collect incidental damages and lost profits

Front 62

How is the risk of loss apportioned for unidentified goods? identified goods?

Back 62

Unidentified goods—if goods are damaged/destroyed and there is no breach, risk of loss is on seller until he satisfies delivery obligations (and then risk shifts to buyer)
• Identified goods—seller is excused if goods are totally destroyed w/out the seller’s fault prior to risk of loss being shifted to the buyer

Remember the effect of breach of K too.

Front 63

How does breaching the K affect the risk of loss under the UCC?

Back 63

o Seller’s breach—if seller delivers nonconforming goods, risk of loss remains on the seller until buyer accepts or there is cure
o Buyer’s breach—if buyer breaches/repudiates after goods have been identified but before risk of loss shifts, then risk immediately shifts to buyer (to extent of lack of insurance coverage by seller)

Front 64

For UCC sales Ks, what is the SOL? Can it be reduced or extended?

Back 64

Four years after cause of action accrues
o Generally, cause of action accrues when breach occurs, regardless of whether aggrieved party knows
• Parties may reduce four-year limitations period to not less than one year, but they may not extend it

Front 65

Breach of K –once duty to perform exists, nonperformance is a breach unless duty is discharged. How's this looked at under the UCC?

Back 65

UCC
• In general, seller must strictly perform all obligations under K or be in breach
o Material breach only applies to installment Ks or when parties stipulate it in K

Front 66

Under common law, what is a material breach? what is a minor breach? what impact do they have?

Back 66

CL
• Material breach (non-breaching party does not receive substantial benefit of bargain)—allows non-breaching party to withhold any promised performance and to pursue remedies for breach, including damages
• Minor breach (breaching party has substantially performed)—non-breaching party entitled to pursue remedies for nonmaterial breach (damages) but must perform under the K

Front 67

What quirks are there to UCC installment Ks (goods delivered in multiple shipments, each to be separately accepted) compared to normal UCC rules?

Back 67

o Perfect tender rule doesn’t apply to installment Ks
o Right to reject is determined by “substantial conformity” standard—buyer can only reject if nonconformity substantially impairs value to buyer and cannot be cured
o Buyer may cancel K only if nonconforming tender substantially impairs the value of the entire K

Front 68

Substantial performance...

Back 68

Substantial performance (doesn’t apply to express conditions or sale of goods Ks under the UCC)
• Party who substantially performs can recover on K even though full performance hasn’t been tendered
• Damages –K price minus any amount it will cost other party to obtain complete performance as promised
o Even if no substantial performance, potential recovery through restitution

Front 69

When do rights of an intended beneficiary vest?

Back 69

Rights of intended beneficiary vest when the beneficiary:
• Detrimentally relies on rights created
• Manifests assent to K at one of the parties’ request, or
• Files lawsuit to enforce K

Front 70

Delegating duties?Is it allowed? What impact on liability does it have?

Back 70

Delegation of duties
1. Generally allowed, except when other party to K has substantial interest in a specific individual’s performance (for example, personal services K involving special skill)
2. When obligations are delegated, delegator is not released from liability, so he is still liable if delegatee doesn’t perform (unless there is a novation)

Front 71

Assignment of rights. 4 things to know.

Back 71

1. Not allowed when it materially increases duty or risk of obligor or materially reduces obligor’s chance of obtaining performance
2. Need present intent to transfer the right immediately
3. If assignment is for consideration, it is irrevocable
4. Assignee takes all of the rights of assignor as the K stands at time of the assignment, but she takes subject to any defenses that could be raised against the assignor

Front 72

When is a K unconscionable?

Back 72

K is unconscionable when it is so unfair to one party that no reasonable person in the position of the parties would agree to it, and
• Hidden, complex boiler plate language can be unconscionable, as well as adhesion Ks (take it or leave it type Ks w/ large bargaining power disparity)

Front 73

What is a unilateral K?

How is it different than a bilateral K?

How is a unilateral K offer accepted?

Back 73

A unilateral contract is one where one party promises to do something in return for an act of the other party. Unlike a bilateral contract, the offeree's promise to perform is insufficient to constitute an acceptance; the offeree must perform the act to accept the offer.

Front 74

What is the perfect tender rule? When does it apply?

Back 74

In a sale-of-goods transaction, such as the purchase of shirts, UCC requires that the goods tendered by the seller conform in all respects to the contract.

Front 75

In an installment K when the seller makes non-conforming tender of goods, can the buyer reject the goods?

Back 75

Yes. In an installment K , if the seller makes a non-conforming tender or tenders non-conforming goods under one segment of the K, the buyer can reject only if the non-conformity substantially impairs the value of that shipment to the buyer and cannot be cured.

Front 76

Can you modify a common law governed contract without the modification having consideration? How?

Back 76

Kind of, at CL, modification of an existing K must be supported by consideration. But agreements to modify a K may still be enforced if there is a rescission of the existing K by destroying the K, or some other outward sign, and then entering into a new K.

Front 77

What is the difference between K modification under the UCC and at common law?

Back 77

At CL, modification of an existing K must be supported by consideration, but under the U.C.C., only good faith is required to modify a K for the sale of goods.

Front 78

Under the UCC, is an additional term contained in the acceptance automatically included in the K, when the K is between two merchants?

Any exceptions?

Back 78

Yes. As between merchants, an additional term contained in the acceptance is automatically included in the K, unless 1) the offer expressly limits acceptance to the terms of the offer,

2) the offeror has already objected to the additional terms or does so within a reasonable time, or 3) the term materially alters the original K.

Front 79

Does a fraudulent misreprenstation need to concern a material fact?

Back 79

No, a fraudulent misrepresentation need not be material.

Front 80

If a party to a K becomes incapiticated and no longer able to perform exactly as stated in the K, is s/he in breach?

Back 80

No. The incapacity of a particular person to perform his or her duty under a contract renders the performance impracticable and operates as an excuse for nonperformance. (e.g., engineer becomes injured, and can only be a consultant vs. head engineer.) (continued ability to perform is a basic assumption of the K).