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56 Cards in this Set
- Front
- Back
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Formation of Contracts |
binding K requires mutual assent (offer & acceptance), consideration & lack of valid defenses. |
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OFFER |
objective manifestation of a willingness by offeror to enter into agreement that creates power of acceptance in offeree. Terms must be certain and definite: CL: essential terms (parites, subject matter, price, quantity) - ct. may supply add'tl terms if parties intended K UCC: only essential term = quantity (gap fillers for missing terms) under requirement or output K's only need GOOD FAITH. |
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Bilateral v. Unilateral |
Bilateral: if a return promise is requested *part performance = promise to complete Unilateral: if an act is requested *cannot be revoked once offeree starts performance |
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Termination of OFFERS |
Lapse of Time Death/mental incapacity of OFFEROR Destruction/illegality Promissory Estoppel (detrimental reliance) Partial Performance Revocation: any time b4 acceptance/effective when communicated, sent by mail - when received |
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UCC Firm Offer Rule |
Offer irrevocable (reasonable/no more than 90days) if offeror is a merchant (or business person) and assurances (in writing) are made that offer will remain open. No consideration needed to keep open. |
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Mailbox Rule |
Applies only to acceptance of Bilateral Ks: Acceptance: effect when sent unless offer says otherwise Rejection after Accept: acceptance controls unless detrimental reliance on rejection Accept after Reject: MBR does not apply. First received prevails Revocation: effective upon receipt Irrevocable Offer: MBR does not apply. acceptance must be received by offeror before offer expires. |
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Notice |
Unilateral K: no notice req'd unless offeror wouldn't learn of performance or if offer req's Bilateral K: must give notice of acceptance. (MBR valid when sent) UCC - if made by starting performance, must give notice w/in RT (failure = lapse of offer) |
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CL Mirror Image Rule |
Acceptance must mirror the terms of the offer (any changes = rejection/new counteroffer) Conditional acceptance terminates the offer & acts as new offer from original offeree. |
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UCC (Acceptance w/Add or Diff Terms) |
acceptance containing add'tl terms generally treated as acceptance. Both Ps not Merchants: definite & seasonable expression of acceptance or written confirmation sent w/in RT = acceptance unless expressly condition on new terms (proposed terms need sep. acceptance) Conduct: if offer and acceptance differ too much but both Ps begin performance, K recognized w/any terms actually agreed upon & supplementary terms filled by UCC. |
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UCC Battle of the Forms |
Acceptance contains add'tl terms & both P's = Merchants Add'tl terms automatically included unless they materially alter original K, the offer expressly limits acceptance to terms of the offer, or offeror objects w/in RT after notice (if one met - original terms of offer control) |
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UCC Knock Out Rule |
Acceptance contains different terms & both P's = merchants Different terms in offer/acceptance nullify each other & Ct. uses gap-fillers to patch holes. |
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Consideration |
Must be a bargained-for legal detriment to the promisee Gift: to distinguish gift from consideration test is whether oferee could reasonably believe intent of offeror was to induce action (yes = consideration) Promissory Estoppel: if promisor/donor knows promise to gift will induce sub. reliance & failure to enforce would cause injustice = enforceable |
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Preexisting Duty Rule |
@ CL - does not qualify as consideration unless promisor gives something in addition to what is owed or varies preexisting duty in some way. Exception: 3rd P promise contingent upon performance of another P's contractual obligation is sufficient consideration. |
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Modification |
@ CL - must be supported by consideration. Enforceable if - rescission of existing K & entering into new K; unforeseen difficulties arise & one P agrees to pay for them; or new obligations arise on both sides. UCC: requires only good faith (no consideration) |
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Accord & Satisfaction |
Consideration required for accord to be valid. Satisfaction is performance of accord agreement & discharges both original & accord K (original not discharged until satisfaction = done) |
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Promises Binding w/o Consideration |
Pay a debt barred by SOL (new promise to apy debt after SOL has run = enforceable w/o C) Material Benefit Rule (when party does un-requested service, modern trend permits enforcement of promise to compensate (unless donative intent) Promissory Estoppel (=C substitute; binding if reasonably expect inducemetn, it does induce & injustice only avoided by enforcement) |
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Mistake (defense) |
Unilateral: one P mistake essential element of K - can void if didn't bear risk & enforcement = unconscionable OR non mistaken party knew of mistake Mutual: both Ps mistake - voidable by adversely affected P if mistake existed @ time of K, relates to basic assumption, material impact on trans & AA did not assume risk (if reformation can cure- neither P can avoid K) Reformation (mutual mistake): court can reform writing except to extent that rights of 3rd Ps who relied on K would be unfairly affected. |
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Misunderstanding (defense) |
both parties believe they are agreeing to same material terms but in fact agree to different terms Neither P knows: no K if material term One P knows: K formed based on meaning by unknowing P. Both P's know ambiguous: no K unless both intended same meaning. Wavier: one P can choose to enforce according to other P's understanding |
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Misrepresentation (defense) |
an untrue assertion of fact that can make K void or voidable Fraudulent Misrep: require misrep is fradulent (knowing/reckless w/intent to mislead), induced assent & justifiable reliance Non-Fraudulent: innocent/negligent - render K voidable by adversely affected P. K not voidable if misrep cured before deceived P has avoided K. |
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Fraud in the Factum |
(Execution) fraudulent misrep prevents P from knowing character/essential term of K - no K formed & apparent K is void unless reasonable diligence would have revealed true terms |
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Fraud in the Inducement |
fraudulent misrep is used to induce another to enter K - K voidable by adversely affected P if she justifiably relied on misrep. |
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Duress (defense) |
improper threat that deprives party of meaningful choice K is void when duress is through physical compulsion and voidable in other instances |
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Capacity to Contract |
Infancy: voidable by person under 18 (unless necessaries) Mental Illness: void if adjudicated mentally incompetent; voidable if no adjudication Guardianship: void for individuals under guardianship (unless necessaries) Intoxication: voidable by intoxicated P if unable to understand nature/consequences of K & other P knew. |
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Illegality (defense to enforcement) |
K = unenforceable if consideration/performance under K is illegal K = void if contemplates illegal conduct Duty to perform = discharged if K becomes illegal after formation |
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Unconscionability (defense to enforcement) |
K is unconscionable when it is so unfair to one P that no RP in position of Ps would agree to it |
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Implied-in-fact Ks |
conduct, not words, indicates assent or agreement |
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Quasi-Ks |
plaintiff confers benefit on a defendant & plaintiff has reasonable expectation of compensation & ct implies K to prevent unjust enrichment Requires: P conferred measurable benefit on D, P acted w/o gratuitous intent & unfair to let D retain benefit |
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Express Warranty |
Any promise, affirmation ,description, or sample that is part of the basis of the bargain, unless it is merely the seller's opinion Disclaimers: if unreasonably negates or limits express warranties = inoperative |
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Implied Warranty of Merchantability |
Whenever seller= merchant. Warrants goods must be fit for their ordinary purpose Disclaimed w/"as is" - may be oral but must use term "merchantability"; if written must be conspicuous (all caps, bold) |
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Implied Warranty of Fitness for a Particular Purpose |
Implied whenever seller has reason to know (from any source) buyer has particular use for goods & buyer relies on seller's skill to select goods Disclaimed by conspicuous writing |
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Impracticability (discharge) |
Available if: performance becomes illegal; subject matter is destroyed; performing party dies/incapacitated; or becomes impracticable Elements: unforeseeable event, nonoccurrence was basic assumption of K & party seeking discharge is not @ fault. AoR: impracticability not available to P who assumes risk of event happening If identified source fails - discharged even if other sources available |
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Frustration of Purpose (discharge) |
applies when unexpected events arise that destroy one P's purpose for entering into K (even if performance not impossible) |
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Release (discharge) |
writing that manifests intent to discharge another party from existing duty CL: release must be supported by consideration UCC: written waiver signed/delivered by aggrieved P is enough (no consideration) |
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Destruction to Identified Goods (discharge) |
Destruction: goods identified when K made destroyed by no fault of either P before RoL passes to B - K is avoided/discharged (no breach) Damaged: K avoided or buyer can choose to take goods at reduced price w/o any other claim against seller RoL: if buyer has RoL - K not avoided & seller may demand performance |
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Parole Evidence Rule |
prevents introduction of prior extrinsic evidence that contradicts terms of written K (total integration - Ps intended writing to be their final agreement, PER applies) |
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PER - Intent of the Parties |
CL: four corners rule - can only look to writing itself for intent 2nd R: if an extrinsic term would naturally be omitted from writing, term can be introduced so long as no contradictory UCC: assumes written K is only partial integration & allows almost any outside terms |
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When is PER inapplicable? |
does not apply to communication occurring after the execution of the written K & when: Raising defense to formation/enforcement; proving condition precedent to K; interpreting/clarifying ambiguity UCC - when supplementing unambiguous terms (priority high to low: express terms, course of performance, course of dealing, trade usage) |
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Perfect Tender Rule (UCC) |
Seller must transfer ownership and tender goods conforming to warranty obligations. Substantial performance insufficient unless installment K Buyer may inspect goods (once accepts - obligated to pay) |
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Methods of Tender/Risk of Loss |
S's Place of Business: seller must place goods @ disposition of B Shipment K: (FOB S's city) S must deliver to carrier & K for their shipment. (DEFAULT) - RoL to B when S delivers to carrier. Destination K: (FOB B's city) S must deliver goods to place specified & tender them there by holding @ B's disposition. RoL to B when S delivers |
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CL Breach of K |
once duty to perform exists, nonperformance is a breach unless duty is discharged Material Breach: non-B P does not receive substantial benefit of bargain (non-B can w/hold performance & sue for damages) Minor Breach: breaching P has substantially performed (non-B P entitled to pursue remedies (damages) but must perform under K. |
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UCC Breach of K |
In general, seller must strictly perform all obligations under K or be in breach. Material Breach only applies to installment Ks or when parties stipulate it in K. |
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Anticipatory Repudiation |
CL: Before performance is due, must repudiate clear and unequivocally through words/acts (non-B P can treat as breach/sue or ignore and demand performance) - if only $ left, must wait UCC: unequivocal refusal of B/S to perform of when reasonable grounds for insecurity arise and other party fails to provide adequate assurances w/in RT (no more than 30 days) |
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Expectation Damages |
Intended to put injured P in same position as if K had been performed (must be w/reasonable certainty) Loss in value + other loss - cost avoided - loss avoided = ED Diminution in Value (eco waste): when amount of damages owed is disproportional to any eco benefit/utility gained as result of award |
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Consequential Damages |
reasonably foreseeable losses to non-B P that go beyond expectation damages (loss profit) foreseeable - natural & probably consequences of breach or contemplated by Ps @ formation UCC: limitation of consequential damages for personal injury prima facie unconscionable |
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Liquidated Damages |
damages stipulated by Ps to K as a reasonable estimation of actual damages to be recovered in event of breach Enforceable if: Ps intended to agree, amount was reasonable @ time of K & actual damages would be uncertain/difficult to prove |
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Incidental Damages |
compensation for commercially reasonable expenses incurred as result of other P's breach |
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Punitive Damages |
rarely available in K actions but may be available if conduct constituting breach is also recoverable under tort theory |
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Mitigating Damages |
must avoid or mitigate to extent possible by taking such steps as to not involve undue risk, expense or inconvenience. Non-B P held to standard of reasonable conduct in preventing loss (failure to mitigate may reduce recoverable damages) |
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Restitutionary Damages |
restores a P the benefit conferred on other P (cannot recover if not substantially performed) Non-B: can recover for any benefit conferred by way of pt performance or reliance (not for full performance & only awaiting payment) Breaching P: if D benefited from P's performance, P can recover benefit conferred less D's damages for breach. (if P's breach willful, cannot recover or if K provides non-B P value of performance in liquidated damages) |
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Reliance Damages |
reasonable out-of-pocket expenses incurred by non-breaching party recoverable if non-B P incurs expense in reasonable reliance upon the promise other party would perform CANNOT recover both reliance & exp (choose) |
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Specific Performance |
an equitable remedy possible when damages are inadequate remedy Real property - because unique UCC - when goods are rare/unique Equitable Defenses - laches or unclean hands may be raised by breaching P |
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UCC Buyer's Remedies: Failure to Tender Goods |
market price - K price + incidental/consequential damages specific performance for unique goods; Cover (buyer may cover & recover replacement price - K price); Replevin (buyer can obtain undelivered goods from seller if at least partial payment or unable to effect cover |
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UCC Buyer's Remedies: Nonconforming Tender |
buyer has right to accept or reject all or part of the goods (and the right to inspect before making decision) rejection: can reject if notice to S w/in RT & before acceptance; entitled to return of any $ or seek same remedies as if no tender made accept by: express statement, using the goods or failing to reject Right to Cure: S has right to cure if time of performance under K has not yet lapsed or reasonable grounds to believe B would accept non-C goods |
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UCC Seller Remedies |
Right to $ upon acceptance: price due after goods physically delivered to B & B had opportunity to accept. Right to reclaim goods: from insolvent B if he makes demand w/in 10 days after B gets goods Stoppage of goods in transit: permitted if B breaches or is insolvent Wrongful rejection by B: S can get damages, resell goods, or recover price & get incidental (plus lost profits if "lost volume" seller) |
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Risk of Loss |
Unidentified Goods: if goods are damaged/destroyed & no breach, risk of loss is on S until satisfies delivery obligations (then shifts to B) Identified Goods: S is excused if goods are totally destroyed through no fault of S prior to risk of loss being shifted to B. |
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SoL on Breach of Sales K |
Four years after CoA accrues (when breach occurs/regardless of knowledge) Parties may reduce four year period to not less than one year but MAY NOT EXTEND IT |
