Md Contracts

Front 1

7 Steps of Contract Analysis
["Until February, test pressure & exhaustion both threaten romance"]

Back 1

UCC or common law?
Formation
Terms
Performance and Excuses
Breach
Third Party Issues
Remedies

Front 2

When does UCC govern?

Back 2

Article 2 of the UCC governs the sale of goods, regardless of whether the parties are merchants.

Front 3

UCC "Gravamen" Test

Back 3

When goods and services are combined in a contract where services "predominate," UCC still governs if the "gravamen" of the complaint involves the goods.

Front 4

Requirements for Valid Contract

Back 4

A valid contract is formed when there is an offer, acceptance, adequate consideration or a substitute, and no defenses to formation that would invalidate the contract.

Front 5

Unilateral and Bilateral Contracts

Back 5

Unilateral Contract: Occurs only when offeror clearly indicates completion of performance is only manner of acceptance; OR(2) offer to public, such as reward offer
Beginning performance creates an option contract where offer irrevocable. Offeree must make reasonable effort to notify offeror unless offeror obtains actual notice or indicates notice not required.
Bilateral Contract: Contract consists of the exchange of mutual promises; offer can be accepted by promise or start of performance

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Quasi-Contract, Implied-In-Law, Quantum Meruit

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A quasi-contract is NOT a contract at all, but a theory for recovery to avoid unjust enrichment. Requirements are: P conferred benefit, D knew of benefit, and D would be unjustly enriched if allowed to retain benefit w/o payment

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Is there a valid OFFER?

Back 7

For a communication to be an offer, it must create a reasonable expectation that offeror is willing to contract to an identified offeree with sufficiently defined terms.

Front 8

Essential Terms for Common Law & UCC Contracts

Back 8

Common Law: Parties, subject matter, price, and quantity
UCC: Quantity

Front 9

Advertisements

Back 9

Advertisements generally not considered offers, but rather invitations to deal UNLESS specific quantity and/or offerees identified, OR constitutes reward offer

Quotations are offers if sent in response to inquiry.

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Irrevocable Offers

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1. Options Contract
2. Offer for unilateral contract irrevocable once performance begins (NOT mere preparation)
3. Foreseeable Detrimental Reliance on Offer (context usually contractor's reliance on sub-C bid)

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Firm Offer

Back 11

Under Art. 2, if merchant promises in signed writing to keep offer open, he cannot revoke offer within stated time or reasonable time (90 days). Firm offer does not require consideration.

Front 12

Option Contract

Back 12

Contract in which offeree gives consideration for promise not to revoke outstanding offer, and offeror cannot revoke within stated period.

Acceptance of option contract is valid when received,

Front 13

Termination of Offers

Back 13

An offer cannot be accepted if it has terminated. An offer may be terminated by the offeror (revocation), the offeree (rejection or lapse), or by operation of law (death, impossibility)

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Rejection of Offer

Back 14

Offeree's rejection of offer terminates offer, and is effective upon receipt. Offeree generally cannot reject offer once accepted. . Any COUNTEROFFER operates as a rejection (if reasonable person would believe offer rejected), but mere bargaining or questioning does not

Front 15

Revocation of the Offer

Back 15

An offer may be revoked at any time before acceptance, and is effective upon receipt (or when offeree learns from reliable source). Revocation can be direct OR indirect (by conduct made known to offeree that reasonably indicates the offeror has revoked the offer).

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Waiver and Ratification

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A waiver is the voluntary relinquishment of right to strict enforcement of contract, and occurs when party permits breach to occur without complaint.

A contract is ratified despite being voidable if the party fails to disaffirm the contract within a reasonable time upon gaining capacity.

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Acceptance

Back 17

A manifestation of assent to the exact terms of the offer. Offer can only be accepted by the person to whom the offer was made and who knows of offer. Acceptance must be unequivocal and "mirror" every term. Acceptance is generally effective when mailed.

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Mailbox Rule

Back 18

Acceptance is effective when mailed UNLESS offer states otherwise; acceptance is for an option contract (upon receipt), rejection is sent before acceptance and arrives first, OR if offeree accepts and then rejects, acceptance invalid if detrimental reliance on rejection

Front 19

Seller's Accommodation of Non-Conforming Goods

Back 19

Only applies if delivery intended as acceptance, not promise. If seller notifies buyer that shipment is "accommodation," functions as counteroffer that buyer can reject.

Front 20

Common Law Mirror Image Rule

Back 20

Any acceptance that adds or changes terms to offer is treated as rejection and counteroffer; no contract is formed.
Acceptance must mirror terms of offer

Front 21

Consideration

Back 21

For valid contract, there must be valid consideration (or a substitute). Consideration is bargained-for legal detriment. The legal detriment must be bargained for in exchange for the promise to constitute sufficient consideration. Courts do not inquire into the adequacy of consideration, unless it is nominal.

Front 22

Illusory promise

Back 22

For valid contract, there must be valid consideration (bargained for legal detriment) given by each party. An illusory contract is invalid and occurs where one party has no obligation to perform (thus adequate consideration is not given).

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Consideration Substitutes

Back 23

MD: Seals
Promissory estoppel: Reasonably foreseeable detrimental reliance and need for enforcement to avoid injustice
Written promise to pay even with legal defenses against payment (SOL ran)

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Promissory Estoppel

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Even without consideration, a promise is enforceable (only to extent needed to avoid unjustice) under promissory estoppel if reliance upon the promise is foreseeable and detrimental reliance does occur. No unjust enrichment necessary. Remedy is usually limited to restitution, not expectation.
MD requires clear & definite promise causing detriment that can only be avoided by enforcement of promise.

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Pre-Existing Duty

Back 25

When modifying an agreement, past performance or a promise to perform a preexisting duty owed to the party is not sufficient consideration.

EXCEPTIONS: New consideration, honest dispute as to duty, reaffirming voidable or unenforceable promise, duty owed to 3rd

Front 26

Defenses to Formation

Back 26

Statute of Frauds
Mistake
Fraud
Incapacity (infancy/incompetence)
Illegality
Impossibility
Frustration of Purpose
Duress
Unconscionability

Front 27

Statute of Frauds

Back 27

Contracts that fall under MD Statute of Frauds must be evidenced by a writing signed by the parties to be bound. Noncompliance renders contract unenforceable at option of party being charged

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When does Statute of Frauds apply? [MY LEGS]

Back 28

Marriage: Ks made on consideration of marriage
Year: K that never can be performed within 1 year
Land: Most Ks for use/sale of real property
Executor: Executor's promise to pay estate's debt
Goods $500 and up
Suretyship: Exception for surety's "original undertaking"

Front 29

Part Performance Doctrine

Back 29

Exception to writing requirement of SOF that applies to real estate contracts (possession, improvements, payment) and UCC contracts to extent goods received, but NOT services contracts (requires full performance)

Front 30

Parol Evidence Rule

Back 30

§ Under the Parol Evidence Rule, a party may not introduce evidence of a prior or contemporaneous agreement (oral or written) that contradicts a later writing. However, there are four exceptions where parol evidence is permitted: (1) to correct a clerical error; (2) to establish a defense against formation (such as fraud); (3) to interpret vague or ambiguous terms (if terms remain unclear after applying plain meaning rule); and (4) to supplement a partially integrated writing. The Parol Evidence Rule does not apply to subsequent agreements.

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Express Warranties

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An express warranty is a statement of fact, promise, description, or demonstration regarding a product that is part of the basis of the bargain; does not include mere opinions. Express warranty cannot be disclaimed.

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Implied Warranty of Merchantability

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Warranty only by merchant that goods are fit for their ordinary purpose (NO defect: manufacturing, design, or warning). No warranty for defects buyer had opportunity to discover and failed to. In MD, cannot be disclaimed.

Front 33

Implied Warranty of Fitness for Particular Purpose

Back 33

Warrants that goods are fit for buyer's particular purpose: applies if buyer relies on seller and ANY seller has reason to know of buyer's special purpose and that buyer is relying on seller's judgment. In MD, cannot be disclaimed.

Front 34

Covenants Not to Compete

Back 34

Generally, courts disfavor restraints on one's ability to seek employment for public policy reasons. However, a non-compete agreement will be enforced if the agreement is reasonable in duration and area, AND a agreement is reasonably necessary to protect employer because employee's services are unique and damages would be inadequate. Otherwise, a court will invalidate or narrow the non-compete agreement.

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Liquidated Damages Clause

Back 35

Liquidated damage clauses are valid if damages were difficult to calculate when contract was formed and amount is a reasonable forecast of likely damages. If clause enforceable, damages awarded even if no actual damages were suffered. An unreasonable amount is construed as a penalty and not enforced, though the injured party can still recover actual damages.

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Installment Contract

Back 36

Contract that requires delivery of goods in separate lots to be separately accepted.

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Outputs Contract

Back 37

Article 2 contract where buyer agrees to purchase all that seller produces. Requested amount must not be unreasonably disproportionate to estimates

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Requirements Contract

Back 38

Article 2 contract where buyer promises to buy all goods buyer requires from seller, and seller agrees to sell that amount to buyer. Requested amount must not be unreasonably disproportionate to estimates

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Shipment Contract

Back 39

Most contracts with delivery obligations are shipment contracts- contract where seller ships goods by carrier: risk of loss passes to buyer when seller delivers goods to carrier. Free on board followed by city where seller is or where goods are is a shipment contract; FOB followed by any other city means destination contract.

Front 40

Destination Contract

Back 40

Contract requires seller to deliver goods to destination, NOT carrier: risk of loss passes to buyer when goods are tendered to buyer at destination

Front 41

Assignment of Rights (Assignee is 3rd Party)

Back 41

Obligor contracts with assignor (original parties), who assigns right of obligor's performance to an assignee. (two-step process). Contract must specify assignments are void or prohibited

Front 42

Delegation of Duties (Delegate is 3rd Party)

Back 42

Delegator owes duty of performance to obligee, then delegates duty to delegate.
Delegator remains liable on contract.

Front 43

Divisibility of Performance

Back 43

If contract is divisible and party performs a unit, he is entitled to equivalent for unit even if other units not performed. Nonbreaching party can sue or withhold performance for failure to perform other units. A contract is divisible if each party's performance is divided into two or more parts; number of parts due from each is same; one party's performance of each part is agreed to be equivalent of corresponding part

Front 44

Express Conditions

Back 44

An express condition is explicitly stated in contract, usually includes condition of satisfaction. Express conditions require strict compliance.

Front 45

Implied Conditions

Back 45

Conditions implied by parties' intent or by court. Implied conditions may be satisfied by substantial performance, which constitutes breach, but other party still required to perform & may only recover damages
Implied Conditions of Performance: Each party's duty to perform is implicitly conditioned on other party's rendering of performance
Implied Condition of Cooperation and Notice: One party's duty to perform is conditioned on other's cooperation & notice of due performance

Front 46

Unilateral Mistake vs. Mutual Mistake

Back 46

A contract may be rescinded or reformed when there is a mutual mistake, which occurs when both parties are mistaken as to a basic assumption on which the contract is made AND mistake is material. A unilateral mistake is a mistake made by one party unknown to the other party. A unilateral mistake is generally not a valid defense to formation of a contract. However, if one party knew or had reason to know that other party was mistaken, the contract is voidable by the mistaken party. When the mistake involves price/value, the rescission or reformation will not be allowed because price/value is NOT considered material

Front 47

UCC Exception to Mirror Image Rule

Back 47

Under Article 2, mirror image rule does not apply. UCC states acceptance can include different/additional terms and thus form a valid contract. However, offeree’s different/additional term(s) are included in the contract ONLY IF: (1) both parties are merchants; (2) the term is not a material change; AND (3) no objection was made within a reasonable time. A material change is any change that is likely to cause hardship or surprise to the offeror

Front 48

Impracticability

Back 48

Unforeseen change that fundamentally alters the nature of performance

Front 49

Impossibility

Back 49

Performance excused if objectively impossible (destruction of subject matter)

Front 50

Frustration of Purpose

Back 50

Exists if purpose of contract has become worthless by some supervening unforeseeable event not the fault of party seeking discharge. K has NO value.

Front 51

Anticipatory Repudiation

Back 51

If other party unambiguously states he is not going to perform, then performance is excused

Front 52

Intended Beneficiaries

Back 52

Intended beneficiaries must (1) be identified in contract, (2) receive performance directly from promisor, OR (3) have relationship with promisee indicating intent to benefit

Front 53

Vesting of Beneficiary's Rights

Back 53

Third party beneficiaries can only enforce a contract if their rights have vested, which occurs when they (1) manifest assent to a promise in manner requested, (2) sue to enforce the promise, or (3) materially change position in justifiable reliance on promise.

Front 54

Buyer's Acceptance of Goods

Back 54

Under Article 2, a buyer accepts when:
Buyer indicates he will keep goods after inspection
Buyer fails to reject or notify seller of rejection within reasonable time OR
Buyer performs any act inconsistent with seller's ownership

Front 55

UCC Perfect Tender Rule

Back 55

Article 2 requires "perfect tender" of performance, NOT substantial performance . If seller fail to conform to contract in ANY way, the buyer may reject all, accept all, or accept some units and reject the rest. However, two exceptions to rule exist: (1) if seller has the right to cure and (2) for installment contracts.

Front 56

Buyer's Revocation of Acceptance

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Buyer can only revoke acceptance if: (1) nonconformity substantially impairs the value of the goods AND (2) defect was difficult to discover (a latent defect). Revocation of acceptance must occur within a reasonable time after the buyer should have discovered the problem.

Front 57

Reformation

Back 57

Action to change agreement between parties to conform to original intent; usually based on mutual mistake OR unilateral mistake due to misrepresentation. In MD, only available for written agreement and parties' same intent

Front 58

Specific Performance

Back 58

Equitable remedy that is only available if monetary damages are inadequate. Specific performance is always available for rare/unique items and land, NOT available in personal service contracts

Front 59

Rescission

Back 59

Equitable remedy if one party seeks to rescind voidable contract and other party refuses, treated as if contract didn't exist. Party must have valid grounds for rescission (mistake, fraud, illegality, duress, incapacity, impossibility. If P paid money to D, he is entitled to restitution. If P completed performance, no rescission

Front 60

Restitution

Back 60

Remedy for actions in quasi-contract, based on preventing unjust enrichment when one has conferred a benefit with reasonable expectation of payment. Measure of restitution damages is value of benefit conferred or detriment suffered if benefits are difficult to measure. Remedy is NOT limited to contract price.

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Expectancy Damages

Back 61

Damages designed to put injured party in same position had contract been performed. If a seller breaches, a buyer entitled to cover damages. If buyer breaches, seller entitled to actual damages plus lost profits.

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Nominal Damages

Back 62

Awarded when breach shown but no actual loss proven.

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Consequential Damages

Back 63

Losses resulting from breach that are reasonably foreseeable and certain at time of contract formation

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Article 2 Incidental Damages

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Costs incurred when dealing with a breach, such as costs the injured buyer or seller incurred in transporting/caring for goods after a breach or for arranging a substitute transaction. NO foreseeability requirement

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Reliance Damages

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Damages awarded to someone who has foreseeably relied on an ordinarily unenforceable promise. (NOT unjust enrichment)

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Mitigation of Damages

Back 66

Injured party CANNOT recover damages that could be reasonably avoided. P must avoid further costs and make reasonable effort to mitigate loss through substitute performance at fair price.

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Cover Damages

Back 67

Cover Damages are difference between contract price and price of substitute goods used in good faith. Market Damages used if buyer did not cover in good faith or at all: difference between market price and contract price. Loss-in-Value Damages used if buyer keeps non-conforming goods: difference in value as promised and value of non-conforming goods.

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Action for the Price

Back 68

Seller can sue for FULL K price ONLY if can't resell:
1) NO RESALE MARKER, or
2) Goods Destroyed, or
3) Buyer wrongfully keeps goods

Front 69

Action for Lost Profit

Back 69

Lost Volume Seller: If seller has 10 boats, K w/ A to buy a boat, A repudiates, and seller sells same boat to B at same price;

Remedy is Lost Profit [seller would have sold 2 boats but for breach]

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Indemnification

Back 70

Between principal and agent, wrongdoer pays other's entire damage

Front 71

Risk of Loss

Back 71

Agreement controls.
If one party has breached he has risk of loss even if breach was unrelated.
If common carrier delivery, then risk shifts to buyer when delivery obligation has been completed.
If seller is a merchant, then risk shifts upon buyer's receipt of goods (physical possession)
If seller is not a merchant, the risk shifts upon tender of goods (when they are made available to buyer)

Front 72

UCC Good Faith Purchasers

Back 72

A merchant may keep goods bought from a seller who did not have title, if merchant was a good faith purchaser for value: must be a merchant, conducted transaction with honesty, and observed standards of fair dealing.

Front 73

Maryland Article 2A Leases

Back 73

Lease is a transfer of a right to possess or use goods for a term for consideration. Includes subleases.

Must be in signed writing if payments total $1000 and describe goods and lease term, and indicate lease

Front 74

Consumer Leases

Back 74

If lessee is consumer (one who leases for personal purposes), lease is consumer lease: lessor may only exercise any option to accelerate at will in good faith, and unconscionability of lease requires only procedural OR substantive unconscionability, not both.

Front 75

Finance Lease

Back 75

Lessee has lessor buy goods from a seller (2A supplier), and leases goods to lessee. Lessor must be a true financier, NOT in business of goods involved: lessee selects or approves goods. Lessor makes no implied warranties: supplier's warranties passed on. Lessee has cause of action against supplier.
Imposes absolute duty on lessee to make payments to lessor even if goods damaged or destroyed, unless consumer lease.

Front 76

Subleasing

Back 76

Subleasing allowed even if agreed otherwise, but a transfer of lease in material violation of lease terms is ground for default and damages. Sublessee has same rights as original lessee (sublessor)

Front 77

Is a MODIFICATION of the Contract Effective?

Back 77

A contract modification is effective when there is an agreement to modify AND:
1. New/additional consideration
2. Rescission and replacement
3. Good faith response to unforeseen hardship
4. UCC: Only good faith

Front 78

Exceptions to Statute of Frauds writing requirement

Back 78

Part performance
Judicial admission

Front 79

SOF Requirement for Goods $500+ [SWAP exceptions]

Back 79

Under Article 2, all contracts for sale of goods $500 or more MUST be in writing. Writing must state the parties, the quantity and nature of the goods, and be signed by party to be charged. However, four exceptions exist: (1) specially manufactured goods where seller has made a substantial start AND not suitable for sale in ordinary course; (2) Merchant’s Written Confirmation– between merchants, written confirmation sufficient even if it is signed only by party enforcing it if other party did not object; (3) Admission in Hearing: party to be charged admits that there was a contract during a judicial proceeding; (4) Payment for Goods – seller may enforce for any goods accepted or paid for, NOT the whole contract price

Front 80

SOF Requirement for Contracts Not Performed Within 1 Year

Back 80

Contracts that cannot be performed within one year fall within SOF and must be in writing signed by party to be charged. Only applies if there is NO way contract can be performed within a year.

If one side has fully performed, agreement is still enforceable.

Front 81

Unconscionability

Back 81

Contract will not be enforced by court if its terms are unconscionable, which occurs when it shocks the conscience of the court. An unconscionable contract is one that is both substantively AND procedurally unconscionable. Procedural unconscionability occurs when one party has superior bargaining power and engages in unfair pressuring or bargaining practices to force the other party to enter into the contract. Substantive unconscionability occurs when the contract contains obviously unfair and one-sided terms in favor of party with superior bargaining power.

Front 82

Compensatory Damages

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Compensates claimant for loss, injury or harm suffered as the result of the other party's breach of contract.