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96 Cards in this Set

  • Front
  • Back
Define Offer
Manifest of an intention to be bound
Under what 4 circumstances will an offer likely not be enforced?
1. No quantity term

2. Indefiniteness

3. Requirement K -- taking seller by surprise with out of line buyer patterns

4. Advertisements (invitation to offer)
What is the general rule for revocations of offers?
Offers can be revoked anytime before acceptance.
What are 4 exceptions to the general rule that an offer can be revoked at anytime before acceptance?
1. Option

2. Foreseeable reliance before acceptance (subcontractor)

3. Starting to perform unilateral K (MBE only)

4. Firm offer (sale of goods only/3 month time limit)
Under NY law, what is required to create an option contract?
Simply a writing will do. By contrast, under the MR you also have to pay money for an option.
What is the general rule for rejecting an offer?
Offer terminates when the offeree rejects it but mere bargaining does not reject.
Under the common law, does an acceptance varying the offer reject the offer?
Yes, mirror image rule applies.
Under the UCC does an acceptance varying offer reject the offer?
It does not if ...

1. Both parties are merchants

2. Term is not a material change

3. Offeror does not object in a reasonable time.
Death of a party before acceptance does not terminate a revocable offer, True/False?
False. It does revoke.
The mailbox rule trumps even the express language in the offer?
False. Language in the offer always trumps.
What is the mailbox rule?
Default rule for acceptance under which acceptance is effective when mailed
What is acceptance under a unilateral K?
Completion of the task is acceptance
Under the common law, improper performance is __________.
Simultaneous acceptance and breach.
Name an exception to the mailbox rule.
Mailbox rule does not apply where the offeror relies on an overtaking rejection (the rejection got their first)
Name 7 defenses to contract formation,
1. Incapacity

2. Duress

3. Misrepresentation

4. Ambiguity/Misunderstanding

5. Mutual Mistake

6. Unilateral Mistake

7. Void as against public policy
Distinguish, Ambiguity, Mutual Mistake and Unilateral Mistake
1. Ambiguity - Two parties think two different things

2. Mutual Mistake - parties think the same thing but its wrong

3. Unilateral - one party thinks the wrong thing (K stands)
Define Consideration
A bargained-for legal benefit or detriment.
Is new consideration needed to modify a contract for a sale of goods?
No, only good faith. It is needed to modify a common law contract under the pre-existing duty rule.
Is consideration needed for a contract to forgive a debt after partial payment?
NY - if the agreement is in writing then no consideration is needed.

MR - yes, unless debt is in dispute
What is the rule for a time barred debt (SOL)?
A written promise to pay a debt, the collection of which is barred by the SOL, is enforceable without consideration
How will a court deal with a covenant not to compete (non-competition clause)?
If the covenant operates as a restraint on trade, the court will narrow it as against public policy.
What two things will a court consider in determining whether to narrow a covenant not to compete?
1. Scope of the covenant

2. Need for the covenant
How must an exculpatory clause be narrowed?
Can eliminate liability for negligence but not for gross negligence or intentional torts.
Under what circumstances must a contract be in writing to comport with the statute of frauds?
1. Transfer of interest in real property

2. Performance cannot be completed in a year (if theoretically possible then OK)

3. Sale of goods for $500 or more

4. Lease of goods for 1000 or more (NY only)

5. Suretyship (co-sign)

6. Contract modification (only if mod is within SOF)

7. Other NY provisions
Does a lifetime contract need to be in writing?
MR - no writing required

NY - writing required
What are the miscellaneous NY provisions that must be in writing to satisfy the SOF?
1. Assignment of an insurance policy

2. Promise to pay a discharged debt

3. An agreement to pay a finder's fee or broker's commission
Describe a writing that will satisfy the statute of frauds for a contract under the UCC
UCC art 2 - Quantity term, signed by party to be charged with breach

Art 2a - Statement that its a lease, quantity, duration and rental payments, signature of the D
Describe a writing that will satisfy the statute of frauds for a contract under the common law.
Must contain ....

1. All material terms (who/what)

2. Must be signed by D
Under what circumstances is a writing not required in a contract for real property?
1. Less than 1 year

2. Partial performance (some payment, improvements, possession)
Define the parol evidence rule
Keeps out evidence of a prior agreement (oral/written) that contradicts a later writing.
What are the exceptions to the parol evidence rule?
1. To correct a clerical error

2. To establish a defense to formation

3. To interpret a vague or ambiguous term

4. To supplement a partially integrated writing

5. Subsequent developments (after K reduced to writing)
Define "partially integrated writing" to which the parol evidence rule does not apply
1. Contract is a final statement of the terms included but not a complete statement of the terms agreed to

2. The contract does not seem to be complete on its face
In what three ways can the conduct of the parties explain terms or fill in gaps in a contract?
1. Course of performance (what the parties did under this contract - most important)

2. Course of dealings (what parties did under prior K with each other)

3. Usage of trade (what others in the trade do in similar K's - least important)
Is a buyer generally liable for a breach of an express warranty?
Yes. Example: promises, descriptions
What is the implied warranty of merchantability and when does it apply?
Goods are fit for their ordinary purpose. It applies in general when the seller is a merchant that has special knowledge of the goods in K.
What is the implied warranty of fitness for a particular purpose?
1. Goods are fit for the buyer's particular purpose
When does the implied warranty of fitness for a particular purpose apply?
1. Buyer has a special purpose in mind

2. Buyer relies on seller to select suitable goods,

3. Seller knows it

4. Seller need not be a merchant
What is a lessor's warranty in a lease for goods?
The same as under article 2.
Seller can disclaim express but not implied warranties, True/False?
False. Seller can disclaim implied warranties but not express.
What are the magic phrases for disclaimers of implied warranties?
1. as is

2. with all faults

3. No implied warranties of merchantability
Seller can limit buyer's remedies for any ____________ if the limitation is not unconscionable.
breach of any warranty
Limiting a buyer's remedy for personal injury in the case of _______ _________ is prima facie __________.
1. Consumer goods

2. Unconscionable
Who bears the risk of loss when goods are damaged before the buyer gets them and the buyer breaches the contract?
the buyer. The breaching party always bears the risk of loss even if the breach and loss had nothing to do with each other.
In a contract for the sale of goods where the seller has completed its delivery obligations to a common carrier, who bears the risk of loss?
The buyer.
What does FOB seller (shipment K) mean
1. Seller must get the goods to common carrier

2. Make delivery arrangements

3. Notify the buyer
What does FOB Buyer mean (destination K)?
Seller must get the goods to a specific destination, usually where the buyer is located.
In a non-carrier case where the seller is a merchant, who bears the risk of loss?
The seller bears risk of loss until the buyer takes possession.
In a non-carrier case where the seller is NOT a merchant, who bears the risk of loss?
Seller bears the risk of loss until the goods are tendered.
What is the general rule for risk of loss for lease of goods under UCC article 2a?
Seller always bears the risk of loss (unless its a finance lease)
Does the perfect tender rule apply to a sale of goods?
Yes.
What is the perfect tender rule?
1. If seller's delivery is not perfect, buyer may reject the goods

2. But must give option to cure is K time for delivery has not expired
Under the UCC, does the perfect tender rule apply to installment sales contracts?
No
Under the UCC, under what circumstances can a buyer reject an installment of an installment contract?
Only if there is substantial impairment in the installment contract.
Under the UCC, under what circumstances can a buyer reject an entire installment contract?
Only if there is an installment that substantially impairs the value of the entire contract.
How can a buyer accept goods implicitly?
Buyer keeps goods without objection after having opportunity to inspect.
Under what circumstances can a buyer revoke its acceptance of goods?
Generally can't but ...

1. Substantial impairment of value of goods

2. Latent defect

(buyer can return, refund. damages)
Does the perfect tender rule apply to contracts under the common law?
No. Substantial performance is all that is required (no material breach)
What are 8 later excuses for non-performance under the common law?
1. other party's breach

2. Anticipatory Repudiation

3. Later Agreement

4. Impossibility/Impracticability

5. Death or incapacity of essential person

6. Supervening governmental regulation

7. Frustration of purpose

8. Failure of expressed condition
What are a buyer's options when a seller breaches by violating the perfect tender rule?
1. Accept all the proper items and reject the others

2. Accept all or keep all

(can get damages from seller in any event)
Under the _______, where payment is on _________ basis (_______), the breaching party can recover the K price for any unit on which he has _____________.
1. Common law

2. per unit basis

3. (divisible contract)

4. Substantially performed
Where a party anticipatorily repudiates a contract, what is the non-breaching party's remedy?
Non-breaching party may stop working (or not start) and collect damages.
What is anticipatory repudiation?
Party indicates that it does not plan on performing BEFORE the time for performance occurs.
Under what circumstances may a breaching party rescind its repudiation in the anticipatory repudiation context?
Can rescind repudiation as long as the non-breaching party has not already acted in reliance.
Name and distinguish 4 ways performance can be excused by later agreement.
1. Rescission (parties cancel)

2. Modification (replace (in present))

3. Accord and Satisfaction

4. Novation
What is accord and satisfaction?
Agreement to accept performance in future satisfaction of an existing duty.
What is a novation?
An agreement to substitute a new party for an existing one
Define impossibility and impracticability under the common law and UCC.
Later unforeseen event that makes performance ....

CL - impossible

UCC - much harder/expensive
Does destruction of something necessary for performance make non-performance excusable under impossibility?
CL - yes

UCC - yes, if good is "identified to K"
When will death or incapacity of an essential person excuse performance?
If the dead or incapacitated person had unique skills such that they are essential to performance.
Under what circumstances may performance be excused by frustration of purpose?
Buyer's remedy only and only if ...

1. Seller knew what the purpose of the K was AND

2. Later unforeseen event thwarted that purpose
What language indicated an express condition in a contract?
1. if

2. as long as

3. when

4. provided that

5. on condition that

6. unless

7. during
When is specific performance available for a sale of goods?
1. if the goods are unique
When may a seller reclaim its goods?
Not generally available but may be if ...

1. Buyer was insolvent AND

2. Seller makes demand within 10 days after buyer received

3. But not available if buyer already sold to 3rd party

4. Buyer can reclaim anytime if buyer misrepresented solvency in writing within 3 months before delivery
What is the rule regarding the right to request assurances in a sale of goods under the UCC?
1. Party with reasonable grounds for insecurity may request in writing adequate assurances that other party will perform

2. If assurances refused then buyer can treat as anticipatory repudiation
When will liquidated damages clauses be upheld?
1. damages were difficult to estimate

2. Reasonable forecast of probable damages

3. Damages are not a penalty
Even if a liquidated damages clause is struck down, a non-breaching party may still get _________.
Actual damages
What are a buyer's three damage options in a sale of goods?
1. Cover damages

2. Market damages

3. Loss in value (promised vs. actual)
What are a seller's 4 options for damages in a sale of goods K?
1. Resale damages

2. Market damages

3. Lost profits (lost volume dealer)

4. Contract price (if cannot re-sell)
Define incidental damages.
Cost of transporting and caring for goods after breach and arranging a substitute transaction. (both buyer and seller can get)
What are consequential Damages?
Damages that are special to THIS plaintiff and were reasonably foreseeable to the breaching party at the time to the K (buyer only).
What is the rule concerning avoidable damages (mitigation)
Injured party cannot get damages he could have avoided with reasonable efforts.
Define 3rd party beneficiary
A person who is not party to the contract but has rights under the contract because it was intended to benefit them.
A person is a 3rd party beneficiary of a contract if _________.
1. She was expressly designated in the contract

2. Some performance is to be made directly to her and

3. She stands in such a relationship to the promisee that an intent to benefit her can be inferred
Who is the intended beneficiary of a contract for a third party?
Person the contracting parties intend to benefit (usually named in the K)
After what point may a promisor and promisee NOT rescind on contract made to benefit a 3rd party?
After the 3rd party's rights have vested.
When have a 3rd party beneficiary's rights "vested"
1. TPB knows about terms of K

2. TPB relies on the terms of the K

(but contrary language in K controls)
What are a 3rd party beneficiary's rights against the promisor?
TPB may sue promisor for breach.
What are a 3rd party beneficiary's rights against the promisee?
TPB cannot recover against the promisee unless the TPB was in the position of creditor beneficiary
Is the consent of the person to whom performance is owed necessary to delegate contractual duties?
No. But contract language controls and there is no delegation of special skills/reputation
What are the rights of an obligee where the promisor delegated its duties to a 3rd person?
Obligee may generally sue only the delegating party (promisor) unless the delegate got consideration from delegator.
Assignment of right transfers ________ while assignment of entire contract assigns both ________ and _________.
1. Rights only (usual case)

2. Rights and obligations
Is consideration needed for an assignment?
generally not
What are two restrictions on assignments?
1. Contract language restricts

2. Cannot substantially change the duties of the obligor
What are the assignee's rights against the obligor?
Assignee has no rights to sue the obligor.
Is a clause in a contract labeled a "penalty clause" unenforceable?
Not necessarily. Only if it ACTS as a penalty violating the law of liquidated damages.
A contract in consideration of marriage must be ____________.
In writing