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118 Cards in this Set
- Front
- Back
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Contract
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A contract is an agreement for which the law gives a remedy for breach
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Governing Law: Common Law
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The common law applies to transactions involving services, sale of real property, and intellectual property
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Governing Law: UCC
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Article 2 of the UCC applies to the sale of goods
Goods are movable tangible property identifiable at the time of contracting. |
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Merchant
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A merchant is a person who regularly deals in a goods of a particular kind or who purports to have a special knowledge or skill.
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Valid Contract
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A valid contract consists of an offer, acceptance, consideration and lack of formation defenses
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Bilateral offer
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Bilateral offer involves the exchange of promises between the parties
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Unilateral offer
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Unilateral offer involves a promise in exchange for a fully, completed performance
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Advertisements
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Advertisements are considered preliminary offers, unless they state all of the material terms (Q-TIPS)
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Offer:Commitment
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Commitment is evaluated based on the
(1) objective theory, whether a reasonable person under the circumstances believe the offereror intended to form a contract (2) Prior course of dealings (3) Custom of the industry (4) Any other relevant circumstances |
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Communication
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The offer must be
(1) communicated to an identified (2) Offeree is the only one that can accept (3) Offeree must know about the offer |
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Offer: Definite Terms
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(MAJ) To be a valid offer, the subject matter must be addressed with certainty and definiteness.
(MIN) To be a valid offer all the material terms must be addressed with certainty |
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Offer: UCC
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(1) Subject matter and quantity must be addressed
(2) Exception: Requirement and Output contracts |
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Offer: UCC Missing terms
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In a contract for the sale of goods, the UCC will provide many missing terms
(1) Price: reasonable price at the time of delivery (2) Delivery: Seller's place of business, if none residence (3) Payment: is due at the time and place at which the buyer is to receive the goods. |
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Irrevocable offers: Merchant Firm offer
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Where a merchant puts a signed offer in writing that states the offer must be held open, the offer is irrevocable for time stated but not to exceed three months.
(1) Offeror must be a merchant |
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Irrevocable offers: Option contract
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Where the contract is supported by consideration to keep the offer open for an agreed amount of time.
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Irrevocable offers: Unilateral K
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(MAJ) The offer is irrevocable once the offeree begins performance. Mere preparation does not constitute performance
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Irrevocable offers: Promissory Estoppel
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When the offeree relies on the offer and the reliance is detrimental, reasonable and foreseeable the offer must remain open for a reasonable time
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Offer termination: 6 ways
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(1) Revocation
(2) Rejection/Counter-offer (3) Lapse of time (4) Death or incapacity of the offeror or offeree (5) Subject matter destroyed (6) Supervening illegality |
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Offer termination: Rejection/Counter-offer
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(1) Offeree rejects the offer
(2) Conditional acceptance is a counter offer, (words like "if" "unless") |
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Offer termination: Revocation
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(1) Express revocation: the offeror specifically withdraws the offer - valid when offeree or the offeree's agent recieves it
(2) Implied revocation - the offeror performs an act that prevents performance of the contract. Valid when oferee learns of it from a reliable source (3) Indirect revocation - occurs if an offeree recieves correct information from a reliable source that teh offeror no longer wants to be bound to the offer |
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Offer termination: Lapse of time
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Offer will lapse after a reasonable time.
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Offer termination: Supervening Illegality
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A law is passed after the offer is made that makes performance of the contract illegal.
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Acceptance
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Acceptance is the manifestation of assent to the terms made by the offeree in a manner invited or required by the offer.
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Acceptance under common law
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(1) Mirror image rule
(2) Additional, different or missing term will result in rejection/counter-offer (3) Last shot rule - implied acceptance by conduct of last counteroffer. (4) Mailbox rule |
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Mailbox Rule
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If acceptance is properly addressed with delivery charges prepaid, then the acceptance is valid on dispatch
EXCEPTIONS: (1) By contract (2) In an option K, acceptance must be recieved before deadline (3) Rejection sent and recieved first, then acceptance, MBR does not apply |
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Acceptance under UCC
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(1) Offer can be accepted by return promise
(2) Acceptance by performance can be accomplished by shipment of conforming goods. -Shipment of non-conforming goods is an accpetance and breach. -Non conforming goods as an accomodation is a counter-offer (3) Acceptance with additional or different terms under UCC 2-207 |
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UCC 2-207
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Additional Terms between merchants, automatically become part of the contract unless:
(1) Offer limits acceptance to the terms of the offer (2) Offeror objects within a reasonable time (3) Terms automatically alter the contract If at least one party is a non-merchant, then additional term is a mere proposal Diferent term may get knocked out and gap fillers are applied. |
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Material term
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A material term is material if it substantially affects the economic risk or benefits or in any way limits the usual remedies for breach.
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Consideration
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Legally sufficient, bargained for exchange, which induces current performance, detriment to the promisee and a binding obligation on both parties
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Consideration: Legally sufficient
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(1) Not a token amount - considered a disguised gift
(2) Legal adequacy is not considered |
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Consideration: bargained for exchange
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(1) Both parties give something to induce an exchange
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Consideration: Induces current performance
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(1) Past consideration is no consideration
(2) Pre-existing duty rule -a promise to perform an existing legal duty is not sufficient consideration (3) Detriment to the promisee: doing something that someone is not legally obligated to do or refraining from doing something that one has the legal right to do (4) Binding obligation on both parties: both parties need to be bound to the terms of the agreement |
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Modification under common law
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(1) Mutual assent
(2) Consideration (3) Must satisfy the SOF |
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Modification under UCC
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(1) Additional consideration is not required as long as modification is requested in good faith
(2) Must satisfy SOF, unless reliance has already occured. |
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Statute of Frauds
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Under SOF, certain contracts must be evidenced a writing to be enforceable
<G SMILEY> Goods Surety Marriage Intangible personal property Land Exector Year |
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SOF: Sale of Goods over $500
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Removed from SOF protection if:
(1) Specially manufactured goods (2) Part or full performance - acceptance or payment (3) Merchant confirmatory memorandum |
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SOF: Surety
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A surety is one who guarantees the payment of debt of another
Exception: Main purpose rule, when it will benefit the promisor |
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SOF: Marriage
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Promise to induce marriage by offering something of value
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SOF: Intangible personal property
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Sale of intangible personal property over $500
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SOF: Land
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SOF requires that a contract for the sale of real property be evidenced by a writing.
Exception to SOF protections: (1) P can show possession of the real estate in addition to substantial improvements on the property or payment of all or part of the purchase price |
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SOF: Executor
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Executor's promise to personally pay for the debt of the estate
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SOF: Year
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(1) Contract by their very nature that cannot be performed
(2) Time begins from the time of formation |
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SOF: Satisfaction - Writing
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Writing must contain all the essential terms as well as the signature of the party to be charged.
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Defenses to formation
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<SIIMDUUM>
Statute of Frauds Incapacity Intoxication Mistake Duress Unconscionability Undue Influence Misrepresentation |
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Defenses: Unconscionability
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Absence of meaningful choice coupled with unfair terms on the other party
-must be uncon. at formation Remedies: -refuse enforcement of entire K -Blue pencil power - eliminate uncon. terms but enforce |
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Defenses: Mistake
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(1) Mutual mistake - occurs when both parties are mistaken as to a material fact
(2) Unilateral mistake - occurs when only one party is mistaken as to material fact No defense: (a) When non-mistaken party new of should have known of mistake (b) Mistake due to computational error. |
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Defenses: Misrepresentation/Fraud
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A mispresentation of a material fact that was reasonable and actually relied on upon
-Fact opinion or opinion "fluffing" |
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Defenses: Incapacity
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(1) Minors - Ks voidable at the option of the minor unless:
(a) K can be affirmed after reaching age of majority (b) K not disaffirmed within reasonable time after age of maj. (C) K for necessity (2) Mental (a) Adjudicated insane - K void (b)Deficient mental capacity - voidable (3) Intoxication (a) K with intoxicated are voidable if other person had reason to know of intoxication |
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Defenses: Undue influence
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When one party unduly influences another or asserts their will over the will of another
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Defenses: Duress
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Physical: When one party enters into a contract or modifies a contract solely based on physical force or threats of physical force, K is void
Economic: When a party enters into a contract or modifies an existing contract solely based on serious threat to property or finance |
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Defenses: Intoxication
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Renders contract voidable when non-intoxicated party knew or should of known others parties state of mind.
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Condition Concurrent
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A condition concurrent occurs when both parties' duties arise at the same time and from each other parties' actions.
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CONDITIONS
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All contracts have conditions. Conditions must be excused or satisfied before the obligations to which they are attached mature into contract duties.
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Condition Precedent
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An event that must occur before a duty arises
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Condition
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A condition is an event that determines if and when a duty either arises. A condition is expressed, implied, or constructive.
Condition must be excused or satisfied to have an absolute duty to perform. |
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Excuse of conditions
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<FAVE W>
Failure to cooperate Anticipatory Repudiation Voluntary Disablement Estoppel Waiver |
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Condition Subsequent
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There is already a duty to perform but a condition subsequent occurs and now the duty to perform is extinguished.
- "I am liable to perform this notice until..." |
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Conditions: Excuse: Failure to cooperate
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If a party fails to cooperate so that a condition cannot be met, the condition is now excused and the party has to perform.
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Conditions: Excuse: Anticipatory Repudiation
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Where one party communicates to the other an unequivocal intention not to perform the agreement.
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Conditions: Excuse: Anticipatory Repudiation: 4 options
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Anticipatory Repudiation gives the non-repudiating party four options:
• Treat the contract as totally repudiated and sue immediately, if the other party has not performed • Suspend own performance and wait until performance due to sue, when other party has performed • Treat the repudiation as an offer to rescind and treat the contract as discharged • Ignore the repudiation and urge performance -Exception: Option K, the innocent party may immediately bring suit for breach upon repudiation - even if innocent party is in a bilateral K, where the other party performance is already complete. |
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Conditions: Excuse: Anticipatory Repudiation: Demand for adequate assurance of performance
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One party is insecure about the other party's performance, the insecure party can make assurances about adequate assurances of performance.
-Code K: Response within 30 days |
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Conditions: Excuse: Voluntary Disablement
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Repudiation by conduct - one party puts themselves in a position that they cannot perform agreement, breach is accelerated.
Exception: novation - new K |
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Conditions: Excuse: Estoppel
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Prior to conditioned event is supposed to occur, communication that will perform irregardless that event will occur - either party that changes position in reliance, condition is excused.
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Conditions: Excuse: Waiver
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Excuse in the non-occurance of or delay in the occurance or a constructive condition - intentional relinquishment of right to declare a breach
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Conditions: Satisfaction
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(1) Complete Satisfaction
(2) Substantial Satisfaction (3) Doctrine of Divisibility |
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Conditions: Satisfaction: Complete Satisfaction
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Required for all express conditions - under the UCC perfect tender rule
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Conditions: Satisfaction: Substantial Satisfaction
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Substantial Satisfaction is required for all constructive conditions
(1) When the performance meets the essential performance of the contract (2) Courts allow for a damage offset - if a party has substantially performed and has satisfied a condition precedent, then the performance can be offset by damages. |
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Conditions: Satisfaction: Doctrine of Divisibility
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Divisible K is one parties have divided performance into separate units
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CONDITIONS HAVE BEEN EXCUSED OR SATISFIED BEFORE DUTY OF PERFORMANCE MATURES
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CONDITIONS HAVE BEEN EXCUSED OR SATISFIED BEFORE DUTY OF PERFORMANCE MATURES
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Duties
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After condition has been excused or satisfied, a party must discharge the duty, perform the duty or be in breach.
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Duties: Discharge
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<FANFIMMI>
Frustration of purpose Accord and Satisfaction Novation Failure to satisfy a cond. subsequent Impracticability Mistake Mutual recession Impossibility IF THE CONTRACT DUTY HAS NOT BEEN DISCHARGED, IT MUST BE PERFORMED OR THERE WILL BE A BREACH OF CONTRACT |
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Duties: Discharge: Frustration of purpose
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An unforeseen event at the time of formation that frustrates the principal purpose for entering into the K.
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Duties: Discharge: Accord and Satisfaction
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Parties in a K compromise or resolve a dispute that has arisen from the original agreement
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Duties: Discharge: Novation
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Substituting a new party for an original party under the agreement - all parties must agree
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Duties: Discharge: Failure to satisfy a condition subsequent
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There is already a duty to perform but a condition subsequent occurs and now the duty to perform is extinguished
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Duties: Discharge: Impracticability
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Event unforeseen at formation that renders a contract duty, subjectively unreasonable
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Duties: Discharge: Modification
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Change or eliminate duties under the original agreement
- Common Law: consideration needed <exception> unanticipated circumstances - Code K: No consideration needed if it involves the sale of goods, as long as modification is made in good faith |
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Duties: Discharge: Mutual rescission
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Parties eliminate or cancel of a K, requires an offer, acceptance and consideration.
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Duties: Discharge: Impossibility
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An event that is unforeseeable by both parties at the time of formation renders performance of contract duty objectively not possible.
(1) No reasonable person could perform the contract duty as a result of the event. |
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Duties: Satisfaction: Complete Satisfaction
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Required for all express duties - under the UCC perfect tender rule
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Duties: Satisfaction: Substantial performance
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Substantial Satisfaction is required for all non-express contract duties:
(1) When the performance meets the essential performance of the contract (2) Courts allow for a damage offset - if a party has substantially performed and has satisfied a condition precedent, then the performance can be offset by damages. |
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Duties: Satisfaction: Doctrine of Divisibility
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Divisible K is one parties have divided performance into separate units
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Risk of Loss
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-Risk of loss passes when the buyer takes physical possession of the goods
- Shipment K: When the seller delivers the goods to the carrier and enters into a reasonable contract for the delivery of the goods <exception> when the K has a delivery clause |
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FOB
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Free on Board: the merchant bears the cost of delivering the goods to that particular destination
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FAS
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Free along side: merchant bears costs of delivering the goods to a port or vessel
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CIF
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Cost, insurance, freight: merchant bears the cost, insurance and freight
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CF
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Cost, Freight: merchant bears the cost and freight charges
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Breach of Contract
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A breach occurs when a party is under an absolute duty to perform and fails to perform
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Breach of Contract: Material breach
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When the non-breaching party does not receive the substantial benefit of the bargain
-Non-breaching party may suspend performance and sue for damages immediately -Failure to perform by time stated is generally not a material breach, (unless K expressly states that time is of the essence). |
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Breach of Contract: Minor Breach
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If a party has received the substantial benefit (usually 80% or more) of the contract, then the breach is minor
-Non breaching party must perform his part of the obligation but may offset payment by the amount the minor breach caused |
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Breach: Damages/Remedies
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Damages and remedies try to put the non-breaching party in as good of a position as remedies would provide
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Duty to mitigate
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Generally there is no duty to mitigate, but party may recover damages that were avoidable
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Breach of Contract: Common Law remedies: Compensatory Damages
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Compensatory Damages include:
-Expectancy damages: benefit of the bargain -Incidental damages: to find a substitute (out of pocket expenses) -Consequential damages: foreseeable at the time of formation -Less any losses that could have been avoided |
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Breach of Contract: Common Law remedies: Quasi K Remedy
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Quasi K prevents unjust enrichment to the D's benefit and the detriment of the P, when no K.
Cost incurred in reliance: reliance damages. |
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Breach of Contract: Common Law remedies: Liquidated damages
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Preagree in K, damages on breach, enforced when:
(1) Damages difficult to assess (2) Amount reasonable (no punitive damages) |
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Breach of Contract: Common Law remedies: Equitable relief
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Equitable relief: when P wants court to instruct D to do or refrain from something.
(1) Recisssion: when fraud, K is voidable/void to terminate rights and liabilities (2) Restitution: To disgorge enrichment, parties are returned to status quo (3) Specific performance: compel the breaching party to perform contract duty Defenses: SOF; Doctrine of laches (Late cheese) P delayed for an unreasonable time that has caused prejudice to D; Unclean hands P has acted wrongly in matter related to the subject matter |
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Breach of Contract: Common Law remedies: performance
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Specific performance: compel the breaching party to perform contract duty, when:
(1) When subject matter is unique - all real estate (2) No personal service K's (3) No court supervision of performance |
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Breach of contract: Code remedies: Sellers remedies (buyer breach): All elements
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What are my recourse Loser?
<W> When: Manufacture, Shipment, Receipt <A> Action for price <M> Market price damages <R> Resale <L> Lost volume seller |
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Breach of contract: Code remedies: Sellers remedies (buyer breach): recover goods/after goods recovered
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To get goods back:
(1) During manuf. - anything reasonable (2) During transit - stop shipment (3) After shipment - reclaim goods within 10 days After goods recovered: (1) Resale: seller can recover K price less resale of price difference - must notify buyer, unless goods perishable or decline in value (2) Market price damages: difference in K price and market price at tender (3) Lost volume seller can seek lost profit (4) Action for the price: no market so forced payment and delivery |
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Breach of contract: Code remedies: Buyer remedies (seller breach)
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What M'fr Sells Red Rabbit car?
<W>Warranty <M>Market price damages <S>Specific performance <R>Rejection <R>Revocation of acceptance <C>Cover (Cost of sub.-K price+incidental+consequential) |
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Breach of contract: Code remedies: Buyer remedies (seller breach): Rejecting non-conforming goods back to seller
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Rejecting non-conforming goods back to seller
(1) Rejection of non-conforming goods (as long as no acceptance) (2) Revocation of acceptance (after acceptance): If substantial defect difficult to discover or seller promised to fix defect and did not - Buyer must notify seller of defect and give chance to cure |
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Breach of contract: Code remedies: Buyer remedies (seller breach): After goods are back with the seller
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(1) Cover: reasonable substitute w/o unreasonable delay; gets difference in cost of cover and market price
(2) Market price damages: difference between market price at breach and K price. (3) Specific performance: compel the breaching party to perform K duty (4) Remedy for Warranty damages |
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Breach of contract: Code remedies: Buyer remedies (seller breach): Remedy of Warranty damages
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If warranties are breached buyer can recover difference if goods met warrantied:
(1) Express Warranty: promise by seller as to fact of goods (2) Implied warranty of merchantability: from seller who deals in goods of that kind, goods are fit for ordinary purpose (3) Implied warranty of fitness for particular purpose: seller knows buyer relying on skills to select/deliver goods for a particular purpose |
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Third Party Beneficiary
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At the time of contract formation, a third-party is identified.
(1) Incidental: no rights from K just benefits (2) Intended: gets K rights must be identified in K - Donee: receives benefit as a gift -Creditor: when promisee owed a debt and using promisor's performance to satisfy |
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Beneficiary can enforce promise
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When rights vest.
Rights vest, when TPB learns of promise and assents to it. (1) Promisee/Promisor can changes or rescind promise until rights vest (2) Promisee can enforce promise against promisor (3) Creditor TPB can sue promisee on underlying promise or promisor on third party promise |
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Assignment of Rights
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<RPM>
Rights assignable, not if Properly assigned? Multiple A's Assignor<>obligor >Assignee |
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Assignment of Rights: Rights assignable, not if
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<KiLS>
-K prohibition -Law prohibition -Substantial change in personal services K |
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Assignment of Rights: Properly assigned?
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<DOW>
-Description of right -Obligor receives notice -Words of present transfer |
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Assignment of Rights: Multiple A's
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Discharge gratitious assignments, unless: <WET>
-Writing -Estoppel -Token Chose otherwise, 1st valid unrevoked assignment, unless subsequent w/o knowledge gets: <PNTJ> (poon,nany, in TJ) -Payment -Novation -Token Chose -Judgement |
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Delegation of Duties
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Transfer of K duty to a 3rd party
Delegator=Obligee <Delegate |
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Delegation of duties: Delegation
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Duty delegetable, not if: <KiLS>
-K prohibition -Law prohibition -Substantial change in character of performance |
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Delegation of Duties: Nature of performance
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Valid delegation:
(1) Obligee must accept performance from the delegate (2) Delegator remains surety for performance (3) Obligee becomes TPB of K (4) If consideration obligee can force delegate to perform |
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Parol Evidence Rule
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If the parties, have a final written agreement, no prior written, oral, or contemporaneously oral negotiations shall be admissable to vary the final written agreement.
Rule of evidence that deals with the admissability of evidence to a judge or jury. |
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Parol Evidence Rule: Complete integration
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If K says so or if unstated would a reasonable person similarly situated have included prior of contemporaneous negotiations to the document>then court would consider writing final
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Parol Evidence Rule: partial integration
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Parol evidence is admissable
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Parol Evidence Rule: evidence allowed
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(1) Bars prior negotiations evidence that contradicts the agreement
(2) Allows evidence that explains an ambiguity and subsequent evidence (after negotiations) |
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Defenses: Entrapment
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<PD>
Defense if: (1) (NOT) Predisposed to commit the crime (2) (Criminal) Design originated with police |
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Defense: Mistake
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Take the facts as
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