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89 Cards in this Set
- Front
- Back
Applicable Law--UCC |
UCC applies to the transactions for the sale of goods (items that are movable/tangible at the time of contracting).
Look for the involvement of a merchant (one who regularly engages in buying/selling of goods of the particular type). |
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Applicable Law--Common Law
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Applies to all other contracts
look for sale of land, employment contracts and service or construction contracts |
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Predominant Purpose Test
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ask whether the predominant purpose of the transaction is the rendition of a service, with goods incidentally involved i.e. a contract with artist for a painting, or is a transaction of sale, with service incidentally involved i.e. installation of a water heater in a bathroom.
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Contract defined
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short def: : a legally enforceable agreement
long def: a promise or set of promises, for the of which the law gives a remedy, or the performance of which the law in some way recognizes a duty |
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Express K
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created by parties' words (either oral or written)
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Implied-in-fact K
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created by the parties' conduct
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Lack of Consideration
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no contract exists
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Construction K
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Whenever a general K relies on the bid of a subcontractor, it creates an option K between the general and the subcontractor.
If K is breached by the owner, builder is entitled to profit plus any costs expended. -risk of loss lies with the builder, absent contrary provisions |
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Exclusivity K
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Consideration b/c courts imply a promise to use best efforts to sell te product.
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Mutual Assent--Offer
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offer is a manifestation of an intention to be bound
typically tested in 2 situations: advertisements, auctions and indefiniteness |
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Bi-Lateral Contract
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Offer can be accepted in any reasonable way
i.e. promise, performance, forbearance |
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Unilateral K
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Offer can be accepted only by performing
All K's are bilateral in nature except: 1. Reward, Contest, or Prize 2. Offer expressly says it can be accepted only by performing -rescission promise must be supported by EITHER: 1. offer of new consideration 2. elements of promissory estoppel OR **3.offeree's manifestation of an intent to make a gift of the obligation owed him. |
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Formation Methodology
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1. Is there an agreement (offer and acceptance)
2. If so, is it legally enforceable (are there any defenses against the K's enforcement?) |
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Elements required to create a K:
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1. Mutual Assent i.e. offer and acceptance
2. Consideration (or a substitute) 3. No defenses to formation |
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Offer--advertisements
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Generally an advertisement is NOT an offer
UNLESS the ad specifies a QUANTITY term and who can accept --advertisement materials i.e catalogues sent aftert request to purchase CAN be considered an offer. |
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Offer-Definiteness and Certainty
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see if any of the terms are too indefinite to be enforced
"All essential terms must be covered" |
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Offer-indefiniteness--Requirement Contracts (Art. 2)
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Requirements Ks are definite enough, even though there is no specific quantity mentioned.
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Offer-indefiniteness--Open Price Term
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CL--open price term too indefinite
UCC--open price term is NOT too indefinite |
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Offer--Auctions
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General Rule: A normal auction has a reserve price. Bidder is the offeror
Exception: No reserve (aka "Absolute Auction") the auctioneer is the offeror and the highest bid is an acceptance. |
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Offer-Termination
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4 ways to terminate an offer:
1. Lapse of Time 2. Revocation 3. Rejection 4. Death before Acceptance |
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Offer-Termination--Lapse
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An offer lapses after a STATED term or after a REASONABLE TIME has passed
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Offer-Termination--Revocation
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Generally, offer can be revoked at any time before acceptance
revocation can be either 1. direct or 2. indirect |
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Offer-Termination--Direct revocation
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offeror indicates DIRECTLY TO THE OFFEREE that he has changed his mind about the deal.
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Offer-Termination--Indirect Revocation
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2 part definition:
1. offeror engages in conduct that indicates he has changed his mind AND 2. the offeree is AWARE of the conduct -if offer was made by PUBLICATION, then the rejection must be made in the manner (or medium) in which the offer was made |
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Offer-Termination--Revocation--Exceptions
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4 situations where an offer cannot be revoked:
1. Option: an option to keep the promise open that is PAID FOR( a mere promise to keep open is not enough) 2. Foreseeable reliance before acceptance (very rare) i.e general contractor relies on sub to make a bid on the project 3. Starting to perform a UNILATERAL K 4. Firm Offer (UCC) 2. |
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Offer-Termination--Revocation--Timing
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Revocation of an offer is effective ONLY ON RECEIPT
-mailbox rule has nothing to do with a revocation b/c it is only effective on receipt |
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Offer-Termination--Rejection
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An offer terminates when the offeree rejects it ("inappropriate response")
1. Counter-Offer 2. Conditional Acceptance 3. An Acceptance Varying an offer (except UCC--apply battle of the forms) |
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Offer-Termination--Rejection--Counter Offer
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operates a rejection but mere bargaining does not
-asking a question is mere bargaining |
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Offer-Termination--Rejection--Acceptance Varying an offer--CL
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Acceptance must exactly mirror the offer--MIRROR IMAGE RULE
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Offer-Termination--Rejection--Acceptance Varying an offer--UCC
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Battle of the Forms--acceptance does NOT have to mirror the terms of the offer.
1. adding a term or changing a term does not prevent acceptance 2. but the offeree's terms are not automatically included in the K. The terms become part of the K only if: 1. Both parties are MERCHANTS 2. term is not a MATERIAL CHANGE ( a change that is likely to cause hardship or surprise for the offeror) AND 3. the offeror does not OBJECT within a reasonable time --basically the offeree's terms almost never become become part of the K |
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Offer-Termination--Death Before acceptance
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Death of either party before acceptance terminates a REVOCABLE offer
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Acceptance
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Language of the offer controls.
Valid acceptance requires: 1. an offeree with power of acceptance 2. unequivocal terms of acceptance AND 3. communication of acceptance |
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Acceptance by starting performance
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Bilateral K--starting performance is acceptance of an offer to enter a bilateral contract and carries with it an IMPLIED PROMISE to finish the job
Unilateral K--starting performance is NOT acceptance. only COMPLETING PERFORMANCE is acceptance |
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Acceptance--Improper Performance
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CL--improper performanceoperates as ACCEPTANCE and BREACH
UCC-improper performance operates as acceptance and breach UNLESS the seller is sending goods as an ACCOMMODATION to the buyer |
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Acceptance--Silence
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offeree's silence is generally not aceptance
UNLESS 1. express waiver of comm by offeror 2. offer requires an act as acceptance 3. offeree silently takes the offered benefits 4. prior dealings between the party or trade practices or both created a reasonable expectation by the offeror that silence constitutes acceptance. |
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Acceptance--Timing
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Generally, MAILBOX RULE. offer is accepted when it IS MAILED
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Exceptions to Mailbox Rule
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heavily tested
1. Offer provides otherwise (can be contracted out) i.e. if offer says acceptance upon receipt. 2. if IRREVOCABLE offer, the offeree doesnt need protection of the mailbox rule 3. offeror RELIES on OVERTAKING REJECTION(where an acceptance is sent first, but rejection arrives first ***4. Rejection sent first--mailbox rule does not apply. whichever letter arrives FIRST is effective -does not matter that rejection letter is ACTUALLY opened. If delivered/received before acceptance then no K. --**Mailbox rule does NOT apply to the exercise of options. Acceptance must be RECEIVED by the offeror. --if offers stating precisely the same terms cross in the mail, they do not give rise to a K b/c an offer cannot be acceptance if there is no knowledge of it. |
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Consideration
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required in order to create a valid K
Involves 2 elements: 1. Bargained for exchange 2. Legal Value |
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Bargained for exchange
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bilateral K--parties exchange promises
unilateral K--parties exchange a promise for an act |
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Legal Value--Benefit-Detriment test
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a legal DETRIMENT is when one promises to do something he is under no legal obligation to do, or promises not to do something he has a legal right to do.
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Consideration
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bargained-for return promise or performance that reasonably induces the initial promise
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Consideration--Gratuitous or Donative promises?
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No consideration b/c not induced by any return promise or performance
-$25K donation -$200 gratuitous promise |
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Consideration--Waiver
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Can equal valid consideration
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Consideration--forbearance
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can equal consideration
-uncle promise to pay his nephew $5k is induced by nephew's forbearances(not drink, smoke, gamble, etc) |
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Adequacy V. Inadequacy--Consideration
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-courts use baseline inquiry
1. if the consideration is "sham" nominal--no consid. i.e. one penny for $500 2. If objective value, courts leave valuations to parties--Batsakis Where there is a possibility of value, in the thing bargained for, consideration will be found even if value never comes into existence. |
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Consideration--worthless or valueless promises
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do not serve as consideration b/c they they are worthless therefore cannot reasonably induce a promise
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Consideration--Waiver or Forbearance of invalid legal claims
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Valueless unless:
1. claim or defense is doubtful because of uncertainty as to law or facts 2. the waiver believes that the claim may fairly be determined to be valid[good-faith belief approach] |
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Consideration--Discretionary promises
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Where the promise reserves a choice, each of the choices or alternative performance, must be consideration on its own.
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Consideration--Illusory Promises
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lacks mutuality and attaches no obligation i.e. promising to buy as much coal as one "would want"
If K can be canceled at any time, then illusory. otherwise, valid K |
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Consideration--Output Requirements Contracts
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Not Illusory b/c quantity measured as "actual output" of seller(or "actual requirements" of buyer) as may occur in good faith, but cannot be reasonably disproportionate
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Exclusivity Contracts--Consideration
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Not Illusory.
implied promise to use "reasonable efforts or best efforts" |
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$ Consideration--Pre-existing Duty Rule
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1. performance of a legal duty owed to promisor that is neither doubtful nor the subject of honest dispute is not consideration.
2. There must be a modification with new consideration |
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$ Pre-Existing Duty Rule--Exceptions
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$ 1. New or different Consideration
2. Promise is to ratify a VOIDABLE OBLIGATION (i.e. ratification of minor's K after he reaches majority) 3. preexisting duty owed to a 3P rather than the promisor 4. HONEST DISPUTE as to the duty 5. UNFORESEEN CIRCUMSTANCES sufficient to discharge a party. -an attempt to pay a smaller amount than due on a debt is generally not enough consideration for the a promise by debtor to discharge the debt, BUT look for EARLIER payment than required or STOCK instead of cash. change in performance could make the smaller payment amount sufficient consideration. |
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Consideration--Accord and Satisfaction-CL
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The Payment in Full Check Cashing Rule says that :
if a person sends a check clearly marked “payment in full” for a disputed amount, the cashing of the check by the other person is an accord and satisfaction and is sufficient consideration. Accord is an agreement where one party to an existing K agrees to accept--in lieu of performance that he is supposed to receive from other party--some other, different performance. Satisfaction is the performance of the accord agreement. *If debtor breaches the accord agreement, the debtor has option of either raising the accord agreement as equitable defense OR waiting until he is damaged (i.e. creditor is successful in an action on original K) and THEN bringing an action for breach of the ACCORD K. |
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Consideration--Accord and Satisfaction-UCC
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The Payment in Full Check Cashing Rule says that:
if a person sends a check clearly marked “payment in full” for a disputed amount, the cashing of the check by the other person is an accord and satisfaction and is sufficient consideration BUT if the check is sent to a company, it must be sent to a designated address for such claims if there is one specified. In addition, if there is no designated address for disputed claims, a claimant may prevent an accord and satisfaction if, within 90 days of the payment of the check, the claimant tenders repayment of the amount of the check to the person against whom the claim is asserted. |
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Account Stated
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occurs when one payment is made to pay for a number of earlier invoices.
i.e. there must be more than one prior transaction between the parties |
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Consideration--Past or Moral Consideration
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A promise given in exchange for something already done does not satisfy the consideration req.
EXCEPT Where a past obligation is unenforceable for a technical defense (e.g. SOL) a new promise in writing will be enforceable if a new promise is IN WRITING or is PARTIALLY PERFORMED . |
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Promissory Estoppel or Detrimental Reliance--Elements
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1. Promisor should REASONABLY EXPECT his promise to INDUCE ACTION OR FOREBEARANCE
2. action or forebearance must be of a DEFINITE and SUBSTANTIAL character, and 3. such action or forebearance is IN FACT INDUCED. 4. promise is ONLY ENFORCEABLE TO THE EXTENT NECESSARY TO PREVENT INJUSTICE --therefore a valid K is better than an agreement enforceable by promissory estoppel. if the K is valid, do not pick it as an answer choice. |
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Detrimental Reliance--Elements--Examples
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1. uncle promises nephew trip to europe, it is forseeable that he would take it, and he actually took it because of the promise.
2. Board promises employee $200/yr. when she retires. she retires. vs. case where man retires then told he would be taken care of. Action was not induced by promise nor reasonably forseeable as a result of the promise. |
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Reliance in the Construction Biz/other three-party contracts outside the contracting biz.
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-Absent contrary agreement, subs bound to supply services per bids once the GC detrimentally relies on bid in seeking, and then obtaining, the prime K. [drennan]
but not vice-versa GC's not bound to use subs in the same way. |
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UCC--Subsequent modifications
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consideration not necessary to GOOD FAITH, WRITTEN modification of a K
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UCC--promises to pay
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If a legal obligation is not enforceable under law (i.e. debt barred by statute of limitations) , a new promise is enforceable if in WRITING
this promise wil be enforceable only according to the NEW TERMS, not the terms of the original legal obligation. |
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UCC-Seal
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no effect
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$ Unconscionability
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K may be voidable where the clauses are so one sided as to be unconscionable.
tested at the TIME K WAS MADE, not later (i.e. K must have been unfair when it was entered into) -includes Ks with risk-shifting provisions (e.g. W disclaimers in fine print) -includes adhesion Ks RARELY A GOOD DEFENSE ON MBE |
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Uconscionability--def and elements
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K or K term is unscionable the court can refuse or limit its enforcement
1. Substantive Unconscionability -unreasonably favorable terms/gross disparity in values exchanged/extremely and dramatically one-sided i.e. furniture case 2. Procedural Unconscionability -absence of meaningful choice: 1. factor 1: gross inequality of bargaining power 2. factor 2: over-reaching manner in which K was entered e.g. maze of fine print, deceptive sales practices(high pressure, etc.) |
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$ SOF--does it apply
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SOF requires that certain agreements must be in writing.
MY LEGS 1. Interest in LAND $ 2. SURETYSHIP Agreement--must be evidenced by a writing. 3. Performance within a YEAR 4. Consideration of MARRIAGE (Pre-Nups) 5. EXECUTOR or Administrator's Promise to pay debts of the estate out of his own funds $ 6. GOODS valued at $500 or more (UCC) BUT an oral K for the sale of goods over $500 is enforceable to the extent of goods received and accepted by the buyer. Modification Rule: look to K as modified. "if new price brings K within SOF, must be in writing" |
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SOF--MY LEGS
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marriage
within one year Land Executor Goods Surety |
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SOF--writing requirement
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Long rule:
1. IDENTITY of parties 2. identification of k's SUBJECT MATTER 3. TERMS AND CONDITIONS of the k 4. recital of CONSIDERATION AND 5. signature of the PARTY TO BE CHARGED. Short rule; must contain all essential terms and signature of the party to be charged. --can be cobbled together |
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SOF--One-Year Provision
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K that cannot possibly be performed within a year of its making must be in writing.
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SOF--Land Contract Provision
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Promise to transfer an interest of land. includes sales, mortgages, leases.
BUT under part-performance doctrine, conduct that unequivocally indicates that parties have contracted for the sale of land will take the K out of the SOF. -evidence that could be construed as a continuation of L-T relationship is NOT unequivocal. |
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SOF--Suretyship Provision
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A guaranty i.e. a promise to pay the legally enforceable debt of another
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SOF--writing requirement UCC--ADD TO THIS
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1. QUANTITY term
2. Signature of party to be charged Merchant exception: written confirmation not objected to within 10 days satisfies the signature requirement. |
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$ Defenses based on lack of capacity
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Party incurs voidable contractual duties if:
$ 1. Minor 2. Mentally ill or defective 3. $ Intoxicated |
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$ Minor Restriction
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$ Generally: a minor may disaffirm a K up until age of majority or a reasonable time thereafter
-voidable on infant but binding on adult. $misrepresentation of age has no effect on ability to disaffirm -NOT in TN--minor eho misrepresents his age is estopped to disaffirm the K exceptions: necessities, student loans, insurance contracts. |
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Insane persons
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lack capacity, but may contract during a lucid interval.
-absent a judicial declaration of insanity, an insane person's contracts generally will not be avoided UNLESS the opposite party knew of the insanity at the time of the K. |
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$ Intoxicated/Drugged persons
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lack capacity if other party had reason to know of the intoxication
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Quasi-Contract--recovery
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limited to the value of the benefit conferred and not the actual contract price.
--To recover under the theory of quasi-contract, the person conferring the benefit must not have been a volunteer or an officious intermeddler. **MBE tip: dont pick as an answer UNLESS : 1. no formal agreement between the parties and 2. unjust enrichment |
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Restitution Damages/Unjust Enrichment--elements
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1. One party has conferred a benefit by rendering service or expending properties on the other
2. person has a reasonable expectation of being compensated 3. person conferring benefit was not a "volunteer" or an "officious intermeddler" 4. If ∆ is allowed to retain the benefits without compensating the π, ∆ would be unjustly enriched **benefit measured by the benefit to enriched party(in cases of breaching contractor--K price) not the detriment to claimant UNLESS it would achieve an unfair result -benefit never measured by detriment to the breaching party. |
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Unjust Enrichment(as consideration substitute)--Elements
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1. Conferral of measurable benefit to another at one's expense
2. Conferral is non-officious(i.e. wanted) 3. Conferral is non-gratuitous(i.e. expectation of compensation) *all requirements must be met |
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Quasi-Contract
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protects against unjust enrichment (equitable remedy) whenever contract yields an unfair result.
-a remedy of LAST RESORT |
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$ Defenses to Formation
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1. Absence of Mutual Assent(mistake/ $fraudulent misrepresentation)
2. Absence of Consideration 3. Public Policy Defenses 4. $ SOF 5. $ Failure to agree on an essential term 6. $ Illegality 7. $ Unconcsionability |
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Mutual Mistake
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Mistake by both parties is a defense if:
1. mistake concerns a BASIC ASSUMPTION on which the k was made 2. mistake has a MATERIAL ADVERSE EFFECT on the agreed-upon exchange AND/UNLESS 3. adversely affected party did NOT ASSUME the risk i.e. builder draws up plans, begins to build then realizes that it will cost $1mill more to complete. arguably, builder assumed the risk. grounds for unilateral rescission |
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Unilateral Mistake
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Insufficient UNLESS nonmistaken party knew or should have known of the mistake. (except for errors in judgment as to the value or quality of work done or goods contracted for).
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Mistakes in Transmission
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e.g. telegraph company makes a mistake
message usually will be operative AS TRANSMITTED UNLESS the party should have been aware of the mistake. |
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Latent Ambiguity Mistake
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if K includes an ambiguous term, result depends on awareness of the ambiguity
1. Both Parties unaware or aware--no K unless both Ps intended the same meaning 2. One party aware--binding K based on what the ignorant party reasonably believed to be the meaning of the ambiguous words |
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$ Misrepresentation
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When a misrep is fraudulent, person to whom the misrep was made need only rely on it.
-reliance need not be reasonable. -if actually relied on, K is voidable upon action of the injured party. Fraud in the inducement--voidable Fraud in the factum--void |
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Public Policy Defenses--consideration or subject matter is illegal
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K is void UNLESS:
1. π unaware of the illegality while ∆ knows of it 2. parties in pari delicto (one party not as culpable as the other) 3. illegality is failure to obtain a license when the license is for revenue-raising purposesrather than the protection of the public. |
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Public Policy Defenses--only purpose behind K is illegal
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K is VOIDABLE by a party who:
1. was UNAWARE of the purpose OR 2. was aware but did not facilitate the purpose AND the purpose does not involve serious moral turpitude (i.e. murder) |
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Rejection--Lapse of Time--Face-to-face rule
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continue only to close of conversation unless offer or other circumstances indicate that the offer is intended to extend beyond the conversation
-applies to phone conversations |