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102 Cards in this Set

  • Front
  • Back
Multi-State Applicable Law
Sale of Goods: UCC Art. 2
All other Contracts: Common Law
NYS Applicable Law
Sale of Goods: UCC Art. 2
Lease of Goods: UCC Art. 2A
All other Contracts: Common Law
Define: Contract
"A contract is a legally enforceable agreement"
Define: Quasi-Contract
An equitable protection against UNJUST ENRICHMENT when contract law yields an unfair result. Remedy of last resort.
Define: Unilateral Contract
Offer can be accepted ONLY by performing.

e.g. reward, contest, or prize
OR if offer says it can only be accepted by performing.
Define: Offer
"a manifestation of an intent to be bound"
Rule: Open Price Term
A specified price term is not required.
A court will read in a reasonable price.
Rule: Requirements Contracts
Article 2 permits quantity to be measured by needs or requirements.

But, even in good faith, the buyer cannot take the seller by surprise. Any increase cannot be massively out of line with prior demands.
Rule: Lapse
An offer lapses after a STATED TERM or a REASONABLE time has passed.
General Rule: Revocation
An offer can be revoked any time before acceptance.
Define: Direct/Indirect Revocation
Direct: directly indicates to offeree that offer is revoked.

Indirect: engages in conduct that indicates a change of mind and offeree is aware of the conduct.
Define: Option
A promise to keep the offer open that is paid for.
Four Exception when Offers are NOT Revocable
1: Option
2: FORESEEABLE Reliance BEFORE Acceptance
3: Starting to Perform a Unilateral Contract
4:Firm Offer
Define: Firm Offer
in a sale of goods, a merchant promises in a SIGNED WRITING to keep an offer open.

Art. 2 imposes a 3 month time limit, after which a firm offer is revocable, regardless of its terms.

If no specified time--then a REASONABLE time.
Rule: Timing of Revocation

When is Revocation effective?
Revocation is effective only on receipt.

No mailbox rule.
Rule: Effect of a Counter Offer
A counteroffer operates as a rejection.

Mere bargaining does not.
Rule: Effect of a Conditional Acceptance
Conditional acceptance is not acceptance at all.
Rule: Acceptance Varying Offer

Is it acceptance?
Common Law: Acceptance MUST mirror offer. Adding or changing a term operates as a rejection.

Article 2: Adding or changing a term does NOT prevent acceptance. But offeree's terms are included ONLY if:
a) both parties are merchants
b) change is not material
c) the offeror does not object
Rule: Effect of Death onOffers
Death terminates a REVOCABLE offer.

An irrevocable offer is NOT TERMINATED by death.
Rule: Starting Performance

Is starting performance acceptance?
Bilateral Contract: starting performance is acceptance

Unilateral Contract: starting performance is not enough.
Rule: Revoking Unilateral Contract Offers
MBE: once offeree starts to perform, offer may not be revoked

NYS: offer may be revoked even after the beginning of performance
Rule: Effect of Improper Performance
Common Law: improper performance is both acceptance and breach

Art. 2: improper performance is both acceptance and breach, unless seller is sending goods as an accomodation
Rule: Offeree Silence
Silence cannot become acceptance.

In NYS sending unsolicited merchandise constitutes a gift.
Rule: Timing of Acceptance

When is it effective?
Acceptance is effective when it's MAILED, unless

a) Offer says otherwise
b) Irrevocable offer doesn't get mailbox rule protection
c) Offeror relies on OVERTAKING rejection
d) Offer is first rejected
Rule: Lack of Capacity
An incapacitaded defendant MAY disaffirm the contract if he wants to avoid it.

An incapacitated party is liable for necessities on a quasi-contract basis.

Retaining the benefit of a contract without complaint after gaining capacity is an IMPLIED AFFIRMATION, making it enforceable.
Rule: Misrepresentation

What is the effect of an honest misrepresentation?
Even an honest misrepresentation can be a fatal flaw, as long as it is MATERIAL.
Rule: Misunderstanding
No contract if both parties are innocent in the misunderstanding.

If one party knows or has reason to know, there is a contract, but using the innocent parties' meaning.
Rule: Mutual Mistake
No contract if both parties were mistaken about something CRITICAL to the agreement.

A mistake about market value is generally not material.
Rule: Unilateral mistake
A unilateral mistake is NOT a defense against contract formation.

One party's mistake is not a fatal flaw, unless the other knew or had reason to know about the mistake.
Define: Consideration
"bargained for legal detriment/benefit"
Rule: Past Consideration
A past benefit/detriment is NOT consideration. Can't bargain for something already done.
Rule: Contract Modification
Common Law: Modification REQUIRES NEW CONSIDERATION

Article 2 sale of goods: consideration is not required for modification as long as there is good faith.
Rule: partial payment on a debt
If debt is UNDISPUTED, an agreement to pay part in exchange for forgiveness is unenforceable--no consideration.

If debt is DISPUTED, then there is consideration.
NYS Distinction: Consideration
Consideration is not required when a contract is a signed writing.
Rule: Time-barred debt
A WRITEEN promise to pay a debt barred by the statute of limitation is ENFORCEABLE, even without consideration.
Rule: Covenant not to Compete
A court will invalidate or narrow a covenant not to compete that operates as a restraint of trade.

Are limits reasonable and are the services unique such that a covenant is needed?
Rule: Statute of Frauds

Must be in Writing:
1: transfer an interest in real property
2: contract performance CANNOT be complete in one year
3: sale of goods worth more than $500
NYS Distinctions: Statute of Frauds
Must be in Writing:
1: NYS ONLY: Lease of goods worth more than $1,000
2: Assignment of an insurance policy
3: promise to pay discharged debt
4: agreement to pay a finders fee or broker's commission (except attorney, auctioneer, or real estate agent)
Rule: Article 2 writing to satisfy Statute of Frauds
Must contain a quantity term and be signed by the party being charged with breach of contract.
Rule: Article 2A writing to satisfy Statute of Frauds
Must state that is a LEASE, and include QUANTITY, DURATION, and RENTAL PAYMENTS, and be signed by the DEFENDANT
Rule: Common Law Writing to satisfy Statute of Frauds
Must contain all MATERIAL terms and be SIGNED by the DEFENDANT
Rule: Real Property and Statute of Frauds
Generally: Writing required

but 2 of 3 can substitute for a writing:
a) partial payment
b) improvements
c) possession
Rule: Full Performance and Statute of Frauds
A party that has FULLY performed can recover without a writing on a contract extending beyond 1 year.

PARTIAL performance is insufficient, although recovery in Quasi-Contract might be available.
Rule: Accepted Goods and Statute of Frauds
A party who has accepted some or all of the goods CANNOT invoke statute of frauds to avoid payment for the ACCEPTED goods.
Rule: Merchant's Confirmatory Memo
One party can use OWN signed memo to satisfy statute of frauds if:
1: both merchants
2: writing claims a PRIOR ORAL AGREEMENT and has a QUANTITY term
3: recipient DOENS'T OBJECT
Rule: Suretyship and Statute of Frauds
If the surety's MAIN PURPOSE in making the promise was to benefit himself, NO writing is required.

NO Main Purpose Exception in NYS
Rule: Other Statute of Frauds Exceptions
1: custom made goods--seller has started making and cannot sell in normal course of business
2: judicial admission of contract (in deposition, testimony, etc.)
Define: Parole Evidence Rule
The court will not permit introduction of evidence of prior agreement (oral or written) that contradicts a LATER WRITING.
Parole Evidence Exceptions
1: clerical error
2: to establish a defense against contract formation (not trying to rewrite)
3: to interpret vague or ambiguous terms
4: to supplement a PARTIALLY-INTEGRATED writing
Rule: Use of Conduct to Explain Terms
Can look to:
Course of PERFORMANCE: parties during performance
Course of DEALING: parties under previous contracts
USAGE of TRADE: other parties in similar contracts
Rule: Express Warranty
A seller is liable for breach of an express warranty.

Includes: statements of fact, promises, descriptions, and use of samples. NOT opinions.

Must be the basis of the bargain--seller could have relied on it.
Define: Implied Warrant of Merchantability
Goods are fit for their ORDINARY PURPOSE

Requires: Seller is a merchant dealing in goods of that KIND.
Define Implied Warrant of Merchantability for a Particular Purpose
Goods are fir for the buyer's PARTICULAR PURPOSE

Requires:
a) buyer has a SPECIAL PURPOSE in mind
b) buyer is relying on seller to select SUITABLE goods
c) seller knows it.

NEED NOT be a merchant.
Rule: Lessor's Warranties on a Lease of goods
SAME warranties as SALE of goods.

Exception: Finance Lease (lease from bank, which purchases)--warranties only from the manufacturer.
Rule: Disclaimers of Warranties
Sellter can disclaim IMPLIED, but NOT EXPRESS warranties.
Rule: limitation of remedies
Seller can limit buyer's remedies unless it would be UNCONSCIONABLE.

Limiting remedies for personal injuries in the case of consumer goods is PRESUMED to be unconscionable.
Rule: Risk of Loss
1: agreement of parties controls
2: breaching party bears risk
3: shipment by common carrier
a) SHIPMENT contract: seller must get to common carrier, make arrangements, notify buyer
b) DESTINATION contract: seller must get goods to destination.
4: Non-carrier
a) if merchant, seller bears risk until buyer takes possession
b) if not merchant seller bears risk until tender (make available) goods.
Rule: Risk of Loss and Leases
Lessor bear risk even if lessee has possession.

Exception: finance lease.
Define: Perfect Tender Rule
Art. 2: If seller is not perfect, buyer may reject goods.

Does not apply to installment contracts.
Rule: Option to Cure
Time for performance has NOT expired: seller HAS the option to make things right by the deadline.

Time for performance HAS expired: NO option to cure. BUT, seller may have the option to cure if buyer has accepted non-conforming goods in the past, creating a reasonable assumption that these would be accepted.
Define: Installment Sales Contract
Requires or authorizes delivery in separate installments.
Rule: Perfect Tender and Installment Contracts
Can reject INSTALLMENT only if there is a SUBSTANTIAL IMPAIRMENT that can't be CURED.

Can reject ENTIRE contract only if defect SUBSTANTIALLY IMPAIRS the entire contract.
Rule: Implied Acceptance
Buyer keeps goods without objection after having the opportunity to inspect.
General Rule: Acceptance of goods
1: Cannot be revoked
2: Cannot reject goods after acceptance
3: CAN still get damages for non-conforming goods.
Exception: Revocation of Acceptance
If a non-conformity SUBSTANTIALLY IMPAIRS the VALUE of a good AND was DIFFICULT to DISCOVER (e.g. latent defect)

Result: Return at sellers expense, refund, damages
Rule: Performance of Common Law Contracts
NO perfect tender rule. SUBSTANTIAL PERFORMANCE is sufficient.
Rule: Excuse from Performance due to Other Party's Breach
Sale of Goods: if tender is not perfect, buyer is excused from performance at his election.

Common Law: unless breach is MATERIAL, not excused from performance.
Define: Divisible Contract
Payment is on a PER UNIT basis.

Substantial Performance is ALSO PER UNIT. (e.g. complete 3/10, get paid for 3/10)
Rule: Anticipatory Repudiation and Excuse from Performance
Works like breach: if one party announces the intention to breach, the other is excused from performance and may sue.

BUT, anticipatory repudiation can be rescinded as long as the other party has not relied on it.
Define: Rescission
Agreement to CANCEL contract.
Define: Novation
An agreement to substitute a new party for existing party
Define: Accord and Satisfaction
an agreement to accept performance in FUTURE satisfaction of an EXISTING duty.

E.G. current obligation remains, but will accept new way of fulfilling it.
Define: Modification
Replace existing agreement with a new one.

Earlier agreement can no longer be enforced, even if the new agreement is not met.
General Rule: Impossibility/Impracticability as an excuse
Impossibility (common law) or Impracticability (Art. 2) MAY provide an excuse for non-performance.

RARELY an excuse on MBE.
Performance Excuse: Destruction of Something Necessary
Common Law: excuse for non-performance.

Art. 2: provides an excuse IF:
a) destroyed goods were identified in the contract
b)seller bore risk of loss (buyer is NOT excused)
Performance Excuse: Death of an Essential Person
Unless the person in question had special talents, death or disability is not an excuse.
Performance Excuse: Supervening Regulation
New regulations making the activity illegal ARE an excuse to performance
Performance Excuse: Frustration of Purpose
Excuse IF:
1: buyer had a special purpose
2: seller knew of special purpose
3: later unforeseen event frustrated that purpose
Performance Exception: Express Condition
an express condition must be COMPLETELY satisfied or the party will have an excuse.
Performance Exception: Satisfaction Clauses
IF contract requires that buyer be satisfied, OK, but
1: apply a reasonable person standard--objective satisfaction
2: for works of art, subjective standard--buyer must be satisfied
Excusing a Contract Condition
An express condition may be excused (and performance required) if:
1: party waives condition
2: party fails to cooperate in fulfilling condition
General Rule: Specific Performance
available only if monetary damages are inadequate
1: generally available for real estate
2: available for goods only if they are unique or substitutes are not available
3: unavailable for service contracts
Rule: Right to Reclaim Goods
No right to reclaim unpaid for goods under Art. 2 (must go to bankruptcy).

Exception is buyer was insolvent on receipt and seller demands return within 10 days.
Rule: Entrustment
An owner who entrusts goods with a merchant (e.g. for repair) has NO RIGHTS against a bona fide purchaser of them (e.g. if they were mistakenly sold).
Rule: Assurance
During performance, a party may request a REASONABLE assurance that the other party will perform.
Refusal to provide an assurance counts as anticipatory repudiation.
No right to demand a specific assurance or change contract terms.
Rule: Punitive Damages
NO punitive damages for breach of contract.
General Rule: Liquidated Damages
will be upheld if damages were difficult to estimate and are a reasonable forecast of probable damages (but not a penalty)
NYS Distinction: Liquidated Damages
a real estate seller is entitled to keep a down payment as liquidated damages.
Define: Expectation Damages
put the injured party in the same position as full performance
Rule: Art. 2 and Buyer's Expectation Damages
Cover damages: price to cover minus contract price. MUST cover in good faith.

Market damages: market price minus contract price (no obligation to cover)

Loss in value: value as promised - value as delivered (if buyer elects to keep goods)
Rule: Art. 2 and Seller's Expectation Damages
1: Resale Damages: contract price minus resale price (must resell in good faith)
2: Market Damages: contract price minus market price
3: Lost profit: if seller deals in volume, and loss is of volume rather than opportunity to sell
4: Contract price: if resale is impossible.
Rule: Incidental Damages
Incidental cost of adjusting to breach.

Available to both parties
Rule: Consequential damages
Will be awarded:
1: Damages special to particular plaintiff.
2: known or reasonably foreseeable to breaching party.

NOT available to a seller under Art. 2.
General Rule: Third Party Beneficiaries
A promisor and promisee can rescind or modify the contract until the third parties rights have vested

OR at any time if the contract specifically provides.
Rule: Rights of 3rd Party Beneficiary
Third Party MAY sue breaching PROMISOR (person who conveys benefit to 3rd party)

Third Party MAY NOT sue breaching PROMISEE (person secures promise)
General Rule: Delegation of Duties
Contractual duties MAY be delegated WITHOUT the CONSENT of the person who whom performance is owed.

UNLESS:
1: contract says otherwise
2: party has special skill or reputation
Rule: Delegation and Liability
Delegating party is still liable in the absence of a novation.

Delegate is only liable if there was consideration in the delegation (and thus original contracting party is a 3rd party beneficiary to the contract between delegator and delegate).
Rule: Assignment vs. 3rd Party Beneficiary
3rd Party beneficiary is present at the time of contract formation.

Assignee appears later.
Requirements for an assignment
Must be current--no promises to assign in the future.

Gift assignments are ok, no consideration required.
Restrictions on Assignment
1: contract language controls
2: cannot substantially change duties
a) can always assign right to payment
b) can rarely assign services
c) can assign requirements contracts (as long as requirements don't differ significantly)
Multiple Assignments:
Last gift assignee in time prevails (gift assignments are freely revocable)

First assignee for consideration prevails (irrevocable), EXCEPT if later assignee does not know of the others and gets a judgment first.
NYS Distinction: gift assignments
a gift assignment is NOT revocable if it is embodied in a signed writing.