Term
| 3 basic questions when assessing a Contracts question |
|
Definition
Has an enforceable contract been formed?
Has the contract been performed, or has performance been excused?
What are the remedies for breach? |
|
|
Term
|
Definition
| A legally enforceable agreement. |
|
|
Term
| There are 2 "universes" of contract law. what are they. |
|
Definition
Common law: Real estate or services
UCC Article 2: Goods |
|
|
Term
| How do you figure what law applies in a "mixed" contract? |
|
Definition
1st: the "all-or-nothing" rule: For indivisible contracts, they must be either classified as a goods or services/real estate contract.
2. Predominant purpose rule: does a good or a service play a bigger role? That's what governs. |
|
|
Term
| When assessing whether an enforceable contract has been formed, you must remember: |
|
Definition
All Contracts Don't Stink.
Agreement.
Consideration
Defenses to formation
Statute of frauds |
|
|
Term
|
Definition
| An offer is a manifestation of a willingness to enter into an agreement by the offeror that creates a power of acceptance in the offeree. |
|
|
Term
| Offer and acceptance are governed by the ____________ test. Which means _____________. |
|
Definition
Offer and acceptance are governed by the objective test, which means that outward appearance of words and actions is what matters--not secret intentions.
Key question is whether an offeror displays an objectively serious intent to be bound. |
|
|
Term
| What does the Common Law require to be included in an agreement? |
|
Definition
| All essential terms: parties, subject, price, quantity. |
|
|
Term
| What does the UCC require to be included in an agreement? |
|
Definition
| Less!! They will fill gaps. MUST have quantity, but price is not necessary! |
|
|
Term
| 6 ways to revoke an offer: |
|
Definition
1. Offeror revokes by express communication.
2. Offeree learns that the offeror has taken an action ABSOLUTELY inconsistent with a continuing ability to contract.
3. Offeree rejects the offer.
4. Offeree makes a counteroffer.
5. Oferror dies. (remember--this is still in "offer" stage!)
6. Reasonable amount of time passes. |
|
|
Term
| 4 ways to make an offer irrevocable: |
|
Definition
1. Option
2. Firm Offer
3. Offeree has started performance
4. Detrimental reliance |
|
|
Term
What is a "firm offer?"
How does it differ from an option? |
|
Definition
Firm offer is made by a MERCHANT. This is in UCC territory. Must be written, contain and explicit promise not to revoke, and be signed. Lasts for a reasonable time, not to exceed 90 days.
Differs from an option in that anyone can enter into an option contract, and an option just requires consideration to keep the offer open. |
|
|
Term
| Who is "the master of the offer?" |
|
Definition
| The offeror! This means he controls the terms of the offer--and thus--the acceptance. |
|
|
Term
| What if the seller tries to accept by shipping the wrong goods? |
|
Definition
| This is ACCEPTANCE and a BREACH!!!!!! |
|
|
Term
| What's an implied-in-fact contract? |
|
Definition
| Acceptance of a contract without writing or speaking. If you drive into a car wash, or sit down for a haircut...you've accepted a contract. |
|
|
Term
What is the mailbox rule?
What are the exceptions? |
|
Definition
Mailbox rule says that acceptance sent by mail is valid when the letter is sent.
It does not apply if the offerree sends something else first (rejection or counteroffer), or to option contracts. |
|
|
Term
| What is the mirror image rule? |
|
Definition
| COMMON LAW rule, means that the acceptance must match the terms of the offer exactly, or else it is a counteroffer. |
|
|
Term
|
Definition
This is what the UCC uses instead of the mirror-image rule.
Main intuition: A purported acceptance that does not match the terms of the offer exactly can still count as a legal acceptance in many circumstances. Don't assume that all terms in the acceptance will come in.
2-207(1): definite and seasonable expression of acceptance will count as an acceptance, even if there are new terms, UNLESS acceptance is conditional upon assent to the additional terms.
2-207(2): If both parties are merchants, new terms MAY control, if they don't materially alter the deal, the initial offer did not limit acceptance to its terms, and the offeror doesn't object to the terms within a reasonable time. |
|
|
Term
|
Definition
Common law rule; says that no modification of a contract can occur unless there is new consideration.
Exceptions include a change in performance, a third party promising to pay, or unforeseen difficulties. |
|
|
Term
| Modification under the UCC: |
|
Definition
UCC universe does not follow the preexisting duty rule.
A modification made in good faith is binding even without new consideration. |
|
|
Term
| Is promising not to sue a valid form of consideration? |
|
Definition
| yes, if you have an honest belief in the validity of the claim. |
|
|
Term
| 3 elements of Promissory Estoppel: |
|
Definition
Promise is made that would be reasonably expected to induce reliance.
promisee does indeed take detrimental action in reliance on the promise.
Injustice can be avoided only by enforcement of the promise |
|
|
Term
|
Definition
"Contract implied in law." 3 elements.
Plaintiff confers a measurable benefit on the defendant.
plaintiff reasonably expected to be paid.
it would be unfair to let the defendant keep the benefit without paying. |
|
|
Term
| Moral obligation plust subsequent promise. |
|
Definition
| A FEW JURISDICTIONS have some case law suggesting that a moral obligation plus a subsequent promise to pay can be binding. Normall, this is past consideration, and not binding. |
|
|
Term
Seven common defenses:
(D in "All contracts don't stink.") |
|
Definition
Misunderstanding
incapacity
mistake
fraud/misrepresentation/nondisclosure
duress
illegality
unconscionability |
|
|
Term
| Misunderstanding (3 elements): |
|
Definition
Defense to contract formation:
The parties use a material term that is open to two or more reasonable interpretations (so the objective test cannot apply).
Each side attaches a different meaning to the term; and
neither party knows, or should know, of the confusion.
Think Peerless case, or sit-com style contracts. |
|
|
Term
|
Definition
minors.
mentally ill.
intoxicated persons. |
|
|
Term
|
Definition
"Incapacity" defense.
Under the age of 18.
Blanket protection until they reach the age of 18.
Still must pay fair value for necessities. |
|
|
Term
| contracting with intoxicated persons |
|
Definition
incapacity defense.
must be VERY intoxicated, and the other party must know this. |
|
|
Term
| contracting with mentally ill persons; two standards |
|
Definition
The person cannot understand the nature and consequences of his actions; or
the person cannot act in a reasonable manner in relation to the transaction (if the other side knows this). |
|
|
Term
|
Definition
| Mistake is a belief that is not in accord with a present fact. |
|
|
Term
|
Definition
Adversely affected party may rescind if:
there is a mistake of fact, existing at the time the deal is made.
The mistake relates to a basic assumption of the contract and has a material impact on the deal.
The impacted party must not have assumed the risk. |
|
|
Term
|
Definition
Lets the adversely affected party rescind if:
You can prove all the elements of mutual mistake plus...
mistake would make the contract unconscionable; or
the other side knew of, had reason to know of, or caused the mistake. |
|
|
Term
|
Definition
party must show...
a misrepresentation of a present fact
that is material or fraudulent (intentional); and
that is made under circumstances in which it is justifiable to rely on the representation. |
|
|
Term
|
Definition
| trick someone into signing something that they don't know is a contract. |
|
|
Term
|
Definition
| Normally, no need to tell other side all material facts, but cannot actively conceal, and may have to disclose if in fiduciary relationship. |
|
|
Term
|
Definition
| where one party makes threats to induce another party to contract or modify a contract. |
|
|
Term
|
Definition
| illegal contracts are unenforceable, but a contract entered in furtherance of an illegal act (that is not itself illegal) will still be enforced. |
|
|
Term
|
Definition
2 types:
procedural unconscionability: a defect in the bargaining process itself, such as a hidden term (surprise) or an absence of meaningful choice ( no other contracting option);
Substantive unconscionability: a rip-off in some term of the contract. |
|
|
Term
| When does the Statute of Frauds apply? |
|
Definition
M. Sour!!
Marriage: a contract made in consideration of marriage (ex: prenups)
Suretyship: contract promising to guarantee the debt of another.
One Year: A contract that by its terms cannot be performed within a year from its making.
UCC: Applies to goods contracts for a price of $500 or more.
Real Property: A contract for the sale of real property. |
|
|
Term
| What is the exception to Suretyship contracts, where the SoF doesn't apply? |
|
Definition
| The Main Purpose Exception: if the main purpose in agreeing to pay the debt of another is for the surety's own economic advantage, then the statute of frauds applies. |
|
|
Term
| 2 main ways to satisfy the statute of frauds? |
|
Definition
|
|
Term
| Services contracts under the Statute of Frauds can be satisfied by.... |
|
Definition
FULL performance by either side.
Part performance of a services contract does not. |
|
|
Term
| A writing signed by a party can satisfy the SoF when... |
|
Definition
| it is asserted against the party who signed it; and when it includes an indication that a contract has been made, it identifies the parties, and it contains all the essential elements of the deal. |
|
|
Term
| Real Estate contracts can be satisfied under the SoF in 2 ways: |
|
Definition
A signed writing.
Part performance when 2 of 3 elements are met:
Possession, Payment, imProvements to the land. |
|
|
Term
| When does a writing satisfy the SoF for Goods purposes? |
|
Definition
| Signed writing will satisfy the SoF, but must mention the quantity sold. No need to mention price. |
|
|
Term
| If a goods contract for $500+ mentions quantity X, but one party asserts that the contract was orally made for quantity Y, which quantity will control? |
|
Definition
| X. The quantity memorialized. |
|
|
Term
| How does part performance satisfy the SoF for a goods contract (over $500)? |
|
Definition
| Only for the quantity delivered and accepted. |
|
|
Term
| What is the custom made goods exception? |
|
Definition
Custom goods are exempted from the SoF.
As soon as a maker makes a substantial beginning toward manufacturing the goods, the SoF is satisfied (...in that it doesn't apply). |
|
|
Term
| What oral acknowledgment of a contract will satifisfy the SoF? |
|
Definition
| a judicial admission, such as a statement in a pleading or during testimony. |
|
|
Term
| When does a failure to object to a confirming memo satisfy the SoF? |
|
Definition
| When both parties are merchants. |
|
|
Term
| What is the equal dignity rule: |
|
Definition
| Rule that states that a principal must sign a writing to authorize an agent to form a contract in SoF world. |
|
|
Term
| Do you need a writing to modify a contract that required a writing under the SoF? |
|
Definition
| If the modification would keep the deal in SoF world, yes; if it would take the deal out of SoF world, then no. |
|
|
Term
| Parol evidence rule applies to... |
|
Definition
| Earlier written documents and communications, but NOT later written or oral statements. Subsequent communications are modifications. |
|
|
Term
| What is the presumption in the UCC regarding the Parol Evidence Rule? |
|
Definition
| UCC presumes that a contract is at most a partial integration, and will only exclude disputed terms that "would have certainly been included" in a writing |
|
|
Term
| When will courts allow extrinsic terms? |
|
Definition
| If the term would have "naturally been omitted" from the contract. |
|
|
Term
| The parol evidence rule does not apply to: |
|
Definition
Defenses to contract formation (such as mistake, duress, fraud).
Evidence of a separate deal.
Evidence of a prior communication that is designed to interpret an AMBIGUOUS TERM in the final agreement (has to be an ambiguous term though). |
|
|
Term
| Distinguish SoF from PER... |
|
Definition
SoF deals with, generally, signed writings.
PER deals with signed writings vs. earlier discussions. |
|
|
Term
|
Definition
| A promise about a term of the contract that explicitly shifts the risk to the party making the promise. |
|
|
Term
| What is an express warranty? |
|
Definition
A promise that affirms or describes the goods and that itself is part of the basis of the bargain.
The use of a sample or model good creates an express warranty. |
|
|
Term
| What is an implied warranty of merchantability? |
|
Definition
MUST BE A MERCHANT SELLING A PRODUCT THEY ARE A MERCHANT OF.
Merchant implies that the goods are fit for ordinary commercial purposes. |
|
|
Term
| Can a merchant disclaim an implied warrant of merchantability? |
|
Definition
| Yes, but only if it is VERY CONSPICUOUS!!! (words like "as is" help). |
|
|
Term
| What is an implied warranty of fitness for a particular purpose? |
|
Definition
Warranty created where buyer relies on a seller's expertise to select a special type of good that will be used for a special purpose.
The seller makes an implied warranty that the goods will satisfy the special purpose.
Seller can disclaim this warranty. |
|
|
Term
| Can nonmerchant sellers create an implied warranty of fitness for a particular purpose? |
|
Definition
| Yes--buyer just has to be relying on seller's expertise. |
|
|
Term
|
Definition
another way to shift risk.
Contractual obligations will only kick in if some future event takes place.
Can be express or implied. |
|
|
Term
| What is an express condition? |
|
Definition
Express conditions are created by language in the contract such as "only if," "provided that," "on condition that," etc.
Must be satisfied strictly--unless the conditions is excused somehow. |
|
|
Term
| 2 approaches to satisfaction clauses: |
|
Definition
Preferred approach is to use an objective standard, meaning that if most reasonable people would be satisfied, then the condition is met.
Contracts involving aesthetic taste, such as art or tutoring, will measure whether any satisfaction conditions are met with a subjective standard. Party can still breach by claiming dissatisfaction in bad faith. |
|
|
Term
| How can a party receiving protection of the condition waive the condition? |
|
Definition
By words or conduct.
Note that the other party CANNOT waive the term (only the party who benefits from the protection of the condition can waive it). |
|
|
Term
| What happens if a party to a conditional contract interferes with or hinders the occurrence of a condition? |
|
Definition
| They waive the condition. |
|
|
Term
| What is a constructive condition of exchange? |
|
Definition
Most important conditional requirement.
says that one party's performance is conditioned on the other side's performance.
At common law, a CCE is satisfied by substantial performance (no material breach). |
|
|
Term
| Under the UCC, does substantial performance apply? |
|
Definition
NO! The UCC uses perfect tender.
Perfect goods.
Perfect delivery.
Buyer can reject the goods, or can revoke acceptance after inspection in a reasonable time.
Must give the seller a chance to cure. |
|
|
Term
| When does the UCC NOT require perfect tender, but instead uses Substantial Performance? |
|
Definition
Installment contracts.
In installment contracts, an installment can be rejected only when there is substantial impairment in the installment that can't be cured. |
|
|
Term
| 3 common methods of tender/delivery: |
|
Definition
Seller's place of business.
Shipment Contract.
Destination Contract. |
|
|
Term
| Seller's 3 obligations in a shipment contract: |
|
Definition
Get the goods to a common carrier.
Make arrangements for delivery.
notify the buyer.
Buyer bears risk of loss in transit (unless specifically dealt with in contract, and unless a party has breached) |
|
|
Term
| Destination contract (identified F.O.B.) |
|
Definition
Seller must get the goods to the buyer's business and notify the buyer.
Seller bears risk of loss in transit (unless specifically dealt with in contract, and unless a party has breached) |
|
|
Term
| Excuses distinguished from Defenses.... |
|
Definition
| Defenses deal with contract formation; excuses allow a party to not perform |
|
|
Term
| Impossibility and impracticability: 3 common situations |
|
Definition
Contract EXCUSES for performance.
Performance becomes illegal after the contract is formed.
Subject matter of the contract is destroyed.
Services contract with a special person, and person dies.
Something making performance more expensive will not suffice: look for something that hinders ABILITY to perform, not cost. |
|
|
Term
| Does death normally excuse liability on a contract? Exception? |
|
Definition
Not generally. Estate will be on the hook for contractual obligations.
If there is something special about the person performing the contract, then performance will be excused. |
|
|
Term
|
Definition
Performance Excuse:
Performance can still occur, but something has happened to undermine the entire reason for the creation of the contract.
Event must be extreme, and risk must not have been allocated. |
|
|
Term
| Can both parties agree to walk away from a contract? |
|
Definition
Yes, so long as both parties have some remaining performance obligations.
If one party has performed completely, then you can't walk away. |
|
|
Term
|
Definition
form of modification:
parties to an earlier contract agree that performance will be satisfied instead by the completion of a different performance.
The new performance is the accord.
The excusing of the initial performance is called the satisfaction. |
|
|
Term
|
Definition
| Both parties to agree that a 3rd party will take over one of the party's performance obligations. |
|
|
Term
| Anticipatory Repudiation: |
|
Definition
Unequivocal expression that a party will not perform.
Non-breaching party can treat the repudiation as a breach and sue for damages immediately, or:
Ignore the repudiation, demand performance, and see what happens. |
|
|
Term
| When can a party retract its repudiation? |
|
Definition
| Before the other side has filed a lawsuit, or acted in reliance on the repudiation. |
|
|
Term
| When is "adequate assurance" appropriate? |
|
Definition
A party can demand adequate assurance of performance under the UCC when reasonable grounds for insecurity exist.
Failure to respond in a reasonable time constitutes a repudiation. |
|
|
Term
Expectation damages are....
how are they measured? |
|
Definition
This is the normal way to calculate money damages.
The goal is to put a party in the same position that it would be in if the contract had been performed as promised.
Compare the value of the performance without the breach to the value of the performance with the breach (basically, what you would pay under the contract versus what you actually had to pay because of the breach).
In the UCC: buyer can "cover" with similar products and recover the difference in cost. They can accept non-conforming goods and recover the cost of perfecting the performance. They can reject the goods. |
|
|
Term
| 3 major limits on Expectation Damages |
|
Definition
1. Expectation damages must be proved with reasonable certainty
2. Unforeseeable consequential damages are not recoverable unless the breaching party had some reason to know about these otherwise unforeseeable consequential damages.
3. Breached-Against party must take reasonable steps to mitigate damages. |
|
|
Term
|
Definition
If seller is a retailer who sells this type of good all the time, then reselling the item isn't "mitigation," because they could have sold both otherwise.
Seller will be able to recover their profit margin (?). |
|
|
Term
|
Definition
If the paying party breaches in a partially completed building contract, the builder can't finish the building.
Damages= the total contract price - what has already been paid to non breacher - cost to non-breacher of completing performance. |
|
|
Term
| Economic waste and diminution in market value damages: |
|
Definition
Cost -to-complete is normal measure of damages, but where this would result in dramatic overcompensation of plaintiff, then the court will calculate damages by the reduction in market value (this could be $0!!!!!).
Breaching party generally must have innocently and unintentionally breached. |
|
|
Term
|
Definition
| put the party in the same economic position it would be in if the contract had not been performed in the first place. (what loss has the plaintiff incurred as a consequence of the breached contract) |
|
|
Term
|
Definition
| Compensate the plaintiff for the economic benefit conferred upon the defendant. |
|
|
Term
|
Definition
Damages set out in the contract as an explicitly negotiated amount due upon breach.
Only allowed where:
Amount of liquidated damages was reasonable at the time of contracting;
actual damages from breach would be uncertain in amount and difficult to prove. |
|
|
Term
|
Definition
| Almost never allowed in contract law; generally only if there is also a tort in issue. |
|
|
Term
| Specific Performance/Injunction |
|
Definition
Only awarded where money damages are considered inadequate for some reason.
Presumptively available in real estate transactions.
Presumptively NOT available in personal service contracts.
Generally available for UNIQUE GOODS/custom items. |
|
|
Term
|
Definition
Equitable right of an unpaid seller to reclaim goods when buyer is insolvent.
Buyer must be insolvent.
Seller must demand goods within 10 days or reasonable time.
Buyer must still have the goods. |
|
|
Term
|
Definition
Parties intended to convey enforcement rights to the third party in the event of the breach.
Intended beneficiaries HAVE the right to sue. |
|
|
Term
|
Definition
| Does not have the right to sue. |
|
|
Term
|
Definition
| Arises when the promisee strikes a deal with the promisor in order to repay some earlier debt to the third party. |
|
|
Term
|
Definition
| Arises where promisee clearly intends to confer a gift of enforcement upon a third party. |
|
|
Term
| Modifying/revoking away third party's right to enforce the contract: |
|
Definition
If 3rd party did not know of the rights, they may be modified/revoked.
Beneficiary relied on the rights.
Beneficiary manifested assent to the contract/rights.
Beneficiary files suit to enforce the contract. |
|
|
Term
| Assignment and delegation |
|
Definition
Assignment: transfer of rights under a contract.
Delegation: transfer of duties under a contract. |
|
|
Term
| Distinguish Assignment and Delegation from 3rd party beneficiary contracts.... |
|
Definition
A&D is a two step process: Contract is formed, and then transfer of benefits/obligations.
3rd party contract: the 3rd party is contemplated in the formation of the contract. |
|
|
Term
| Distinguish between prohibiting assignments and invalidating assignments. |
|
Definition
Usually, they can still be assigned, but you've breached. 3rd party can still recover rom the guarantor.
If a contract states that assignments are INVALIDATED, then you cannot assign them, and the 3rd party cannot recover anything. |
|
|
Term
|
Definition
Under the common law, a promise to perform a pre-existing legal duty does not qualify as consideration because the promisee is already bound to perform (i.e. there is no legal detriment).
The more modern approach provides an exception where contractual parties owe each other existing contractual obligations, but a third party offers a promise contingent upon performance of the contract. The third party's promise will be sufficient consideration. |
|
|
Term
| When a party is suing for payment in a breach, what do you need to look out for? |
|
Definition
Timing!!!
If a renter breaches a year long contract, the landlord is only entitled to the money that he was due at the time the suit is brought!!
If one party performs completely, and the other party anticipatorily repudiates, the non-breaching party just has to wait out the term!! Note: if both parties have performance remaining, they can sue at that moment. |
|
|
