Contracts

Flashcards based on Contracts Lecture Notes

What is an offeror?

The person who makes the offer

What is an offeree?

The person to whom an offer is made

What is a merchant?

A person who deals in goods of the kind

What is a bilateral contract?

Formed from an exchange of promises

What is a unilateral contract?

Involves only 1 promise (by the offeror) that expressly requires performance to accept

In a unilateral contract, when is the contract formed?

The offeree must complete performance

What is an express contract?

Formed by express written or oral terms

What is an implied-in-fact contract?

Formed by the conduct of the parties

Is an implied-in-law (quasi-contract) enforceable?

No, it is not a contract. It is a restitution remedy to prevent unjust enrichment

What does it mean if a contract is void?

No contract exists, agreement has no legal effect

What does it mean if a contract is voidable?

A problem with the contract exists, but it may be enforced or rejected at the option of one party

What does it mean if a contract is unenforceable?

A valid contract exists, but it CANNOT be enforced because a defense applies

What two types of law govern contracts?

Article II of UCC + Common Law

What distinguishes between whether UCC or common law governs a contract?

UCC - governs the sale of goods contracts; Common Law - applies to all other contracts (services, property, etc.)

How do you determine what law applies in a mixed contract that involves goods and services?

The predominant purpose of the contract controls the law that applies

Define a good with respect to Article II of the UCC?

All things movable at the time of identification to the contract

Is money/currency defined as a good?

No, it is not.

What is the “formula” to form a valid contract?

[Mutual Assent + consideration] - defenses

What are the two elements of mutual assent?

Offer + acceptance

What are the three elements of an offer?

Manifestation of present intent to enter into a contract; With definite and reasonably certain terms; Communicated to an identified offeree

Can an offer be terminated before acceptance by revocation, what about rejection or a counter offer?

Yes and yes.

Can an offer be terminated before acceptance by lapse of time, what about death of a party?

Yes and yes

If the contract becomes illegal after an offer is made, but before acceptance, will the offer terminate?

Yes

What is the indirect revocation of an offer? Two elements

When an offer takes definite action inconsistent with entering into a proposed contract, AND Offeree acquires reliable info to that effect

What is an option contract?

A promise to keep an offer open, supported by consideration

Can an offeror revoke an option contract?

No

What are the three elements of the UCC Merchant’s Firm Offer rule?

An offer by a merchant to buy/sell goods; Signed by both parties; Stating offer will be held open

Is consideration required in the UCC Merchant firm offer rule?

No, it is not.

Can an offeror revoke an offer if the offeree detrimentally relied on it?

No, they cannot (Promissory Estoppel)

In a unilateral contract, can an offeror revoke an offer after the offeree has started performance? What if they have only prepared, but haven’t started?

No, mere preparation is usually insufficient alone.

What is rejection with respect to an offer?

The manifestation of intent to NOT accept an offer, communicated to the offeror

What are the two results of a counteroffer?

A rejection of offer 1; The creation of offer 2

Is a conditional acceptance treated the same as a counteroffer?

Yes, it is

Define acceptance?

Offeree’s manifestation of objective assent to the terms of the offer; An acceptance can be based on an objective standard. They don’t have to be a YES or NO.

What are two main ways you can accept an offer?

By express words or conduct; By performance

What is the difference in acceptance between a bilateral contract and a unilateral contract with respect to performance?

Bilateral contract - start of performance manifests acceptance; Unilateral contract - completion of performance manifests acceptance

Does silence constitute acceptance?

Generally NOT, unless an implied-in-fact contract exists.

Does the shipment of goods constitute acceptance? What about the promise to ship goods?

Yes and Yes

What is the mirror image rule?

Acceptance MUST exactly mirror the offer; any variations constitute a counteroffer.

Does the mirror image rule exist under the UCC? What about common law?

The mirror image rule DOES NOT exist under the UCC, but exists under common law.

What are the four elements that allow an acceptance to not mirror the offer under the UCC?

Both parties have to be merchants; The term is not a material change; Offer does not limit acceptance to the exact offer, AND No objection was made within a reasonable time

Give me an example of a material change?

Disclaimer of a warranty, arbitration clause

When is an offer effective? (timing)

When it is received.

When is an acceptance effective? (timing)

When it is dispatched.

When is the acceptance of an option contract effective? (timing)?

When it is received. This is an exception to the general rule.

When is a rejection of an offer effective? (timing)

When it is received.

If an offeree sends both an acceptance and a rejection, what is the rule if the acceptance is dispatched before the rejection?

A valid contract is formed

If an offeree sends both an acceptance and a rejection, what is the rule if the rejection is sent before the acceptance?

The first one received by the offeror controls.

What is an implied-in-fact contract? (Two elements)

A contract is created by conduct if: The conduct is intentional; AND Each party has a reason to know the other party will interpret the conduct as an agreement

What are the four typical terms of a common law contract?

Parties, subject matter, price, time

What is the only essential term under the UCC?

Quantity

What are the two terms required for a contract on real property?

Description of land and price

Define consideration?

Bargained for exchange of any act that benefits the promisor or causes detriment to the promisee.

Is moral consideration valid?

No

Is past consideration valid?

No

Is a promise of a gift valid consideration?

No

What is the material benefit rule?

A promise made in recognition of a benefit previously received is binding to the extent necessary to prevent injustice.

What are the three elements of promissory estoppel?

A promise is enforceable without consideration when reliance was reasonable, foreseeable, and resulted in detriment to the promise.

Promise + Inducement +Reliance

Is a promise to pay a non-legally enforceable past debt valid consideration? What is required if so?

Yes, needs to be in writing.

What are the two requirements to modify a contract under common law?

Mutual assent; Valid consideration

Is a pre-existing duty valid consideration? Exceptions?

No, it is not. i. Exceptions: 1. Addition or Change 2. Unforeseen circumstances 3. Third-party promise

Is consideration needed to modify a contract under the UCC?

No

What are the two requirements for modifying a contract under the UCC?

Mutual assent; Good faith

Is the statute of frauds applicable to modifications?

Yes

Is consideration required for a modification under the UCC? What about a waiver?

✅ Modification: Under the UCC, consideration is NOT required for a contract modification if it is made in good faith (UCC §2-209(1)).

✅ Waiver: A party may waive a contractual term under the UCC without consideration, but the waiver can generally be retracted unless the other party has relied on it (UCC §2-209(5)).

Explain the defense of incapacity.

The contract is VOIDABLE by the person who lacked capacity

Can intoxication be used as an incapacity defense to contract formation? Explain?

Only if the other person has reason to know of the intoxication

Explain the necessity exception to the incapacity of a minor in a contract?

Minoirs are bound on contracts for necessities such as food, shelter and medical care.

Explain the implied affirmation exception to the incapacity of a minor in a contract.

A contract can be enforced if: Minor lacked capacity at formation; Minor later gains capacity (turns 18); 18 year 18-year-old retains the benefit of the contract

Is a contract valid if created under physical duress? Void or voidable?

No, physical compulsion is a valid defense. The contract is void.

Is a contract void or voidable under non-physical/economic duress?

The contract is voidable by the victim if: An improper threat is made; That induces a party, Who has no reasonable alternative, To enter into a contract.

Is a contract void or voidable based on the undue influence of another? Explain.

The contract is voidable if there is: Unfair persuasion of the victim; The victim is under domination or in a close relationship with the other party

What are the three major elements of a mutual mistake as a defense to contracts?

Both parties are mistaken; Mistake is material; The person asserting the mistake did not bear the risk of the mistake

Is a mistake about the price/value material?

Generally, not.

What is a unilateral mistake?

One party makes a mistake that is unknown to the other party.

Is a unilateral mistake a valid defense? Exceptions?

Generally not, but a contract is voidable if one party knew or had reason to know of the mistake or if it is unconscionable.

Is a misunderstanding by both parties a valid contract defense?

Yes, if it is material and there are different subjective meanings.

If one party is aware of a meaning understood by the other party, is a contract formed according to the understanding of that party?

Yes, it is.

What are the four elements of fraudulent misrepresentation?

D knowingly; Made a false representation; Of material fact; The other party relied on it.

Is a contract void or voidable if there is fraudulent misrepresentation?

Voidable by the injured party

Is the contract void, voidable, or governing if there is non-fraudulent misrepresentation?

Voidable by the injured party

Generally, is there a duty to disclose?

Usually not, unless it is required.

Is concealment allowed?

Generally not, it is deemed a misrepresentation.

If the subject matter of the contract is illegal, is the contract void or voidable?

Void

If the purpose of the contract is illegal and a party didn’t know of the illegal purpose, is it void or voidable?

Voidable by the party that didn’t know of that purpose.

Will courts enforce a contract that is contrary to public policy?

Generally not.

What are the two main requirements for unconscionability? Explain them?

Procedural unconscionability: Unfair bargaining; Substantive unconscionability: Unfair terms

What is the statute of frauds?

Contracts subject to the statute of frauds are not valid unless in writing

What are the six types of contracts that are subject to the statute of frauds?

Goods for $500 or more; Contracts greater than 1 year; Marriage; Suretyship (Promise to pay debt); Land contracts; Executor promises (wills/trusts)

Is a confirmatory memo a valid exception to the statute of frauds?

Yes, if signed and the other party doesn’t object within 10 days.

If a party accepts or pays for goods, does the statute of frauds apply?

No, not anymore

Explain the custom-made goods exception to the statute of frauds.

Goods custom-made for a buyer do not need to be enforced in writing

In a land contract, what is required for the statute of frauds not to apply?

⅔ of the following: Payment for land; Possession of land; Made valuable improvements to the land

What is the parol evidence rule?

Evidence of a prior or contemporaneous negotiation or agreement is INADMISSIBLE to contradict/supplement a later written contract.

Does the parol evidence rule apply to subsequent agreements?

No, it does not.

If the integrated writing does not contain all terms of the contract, can extrinsic evidence oral be allowed?

Only if it doesn’t contract the written terms of the contract.

If a contract is missing default contracdt terms, how will they be determined?

The court will fill in default gaps base on reasonable price, time, occurrence, etc.

What is the different between a shipment contract and a destination contract?

Shipment Contract - Seller must deliver goods to a suitable carrier at seller’s location (FOB Seller’s location); Destination Contract - Seller must safely deliver goods to Buyer’s Location (FOB Buyer’s location)

When does the risk of loss pass to the buyer in a shipment contract and a destination contract?

Shipment contract - Passes when goods are delivered to the carrier; Destination contract - Passes when goods are delivered to the buyer.

If the contract doesn’t specify, is a shipment or destination contract presumed?

A shipment contract is presumed and shipment is by an independent carrier.