Contracts Checklist Fixed

Offer

An outward manifestation[1] Of a present contractual intent[2] Which has certain and definite terms and[3] in communicated the offeree[4]

Contract

 An agreement between two or more parties which the law will enforce. [Mutual Assent + Consideration, offer, acceptance and consideration ]

Objective Theory of Contracts

• The modern rule holds that mutual assent exists if

  • A reasonable person

  • would objectivity have understood

  • the outward actions and statement of the other party

  • to indicate an intent to enter into a legally binding contract 

  • agreement to terms and conditions of the contract

Mutual Assent

1. Offer and Acceptance

   1. Can you provide valid offer and valid acceptance

2. Objective Theory of Contracts

   1. Would a reasonable person have understood the objective actions and statement of the parties to indicate a binding contract plus the terms? 

3. UCC Formation Rule

   1. Did the parties' words and conduct 'sufficient to show agreement' in 'any manner'?

Firm Offer [Common Law]

A firm offer is an offer which is irrevocable because an option has been paid for by one of the parties

Firm Offer[UCC ]

An option need not be paid for if the firm offer was Made by a merchant who signed  in writing giving assurance that the offer 

1. Will remain open for a specified length of time OR

2. If not specified, then for a reasonable length of time not to exceed three months

Present Contractual Intent

Offeror's outward, objective manifestation of a genuine willingness to be legally bound by specific terms the moment the offeree accepts.

Contract Definite Terms

(Q-Tips):  Quality, Time for performance, Identity of the parties, Price, and Subject matter

Termination

An offer lapses if the offeree fails to accept the offer prior to a specified time.

1. Termination Time Stated in Offer: Set time that offer will terminate

2. No termination time stated and is made during convo or meeting: Offer terminates at end of convo or meeting

3. No termination time is stated and not during convo or meeting: Terminated after reasonable time

UCC Rule on Lapse of Offer

When acceptance is by beginning performance, the offeree must notify the offeror within a reasonable time, or the offeror may treat the offer as having lapsed.

Revocation

Offeror revokes the offer before acceptance

[Takes effect upon receipt by the offer. Minority view: holds revocation become effective when sent by the offeror]

UNLESS

1. Unilateral Contract and the offeree has begun performance

2. Firm offer [which terminates at end of time stated] 

3. Offeree detrimentally relied on the offer

Rejection

A manifestation by the offeree that he or she does not intend to accept the offer nor give it further consideration. A rejection becomes effective upon receipt by the offeror

Counteroffer

An implied rejection of the original offer – It is , in effect a new offer available for acceptance [Implied Rejection] 

Acceptance

The unequivocal assent to the terms of the offer

Mirror Image Rule

Under the common law, an acceptance must match the terms of the offer

[If the acceptance contains additional or different terms, it is a counter offer rather than an acceptance]

Acceptance Under the UCC

• Under the UCC, an acceptance may differ from the offer with regards to minor terms 

• A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance, even though it states terms additional to or different from those offered or agreed upon

UCC Additional Terms in Acceptance or Confirmation by Non-merchants

If additional / different terms are included in an acceptance for a contract between non-merchants, These terms are merely a proposal unless acceptance is expressly conditional on assent to the additional or different terms

UCC Additional / Different Terms in Acceptance or Confirmation by merchants

Additional terms in an acceptance for a contract between merchants become part of the contract unless the other

• 1.Expressly limits acceptance to the terms of the offer

• 2.The additional terms constitute a material alteration or 

• 3.Notification of objection to the additional terms has already been given or is given within a reasonable time after notice of them is received

UCC Different Terms in Acceptance or Confirmation by Merchants 

Different terms in an acceptance for a contract between merchants don't generally become part of the contract even if they do not constitute a material alteration

• 3 Different rules may apply, depending upon the jurisdiction 

  • 1. Knockout Rule

  • First Shot Rule

  • Last Shot Rule

Knockout Rule

The different terms in both the offer and acceptance are 'knocked out' of the contract, and the contract consists of those terms upon which the parties agree, with UCC gap fillers used to supply missing terms

First Shot Rule

 Terms in an acceptance which are different from those in an offer are out, so the contract consists of the terms of the contract

Last Shot Rule

Different terms are treated as a proposal [same as additional terms] Such different terms are deemed to have been accepted and therefore binding, if followed by performance

Consideration

Is that which bargained for and given in exchange for a promise [bargained for exchange] [Consideration must include a legal determined to both parties ]

• An act

• A forbearance to act or

• A return promise

Legal Detriment

A promise TO do something that you are not legally obligated to do, OR To refrain from doing something that you are legally privileged to do 

Nominal Consideration

Some courts will say it is not real consideration. Other courts will consider it consideration

Preexisting duty Rule

When one party already owes a duty to the other under some prior agreement, performance of that duty cannot be consideration for a new agreement

Illusory Promise

An expression that resembles promissory terms, but actually imposes no obligation upon the party making it [So the element of legal detriment is lacking]

Parol Evidence Rule [Under Common Law]

Provides that where the parties have entered into an agreement that has been reduced to writing with the intent being to make that writing a final and complete expression of their contract, no evidence of a prior contemporaneous agreement can be introduced to change the terms of the written contract

A.Exceptions to Parol Evidence Rule

1. Proof of lack of formation of contract

2. Proof of a condition precedent

3. A modification OR

4. Naturally omitted terms which were part of a collateral agreement or supported by separate consideration

Parol Evidence Rule [UCC]

the court must specifically find that the parties intended the writing to be the final agreement before extrinsic evidence will be excluded

• Additionally, the contract may be explained or supplemented by parol evidence as to course of performance, course of dealing or usage of trade 

Adhesion Contracts

A contract drafted by the stronger of two parties, with terms unfairly favoring the stronger party, and offered to the weaker party with little or no negotiation as to the already drafted terms.

Mistake

 A mutual mistake occurs when both parrots to a contract have an erroneous belief related to the facts, or to the contents or effects of a writing at the time of the creation of the contract [Unilateral mistake = only one party thinks there is a mistake] [Defenses to Formation]

Misrepresentation (Neg)

One party intentionally, negligently, or even innocently makes a false statement upon which the other party relies in agreeing to the contract. The remedy is recession, or if not possible, then actual damages may be awarded. [[Defenses to Formation]

Incapacity (Legal/Mental):

A legal immature or mentally incapacitated person has the power to disaffirm a contract by manifesting to the other party and unwillingness to continue to be bound by the contract [Enforceable as long as the minor wants to be a part of the contract but minor can walk away ] [Defenses to Formation]

Statute of Frauds

A contract involving [insert one of the five choices] must be signed in writing by the defendant to be enforced

• A contact which by its terms cannot be performed within one year from the making thereof

  • One Year. Cannot be performed in less than a year 

• A promise to answer for the debt or default of another

  • Two D's: Debt or Default 

• A promise in consideration of marriage

  • Third Finger [Ring Finger] 

• A contract involving an interest in real properly &

  • Four Corners of a Property 

• Under the UCC, a contract for the sale of goods priced $500 or more 

  • Five Hundred Dollars

UCC EXCEPTIONS TO THE STATUTE OF FRAUDS:

• A sale confirmation signed by the sender was received but not objective within 10 days of receipt 

• The contract deals with goods to be specially manufactured and the seller has made either a substantial beginning of their manufacturer or commitments for their procurement prior to receiving repudiation 

• The party against whom enforcement is sought admits in court that a contract was made, but the contract is not enforceable beyond the quantity of goods admitted 

• Payment has been made, but the contract is not enforceable beyond the payment 

• The goods have been received and accepted, but the contract is not enforceable beyond the quantity of goods received and accepted

Common Law EXCEPTIONS TO THE STATUTE OF FRAUDS:

• A sufficient memorandum of the agreement in available 

• Part performance of the contract has occurred –however, the contract may be enforceable only to the extent of completed performance 

• The doctrine of promissory estoppel applies 

• The contract involves payment of another's debt or default, but the main purpose of the contract was a different purpose 

  • Example: If you get all A's this semester i'll pay off your car 

• The contract cannot be fully performed within one year, but one party has already fully performed

Ambiguity

A contract is ambiguous when, examining the contract as a whole, in light of the circumstances at the time of its creation, the meaning of the contract is uncertain or material terms of the contract could reasonably be intercepted in two or more inconsistent ways [Defense to Formation]

Illegality

If the subject matter of a contract is unlawful, the contract is unenforceable

Duress

Where one party uses coercion which is subjectively great enough to overcome the free will of another, thereby inducing the other to enter or modify a contract, the contract or modification may be set aside  [VOIDABLE]

Fraud

Intentional making of a false statement upon which the other party to the contract relies when agreeing to enter the contract [Fraud may also be found when one party misleads the other by telling a half truth or by acting to conceal the truth or has a fiduciary duty to the other party and intentionally fails to disclose a material fact]

Unconscionability

A provision that no fair and honest person would make and no person in his or her right mind would accept.

[Such contract usually agreed to through "oppression" in that the promisee knows that he or she is giving up his or her rights but is forced to if he or she wishes to purchase the subject product]

Third Party Beneficiary

 A contract in which performance by the promisor will benefit another party

[A contract made for the benefit of a third party who is neither the offeror nor the offeree of that contract] 

6 Steps to Prove 3rd Party Beneficiary Contract

• Does Public Intercourse Cause VD?

  • D=Define third party beneficiary contracts

  • P= Address the issue of privity

  • I= Prove there was an intent to benefit the 3rd party at the time the contract was formed

  • C= Classify the type of 3rd party beneficiary rights created

  • V= Prove up when the third party rights vest

  • D= Divide up the lawsuit if necessary

Privity

The relationship that exists between the parties; to an agreement, allowing them to sue each other to enforce the agreement, but preventing a third party from doing so

Creditor Beneficiary-Intended Beneficiary

Promisee's intent in contracting with promisor was to discharge a debt or duty to the 3rd party beneficiary

[CAN SUE PROMISOR]

Donee Beneficiary-Intended Beneficiary

Promisee's intent in contracting with promisor was to make a gift to the 3rd party beneficiary

[CAN SUE PROMISOR]

Unintended Beneficiary

The contracting parties were not contracting with an intent to benefit the 3rd party, but he may incidentally benefit [CAN NOT SUE PROMISOR]

Third Party Beneficiary Vesting

The original parties retain the power to defeat or alter the beneficiary's rights up until the time that the beneficiary's rights have vested.

1. Majority Rule: The rights of an intended beneficiary vest when he has learned of the existence of the contract and assented to it 

2. Minority Rule: The rights of an intended beneficiary vest when he has detrimentally relied on the contract

Assignment

1.A transfer of a contractual right 2. By an obligee to a third party 3.Made after formation of a contract

Assignment: After contract formation

Obligee transfers his already existing right to receive the obligor's consideration to a 3rd party. Now the Obligor's performance must be made to the 3rd party.

DEPRAVED

• DE= Define Assignment 

  • A transfer of a contractual right by the obligee to third party, made after formation of a contract 

• P= Privity

  • Generally privity is not required to make an assignment 

• RA= Right Assignable

  • Contractual rights are usually assignable unless the assignment results in a substantial change in the performance of the contract 

    • EXCEPTIONS [ASSIGNMENT NOT ALLOWED]

      • 1. A reasonable person would consider the contract too personal to replace an original party

      • 2.Assignments are prohibited by the contract

• V= Valid Present Assignment

  • Parties can assign any interest under an existing contract, whether it is a present or future interest  

• E= Effect of Valid Assignment

  • The assignee steps into the shoes of the obligee/assignor so the obligor must now perform to assignee, not to the obligee/assignor 

• D= Defenses 

  • Any defense that the obligor has against the assignor/obligee may be raised against the assignee

Delegation

Assumption of duties is a transfer of a contractual obligation[1] by the obligor/delegator to a third party[2], made after formation of a contract[3]

Delegation-Intended beneficiary

One in whose favor the original parties to the contract purposefully create an obligation [Both parties know and enter into the deal for the benefit the third party]

Incidental Beneficiary

The original parties to the contract would do the deal for their own reasons regardless of how it benefits someone else

[A third party who may benefit from the contract but who only does so incidentally]

Covenant/Promise

 A promise to act or to refrain from acting that is not dependent upon the other party's acts nor upon other events.

• If the Covenanting party breaches his covenant, the other party may bring an action for breach 

• Promise that does not depend on what the other side does [Look for words like "I Will / I Promise"]

Condition

An act or even which affects a contractual obligation to perform

• DOES AFFECT OBLIGATION TO PERFORM 

• Can be expressed or implied  [Look for words like " If / Then/ Subject to / Provided That"]

Condition Precedent

Related to an event, other than a lapse of time, which must occur before a duty to perform will arise.

[It may arise out of an express or implied term of the contract, or by operation of law under the Doctrine of Constructive Conditions]

Condition Concurrent

A type of condition which exists when the parties to a contract are bound to render performance at the same time.

Condition Subsequent

To an event which by agreement of the parties, operates to terminate a duty of performance after it has arisen

 Express Condition

An express condition is stated in the contract

[The general rule is that express conditions are strictly and literally enforced by the courts]

Implied in Fact

One which is necessary to the performance of the contract between the parties and therefore is deemed to have been intended by the parties, but is not expressly stated.

Implied in Law

 Enforced by the court because it is reasonable under the circumstances

Constructive Condition

• A condition implied by law, like the condition of corporation 

• A way of you showing you tried to perform

Warranty

A type of covenant in which one party attest to certain facts.

An assurance, promise, or guarantee by one party that a particular statement of fact is true and may be relied upon by other party

Express Warranty

One that is stated either verbally or in writing

Express Warranty [UCC ]

When a seller affirms a fact or makes a promise to the buyer which relates to the goods and becomes part of the basis of the bargain, the affirmation or promise creates an express warranty that the good conforms. 

• A description of the goods which is made part of the basis of the bargain creates an express warranty that the goods conform to the descriptions