Contracts - Defenses and Remedies

Vocabulary flashcards covering contract defenses, the Statute of Frauds, performance, breach, and remedies.

Contract Defense

A legal argument that a party will use even after there’s a validly formed contract to argue to the court there should still not be any enforceability.

Statute of Frauds

Contracts whose subject matter falls within the scope of the statue of frauds are not enforceable unless they are in writing.

Marriage (Statute of Frauds)

Contracts in consideration of Marriage (Prenup/Postnuptial).

Year (Statute of Frauds)

Contracts that cannot possibly be performed within one year from today's date.

Land (Statute of Frauds)

Land sale contracts, most interest in land, transfer of an interest in land of a term of more than one year.

Executor (Statute of Frauds)

When an executor of an estate promises to pay the estate’s debts out of some other source of funds (typically his own pocket).

Goods (Statute of Frauds)

Sale of Goods $500 or more, that are covered by the U.C.C. Article 2 Statute of Frauds requirements (U.C.C. Section 2-201).

Surety (Statute of Frauds)

A surety is a guarantor of the debt of another person, somebody who guarantees the debt of somebody else.

Specialty Manufactured Goods Exception

Goods made to order, custom made. Once there has been a substantial beginning of the making or obtaining of the goods, then your buyer, in that situation, will lose his statue to frauds defenses.

Written Merchant Confirmatory Memorandum

Oral contract over phone, buyer sends a conformation letter to the seller, Never responds or answers, if allege statue of frauds defenses, would lose, because even if the seller never signed anything if it was a fraud being perpetrated by the buyer, seller would have objected right away.

Performance (Statute of Frauds)

If you have fully performed under your contract, even those subject to the statue of frauds statue originally, you lose the statue of frauds defenses, theory is that you been full performances substitutes for the existence of the right, provides evidences that a deal actually occurred.

Promissory Estoppel (Statute of Frauds)

Determently relied on a promise made by your opposing party.

Mistake (Defenses of Formation Defects)

It is a factual error regarding a fundamental matter, that has a material effect on the agreed exchange. Adversely affected party may then avoid the contract.

Mutual Mistake Category

Both parties in the contract suffer from the factual error.

Unilateral Mistake Category

Where only one party suffers from making the mistake in a judgment of fact. Only one party suffers from the factual error.

Palpable Unilateral Mistake Exception

Only one party makes a mistake but it’s obvious. Clear that anyone on the other side of the transaction that she is dealing with a unilaterally mistake in party.

Misrepresentation

It is an innocent or negligent untrue assertion of fact or omission. It will render a contract, voidable.

Voidable

Giving the agree end party the option of getting out of the contract.

Fraud

Fraud involves a deliberate or intentional lie or omission. Deliberate or intentional- then voidable if the innocent party is deceived to her detriment.

Physical Duress

Classic case of the gun to your head situation. ‘sign this contract or I will kill you’.

Economic Duress

Economic duress involves an improper or wrongful threat, NOT A PHYSICAL THREAT OF VIOLENCE

Procedural Unconscionability

An absence of meaningful choice in the bargaining process. i.e. Unfair Surprise.

Substantive Unconscionability

Refers to the terms of the deal themselves. Unreasonably harsh and oppressive terms.

Ambiguity

Is one which is not obvious on the face of the contract but appears as the context unfolds.

Infancy

Contract by minors, meaning under the age of 18. A contract by an infant one who is under the age of 18, is voidable by the minor.

Insanity

A contract is voidable by one who is unable to understand the nature and consequences of the transaction. She will have the insanity defenses

Illegality

If a legislature convenes and passes a law outlining the subject of your contract (or already passed a law outlawing whatever is the subject matter of the contract).

Exculpatory Contracts

Someone is trying to use a contract to contract away his or her liability for her tort actions.

Noncompete Contracts

You might agree to, when you sign up for your employer’s job that you will never compete with that employer if you leave his employ.

Parol Evidences Rule

Its about whether or not the final writing, which contains terms X,Y, or Z, can be contradicted by alleged oral negations, or prior contemporaneous agreements made right up until the signing of he final written document.

Collateral Agreements

Two separate contracts and agreements. Contract for a sale of a house and another contract you have with this guy for the sale of your boat, again, these are two separate and distinct collateral agreements, separate and distinct contracts.

Conditions Precedent

No contract obligation is due yet, until a condition precedent has been satisfied.

Context Rule

Extrinsic evidence, this is evidence outside the four corners of your written contract, is admissible to determine the intent and context surrounding formation of the contract.

Course of Performance

The course of performance between these parties as a method of figuring out what the terms of their deal are. Refers to these same two contracting parties and this same contract, by previous installments of this contract.

Course of Dealing

Looking at the same two parties dealing with each other. But now we turn to look at last year’s contract to ascertain the meaning of this year’s contract.

Trade Custom/ Usage of the Trade

Community norms of which the parties either are or should be aware

Perfect Tender Rule

Is the general standard of performance under UCC 2-601.

Possibility of Cure

A seller in limited circumstances, will have an opportunity to cure her imperfect tender under UCC 2-508.

Shipment Contract

Seller complete delivery obligation when one, she gets the goods to a common carrier. (Common carrier is a third party transporter) two, seller makes reasonable arrangements for deliver, three seller notify buyer

Destination Contract

Seller complete the obligation when the goods arrive at the buyers location.

Risk of Loss (Contract Allocation)

If the contract itself allocates the risk of loss, then the contract itself is the controlling doctrine.

Implied Warranty of Merchantability

Goods are fit for the ordinary purpose for which they are to be used.

Implied Warranty of Fitness for Particular Purpose

Beyond the ordinary purpose, it goes to the buyers special purpose.

Excuse

Doctrine that might excuse a contracted-for performance.

Material Breach

A breach that undermines the sustainable benefit of the bargain.

Minor Breach

A light deviation from promised performance.

Conditions (Excuse Due to Failure of Conditions)

A condition is an event not certain to occur, that will either trigger or terminate a party’s performance obligations .

Condition Precedent

The occurrence of a condition precedent will trigger somebody’s performance obligation. (It has to come first).

Condition Subsequent

Cuts off a party’s duty of performance. It will terminate the already existing obligations of performance.

Concurrent Conditions to Performance

Simultaneous conditions to perfomance.

Express Conditions

Means by words, the parties words themselves are what set up this express condition.

Implied Conditions (or Constructive Conditions)

The rule is that substantial perfomance is generally enough.

Failure to Cooperate (Hindrance)

You have to cooperate in good faith with the occurrence of your condition precedent.

Estoppel

It’s based on a statement made by a person protected by a condition before the conditioning event was to occur, and it requires a change of position in reliance by the other party.

Waiver

Based on a statement based on a person protected by a condition made after the conditioning event already failed to occur.

Actual Performance

Actually performing the obligation.

Tender of Performance

An offer to pay or perform by one who is willing and able to do so.

Impossibility

Literal impossibility. You just can’t do what is being asked, it is impossible.

Impracticability

Where perfomance has become unduly and unreasonably expensive or burdensome.

Frustration of Purpose

The central, mutually understood purpose, of the contract must be undermined.

Rescission Agreement

A revision is a situation in which the parties exchange mutual promise to end the original contract.

Modifications

Modification is where the parties mutually agree to change their contract. We had contract number one, now we agreed to modify it and change it so that it says something else.

Notation

It is a mutual agreement to substitute a new party to do the performance obligation under your original contract.

Accord

Is an agreement by the parties to an existing obligation to accept a different performance in satisfaction of the existing obligation.

Satisfaction

Is perfomance of the new agreement. Satisfaction is perfomance of the accord. Once yo deliver the 20 widgets, now your obligation, your original obligation to pay back $1,000 is excused.

Account Stated

Debtor and Creditor entered into 10,20 transactions with each other. The Tital bill for all 20 transactions is $1,000 and they agree to lump all of those transactions together and agree to liquidate the debt for a reduced sum.

Repudiation

Is an unambiguous indication that breach will result when it comes time to perform.

Retraction

Repudiations can also be retracted, however, only for so long, only up until the time that performance is due or until the time that it is relied upon, whichever comes first.

Specific Performance

Makes your breaching party specifically perform exactly what she said she was going to perform?

Reformation

The court will reform a contract to get it to say what the parties thought it was going to say.

Reclamation

Is the right of an unpaid seller to get her good back.

Expectation Interest

It provides the amount of money that will put the aggrieved party in the position that she thought she was going to be in, had this contract actually been performed.

Reliance Damages

When thinking about reliance damages we are no longer trying to give the aggrieved plaintiff the benefit of her bargain, putting her in the ex-post position. Instead we try to reimburse her for her detriment incurred, taking her back to her ex-ante position.

Liquidated Damages

Where the parties decide the remedy themselves in the contract. We don’t trust the court to figure out what the expectation interest is. In the event of a breach, we liquidate our damages at X.

Restitution

Main purpose of restitution as a remedy is to prevent defendants unjust enrichment. No longer looking at what plaintiff has lost, her expectations, her reliance. Now, you are looking at how much defendant has wrongfully gained.

Assignment

Basically a situation where you’re transferring away your contract rights to some other third party.

Delegation

Situation in which you’re transferring a contractual duty. (not your rights under the contract, but rather your duties to do the work under the contract.)

Third Party Beneficiary

That’s the person who’s not a party to the original contract, but is still able to enforce that contract that other people made for her benefit.

Promisor

Is the persons who is making the promise that will run to the benefit of the third party. (Who is making the promise that benefits the third party the insurance company).

Promisee

Is the party that obtains the promise that will later benefit the third-party.

Intended Beneficiaries

Only intended third party beneficiaries have contract rights. They can sue to enforce the contract directly, but not Incidental Beneficiaries.

Assignments

Requires two separate steps: 1. Party A and Party B agree to the transaction 2. Party A and Party C agree to the transaction

Assignee

The third party who has been transferred the rights under the contract.

Assignor

Is the party who transferred away the contract rights.

Obligor

Party with the duty to actually perform on the assignment right.

Delegation

A transfer of the duty under your contract to somebody else. (transfer the work to some other third party is what a delegation is)

Delegate

The party whom a duty has been transferred.

Delegator

Is the party who is delegating his duty to somebody else.

Obligee

Is the party with the right to receive the benefit of the delegated duty.