pt 2 BUS 207 midterm

Dispute Resolution Agreement (know as Arbitration Agreement)

Contract as issue

Procedural Unconscionability

unfairness or inequality in the formation of the contract like a take or leave it form or a confusing contract with terms in small print

substantive unconscionability

substance of the agreement like when a price is being agreed to that is much higher than the market value for the item being purchased

what need to show to prove unconscionability

procedural and substantive

Duress

has been some kind of coercion, physical, or mental that means the other party did not enter the contract by his or her own free will

undue influence

occurs when a party takes advantage of another party bc they have a superior position in a close relationship

What is Breach of Contract?

valid contract and someone fails to comply with one or more term

What need to show to prove breach of contract?

breach of a term

damages

typical breach of contract remedies include

money damages

equitable remedies

• restitution

• rescission

• reformation

• specific performance

money damages

compensate for the losses caused by the breach

losses must be foreseeable

mitigation of damages

party to a contract cannot sit back and let a breach of contract cause harm that can be avoided

Restitution

restores the injured party to the position they had prior to the formation of the contract

Reformation

allows a court to fix a term (reform) a contract

specific performance

compels one party to perform the promise stated in a contract

What is a contract?

An agreement (express or implied)

between 2 or more parties

can be enforced in court

elements of a contract

offer

acceptance

mutual agreement or meeting of the minds

consideration

capacity

legality

Bilateral

a promise for a promise

Unilateral

one person promises and other person acts

executed

fully performed

executory

terms still to be performed

offeror

party who makes an offer

offeree

party to whom an offer was made

offer

must indicate a clear intent to enter into a contract

be suffifciently definite so that a court can determine the actual intent of the parties

be communicated to the other party

Advertisements

is not usually specific to particular person or group of people

considered instead to be an “invitation to deal”

it can be enforced like a contract offer

Acceptance

must accept the offer’s terms

offeree accpets the offer as made, then a legal contract is formed

Revoked offers

offer can revoked any time before it is accepted

• an option contract (an offer that is actually a contract to hold open an offer for a set period of time)

• a unilateral contract and there has been substantial performance by the offeree

• firm written offer by a merchant to buy or sell something for a set period time or a reasoanable period of time

• other party reasonable relied upon the offer

consideration

something of value given in exchange for the agreement

can be money, property, a promise to do something or promise not to do something

Promissory Estoppel

when a promise is made without any consideration, but the promise reasonable relied upon that promise and should not suffer the loss

Requirements for promissory estoppel

legal relationship between the parties

promise made

reliance on the promise

substantial and measurable detriment as a result

unconscionable or gross injustice

Unenforceable

one of the requirement is missing

Void

contract was not one that could be enforced

voidable

a contract that is only binding on one party

contracts with minors

adult party to the contract can be bound to the agreement, but minor is not legally obligated

they have right to cancel or reject a contract= disaffirmance

• must return the goods if they disaffirm

• voidable = something one of the parties (the minor) can refuse to honor

Contract is for “Necessaries”

contract with a minor is for one of those types of items, then a court will say the minor should have to pay the reasonable value for what was provided

DOESNT Apply if the minor is living at home with parent or guardian

Only applies when contract is for goods and services

Contract Executory

an exchange of promises not yet performed

Ratification

minor becomes the age of majority becomes the age of majority (18) and accepts the obligation of the contract either verbally or by his or her conduct (implied)

Mental incapacity

measures against the “cognitive standard” of whether the party understood the meaning and effect of the contract.

What if the person is intoxicated?

can be proven:

• intoxication meant the person could not understand what he or she was doing

• intoxication had to be obvious to the other party

person has to pay for or restore what he or she may have received

Statutes

criminal laws passed by legislatures

example

• laws restricting things like amount of interest you can charge on loans, (Usury laws)

• gambling and sale of alcohol on certain days (Blue laws)

Public Policy

expressed through court decisions and the intent expressed by legislators when enacting certain laws

examples:

• contracts that discriminate based on protected classes

Exculpatory clasuses

a contract term that states that one party is not liable for something like negligence or other potential wrong

examples

• sign in a parking lot that says “owners of the cars are solely responsible for any damage to the car that occurs in the parking lot.”

What is Promissory Estoppel?

comes into play when consideration is missing

• no consideration= no contract

legal principle that allows for a court to enforce a contract even though technicallly one was not legally created bc consideration is missing

elements to prove Promissory Estoppel

1. a legal relationship ( already existing or anticipated between the parties)

2. A promise ( one party must make a promise to the other party)

3. Justifiable reliance (party to whom the promise is made must have acted in justifiable reliance on the promise)

4. Detriment Suffered (party to whom the promise is made must have suffered some detriment as a result of their justifiable reliance on the promise of the other party)

Contract formation defenses

duress

undue influence

unconscionable

impossibility of performance

something has happened that makes it impossible for a party to perform

mutual mistake

both parties made a mistake

unilateral mistake

one party made a mistake that the other party knew was a mistake or should have known

Accord and Satisfaction defense

when parties to a contract agree to discharge an existing obligation in a manner other than in accordance with the terms if their original contract

Elements to prove accord and satisfaction

1. evidence of a dispute between the parties about what is expected

2. evidence establishing that parties specifically and intentionally agreed to discharge the existing obligation by means of a lesser payment tendered and accepted

Repudiation (AKA Anticipatory Breach )

A DEFENSE is a party to a contract without a just excuse, they will not perform their obligations under the contract

can be express or implied by the party’s words or actions

Proof of Repudiation

must be a party’s unconditional words or actions indicating an intent to abandon, renounce or refuse to perform their obligation under the contract

Sales contract

A specific type of contract involving the buying and selling of a good (delivering and transferring ownership of a good to another party in exchange for money or some equivalent

• party that is obligated to deliver the good is know as the Vendor or the seller

• receive and pay for the good is know as the vendee or the buyer

• governed by general contract law and by article 2 of the uniform commercial code

A sale

void title is when the seller did not own the good

voidable title is when one party to the sale can declare the contract void

features of a sales contract

1. consensual (can be enforceable based on evidence of consent)

2. bilateral (binds both parties)

3. mutual consideration (buyer pays and seller delivers the good)

4. commutative (good is considered to be= money paid for it)

5. designation (designated as a sales contract)

6. validity (not dependent on the existence of the other contracts)

UCC

• 9 sections (know as Articles)

• all states except Louisiana had adopted the UCC in whole

UCC 2-105

two main features

• moveable

• tangible

examples: refrigerators, paper, computers, cars

non good items of UCC

something that is on land can be severed or removed from the land= considered a “good” and is covered by the UCC

example:

• oil, crops, trade fixtures

general rule followed under the UCC

1. parties intended to make a contract

2. reasonably certain basis for the court to grant and appropriate remedy

Flexibility

USS generally provides more relaxed, flexible rules designed to try to enforce contracts in a way that carry out the intent of the parties

UCC rule 2-305

open price term

1. parties do not name a price in a sales contract, a court will conclude that the parties intended that the buyer will pay a “reasonable price”

2. a court will hear evidence and decide what the reasonable price for the goods is

UCC rule 2-310

open time for payment

1. manner of payment is not specified, a court will conclude that the payment is due at the time and place where the buyer receives the goods

2. court will hear evidence about when and where the buyer is receive the goods and conclude that is when payment is also due

What is UCC rule 2-308?

absence of specified place for delivery

1. manner of delivery is not specified, a court will conclude that the buyer will be expected to take delivery at the seller’s place of business

2. court will hear evidence about where the seller’s place of business is and conclude that this where the goods are to be delivered to the seller

What if quantity is not defined?

a court will not conclude what the reasonable quantity of goods was intended by the parties if they fail to specify it in their contract

two exceptions to this rule

• requirement contracts

• output contracts

“AS much as I need” type of contract

governed b y UCC 2-306

“ As much as you can produce” type of contract

governed by UCC 2-306

What is Rule 2-306?

If we agree that I will sell you all of the doc management programs you make (output) over the next 2 years, means I will sell you the actual output I produce unless I am wildly off any reasonable projections or wildly off any normal or comparable prior output

Merchant

someone who is engaged in the purchase and sale of goods

under the UCC: someone who deals in the kinds of goods being sold under a sales contract or who holds themselves out as having skill or knowledge in the particular goods being sold under a sales contract

Firm Offers

Merchant gives a buyer a signed written offer that states it is open and can be accepted for a period of time that does not exceed 3 months, merchant cannot revoke that offer even if the Offeree has not paid any money to the Merchant to keep the offer open

What is Rule 2-201?

The Statute of Frauds

a contract for the sale of goods of $500 or more is not enforceable unless in writing

if there is a writing, it will be considered enforceable even if it leaves out a terms (except Quantity)

a contract is not enforceable for a quantity of goods that exceeds what is shown in the writing

Analogy

orchestra makes music that is recorded and sold on a CD

music itself is not a “good” but when it is transferred tot eh CD, it becomes a merchantable commodity

example: when a professor gives a lecture, it is not a good, but if it is published in a book, it is now a good that can be sold

What about service that is offered when a product is sold?

UCC will apply if the essence of the contract is the sale of goods

one factor is the relative costs of the goods versus the cost of the labor to provide the service

Simple Delivery Contract

When goods are transferred at the time of the sale or later then title transfers when the contract is executed.

If the Buyer has title on the execution of the contract, Buyer now has an interest that is insurable,

Buyer can obtain insurance on the item

Risk of loss transfers when the Buyer takes possesion unless the Seller is not a merchant

Seller is not a merchant, the risk of loss transfers when the seller “tenders” the goods to the buyers.

Shipment Contract

One that specifies that the goods will be delivered “FOB shipping point”. Seller will be responsible for the goods only until they are delivered tot eh designated shipper. Title to the goods transfers when the goods are delivered to the shipping point

Destination Contract

Goods will be delivered “FOB destination point” or specifies the delivery address. Seller will be responsible for the goods until they are delivered all the way to the specified destination. Title to the goods does not transfer until the goods arrive at the destination

Goods in Bailment Contract

Document must say “deliver to the order of the Sellers”. If the Seller has this, Seller can endorse it over to the Buyer and title and risk of loss transfers to the buyer.

2. If document does not have the words “deliver to the order of the Seller”, then title will pass when the Seller endorses it, but risk of loss wont transfer until the custodian takes possession of the goods

3. if there is no ownership document, title passes when the contract is signed and risk of loss passes when the custodian is notified of the transaction

Remedies under the UCC

if a Seller delivers non confirming goods the buyer may:

1. cancel the contract

2. obtain cover (purchase a substitute but must be reasonable, acquired without delay and obtained in good faith)

3. seek specific performance (ask a judge to order that the goods be delivered as specified in the contract- usually only if the goods are unique or money damages would not be sufficient)

4. sue for money damages (ask a judge to award consequential and incidental damages for the breach)