Contracts

What terminates an offer?

1. Death/mental incapacity

2. Destruction/illegality

3. Lapse of reasonable time

4. Rejection

5. Express revocation (if mailed, when received)

What offers are irrevocable?

1. UCC: Firm offer by merchant, written and signed with assurance it will remain open

2. Common Law: Option contract (pay to keep it open); Partial performance of unilateral contract; Promissory estoppel/detrimental reliance

If a buyer asks a seller to ship goods, how can they accept?

• By promise to ship or prompt shipment

• Shipping nonconforming goods = acceptance and breach unless seller seasonably notifies buyer (then its a counteroffer)

How is an offer contract accepted?

Seller much receive the acceptance before the offer expires

What is the effect of additional or different terms in a reply to an offer in common law?

Offer is rejected and reply is a counteroffer

What is the effect of additional or different terms in a reply to an offer in UCC?

• All parties merchants → offer is accepted unless reply expressly required assent to new terms

  • Additional terms become part of the contract unless they materially alter it or other party objects within a reasonable time

  • Different terms cancel each other out (knockout rile) and court patches the holes

• One or no parties are merchants → offer is accepted unless reply expressly required assent to new terms

  • Additional and different terms are treated as proposed additions

How may a contract be modified?

• Common Law: requires new consideration unless justice requires bc a party materially changed position or one party agrees to compensate the other when unanticipated difficulties arise

• UCC: requires only good faith

What promises are binding without consideration?

• Promise to pay a debt barred by statute of limitations

• Promise to perform a voidable duty

• Promissory estoppel (detrimental reliance)

What are the defenses to contract formation?

1. Mistake about essential element

2. Misunderstanding about material terms

3. Misrepresentation

4. Undue Influence

5. Duress

6. Lack of Capacity

How is a contract impacted by mistake?

• Unilateral: not voidable unless enforcement would be unconscionable or other party caused/knew of mistake

• Mutual: not voidable if reformation is available (court’s ability to change terms to reflect what the parties want); voidable by adversely affected party who did not bear the risk of mistake

How is a contract impacted by misunderstanding?

• No party knew: no contract

• One party knew: contract based on other party’s understanding

• Both parties knew: no contract unless they intended the same meaning

• One party can waive misunderstanding

How is a contract impacted by misrepresentation?

• Fraudulent misrep (induced assent and reliance): generally voidable; void if prevented party from knowing contract’s essential terms

• Nonfraudulent misrep (material, induced assent and reliance): voidable

What are the defenses to contract enforcement?

1. Illegality

2. Unconscionability

3. Public Policy

What are defenses to discharge performance?

1. Impracticability: unforeseeable event, basic assumption it would not happen, and party seeking discharge is not at fault

2. Frustration of purpose: unexpected event destroys purpose

3. Release: written discharge from duty

4. Mutual rescission

5. Destruction or injury to identified goods

When does an intended beneficiary’s rights vest?

1. Detrimentally relies on rights created

2. Manifests consent to the contract at one party’s request or

3. Files a lawsuit to enforce it

What is assignment?

• Transfer of rights

• No consideration required; if consideration, then assignment is irrevocable

What is delegation?

• Transfer of duties and obligations

• Delegator is not released from liability unless novation

What contracts fall under Statute of Frauds?

1. Marriage

2. Suretyship

3. One year

4. $500+ goods

5. Real Property

What are the exceptions to Statute of Frauds?

1. Promissory estoppel

2. Judicial admission

What is the parol evidence rule?

Prevents a party from presenting extrinsic evidence that contradicts the terms of a written party

• If written K is partially integrated, then parol evidence is inadmissible to contradict

• If written K is completely integrated, then parol evidence is inadmissible to supplement or contradict

• Does not apply to: raising a defense, proving condition precedent, interpreting ambiguity

  • Under UCC, does not apply to explaining terms with evidence of (1) course of performance, (2) course of dealing, and (3) trade usage

When is a contractual duty performed?

1. CL: Substantial performance - can recover contract price minus what was left

2. UCC: Perfect tender unless installment K or parties agree

If a party anticipatorily repudiates, what can the nonbreaching party do?

1. Treat as breach

2. Ignore and demand performance

3. Wait for actual breach to file suit

→ Repudiation can be retracted if other party has not cancelled the contract or materially changed position

What are compensatory damages?

Expectation (what was promises minus what was received) + foreseeable consequential and incidental damages - costs avoided and loss avoided