Contracts Law Capsule Summary Flashcards

Comprehensive vocabulary flashcards covering the major legal concepts, doctrines, statutes, and remedies from the Calamari, Perillo, and Malloy Contracts Capsule Summary.

Objective Theory of Contracts

The doctrine under which mutual assent is determined by asking whether a reasonable person in the position of one party would believe that the words and conduct of the other party constituted assent.

Offer

A promise to do or refrain from doing some specified thing in the future if the offeree will do something in exchange, justifying a reasonable person in concluding that their assent is invited and will conclude the agreement.

Promise

A manifestation of intent that gives an assurance (commitment) that a thing will or will not be done.

Preliminary Negotiations

Communications prior to an operative offer, including expressions of opinion, statements of intention, inquiries, catalogs, circular letters, invitations to make bids, and price quotations.

Option Contract

An irrevocable offer that binds the offeror to a contract promising that the offer cannot be revoked.

UCC § 2–206(1)(b)

A provision stating that an offer to buy goods for prompt or current shipment invites acceptance either by a prompt promise to ship or by prompt or current shipment of conforming or non-conforming goods.

Mailbox Rule

The rule providing that, between parties at a distance, an acceptance sent by a reasonable medium of communication is effective upon dispatch (when put out of the offeree's possession), even if lost or delayed.

Conversion (Acceptance by Act of Dominion)

A tortious wrongful act of dominion over another's personal property that occurs when an offeree takes possession of offered goods while rejecting the terms; the offeror may elect to treat the act as rightful assent under a contract theory.

Mirror-Image Rule

A common law rule (also called the ribbon matching rule) providing that an offeree's response that adds qualifications or conditions operates as a rejection and counter-offer, even if the condition relates to a trivial matter.

UCC § 2–207(1)

A provision that abolishes the mirror-image rule in the sale of goods by establishing that a definite and seasonable expression of acceptance operates as an acceptance even if it states additional or different terms, unless acceptance is expressly made conditional on assent to those terms.

Firm Offer (UCC § 2–205)

An irrevocable offer by a merchant to buy or sell goods without consideration, made in a signed writing that assures it will be held open, for a period not exceeding 3 months.

Gap-Filler

A contract term supplied by the court or statutory provisions because the parties would have agreed to it had it been brought to their attention, or because it comports with community or commercial standards of fairness.

Consideration

A required element of contract enforceability consisting of a bargained-for exchange where the promisee suffers a legal detriment.

Legal Detriment

Doing or promising to do what one is not legally obligated to do, or refraining or promising to refrain from doing what one is legally privileged to do.

Past Consideration

An act or detriment that occurred before a promise was made; it does not constitute valid consideration because it was not bargained for in exchange for the promise.

Pre-Existing Duty Rule

A common law rule stating that doing or promising to do only what a party is already legally obligated to do does not constitute legal detriment, because the party does not surrender any legal right.

Rule of Foakes v. Beer

An application of the pre-existing duty rule holding that part payment by a debtor of an amount undisputedly due is not consideration to support a creditor's promise to discharge the entire debt.

Illusory Promise

An expression cloaked in promissory terms that, upon closer examination, reveals that the promisor has made no actual commitment.

Aleatory Promise

A promise that is conditional on the happening of a fortuitous event (or an event supposed by the parties to be fortuitous) outside the control of either party; it is not illusory.

Requirements Contract

A contract where the quantity of goods purchased is measured by the actual good faith needs and requirements of the buyer.

Promissory Estoppel

A doctrine that enforces a promise lacking consideration when the promisor should reasonably anticipate substantial reliance, the promisee justifiably relies, and injustice can be avoided only by enforcement.

Infant (Contractual Capacity)

A person who has not reached the first moment of the day preceding their 18th birthday; their contracts are voidable at their option despite emancipation or marriage.

Necessaries

Essential items (such as food, shelter, and medical care) for which an infant or mental incompetent is liable in quasi-contract for the reasonable value received, despite disaffirmance.

Parol Evidence Rule

A rule of substantive law and evidence providing that a totally integrated writing cannot be contradicted or supplemented, and a partially integrated writing cannot be contradicted, by prior agreements or contemporaneous oral agreements.

Total Integration

A written agreement that the parties intend to be final and complete; it cannot be contradicted or supplemented by parol evidence.

Partial Integration

A written agreement that the parties intend to be final but not complete; it cannot be contradicted, but it may be supplemented by consistent additional terms.

Course of Dealing

A sequence of previous conduct between the parties to a particular transaction that establishes a common basis of understanding for interpreting their expressions.

Course of Performance

Conduct of the parties in the performance of the immediate agreement at hand, used as an aid to contract interpretation.

Usage of Trade

Any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question.

Main Purpose Rule

An exception to the suretyship Statute of Frauds providing that an oral promise to answer for another's debt is original and enforceable if the promisor's primary objective is a direct, immediate benefit to themselves.

Del Credere Agent

An agent who takes possession of goods to sell on commission for a principal and, for an additional fee, guarantees to the principal that purchasers to whom credit is extended will perform.

Condition

An act or event, other than a lapse of time, which must occur before a performance under a contract becomes due, or which discharges an existing duty of immediate performance.

Divisible Contract

A contract where the performances of each party are divided into two or more parts, and the performance of each part by one party is the agreed exchange for a corresponding part by the other party.

Election

A waiver of an express or constructive condition that occurs after the condition has already failed; it requires no consideration and generally cannot be withdrawn.

Repudiation

A material breach occurring when a party makes an unjustified statement positively indicating an unwillingness or inability to perform, or commits a voluntary act rendering performance impossible.

Perfect Tender Rule

A sales rule requiring the seller to tender goods and delivery that conform in every respect to the contract; otherwise, the buyer may reject the whole, accept the whole, or accept conforming commercial units and reject the rest.

Implied Warranty of Merchantability

A warranty implied in a contract for the sale of goods by a merchant seller that the goods will pass in the trade under the contract description and are fit for ordinary purposes.

Implied Warranty of Fitness for a Particular Purpose

A warranty created when a seller knows the buyer requires goods for a specific purpose and knows the buyer is relying on the seller's skill and judgment to select suitable goods.

Frustration of Purpose

A defense discharging contractual duties when a supervening event, the non-occurrence of which was a basic assumption of both parties, destroys the primary object of the contract, making one party's performance valueless.

Equitable Conversion

A real property doctrine holding that once a binding contract for the sale of real estate is formed, equity regards the purchaser as the owner, thereby placing the risk of casualty loss on the purchaser prior to closing.

Sale on Approval

A sales arrangement where goods are delivered primarily for the buyer's use with the right to return them if dissatisfied; risk of loss remains with the seller until the buyer accepts.

Sale or Return

A consignment-style transaction where goods are delivered to the buyer primarily for resale; risk of loss passes to the buyer upon delivery and remains there until returned at the buyer's expense.

In Pari Delicto

A doctrine meaning 'in equal fault'; courts will not aid parties to an illegal bargain unless the claimant is not equally guilty of serious moral turpitude relative to the defendant.

Locus Poenitentiae

The 'place for repentance' doctrine permitting a party to withdraw from an illegal contract and seek restitution if the withdrawal occurs before the illegal purpose is attained.

Executory Accord

An agreement to render in the future a stipulated performance that will be accepted in discharge of a present claim; it suspends the original claim until performance or breach.

Substituted Contract

An agreement where an existing claim is immediately discharged in exchange for the promise of a future performance, completely merging and extinguishing the prior claim.

Novation

A tripartite contract that immediately discharges a previous contractual duty, creates a new duty, and adds a new party who neither owed the original duty nor was entitled to its performance.

Account Stated

An agreement between debtor and creditor with matured transactions who compute a final balance that the debtor promises to pay and the creditor agrees to accept in full satisfaction.

Covenant Not to Sue

An executory promise supported by consideration not to sue either permanently or for a limited period, often used to avoid the common law rule that releasing one joint obligor releases all.

Expectancy Interest

The primary contract damages interest that seeks to place the aggrieved party in the economic position they would have enjoyed had the contract been fully performed.

Liquidated Damages Clause

A contractual provision that establishes a reasonable, bona fide pre-estimate of damages in advance of a breach; it is valid unless it functions as a punitive penalty.

Specific Performance

An equitable remedy ordering a breaching party to render the exact promised performance, granted only when the legal remedies of damages or restitution are inadequate (such as for unique property or land).

Duress

Any wrongful act or threat that overcomes a party's will and induces them to enter into a contract, rendering the resulting transaction voidable (or void if assent is entirely absent).

Undue Influence

Unfair persuasion exerted by a dominant party over a subservient party, or by a person in a position of trust and confidence, resulting in an unnatural and one-sided transaction.

Fraud-in-the-Factum

A misrepresentation where a party signs a document that is radically different from what was represented without knowing its character or essential terms; it renders the agreement completely void.

Reformation

An equitable remedy that rewrites a contract document to conform to the parties' true prior agreement when a variance exists due to mistake, misrepresentation, or duress.

Procedural Unconscionability

A form of unconscionability characterized by unfair surprise, such as hiding fine-print, incomprehensible terms in a contract that a reasonable adhering party would not expect.

Substantive Unconscionability

A form of unconscionability characterized by oppression, where the terms of the contract are grossly one-sided, oppressive, or totally imbalanced.

Intended Beneficiary

A third person to whom a promisee intends the benefit of the promisor's performance to run directly, thereby granting that person enforceable rights under the contract.

Incidental Beneficiary

A third party who benefits from the performance of a contract but was not intended by the promisee to have legal rights; they cannot sue to enforce the agreement.

Creditor Beneficiary

An intended third-party beneficiary who is promised performance because the promisee owes a debt or legal obligation to that third party.

Donee Beneficiary

An intended third-party beneficiary upon whom the promisee intends to confer a gift via the promisor's performance.

Assignment

A manifestation of intent by the owner of a contract right to effectuate a present, executed transfer of that right to an assignee.

Delegation of Duties

An act by an obligor (delegant) appointing another party (delegate) to render a performance that the obligor owes to a third party; the delegant remains liable unless discharged.

Recoupment

A counterclaim raised by an obligor against an assignee that arises out of the same transaction as the assigned right, usable only defensively to subtract from the assignee's claim.

Set-Off

A counterclaim raised by an obligor against an assignee that arises from a different transaction with the assignor, which may only be raised if it accrued before notice of the assignment.