contracts midterm

what are the requirements for a contract to be formed and enforceable?

offer, acceptance, consideration

what is the Parol evidence rule

addresses whether the court can look to other evidence (like oral testimony) to determine terms of agreement

what is anticipatory repudiation

occurs when one party clearly and unequivocally communicates, before that party’s performance has become due, that it is unwilling or unable to perform.

what are the 2 different types of breach?

partial: Contract not terminated but non breaching may be entitled to damages

total:  Non breaching can terminate contract, usually w/o any liability

what are the conditions for performance

Can only be a breach if a contractual duty exists

what is the guiding principle of remedies ?

 Remedy is the expectation interest. It attempts to put victim of breach in same position they would have been in had the contract been performed

through money damages/performance

what is the principal method on how money damages are calculated?

Calculate increased cost P) must pay to get what originally bargained to get

what is a performance damage?

A court order compelling breaching party to perform what was promised. Otherwise held in contempt of court

Will be ordered if court feels money cannot compensate P)

what is the freedom of contract principle?

Stands for the belief that parties should be free enter into agreements w/o government intervention

as long as agreements do not violate the law

what is the court’s role in contracts?

decide if a contract formed

if a party breached

the remedy for the breach

what is the policy of equity/fairness?

tempers freedom of contract by recog. situations a contract so unfair that social justice demands a look at terms of deal

seeks to rectify imbalances of bargaining power

courts who enact this policy may change, cancel, terminate terms of contract

what is contained in primary authority of contract common law?

law

comprises general principles widely adopted/developed through judicial opinions over time, changes over time

precedent

what is the mailbox rule: acceptance?

when sent through mail, effective on dispatch (restatement 63)

why was UCC developed?

Was developed in an attempt to harmonize different law covering sales in each state

bc a consistent set of laws was thought to be a way to encourage commerce

what is the mailbox rule: all else (rejection, counteroffer, revocation)?

effective on receipt

what is the mailbox rule: acceptance then rejection?

If send rejection following acceptance

·       Rejection ineffective

If offeror receives rejection before acceptance

·       And relies to their detriment on rejection, offeror may use doctrine of detrimental reliance to estop offeree from claiming contract formed upon dispatch of acceptance (bc offeror relied on rejection)

what is the mailbox rule: rejection then acceptance?

NO MAILBOX RULE (restatement 40)

It becomes whichever one (acceptance or rejection) arrives first

what are the exceptions to the mailbox rule?

Offeror can stipulate that acceptance is not effective until receipt

Under option contract, acceptance is not effective until receipt

Federal gov’t not bound by mailbox rule

what are “goods” under UCC?

all things (inc. manufactured goods) which are movable at time of ID to contract

Contract for sale of minerals or the like (inc. oil/gas) or a structure or its materials to be removed from realty

Is contract for sale of goods if they are to be severed by seller

how are hybrid transactions determined to be either under UCC or common law?

predominant purpose test

(minority uses gravamen test)

what is the predominant purpose test?

how courts determine purpose of contract (mainly for goods or services?)

look at language, what does the seller primarily sell, intrinsic value

what is the gravamen test?

Allows courts to apply UCC even if cases where predominant purpose may have been services

Focuses on nature of complaint rather than character of the transaction 

“did essence of complaint arise from performance of service or from the goods sold?”

what are the exceptions to the mailbox rule: email phone?

restatement provides, acceptance given by phone or email governed by principles applicable to acceptances when parties in presence of each other

(some disagree)

what is mutual assent?

Requires both parties to have intent to enter into a contract shown by language and actions

what is objective theory of mutual assent?

Party’s manifestation of assent judged by the objective reasonable interpretation of their outward expression of consent, not by their subjective intent

How a reasonable person in those circumstances would interpret the words/actions

what is the idea on the failure to read? and using that as an excuse?

those entering into a contract have a duty to read

If a party does not read the contract, no breach, but have taken a risk

If a party signs a contract, deemed to have read, understood and intended to be bound by the terms

Unless there is a valid defense

contracts in case of bluffing, boasting, joking

Courts will determine whether reasonable people in the situation would understand the statements to be serious or a joke

whose meaning prevails when parties have same subjective meaning of term that is different from objective meaning?

court will not apply objective meaning bc does not reflect parties’ intent

whose meaning prevails if party A knows or has reason to that party B has fifferent interpretation than party A

party A bound by party B interpretation

if both parties had different understandings and neither was aware and it comes up later

courts likely will conclude “no contract” bc no '“meeting of minds”

making the offer: acceptance

forms contract

making the offer: consideration

determines enforceability

making the offer: offer

defines terms of contract (rights/duties of parties)

terms (most important when it comes to interpretation, breach, remedies)

role of parties: offeror

master of offer

makes offer and has control over terms

role of parties: offeree

to whom offer is made

has power of acceptance, can form by accepting

if they propose offer in diff. terms, counteroffer, causes loss of power of acceptance, now the offeror

what are preliminary negotiations

when parties discussing pot. contract, no offer made

in complex negot: parties negot. more fluid way, come to understanding, that set of terms if the bargain they wish to enter

elements of offer: offer requires (intent)

offeror’s lang./actions unequivocally express intent to enter a bargain

if any hesitation shown courts determine no offer made

elements of offer: offer requires (terms)

terms must be certain and definite to be able to determine breach/remedy, but may imply terms if parties had clearly intended to enter bargain

elements of offer: offer requires (communicated to ID person) restatement 24/29

in an invitation to deal, party may not be ready to enter a bargain, want to solicit interest

offeror needs to specify method for ID person or group for

elements of offer: offer requires (offeree)

offeree can reasonably understand contract results if accepted

must be reasonable to conc. acceptance forms a contract

certain definite terms: (restatement 33)

1) though manifestation of assent intended to be understood as offer, can’t form unless terms reasonably certain

2) must provide basis for breach/remedy

3) if 1+ terms of proposal left open may show that a manifestation of intent not intended to be understood as offer/acceptance

certain definite terms: (parsing rule)

contract may still form even if parties do not agree on every single term

Courts reluctant to find unenforceable for lack of certainty, especially if performed w/ assumption contract was in place

will try and interpret, may imply terms

if no basis breach/remedy, no contract: if party already performed recovery will be in restitution

certain definite terms: (essential terms)

depends on type of agrmnt and circumstances

typical list: parties, subj. matter, price, payment terms, duration

what is the benchmark test for determining if all essential terms satisfied?

whether a breach/remedy can be found given the terms

when is silence considered acceptance?

The parties agree that silence is acceptance

In previous dealings parties operated where silence was acceptance

When offeree could have rejected

·       Instead of taking advantage of it, knowing compensation expected (exercised dominion), therefore accepted

what is the mirror image rule?

Acceptance must mirror every term in the offer

If offeree changes even one term, deemed counteroffer

what are the aspects of manifestation of assent?

Must be unequivocal and unqualified

When an offeree exercises their power of acceptance, offer accepted

Acceptance need not be words, party’s actions could be construed as assent

what is conditional acceptance?

Where offeree accepts offer on condition that offeror accepts some additional terms

may form contract under UCC 2-207

how must offeree accept offer?

in manner invited or req. in offer

if no manner of acceptance specified, immaterial how accepted

what ways can an offeree’s power of acceptance be terminated?

rejection, counteroffer, revocation, lapse of time or death/incapacity

what are exceptions to rejection?

Offeree states not presently accepting but may reconsider

Offeror indicates offer remains open even w/ rejection

Offeror renews offer rejected, offeree regains power of acceptance

what are aspects of a counteroffer?

Rejects original offer and replaces w/ a new one

Offeree becomes offeror and vice versa

if offeror states that original offer remains open, then offeree retains power of acceptance

what are the aspects of revocation?

Offeror may freely revoke offer any time before acceptance, if offeree receives the revocation (d or I)

Offer may be revoked even if offeror merely displays hesitation

Can be made irrevocable (option contract)

how is the lapse of time termination applied?

Offeree’s power of acceptance terminated at specified time in offer

If no time specified, at end of reasonable time

what is a bilateral contract?

forms when the parties exchange promise before either party performs under terms of contract

Once exchanged, contract forms

how may bilateral contract be accepted?

Offer interpreted as inviting offeree to accept by promise to perform or by rendering performance

Promises can be made by words or conduct, offeree that begins to perform their duties could be deemed to have made return promise

if choose performance, beginning of performance is acceptance, bound by it

what is a unilateral contract

forms when promise exchanged for actual performance under contract

how is a unilateral contract offered, formed and accepted?

one party makes promise to do something and the only way offeree may accept is to fully perform

at formation: offeror’s duties executory (not performed yet) but offeree duties executed (fully performed)

when does offeree in unilateral contract have to notify of acceptance?

Offeror requires it (or)

Offeror has no reasonable means to learn of their learning of performance in reasonably prompt time

when can offeror revoke unilateral contract?

Offeror can always revoke before acceptance

what does UCC 2-204 state regarding contract formation?

contract for sale of goods may be made in any manner sufficient to show agreement

sufficient agreement may be found even if the moment of its making is undetermined

1 or more terms left open does not automatically qualify it to fail for indefiniteness if parties have intended to make contract and if there is reasonably certain basis for granting remedy

what does UCC 2-206 state regarding acceptance?

An order or other offer to buy goods for prompt or current shipment deemed inviting acceptance

Satisfied by promise to ship or by prompt/current shipment of nonconforming/conforming goods

what are ads, catalogs, flyers, price quotes often considered?

invitations to deal/bargain

when could price quotes be an offer?

there are enough terms in price quote to satisfy certainty

obj. meaning of quote shows intent to enter bargain

when could ad be an offer?

if satisfies all elements of an offer

how do courts deal with deliberately misleading advertising

will often consider an offer when a store tries to “bait and switch” (lures in customers w/ ad then tries to sell them a different, higher priced item)

or hold liable for a breach if do not offer what was advertised

how are rewards offered applied in terms of offers?

ad that offers a reward is often an offer (unilateral, as performance is required)

what are the rules on the essential terms: Scope of work/property transferred?

Too much certainty about the work being done or thing being bought can also make it unenforceable

In sale of property, land to be sold must be ID’d

Construction contracts must have plans within

Typically, terms like “about” and “more or less” do not make unenforceable

what is an agreement to agree?

In negotiations where parties cannot agree on some essential terms

Common to have agreement to agree in the future

why will parties often exercise an agreement to agree?

when parties want to announce a partnership when all essential terms worked out, but final version has not been drafted/signed

how may an agreement to agree be enforceable?

parties manifest intent to enter bargain

enough certainty exists in terms of determining breach and remedy

what is the preexisting duty rule?

states that a promise to pay more for performance that a party is already legally obligated to complete under an existing contract lacks consideration and is therefore unenforceable

what is the Modern Unforeseen Difficulties Exception?

a modification is binding if it is fair and equitable in view of circumstances not anticipated by the parties when the contract was made (Restatement (Second) of Contracts § 89)

when do you not need any consideration under the UCC?

when offer made/negotiated in good faith/ if modifications made still no need if in good faith (UCC 209)

when is acceptance formed under UCC in mailbox rule terms

generally, upon dispatch, but depends on contract terms

what does UCC 2-207 state?

additional terms in an acceptance b/w merchants become part of the contract unless:

(a) the offer expressly limits acceptance

(b) they materially alter it, or

(c) notification of objection is given.

what does UCC 2-209 state?

No consideration needed if in good faith