LENB exam 5

conditional contracts

a contract that becomes enforceable only on the happening or termination of a specified condition

3 types of conditions

conditions precedent, conditions subsequent, concurrent conditions

condition precedent

an event that must occur or an action that must be taken before a party's duty arises

condition subsequent

a future event that terminates a party's duty when it arises

concurrent conditions

when each party's duty is conditioned upon the performance of the other, each party's duty must be performed simultaneously

express conditions

condition specifically and explicitly stated in a contract and usually preceded by words such as conditioned on, if, provided that, or when

implied conditions

a condition that is not specifically and explicitly stated but is inferred from the nature and language of the contract

tender

an offer by a party in a contract to perform, along with being ready, willing, and able to perform, a duty outlined in that contract

2 types of performance

complete performance and substantial performance

complete performance

contract performance that occurs when all aspects of the parties' duties under the contract are carried out perfectly

substantial performance

occurs when all the following conditions have been met: \n 1. completion of nearly all the terms of the agreement \n 2. an honest effort to complete all the terms \n 3. no willful departure from the terms of the agreement

Subjective Satisfaction Standard

when the judgement involved is a matter of personal taste

objective satisfaction standard

when the performance is related to a mechanical or utility standard

satisfaction

an express condition that must be met before the other party's obligation to pay for the performance arises

breach

when a party fails to perform their obligations under contract

material breach

A substantial breach of a significant term or terms of a contract that excuses the nonbreaching party from further performance under the contract and gives the nonbreaching party the right to recover damages.

anticipatory repudiation

An assertion or action by a party indicating that they will not perform an obligation that the party is contractually obligated to perform at a future time.

mutual rescission

An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract.

substituted contract

a new contract accepted by both parties in satisfaction of the parties' duties under the original contract

novation

substitution of a third party for one of the original parties, the duties remain the same but only one party is discharged and the third party takes their place

situations where a contract can be discharged by operation of law

Alteration of the contract, bankruptcy, tolling of the statute of limitations, impossibility, commercial impracticability, and frustration of purpose

alteration of the contract

when a party materially alters a written contract without the other party's knowledge, the innocent party can be discharged from the contract

bankruptcy

the legal proceeding by which a bankrupt person's assets are distributed among those to whom he or she owes debts, the party is discharged in bankruptcy

tolling of the statute of limitations

the expiration of time allowed by a statute, does not discharge a party from obligations, but they cannot sue the other party for breach

impossibility of performance

an unforeseen event that makes it physically or legally impossible for a party to carry out the terms of the contract, both parties are discharged

3 situations courts find objective impossibility

destruction of the subject matter, death or incapacity of a party whose personal services are necessary, and subsequent illegality

commercial impracticability

Because of an unforeseeable event, one party would incur unreasonable expense, injury, or loss if that party were forced to perform the terms of the contract

3 elements needed for discharge by reason of impracticability

1\. That an event occurred whose nonoccurrence was a basic assumption of the contract. \n 2. That continued performance is not commercially practicable. \n 3. That the party claiming discharge did not expressly or impliedly agree to performance in spite of impracticability that would otherwise justify his nonperformance.

frustration of purpose

A court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party's control).

Monetary Damages (Legal Damages)

compensatory, punitive, nominal, and liquidated damages

compensatory damages

money awarded to a plaintiff in payment for his or her actual losses

consequential damages

Foreseeable damages that result from a party's breach of contract but are caused by special circumstances beyond the contract itself.

punitive damages

compensation awarded to a plaintiff that goes beyond reimbursement for actual losses and is imposed to punish the defendant and deter such conduct in the future

nominal damages

Monetary damages awarded to a plaintiff in a very small amount, typically $1 to $5, to signify that the plaintiff has been wronged by the defendant even though the plaintiff suffered no compensable harm.

liquidated damages

damages specified as a term of the contract, before a breach of contract occurs

mitigation of damages

A rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant.

equitable relief requirements (5)

1\. no adequate legal remedy is available \n 2. irreparable harm to the plaintiff may result if the equitable remedy is not granted \n 3. the contract is legally valid \n 4. the contract terms are clear and unambiguous \n 5. the plaintiff has "clean hands" (has not been deceitful or done anything to breach the contract)

rescission

termination of contract

restitution

the return of any property given up under a contract

specific performance

an order of the court requiring a breaching party to fulfill the terms of the contract

injunction

a court order either forcing a party to do something or prohibiting a party from doing something

Recovery Based on Quasi Contract

Court may impose a contract like obligation on a party to prevent an injustice from occurring

to recover under a theory of quasi-contract a plaintiff must prove...

1\. the plaintiff conferred a benefit on the defendant \n 2. the plaintiff had reasonable expected to be compensated for the benefit conferred on the defendant \n 3. the defendant would be unjustly enriched from receiving the benefit without compensating the plaintiff for it

statute of frauds

state-level legislation that addresses the enforceability of contracts that fail to meet the requirements set forth in the statute; protects promisors from poorly considered oral contracts by requiring certain contracts to be in writing

types of contracts under the statute of frauds

1\. contracts whose terms prevent possible performance within one year \n 2. promises made in consideration of marriage \n 3. contracts for one party to pay the debt of another if the initial party fails to pay \n 4. contracts related to an interest in land

Contracts whose terms prevent possible performance within one year is dependent on...

possibility, not likelihood

prenuptial agreement

an agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party's property, must be in writing

promises made by a third party to pay debts if another party fails to pay are referred to as...

secondary promises, collateral promises, or suretyship promises

primary obligations

debts entered into in an initial contract (not within statute of frauds, does not have to be in writing)

secondary obligation

A promise to pay another's debt only if that party fails to pay (within statute of frauds, must be in writing)

Circumstances where the statute of frauds applies

marriage, year, land, executor, goods

Exceptions to Statute of Frauds

admission, partial performance, promissory estoppel

admission

a statement made in court, under oath, or at some stage during a legal proceeding in which the defendant admits that an oral contract existed, even though the contract was required to be in writing

partial performance

An exception to the statute of frauds in which the performance of portions of an unwritten agreement by one or both parties can constitute proof that an oral contract exists between the parties.

promissory estoppel

the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract

required elements in the writing

identification of the parties to the contract, the subject of the agreement, the consideration if any is given, and any pertinent terms of the contract

parol evidence rule

A common law rule which states that oral evidence of an agreement made prior to or contemporaneously with a written agreement is inadmissible when the parties intend to have the written agreement be the complete and final version of their agreement.

merger clause

A clause in a written agreement within the statute of frauds which states that the written agreement accurately reflects the final, complete version of the agreement.

Exceptions to the Parol Evidence Rule

1\. contracts that are subsequently modified \n 2. contracts conditioned on orally agreed-on terms \n 3. contracts that are not final because they are part-written and part-oral \n 4. contracts with ambiguous terms \n 5. incomplete contracts \n 6. contracts with obvious typographical errors \n 7. voidable or void contracts \n 8. evidence of prior dealings or usage of trade

condition precedent

A condition in a contract that must be met before a party's duty to arise

obligors

contractual parties who agreed to do something for the other party

obligees

contractual parties who agreed to receive something from the other party

assignment

a contracting party's transfer of his or her rights to a contract to a third party

assignor

party who transfers rights under contract to another party (assignee) to collect what was contractually agreed on in the original contract

assignee

the party who receives the rights of another party (assignor) to collect what was contractually agreed on in the original contract

Rights that cannot be assigned

1\. rights that are personal in nature \n 2. rights that increase the obligor's risk or duties \n 3. rights whose assignment is prohibited by contract \n 4. rights whose assignment is prohibited by law or public policy

first-assignment-in-time rule

a rule that states that the first party granted the assignment is the party correctly entitled to the contractual right

english rule

a rule that states that the first assignee to give notice of assignment to the obligor is the party with rights to the contract

delegation

a contracting party's (delegator's) transfer of their duty to perform to a third party who is not part of the original contract (delegatee)

delegator

Party to a contract who transfers their duty to perform to a third party who is not par of the original contract (delegatee)

delegatee

a third party who is not part of the original contract but to whom duties to perform are transferred by one of the contracting parties (a delegator)

Duties that cannot be delegated

1\. duties that are personal in nature \n 2. duties for which the delegatee's performance will vary significantly from the delegator's \n 3. duties in contracts that forbid delegations

third-party beneficiary contract

a contract created when two parties enter into a contract agreement with the intended purpose of benefiting a third party

intended beneficiary

a third party to a contract whom the contracting parties intended to benefit directly from their contract

promisor

the party to the contract who made the promise that benefits the third party

promisee

the party to the contract who owes something to the promisor in exchange for the promise made to the third party

creditor beneficiary

a third party who benefits from a contract in which the promisor agrees to pay the promisee's debt

donee beneficiaries

third party who benefits from a contract in which a promisor agrees to give a gift to the third party

vest

to mature, as in the maturing of rights such that a party can legally act on the rights

one of three things must occur for a third party's right to contract to vest

1\. rights vest immediately, 3rd party can enforce the contract at anytime \n 2. when the beneficiary decides to accept the rights to the contract \n 3. when the beneficiary changes their position because of reliance on the contractual rights

distinctions between creditor beneficiaries and donee beneficiaries

\-if the contract intends to grant a gift to a third party, it is a donee beneficiary and if the contract is intended to release a party from an obligation to a third party, it is a creditor beneficiary \n -creditor beneficiaries can enforce their rights under a contract whenever the contract is valid, donee beneficiaries can enforce their rights to most contracts but not in all situations

incidental beneficiary

one who unintentionally gains a benefit from a contract between other parties

voidable

a term applied to a contract that one or both parties have the ability to either withdraw from or enforce

rescinded

to cancel a contract

mistake

an erroneous belief about the facts of a contract at the time the contract is concluded. when this occurs, legal assent is absent

unilateral mistakes

the result of an error by one party about a material fact, that is, one that is important in the context of a particular contract

mutual mistakes

the result of an error by both parties about a material fact

does a unilateral mistake void a contract?

usually no

conditions that permit a court to invalidate a contract on grounds of unilateral mistake

1\. one party made a mistake about a material fact and the other party either knew or had reason to know about the mistake \n 2. the mistake was caused by a clerical error that did not result from gross negligence \n 3. the mistake was so serious that the contract is unconscionable, that is, so unreasonable it is dangerous

when can a party rescind when there is a mutual mistake?

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at any time when there is a mistake about current or past material fact

for a mutual mistake to interfere with legal consent, it must include all...

1\. a basic assumption about the subject matter of the contract \n 2. a material effect on the agreement \n 3. an adverse effect on a party that did not agree to bear the risk of mistake at the time of the agreement

misrepresentation

an untruthful assertion by one of the parties about a material fact

innocent misrepresentation

a false statement about a fact material to an agreement that the person who made the statement believed to be true

scienter

intent or knowledge

negligent misrepresentation

A false statement of material fact made by a person who thinks it is true but who would have known the truth about the fact had he or she used reasonable care to discover or reveal it.

fraudulent misrepresentation

a false representation of a material fact that is consciously false and is intended to mislead the other party

intentional misrepresentation

A false representation of a material fact made by a party who either knows or believes that the factual claim is false or knows that there is no basis for the assertion. Scienter is clear.

3 requirements for finding a fraudulent misrepresentation

1\. a false statement about a past or existing fact that is material to the contract \n 2. intent to deceive \n 3. justifiable reliance on the false statement by the innocent party to the agreement

concealment

the active hiding of the truth about a material fact

nondisclosure

failure to provide pertinent information about the projected contract