ACCT 2700 Ostendorf - Test 4

Mistake that might allow a contract to be cancelled

mistake of material fact

Mistake made by one party (generally still enforceable)

Unilateral mistake

Mistake that is a mutual understanding by both parties

Bilateral mistake

Mistake about future value or quality of the object of the contract

mistake of value

Innocent party induced to enter contract by a misrepresentation may avoid the contract because he/she did not genuinely consent

Fraudulent Misrepresentation

Required elements for misrepresentation

Misrepresentation of material fact, intent to deceive, justifiable reliance on misrepresentation, injury to the innocent party

Party takes specific action to conceal a fact that is material to the contract

Misrepresentation by contract

Statement that is generally, not considered to be fraudulent

statement of opinion

Misrepresentation that ordinarily does not entitle a party to relief

Misrepresentation of law

Misrepresentation in which neither party has duty to disclose facts

Misrepresentation by silence

Knows a fact is not as stated, makes a statement he believes is not true, makes a statement recklessly, says a statement is made based on personal knowledge when it is not

Scienter

Misrepresentation that occurs when a person makes a statement, he believes to be true but actually misrepresents facts

Innocent misrepresentation

Misrepresentation that fails to use reasonable care

negligent misrepresentation

Deceived party must have justifiably relied on the misrepresentation

Justifiable reliance

Not required to rescind the contract; but required if the innocent party seeks to recover damages

Injury

Arises from relationships in which one party can greatly influence another party (lacks consent)

Undue influence

One party dominates the other

Fiiduciary relationships

When contract enriches the dominant party, court will often presume undue influence

Presumption

A party who enters a contract under fear or threat makes the contract voidable

duress

Generally, not sufficient on its own to constitute duress

economic duress

Contracts that require a writing

Marriage contracts, contracts which cant be performed within a year, contracts which involve interests in land, executor contracts, contracts for the sale of goods worth over $500, surety contracts

[Exception to writing requirement] court may grant specific performance such as an equitable remedy

partial performance

[Exception to writing requirement] Court may stop a person from denying a contract exist

promissory estoppel

[Exception to writing requirement] party admits a contract exists

Admissions

Statute of frauds requires a '_____________________ (written or electronic) signed by the party against whom enforcement is sought

Written Memorandum'

Oral representations or promises made prior to the contract's formation or at the time the contract was created may not be admitted in court

parole evidence rule

When determining whether to admit parole evidence, courts consider whether the contract is intended to be _____________

complete

Only original parties to a contract have rights and liabilities under the contract

Privity of contract

3 exceptions to privity of contract

Assignment, delegation, third party beneficiary contract

[Exception to privity of contract] transfer of contractual rights

assignment

Party assigning rights to third party

assignor

Party receiving rights

Assignee

Person required to perform the duty

Obligor

When the rights of an assignor are _______________ assigned, assignor's rights are extinguished .

unconditionally

Form of the assignment

oral or written

What rights can be assigned?

All rights under a contract

Exceptions to the assignment of rights

Statute expressly prohibits assignment, contract is personal, assignment significantly changes the risks or duties of the obligor, contract prohibits assignment

Is it legally necessary to notify the obligor of the assignment?

no

[Exception to privity of contract] transfer of contractual duties

delegation

Party delegating the duties

delagator

Party to whom the duties are delegated

delegatee

There is no special _________ required for delegation of duties.

form

Any duty can be delegated with the exceptions...

special trust placed in the obligor, performance will vary materially from that expected, contract prohibits delegation

[Exception to privity of contract] : people who the parties for the contract intend for the contract to benefit

third party beneficiary contract

Type of beneficiary in which you can sue to enforce contract made for their benefit

intended

Type of beneficiary in which you can not sue because benefit is unintentional

incidental

A party may be discharged (released) from a contract by:

condition, performance, agreement, operation of law

A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract

Discharge by condition

Condition that must be fulfilled before a parties performance can be required

precedent

Condition fulfilled to terminate a parties absolute promise to perform

subsequent

Full performance or material breach by the other party

discharge by performance

Most common way contracts are terminated

discharge by performance

[discharge by performance] One party has done everything required

tendering

[types of performance] when a party performs exactly as agreed and there is no question as to whether the contract has been performed

complete

[types of performance] performed in good faith; performance does not vary greatly from what was promised; performance creates substantially the same benefits

substantial

contract that is personal in nature; held to the reasonable person standard unless contract explicitly states third party approval

performance to the satisfaction of another

occurs when performance is not substantial; nonbreaching party is excused from performance and entitled to damages

material breach of contract

Duty to perform is not excused and the non-breaching party must resume performance of the contractual obligations undertaken

non material breach of contract

Time for performance - if no time is stated in contract, ______________ time is implied

reasonable

one of the parties refuses to carry out his or her contractual obligations before either party has a duty to perform

anticipatory repudiation

[discharge by agreement] parties make another agreement for the purpose of cancelling the original agreement

discharge by mutual recession

[discharge by agreement] Both parties agree to substitute a new third party for one of the original parties

discharge by novation

[discharge by agreement] requirements for discharge by novation

previous valid obligation, agreement by all parties, extinguishment of all old obligations, new valid contract

[discharge by agreement] Discharge in which the parties agree to accept performance that is different from the performance originally promised

discharge by accord and satisfaction

[discharge by agreement] a new agreement made to resolve a contract dispute

accord

[discharge by agreement] Performance of accord

satisfaction

[discharge by operation of law] innocent party is discharged after material alteration

material alteration

[discharge by operation of law] must file suit within time permitted by applicable law

statutes of limitations

[discharge by operation of law] generally bars enforcement of non-exempt transactions

bankruptcy

[discharge by operation of law] supervening event was not foreseeable

objective impossibility fo performance

[discharge by operation of law] Performance becomes extremely difficult or costly, and not have been known by parties when contract made

commercial impracticability

[discharge by operation of law] Supervening event makes it impossible to attain purpose both parties had in mind; event must not have been foreseeable, and decreases value of what a party receives under contract

frustration of purpose

[contract remedies] Most common breach of contract remedy; goal is to "make the party whole" or give them the "benefit of their bargain"

damages

[contract remedies] 4 types of damages

compensatory, consequential, nominal, punitive

[contract remedies- damages] to cover direct losses and costs (compensate the non breaching party for the loss of the bargain)

compensatory

[contract remedies- damages] to cover indirect and foreseeable losses (foreseeable damages resulting from the breach - like lost profits on sale of goods intended for resale)

consequential

[contract remedies- damages] to recognize wrongdoing when no monetary loss is shown (rare, unless a tort is also involved)

nominal

[contract remedies- damages] to punish and deter wrongdoing (awarded when there is only a technical injury)

punitive

[contract remedies] awarded when legal remedies (damages) are inadequate

equitable remedies

[contract remedies - equitable remedies] Terminates the contract and returns parties to their positions prior to the transaction (happens with fraud, duress, undue influence, etc)

recession

[contract remedies - equitable remedies] when a contract is rescinded, both parties must return goods, property, or money, previously conveyed

restitution

[contract remedies - equitable remedies] calls for the performance of the act promised in the contract; gives the non breaching party the exact bargain promised in the contract

specific performance

[contract remedies - equitable remedies - specific performance] only if goods are unique

sale of goods

[contract remedies - equitable remedies - specific performance] appropriate because land is unique

sale of land

[contract remedies - equitable remedies - specific performance] not appropriate because it amounts to involuntary servitude

personal services

[contract remedies - equitable remedies] used when the parties have imperfectly expressed their agreement in writing