What type of theory is intent determined in contract law?

Objective

Explain Express & Implied Contracts

Express Contracts: words express the intent of the parties

Implied Contracts: conduct indicates asset or agreement

What are essential terms under the common law?

The parties

Subject matter

Price Quantity 

What are essential terms under the UCC?

As long as the parties intend to create a contract, the only essential term is QUANTITY. 

The UCC "fills the gap" for other missing terms.

Which statement is an offer and which is a question?

1. What is your lowest price?

2. We can quote you $5 per gross for immediate acceptance

1. Question

2. Offer 

An independent promise to keep an offer open for a specified period of time is a...

Option

*Limits the power to revoke until after the period has expired.

Re: Option Ks, when much the offeree generally give separate consideration for the option to be enforceable?

If the option is a promise not to revoke an offer to enter a new contract.

UCC Firm offer rule

Under the UCC, an offer to buy or sell goods is irrevocable if:

And...is consideration required?

1. the offeror is a merchant

2. there is an assurance that the offer is to remain open; and

3. the assurance is contained in a signed writing from the offeror

** no consideration required under UCC firm offer rule

What is a bilateral contract?

Promise by one party is exchanged for a promise by the other

Can be accepted either with return promise, or starting to perform.

What is a unilateral contract?

One party promises to do something in return for an act of the other party 

*money for finding lost dog

Acceptance requires complete performance.

Can the offeree of a unilateral contract accept if he is unaware of the offer?

NO

1. the term materially alters the original contract

2. the offer expressly limits acceptance to the terms of the offer;

3. the offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received. 

What is a quasi-contract?

equitable remedy when K results are unfair

Prevents unjust enrichment

What is required content in the offer of contracts for: sale of goods, requirements contracts, employment, and land sale?

UCC: description + quantity

Requirements Contract: terms of exclusivity

Employment: Duration

Land Sale: ID of land and price

What is the mailbox rule?

Acceptance is effective when mailed

Everything else is when it is recieved

What is the effect of a seller of goods sending the wrong goods?

If sent with an explanation, it is a counteroffer

What is the effect of additional terms on a UCC K for goods?

One merchant?

Two Merchants?

One Merchant: additional term is proposal subject to separate rejection

Two Merchants: additional term is part of K, unless materially alters, offeror objection within a reasonable time, or offer limits acceptance to the terms.

What are the contract defenses?

MAIDS PIMD

Public Policy:

Incapacity:

Misrepresentation/Nondisclosure:

Duress:

Mistake:

Ambiguity/Misunderstanding:

Illegality:

Duress:

Statute of Frauds: 

Contract Defenses

Incapacity: under 18, right to disaffirm K, unless minor retains benefit after gaining capacity

Illegality: subject matter illegal = K void; subject matter legal, purpose illegal = K is enforceable only by person who didnt know of illegal purpose

Public Policy: covenant not to compete, exculpatory clauses

Misrepresentation/Nondisclosure: innocent party may rescind if induced to enter K by fraudulent misrepresentation

Duress: improper threat and no reasonable alternative

- Unconscionability: unfair surprise and oppressive terms at time of K

Ambiguity/Misunderstanding: each party uses a material term open to 2 reasonable interpretation; each party attaches different meaning to the term; neither party knows or has reason to know the term is subject to two interpretations causing ambiguity.

Mistake: no K for mutual mistake on basic assumption of fact that materially affects agreed upon exchange and not a risk that either party bears. Unilateral mistake not voidable unless other party knew or should have known

Statute of Frauds: Applies to MYLEGS - Marraige, Year, Land, Executory guarantee, Goods >$500, Suretyships. 

What is a reverse auction?

The auctioneer may withdraw goods any time before she announces completion of the sale.

An auction is with reserve unless specifically announced as a no-reserve auction

What is a no-reserve auction?

After the auctioneer calls for bids on the goods, the goods cannot be withdrawn unless no bid is received within a reasonable time.

What are the forms of consideration?

4

1. A return promise to do something
2. A return promise to refrain from doing something
3. The actual performance of some act; or
4. Refraining from doing some act

Is a promise to make a gift enforceable?

No, because there is no bargained for exchange.

When is a promise to make a gift enforceable?

under the doctrine of promissory estoppel if the promisor/donor knows that the promise will induce substantial reliance by the promisee, and the failure to enforce the promise will cause a substantial injustice.

What is the test to distinguish a gift from valid consideration?

Whether the offeree could have reasonably believes that the intent of the offeror was to induce the action.

If yes, there is consideration, and the promise is enforceable.

Contract defenses: incapacity

Incapacity: under 18, right to disaffirm K, unless minor retains benefit after gaining capacity

Contract Defenses: Illegality

Illegality:

subject matter illegal = K void;

subject matter legal, purpose illegal = K is enforceable only by person who didnt know of illegal purpose

Contract Defenses: Public Policy

Public Policy: covenant not to compete, exculpatory clauses

Contract Defenses: Misrepresentation/Nondisclosure:

Misrepresentation/Nondisclosure:

innocent party may rescind if induced to enter K by fraudulent misrepresentation

Contract Defenses: Duress

Duress: improper threat and no reasonable alternative

- Unconscionability: unfair surprise and oppressive terms at time of K

Contract Defenses: Ambiguity/Misunderstanding:

Ambiguity/Misunderstanding: each party uses a material term open to 2 reasonable interpretation; each party attaches different meaning to the term;

neither party knows or has reason to know the term is subject to two interpretations causing ambiguity.

Contract Defenses: Mistake

1. Mistake of fact existing at the time the K was formed
2. The mistake relates to a basic assumption of the K
3. The mistake has a material impact on the transaction; and
4. The adversely affected party did not assume the risk of the mistake.

Unilateral mistake not voidable unless other party knew or should have known

Contract Defenses: Statute of Frauds

MY LEGS

Statute of Frauds: Applies to MYLEGS - 

Marraige,

Year,

Land,

Executory guarantee,

Goods >$500,

Suretyships. 

At common law, does a promise to perform a preexisting legal duty qualify as consideration?

no, because the promisor is already bound to perform

i.e., there is no legal detriment

What is the exception to the pre-existing duty rule for third parties?

When a third party offers a promise contingent upon performance of a contractual obligation by a party, the third party's promise is sufficient consideration

Does a modification to an existing contract at common law need to be supported by consideration?

Does a modification to an existing contract under UCC need to be supported by consideration?

N, only require good faith

What is accord and satisfaction?

mutual agreement of existing obligation to accept different performance or by acceptance of check marked “paid in full.”

Accord: the agreement

Satisfaction: performance of the accord agreement

What is an illusory promise?

Essentially pledges nothing because it is vague or because the promisor can choose whether to honor it.

Promise is not legally binding.

what is a requirements contract?

Contract under which a buyer agrees to buy all that he will require of a product from the other party

What is an output contract?

Contract under which a seller agrees to sell all that she manufacturer of a product to the buyer

Re: requirements and output K's: is there consideration?

Yes, because the promisor suffers a legal detriment

The fact that the party may go out of business does not render the promise illusory.

What promises are binding without consideration?

Promise to pay a debt barred by the statute of limitations

Promise to perform a voidable duty

Promise to pay Benefit received: material Benefit Rule

Promissory Estoppel

What is the material benefit rule?

When a party performs an unrequested service for another party that constitutes a material benefit the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered.

Performing party should have a payment expectation.

Under promissory estoppel, when is a promise binding?

i. the promisor should reasonably expect it to induce action or forbearance on the part of the promisee of third person

ii. the promise does induce such action or forbearance or the promise

iii. injustice can be avoided only by enforcement of the promise

What proof is required to find a contract unenforceable based upon a defense to formation or to enforcement?

Void K

Voidable K

Unenforceable K

Void: a void K results in the entire transaction being regarded as a nullity, as if no K ever existed between the parties

Voidable: operates as a valid K, unless and until one of the parties takes steps to avoid it

Unenforceable: valid K that cannot be enforced if one of the parties refuses to carry out its terms.

What are the defenses to the enforcement of a K?

Illegality

Unconscionability

Public Policy

A party's duty to perform can be dismissed by impracticability. When is this defense available?

i. Performance becomes illegal after the K is made;

ii. The specific subject matter of the K (e.g., goods) is destroyed;

iii. In a personal services K, the performing party to the K dies or becomes incapacitated; or

iv. performance becomes impracticable.

What are examples of unforeseen sufficient excuses for performance?

Is a non-extraordinary increase in the cost of performance sufficient to excuse performance?

Natural disasters, wars, trade and military embargoes, strikes, and local crop failure

NO

What are the elements of impracticability? 

i. an unforeseeable event;

ii. nonoccurrence of the event was a basic assumption on which the K was made; and

iii. the party seeking discharge is not at fault.

When does the doctrine of frustration of purpose apply?

What is the frustrated party entitled to?

when unexpected events arise that destroy one party's purpose in entering into the K, even if performance of the K is not rendered impossible.

Frustrated party may rescind the K without paying damages

The event arising must not be the fault of the frustrated party.

How can a party's duty to perform be discharged?

By some supervening event or change in circumstances arises after the formation of the K. The duty may be discharged.

Impracticability

Frustration of Purpose

Recission

Release

Destruction of Injury to identified goods

What is recission?

The canceling of a K so as to restore the parties to the positions they had before the K was made.

Recissions for recission include:

mutual mistake

fraud

misrepresentation

unilateral mistake

Grounds for recissions must have existed at the time K was made.

Re: recission of a K. 

If the third-party beneficiary rights have vested, does mutual recission discharge the K?

NO

If performance of a promise would satisfy an actual, supposed, or asserted duty of the promisee to a third party, and the promisee did not intent to make a gift to the third party, what is the third party called?

Who can they sue to enforce k?

Creditor Beneficiary

Promisor or promisee

intended v. incidental beneficiary

If the promise indicates that the promisor will pay the third party directly to relieve the promisee from a debt = intended beneficiary

If the promisor is to pay the promisee in order that she may pay the third party, then the third party is most likely an incidental beneficiary.

When do the rights of an intended beneficiary vest?

The rights of an intended beneficiary vest when the beneficiary:

i. Detrimentally relies on the rights created;

ii. Manifests assent to the K at one party's request; or

iii. Files a lawsuit to enforce the K

What are assignments and delegations?

Assignment: transfer of rights

Delegation: transfer of duties

What is a novation?

A mutual agreement to substitute existing party with another, excusing performance of a substituted party.

Parol Evidence Rule:

what does it deal with?

Can PE reform or contradict written terms?

What is PE allowed to do?

Integration Issues

Merger clause is persuasive but not determinative

No reformation unless there is a mistake in integration

PE CAN: argue defense to enforcement; explain ambiguous terms. provide additional terms if only partial integration, additional terms would ordinarily be in separate agreement 

What are the non-monetary K remedies?

Specific Performance

Rescission

Reformation

Reclamation

Rights of good faith purchaser in entrustment

What are the monetary damage measures?

Expectation Damages: Put P as if K wasn't breached

Reliance Damages: Puts P in same dollar position as if K wasnt breached

Restitution Damages: prevents D's unjust enrichmen

What must Seller do in shipment K?

FOB(free on board)

1. Seller must deliver the goods to the carrier,
2. make a proper K for their shipment,
3. obtain and deliver any document necessary for the buyer to obtain possession of the goods, and
4. give buyer notice

What is required in a destination K?

FOB(free on board)

The Seller must:

1. deliver the goods to a particular place (specified in the K)
2. tender them there by holding the goods at the buyer's disposition and
3. giving the buyer notice

What is required in a destination K?

FOB(free on board)

The Seller must:

1. deliver the goods to a particular place (specified in the K)
2. tender them there by holding the goods at the buyer's disposition and
3. giving the buyer notice

RE: Seller's obligation to tender goods:

What are the four methods of tender?

i. Seller's place of business

ii. Shipment k

iii. Destination K

iv. Goods in the hands of a bailee

What are the buyer's obligations when conforming tender is made in a noncarrier case versus a carrier case?

Payment is due from buyer at the moment buyer receives the goods

Non-carrier cases: payment is due upon tender of delivery by seller

What happens to the goods under a shipment under reservation K?

A seller who ships by carrier under a K that does not specify the method or form of payment may send the goods under reservation, meaning that the carrier will hold the goods until the buyer pays

This is accomplished by the seller's obtaining a negotiable or nonnegotiable bill of lading

What is the expectation damages formula?

Expectation = loss in value + other loss - cost avoided - loss avoided

What do courts award for damages when expectation damages would result in economic waste?

Diminution in value:

economic waste occurs when the amount of damages owed is disproportional to any economic benefit or utility gained as a result of the award.

What are consequential damages?

reasonably foreseeable losses to a non-breaching party that go beyond expectation damages, such as loss of profits.

What are liquidated damages?

what must be shown to enforce?

Damages stipulated by the parties in the K as a reasonable estimation of actual damages to be recovered in the event.

i. the parties intended to agree in advance to the settlement of damages that might arise from the breach;

ii. the amount of liquidated damages was reasonable at the time of contracting, bearing some relation to the damages that might be sustained; and

iii. Actual damages would be uncertain in amount and difficult to prove.

What are incidental damages?

The cost for finding a replacement

What are punitive damages?

rarely in K actions

Some states allow to punish fraud, for violation of a fiduciary duty, for acts of bad faith or for deterrence

What are nominal damages?

Damages do not need to be alleged in a cause of action for breach.

If no damages are alleged or no damages are proved, the P is still entitled to a judgment for "nominal" damages (e.g., one dollar)

When does a mutual mistake occur?

When both parties are mistaken as to an essential element of the K

K may be voidable by the adversely affected party if they can prove:

i. mistake of fact existing at the time the K was formed 

ii. the mistake relates to a basic assumption of the K

iii. the mistake has a material impact on the transaction

iv. the adversely affected party did not assume the risk of the mistake

when does a misunderstanding occur?

when both parties believe that they are agreeing to the same material terms, but in fact, they agree to different terms.

If the misunderstanding involves a material term, and neither party knows or should know that there is a misunderstanding, then there is no contract.

Formation of Contracts: Defenses to Formation

What is a misrepresentation?

What does fraudlent misrepresentation require?

An untrue assertion of fact (not merely of law or opinion) that can make the contract void or voidable.

Fraudulent misrepresentation requires proof of:

i. the misrepresentation if made knowingly and with intent to mislead the other party

ii. the misrepresentation induced assent to the K, and

iii. the adversely affected party justifiably relief on misrepresentation

Formation of Contracts: Defenses

Does a fraudulent misrepresentation need to be material in order to be relief on>?

No, it may make the K voidable at the adversely affected party's option. 

Is nondisclosure of a known fact the same as an assertion that the fact does not exist?

Fraudulent misrepresentation

Defaulting buyer's right to restitution 

accord agreement

One party to a K agrees to accept different performance from the other party than what was promised in the existing K

Generally, consideration is quired for an accord to be valid

By compromising, each party surrenders its respective claim as to how much is owed

When a creditor agrees to accept a lesser amount in full satisfaction of the debt, the original debt is discharged only when there is some dispute either as to the validity of the debt or the amount of debt, or when the payment is of a different type than called for under the original contract.