Term
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Definition
| Expressly requires PERFORMANCE as the only possible method of acceptance |
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Term
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Definition
| (all other contracts) Usually offer is silent as to the method of acceptance. Can be accepted by a promise to perform or by beginning performance |
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Term
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Definition
Common law = real estate & services contracts
UCC - applies to sale of goods |
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Term
| To form a contract, need: |
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Definition
1) Mutual Assent (offer + acceptance)
2) Consideration |
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Term
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Definition
| Manifestation of present intent to contract |
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Term
| What is required of an offer? |
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Definition
1) Must be certain and definite terms (identify the offeree and subject matter of the deal)
2) Must be a communication to the offeree so that they have knowledge of the offer. |
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Term
| For a sale of land, what must the offer include? |
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Definition
| Description of the land and the price |
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Term
| For a sale of goods, what must the offer include? |
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Definition
| Quantity (either certain or capable of being certain) |
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Term
| What is a requirements contract? |
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Definition
Buyer promises to buy from a certain seller ALL the goods the buyer requires. The seller agrees to sell that amount to the buyer.
Cannot be unreasonably disproportionate. |
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Term
| What is an outputs contract? |
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Definition
Seller promises to sell to a buyer ALL of the goods the seller produces, and the buyer agrees to buy that amount from the seller.
Cannot be unreasonably disproportionate. |
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Term
| For services contracts, what must the offer include? |
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Definition
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Term
| Courts can supply reasonable terms for: |
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Definition
For missing prices (Except for real property): courts will supply reasonable price.
Courts will not decide anything for VAGUE terms. |
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Term
| An offer may be terminated by: |
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Definition
1) Lapse of time
2) Death of a party prior to acceptance (Except irrevocable offers)
3) Destruction of subject matter
4) Supervening illegality
5) Revocation
6) Rejection |
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Term
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Definition
| Unambiguous words or conduct of the offeror terminating the offer (unwillingness or inability to contract) of which the offeree is AWARE. |
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Term
| In what situations can an offer NOT be revoked? |
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Definition
1) Option
2) UCC Firm Offer
3) Detrimental Reliance
4) Unilateral contract |
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Term
| Option contract (under common law) |
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Definition
-A promise to not revoke (or keep offer open)
-Supported by consideration |
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Term
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Definition
A promise not to revoke an offer for the sale of GOODS that is:
-Signed
-Written
-Where a party is a merchant |
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Term
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Definition
| An offer cannot be revoked if there has been reliance that is foreseeable and detrimental |
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Term
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Definition
Start of performance pursuant to an offer to enter a unilateral contract makes the offer irrevocable for a reasonable time to complete the performance.
NOTE: Mere preparation is NOT enough for performance. |
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Term
| When is rejection effective? |
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Definition
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Term
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Definition
| Acts as a rejection and creates a new offer (distinguish from bargaining which is usually in the form of a question) |
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Term
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Definition
Conditional acceptance acts a rejection of the offer and creates a counteroffer
Look for "accept" followed by words like "if" "only if" "provided" "so long as" "but" or "on the condition that" |
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Term
| A response that offers additional terms in COMMON LAW: |
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Definition
| Mirror image rule - if it adds new terms, it's a counteroffer, NOT an acceptance |
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Term
| A response that offers additional terms in UCC contract: |
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Definition
A response to an offer that adds additional or different terms but does not make the new terms a condition of acceptance IS part of a contract only if:
• BOTH parties are merchants
• Additional term does not materially alter original terms of the offer
• The offer does not expressly limit acceptance to the terms of the offer
• Additional term is not objected to by the original offeror.
If both parties are NOT merchants, then the additional terms are treated as mere proposal. |
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Term
| Acceptance of an offer: common law & UCC |
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Definition
Common law: acceptance must mirror offer
UCC: Additional or different terms are part of the contract if both parties and merchants and it does not materially alter or expressly limit acceptance and if it's not objected to. |
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Term
| When is acceptance effective? |
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Definition
| When it is mailed (mailbox rule). All other communications are effective when received. |
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Term
| If rejection is mailed and party changes mind and mails acceptance, which is effective? |
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Definition
| The one that is first received. |
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Term
| If acceptance is mailed and then party changes mind and mails rejection, which is effective? |
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Definition
| Acceptance is effective unless rejection is received first and the offeror detrimentally relies. |
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Term
| When is the mailbox rule inapplicable? |
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Definition
| To meet an option deadline |
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Term
| Who can accept the offer? |
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Definition
| A person who knows about the offer at the time they accept |
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Term
| Can offers be assigned? Can options? |
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Definition
No, offers cannot be assigned.
Yes, options can be assigned unless otherwise provided. |
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Term
| When contractor relies on subcontractor's bid in calculation, what is created? |
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Definition
| An option contract between general contractor and subcontractor |
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Term
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Definition
| A bargained for exchange between parties that results in either legal detriment or legal benefit |
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Term
| Is past consideration count as consideration? |
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Definition
No, unless it is expressly requested by promior and expectation of payment by promise
- |
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Term
| Is pre-existing contractual or statutory duties count as consideration? |
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Definition
Common law: No, doing what you are already legally obligated to do is not new consideration for a new promise to pay you more to do merely that...UNLESS there is:
-an addition to or change in performance
-unforeseen difficulty so severe as to excuse performance or
-a third party promise to pay
UCC: There is no preexisting duty rule. New consideration is required to modify an existing sale of goods contract |
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Term
| Is PART payment to settle existing debt consideration for release of that debt? |
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Definition
No, not if the amount is due and undisputed.
If it is not due or disputed, early payment IS consideration for a release |
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Term
| What is a party makes a payment of debt that has been barred by the Statute of Limitations? |
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Definition
| A written promise to satisfy an obligation that is barred by SOL is enforceable without consideration. |
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Term
| Promissory estoppel as a substitute for consideration |
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Definition
-Promise
-Reliance on the promise that is reasonable, detrimental and foreseeable
-Enforcement is necessary to avoid injustice |
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Term
| Reasons for not enforcing an agreement include: |
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Definition
1) Lack of consideration
2) Lack of capacity
3) Statute of Frauds
4) Illegality
5) Public policy
6) Misrepresentation
7) Nondisclosure
8) Duress
9) Unconscionability
10) Ambiguity
11) Mistake |
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Term
| What contracts are within the Statute of Frauds |
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Definition
1) Suretyship - promise to answer for debts of another
2) Service contracts not capable fo being performed within 1 year
3) Transfers of interest in real estate (with exception for leases less than 1 year)
4) Sale of goods for $500 or more |
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Term
| Statute of Frauds is satisfied in the following situations (SWAP): |
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Definition
Specially manufactured goods not suitable for sale to others where the seller has made substantial beginning in their manufacture or commitments for their purchase
2) Written confirmation by merchant - a written confirmation of understanding if he has reason to know of the contents and does not object within 10 days or receipt
3) Admissions in pleadings or courts
4) Performance/Payment of goods - if goods are received and accepted or paid for, the contract is enforceable despite not being in writing. |
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Term
| Modification of a contract requires: |
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Definition
Common Law: requires NEW consideration
UCC: no requirement for new consideration so long as made in GOOD FAITH
Note: If contract was required to be in writing under SOF, then the modification may also need to be in writing. |
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Term
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Definition
| A waiver will be found whenever the other party has changed position in reliance on the oral modification. However, a party who makes a waiver affecting a not yet performed portion of the contract may retract the waiver if she notifies the other party...but it may not be retracted if the other party detrimentally relied. |
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Term
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Definition
| Prior oral or written, or oral contemporaneous agreements are inadmissible to vary, modify or contradict an integrated agreement intended as a complete and final expression of the parties. |
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Term
| What extrinsic evidence may be admitted and falls outside the parol evidence rule? |
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Definition
Evidence regarding
-Formation defects
-Defenses to the enforcement of the contract
-Ambiguity/explaining a term in the contract
-Adding to the written deal when it is a PARTIAL integration OR that the additional terms are that which would usually be in a separate agreement |
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Term
| Can third party beneficiaries enforce a contract? |
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Definition
Depends on whether they are an intended or incidental beneficiary.
1) Only INTENDED beneficiaries (either creditor or donee, a person who benefits gratuitously) can sue under the contract.
2) The intended beneficiary can only enforce the contract if it has VESTED. |
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Term
| When does a 3rd party beneficiary's interest vest? |
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Definition
1) When 3rd party manifests assent to a promise in the manner requested by the parties
2) Brings a suit to enforce the promise; or
3) Materially changes position in justifiable reliance on the promise |
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Term
| Prior to vestingm can the promisee and promisor modify or rescind the beneficiary's rights under the contract? |
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Definition
| Yes, this includes removing the 3rd party beneficiary altogether without consulting the 3rd party. |
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Term
| Who can sue in 3rd party rights? |
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Definition
-Beneficiary can sue promisor
-Promisee can sue promisor
-Creditor beneficiary can sue promisee |
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Term
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Definition
| Transfer of rights under a contract |
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Term
| What rights can be assigned? What cannot be assigned? |
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Definition
Generally ALL rights may be assigned, unless contract prohibits or invalidates assignments.
The following CANNOT be assigned:
-An assignment that would substantially change the obligor’s duty or risk (e.g., personal service contracts where service is unique, requirements and output contracts where assignee would substantially vary the quantity)
-An assignment of future rights to arise from future contracts
-An assignment prohibited by law |
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Term
| Are assignments revocable or irrevocable? |
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Definition
Assignments for Value – An assignment is for value if done for consideration or taken as security for or payment of a preexisting debt. Assignments for value CANNOT be revoked.
Gratuitous Assignments – Can generally be revoked. |
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Term
| Who can sue under assignment? |
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Definition
-Assignee can sue obligor
-Assignee can sue assignor if irrevocable (assignment for value)
Note: Assignor for consideration CANNOT sue obligor. |
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Term
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Definition
| The transfer by a party to a contract of his duties or burdens under the contract to a 3rd party who was not a party to the contract. |
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Term
| Contractual duties are delegable unless: |
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Definition
1) Contract prohibits delegations or prohibits assignments or
2) Involves personal service or special skill
3) Changes the obligee’s expectations |
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Term
| Who can sue for nonperformance in delegation? |
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Definition
Obligee can due delegator (always remains liable)
Obligee can sue delegatee if she receives consideration from delegating party |
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Term
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Definition
-Common law: basic duty is to substantially perform all that is called for in the contract
-UCC: Perfect Tender rule, which means the goods must be exactly as promise. |
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Term
| Under UCC, if seller sends imperfect goods, buyer can: |
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Definition
| -Retain the goods and sue for damages OR -Reject all or any commercial unit and sue for damages |
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Term
| When seller of goods sends the wrong goods, it is an acceptance of the offer and a breach of the contract...UNLESS: |
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Definition
| There is an accommodation (i.e., explanation). If there is an accommodation, then it is a counteroffer and no breach and the person can either accept or reject goods |
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Term
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Definition
| A seller who fails to make a perfect tender will be given a second chance, an option of curing. Seller does not always have the opportunity to cure and that the buyer cannot compel the seller to cure. |
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Term
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Definition
| Requires or authorizes delivery of the goods in separate lots to be separately accepted. The buyer has the right to reject an installment only where there is a substantial impairment in THAT installment that can’t be cured |
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Term
| Revocation of acceptance of the goods |
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Definition
Buyer returns goods and the seller returns payment. Requirements:
-A nonconformity that substantially impairs the value of the goods; and
-An excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction, and
-Revocation within a reasonable time after discovery of nonconformity |
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Term
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Definition
| Any seller of goods warrants that the title transferred is good, that the transfer is rightful and that there no liens or encumbrances against the title of which the buyer is unaware at the time of contracting. (Automatic warranty) |
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Term
| Implied Warranty of Merchantability |
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Definition
| A seller of goods warrants that the goods are fit for the ordinary purpose for which such goods are used. |
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Term
| Implied Warranty of Fitness for a particular purpose: |
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Definition
A warranty will also be implied in a contract for the sale of goods whenever ANY seller, merchant or not:
1) has reason to know the particular purpose for which the goods are to be used
2) that the buyer is relying on the seller’s skill & judgment to select suitable goods
3) the buyer in fact relies on the seller’s skill or judgment |
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Term
| Failure of a condition to occur: |
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Definition
| Relieves other party if his/her obligations |
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Term
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Definition
-Express or constructive (implied)
-Precedent, concurrent, subsequent |
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Term
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Definition
Party prior to the time set for performance of his promise, indicates that he will not perform when the time comes.
Non-repudiating party can:
-Sue immediately
-Suspend performance sue when performance due
-Treat repudiation as a rescission and a discharge or
-Urge performance |
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Term
| Can an anticipatory repudiation be retracted? |
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Definition
| Yes, unless accepted or detrimentally relied on by the other party |
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Term
| Prospective inability to perform |
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Definition
If person is prospectively unable or unwilling to perform, this is not anticipatory repudiation. It merely raises doubts.
The innocent party can:
-Suspend further performance on her side until she receives adequate assurances that performance will be forthcoming.
-If the other party fails to provide adequate assurances, the innocent party may be excused from her own performance and may treat the failure to provide assurances as a repudiation. |
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Term
| Discharge of duties by events such as: |
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Definition
-Impossibility
-Impracticability
-Frustration of Purpose |
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Term
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Definition
-The nonoccurrence of the event was a basic assumption of the parties and
-Neither party assumed the risk of the event occurring
Examples: death or physical incapacity (only if services are kind that cannot be delegated), illegality, & destruction of subject matter |
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Term
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Definition
-Extreme and unreasonable difficulty and/or expense; and
-The nonoccurrence of the event was a basic assumption of the parties |
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Term
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Definition
-There is an unforeseeable supervening event
-Which destroys the purpose or value of the contract, and
-The purpose was understood by both parties at the time of contract |
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Term
| Discharge of duties by parties such as: |
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Definition
-Modification
-Rescission
-Novation
-Accord & Satisfaction |
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Term
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Definition
| A new contract replacing the valid contract with all parties agreeing to release one original party and substituting a new party and extinguishing the original contract |
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Term
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Definition
Accord is an agreement to accept a different performance when there is a bona fide disagreement
Satisfaction is performance of the Accord, discharging the accord and the original contract |
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Term
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Definition
A major/material breach occurs when the party does not receive substantial benefit of the bargain and thus, does not have to perform under the contract
A minor breach occurs when the party DOES receive substantial benefit and thus, can receive setoff but must perform under the contract. (If minor breach is coupled with anticipatory repudiation, party can treat it as a material breach) |
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Term
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Definition
| Benefit of the bargain; put plaintiff in position he would have been in had the contract been properly performed |
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Term
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Definition
| Cost of plaintiff's performance; put plaintiff in position he would have been in had the contract never been formed |
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Term
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Definition
| Expenses reasonably incurred by the breach such as costs of storing rejected goods in a sale of goods or finding a replacement in a services contract; incidental damages are always recoverable |
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Term
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Definition
A party has a duty to mitigate and cannot recover for damages that could have been avoided; if a party does mitigate, they may recover the expenses of mitigation
Examples of mitigation: finding a similar employment position, reselling goods, not continuing work in manufacturing contracts & construction contracts. |
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Term
| Buyer's damages when seller breaches in a contract for sale of goods: |
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Definition
Seller does not deliver or buyer rejects goods or revokes acceptance:
• Contract price – FMV
• Contract price – cost of cover (replacement)
Seller delivers nonconforming goods that buyer accept
• Warranty damages: value of goods as delivered – value they would have had if they had been according to contract
• (Buyer must notify seller of defect within a reasonable time)
Seller anticipatorily breaches contract:
• Contract price – FMV at the time buyer learns of the breach
Consequential damages |
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Term
| Seller's damages when buyer breaches in a contract for sale of goods: |
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Definition
Where buyer repudiates or refuses to accept conforming goods:
• Contract price – FMV
• Contract price – resale price
• Contract price – cost to seller = lost profits
Incidental damages |
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Term
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Definition
| Lost volume seller is one who makes an unlimited or high volume number of goods... His damages are limited to provable lost profits. |
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Term
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Definition
Prevents UNJUST ENRICHMENT and the measure of damages is the value of the benefit conferred
If no contract exists (quasi-contract), plaintiff can recover if:
-Plaintiff conferred a benefit with reasonable expectation of compensation
-Defendant knew or had reason to know of plaintiff’s expectation
-Defendant was unjustly enriched. |
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Term
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Definition
if legal remedy is inadequate, non-breaching party may seek specific performance (order to perform or face contempt of court charges). Available for land contracts or rare/unique goods.
Equitable relief can be:
-specific performance
-rescission
-reformation |
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Term
| Defenses to equitable relief |
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Definition
-Laches – unreasonable delay in pursuing the claim in a way that results in prejudice to the defendant
-Unclean hands – plaintiff cannot pursue the claim if he/she has done anything unethical in relation to the subject of the lawsuit
-Hardship
-Mistake and Misrepresentation |
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