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Contracts Outline

Contracts Outline

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Published by ericachavez
Law School Contracts Outline
Law School Contracts Outline

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Published by: ericachavez on Apr 10, 2010
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02/20/2015

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Do NOT forget your commonsense; if someone breaches its most likely going to mean they will lose!!
Contracts Checklist
1.
A
 pplicable Law (UCC sale of goods or common law)
2.
F
ormation (offer, acceptance, consideration or consideration substitute & no formation defense)
3.
T
erms
4.
P
erformance
5.
emedies for Unexcused nonperformance
6.
E
xcuse of Non performance
7.
T
hird Party BeneficiariesI.
Vocabulary
A.
Contract
: a legally enforceable agreement
B.
Bilateral Contract
: exchange of mutual promises
C.
Unilateral Contract
: the offer expressly requires performance as the only method of acceptance (reward, prize, contest)
D.
Quasi Contract
: where a contract fails, courts may impose a quasi-contract to prevent unjust enrichment (equitable remedy)
1.
RULE:
a.
п conferred a benefit on Δ;
 b.
п reasonably expected to be paid; &
c.
Δ is unjustly enriched by not compensating п (recovery is measured by the benefit conferred)II.
Applicable Law
A.
UCC Article 2
– 
Sale of Goods
1.
Good : moveable, tangible property
2.
Merchant: one who regularly deals in goods of the kind (or) who hold themselves out as having special knowledge/skill peculiar to those goods. The UCC has special rules governing transactions between merchants
B.
Common Law
(real estate or services contracts)
C.
Hybrid Transaction :
predominant purpose
III.
Formation
A.
Offer
:
1.
Manifestation of intent to be bound;
2.
In definite & certain terms (vague or ambiguous terms are illusory);
a.
An offer is NOT required to contain all of the material terms (missing terms to be supplied by the court)
 b.
Common Law Exception: real estate transactions MUST contain price & description
c.
UCC Exception: Quantity term MUST be stated (missing terms to be supplied by the court)
i.
Requirement/Output Contracts : quantity pursuant to buyer’s needs or seller’s output (exclusively or non-exclusively); be wary of illusory contracts; increases allowed if 1) proportionate & 2) made in good-faith3.Creating power of acceptance in the offeree
a.
Advertisements, invitations to deal (or) preliminary negotiations are NOT offers b.Exception: a response to a very specific inquiry may be construed as an offer, as opposed to a mere price quote
B.
Termination of Offer
: an offer may be accepted so long as it has NOT been terminated
1.
Revocation
(by offeror): unequivocal words/conduct evidencing the termination of an offer effective when received
a.
Irrevocable Offers : an offer cannot be revoked is one of the following:
i.
Option
: 1) promise to keep an offer upon & 2) supported by consideration
ii.
Firm Offer
: 1) offer, 2) by amerchant, 3) in a signed writing, 4) which by its terms gives assurance that it will be held open is 5) irrevocable for the time stated (or if no time is stated, for 3 months)
iii.
Detrimental Reliance
: detrimental reliance (foreseeable) & enforcement is necessary to avoid injustice
iv.
Unilateral Contract/Beginning Performance
: unilateral contract are irrevocable for a reasonable period of time for the offeree to complete performance (exception: mere preparation)
2.
Rejection
(by offeree) or 
Lapse of Time
: effective when received
a.Express/Direct
 b.
Counteroffer
(as opposed to mere bargaining): terminates the prior offer and creates a new offer 
c.
Conditional
 
Acceptance
(as opposed to mere preferences): terminates the prior offer and creates a new offer 
d.
Mirror Image
(common law): acceptance adding “new” terms terminates the prior offer and creates a new offer 
1
 
e.
Battle of the Forms
(UCC):if  between merchantsthe new terms become part of the contract UNLESS 1) material alteration (substantially effects a party’s risks or remedies), 2) the offer expressly limits acceptance to its terms (or)3) offeror objects within a reasonable time
3.Operation of Law
a.
Death or Incapacityi.Exception: option contract or part performance of offer to enter into a unilateral contract b.Destruction of subject matter of the contractc.Supervening illegality
C.
Acceptance
:
1.
Manifestation of assent to the terms of the offer (common law
mirror image
; UCC
battle of the forms
 
 supra
);
2.
By the person to whom the offer was made (offers are NOT assignable);3.With knowledge of the offer; &
4.
UNLESS specifically limited by offeror, by any reasonable means:
a.
Later Conduct
(by offeror)
Implying a Contract
notwithstanding an improper response by the offeree
i.
Battle of the Forms
 
 supra
: new contract, inconsistent terms knock each other out, UCC fills the gaps
 b.
Promise to Perform
(by offeree): acceptance of bilateral contract only (acceptance upon completion of  performance under a unilateral contract)i.An offer calling for the shipment of goods may be accepted by a promise to ship
c.
Starting to Perform
(by offeree): acceptance of bilateral contract only (acceptance upon completion of  performance under a unilateral contract)
d.
Complete Performance
(by offeree): acceptance for both bilateral & unilateral contracts;
notice
may be required
e.
Mailbox Rule
: acceptance is generally effective when mailed; all other communication are effective when received
i.
Exception: if rejection is sent before acceptance, neither is effective until received
f.
Nonconforming Tender
: acceptance & breach UNLESS offeree is making a mere accommodation, then no breach& it operates as a counteroffer (noting that the offeror can either accept or reject the accommodation; should theyreject, they will have no further remedy)
D.
Consideration
:
bargained for exchange of legal value
; courts generally do NOT inquire into the adequacy of consideration,however, if only one party is bound to perform the promise is illusory and is unenforceable for lack of consideration1.Adequate Consideration
a.
Performance or Promise to Perform
: a promise can be consideration for another promise UNLESS illusory
 b.
Forbearance or Promise to Forbear
: giving up something you have the legal right to do2.Inadequate Consideration
a.
Past Consideration/Moral Consideration
: NOT consideration UNLESS
i.
Expressly requested & there is an expectation of payment
 b.
Preexisting Duty Rule (MODIFCIATION)
: new/additional consideration is required UNLESS
i.
Unforeseen circumstances (or) third party promise to pay
ii.
 No additional consideration is required, only
good faith
modification for the sale of goods
c.
Part Payment to Release Debt (MODIFICATION)
: if debt is due & undisputed partial payment is NOTconsideration for release of that debt, however 
,
EARLY payment IS CONSIDERATION for release of debt
3.
Consideration Substitutes: there is a legally enforceable agreement even though there is no new consideration
a.
Promissory Estoppel
: 1) promise, 2) detrimental reliance (foreseeable) & 3) enforcement is necessary to avoidinjustice
 b.
Promise to Pay Legal Obligation now Barred by SOL
: 1) writing 2) enforceable as to those new terms
E.
Formation Defenses
– “CSIMMMUD”
1.
Lack of Capacity
: person without capacity has the right to disaffirm the contract to avoid liabilitya.Minoi.Implied affirmation (ratification) upon reaching the age of majority b.Mentally incompetentc.Intoxicated (if other party had reason to know)
d.
Quasi-Contract liability to pay reasonable value for necessaries
2.
Statute of Frauds
: for certain agreements to be enforceable they must be 1) in writing & 2) signed by party againstwhom enforcement is sought (if a contract falls within the SOF but is satisfied, it is enforceable = no SOF defense; if acontract falls within the SOF but it NOT satisfied, it is unenforceable = SOF operates as a defense to contract formation)
a.
Agreements within the SOF
2
 
i.
Promise to Answer for the debts of another (exception: “main purpose” of guarantor was to benefit themselves)ii.Promise by Executor to pay Decedent’s Debts Personallyiii.Promises made in consideration of Marriage
iv.
Promises that by its terms cannot be competed within (1) year (starting from the date of the agreement; lifetimecontracts are not within the SOF nor are tasks)
v.
Transfers of an interest in real estate (exception: leases for (1) year or less)vi.Sale of goods for $500+ b.Satisfying the SOF
i.
Writing
(common law): 1) parties, 2) subject matter & 3) signed by the party against whom enforcement issought (UCC):1) quantity term & 2) signed by the party against whom enforcement is sought (merchantsexception: if a writing in confirmation of an agreement is received within a reasonable time, it satisfies the SOFUNLESS objected to in writing within 10 days.
NOTE
: the
Equal Dignity Rule
states that writtenauthorization is required
to act for someone else
if the underlying contract is within the
SOF
 
ii.
Judicial Admission
: the party asserting the SOF defense admits to an agreement in a pleading, response todiscovery (or) while giving testimony
iii.
Performance
: 1) transfer of an interest in real estate (part performance by buyer if at least two of the followingare satisfied: a) full/part payment, b) possession or c) improvements) 2) services contract (full performance byeither party) (or) 3) UCC: part/full performance of specially manufactured goods
3.
Illegality
:a.Illegal Subject Matter: void
 b.
Illegal Purpose: enforceable only by the party unaware of illegality
4.
Misrepresentation
(concealment): false assertion (or) concealing material facts that were reasonably relied upon
5.
Misunderstanding
(ambiguity):
a.
Material terms open to 2+ reasonable interpretations;
 b.
Each party attaches a different meaning to those terms; &
c.
 Neither party knows (or has reason to know) that the terms are capable of 2+ reasonable interpretations
6.
Mistake of Fact
: a contract will NOT be avoided by unilateral mistake [except where the non-mistaken party knew (or should have known) of the mistake], however it may be avoided where:
a.
Both parties are mistaken as to the contractual terms (NOT what something is worth or the need to enter into a K);
 b.
Materially affects their agreement; &
c.
 Neither party bears the risk 
7.
Unconscionability
: all/part of an agreement may be unenforceable if the contract terms are incredibly one-sided
8.
Duress
:a.Improper threat; & b.No reasonable alternativeIV.
Terms
A.
Contractual Interpretation
:
1.
Contracts are construed as a whole according to the ordinary meaning of its words
2.
Ambiguities are interpreted against the drafter 3.Courts may look at course of performance, course of dealings or trade custom/usage to determine the parties intent
4.
Courts generally want to find a valid/enforceable agreement
B.
Parol Evidence Rule
: evidence of prior/contemporaneous written/oral statements are inadmissible to
contradict, modify, orvary the contractual terms
where an agreement was intended by the parties as their complete/final agreement
1.
Exceptions
(the following are admissible)a.Formation Defenses (“CSIMMMUD”) b.To explain/supplement with evidence of the parties course of performance, course of dealings or trade custom/usagei.Course of Performance: same parties/same contractii.Course of Dealing: same parties/different but similar contractiii.Custom/Usage in the Industry: different but similar parties/different but similar contractsc.Subsequent Modifications
C.
Seller’s Delivery Obligations
(common carrier)
a.
Shipment Contract
: seller completes deliver upon 1) tendering the goods to the common carrier, 2) makingreasonable accommodations for their shipment & 3) notifying the buyer 
 b.
Destination Contract
: seller completes delivery when goods are delivered to buyer’s location
3

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