contract review

Contracts Agreement meeting of the minds offer definition problems with intent invitation to bargain price quotes letters of intent advertisements auction problems with definiteness UCC and open terms(gap-filler provision) open price output and requirements provisions delivery, time, and payment warranties termination of offers by revocation firm offers and revocability common law rule option contract sale of goods by rejection counter-off by expiration by operation of law acceptance definition mirror image rule UCC and the Battle of Forms~~(additional or different terms) communication of acceptance medium and manner of acceptance time of acceptance: the mailbox rule Consideration a bargain and an exchange the things bargained for adequacy of consideration mutuality of obligations illusory promise sales law: requirements and output contracts past consideration (1) exception: economic benefit preexisting duty exception: additional work exception: modification exception: unforeseen circumstance settlement of debts liquidated debt unliquidated debt: accord and satisfaction accord and satisfaction by check UCC exceptions Legality Contracts that violate a statute wages insurance licensing statutes usury Contracts that violate public policy restraint of trade sale of business employment exculpatory clauses types of being unenforceable to exculpatory clauses bailment cases unconscionable contracts adhesion contracts unconscionability and sales law Capacity: the pa rites must be adults of sound mind Minors: a minor is some one under the age of 18. A voidable contract may be canceled by the party who lacks capacity disaffirmance: to give notice of refusal to be bound by an agreement by telling the other party, orally or in writing, that he will not honor the deal by filing a suit to rescind(a court’s order to cancel a contract) the contract by refusing to perform his obligations under it restitution: restoring an injured party to its original position. A minor who disaffirms a contract must return the consideration he has received, to the extent he is able. timing of disaffirmance/ratification after turning 18: a minor may disaffirm a contract anytime before she reaches age 18. she also may disaffirm within a reasonable time after turning 18 ratification: words or actions indicating an intention to be bound by a contract. If a minor enters into a contract and then, after turning 18, ratifies the deal, she loses her right to disaffirm and the agreement becomes fully enforceable. exception: necessaries: a necessary is something essential to the minor’s life and welfare. On a contract for necessaries, a minor must pay for the value of the benefit received. In other words, the minor may still disaffirm the contract and return whatever is unused. But he is liable to pay for whatever benefit he obtained form the goods while he has them. exception: misrepresentation of age: the rules change somewhat if a minor lies about his age because the law was intended to protect childhood innocence, not calculated deceit. Mentally impaired persons a person suffers from a mental impairment if by reason of mental illness or defect he is unable to understand the nature and consequences of the transaction a party suffering a mental impairment generally creates only a voidable contract the law presumes that adult is mentally competent Intoxication: when one party is so intoxicated that he cannot understand the nature and consequences of the transaction, the contract is voidable. Consent: neither party may trick or force the other into the agreement Misrepresentation and fraud, misrepresentation: a factually incorrect statement made during contract negotiations. If the owner believes the statement to be true and has a good reason for that belief, he has made an innocent misrepresentation. If the owner knows that it is false, the statement is fraudulent misrepresentation element one, false statement of face: the injured party must show a false statement of fact which does not mean the statement was a lie. To the problem of puffy the court think the writing was pretty poor, but you still may not sue. element two: fraud or materiality the statement was fraudulent if the maker intended to induce the other party to contract, either knowing that her words were false or uncertain that they were true the statement was material if the maker expected the other party to rely on her words in reaching an agreement element three, justifiable reliance: the injured party must also show that she actually direly on the false statement and that her reliance was reasonable. No duty to investigate: a party to a contract has on duty to investigate the other party’s factual statements. plaintiff’s remedy for misrepresentation or fraud: in the maker’s statement is fraudulent, the injured party generally has a choice of rescinding the contract or suing for damages. if statement is fraudulent, the injured party has remedies including rescission, suing for damages and so on if statement is innocent, the injured party has no remedy other than rescission Sale of goods: UCC & 2-721 permits a party to rescind a contract and then sue for damages, whether the misrepresentation was fraudulent or innocent special problem: silence (nondisclosure of a fact amounts to misrepresentation only in following four cases) to correct a previous assertion: when an earlier statement later appears inaccurate, the change generally must be reported. to correct a basic mistaken assumption: when one party knows that the other is negotiating with a mistaken assumption about an important fact, the party who knows of the error must correct it. A seller generally must report any latent defect he knows about the buyer should not be expected to discover himself. to correct a mistaken understanding about a writing a relation of trust: when one party naturally expects openness and honesty, based on a close relationship, the other party must act accordingly Mistake bilateral mistake: occurs when both parties negotiate based on the same factual error. If the parties contract based on an important factual error, the contract is voidable by the injured party unilateral mistake: occurs when only one party enters a contract under a mistaken assumption. To rescind for unilateral mistake, a party must demonstrate that she entered the contract because of a basic factual error and that either enforcing the contract would be unconscionable or the nonmistaken party knew of error. Duress: an improper threat made to force another party to enter into a contract. If one party makes an improper threat that causes the victim to enter into a contract, and the victim had no reasonable alternative, the contract is voidable. Economic duress: in analyzing a claim of economic duress distinguished from business tactics. The courts looks at these factors: acts that have no legitimate business purpose greatly unequal bargaining power an unnaturally large gain for one party financial distress to one party Undue influence: to prove undue influence, the injured party must demonstrate: a relationship between the two parties either of trust or of domination improper persuasion by the stronger party Written contracts: some contracts must be in writing to be enforceable. However, agreement is unenforceable, but it is not volid. Once a contract is fully executed, it makes on difference that it was unwritten. Contracts that must be in writing [Mylegs](the statute of frauds: a plaintiff may not enforce any of the following agreements, unless the agreement, or some memorandum of it, is in writing and signed by the defendant) marriage: a promise made in consideration of marriage must be in writing to be enforceable year: contracts that cannot be performed within one year are unenforceable unless they are in written. land: a contract for the sale of any interest in land must be in writing to be enforceable exception: full performance by the seller—if the seller completely performs her side of a contract for an interest in land, a court is likely to enforce the agreement even if it was oral. exception: part performance by the buyer—the buyer of land may be able to enforce an oral contract if she paid of the purchase price and either entered upon the land or make improvements to it. exception: promissory estoppel—if a promisor makes an oral promise that should reasonably cause the promisee to rely on it, and the promisee does rely, the promisee may be able to enforce the promise, despite the statute of frauds, if that is the only way to avoid injustice. The statute of frauds was passed to prevent fraud, not to enable one person to mislead another and benefit at her expense. executor’s promise to pay debt: an executor`s promise to use her own funds to pay a debt of the deceased must be in writing to be enforceable. guarantee of performance(pay a debt of another): when one person agrees to pay the debt of another as a favor to that debtor, it is called a collateral promise, and it must be in writhing to be enforceable. exception: the leading object rule: when the promise guarantees to pay the debt of another and the leading object of the promise is some benefit to the promisor himself, then the contract will be enforceable even if unwritten. In other words, if the promisor makes the guarantee not as a favor to the debtor, but out of self-interest, the stature of frauds does not apply. sale of goods [UCC] the basic rule, UCC&2-201(ⅰ): A contract for the sale of goods worth $500 or more is nor enforceable unless there is some writing, signed by the defendant, indicating that the parties reached an agreement. the merchants` exception, UCC&2-201(ⅱ): when a reasonable time of making an oral contract, if one merchant sends a written confirmation to the other(merchant), and the confirmation is definite enough to bind the sender herself, then the merchant who receives the conclamation will also be bound by it unless he objects in writing within 10 days. special circumstances, UCC2-201(ⅲ): an oral contract may be enforceable, even without a written memorandum, if: the seller is specially manufacturing the good for the buyer, or the defendant admits in court proceedings that there was a contract, or the goods have been delivered or they have been paid for special manufactured goods admissions in court: when the defendant admits in court proceedings that the parties made an oral contract, the agreement is binding. goods delivered or paid for: if the seller has delivered the goods ,or the buyer has paid for them, the contract may be enforced even with noting is writing. What the writing must contain signature reasonable certainty: the name of each party, the subject matter of the agreement, and all of the essential terms and promises. Parole evidence: refers to anything (apart from the written contract itself) that was said, done, or written before the parties signed the agreement or as they signed it. the parole evidence rule: when two parties make an integrated contract, neither one may use parole evidence to contradict, vary, or add to its terms integrated contract: a writing that the parties intend as the final, complete expression of their agreement. exception: an incomplete or ambiguous contract: if a court determines that a written contract is incomplete or ambiguous, it will permit parole evidence exception: misrepresentation or duress: a court will permit parole evidence of misrepresentation or duress. Third party: some contracts affect people other than the parties themselves. third party beneficiary: a third party beneficiary is someone who was not a party to the contract but stands to benefit from it intended beneficiary: someone who may enforce a contract made between two other parties. the parties intended third parties to benefit, and either enforcing the promise will satisfy a duty of the promisee to the beneficiary, or (creditor beneficiary: if the promisee is fulfilling some duty, the third party beneficiary is called a creditor beneficiary) the promisee intended to make a gift to the beneficiary. (if the pormisee is making a gift, the third party is a donee beneficiary) incidental beneficiary: someone who might have benefited from a contract between two others but has no right to enforce that agreement. (any beneficiary who is not an intended beneficiary is an incidental beneficiary) Assignment: transferring contract rights. Assignor: the one making a n assignment. Assignee: the one receiving and assignment. Obligor: the one obligated to do something. Obligee: the one to whom an obligation is due. the rights are assignable unless substantial change it would substantially change the obligor`s situation assignment is also prohibited when the obligor is agreeing to perform personal services. public policy contract prohibition elements of rights assigned writing : in general, no particular formalities are required(written or oral). However, when someone wants assign rights governed by the statute of frauds, she must of it in writing. Consideration: an assignment can be valid with or without consideration. However, an assignment for consideration is irrevocable; and a gratuitous assignment is generally revocable if it is oral and generally irrevocable if it written. notice to obligor: the assignor with common sense will immediately inform the obligor of the assignment. rights of parties after assignment including once the assignment is made and the obligor notified, the assignee may enforce her contractual rights against the obligor the obligor may generally raise all defense against the assignee that she could have raised against the assignor assignor’s warranty the rights he is assigning actually do exist, and there are no defense to the rights other than those that would be obvious, like nonperformance. differences under the UCC. UCC &9-404, the obligor on a sales contract may generally assert any defenses against the assignee that arise form the contract, and any other defenses that arose before notice of assignment. The Code’s reference to any defenses that arise from the contract means that if the assignor breached his part of the deal, the obligor may raise that as a defense. Where the Code talks about other defenses that arose before notice of assignment, it refers, for example, to fraud. (security interest: a legal right in personal property that assures payment) UCC &9-403, an agreement by a buyer(a lessee) that he will not assert against an assignee any claim or defense that he may have against the seller(or lessor) is generally enforceable by the assignee if he took the assignment in good faith, for value, without notice of the potential defense. Delegation: most duties are delegable, but delegation does not by itself relieve the delegator of his own liability to perform the contract duties delegated unless public policy contract prohibition substantial interest in personal performance Novation: a three-way agreement in which the obligor transfers all rights and duties to a third party Discharges and performance: if a party full yaccomplishes what the contract requires, this duties are discharged. Discharge: a party is discharged when she has no more duties under the contract most contracts are discharged by full performance sometimes the parties discharge a contract by agreement. For example, the parties may agree to rescind(to terminate) their contract Performance strict performance: requires one party to perform its obligations precisely, with no deviation from the contract terms. substantial performance: occurs when one party fulfills enough of its contract obligation to warrant payment. A party that fails to perform substantially receives nothing on the contract itself and will only recover the value of the work, if any. When is performance substantial——no perfect test, but courts look at these issues: how much benefit has the promisee received? If it is a construction contract, can the owner use the thing for its intended purpose Can the promisee be compensated with money damages for any defects? Did the promisor act in good faith? personal satisfaction contracts：permit the promisee to make a subjective evaluations of the promisor`s performance a court applies a subjective standard only if assessing the work involves personal feelings, taste, or judgment and the contract explicitly demanded personal satisfaction. In all other cases, a court applies an objective standard to the promisee`s decision. An objective standard means that the promisee`s judgment of the work must be reasonable. good faith: every contract imposes upon each party a duty of good faith and fair dealing tin its performance and into enforcement. The parties must remain faithful to the “agreed common purpose and justified expectations of the other party”. time of essence clauses: generally make contract dates strictly enforceable. Merely including a date for performance does not make time of the essence. If the parties do not clearly state that prompt performance is essential, then both are entitled to reasonable delays. Condition: an event that must occur before a party becomes obligated under a contract. If the condition does not occur, one party will probably be discharged without performing methods of creating conditions express conditions: the partied may expressly state a condition. No special language is necessary to create the condition implied conditions: the parties say nothing about a condition, but it is clear from their agreement that they have implied one. types of conditions. condition precedent: the event must occur before a duty arises condition subsequent: condition must occur after the particular duty arises. If the condition does not occur, the duty is discharged. concurrent condition: both parties have a duty to perform simultaneously(at the same instant) Breach: when one party breaches a contract, the other party is discharged material breach: that substantially harms the innocent party and for which it would be hard to compensate without discharging the contract. In a more general sense, courts will only discharge a contract if a party committed a material breach. anticipatory breach: by making it unmistakably clear that it will not honor the contract. sometimes a promisor will actually inform the promisee that it will not perform its duties. At other times, the promisor takes some step that makes the breach evident. statute of limitations: a statutory time limit within which an injured party must file suit. impossibility true impossibility: means that something has happened making it utterly impossible to do what the promisor said he would do. destruction of the subject matters death of the promisor in a personal services contract illegality commercial impracticability: means some event has occurred that neither party anticipated and fulfilling the contract would now be extraordinarily difficult and unfair to one party frustration of purpose: means some events occurred that neither party anticipated and the contract now has no value for one party. courts consider the following factors in deciding impracticability and frustration claims: mere financial difficulties will never suffice to discharge a contract the event must have been truly unexpected if the promisor must use a different means to accomplish her task, at a greatly increased cost, she probably does have valid claim of impracticability a force majeure clause is significant but not necessarily dispositive the UCC permits discharge only for major, unforeseen disruptions. Remedies: a court will award money or other relief to a party injured by a breach of contract. Expectation interest: is designed to put the injured party in the position she would have een