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Definition: Contracts

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Legally enforceable promise or exchange of promises of performance

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Three Elements of Every Contract

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1. Mutual Assent - Someone has to offer and the other party has to accept 2. Considerations - you have to be giving up something of legal value and getting something of legal value 3. No Defenses - no legal reasons that the performance cannot be completed

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Bilateral Contract

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an exchange of two promises of mutual performance Common Example: Apartment Leases

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Unilateral Contract

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an exchange of present performance for a promise of a future performance. The future performance is triggered upon the happening of the present performance

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Valid/Enforceable Contract

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Meets all the elements

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Unenforceable Contract

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not enforceable because it fails to meet a legal rule

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Voidable Contract

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Option of one party to void or cancel the contract

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Void Contract

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Not able to be enforced by either party, has been cancelled already

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Express Contract

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Communicated agreement between both parties

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Implied Contract

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Implied agreement that when the person provides the service they will be compensated Common Example: Doctor & Restaurants

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Executory Contract

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Someone still has something to complete

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Executed contract

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both parties have completed what they agreed upon

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Law of Contracts

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- Primarily Established in common law - Developing in statutory law in certain areas, like the UCC (state law)

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Common Law

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non-sale of goods contracts

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Uniform Commercial Code (UCC)

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All goods, contract - sale/lease

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Quasi Contract

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Meaning: Unjust Enrichment - one party is giving a benefit and you are receiving the benefit and you do nothing to prevent it - other party can try to get a reasonable amount of money

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Promissory Estoppel

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Meaning: Reliance on a promise - promisor makes a promise to the promisee - the promisee detrimentally relies on the promise and changes their legal position (Usually spend money) based on the promise - reasonable

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Mutual Assent

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Offer & Acceptance; someone has to offer something, and the other must accept it.

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3 Elements of the Offer

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1. Present intent to contract now 2. Specific Terms 3. Communication to the Offerree

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Definition: Intent

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Objective standard; would a reasonable person believe an intent to create an offer exists if i were to accept?

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Mutual Assent: Terms (Common Law VS UCC)

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Common Law - Must be complete and definite terms. Needs all integral terms within the offer UCC - gap filling positions: court can enter "reasonable" terms if the parties fail to state the terms. Must know if a term was left out OR not agreed after negotiation of the same, can't be disagreed upon terms.

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Communication Issues: Advertisements

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not actually offers, store reserves the right to change the price, advertisements are invitations to create offers

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Communication Issues: Rewards

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not offers, invitations to enter into a unilateral contract

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Communication Issues: Bids

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invitation to come and make an offer

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Exception to Offers: Option Contract

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Contract to extend the offer, buying time

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Exception to Offers: Unilateral Contracts

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once the party has begun accepting or completing the performance the offeror is not free to revoke the offer.

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Exception to Offers: Promisorry Estoppel

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offeror is not free to revoke the offer until a reasonable amount of time has passed for them to accept

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Exception to Offers: Merchant Firm's Offer

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If the offer is a merchant and they have made an offer in writing, they are not free to revoke the offer until the period of time specified has passed

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3 Elements of an Acceptance

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1. Present intent to contract now by accepting 2. Same terms, you are agreeing to the same terms from the offer -> Mirror image rule 3. Communication to the Offeror

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Stipulated Communication

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requirement in order to create a valid argument, you have to communicate in the stipulated manner. Example: must send in mail for offer

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Suggested Communication

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Doesn't mean you have to communicate in that way. The offeror would just prefer it, any reasonable means will work

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Silent Communication

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If the offer does not say, any reasonable means will work

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Silence as Acceptance

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can never be stipulated or mandated by the offeror. However, the offerree can use silence as acceptance, offerree is stipulating on their own.

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Defintion: Consideration

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Legal Value, Bargained-for-exchange

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Consideration

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give in exchange for an act or promise of performance. Do something you're not already delegated to do

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Bargained For Exchange

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the promise given by the offeror must induce the offeree to offer a return promise. Example: performance, forbearance and the performance, forbearance of offerree must induce the promisor to make the promise.

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Illusory Promises

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Overly vague consideration often subject to will or only one party

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Cancellation Clauses

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if unconditional, then it's illusory conditional upon uncertain future event, OK.

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Outputs and Requirement Contracts

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UCC Contract where quantity is not specified. So long as reasonable, it is adequate consideration.

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Contractual Duties

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- Modifications in common law contracts - Requires additional consideration to both parties - UCC Modification - if parties agree, no consideration is necessary

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Pre-Existing Debts

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1. Liquidated - parties agree how much is owed 2. Unliquidated - parties disagree how much is owed 3. Accrual + Satisfaction

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No Defenses: Reality of Consent

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- defense to mutuality of agreement - generally: voidable by the party whose assent may have been questioned - rescind: make a contract void, cancel the contract - Must act promptly, unequivocally - avoid behavior that appears to be a ratification to the contract

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No Defenses: Misrepresentation

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Usually made during negotiation - an untrue assertion of fact was made - fact asserted was material or fraudulent - complaining party entered the contract because of the reasonable reliance of assertion.

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Scienter

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intent to deceive creates a tort case, punitive damages become possible.

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No Defenses: Mutual Mistake

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- Mistake relates to a basic K assumption - Mistake has a material impact on the bargained-for-exchange - party adversely impacted by the mistake does not bear the risk of the mistake

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No Defenses: Unilateral Mistake

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occurs when only one party is mistaken as to the subject matter or the terms contained in the contract agreement

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No Defenses: Duress

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- wrongful coercion inducing someone to enter into the contract - Contract was induced by an improper threat - Party had no reasonable alternative but to enter into the contract

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No Defenses: Undue Influence

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- Unfair persuasion - relationship of trust exists between the parties - person exercising the persuasion dominates the party being persuaded - the persuasion is unfair

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No Defenses: Capacity

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Minority: Under 18 creates a voidable situation at the option of the minor - Ratify: continuing on with the contract they made before they were 18, assuming they do nothing to void it - Only enforced if it is for Necessaries: Food, Clothing, Shelter & Medical Care

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No Defenses: Incapacity

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Mental Competence as determined by the Probate Court Date of that ruling is very important - If adjudicated incompetent, then enter into a contract it is voided. - if you enter into a contract, then adjudicated incompetent it is voidable.

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No Defenses: Intoxication

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- Must be severe - Must be provable - Greater standard than as a criminal defense

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No Defenses: Illegality

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- Criminal Nature of a contract: Void - Illegal by violation of public policy; 1st courts seek to sever the illegal provision - if it was not illegal when you entered into the contract, but then becomes illegal, then the contract is void.

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No Defenses: Licensing Laws

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- Engaging licensed services/product seller - Contract in violation of a licensing statute: look to nature of statute - revenue raising: enforceable contract - regulatory statute: void

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Agreement in Restraint of Competition

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- Must serve as a legitimate business purpose: easy to prove - must be reasonable in time/scope/geography (Important) - cannot impose an undue hardship: cannot make it impossible for them to earn a living

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Exculpatory Clauses/Waiver of Liability

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- Cannot waive "any and all" liability - only negligence may be waived - can't waive where there is a public duty.

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Family Obligations

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- Agreements to divorce/not to marry: not enforceable - agreements to waive child support: cannot do this because the child should not have to suffer

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Unconscionability - UCC

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- Effort to correct abuse of superior bargaining power/ability of one party - makes the contract unreasonably advantageous to one party - Court can cancel the contract, cancel the unconscionable provisions and limit their application

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Statute of Frauds (SOF) Writing Rule

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Some contracts are so important that they must be manifested to writing in order to be considered legally forceable

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6 Types of SOF Contracts (will be on exam)

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1) Collerateral 2) Sale of an interest in Land 3) Bilateral Contract that cannot be performed in one year 4) Administrators Contract 5) Contract where marriage is the consideration (prenups) 6) Sale of goods over $500

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Collateral Contract (Guarantor)

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- Agreeing to be liable for the debts of another up their default - Liability begins when yours has defaulted Exception: Lending Object/Main Purpose Rule

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Sale of an Interest in Land

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- Needs to be in writing to be enforced Exceptions: 1. full performance by the seller (Delivery of the Deed). the seller is required to transfer the title into the hands of the buyer 2. Part performance by the buyer. Some portions of the sales price has to be paid (down payment).

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Bilateral Contract that cannot be performed in one year

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Stated in writing

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Administrator's Contract

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agree to be personally liable for the debts of an estate

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Contract where marriage is consideration (pre-nuptial)

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has to be predetermiend in writing

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Sale of Goods over $500

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"The contract must be signed by the party whom enforcement is sought"

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Statute of Frauds Requirements (4)

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1. Memorandum containing essential terms 2. Identify the parties to the Contract 3. Identify the subject matter to the contract 4. UCC standards are more loose - required quantity

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Signature Requirement

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The contract must be signed by the party whom enforcement is sought.

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Parol Evidence Rule

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- Oral testimony that is given in support of the contract - cannot use parol evidence that is different from the fully integrated agreement but you can if it is partially integrated.

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3rd Party Rights (2)

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1. Transfer of Rights -> Assignment - For an assignment, notify the obligor of the assignment to the assignee then, assignor no longer has rights under the contract 2. Transfer of Obligations -> Delegation - Rights: generally, freely assignable under every contract, unless specifically prohibited.

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Delegation of Duties/Obligations

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- Cannot be personal services contract - benefit of the bargain is important - generic services/obligation - does not relieve the original obligor/delegator of the duty to perform

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Novation

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Obligee and Delegatee establish a new agreement, substituting parties. Relieves original obligor's performance

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3rd Party Beneficiaries

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- where the contract is intended to benefit a 3rd party, that 3rd party may sue to enforce the contract once rights have vested; Only once they have become aware they are a 3rd party beneficary

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Intended 3rd party Beneficiary

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can sue

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Incidental 3rd party beneficiary

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cannot sue

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Conditions to Performance

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future, uncertain events that impact performance obligations

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Condition Precedent

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future, uncertain event triggering performance

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Condition Concurrent

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Performance of one is conditioned on the other. Parties agree to perform at the same time

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Condition Subsequent

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future, uncertain event discharging performance

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3 Types of Conditions

answer

1. Express 2. Implied-In-Fact 3. Constructive

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Express Condition

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stated, parties agree to the condition up front

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Implied-In-Fact Condition

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never stated, required factually to happen in order for that contract to be performed. Conditions must be met

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Constructive Condition

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Imposed by Law; Legally must happen. Example: Managing certain materials, licenses

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Performance Standards - UCC

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Strict performance - in deviation. - Should receive exactly what the person ordered - Conforming Goods

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Substantial Performance

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Some deviation is acceptable

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3rd Party Performance/Inspection

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- Might have to meet inspection standards Example: building code

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Personal satisfaction of other party

answer

virtually impossible to win

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Material Breach

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- breach deprives the non-breaching party of the full benefit expected under the contract - Non-Breaching Party has the right to: (1) cancel the contract (2) sue for damages (3) suspend your performance - Time/Deadlines may be material if "time is of the essence" is stated

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Non-Material Breach

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- breach that doesn't deprive the non-breaching party of the entire contract value - They can: (1) cancel the entire contract (2) sue for damages (3) can't cancel the contract

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Anticipatory Repudiation

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- Knowledge the other party can't/won't perform and you can (1) wait and see (2) treat as material breach (3) request/demand for assurances

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Compensatory Damages

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what was the benefit you lost

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Consequential Damages

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because of the breach it costed a lot of money, cost me more

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Incidental Damages

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if you had not breached, i would not have to deal with this

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Punitive Damages

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not only did you breach this agreement, but you induced me into the agreement, limited to fraud

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Nominal Damages

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they breached but you cannot prove damages

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Lost Profits

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can only be claimed if they are contemplated before you enter into the agreement, you have to let the other side know what you stand to lose.

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Liquidated Damages

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agreement between the parties that if one party breaches you have pre-determined the measure of damages that the breaching party is going to be required to pay

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Equitable Damages

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- Specific Performance - Things that are really unique like real estate, heirlooms, antiques and fine art

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Sale of Goods Contracts

answer

Delivery of Goods - unless specified, at the sellers place of business, in a single lot of delivery

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Passing of Title to Goods (4)

answer

1. Delivery Contract 2. Shipment Contract 3. Goods Don't Move 4. Buyer Rejects

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Delivery Contract

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- title passes at tender of goods directly to the buyer

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Shipment Contract

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- title passes to buyer at seller's tender of goods to common carrier

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Goods Don't Move

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- title passes at time of contracting - if held in a warehouse, title passes with a document of title (bill of lading, warehouse receipt)

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Buyer Rejects

answer

title passes back to the seller upon rejection

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General Title Rule

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you can't obtain better title than that held by your seller

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Risk of Loss

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- By Agreement - Shipment Contract - Destination Contract - Warehoused Goods - If none of above apply, risk passes when buyer takes receipt of goods if seller is a merchant.

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Insurable Interests

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- Must Identify the Goods - Sale on Trial - Sale on Approval

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Warranty Theory

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-Affirmation of fact or promise regarding the goods - Description of the Goods - Sample or model: purchased item will perform similarly

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Implied Warranty of Merchantibility

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by merchant seller - goods are fit for ordinary, intended use

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Implied Warranty of fitness for a particular purpose

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- sold by merchant, known, intended, specific use - Seller has reason to know of specific use by buyer - seller knows buyer is relying on seller's expertise - buyer DOES rely on seller

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Negligence Liability

answer

- Negligence Manufacture: assembly, materials, packaging - Negligent Inspection - Negligent Design - Safety Vs Cost - Negligent Duty to warn

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Strict Liability

answer

- Seller is engaged in business of selling the product harming the plaintiff - Product is defective and as a result, unreasonably dangerous - Buyer did not significantly modify the product

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Excuse for non-performance: impossibility

answer

not kinda hard, no one can do this

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Excuse for non-performance: commercial impractibility

answer

situations have changed that make the k not commercial viable anymore. Neither one of us is getting the same benefit we were going to get, it's not practical to keep going on.

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Agency

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- Fiduciary relationship arising when a principal manifests assent to an agent that the agent will act on behalf of the principal and in the principal's best interest, and be under the principal's consent. - You hire someone to do something for you, that person is your agent. The most important part of an agency relationship are the two words fiduciary relationship. - First, you must have capacity. must maintain capacity throughout the performance of the relationship

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Capacity

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- Must exist at the time the agency is created and continue throughout. - Exception - Durable POA - Dubable: strong enough to survive the principal's subsequent incompetence.

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Non Delegable Obligations (3)

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1. Marry/Divorce - someone cant get married for you 2. Public election voting - someone can't vote for you 3. personal services contract - can't hire someone to do something you were hired to do

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General Agent

answer

you can do anything you want

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Special/Limited Agent

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here is specifically what i am empowering you to be able to do

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Gratutious Agent

answer

agents who work for free

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Sub-Agents

answer

Agent of an agent, most contracts prohibit this

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Fiduciary Duties: Agent to Principal (will be on final)

answer

o Care - reasonable care and skill of an ordinarily proven agent under the circumstances o Obey - Obey the lawful instructions of the principal o Account - all money going In and out o Loyalty - no conflict of interests o Disclosure - relevant and important

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Fiduciary Duties: Principal to Agent (will be on final)

answer

o Compensation - you got to pay your agent unless they are a gratuitous agent. o Indemnification - as my agent you suffer a verdict or a lawsuit, you must incur attorney fees, I will indemnify you. "hold harmless" - Principal will pay for the whole suit/verdict/litigation costs.

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Unauthorized Act

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- beyond the scope of the agent's actual authority - you can';t do this - but you did it anyway

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Express Ratification

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you tell the agent I am going to do the transaction that was unauthorized and I will agree to indemnify you

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Implied Ratification

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you take behavioral steps to further instep the agreement. The land was $100k was more than the amount you told me to buy it for.

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Contract Liability of Agent & Principal: Fully Disclosed

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look in book

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Contract Liability of Agent & Principal: Partially Disclosed

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where that agent will disclose that they are working for a principal, but will not say their name.

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Contract Liability of Agent & Principal: Undisclosed

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Only you

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Respondeat Superior

answer

Let the master answer - the master is responsible for any and all damages suffered by that party Must be: Employee & Acting within the scope of employment

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Detour

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Foreseeable & Reasonable Example: i went to carriage town and something happened (during the day) - principal is liable

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Frolic

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Unforeseeable & Unreasonable Example: you work in kingston, but you went to scorps for beers during your shift. - agent is liable, no imputed liability to the principal

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