What are the elements of a valid contract?
- Mutual Assent (offer and acceptance);
- Consideration; AND
- No defenses to formation.
Priority: HIGH
What law governs contracts for the Sale of Goods?
Article 2 of the Uniform Commercial Code.
*Under the UCC, a contract may be made in any manner sufficient to show agreement (i.e. conduct showing parties recognize existence of a contract).
*For mixed contracts, the predominant purpose determines which law governs.
Priority: HIGH
What are the elements of Mutual Assent?
- Offer: A manifestation of intent to contract, with definite and reasonably certain terms, that is communicated to the offeree.
- Acceptance: A manifestation of assent to the terms of the offer, which indicates a commitment to be bound.
Priority: HIGH
When is an offer Terminated?
Offers may be terminated before acceptance by:
- Rejection or Counter-offer by offeree;
- Lapse of time;
- Revocation by offeror; OR
- Death / Incapacity of either party.
Priority: HIGH
When may an offer be revoked, and which types of offers are not revocable?
They may be revoked at any time before acceptance through unambiguous words/conduct indicating an unwillingness/inability to contract (effective when received).
Irrevocable offers include: option contracts, a merchant’s firm offer, beginning performance for unilateral contracts, and offers that were relied on to the offeree’s detriment.
Priority: HIGH
What is a Merchant’s Firm Offer?
- An offer to buy or sell goods;
- By a merchant;
- In a signed writing;
- Which states that the offer will be held open and is not revocable; AND
- The assurance to keep the offer open must be signed separately by the offeror.
*Enforceable WITHOUT consideration.
Priority: HIGH
Rejection vs. Counteroffer
Rejection: Manifestation of intent to not accept an offer (words/conduct) which terminates the offer. Offers CANNOT be accepted after they have been rejected.
Counteroffer: Both a rejection that terminates the original offer and a NEW offer.
Priority: HIGH
What is the Mirror Image Rule and UCC exception?
The common law Mirror Image Rule holds that an acceptance MUST exactly mirror the offer.
UCC Art. 2 Exception: The acceptance DOES NOT need to mirror the offer, and additional terms may be added. Additional terms are included if:
- Both parties are merchants;
- The term is not a material change;
- The offer doesn’t limit acceptance to the exact terms; AND
- No objection was made within a reasonable time.
Priority: Medium
When is an agreement deemed Indefinite?
When the terms of the agreement are NOT certain (they cannot be ascertained to a reasonable degree of certainty), the contract is deemed indefinite and is unenforceable.
*A contract that is indefinite as to duration is generally invalid.
Priority: Medium
What is Consideration?
A bargained for exchange of a promise for a return promise or performance (that benefits the promisor or causes detriment to the promisee).
*Past or moral consideration is NOT sufficient to support a contract.
Priority: HIGH
When does Promissory Estoppel apply?
Applies when:
- A party reasonably and foreseeably relied to his detriment on the promise of the other party;
- The promisor should have reasonably expected a change in position in reliance of the promise; AND
- Enforcement of the promise is necessary to avoid injustice.
Priority: HIGH
Settlement of Legal Claims
The voluntary relinquishment of some known right or privilege.
*Constitutes valid consideration.
Priority: Medium
What is the Common Law Pre-Existing Duty Rule?
What are the exceptions?
Past performance or performance of a pre-existing duty is NOT adequate consideration.
Exceptions:
- If there is an addition or change in performance or promise; OR
- A fair and equitable modification is made due to unanticipated changed circumstance AND the contract is not yet fully performed by either party.
Priority: HIGH
Is consideration required for a modification to a UCC Art. 2 sale of goods contract?
NO, consideration is not required for contract modifications made in good faith.
BUT, the modification must be in writing if:
- It falls within the Statute of Frauds; OR
- The original contract states that modifications must be in writing.
Priority: HIGH
Duress
Physical Compulsion vs. Economic Duress
Physical Compulsion: If a person physically compels a person to agree to contract, then the contract is void.
Economic Duress: If a person makes an improper threat that induces a party (who has no reasonable alternative but to enter into the contract), then the contract is void.
*A mere threat to breach is generally insufficient)
Priority: Medium
Undue Influence occurs when?
There is:
- Unfair persuasion of a person,
- Who is either:
- Under the domination of the person exercising the influence; OR
- Justified in assuming that the person will not act in a manner inconsistent with his welfare because of his relationship between them (i.e. parent/child).
Priority: Medium
Mutual Mistake vs. Unilateral Mistake
Mutual Mistake: When (1) both parties are mistaken as to the basic assumption on which the contract is made, (2) the mistake is material to the contract, AND (3) the person asserting the mistake did not bear the risk of the mistake.
Unilateral Mistake: A mistake by one party, that is unknown to the other party, concerning a basic assumption that has a material effect on the contract.
Priority: Medium
Fraudulent Misrepresentation
vs.
Non-Fraudulent Misrepresentation
Fraudulent: When one party knowingly makes a false representation of a fact AND the other party reasonably relies on the misrepresentation to their detriment.
Non-Fraudulent: When there is a statement of material fact by a party or agent that is false, inducing the contract, AND the other party reasonably relies on the misrepresentation to his detriment.
Priority: Medium
Procedural Unconscionability
vs.
Substantive Unconscionability
Unconscionability usually occurs if the contract/term is BOTH substantively and procedurally unconscionable.
Procedural: When one party to the contract has a superior bargaining position over the other, and uses that power to their advantage.
Substantive: When the contract contains terms that are obviously unfair and one-sided in favor of the person with the superior bargaining power.
Priority: Medium
Under the Statute of Frauds, which types of contracts require a signed writing to be valid?
- Marriage contracts.
- Suretyships (unless the main purpose exception applies).
- Contracts that cannot be fully preformed in 1 year.
- Contracts for the sale of real property (or creating an interest in real property).
- Promises to pay an estate’s debt from the personal funds of the Executor/Administrator.
- Contracts for the sale of goods for $500 or more.
Priority: HIGH
Contracts for the sale of goods for $500 or more MUST be in writing.
What are the four exceptions to this rule?
- Merchant’s Confirmatory Memorandum.
- Goods accepted or Paid for.
- Custom Made Goods.
- Admission during judicial proceeding.
Priority: HIGH
What satisfies the writing requirement under the Statute of Frauds?
The writing MUST:
- Be signed by the party to be charged;
- Identify the subject matter of the contract;
- Indicate that a contract has been made by the parties; AND
- State the essential terms with reasonable certainty.
*An agreement DOES NOT need to be in one writing, it may consist of several writings.
Priority: HIGH
What are the exceptions to the Parol Evidence rule?
- To correct a clerical error or typo.
- To establish a defense against formation.
- To interpret vague or ambiguous terms.
- To supplement a partially integrated writing.
*The parol evidence rule DOES NOT apply to subsequent agreements.
Priority: Medium
What are the two instances where a Condition Precedent may be excused?
- A protected party’s failure to cooperate or make a good faith effort.
- Waiver – a protected party voluntarily gives up the protection of the condition.
Priority: Medium
