Legal Studies Final

What are the offer and acceptance rules for auctions?

-Bidders make offers, auctioneers drop the gavel to accept -In reserve auctions, auctioneer may withdraw the item for sale at any time during the bidding -In auctions without reserve, auctioneer can't withdraw the item once the bidding has begun

What is a material breach of contract?

-Breach of the heart of the contract -e.g. failure of substantial performance; anticipatory repudiation; total non-performance

Actual (Expressed or Implied) vs. Quasi-Ks

Expressed and Implied, which are actual, contracts are legally enforceable. Quasi-Ks aren't contracts, but imposition of legal obligation where otherwise party unjustly enriched; i.e. Contract by Operation of Law.

What are contracts?

Legally enforceable agreements, building blocks for any market economy. Contracts have strong ethical underpinnings; e.g. honoring agreements, avoiding deception, relational exchanges, etc.

When does the common law of contracts apply? The UCC?

UCC: Applies to contracts for the sale or lease of goods. COMMON LAW: Applies to all other contracts (sale or lease of real estate, services, etc.)

If express condition is an agreement, can it be a contract?

Express conditions trigger a contract's performance but are not a contract

How does one accept an offer?

- Occurs in any manner reasonable under the circumstances ("please ship" offers?) - Must be communicated to the offeror (exception: mail box rule; if reasonable to accept by mail, acceptance counts when mail sent, not when received) -Must mirror the offer (exception: UCC "Battle of the Forms")

What is unconscionability? What does it mean to say that determining unconscionability "is a matter of law"?

-(UCC 2-302) if court as matter of law finds contract or any provision therein unconscionable, the court may void contract or unconscionable provision =UNCONSCIONABLE: No meaningful bargaining choice; grossly unfair bargining power; provisions that "shock courts conscience" -EX: Elderly man is totally dependent on nephew. Nephew tells elderly man he must transfer land for 35% under market price, or he'll stop supporting him so elderly enters into contract.

What is the basic rule for minors and contracting?

-Minor may dis-affirm a contract during his minority and for reasonable period of time after reaching 18. (In OK, reasonable time = 1 year) -Generally doesn't matter if contract is executed

What is a 3rd party beneficiary in a contract? Give an example. Are 3rd party beneficiaries in privity?

-3rd PARTY BENEFICIARY: One for whose benefit a promise is made in a contract but isn't actually a party in the contract -EX: Allan owned condo in complex located directly below condo owned by Koraev. Allan's unit suffered several sewage incursions from plumbing problems in Koreav's unit. Allan sued Koreav and Koreav appealed arguing he didn't have contractual duty to Allan. Court found Allan was intended 3rd party beneficiary of contract between Koreav and Condo owners -INTENDED BENEFICIARIES: Have privity in contract because contract performance directly benefit 3rd party -INCIDENTAL BENEFICIARIES don't have privity because the benefit is unintentional

What is anticipatory repudiation? Why is it sometimes an ethical thing to do?

-A repudiation of contract obligations before they become due -Material breach of K

What is ratification? How does it apply to minors' contracts?

-Affirming a contract -Once a person turns 18, they can ratify contracts made during minority -EXPRESS RATIFICATION: Minor reaches majority and states orally or in writing that they intend to be bound by contract. -IMPLIED RATIFICATION: Minor reaches majority and indicates intent to abide by contract by things such as continuing performance.

When can an offeror revoke the offer? What are exceptions for unilateral contracts, options, and firm offers?

-Any time before acceptance, including cases in which offeror tells offeree that offer is open for specified time. -Exceptions: -Firm Offers (UCC 2-205): offer in writing and signed by "merchant" assuring offer will be open for stated or reasonable time - Offer to enter into unilateral L: Offeror can't revoke once offeree begins performance - Option: offeree pays offeror to keep open for defined period

What are the rights of an assignee of a contract right to money? How does "privity" relate to the assignee?

-Assignee must be in privity and stand in same legal position as assignor -If assignor had right to money, so does assignee -BUT, if debtor has lawful defense against Assignor, then debtor can use that defense against assignee

What contacts fall within the Statute of Frauds? (i.e. must be written to be enforceable?)

-CONTRACTS INVOLVING INTERESTS IN LAND: K for sale of real estate or any interest therein (often doesn't include leases) -ONE-YEAR RULE: K which by terms can't be performed within 1 year of date of K -COLLATERAL PROMISES: Contracts to answer for another's debts (suretyship/guarantee Ks) -PROMISES MADE IN CONSIDERATION OF MARRIAGE: Premarital Ks -CONTRACTS FOR SALE OF GOODS: K for sale of goods K price >= $1000 -K for lease of good K price >= $1000

What employees are not at will workers?

-Contract term workers -Union workers -Merit/Tenured Workers

Why do Uber and other firms want to designate their workers as independent contractors?

-Control - Uber sets pries, monitors performance, and "fires" if performance low -Uber doesn't tell drivers where/when to drive, how many hours, etc -Employees require certain benefits from company stipulated under states' labor laws

What is specific performance? If best expectation remedy, why doesn't it apply to all breach of contract cases?

-Court order which requires party to perform a specific act, usually what's stated in the contract -Equitable remedy; therefore available only if legal remedy inadequate

What are consequential damages? When are consequential damages recoverable?

-Damages in addition to compensatory (expectation) contract damages such as lost profits -Recoverable if foreseeable by the breaching party at the same time of the contract

What are liquidated damages?

-Damages upon which the parties explicitly agree -Based on freedom of contract -Courts will enforce damages if reasonable -- reasonably reflect measure of actual damages

What is employment at will?

-Employer or employee can terminate relationship at any time for any reason -Majority of workers are employment at will

What are incidental damages?

-Expenses that are caused directly by a breach of contract - such as those incurred to obtain the performance from another source

What are Express Conditions?

-Explicit term of contract that requires the occurrence of a specified event to trigger performance (e.g. "I'll buy your house if I can get financing...") -Conditions trigger performance, not contracts -Failure of a condition discharges the contract

What is fraud? What is Scienter? How is fraud different from negligent misrepresentation?

-FRAUD: Intentional misrepresentation (scienter). Someone maliciously chose to deceive another. Grounds for rescission & possibly tort action with punitive dmages -SCIENTER: The knowledge of deception -NEGLIGENT MISREPRESENTTION: Knowingly not disclosing facts/not using skill or competence required for business or profession -Fraud is purposefully lying to someone, negligent misrepresentation is purposefully not telling someone info or not doing job to their abilities.

Be able to state damages when a seller or buyer breaches a contract for the sale of goods

-For the seller -If seller resells---> K price - Resale price + Incidental damages -Otherwise---> K price - Market price (time & place of delivery) + Incidental damages -For the buyer -If buyer covers---> Cover price - K price + Incidental + Consequential damages -Otherwise---> Market (time of breach/place of delivery) - Contract Price + incidental + consequential damages

How long does an offer last?

-How long the offeror states it odes -If not, open for "reasonable period of time" and depends on cirumstance

State and be able to apply the doctrines of impossibility and commercial impracticability. How does the objective theory of contracting apply to themState and be able to apply the doctrines of impossibility and commercial impracticability. How does the objective theory of contracting apply to them

-IMPOSSIBILITY: Supervening events after contract has been made may make performance objectively impossible. Only applies when parties couldn't have reasonably foreseen at the time of contract formation. -COMMERCIAL IMPRACTICABILITY: Performance becomes so difficult or costly due to unforeseen event that a court determines the contract discharged -Objective impossibility is "It can't be done" while subjective impossibility is "I'm sorry, I simply can't do it." Party says it's impossible for them to perform, not impossible for anyone to perform

What is the mirror image rule? How does UCC's "Battle of the Forms" change this?**

-If attempted acceptance doesn't mirror offer, then it is a counteroffer -UCC's "battle of the Forms": offeree's acceptance containing different or additional terms can be acceptance if the different or additional terms arise from competing forms used by seller and buyer

Parole Evidence Rule

-If parties have reduced contract to writing, neither party can testify about statements made before or at the same time they signed the writing if these statements would modify -Exceptions: -Contracts subsequentially modified -Voidable or void contracts (or contains ambiguous terms) -Incomplete contracts -Prior dealing, course of performance, or usage of trade -Contracts subject to an orally agreed-on condition precedent -Contracts with an obvious or gross clerical (or typographical) error that clearly wouldn't represent the agreement of the parties

How does the objective standard apply to determining whether someone is too intoxicated to contract?

-If person was sufficiently intoxicated to lack mental capacity, agreement may be voidable even if intoxication was voluntary -If person understood legal consequences of agreement even when intoxicated, contract will be enforceable.

What is the difference between an employee and an independent contractor? How does the law distinguish between employees and independent contractors?

-Independent contractors contract with customer to do something, such as build addition to house or install an air conditioning unit. Makes own decisions within context of contract -Employee operates under control of the employer -The law is decided over CONTROL. In cable guy case: -Company controls virtually every aspect; when he comes in, where he goes to work, what he has to do when finished -Decided that cable guy was employee

What does it mean to say that adequacy of consideration? How does it apply to consideration?

-Involves how much consideration given, concerns fairness of bargain -Generally court won't question adequacy based solely on value of things exchanged. Mostly exchange of promises/potential benefits deemed sufficient consideration

What is a bargained-for exchange?

-Item of value must be given or promised by the promisor (offeror) in return for the promisee's promise, performance, or promise of performance -Distinguishes contracts from gifts

How/When does an offer terminate?

-Lapse of time: offeree doesn't accept within a reasonable or prescribed period of time -Offeror's revocation (must be communicated to offeree) -Offeree's rejection -Offeree's counter-offer

Define consideration

-Legal benefit or detriment flowing from each side of the agreement to the other -To be legally sufficient, consideration may consist of... -Promise to do something that one has no prior legal duty to do -Promissory Estoppel -Performance of action that one is otherwise not obligated to do -Refraining from action that one has legal right to do

If a contract falls within St of Frauds, how does one comply with the writing requirement? Did the writing in Lucy v. Zehmer comply with the St of Frauds? Explain.

-Must include minimum requirements... -Manifest K intent -Include essential terms -Signed by person against whom enforcement is sought -UCC 2-201: Writing in confirmation of K sufficient to bind sender also binds receiver if they have reason to know contents and don't object in 10 days of receipt of confirmation. ONLY APPLIES IF BOTH PARTIES ARE MERCHANTS. FIND OUT HOW EXACTLY SOMEONE IS A MERCHANT

What are the requirements for an offer?

-Must manifest contractual intent; i.e. the receiver must objectively construe the communication as an offer. -Must be definite about terms (Subject matter, price?, quantity?)* -Must be communicated to the offeree

Define and be able to apply promissory estoppel

-Person who has reasonably and substantially relied on the promise of another may be able to obtain some level of recovery (form a basis for a court to incur contract rights and duties) -Only uniformly recognized exception to consideration -Promisor should reasonably have assumed that promise would so rely -Applied to wide variety of contexts in which promise otherwise unenforceable -P.E. Requirements: -Must be cler and definite promise -Promisor should've expected that promisee would rely on promise -Promisee reasonably reasonably relied on promise by acting or refraining from some act -Promisee's reliance was definite and resulted in substantial detriment -Enforcement of the promise is necessary to avoid injustice

What are the exceptions to the pre-existing duty rule?

-Pre-existing duty rule: Usually promise to do what one already has legal duty to do doesn't constitute legally sufficient consideration EXCEPTIONS: -UNFORSEEN DIFFICULTIES: If during performance, extraordinary difficulties arise that were totally unforeseen at the time contract was formed then court may allow exception *EX: Ajax Contractors asking extra $75,000 because it encountered rock formation that no one knew existed. Court will most likely find it fair to do so. But if rock formations are common in the area, court may determine they should've known risk -RECISSION AND NEW CONTRACT: Unmaking of contract to return parties to positions they were in before contract made. Sometimes parties make new contract at same time as rescission. When new contract, must determine if there's consideration for new contract or if there was preexisting duty under old contract.

What is a legal detriment?****

-Promise or performance in which a person forbears doing something she has legal right to do. If bargained for by other side, it is consideration. -Hamer v. Sidway -Uncle offered $5000 if nephew doesn't drink, smoke, gamble, or play billliards until he's 21. -Nephew refrains, uncle dies, estate refuses to pay him -Consideration not always based on promise to bestow a benefit; e.g. promise to pay money or deliver car -Sometimes consideration based on promise not to do what one has legal right to do i.e. LEGAL DETRIMENT. Good contemporary e.g. the promise not to sue in a litigation settlement contract

What is an "illusory promise?" Why isn't it consideration?

-Promisor hasn't DEFINITELY promised to do anything, no consideration and unenforceable -The person making the promise can take it back at any time but the other side has to stay true to the contract. -EX: President of compay offers 10% bonus if profits if profits stay high. Illusory because performance depends solely on discretion of president. No bargain for exchange.

What are 2 different goals of contract remedies?

-Realize Expectations: Place plaintiff in position she would have realized had contract actually been performed -Restoration: Place plaintiff in position she would have been in had there been no contract at all. Rescission and restitution. Compare with TORT

What is the UCC rule for "please ship" offers?

-UCC 2-206 states offeree may accept these offers either by the prompt shipment of goods or by a prompt promise to ship (UCC downplays bilateral/unilateral distinction)

If a minor enters into a contract, then is the contract valid, voidable, or void?

-Voidable at the option of that minor, subject to certain exceptions -Minor only needs to manifest (clearly show) intention not to be bound by it -Minor "avoids" contract by dis-affirming it

If a contract falls within the Statute of Frauds but isn't written, what happens to that contract? What are exceptions to this rule?

-Voidable, except when: -PARTIAL PERFORMANCE: Contract has been partially performed or partially paid for and purchaser took possession. Whether court enforces oral contract usually determined by degree of harm that would be suffered if court chose not to enforce it. -EX: Cooper orders 20 chairs from online seller. Receives 10 of them and denies existence of contract. Seller can enforce contract and obtain payment for 10 chairs already accepted by Cooper -LEGAL ADMISSION: If party against whom enforcement of oral contract is sought "admits" under oath that contract for sale was made, contract is unenforceable. -EX: President of Bistro Corporation admits under oath agreement was made to buy certain equipment from Commercial Equipment for $10,000. Court will enforce agreement to the admitted $10,000, even if Comm. Kitchens claims agreement was $20,000 -PROMISSORY ESTOPPEL: Oral contract that would otherwise be unenforceable can be enforceable can be enforced in some states if person justifiably relies on another's promise to his or her detriment -SPECIALLY MANUFACTURED GOODS: Oral contracts for customizeable goods, oral contracts between merchants that have been confirmed in written memorandum

What is substantial performance? How does it apply?

-When party has performed well enough in a contract to be entitled to the contract price minus any damages caused by deviations from the contract -If one doesn't substantially perform, they've breached contract

Can a minor avoid an executed contract?

-Yes -Exceptions: -CONTRACTS FOR NECESSARIES: Minors can dis-affirm but are liable to pay the reasonable value for necessities sold to them. What is necessary to one minor, may be luxury to another. Enforceable only to level of value needed to maintain minor's standard of living. -MISREPRESENTATION OF AGE: In some states (not OK) minor is contractually responsible if she misrepresents age

When does a contract form at a self-service store?

At the check-out counter

Differentiate classical contract theory from modern contract theory

CLASSICAL CONTRACT THEORY: freedom of contract (assumes parties of generally equal bargaining power) MODERN CONTRACT THEORY: considers asymmetries in power and information; e.g. standard (take it or leave it) contracts.

Why is exception goal of contract remedies more important than the rescission goal?

Expectation goal gets you to where you want to be, hence the reason for signing the contract

Distinguish Contract Law from Tort Law

CONTRACT LAW encourages Ex ANTE Facto (parties' ability to allocate rights and liabilities BEFORE the fact). Remedies primarily promote parties' expectations. Contract remedies for breach of contract attempt to place plaintiff in position they would have enjoyed had the breaching party fully performed. TORT LAW encourages Ex POST Facto (after-the-fact consideration of the parties' rights and liabilities.) Remedies primarily restorative. Tort remedies attempt to restore plaintiff to her former position, as if tort never occurred.

How do contracts relate to property?

Contracts are used to transfer property and sometimes define "property"

What does it mean for a contract to be discharged?

Contractual duties are ended

Void Contract

Contradiction in terms. Has no legal effect (e.g. an illegal contract to, for example, injure or kill someone)

Executed vs. Executory Ks

If a contract is executory, one side and/or both has/have not completed performance; totally executory is where neither side has begun performance. Totally executed means both sides completed performance. If one party completed performance but the other hasn't, contract is executed as to the former and executory as to the latter.

Typically acceptance must be communicated to the offeror. How does the mail box rule change this?

If reasonable to accept by mail, acceptance counts when mail sent, not when received.

Be able to determine when a mutual mistake of fact or law is grounds for rescission of the contract

MUTUAL MISTAKE OF FACT/LAW: Bilateral mistake; mutual misunderstanding concerning basic assumption on which contract was made -Both parties must be mistaken on same material fact -Word or term in contract may be subject to more than one reasonable interpretation. If parties attach materially different meaning to the term, court may allow rescission b/c no "meeting of the minds"

Bilateral v. Unilateral Ks

Most contracts are bilateral, where both sides exchanged promises. Small minorities of contracts are unilateral, where one side exchanges a promise for other sides's performance.

What is the objective theory of contracts?

Party's intention to enter contract is judged by objective facts, facts interpreted by reasonable person rather than party's own secret, subjective intentions. What do parties know or have reason to know? Applies to contract formation (e.g. Lucy v. Zehmer) and contract interpretation; i.e. contract consists of its explicit terms and its implicit terms: What did the parties know or have reason to know at the time of contract formation?

What is a legal benefit?

Promisor obtaining something that he previously had no legal right to obtain

What is the exception to the at-will discharge rule?

Public Policy Exception: employer cannot fire an at will employee if such discharge violates public policy

How are "quasi-contracts" different from contracts?

QUASI-CONTRACTS are not contracts, contracts implied in law. Do not arise from an agreement from parties themselves. They are usually imposed by the court to avoid unjust enrichment of one party at the expense of another. When court imposes quasi-k, plaintiff may recover in quantum meruit, latin phrase meaning "as much as he/she deserves. They also bridge the gap between tort and contract.

How does objective intent affect contracting? The offer? Acceptance?

We judge one's conduct -- including whether one intends to contract -- based on his or her objective intent. Objective intent is the intent one makes apparent to a reasonable person. Did the Zehmers objectively intend to contract? YES.

Voidable Contract

contradiction in terms. Allows at least one party to dis-affirm any legal obligations therein (e.g. contract by a minor)

Valid Contract

meets legal requirement for a contract and is enforceable by at least one of parties (*GO OVER HOW TO FIGURE OUT WHICH PARTY CAN ENFORCE*). Consists of: agreement (offer and acceptance; legally sufficient consideration; made by parties with legal capacity to enter contract; legal purpose

Privity of Contract

to be a party to a breach of contract case, a person must be in privity of contract; i.e. must be a party to the contract (includes 3rd party beneficiaries, assignees of contract rights, etc.)