Contract Law

(gratuitous assignments) In the absence of a writing, the assignment would also be irrevocable if

1. in writing 2. already received payment 3. sued and retained judgement 4. substituted 5. changed position in detrimental reliance

A and B agree that A will wash B's car next Saturday for $25. Is there a covenant?

A and B have both made covenants (promises)

Statute of Frauds

A state statute under which certain types of contracts must be in writing to be enforceable. no more than 1 year

A and B agree that A will wash B's car next Saturday for $25, provided that it does not rain. what is the condition

A's performance is conditioned on the weather. This is a condition precedent.

third party beneficiary contracts

Agreements in which the original intent of one of the contracting parties, when entering into the contractual agreement, is to have the promised-for consideration pass not to her, but to some other person

Contractual Capacity; mental capacity

All Adults are presumed to have the mental capacity to enter into contracts

An executory contract is one in which:

An agreement where one or both parties have outstanding duties of performance

covenant

An unconditional, absolute promise to perform.

non-assignment clauses

CANNOT SIGN WITHOUT CONSENT Clauses prohibiting assignment are very common in most sorts of contract }In no event shall this Agreement be assigned by either party without the other party's written consent."

categories of conditions

Conditions categorized by when they create, or extinguish, the duty to perform the covenant

3 subverted facts with contractual intent

Fraud- one party enters into the contract with incomplete or inaccurate information. Duress- one party agrees to a bargain only because she is presented with a less pleasant alternative. Mistake- one or both parties enter into an agreement that does not correspond with their true intent.

practical effect of illegality

IN CONTRACTS most contracts are going to have a severance clause; it says party agrees that if some court decides that some part of the contract is illegal, they are still going through with the other parts of the contract

assignment for consideration

If an obligee assigns his rights under a contract to a third-party for consideration, that is a separate contract, and the obligee can not revoke the assignment without being in breach

What is the legal effect of a counteroffer?

It operates as a rejection of the original offer. It terminates the ability of the offeree to accept the original offer. It vests the original offeror with the ability to create a binding contract by accepting the counteroffer.

supervening illegality

Legal when signed but becomes illegal

A sells to B for $500 a cow which both believe is with calf. In fact, the cow is barren; what is the type of mistake?

MUTUAL MISTAKE Either a or b can cancel the contract because it was a mistake Scrivener's error = drafting error, what is written is wrong for some reason and if you can prove that then you can end the contract

chapter 13 reorganization

ONLY FOR INDIVDUALS Debtor remains control over property, doesn't need to turn anything over to trustee

forms of duress

Physical threats economic threats(blackmail or extoriton); difficult to prove in court mental duress; hard to prove, one party is using psychological factors for them to enter into a contract

Coyote Industries and Acme Products Inc. have been doing business together for several years. Coyote sends a purchase order for A1,000 rocket skates, price TBD at shipment.@ Is this a valid offer?

Probably because a court can reference the parties= course of dealing to determine the missing terms.

what is a consequence of fraud

SUING; The victim of contractual fraud can either sue in equity to rescind the contract, or can sue at law for damages. Asking to presume position before fraud happened; court of equity can undo the transaction; damages restored status quo (before transaction happened) Money judgement- damages suffered, can sue the seller

offer and acceptance under the UCC

Seller has to awknowledge the offer within a certain amount of time (accepting the offer)

conditions

Specific promises made by the parties to the contract.

When analyzing whether the parties= communications create an offer and acceptance, which best describes the standard a court would apply:

The court will look at a party=s express statements to determine whether a reasonable person would conclude the statements are evidence of intent to contract.

Tired of life as a homemaker, Marge Simpson decides to buy a soft pretzel franchise. The franchisor offers financing to Marge on the condition that her husband Homer guarantees the debt. Homer signs a guaranty in exchange for A$10.00 and other good and valuable consideration.@ Which of the following best describes the validity of the guaranty?

The guaranty would be valid, regardless of whether Homer receives the 2+ parties, guarantee created at time of contract, in writing =valid

revocation of the offer

The offer has pushed the power of transaction }The offeror has the right to revoke the offer ANY TIME before it is accepted.

contractual intent

The parties to the contract must actually intend to enter into a contract for the same bargain at the same time

Which of the following could constitute valid consideration for a contract?

The relinquishment of a legal right.

If charging someone with fraud you MUST prove with preponderance upon the evidence (more likely than not) the five elements (T/F)

True

A believing the cow is barren, sells it to B for $25. B knows the cow is with calf. The contract is voidable by A unless A bears the risk of the mistake. }B thinking the cow is with calf, offers A $500. A knows the cow is barren and that the offer implies that B thinks its with calf. The contract is voidable by B unless B bears the risk of mistake.; what type of mistake?

UNILATRAL MISTAKE Tougher concept because it bares some relationship with fraud that does not exist on other transactions bare the risk of mistake- need to look in contract Do dilligance period- to ensure not getting ripped off, and is very difficult to prove unilateral mistake

vesting of rights

Under the Restatement the beneficiary's rights vest only if he changes position in detrimental reliance on the promise, sues on the promise or acknowledges it at the request of the promisor or promisee

impossibilty of performance

Unforeseeable event Contract itself does not allocate risk (if this happens then we do this) Parties cannot bare any fault

UCC

Uniform Commercial Code uniform law

mitigation damanges

When a failed condition suspends a party's duty of performance, the party can not sit back and let damages accrue

In the absence of a direct contractual relationship between the parties, a court may allow for recovery of damages in which of the following circumstances?

Where the defendant has been unjustly enriched at the expense of the plaintiff

tougher proving capacity for a will than a contract; why?

because they are dead with a will so cannot bare consequences of actions

A and B agree that next Saturday A will wash B's car in exchange for $25

bilaterial obligation; promise for a promise

material breach

by one party suspends the other party's duty of performance; small things can be material

what is duress?

connotes some form of threat or coercion exercised over one party to the contract in order to induce that party's promise to contract Basic unenforceable contract; physical duress; the person signing the contract is under physical harm

A hires B to paint his house. B sub-contracts the job to C. C's only contractual remedy is against B. B remains liable to A for the agreed services and A remains liable to B for the contract price. is an example of what?

delegation

A and B have a contract B brings in C; B is liable is an example of what

deligation

what type of duress is this.. business had one major customer, the two owndrs of the businesses have know each other for a long time and the business owner says to the customer that his son graduated college and he has to give his son a job or he is pulling the contract = getting an outside factor

economic

Undue Influence

form of mental duress exerted by someone in a confidential relationship with the victim Confidential relationship- any time one person oppose trusted confidence in another person (that another person is sharing information) number of ways they can arise Show vulnerability to other people influences them

1. Fraud (5 elements)

getting ripped off; think you're buying A but get B 1.A false representation of a material fact 2.Made with knowledge or belief that the representation is false, or in reckless indifference to the truth. 3.made with the intent to induce the other party to act or refrain from acting 4.Justifiably relied on by the other party 5.Damage to the other party as a result.

A rents out a fire hall for a wedding reception and makes a down payment of $1,000. Due to an unforeseen pandemic, the government has banned all gatherings during the planned event. The parties are excused from their obligations of performance and the fire hall is liable to return the $1,000

impossibility example

}Landlord and tenant have a commercial lease for a warehouse. The warehouse is severely damaged by fire. The lease agreement likely has a clause which allocates risk of loss between the parties and the lease would still be enforceable.

impossibility example

Detrimental Reliance

making life chaning decisiomns

what type of duress is seen with elderly people entering into a contract; guilting them into a transaction or that it is in their best interest but really it isn't;

mental duress

UCC most successful; has been adopted by every sate; gap filler to provide law around transaction;

model for states to use

part performance exception (statue of frauds)

more common exception Where one or both parties have partly performed their obligations under an oral agreement, a court of equity can enforce the terms of the bargain through a decree of specific performance

Contractual Capacity; age

must be 18 yrs or older to enter into a binding contract Exception: consent (parent consent) but parent is taking responsibility

what are two types of mistakes?

mutual mistake-a basic assumption of the agreement, the mistake has a material adverse effect on the parties, and the mistake was of the type that could not be foreseen. unilateral mistake-concerns a situation in which only one party to the contract is mistaken

6 types of new agreements

mutual recission- parties agree to go separate ways DIVORCE Release parties agree to not sue SIGNED WITH PAYMENT accord and satisfaction Substitute agreement- a brand new contract Novation- new party assumes the contractual role of an existing party modification- parties agree to amend their obligations under existing agreement

Contemplating retirement, Dr. Hibbert makes a written offer to Dr. Riviera to sell him his medical practice. The offer states that it will Aremain open for thirty days.@ The next week Dr. Hibbert orally informs Dr. Riviera that he changed his mind about retiring and that the offer is terminated. Dr. Riviera responds by accepting the offer

no

In a fit of rage, Abe Simpson tells his adult son Homer that Homer=s birth was Aa mistake.@ Devastated, Homer takes a long trip to India with his friend Apu. While in India, Homer contracts a rare disease which lands him in a hospital and eventually proves fatal. On learning Homer=s fate, Abe is wracked with guilt and offers to pay the hospital bill. The hospital accepts the offer and sends Abe the bill.

no

Lenny owes Carl $50. In exchange for Lenny's promise to pay the debt, Carl promises to wash Lenny's car.

no

Mr. Burns advertises in the Springfield newspaper that he will give $1,000 for the return of his lost teddy bear Bobo. Although he did not read the ad in the paper and is unaware of the offer, Smithers finds Bobo and delivers it to Mr. Burns.

no

Ned leaves a note on Homer=s doorstep, AI want to sell my house. I would consider $50,000 for it.@ Homer promptly answers, AI will buy your house for $50,000 cash.

no

Superintendent Chalmers sends a letter to Principal Skinner stating the terms of a new employment contract. At the end he writes, AYou can accept this offer only by signing on the dotted line below my own signature.@ Skinner replies by e-mail, AI accept your offer.@

no

situation where parties have offer acceptance and considering and is a legal contract... (legal or illegal)

nothing illegal about it

what is a mistake?

occurs when one (or both) of the parties is under a misconception as to the subject matter of the contract.

chapter 11 reorganization

only available to business entities

obtaining life insurance (third-party beneficiaries), Group Life (employee benefit through employeer) promisor- insurance company/ promise- you as a policy holder, YOU do not get the benefit of the insurance (because you will be DEAD) the third-party receives (spouse) beneficiary, must get named when you take out the insurance and can change beneficiary whenever you want. who is the contract between?

promisor and promisee

a small business sells (assigns) its accounts receivable to a factoring company in exchange for payment. AN example of what?

selling accounts to a third party (assignments)

conditions subsequent

something that is putting the contract that will relive one party in contract

Contractual Capacity

the parties legal ability to enter into a binding contractual relationship ex; age, mental capacity, CUI contracting under the influence could play a key role in the court's decision about whether to grant relief.

Usury

the practice of lending money at exorbitant rates; change state by state regulate the legal rate of interest that can be charged for extending credit

delegation

the promisor of a contract authorizes another person to perform some duty owed by the promisor under the contract

Courts don't get involved in consideration; why?

this is an exception to that a bad deal can be evidence that the person being victimized lacks mental capacity; no reasonable person would enter into that

(T/F) The delegated person has absolutely no rights under the contract, unlike third party beneficiaries or assignees, nor does she have any obligations under the contract

true

(T/F) Unlike third party beneficiary contracts and assignments, a delegation does not involve a transfer of rights

true

(T/F) homeowner hires GC (general contractor), does addition for 50k, GC hires multiple subcontractors; electricial, plumber, painter, etc. that all are SEPARATE contracts, get remedy from GC NOT homeowner, painters can have subcontracts; can have multiple layers of subcontracts between contracts can be complicated always reliable under original

true

(T/F}The delegate's only obligation is to the promisor, and the promisor remains totally liable under the contract.

true

Chapter 11 business is trying to go on and stay in business for some period of time

true

Contractual Capacity; CUI A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication (T/F)

true

Fraud can be a civil or criminal case (T/F)

true

If a minor enters into a contract, the minor can either void or ratify the contract upon reaching legal age (T/F)

true

If had an LLC, contract is with an entity is still reliable to the contract

true

If services have already been provided or goods to pass there is still liability; still need to pay if the one who recieved the services dies because they still received the benedit

true

The breach of a covenant typically causes an immediate claim for damages. (T/F)

true

The party asserting incapacity bears the burden of proof (in mental capacity) (T/F)

true

gratuitous assignment is not supported by consideration, it is generally revocable by the assignorHowever, the assignment is deemed irrevocable under the law if it is delivered in writing to the assignee

true

promisor delegates someone to assist him in fulfilling his contractual obligations (T/F)

true

}The aggrieved party has a positive duty to mitigate its damages by exerting reasonable efforts to find a substitute for the promised performance.

true

(T/F) An injured party has a structured settlement which pays money over a period of time, but she needs cash now! So she assigns her rights under the settlement to a finance company (you know the name...) in exchange for a lump sum

true Structured settlement- insurance buys an inundity; monthly payments; can assign annunity to a company

If you wash my car I will pay you $25."

unilateral obligation; promise for an act

Conditions Precedent

unless the condition is satisfied, either or both parties have no duty to perform

minor breach

would not suspend the other party's duty of performance but could give rise to a claim for damages

Acme Products ships 50 anvils, 1000 rocket skates and 500 over-sized sling shots to Coyote Industries under a single purchase order. The rocket skates prove to be defective. The court can enforce the contract as to the anvils and sling shots even though Acme materially breached the rocket skate portion

yes

Coyote Industries, Inc. e-mails a written order to Acme Products, Inc., offering to buy 100 anvils at current market price. The order provides, AShip at once.@ Without giving a written reply, Acme immediately ships the anvils

yes

assignment

}An assignment is the transfer of a promisee's rights under an existing contract. seen in finance world

chapter 7 liquidation

}An individual or corporate entity can choose to file a Chapter 7 liquidation.

}A hires B to perform repairs on A's house. Before B's time for performance comes, A's house sustains catastrophic damage in a hurricane. B's duty to perform is discharged. A would be entitled to restitution of any payments already made.

}Existing contract cannot be carried out because it has been destroyed

frustration of purpose

}Frustration of purpose occurs when the contract, on its face, is both valid and apparently capable of performance, but the underlying reason for the agreement no longer exists.

divisible conttracts

}If a contract can be divided into several parts, a court might find that the breach of one provision does not suspend the duty of performance of the other parts. }Multiple duties but not interconnected

death of the parties or destruction of the subject matter

}If the subject matter of the contract is destroyed, obviously the contract cannot be fulfilled. This is true provided that the object in question is unique and is not destroyed by an act of one of the parties

agreement of parties

}The parties to a contract are always free to rearrange their contractual agreements by mutual assent. As long as both parties agree to a change in the performances, the parties may be discharged from their original obligation without any negative consequences

performance

}The simplest method of being excused from contractual obligations is to perform these obligations

breach of contract

}To breach a contract means to break one's obligation made under the agreement.

bankruptcy

}a debtor to be relieved of his contractual obligations, as well as potential tort liability. When a debtor files a bankruptcy petition, the code provides an "automatic stay" which stops all pending legal actions against the debtor

discharge

}creditors are legally barred from pursuing their claims forever, unless the debtor "reaffirms" the debt, which would have to be approved by the court.