BLAW CONTRACT LAW

Termination after destruction of subject matter

Automatically terminated if SM destroyed before acceptance; no need for notice of destruction

No; something need not be of direct economic or financial value to be considered legally sufficient consideration

Does determination of if consideration exists depend on a comparison of the values of the things exchanged?

Blue pencil doctrine

Enables a court to strike out provisions of contract deemed unconscionable or illegal and leave rest intact

Shrink-Wrap Agreement

The terms are expressed inside the box in which the goods are packaged; the party who opens the box is told that he or she agrees to the terms by keeping whatever is in the box

Collateral (secondary) promise

A promise made by a third party to assume the debts or obligations of a primary party in a contract if the party does not perform; must be in writing to be enforceable

Contract

A promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty; in other words, agreement that can be enforced in court

Offer

A promise or commitment to do or refrain from doing some specified action in the future

Unconscionable bargains

Bargains that are so oppressive that the courts relieve innocent parties of part or all of their duties; so unfair as to be "void of conscience" (see page 271-272 for procedural unconscionability and substantive unconscionability)

Doctrine of Promissory Estoppel

Equitable remedy and a way of enforcing a promise that is otherwise unenforceable; a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery

No, even when one party exacts a very high price for an item that the other party needs; however, if party exacting the price CREATING the need, economic duress may be found

Is economic need sufficient to constitute duress?

No; promises made in return for actions or events that have already taken place are unenforceable because the promises lack the element of bargained-for exchange (merely a gift, not a contract)

Is past consideration considered legally sufficient consideration?

No; these are movable items that people take with them when they leave; includes fruits of the land (such as timber and crops that have been cut / harvested)

Is personal property included in "Land" being transferred?

Secondary obligation

A promise to pay another's debt only if that party fails to pay; must be in writing to be enforceable

Conditioned performance

A qualification in a contract based on a possible future event; occurrence or nonoccurrence of an event will trigger performance / termination of a contract

Counteroffer

A rejection of the original offer and the simultaneous making of a new offer

Contractual Capacity

The legal ability to enter into a contractual relationship

Scienter

"Guilty knowledge"; knowledge on the part of the misrepresenting party that facts have been falsely represented, signifying an intent to deceive

Nominal damages

"In name only"; awarded when breach occurred but no actual damage or financial loss results from the breach; often small (little as $1) and are used to establish that the defendant acted wrongfully so that the plaintiff can ask for other relief (such as an injunction)

Construction against the drafter

"Interpretation against the drafter"; when one party drafted and other did not, the court will interpret the contract in the light least favorable to who wrote it

Integrated document rule

"four corners rule"; when interpreting a contract, we look at the whole thing and only look in the contract (only within the four corners of the agreement) and not extraneous stuff

Revocation, rejection, counteroffer

What are the ways in which an offer can be terminated by action of the parties?

See page 242

What provisions should an online offer include?

Covenant not to compete

"non-compete" clauses; a restrictive covenant

Illusory promise

A promise in which the terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything; these promises are without consideration and unenforceable ("I promise to think about it" for example)

Condition precedent

A condition that must be fulfilled before a contract can come into existence that, if not satisfied, will mean there is no contract even if other elements are present

Conditions subsequent

A condition that, if triggered by happening or not happening, will negate a contract that has already come into existence, discharging the party's duty to perform

Voidable; can utilize ratification or disaffirmance

A contract entered into by a minor is _____________ at the option of that minor. What two options does the minor have in this situation?

Release

A contract in which one party forfeits the right to pursue a legal claim against the other party, baring any further recovery beyond the terms stated in the release; binding if the agreement is made in good faith (honestly), is in a signed writing, and is accompanied by consideration

Unilateral contract

A contract in which the offer is phrased so that the offeree can accept only by completing the contract performance; contract is formed not at the moment when promises are exchanged but at the moment when the contract is performed

Bilateral contract

A contract in which the offeree can accept simply by promising to perform; the contract comes into existence the moment the promises are exchanged

Mixed Contracts

A contract may contain some express terms and some implied terms

Unenforceable contracts

A contract that cannot be enforced because of certain legal defenses against it; a valid contract rendered unenforceable by some statue or law

The One-Year Rule

A contract that cannot be performed within one year from the day after the contract is formed; typically a contract with a particular term stated in it

Executed contract

A contract that has been fully performed on both sides

Executory contract

A contract that has not been fully performed by the parties

Implied contract

A contract that is implied from the conduct of the parties; the conduct of the parties rather than their words creates and defines the terms of the contract

Accord and Satisfaction

A debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed (page 256)

Promise

A declaration by a person (the promisor) to do or not to do a certain act. As a result, the person to whom this made (the promisee) has a right to expect / demand that something either will or will not happen in the future.

Usury

A lender who makes a loan at an interest rate above the lawful maximum commits usury; these contracts are illegal

Bilateral mistake

A mutual understanding concerning a basic assumption on which the contract was made; when both parties are mistaken about the same material fact, either party can rescind the contract (but must be able to return to status quo ante [the way the parties were before)

The Objective Theory of Contracts

A party's intention to enter into a legally binding agreement, or contract, is judged by outward, objective facts as interpreted by a reasonable person rather than by the party's own subjective intentions

Objective Theory of Contracts

A party's words and conduct are held to mean whatever a reasonable person in the offeree's position would think they meant

Innocent misrepresentation

A person makes a statement that he or she believes to be true but that is actually false; the party would have no reason to know that it is false; aggrieved party can rescind or reform but cannot seek damages

Pre-existing Duty Rule

A promise to do what one already has a legal duty to do does not constitute legally sufficient consideration (for example, fireman cannot ask someone for money to put out the fire in their house, as they have a duty to put out fires); if a party is bound by contract to perform a certain duty, that duty cannot serve as consideration for another contract

Primary obligation

A promise to pay another person's debt that is not conditioned on the person's failure to pay; does not need to be in writing to be enforceable

Partnering Agreement

A seller and a buyer who frequently do business with each other agree in advance on the terms and conditions that will apply to all transactions subsequently conducted electronically

Termination after supervening illegality

A statute or court decision that makes an offer illegal automatically terminates the offer

Voidable contracts

A valid contract but one that can be avoided at the option of one or both of the parties

Accord and Satisfaction

A way of getting out of litigation; the parties agree to accept performance that is different from the performance originally promised (agree = new agreement + satisfaction = performing the new agreement)

Mailbox Rule

Acceptance takes effect, thus completing formation of the contract, at the time the offeree sends or delivers the communication via the mode expressly or impliedly authorized by the offeror; need proof of sent mail for person who mailed it

Informal contracts

All contracts other than formal contracts in which no special form is required (except for certain that need to be in writing), as the contracts are based on their substance rather than their form

Licensing statutes

All states require members of certain professions (lawyers and accountants for example) to have licenses; contract with an unlicensed practitioner is generally illegal and unenforceable

Blue pencil doctrine (severability principle)

Allows court to strike unlawful / unethical provisions out of the contract and leave the rest intact

Specific performance

An equitable remedy that requires performance of the contract according to precise terms; granted when a contract has been partially performed and the parties cannot be returned to their original positions; sometimes granted for oral contracts

Commercial frustration (frustration of purpose)

An unforeseeable event that makes it impossible to attain the purpose both parties had in mind when they made the contract; the entire purpose of the agreement is frustrated by something beyond parties' control

Anticipatory repudiation

Announcing in advance that one will not perform the contract; must be clear and unequivocal ("Yes I can do it" or "No I cannot", but not "maybe I can get you the goods in time")

Contracts in restraint of trade

Anticompetitive agreements that prevent people form freely doing business; violation of federal monopoly laws and promotes unfair competition

Contracts to Commit a Crime

Any contract to commit a crime is in violation of a statute; if performance is rendered illegal after the contract is entered into, the contract is terminated by law

Extrinsic evidence

Any evidence not contained in the document itself - such as testimony of parties or witnesses, additional agreements and communications, or other relevant information; may be used by courts when a term in a contract is ambiguous

Agreements to agree to the material terms of a contract at some future date; may be contracts if it is clear that the parties intended to be bound by agreements (emphasizes intent rather than form)

Are agreements to agree contracts (enforceable agreements)?

Parents are not liable (EXCEPT contracts for necessities since parents are legally required to provide); businesses usually require parents to cosign, making the parents personally obligated to perform the conditions of the contract

Are parents liable to contracts made by minor children acting on their own?

Binding contracts only if the parties agreed on all essential terms and no dispute issues remain to be resolved

Are preliminary agreements contracts?

Undue influence

Arises from personal or intimate relationships in which one party greatly influences another to overcome that party's free will; contract entered into under undue influence is voidable and lacks consent; contract can be rescinded with damages

Termination after death or incompetence

Automatically terminated if the offeror or offeree dies or is legally incapacitated unless the offer is irrevocable (in this case, it passes to the person's estate)

Reformation

Available when the contract is incomplete, vague, or ambiguous; allows court to rewrite or complete the contract in accordance with the parties' actual intent, in accordance with what is fair and equitable, or in accordance with actual facts or circumstances

What actions can a party with an option to avoid a contract take?

Avoid any duty to perform (both parties are released from the contract) or ratify (make valid) the contract [both parties must fully perform their legal obligations]

- Voluntary consent - consent of both parties must be voluntary - Form - contract must be in whatever form the law requires

What are defenses to the enforceability of an otherwise valid contract?

May be enforced if the promisee justifiably relied on the promise to his or her detriment and the reliance was foreseeable to the person making the promise and there must be no way to avoid injustice except to enforce the promise (same idea as if plaintiff claims that K lacked consideration à in this case, claims it lacked proper form)

Can an oral contract that otherwise would need to be in writing be enforced under promissory estoppel?

Injunction

Can be a mandatory injunction (to do something) or a prohibitory injunction (to cease doing something)

Fraudulent misrepresentation by conduct

Can occur when a party takes specific action to conceal a material fact

No; a remedy already exists if a party is unjustly enriched: the harmed party can sue for breach of contract

Can the doctrine of quasi contract be used when there is an actual contract?

See page 342

Compensatory damages in a building or construction contract ?

Usually difference between contract price and market price; if buyer breaches before seller has produced goods, damages usually equal lost profits on the sale

Compensatory damages in a contract for the sale of goods ?

Remedies are ordinarily specific performance; however, when the buyer is the party in breach or specific performance is not available, measure of damages is difference in contract price and market price

Compensatory damages in a contract for the sale of land / real estate ?

Contracts to act as a surety (guarantor)

Conditional obligation (only IF the person can not pay) to pay someone else's debts; original contract need not be in writing, but contract to act as surety does; if undertake primary responsibility, not agreed to act as a surety and no need to be written

1) A promise to do something that one has no prior legal duty to do 2) The performance of an action that one is otherwise not obligated to undertake 3) The refraining from an action that one has a legal right to undertake (forbearance)

Consideration must be something of value in the eyes of the law (Something of Legally Sufficient Value) ?

The item of value must be given or promised by the offeror in return for the promisee's promise, performance, or promise of performance

Consideration must provide the basis for the bargain struck between the two parties (Bargained-for Exchange) ?

Discharging contractual duties

Contracts are terminated when the parties perform according to the terms of the agreement or are excused from the contract

Must be in writing because the executor will not normally do this; the promise TO BE the executor can be oral

Contracts for an executor of an estate to pay a debt that really was that of the person who died out of the executor's personal funds ?

The UCC (Uniform Commercial Code)

Contracts for the sale and lease of goods are governed by _______

Must be in writing; DOES NOT include services (if any service is involved, need not be in writing); the writing need only state the quantity term (will not be enforceable for any quantity greater than set forth in the writing)

Contracts for the sale of goods worth $500 or more ?

Quasi contracts (in book, chapter 11 page 223)

Contracts implied in law; not actual contracts, but fictional contracts that courts can impose on the parties as if the parties had entered into an actual contract; equitable rather than legal contracts

A promise to make a payment or give property in consideration of (induced by) a promise to marry must be in writing; includes prenuptial agreements (agreements made before marriage that defines each partner's ownership rights in the other partner's property)

Contracts in consideration of marriage ?

Discriminatory contracts

Contracts in which a party promises to discriminate on the base of race, religion, etc are unenforceable (contrary to statue and public policy)

Contracts contrary to public policy

Contracts that are not enforceable because of the negative impact they would have on society

Formal contracts

Contracts that require a special form or method of creation (formation) to be enforced

Mere Peppercorn Theory of Consideration

Courts will consider the existence of consideration but not its adequacy; just sees if there is something and does not consider the value of the exchange

Option contract

Created when an offeror promises to hold an offer open for a specified period of time in return for a payment (consideration) given by the offeree; takes away the offeror's power to revoke the offer for the period of time specified

Punitive damages

Damages designed to punish a wrongdoer and set an example to deter similar conduct in the future; almost never available in contract cases because parties are normally just compensated for the loss of bargain (economic losses); may be available if person's actions cause both a breach AND a tort (such as fraud)

Compensatory damages

Damages that compensate the nonbreaching party for the loss of the bargain; compensate injured party for damages arising directly from the loss of bargain caused by the breach, simply replacing what was lost because of the wrong

Browse-Wrap Terms

Do not require Internet users to assent to the terms before downloading or using certain software (software can be installed without clicking "I agree"); often unenforceable because do not satisfy agreement requirement of contract formation

Part of the goods have already been accepted by the buyer, the buyer has already paid part of the purchase price, the party admits that there is a contract but is challenging it on some other ground, or the goods are custom ordered (in these situations, the buyer behaves in a way that acknowledges the existence of a contract)

Exceptions during which sale of goods greater than $500 can be made in an oral contract?

See page 303-304

Exceptions to the parol evidence rule ?

Incidental damages

Expenses that are caused directly by a breach of contract

Express & Implied Conditions

Express -> provided for by the parties' agreement; Implied -> understood to be part of the agreement but are not found in the express language of the agreement

Misrepresentation

False statement of material fact by words or actions

E-Sign Act

Federal law providing that no contract, record, or signature may be denied legal effect solely because it is in electronic form; makes electronic signatures valid if the parties have agreed to use e-signatures

Act for the Prevention of Frauds and Perjuries

First version of the statue of frauds passed in England in 1677; established that certain contracts needed to be in writing to be enforceable; intended to prevent lies, fraud, deceit about the terms of the contract as well as to protect against failed memories when contracts are for long periods of time

Consequential damages

Foreseeable damages that result from the party's breach of contract; damages that flow from the consequences of the breach; for nonbreaching party to recover consequential damages, the breaching party must have known that special circumstances would cause additional loss to nonbreaching party

Valid contract

Has the elements necessary to entitle at least one of the parties to enforce it (the five elements of competent parties, agreement, consideration, lawful purpose, and proper form)

Through an accord and satisfaction, a release, or a covenant not to sue

How can a legal claim be settled?

Must be clear and convincing evidence that the party being taken advantage of does not exercise free will in entering into a contract; when contract enriches the dominant party, court often presumes that the contract was made under undue influence; mere existence of fiduciary relationship not sufficient

How can undue influence be proven?

Compensation in order to place innocent parties in the position they would have occupied had the contract been fully performed

How do damages compensate the nonbreaching party in contract law?

Defines e-signature as an "electronic sound, symbol, or process attached to or logically associated with a record (info that is inscribed on a tangible medium / that is stored in an electronic or other medium and is retrievable in visual form) and executed by a person with the intent to sign the record"

How does UETA define e-signatures?

Common law: must mirror the offer exactly / UCC: as long as essential terms are the same and only minor modifications are made (such as pre-printed forms with different boiler plate language), it is a contract

How does common law differ from the UCC regarding the mirror image rule?

The contract is executed on one side and executory on the other side, but the contract is classified as executory

How is a contract defined if one party has fully performed but the other has not?

By the objective theory of contracts

How is intent determined in contract law?

Parol evidence rule

If a court finds that a written contract represents the complete and final statement of the parties' agreement, it will not allow either party to present parol evidence (testimony or other evidence of communications between the parties not contained in the contract itself)

Disaffirmance - Intoxication

If contract voidable because of intoxication, the person can disaffirm while intoxicated and for a reasonable amount of time after becoming sober; must be able to return all consideration received unless contract involved necessity

Any reasonable means

If the offeror does not expressly authorize a certain mode of acceptance, any reasonable method is deemed okay by the courts

Negligent misrepresentation

If the party does not exercise reasonable care in uncovering or disclosing facts; speaker does not know the statement is false but the law says that they should know; negligence = had the DUTY to know that the statement was false; treated as fraudulent misrepresentation, so can rescind and seek damages

Mutuality of Obligation

In consideration, both parties must be able to enforce the promises on each other (not just one)

- When the intent of the parties cannot be determined from contract's language - When the contract lacks a provision on a disputed term - When a term is susceptible to more than one interpretation - When there is uncertainty about a provision

In what situations will a court consider a contract to be ambiguous (unclear)?

Forum-Selection Clause

Indication in online contracts of the forum in which contract disputes will be resolved

No; if the subject matter is illegal, it is void ab initio (treated as invalid from the outset); contracts must be formed for a legal purpose; same goes for a legal activity asked to be performed illegally

Is a contract to do something that is prohibited by federal or statutory law valid and enforceable?

Plain Language Laws

Laws enacted by federal government and many states that help to avoid the difficulty arising when one of the parties is not familiar with the legal terminology used in the contract

Objective theory of contracts

Look at what the contract says on the outside; not going into head and trying to figure out what the person thought it meant

Covenant not to compete - Sale of an ongoing business

Merchant selling a store agrees not to open a store near the sold store; provided the covenant is reasonable and an ancillary part of the sale of an ongoing business -> enforceable

Unilateral mistake

Mistake made by only one of the parties; generally does not give the mistaken party any right to relief from the contract and the contract is enforceable

Uniform Electronic Transactions Act (UETA)

Model legislation that can be enacted by the states; declares that a signature may not be denied legal effect or enforceability solely because it is in electronic form; authorizes e-signatures and gives the electronic contracts same force as hard copy contracts

Void contracts

No contract at all; none of the parties have any legal obligations if a contract is void

Contracts involving interests in land

Not enforceable unless in writing; includes mortgage agreements and leases; "land" includes the property and fixtures (buildings, fences, trees, etc) permanently attached to the soil; must have a legal description of property to be enforceable

Principles of contract interpretation that assist courts in interpreting contracts

Objective theory of contracts, reasonable person standard, plain meaning rule, integrated document rule, blue pencil doctrine (severability principle), course of performance (course of dealing or usage of trade), construction against the drafter

Termination after lapse of time

Offer terminates automatically by law when the period of time specified in the offer has passed; if the offer does not specify time for acceptance, offer terminates at end of a reasonable period of time

If the terms are unreadable (not adequately communicated), there is inequality of bargaining power (big company vs uneducated person), contracts in which people give up their legal rights

Other types of unenforceable contracts ?

Substantial performance

Party performs less than absolute performance but still satisfies the contract provisions; contracts can be enforced and prove no breach if the party performed in good faith without intentional failure to comply, the performance deviation was de minimus (almost nothing), and the performance creates substantially the same benefits as those promised in the contract

Negotiable instruments (checks, drafts, promissory notes, bills of exchange, certificates of deposit) and letters of credit

What are examples of formal contracts?

Negotiations and agreements PRIOR TO contract formation or oral agreements at the same time as contract formation

What are examples of parol evidence that cannot be presented as evidence?

Covenant not to compete - Employment contracts

People in management positions agree not to work for competitors or not to start competing businesses for a specified period of time after termination of employment; cannot be deprived of livelihood, but okay when protected confidential information from former employee; legal in most states if reasonable in terms of nature of employment (high position for example), reasonable length of time, reasonable geographic limitations, reasonable industries covered

Course of performance (course of dealing or usage of trade)

Performance: party can introduce evidence of the way one or both of the parties have performed the specific contract; COUSE OF DEALING -> how performed a previous, similar contract; USAGE OF TRADE -> way industry usually interprets things (to help court understand the terms)

Liquidated damages

Provision in a contract that specifies that a certain dollar amount is to be paid in the event of a future breach of contract

Exculpatory clauses

Release a party from liability in the event of monetary or physical injury no matter who is at fault; courts sometimes refuse to enforce on grounds that they are unconscionable

The nonbreaching party is excused from performance of duties and can also sue for economic damages (not punitive); non-breaching party has obligation to mitigate losses by finding other sources / supplies for the completion of the performance

Remedies for breach of contract ?

Mirror Image Rule

Requires the offeree's acceptance to match the offeror's offer exactly - to mirror the offer; any change in the terms of the original offer automatically terminates that offer and substitutes the counteroffer

Primary and secondary obligors

See chapter 14 slides (page 2)

Requirement and Output Contracts

See page 256

Liquidated and Unliquidated Debt

See page 256-257

Fraud by silence

Silence can equal fraud only if there is a duty to bring forward facts, such as a seller having the duty to disclose latent defects (defects that could not be easily ascertained) or when the parties are in a fiduciary relationship (one of trust such as married couple) they have duty to disclose facts

Is silence acceptance?

Silence cannot constitute acceptance except when the offeree has had prior dealings with the offeror

- Expressions of opinion (unless the person is an expert and their opinion was solicited as part of the negotiation process) - Statements of future intention to do something - Requests or invitations to negotiate (solicitations to offer or commence bargaining) - Invitations to submit bids - Advertisements and price lists (considered invitations to negotiate, not offers to contract) - Live and online actions (these are invitations asking bidders to submit offers)

Situations in which intent is lacking and therefore there is no offer

Choice-of-Law Clause

Specification in online contracts that any contract dispute will be settled according to the law of a particular jurisdiction, such as a state or country

Fraud and statements of opinion

Statements of opinion and future predictions generally are not subject to claims of fraud; opinions are subject to debate while facts are verifiable; may be entitled to remedy if an expert opinion

Statute of Contractual Majority

Statue in every state that dictates the age above / below which you cannot sign a contract

Statute of frauds

Statutes in every state that stipulates what types of contracts must be in writing

Express contract

Terms of the agreement are fully and explicitly stated in words, oral or written

Ratification

The act of accepting and giving legal force to an obligation that previously was not enforceable; minor who has reached age of majority can ratify expressly or impliedly; purely statutory and has nothing to do with mental capacity, even if minor claims they want to ratify before age of majority

Choice-of-Law Clause

The act of clicking on a box labeled "I accept" or "I agree" can indicate acceptance of an online offer; does not require that the parties have read all of the terms in a contract for it to be effective

What the offeree (party to whom offer is made) must do to accept the offer from the offeror

What does the identification of a bilateral or unilateral contract depend on?

Gambling

The creation of risk for the purpose of assuming it; any scheme that involves the distribution of property by chance among persons who have paid valuable consideration for the chance to receive the property is gambling; traditionally illegal and thus void

The main purpose rule

The exception to the writing requirement for secondary obligations; if the guarantor's main purpose in incurring a secondary obligation is to secure a personal benefit, the contract need not be in writing

Doctrine of mitigation of damages

The innocent party in a breach of contract is held to a duty to mitigate (reduce) the damages that he or she suffers; depends on the nature of the contract, but is common with rental agreements and employment contracts (see page 343)

Disaffirmance

The legal avoidance, or setting aside, or a contractual obligation; to disaffirm, minor must express intent, through words or conduct, not to be bound by the contract; must disaffirm entire contract, not just a portion; must be clear and unequivocal

Plain Meaning Rule

The meaning of the terms in a contract must be determined from the face of the instrument - from the written document alone; the words (and their plan, original meaning) determine the intent of the parties at the time that they entered into the contract

Breach of contract

The nonperformance of a contractual duty and failure to meet fundamental terms of contract; the decision to breach is often purely economic

Unequivocal acceptance

The offeree must accept the offer unequivocally, meaning the acceptance can't impose new conditions or change the terms of the original offer (mirror image rule)

Rejection

The offeree rejects the offer by words or conduct to terminate the offer; effective only when it is actually received by the offeror

Revocation

The offeror's act of revoking (withdrawing) an offer; may be accomplished by express repudiation of the offer or performance of acts that are inconsistent with existence of the offer and are made known to the offeree

Agreement

The parties must agree on the terms of the contract and manifest to each other their mutual assent (agreement) to the same bargain

Duress

The threat of use of illegal force or harm (such as physical harm or blackmail) to compel them to enter into a contract; must be an illegal threatened act that renders the person incapable of exercising free will; can rescind the contract and may give rise to civil liability and criminal liability for damages

Rescission

The unmaking of a contract so as to return the parties to the positions they occupied before the contract was made (status quo ante); parties can mutually agree to rescind their contract to the extent that it is executory (still to be carried out)

Specific performance

Type on injunction that calls for the performance of the act promised in the contract; only granted if the party's legal remedy (monetary damages) is inadequate; prominent in sales of real estate (as every parcel of land is unique so monetary damages may not be adequate compensation); never available for personal service contracts (that require one party to work personally for another)

Tender

Unconditional offer to perform by a person who is ready, willing, and able to do so; once performance has been tendered, the party making the tender has done everything possible to carry out the terms of the contract

Rescission

Undoes / nullifies the contract; available as a remedy for fraud, mutual mistake, duress, undue influence, or one party's inability to perform; court must be able to return parties to how they were status quo ante

Covenant not to Sue

Unlike a release, it does not always bar further recovery; the parties simply substitute a contractual obligation for some other type of legal action based on a valid claim

Restitution

Usually to rescind both parties must make restitution to each other by returning what was exchanged

Consideration

Value given in return for a promise or for a performance; motive that causes parties to enter into an agreement; something of legally sufficient value must be given in exchange for the promise and there must be a bargained-for exchange

Acceptance

Voluntary act by the offeree through words or conduct that shows assent (agreement) to the terms of an offer; must be unequivocal and must be communicated to the offeror

- Justifiable ignorance of the facts (one party has no reason to know contract is illegal and is thus innocent): parties allowed to return to OG positions - Members of protected classes (statue clearly designed to protect class of people à member of class can enforce a contract in violation of statute while other party cannot) - Withdraw from illegal agreement (the illegal part of the bargain has not yet been performed -> party rendering performance can withdraw from contract) - Contract illegal through fraud / duress / undue influence (when any of these used, the offended party can recover the performance or its value) - Severable contracts (contracts that consist of distinct parts that can be performed separately with separate consideration for each part); courts may enforce legal portions and not illegal one

What are exceptions to the general rule that both parties in an illegal contract are equally at fault (in pari delicto) and thus neither can sue for breach or recover damages?

- Compensatory (to cover direct losses and costs) - Consequential (to cover indirect and foreseeable losses) - Punitive (to punish and deter wrongdoing) - Nominal (to recognize wrongdoing when no monetary loss is shown) - Liquidated (damage provision put into a contract)

What are the categories of damages?

- Competent parties - both parties must have the contractual capacity to enter into a contract (age, mental state) - Agreement - one party must offer to enter into a legal agreement and another must accept the terms of the offer - Consideration - promises made must be supported by legally sufficient and bargained-for consideration (something of value received or promised) - Lawful purpose - contract's purpose must be to accomplish some goal that is legal and not against public policy - Proper form

What are the elements of a valid contract?

1) Unequivocal promise (clear and definite promise) 2) The promisor should have expected the promisee to rely on the promise 3) The promisee reasonably relied on the promise by acting / refraining from some act 4) The promisee's reliance was definite and resulted in substantial detriment 5) Not to enforce the promise would be inequitable (enforcement is necessary to avoid injustice)

What are the elements required for promissory estoppel to be applied?

Marriage contracts and contracts to enlist in the armed forces cannot be avoided; some states prohibit disaffirmance when they have misrepresented their age; contracts for necessities (basic needs such as food, clothing, shelter, medical services) [protects infants because adults do not have a reason not to provide necessities]

What are the exceptions for the minor's right to disaffirm?

Most states hold that the minor need only return the goods (or other consideration) subject to the contract, provided the goods are in the minor's possession; must return as much of the consideration as the infant has IF POSSIBLE; other states hold minor responsible for damage of goods that minor used prior to disaffirmance and require additional duty of restitution to return adult party to position before contract

What are the minor's obligations on disaffirmance?

Can rescind the contract, but must show proof of injury to recover damages; punitive damages are also available in tort (however, hard to prove fraud since it is a state of mind that the defendant can simply deny, and higher burden of proof since evidence must be clear and convincing)

What are the remedies available for the innocent party in a situation of fraud?

- The plaintiff furnished some service or property - The plaintiff expected to be paid for that services or property and the defendant knew or should have known that payment was expected - The defendant had a chance to reject the services / property and did not

What are the requirements for an implied contract?

1) The offeror must have a serious intention to become bound by the offer (manifestation of willingness to enter into a bargain) 2) The terms of the offer must be reasonably clear, or definite terms, so that the parties and the court can ascertain the terms of the contract 3) The offer must be communicated to the offeree (does not have to be directly to a person, but if there is some offeree out there to accept)

What are the three elements necessary for an offer to be effective?

1) When one of the parties dies or becomes disabled prior to performance à excuses PERSONAL SERVICE contracts 2) When the specific subject matter / essential part of contract is destroyed à both released 3) When a change in law renders performance illegal à both parties released

What are the three types of situations that qualify for the discharge of contracts on the basis of impossibility of performance?

Lapse of time, destruction of the specific subject matter of the offer, death or incompetence of the offeror or the offeree, supervening illegality of the proposed contract

What are the ways in which an offer can be terminated by operation of law?

1) The other party to the contract knows or should have known that a mistake of fact was made 2) The error was due to a substantial math mistake and was made inadvertently and without extreme negligence (mere math error)

What are two exceptions during which a contract with a unilateral mistake may be unenforceable?

When a large disparity exists in the value of consideration exchanged, it can indicate fraud, duress, or undue influence were involved, which may cause the judge to question whether the contract is so one sided that it is unconscionable

What can shockingly inadequate consideration indicate?

Any order confirmation, invoice, sales slip, check, fax, e-mail, or such items in combination

What constitutes a writing?

Any contract that an adult can, except contracts prohibited by law for minors (such as to buy beer)

What contracts can minors enter into?

The party simply has to understand the obligations of the contract

What defines competence?

The identification of the parties, the identification of the object or subject matter of the contract, the consideration to be paid, and the time of payment / delivery / performance

What definite terms must be included in an offer or be reasonably inferred from it?

Court papers, divorce decrees, evictions, foreclosures, health insurance terminations, prenuptial agreements, wills

What documents are excluded from the E-Sign Act?

Only electronic records and electronic signatures relating to a transaction (interaction between two or more people relating to business, commercial, or governmental activities)

What does the UETA apply to?

A false statement that the person knows is false 1) A misrepresentation of a material fact must occur 2) There must be intent to deceive 3) The innocent party must reasonably rely on the misrepresentation to their detriment (the misrep must be an important factor in their entry into the contract) 4) To collect damages, a party must have been harmed as a result of the misrepresentation

What elements make up fraudulent misrepresentation (fraud)?

If during performance of a contract extraordinary difficulties arise that were totally unforeseen at the time the contract was formed, a court may allow exception (key: whether court finds that the modified conditions are fair and equitable in view of circumstances not anticipated by the parties)

What exception to the pre-existing duty rule can be employed to justify additional consideration?

The contract will be enforceable

What happens if a party whom enforcement of an oral contract is sought admits under oath that a contract was made?

No contract will have been formed

What happens if any of the elements of a valid contract are missing?

No remedy in this case; the mistake must be something about the essential quality of the good and not value, as the court will not intervene if buyer buys for more than worth / seller sells for less; contract is enforceable

What happens if the bilateral mistake regards the future market value or quality of the object?

Acceptance may still be effective if substituted method serves same purpose as authorized means; not effective on dispatch, however, but on receipt by offeror

What happens if the offeror authorizes a method of acceptance but the offeree accepts by a substitute method?

An implied covenant of good faith and fair dealing, requiring the parties to perform in accord with the contract and their reasonable expectations under it

What implied terms do all contracts include?

Unilateral: full performance of some act is called for, so acceptance is evident and notification is unnecessary / bilateral: communication of acceptance is necessary

What is the difference between notifying the offeror of acceptance in bilateral and unilateral contracts?

A serious intent on the part of the offeror, which is determined by what a reasonable person in the offeree's position would conclude that the offeror's words and actions meant

What is the first requirement for an effective offer?

- Provide stability, predictability, and certainty for buyers and sellers - Assure both parties that promises they make will be enforceable - Ensures compliance with a promise or entitles an innocent party to relief

What is the function of contract law?

Difference in value between what was contracted for and what was received; might be very minimal

What is the measure of damages for substantial performance?

To determine the parties' intent from the language used in their agreement and to give effect to that intent

What is the primary purpose of the rules of interpretation?

Enforcement of the promise on its terms

What is the remedy for promissory estoppel?

Quantum meruit: the reasonable value of the good / services received

What is the remedy for quasi-contract?

The difference between the value of the breaching party's promised performance under the contract and the value of his or her actual performance

What is the standard measure of compensatory damages?

Ask if there is ANY way, however unlikely, that the contract could be performed in less than one year à if so, oral contracts are enforceable; if performance is objectively impossible in under one year, the contract must be in writing

What is the test for determining whether an oral contract is enforceable under the one-year rule?

Only a mistake of material facts (a fact that a reasonable person would consider important when determining his or her course of action), not mistakes of value or quality

What mistakes make a contract voidable?

The essential terms of the contract (not every term) as well as indication that the parties voluntarily agreed to the terms

What must be contained in the writing?

If the parties satisfy the accord, the new AND OLD contracts are discharged; if fail to satisfy accord, the old contract comes back into play

What occurs if the parties satisfy the accord? Fail to satisfy?

1) Can wait to see if the other party will perform 2) Can find an alternate party to perform (In this case, repudiating party can not sue for breach if later are able to perform) 3) Can treat as a material breach of contract and bring an action for damages (usually only occurs when party has no other options)

What options does the non-repudiating party have when anticipatory repudiation occurs?

Oral understandings following contract formation, oral evidence that completes an ambiguous or unclear contract, evidence tending to prove the contract was voidable or void, evidence that explains an ambiguous contract

What oral evidence will be allowed as evidence?

1) Promises that induce detrimental reliance, under the doctrine of promissory estoppel 2) Promises to pay debts that are barred by a statue of limitations 3) Promises to make charitable contributions

What promises may be enforced despite the lack of consideration?

See page 227-228

What rules will courts use to interpret contractual terms?

Express terms (terms expressly stated in the contract), followed by course of performance, course of dealing, and custom & usage of trade

What terms are given the greatest weight?

Offers to form unilateral contracts

What type of offers are contests, lotteries, and prizes?

Implied ratification

When the minor, on reaching the age of majority, indicates an intent to abide by the contract (such as keep making payments and performing performance obligations)

Option-to-Cancel Clauses

When the promisor has the option to cancel the contract before performance has begun, the promise is illusory

- Contracts involving interests in land - Contracts that cannot by their terms be performed within one year - Promises made in consideration of marriage - Contracts for the sale of goods price at $500 or more - Collateral contract with a promise to answer for the debt of another out of his or her own pocket - Collateral contract with a promise by an executor of an estate to pay a debt of the estate personally (out of his or her own pocket)

What types of contracts are required to be in writing?

Reasonable person standard

What would a reasonable person think this contract / clause / term meant (often sees together with objective theory of contracts)

Emancipation

When a child's parent or legal guardian relinquishes the legal right to exercise control over the child; terminates minority status

Settlement

When a contract will be breached or has already been breached and both parties agree on this, and litigation is a real possibility (the nonbreaching party is looking to sue); negotiations produce a settlement of the dispute without entering into a new contract and thus preventing litigation

Complete performance

When a party performs exactly as agreed (contract is 100% performed); if contract says "to parties' satisfaction" à reasonable person standard used to see if performance complete

Age of majority

When a person is no longer a minor; in almost all states, it is 18 years for contractual purposes

Express authorization

When an offeror specifies how acceptance should be made; the contract is not formed unless the offeree uses that specified mode of acceptance

At any time during minority or for a reasonable period after the minor reaches the age of majority

When can a contract be disaffirmed by a minor?

When a contract is clear and unambiguous

When can a court not consider extrinsic evidence?

Once performance has been substantially undertaken by the promisee

When can an offeror not revoke an offer in a unilateral contract?

The promisor attempts to revoke (cancel) the offer after the promise has begun performance but before the act has been completed

When do problems arise in revoking unilateral contracts?

When it is actually communicated / when the offeree actually receives it; can't be c if the offer has been accepted

When does revocation become effective?

In all contracts except when it has been modified or replaced by statutory law, such as the UCC, or by administrative agency regulations

When does the common law govern contracts?

Concurrent conditions

When each party's performance is conditioned on the other party's performance; exists only when the contract calls for parties to performs their duties simultaneously

If the person had capacity at the time the contract was formed; can occur when an incompetent person has a lucid interval (period during which their judgement is temporarily restored) or when person is on meds during agreement that allows them to be competent

When is a contract valid with regards to mental incompetence?

If a court has previously determined that a person is mentally incompetent and appointed a guardian, any contract made by that person is void (no contract exists)

When is a contract void with regards to mental incompetence?

If the person did not know he or she was entering into the contract or lacked the mental capacity to comprehend its nature, purpose, or consequences

When is a contract voidable with regards to mental incompetence?

When the party has conferred a benefit on someone else unnecessarily or as a result of misconduct or negligence; enrichment in these situations will be considered unjust

When is a party unable to invoke the principle of quasi contract?

If the amount can be reasonably foreseen and is reasonably related to the nonbreaching party's estimated actual losses; if the provision calls for a penalty (which is designed to penalize the breaching party instead of making the innocent party whole), it will not be enforced

When is a provision for liquidated damages enforceable?

When fraud or mutual mistake is present, when oral agreements are transferred incorrectly to a written contract, or in situations when covenants not to compete are unconscionable

When may courts order reformation?

Because of a mistake, misrepresentation, undue influence, or duress; these situations NEGATE CONSENT

When may voluntary consent be lacking?

Novation

When parties agree to release someone from a contract and exclusively accept someone else's performance instead; must completely discharge the prior party and establish a new valid contract; differs from an assignment (where the original party retains some rights and responsibilities to the contract like in a sublease)

Commercial impracticability

When something occurs that does not make performance impossible but makes the anticipated performance significantly more difficult or costly; must not have been foreseeable when contract made; not breach because circumstances were beyond parties' control

State law governs if the state's procedures are consistent with the E-Sign Act, the state does not give priority to one type of technology, and if the state law was enacted after the E-Sign Act and refers to it The E-Sign Act governs if the modifications are inconsistent with the E-Sign Act

When the UETA is enacted in a state with modifications:

State law governs

When the UETA is enacted in a state without modifications:

Express ratification

When the individual, upon reaching the age of majority, states orally or in writing that he or she intends to be bound by the contract

Impossibility of performance

When there is objective impossibility (no one could perform the contract), one or both parties are released from performing (one if other has already performed); must have been an event or hardship that was not foreseeable or expected at contract inception

When the party shows that monetary damages will not provide adequate relief

When will the nonbreaching party be granted an equitable remedy?

If promissory estoppel requirements are met, the promisor will be estopped (prevented) from asserting the lack of consideration as a defense

When will the promisor be estopped?

Voidable: if the person was sufficiently intoxicated to lack mental capacity (intoxicated beyond all reason and understanding); valid and enforceable: despite intoxication, the person understood the legal consequences of the agreement; GENERAL RULE: voluntary intoxication is not a defense

When, in the case of intoxication, will a contract be voidable or valid?

Offeror

Who dictates the proper terms of acceptance?

Economic damages are damages where you can point to a specific amount to say what was actually lost; punitive damages are not in this way tied to actual economic losses

Why are punitive damages non-economic damages?

To avoid the unjust enrichment of one party by another party who thought there was a contract, under circumstances where it would be inequitable not to provide relief

Why are quasi contracts imposed?

Litigation is expensive and time consuming, and court judgements are often difficult to enforce

Why do most parties settle lawsuits for damages prior to trial?

There are two promises: the underlying contract and the promise to hold the offer open; promises are only enforceable when there is consideration (because of the mutuality of obligation needed for contracts), so without the consideration there is no promise

Why do option contracts require separate consideration?

Adhesion contracts

Written exclusively by one party and presented to the other party on a take-it-or-leave-it basis; use standard forms (contain fine-print provisions that shift a risk ordinarily borne by one party to another) and give other party no opportunity to negotiate; must prove contract is unconscionable to avoid it