BSL 212 - Final Exam

Duress

A contract is VOID if a party to the contract is compelled by physical duress, such as the threat to inflict physical harm (e.g., "Sign this or I'll break your legs with my baseball bat."). Otherwise, a contract is VOIDABLE by the adversely affected party if the adversely affected party's assent is induced by an improper threat that leaves the adversely affected party no reasonable alternative. Restatement (Second) of Contracts § 175. A threat is improper if: 1) What is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property; 2) What is threatened is a criminal prosecution; 3) What is threatened is the use of civil process and the threat is made in bad faith; 4) The threat is a breach of the duty of good faith and fair dealing under a contract with the recipient; 5) The resulting exchange is not on fair terms, AND: - The threatened act would harm the recipient and would not significantly benefit the party making the threat; - The effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat; OR - What is threatened is otherwise a use of power for illegitimate ends.

Illegality

A contract is VOID if the consideration or performance under the contract is illegal (e.g., hiring someone to commit a crime). However, the contract may NOT be void if: 1) The plaintiff is justifiably ignorant of the facts that make the contract illegal and the defendant acted with knowledge of the illegality (plaintiff may still enforce the contract); 2) The contract is easily divisible into separate legal and illegal parts (legal parts of the contract may still be enforced); 3) One party is not as culpable as the other (i.e., the parties are not in pari delicto) (the less culpable party may recover restitution); If only the purpose behind the contract was illegal (not the consideration or performance) (e.g., a computer store sells a computer to a customer unaware that the customer is purchasing the computer for the purpose of downloading music illegally), the contract is VOIDABLE by a party who was: 1) Unaware of the illegal purpose; OR 2) Aware of the illegal purpose but did not facilitate the purpose AND the purpose does not involve grave social harm.

Unilateral Mistake

A contract is VOIDABLE at the adversely affected party's discretion if: 1) There is a mistake of fact existing at the time the deal is made; 2) The mistake relates to a basic assumption of the contract; 3) The mistake has a material impact on the deal; The adversely affected party did NOT assume the risk of mistake; AND 4) The mistake would make the contract unconscionable OR the other party had reason to know of the mistake or his fault caused the mistake.

Mutual Mistake

A contract is VOIDABLE at the adversely affected party's discretion if: 1) There is a mistake of fact existing at the time the deal is made; 2) The mistake relates to a basic assumption of the contract; 3) The mistake has a material impact on the deal; AND 4) The adversely affected party did NOT assume the risk of mistake. A party assumes the risk of mistake when: - The risk is allocated to him by agreement of the parties (e.g., "as is" contracts), OR - He is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient (i.e., "conscious ignorance". I n City of Everett v. Estate ofSumstad,an auctioneer sells a safe without knowledge as to the contents of a locked compartment in the safe. Later, the buyer discovers more than $32,000 of cash in the locked compartment. The courts bars the seller's recovery under a mistake theory, because the seller assumed the risk of mistake. The seller treated his limited knowledge of the contents of the locked compartment as sufficient when entering the sale (i.e., he acted with conscious ignorance). City of Everett v. Estate of Sumstad,631 P.2d 366 (Wash. 1981).

Undue Influence

A contract is VOIDABLE by the adversely affected party if the adversely affected party's assent is induced: 1) Due to to the adversely affected party's susceptibility to pressure; AND Courts often consider the following factors to determine a party's susceptibility to pressure: - The nature of the relationship between the parties (e.g., trustee-beneficiary, lawyer-client, doctor-patient, and financial adviser-client relationships usually demonstrate susceptibility to pressure due to the nature of the relationship); - The relative levels of sophistication and expertise between the parties; AND - Any physical, mental, emotional, or financial conditions that might make a party more susceptible to pressure. 2) The other side's application of excessive pressure. Courts often use the Odorizzi factors to determine the excessive nature of the pressure applied, which includes: - Discussion of the transaction at an unusual or inappropriate time; - Consummation of the transaction in an unusual place; - Insistent demand that the business be finished at once; - Extreme emphasis on untoward consequences of delay; - The use of multiple persuaders by the dominant side against a single servient party; - Absence of third party advisers to the servient party; AND - Statements that there is no time to consult financial advisers or attorneys.

Nonfraudulent Misrepresentation

A contract is VOIDABLE by the adversely affected party if: 1) A material misrepresentation of fact (generally not opinion); A misrepresentation is material if: It would be likely to induce a reasonable person to manifest his assent; OR If the maker knows that it would be likely to induce the recipient to do so. 2) Induced the adversely affected party to manifest assent; AND 3) The adversely affected party was justified in relying on the misrepresentation.

Unconscionability

A court may refuse to enforce a contract in whole or in part if the terms of the contract are so unfair and oppressive to one party that it shocks the conscience of the court. There are two types of unconscionability that courts consider: - Procedural unconscionability is present when there is a defect in the bargaining process (e.g., one side applies excessive pressure). - Substantive unconscionability is present when the terms of the deal are grossly unfair and one-sided in one party's favor. Some courts will only refuse to enforce a contract if both types of unconscionability are present. Other courts may refuse to enforce a contract if only one type is present. If a defense is successful, the contract will generally be void or voidable. A void contract is treated as though it never existed (i.e., neither party can enforce the contract). A voidable contract is enforceable until a party takes action to rescind the contract (i.e., the adversely affected party may be able to enforce the contract).

Incapacity by Mental Illness

A person incurs only VOIDABLE contractual duties by entering into a transaction if by reason of mental illness or defect, the individual is unable to: 1) Understand in a reasonable manner the nature and consequences of the transaction, OR 2) Act in a reasonable manner in relation to the transaction AND the other party has reason to know of his condition. If the mentally ill party wishes to avoid liability under the contract, he may disaffirm the contract when lucid or by his legal representative. However, a party to a contract who is mentally ill CANNOT disaffirm the contract if: 1) The contract was made on fair terms; AND 2) The other party is without knowledge of the mental illness or defect (e.g., the mentally ill party is in a lucid state at the time of contracting).

Incapacity by Intoxication

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, the individual is unable to: 1) Understand in a reasonable manner the nature and consequences of the transaction, OR 2) Act in a reasonable manner in relation to the transaction. If the intoxicated party wishes to avoid liability under the contract, he must act promptly upon recovery to disaffirm the contract and is required to return any value received, if possible.

Satisfaction by a Signed Writing

A writing will satisfy the statute of frauds if the writing: 1) Is signed by the party against whom enforcement is sought (i.e., the party who is challenging the enforceability of the contract -- usually the defendant); 2) Shows that a contract was formed; AND 3) Includes the requisite terms. Under the common law, the requisite terms include: parties, subject matter, quantity, and price. Under the UCC, the requisite terms include: parties, subject matter, and quantity.

Statute of Frauds

An otherwise valid contract is unenforceable if the contract: Triggers the statute of frauds; AND Fails to satisfy the statute of frauds.

Formation of a Contract

Checklist: "My Cats do Sneak" (MCDS) - Mutual Assent - Consideration - Defense to Promotion - Statute of Frauds

Consideration

Consideration involves a transfer of legal value in a bargained-for exchange between two parties. Consideration is present if: 1) The promisee incurs a legal detriment OR the promisor receives a legal benefit; AND Notably, most courts only focus on whether the promisee incurred a legal detriment, irrespective of a benefit to the promisor. A legal detriment generally consists of: (1) promising to do something the party has no prior legal duty to do; (2) performing an action that the party is not otherwise obligated to undertake; or (3) refraining from or promising to refrain from exercising a legal right which the party is otherwise entitled to exercise. Promising not to sue (settlement of a legal claim) will act as a legal detriment so long as the party promising not to sue has an honest and good faith belief in the validity of the claim. 2) The promise induces the detriment AND the detriment induces the promise. A bargained-for exchange requires reciprocal inducement - that the promise induces the promisee to incur his legal detriment and that the legal detriment induces the promisor to make his promise.

Third-Party Beneficiary Contracts

Definition a third-party beneficiary contract is one in which one party promises to render a performance to a third person (the beneficiary) Intended Beneficiaries third parties intended by the two contracting parties to receive a benefit from their contract Donee Beneficiary a third party intended to receive a benefit from the contract as a gift Creditor Beneficiary a third person intended to receive a benefit from the contract to satisfy a legal duty owed to him Rights of Intended Beneficiary an intended donee beneficiary may enforce the contract against the promisor; an intended creditor beneficiary may enforce the contract against either or both the promisor and the promisee Vesting of Rights if the beneficiary's rights vest, the promisor and promisee may not thereafter vary or discharge these vested rights Defenses Against Beneficiary in an action by the intended beneficiary to enforce the promise, the promisor may assert any defense that would be available to her if the action had been brought by the promisee Incidental Beneficiary third party whom the two parties to the contract have no intention of benefiting by their contract and who acquires no rights under the contract

Delegation of Duties

Definition of Delegation transfer to a third party of a contractual obligation - Delegator party delegating his duty to a third party - Delegatee third party to whom the delegator's duty is delegated - Obligee party to whom a duty of performance is owed by the delegator and delegate Delegable Duties most contract duties may be delegated except - Duties that are personal - Duties that are expressly nondelegable - Duties whose delegation is prohibited by statute or public policy Duties of the Parties - Delegation delegator is still bound to perform original obligation - Novation Contract a substituted contract to which the promisee is a party, which substitutes a new promisor for an existing promisor, who is consequently no longer liable on the original contract and is not liable as a delegator

Quasi-Contract

Does a quasi-contract exist? Elements 1) P confers a benefit to D 2) D appreciates the benefit Means that "this is almost a contract", but wasn't negotiated. It has to be something that indicates it's something of value to them. Someone hires someone to paint a house. They paint the wrong house. Person doesn't want to pay. If they wanted their house painted, they would need to pay. If they were home they would need to pay. 3) Justice requires compensation

Irrevocable Offers

Generally, the offeror is free to revoke an offer at any time prior to acceptance. However, there are four main types of offers that are irrevocable: 1) Option Contracts; An offer is irrevocable if consideration is given in exchange for a promise to keep the offer open (e.g., "I promise not revoke this offer for one week if you pay me an additional $100 to keep the offer open."). 2) UCC Firm Offers; Under UCC § 2-205, an offer is irrevocable if a MERCHANT makes a firm offer to buy or sell goods, provided that the offer: (1) is in writing; (2) contains an explicit promise to not revoke the offer; and (3) is signed by the merchant. A firm offer will last either as long as stated in the offer or for a reasonable amount of time not to exceed 90 days. The UCC defines a merchant as "a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction." (UCC § 2-104). 3) Offeree Starts Performance on a Unilateral Offer; AND A unilateral offer to contract is irrevocable once the offeree starts performance. A unilateral offer arises from a promise that requests acceptance by performance, as opposed to a bilateral offer, which arises from a promise that invites acceptance by a return promise or does not specify any particular means of acceptance. 4) Detrimental Reliance. An offer is irrevocable if the offeree reasonably and detrimentally relies on the offer in a foreseeable manner.

Examples of Invalid Consideration

Gift Promises are NOT consideration. E.g., A promises to give B his truck for free. Here, B incurs no legal detriment and A's promise to give B his truck is not induced by any action or forbearance from B. This is a gift promise, not bargained-for consideration. Conditional gifts are NOT consideration. E.g., A promises to give B his truck if B will drive 30 minutes away to pick the truck up from A's house. Here, A's promise to give B his truck is not induced by B coming to pick the truck up. Thus, A is not bargaining for B to come. This is a conditional gift, not bargained-for consideration. A preexisting legal duty is NOT consideration. E.g., A promises to pay B $100 if B refrains from smoking crack-cocaine for 6 months. Here, B already has a preexisting legal duty imposed by law to refrain from smoking crack-cocaine. Thus, B incurs no legal detriment, which means consideration is not present. Notably, if A promised to pay B $100 if B refrained from smoking tobacco for 6 months, then consideration would be present (assuming B is 18 years of age or older and can legally smoke tobacco). Refraining from or promising to refrain from exercising a legal right which the party is otherwise entitled to exercise constitutes a legal detriment. Past consideration is NOT consideration. E.g., A's truck catches fire as A is demonstrating the truck's safety features to B. After the fire erupts, B rushes over and extinguishes the flames saving A's life. Grateful, A promises to pay B $100 for the rescue. Here, A's promise to pay B is induced by an action that B already completed. This is past consideration, not bargained-for consideration. A pretense of consideration or sham consideration is NOT consideration. E.g., A and B are cousins. A wishes to give B his truck that is valued at $10,000 as a gift for B's birthday. Attempting to form an enforceable contract, A "sells" B his truck for $1 solely to meet the consideration requirement. Here, A is not induced to give B his truck for the $1. This is merely a pretense of consideration, not bargained-for consideration. An illusory promise is NOT consideration. An illusory promise occurs when the promisor fails to clearly commit to the deal. E.g., A promises to buy B's truck if "he feels like it." Here, A is not committing to the deal. This is an illusory promise, not bargained-for consideration.

Alternative Theories

If a traditional, enforceable contract was NOT formed, are there any alternative theories of recovery available to the plaintiff to enforce the agreement or promise? Checklsit "Pouncing Quells Mice" - Promissory Estoppel - Quasi-Contract - Moral Obligation + Subsequent Promise

Remedies

If a traditional, enforceable contract was formed and one party failed to perform their contractual obligations under the contract, what remedies are available to the plaintiff? Monetary Damages? Equitable Relief? Mitigation of Damages? If an alternative theory of recovery is satisfied, what remedies are available to the plaintiff?

Performance

If a traditional, enforceable contract was formed, did the parties perform their contractual obligations under the contract? Substantial Performance or Perfect Tender? Parol Evidence Rule? Warranties? Conditions? Excuses? Anticipatory Repudiation?

Termination of the Offer

If a valid offer is terminated at any time before acceptance, the offer is invalidated. It cannot be accepted or revived unless a new offer is made. An offer is terminated if any of the following occur at any time BEFORE acceptance: 1) The offeror revokes the offer by express communication to the offeree (unless the offer is irrevocable - see below); 2) The offeree learns that the offeror has taken an action that is absolutely inconsistent with a continuing ability to contract; 3) The offeree rejects the offer by express communication to the offeror; 4) The offeree expressly communicates a counteroffer to the offeror; 5) The offeror dies or otherwise becomes incapacitated; 6) A reasonable amount of time passes; OR 7) Operation of law (i.e., supervening illegality or destruction of property).

The Mailbox Rule

If an offer is terminated at any time before acceptance, the offer is invalidated. It cannot be accepted or revived unless a new offer is made. Under the mailbox rule, an ACCEPTANCE that is sent by mail, email, or fax is valid at the moment of dispatch (NOT when the letter is received), UNLESS: 1) The offeree-sender uses the wrong address or has improper postage (e.g., forgets to put a stamp on the envelope); 2) The offeror stipulates that the acceptance is valid upon receipt; 3) An option contract is involved; 4) The offeree-sender sends a termination letter BEFORE the acceptance letter (e.g., a counteroffer or rejection letter); OR 5) The offeror detrimentally relies on a termination BEFORE he receives the acceptance letter. If an exception applies, then the acceptance becomes effective at the moment the offeror receives the acceptance. The mailbox rule ONLY applies to ACCEPTANCE letters. The mailbox rules does NOT apply to any other type of communication that is sent by mail, email, or fax (e.g., revocation, rejection, or counteroffer letters).

Misunderstanding

If the agreement includes a term that has multiple possible meanings, the result depends on the parties' knowledge of the misunderstanding: If NEITHER party knows or should know of the misunderstanding, then no contract exists UNLESS both parties intended the same meaning. If BOTH parties know or should know of the misunderstanding, then no contract exists UNLESS both parties intended the same meaning. If ONE party knows or should know of the misunderstanding, then a binding contract exists based on the ignorant party's reasonable interpretation of the ambiguous terms.

Complete Integration

If the writing completely expresses all of the terms of the parties' agreement, then it is a complete integration. Absent an exception, all other expressions or statements, written or oral, made prior to the writing, as well as any oral expressions made contemporaneously with the writing, are inadmissible. A merger clause recites that the agreement is the complete agreement between the parties. This is usually strong evidence that the writing is a complete integration.

Partial Integration

If the writing sets forth the parties' agreement about some terms, but not all the terms, then it is a partial integration. Other expressions or statements, written or oral, made prior to the writing, as well as any oral expressions made contemporaneously with the writing, are admissible to SUPPLEMENT the writing so long as the evidence does NOT contradict the terms of the writing.

Promissory Estoppel

Is promissory estoppel available? Even if a traditional, enforceable contract does not exist between the parties, a plaintiff may still be entitled to relief under the alternative theory of promissory estoppel. Under promissory estoppel, a promise is binding and enforceable if: 1) The promisor should reasonably expect the promise to induce action or forbearance from the promisee; 2) The promise does induce such action or forbearance; AND 3) Injustice can be avoided only by enforcement of the promise.

Satisfaction of the Statute of Frauds

Once it is determined that the statute of frauds is triggered, the next issue is whether the statute of frauds has been satisfied. There are two main ways to satisfy the statute of frauds: By a signed writing; AND/OR By performance.

Satisfaction by Performance

Performance of oral agreements can satisfy the statute of frauds under the following circumstances. Common Law Services Contracts under the One-Year Provision Under the common law, FULL performance of a services contract by either side satisfies the statute of frauds. Part performance does NOT satisfy the statute of frauds. Contracts to Transfer, Receive, or Create an Interest in Real Estate In most jurisdictions, the seller in a real estate contract can satisfy the statute of frauds by FULL performance (i.e., conveying the land to the buyer). In most jurisdictions, the buyer in a real estate contract can satisfy the statute of frauds by performance if any two of the following three are met: (1) the buyer takes possession of the property; (2) the buyer makes payment in full or part; AND/OR (3) the buyer makes substantial improvements to the land. Notably, under a lease agreement, a tenant typically takes possession, makes payment, and might make minor improvements to the property. Thus, to satisfy the statute of frauds, the possession, payment, and/or improvements must be substantial enough to show that the transaction is more than a lease agreement. If the buyer satisfies the statute of frauds by performance, his recovery under the contract is limited to equitable relief (i.e., specific performance), not monetary damages. UCC Goods Contracts for $500 or More ("P.A.W.S.") (P) Performance Under UCC § 2-201(3)(c), the statute of frauds is satisfied for the quantity of goods for which payment has been made and accepted or which have been received and accepted (the contract is not enforceable under this provision beyond the quantity of goods for which payment has been made and accepted or which have been received and accepted). (A) Admission in Court Under UCC § 2-201(3)(b), the statute of frauds is satisfied if the party against whom enforcement is sought admits in his pleading, testimony, or otherwise in court that a contract for sale was made (the contract is not enforceable under this provision beyond the quantity of goods admitted). (W) Written Confirmation Between Merchants Under UCC § 2-201(2), the statute of frauds is satisfied if: After an oral agreement between merchants (both parties must be merchants); Either party sends a signed, written confirmation of the oral contract (must be signed by the sender); AND The written confirmation is received by the other party to the oral agreement; UNLESS The party receiving the written confirmation gives a written notice of objection within 10 days after receipt of the written confirmation. (S) Specially Manufactured Goods Under UCC § 2-201(3)(a), the statute of frauds is satisfied when a seller makes a "substantial beginning" toward manufacture of custom goods that are to be specially made for the buyer and are not suitable for sale to others in the ordinary course of the seller's business under circumstances that reasonably indicate that the goods are for the buyer

Contracts that Trigger the Statute of Frauds

The following contracts trigger the statute of frauds ("M.O.U.S.E.R.") (M) Marriage A contract made in consideration of marriage triggers the statute of frauds. However, the marriage contract itself (i.e., the promise between two people to marry each other) does NOT trigger the statute of frauds. (O) One-Year Provision A contract that by its terms CANNOT be performed within one year from the day after its formation triggers the statute of frauds. The one-year provision is interpreted very narrowly. There generally must be no possible way that the contract could be performed within one year from formation. E.g., A hires B to give him contract law lessons for the rest of A's life. Since A could die within one year from formation, the statute of frauds is not triggered under the one-year provision. E.g., A hires B to build a full-scale replica of the Egyptian pyramids. Here, even though it is unlikely, it is possible that B could build the replica within one year from formation. Therefore, the statute of frauds is not triggered under the one-year provision. (U) UCC Goods Contracts for $500 or More A contract for the purchase or sale of goods for $500 or more triggers the statute of frauds. (S) Suretyship A suretyship contract generally triggers the statute of frauds. A suretyship contract is a three-party agreement where the surety promises an obligee to pay the principal's debt if the principal fails to pay the obligee (usually a suretyship contract is in the context of one family member wishing to help another family member get approved for some type of loan). Main Purpose Exception: However, If the surety's main purpose in agreeing to pay the principal's debt is for the surety's own economic benefit, then the statute of frauds is NOT triggered. (E) Executor/Administrator of an Estate Creditors of the estate have priority to the assets of the estate over beneficiaries. The executor or administrator of a will is responsible to use the estate's assets to pay off the estate's debts to creditors before distributing any assets to beneficiaries. However, if an executor or administrator of an estate promises to personally pay a debt that the estate owes to a creditor, the statute of frauds is triggered. This is very similar to a suretyship contract. (R) Real Estate Contracts Any agreement or promise to transfer, receive, or create an interest in real estate triggers the statute of frauds. Notably, agreements to build structures on land (i.e., construction projects) do not transfer, receive, or create an interest in real estate. Therefore, these types of construction project contracts do not trigger the statute of frauds unless they fall under the one-year provision.

Expectation Damages

The most common type of remedy available for breach of contract is an award for money damages based on the plaintiff's lost expectations. Courts use the following formula to calculate the monetary value available to the plaintiff for expectation damages: Expectation Damages = (Loss in Value) + (Other Loss) - (Cost Avoided) - (Loss Avoided)

Parol Evidence Rule Exceptions

The parol evidence rule does NOT apply if any of the following exceptions exist: Formation Defects Extrinsic evidence may be offered to establish a defense to the formation or enforcement of a contract (e.g., incapacity, mistake, duress, lack of consideration, etc.). Condition Precedents Extrinsic evidence may be offered if a party asserts that there was an oral agreement that the written contract would not become effective until a condition occurred. Ambiguity and Interpretation Extrinsic evidence may be offered for the purpose of interpreting or clarifying an ambiguity in the agreement. Separate Deals Extrinsic evidence may be offered if it represents a distinct and separate contract. NOTE. The parol evidence rule does NOT apply to agreements made between the parties AFTER the the execution of the writing. Agreements made after the execution of the writing would be analyzed as contract modifications, and do NOT trigger the parol evidence rule

Acceptance of Offer

To accept the offer, the offeree must: 1) Manifest an objective willingness to enter into the agreement; Acceptance of the offer is governed by an objective test, which means that outward appearances of words and actions are determinative - not hidden intentions (e.g., a person accepts an offer with his fingers crossed behind his back). 2) Accept the offer according to the rules established by the offeror who is master of the offer; AND The offeree must accept the offer according to the terms and conditions established by the offeror (e.g., offeror can require offeree to accept by sending a signed writing within a certain time period). A unilateral offer arises from a promise that requests acceptance by an action or performance, as opposed to a bilateral offer, which arises from a promise that invites acceptance by a return promise or does not specify any particular means of acceptance. For bilateral offers, the start of performance manifests acceptance. For unilateral offers, the start of performance makes the offer irrevocable - the offer is only accepted once performance is complete. 3) Have a power of acceptance. To form a valid offer, the offeror must create a power of acceptance in the offeree. The offeror creates a power of acceptance when the offeree can simply say, "I accept" and know that he has concluded the deal. Generally, an offer must be directed to a specific offeree. However, there is a limited exception for contest offers and reward offers that promise something to anyone who accomplishes a certain task (e.g., posted sign offers a cash reward for finding lost puppy). To validly accept an offer, the offeror must have conferred the power of acceptance to the offeree who is attempting to accept. To accept a contest or reward offer, the offeree must be aware that the contest or reward offer exists.

Mutual Assent

To form a valid offer, the offeror must: 1) Manifest an objective willingness to enter into the agreement; The offer is governed by an objective test, which means that outward appearances of words and actions are determinative - not hidden intentions (e.g., a person makes an offer with his fingers crossed behind his back). 2) Create a power of acceptance in the offeree; AND The offeror creates a power of acceptance when the offeree can simply say, "I accept" and know that he has concluded the deal. Generally, an offer must be directed to a specific offeree. However, there is a limited exception for contest offers and reward offers that promise something to anyone who accomplishes a certain task (e.g., posted sign offers a cash reward for finding lost cat). An advertisement is usually considered an invitation to deal rather than an offer. This is because an advertisement usually fails to confer a power of acceptance to the other side. However, advertisements that are very specific and leave nothing open to negotiation may constitute offers. Key word: "As is" 3) Specify all necessary terms of the agreement. Under the common law, all essential terms must be specified in the offer, which includes: parties, subject, quantity, and price. Under the UCC, the price term is not required in the offer. (UCC § 2-305). The only required terms under the UCC are: parties, subject, and quantity. Requirements and output contracts are valid under the UCC even though they do not specify an exact quantity. In a requirement contract, the seller agrees to sell as much as the buyer would require. In an output contract, the seller agrees to sell his entire production to the buyer.

Incapacity by Infacy

Unless a statute provides otherwise, a person has the capacity to incur only VOIDABLE contractual duties until the beginning of the day before the person turns 18. In other words, if a minor enters into a contract with an adult, the minor may choose to either: 1) Disaffirm (rescind) the contract and avoid liability under it; OR If the minor chooses to disaffirm the contract, the minor must return anything that he received under the contract that still remains in his possession at the time of disaffirmance (there is no obligation to return anything that has been negligently squandered or destroyed). 2) Affirm (enforce) the contract and hold the adult party liable under it. A minor may affirm the contract expressly or by failing to disaffirm the contract within a reasonable amount of time after reaching majority thereby ratifying the contract.

Parol Evidence Rule

When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an integration. If the writing is not an integration (e.g., non-final expressions such as tentative drafts), the parol evidence rule does NOT apply. Otherwise, an integration may be complete or partial.

Deontology

You are making decisions that uphold your duty of what is considered ethically correct. Regardless of the outcome, you are thinking about how to make decisions ethically.

Express Contract

an agreement that is stated in words either orally or in writing

Employment Contracts

an employment contract prohibiting an employee from competing with his employer for a reasonable period following termination is enforceable provided the restriction is necessary to protect legitimate interests of the employer

Subject Matter Jurisdiction

authority of a court to decide a particular kind of case Court must have SMJ to hear a case before it: 1) Federal Question Jurisdiction If the P alleges a claim that arises under federal law, the federal court has FQJ. Will hear and decide the case. 2) Diversity Jurisdiction 1) There has to be complete diversity between the parties If every citizenship on D is different than every citizenship on P, you have complete diversity Citizenship Individuals Citizens in the state in which they are domiciled. Where you reside with intent to remain indefinitely. Corporations Dual citizenship 1) State/Country where its principal place of business is located 2) State/Country where it's incorporated. BOTH OF THESE NEED TO BE DIFF THAN OTHER PARTIES FOR COMPLETE CITIZENSHIP AND 2) The amount in controversy exceeds $75,000 If there are multiple claims, you can combine them, but only if you have one P suing one D. If there are multiple Ds, you only can combine if they are jointly liable. If you have more than one P, then you likely cannot combine.

Concurrent Federal Jurisdiction

authority of more than one court to hear the same case; state and federal courts have concurrent jurisdiction over (1) federal question cases (cases arising under the Constitution, statutes, or treaties of the United States) which do not involve exclusive federal jurisdiction and (2) diversity of citizenship cases involving more than $75,000

Bilateral Contract

contract in which both parties exchange promises

Unilateral Contract

contract in which only one party makes a promise

Implied in Fact Contract

contract in which the agreement of the parties is inferred from their conduct

Usury Statutes

establish a maximum rate of interest

Express Warranty

explicitly made contractual promise regarding contract rights transferred

Exclusive Federal Jurisdiction

federal courts have sole jurisdiction over federal crimes, bankruptcy, antitrust, patent, trademark, copyright, and other special cases

Utilitarianism

idea that the goal of society should be to bring about the greatest happiness for the greatest number of people you don't care about process along as the outcome brings happiness to society.

Requirements of an Assignment

include intent but not consideration Revocability of Assignment when the assignee gives consideration, the assignor may not revoke the assignment without the assignee's consent Partial Assignment transfer of a portion of contractual rights to one or more assignees

Regulatory License

licensing statute that is intended to protect the public against unqualified persons; an unlicensed person may not recover for services he has performed Purpose is to protect the public Renders the contract void if license isn't present

Revenue License

licensing statute that seeks to raise money; an unlicensed person may recover for services he has performed Purpose is to generate revenue (tax) Doesn't render the contract void, could get in trouble with the state though

Assignability

most contract rights are assignable except Assignments that materially increase the duty, risk, or burden upon the obligor Assignments of personal rights Assignments expressly forbidden by the contract Assignments prohibited by law

Implied Warranties

obligation imposed by law upon the assignor of a contract right

Fraud in the inducement

occurs when a fraudulent misrepresentation is used to induce another to enter a contract. Such contracts are VOIDABLE by the adversely affected party if: 1) A fraudulent misrepresentation of fact (generally not opinion); A misrepresentation is fraudulent if it is made: - Knowingly or recklessly without knowledge of its truth; AND - With the intent to induce assent. - A misrepresentation of opinion can form the basis of recovery if an "expert" expresses a high opinion when his opinion is actually low. In Vokes v. Arthur Murray, Inc., a dance studio's false representations about a customer's skill and potential as a dancer provided grounds for rescission of her agreement to pay for more than 2,000 hours of dance instruction. Vokes v. Arthur Murray, Inc., 212 So. 2d 906 (Fla. Dist. Ct. App. 1968). 2) Induced the adversely affected party to manifest assent; AND 3) The adversely affected party was justified in relying on the misrepresentation. A person is not justified in relying on puffery. Puffery is a promotional statement or claim that no reasonable person would take literally (e.g., "Red Bull gives you wings.")

Fraud in the factum

occurs when a person tricks someone else into signing a contract by making it appear that he or she is signing a completely different document. In such cases, the apparent contract is VOID.

Assignor

party making an assignment

Obligor

party owing a duty to the assignor under the original contract

Obligee

party to whom a duty of performance is owed under a contract

Assignee

party to whom contract rights are assigned

Gambling Statutes

prohibit wagers, which are agreements that one party will win and the other party will lose depending on the outcome of an event in which their only interest is the gain or loss

Reliance Damages

reliance damages usually consist of nothing more than the expenses that the plaintiff incurred in reliance on the contract

Exclusive State Jurisdiction

state courts have exclusive jurisdiction over all matters to which the federal judicial power does not reach

Rights of Assignee

the assignee stands in the shoes of the assignor Defenses of Obligor may be asserted against the assignee Notice is not required but is advisable

Exculpatory Clauses

the courts generally disapprove of contractual provisions excusing a party from liability for his own tortious conduct Excuses one party for liability for damages to another party. Only Enforceable If: 1) Clear & Conspicuous Can't be hidden, has to be very obvious in contract. Doesn't leave any room for interpretation. Clearly needs to indicate that people are accepting responsibility for their own injuries. Only avoids liability for negligent conduct (not for reckless or intentional conduct) Negligent: acting separate from what a reasonable person would have done. Ex: if someone is at Whole Foods and they put a gallon of milk in their cart, it spills, and someone slips on it, if it is after a certain amount of time then whole foods is negligent. If they are aware of it, it's negligent. Reckless: Acting with substantial awareness of harm happening. If you were doing target practice and shooting at a stop sign, a bus pulls up, and you try to shoot through the windows of the bus to hit the stop sign. Intentional: killing someone.

Successive Assignments of the Same Right

the majority rule is that the first assignee in point of time prevails over later assignees; minority rule is that the first assignee to notify the obligor prevails

Sale of a Business

the promise by the seller of a business not to compete in that particular business in a reasonable geographic area for a reasonable period of time is enforceable

Definition of Assignment

voluntary transfer to a third party of the rights arising from a contract so that the assignor's right to performance is extinguished

Rule Utilitarianism

which action among various options will deliver the greatest good to society?