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1)
UContracts are unenforceable if parties have actually consented to the contract but their assent is not genuine. •Necessary to create an enforceable contract. •Determined by relevant facts surrounding negotiation and formation of the contract. •May be manifested in any manner sufficient to show agreement, including express words or conduct of the parties.
 
Genuiness of assent
2)
UVoluntary assent by the parties is necessary to create an enforceable contract. uAssent is determined by the relevant facts surrounding the negotiation and formation of the contract. uAssent may be manifested in any manner sufficient to show agreement, including express words or conduct of the parties.
 
3)
Genuineness of assent May be lacking due to
 
€Mistake –Misrepresentation –Duress –Undue Influence
4)
Uoccurs where one or both of the parties have an erroneous belief about the subject matter, value, or some other aspect of the contract.
 
A mistake
5)
UMistakes may be either:
 
Unilateral or mutual
6)
€Law may permit _______ of some contracts made in mistake.
 
Rescission - an action to undo a contract
7)
€When one party is mistaken about material fact regarding subject matter of the contract. •Generally, the mistaken party will not be permitted to rescind the contract. •Contract will be enforced.
 
Unilateral mistake
8)
Relief for a unilateral mistake will be granted if: –Other party knew or should have known that a mistake was made. –Mistake was clerical or mathematical error that was not the result of gross negligence. Mistake is so serious that enforcing the contract would be unconscionable.
 
9)
NA mistake made by both parties concerning a material fact that is important to the subject matter of the contract. nThe contract may be rescinded on the ground that no contract has been formed because there has been no “meeting of the minds” between the parties.
 
Mutual mistake of fact
10)
€Both parties know the object of the contract, but are mistaken as to its value. •E.g., seller agrees to sell old painting for $100, and it turns out that collectors highly value such paintings.
 
Mutual mistake of value –Contract is enforceable. •No relief for party that got “worst” of the deal. Contrary rule would open every contract to such disputes.
11)
UAn assertion is made that is not in accord with the facts.
 
Misrepresentation
12)
UOccurs when one person consciously decides to induce another person to rely on a misrepresentation. uAlso called fraud.
 
Intentional misrepresentation
13)
UOccurs where one party threatens to do a wrongful act unless the other party enters into a contract. nThe assent is not voluntary if one party has been forced into making the contract. nSuch contracts are not enforceable against the innocent party.
 
Duress
14)
Fraud that occurs if a person is deceived as the nature of his or her act and does not know what he or she is signing. Also known as fraud in the factum. CONTACTS ARE VOID.
 
Fraud in the inception also called fraud in the factum
15)
Fraud that occurs when the party knows what he or she is signing but has been fraudulently induced to enter into the contractCONTRACTS ARE VOIDABLE by innocent party
 
Farud in the inducement
16)
Fraud that occurs when one party takes specific action to conceal a material fact from another party.
 
Fraud by concealment
17)
When nondisclosure would cause bodily injury or death, there is a fiduciary relationship between the contracting parties (a relationship of trust and confidence,) or federal and state statutes require disclosure.
 
Silence as misrepresentation
18)
Not actionable as fraud. The innocent party usually cannot rescind the contract because each party to a contract is assumed to know the law that applies to the transaction.
 
Misrepresentation of law
19)
One major exception to the rule of misrepresentation of LAW:The misrepresentation will be allowed as grounds for the rescission of the contract if one party to the contract is a professional who should know what the law is and intentionally misrepresents the law to a less sophisticated contracting party.
 
20)
€Person makes statement of fact that he or she honestly and reasonably believes to be true, even though it is not. •Innocent misrepresentation is not fraud. •The aggrieved party may rescind the contract but may not sue for damages.
 
Innocent misrepresentation
21)
€Occurs where one person: –Takes advantage of another person’s mental, emotional, or physical weakness, and –Unduly persuades that person to enter into a contract. Contract voidable by the innocent party
 
Undue influence
22)
The following elements must be shown for undue influence: •Fiduciary or confidential relationship existed between the parties. •E.g., lawyer-client, psychiatrist-patient, caregiver-elderly patient. •Dominant party unduly used his or her influence to persuade the servient party to enter into a contract.
 
23)
State statute that requires certain types of contracts to be in writing in order to be enforceable. Intended to ensure that the terms of important contracts are not forgotten, misunderstood, or fabricated.
 
Statute of Frauds
24)
Today, every US state has enacted a statute of frauds that requires that types of contracts to be in WRITING.
 
25)
€Contracts that must be in writing....Contracts involving interests in land •Contracts that by their own terms cannot possibly be performed within one year •Collateral contracts where a person promises to answer for the debt of another •Promises made in consideration of marriage (i.e. a prenuptial agreement)
 
26)
€CONT...Contracts for the sale of goods for more than $500 •Real estate agents’ contracts •Agents’ contracts where the underlying contract must be in writing—equal dignity rule •Promises to write a will •Contracts to pay debts barred by the statute of limitations or discharged in bankruptcy •Contracts to pay compensation for services rendered in negotiating the purchase of a business •Finders fee contracts
 
27)
If an oral contract that should have been in writing under the Statute of Frauds is already executed, neither party can seek to rescind the contract on the ground of noncompliance with the statute of frauds.
 
28)
€Any contract that transfers an ownership interest in real property must be in writing under the Statute of Frauds to be enforceable.
 
Contracts involving interests in Real property
29)
€Any contract that transfers an ownership interest in real property must be in writing under the Statute of Frauds to be enforceable.
 
Contracts involving interests in Real property
30)
€Other contracts that transfer an ownership interest in land must be in writing under the Statute of Frauds. •E.g., –Mortgages –Leases –Life Estates –Easements
 
31)
€Court may order an oral contract to be specifically performed if it has been partially performed and performance is necessary to avoid injustice. See slides 29 and 30 •Applies if purchaser paid part of price and took possession or made improvements to land, so that parties cannot be returned to status quo. (14.1 and 14.2)
 
Part performance exception
32)
Most statut eof frauds require leases for a term over ___ ____ to be in writing
 
One year
33)
The person has an interest in the real property for the persons lifetime, and the interest will be transferred to another party on that person's death.
 
Life estates, must be in writing
34)
A given or required right to use another person's land without owning or leasing it. May be express or impliedExpress ____ must be in writing to be enforceable, while implied ___ need not be written
 
Easement
35)
€Executory contract that cannot by its own terms be performed within one year of its formation must be in writing. –E.g., six month employment contract. •Contract may be oral if performance of contract is possible within the one-year period. –E.g., lifetime employment contract. (14.3)
 
One year rule
36)
€contract between the guarantor and the original creditor. •One person agrees to answer for the debts or duties of another person.
 
Guaranty contract, –Must be in writing unless main purpose is to provide pecuniary benefit to guarantor. –E.g., company promises to pay debts of supplier, to keep supplier in business so that it can obtain supplies for its own operations. (14.4 and 14.5)
37)
An exception to the statute of frauds which states that if the main purpose of a transaction and an oral collateral contract is to provide precuniary benefit to the guarantor, the collateral contract does not have to be in writing to be enforced.Also known as the leading object exception.
 
The main purpose exception
38)
An exception to the statute of frauds which states that if the main purpose of a transaction and an oral collateral contract is to provide precuniary (financial) benefit to the guarantor, the collateral contract does not have to be in writing to be enforced.Also known as the leading object exception.
 
The main purpose exception
39)
Agents’ contracts to sell real property must be in writing to be enforceable.
 
Equal dignity rule
40)
€Prenuptial agreements must be in writing to be enforceable.
 
41)
An equitbale doctrine that allows the court to order an oral contract for the sale of land or transfer of another interest in real property to be specifically performed if it has been partially performed and performance is necessary to avoid injustice.
 
Part Performance
42)
€A written contract does not have to be drafted by a lawyer or formally typed to be legally binding. •Generally, law only requires a writing containing the essential terms of the parties’ agreement. –E.g., handwritten agreement on scrap paper may satisfy writing requirement.
 
Formality of writing
43)
€Statute of Frauds and the UCC require the written contract, whatever its form, to be signed by the party against whom enforcement is sought. –Anywhere on the writing. –Stamp or mark (X) suffices if party intended to sign. –Signature of person who is enforcing the contract is not necessary. (14.8)
 
Required signature
44)
€Entire writing does not have to appear in one document to be an enforceable contract. –Incorporation by reference. –Implied integration –E.g., several documents stapled together as contract.
 
Integration of several writings
45)
Integration made by express reference in one document that refers to and incorporates another document within it.
 
Incorporation by reference
46)
€are given their usual meaning according to the dictionary.
 
Ordinary words
47)
€are given their technical meaning unless a different meaning is clearly intended.
 
Technical words
48)
If the parties have not defined the words and terms of a contract, the courts apply the following standards of interpretation: •Ordinary words are given their usual meaning according to the dictionary. •Technical words are given their technical meaning unless a different meaning is clearly intended.
 
Interpreting contract words and terms
49)
€presumed to qualify general terms.
 
Specific terms
50)
€Trade usage incorporated in contract unless otherwise stated.
 
51)
€Where a preprinted form contract is used: –Typed words prevail over preprinted words. –Handwritten words prevail over both preprinted and typed words.
 
52)
€Ambiguity resolved against _____ of contract.
 
Drafter
53)
€Any oral or written words outside the four corners of the written contract.
 
Parol evidence
54)
A rule that says if a written contract is complete and final statement of the parties' agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are in addition to the term of the written contract are inadmissable in court regarding a dispute over the contract.
 
Parol evidence rule
55)
€A clause in a contract that stipulates that it is a complete integration and the exclusive expression of the parties’ agreement. •Parol evidence may not be introduced to explain, alter, contradict, or add to the terms of the contract.
 
Merger, or integration clause
56)
€Equitable doctrine that permits enforcement of oral contracts that should have been in writing. •Where this doctrine applies, the promisor is estopped (prevented) from raising the Statute of Frauds as a defense to the enforcement of the oral contract.
 
Promissory estoppel (equity)
57)
Oral promise is enforceable against promisor if: •The promise induces action or forbearance of action by another. •The reliance on the oral promise was foreseeable. •Injustice can be avoided only by enforcing the oral promise.
 
58)
Parol evidence may be admitted in court if it: Shows that a contract is void or voidable.–e.g., evidence that the contract was induced by fraud, misrepresentation, duress, undue influence, or mistake. Explains ambiguous language. Concerns a prior course of dealing or course of performance
 
59)
€Generally only the contracting parties have any rights or obligations under the contract. –Promisor—promisee as in promise –Obligor—obligee as in obligation •The contracting parties are in privity of contract.
 
60)
€Generally only the contracting parties have any rights or obligations under the contract. –Promisor—promisee as in promise –Obligor—obligee as in obligation •The contracting parties are in privity of contract.
 
61)
Thirdparties, general rule, do not acquire any rights under other people’s contracts. Exceptions: Assignees to whom rights subsequently are transferred, and
 
62)
€Transfer of contractual rights by obligee to a third party.
 
Assignment
63)
Obligee who transfers a right
 
Assignor
64)
€Party to whom a right is transferred.
 
Assignee
65)
€Most rights can be assigned—general rule –E.g., sales contracts, creditors’ rights, sale of mortgages, and other loans. •Generally no formalities required –E.g., need not use term “assign.” Words such as “sell” or “transfer” are effective.
 
66)
€EFFECT OF AN ASSIGNMENT OF A RIGHTAssignee “stands in the shoes of the assignor” and is entitled to performance from the obligor. –Subject to same defenses that existed against assignor. •The unconditional assignment of a contract right extinguishes all the assignor’s rights. –
 
67)
€notice of assignmentTo protect his or her rights, the assignee should immediately notify the obligor that: •The assignment has been made, and •Performance must be rendered to the assignee.
 
68)
Rights that cannot be assigned Personal Service Contracts--no–E.g., contract to paint a portrait. Assignment of Future Rights--no–a currently nonexistent right that one expects to have in the future. WhereAssignment Would Materially Alter the Risk–cannotbe assigned if the assignment would materially alter the risk or duties of the obligor. E.g., safe driver cannot assign automobile insurance coverage to another driver.
 
69)
€Effectively prohibits assignment of rights under the contract. –Some exceptions exist •Used when obligor doesn’t want to deal with or render performance to an unknown third party.
 
Anti assignment clause
70)
€Permits the assignment of the contract only upon receipt of an obligor’s approval. –Assignment is void or invalid without approval •Approval cannot be unreasonably withheld.
 
Approval clause
71)
The american rule is ___ rule in the the US
 
Majority
72)
Provides that the firs assignment in time prevails, regardless of notice. Most states follow this rule.
 
American Rule (New York Rule)
73)
Provides that the firs assignee to GIVE NOTICE to the obligor prevails.
 
Enlgish rule
74)
Provides that under either american or enlgish rule, if the aqssignor makes successive assignments of a contract right that is represented by a tangivble token, such as stock certificate or a savings account passbook, the first assignee who receives delivery of the tangible token prevails over subsequent assignees.
 
Possession of tangible token rule.
75)
€Transfer of contractual duties by the obligor to another party for performance. –with or without a transfer of rights
 
Delegation
76)
€Obligor who transferred his or her duty with or without a transfer of rights.
 
Delegator
77)
€Obligor who transferred his or her duty with or without a transfer of rights.
 
Delegator
78)
€Party to whom the duty has been transferred with or without a transfer of rights.
 
Delegatee
79)
The party to whome the duty is owed
 
Obligee
80)
The person who owes th performance, money, duty , or other thing of value.
 
Obligor
81)
€If obligee has a substantial interest in having the obligor perform, duties may not be transferred. –Personal service contracts calling for the exercise of personal skills, discretion, or expertise. •E.g., Bruce Springsteen’s contract to give a concert. –Contracts whose performance would materially vary if duties delegated.
 
82)
€Prohibits delegation. •Generally legally enforceable. –Courts may nonetheless allow delegation of duties that are totally impersonal in nature.
 
Anti-delegation clause
83)
€Transfer of both rights and duties under a contract. •If the contract contains language of assignment, courts generally find a corresponding delegation of duties.
 
Assignment and delegation
84)
€Third parties sometimes claim rights under others’ contracts. •Such third parties are either: –Intended beneficiaries, •Gets benefits named in contract, or –Incidental beneficiaries •Who has no rights under the contract.
 
85)
€A third party who: – is not in privity of contract. –But is named in the contract. •E.g., “I am acquiring this property for Ben.” •
 
Intended beneficiary
86)
€Contracts intended to confer a benefit or gift on an intended, named third party. •E.g., life insurance policy is donee beneficiary contract.
 
Donee beneficiary contracts
87)
€Contracts where promisor agrees to repay promisee’s creditor to satisfy existing debt.
 
Creditor beneficiary contracts
88)
€Usually arises when: −Debtor borrows from creditor to purchase some item. −Debtor agrees to pay creditor amount of loan plus interest. −Debtor sells item to another party before the loan is paid. −The new buyer promises the debtor that he or she will pay the remainder of the loan amount to the creditor.
 
Creditor beneficiaries
89)
A third party on whom a benefit is to be conferred
 
Donee beneficiary
90)
€Incidental benificiaryA party unintentionally benefited by other people’s contracts. •Incidental beneficiary has no rights to enforce or sue under other people’s contracts. –E.g., contract between homeowner and builder to renovate house, which will increase property values of neighbors. Neighbors are only incidental beneficiaries and so have no rights under this contract.
 
91)
€Unconditional promise to perform. •Nonperformance of covenant is breach of contract that gives the other party the right to sue. •Majority of contract terms are covenants.
 
Covenant
92)
€A qualified or conditional promise that becomes a covenant if met. –Indicated by language such as if, on the condition that, provided that, when, after, as soon as.
 
Conditions
93)
€Event that must occur before a party is obliged to perform. –E.g., “I agree to buy this house if I can obtain a mortgage at 7% or less.”
 
Condition precedent
94)
€Contract may provide that performance must meet party’s personal satisfaction. –Personal satisfaction – contracts involving taste or comfort are based on the Subjective Test. –Satisfaction of reasonable person – most commercial contracts or contracts for mechanical fitness.
 
95)
€Occurrence or nonoccurrence of a specific event excuses performance of a contractual duty. –E.g., “I agree to work for your accounting firm for two years, unless I am admitted to MBA school.”
 
Conditions sebsequent
96)
€Parties to a contract must simultaneously render performance. •Each party’s absolute duty to perform is based on the other party’s absolute duty to perform. –E.g., buyer’s duty to pay and seller’s duty to deliver goods.
 
Concurrent conditions
97)
€Express conditions exist if parties exprey agree to terms. •Implied-in-fact conditions are implied from the circumstances surrounding the contract and conduct of the parties. –E.g., it is implied that buyer of goods will provide proper access for seller’s delivery truck.
 
98)
€A party’s duty to perform under a contract may be discharged by: –Mutual agreement of the parties –Impossibility of performance –Force Majeure clauses –Commercial impracticability –Statute of Limitations –Bankruptcy
 
99)
€The parties mutually agree to discharge or end their contractual duties. –Mutual Rescission •Offer, acceptance, consideration, restitution –Substituted Contract •Same parties—New contract –Discharges old contract on agreement –Can only sue to enforce new agreement
 
100)
Three parties agree to substitute a third party for one of the original parties to the contract. The original contract obligations are discharged. The result is a new contract. This is not a substitution of performance, but a substitution of a party to the contract.
 
Novation
101)
Is a substitution of performance by the same two parties to the original contract. There must be Accord and Satisfaction to discharge the original contract obligation. If there is no Satisfaction, the party may sue to enforce the Accord or to enforce the original obligation
 
Accord and satisfaction
102)
€Objective impossibility (“It cannot be done.”) discharges both parties. –Death or incapacity of promisor prior to performance of personal service contract. –Destruction of subject matter –Supervening illegality—subject matter illegal. •
 
Objective impossibility
103)
€Objective impossibility (“It cannot be done.”) discharges both parties. –Death or incapacity of promisor prior to performance of personal service contract. –Destruction of subject matter –Supervening illegality—subject matter illegal. •
 
Objective impossibility
104)
€Objective impossibility (“It cannot be done.”) discharges both parties. –Death or incapacity of promisor prior to performance of personal service contract. –Destruction of subject matter –Supervening illegality—subject matter illegal. •
 
Objective impossibility
105)
€The parties may agree in contract that certain events will excuse nonperformance of the contract. •These clauses are called ____ ____ ____. –Natural disasters –Labor strikes –Shortages of raw materials
 
Force majeure clauses
106)
€Most states recognize this doctrine as an excuse for nonperformance. •Excuses performance if an unforeseeable event makes it impracticable to perform. •Examined on a case-by-case basis.
 
Commercial impracticability
107)
€Certain legal rules discharge parties from performing contractual duties. –Statutes of Limitations –Discharge of debts in bankruptcy
 
108)
The UCC provides that a cause of action based on a breach of sales or lease contract be brought within ____ years after the cause of action accrues.
 
109)
€If a contractual duty (covenant) has not been discharged or excused, the contracting party owes an absolute duty to perform. •Breach of contract occurs when a contracting party fails to perform an absolute duty owed under a contract.
 
110)
€Contract is executed. –Performing party discharged. –Most contracts are completely performed.
 
Strict performance
111)
€Tender of performance is an unconditional offer to perform. •May be required to hold other party liable for breach •may discharge contractual obligations.
 
112)
€Minor breach of contract. –Performance deviates slightly from complete performance. –Nonbreaching party may recover damages. •For nonperformance •To complete performance
 
113)
€Material breach of contractual obligations. •Nonbreaching party excused from any further performance. •Nonbreaching party may rescind contract and seek restitution, or •Sue to enforce contract and
 
Inferor performance: material breach
114)
€Party repudiates before performance is due that he or she will not perform duties. •Nonbreaching party immediately discharged. •Nonbreaching party may – sue immediately or –Wait for performance date, or –Excuse the breach and move on.Called ___ ___
 
Anticipitatory breach
115)
€Available to nonbreaching party upon any breach. –Minor breach –Material breach •Intended to compensate nonbreaching party for loss of bargain.called ___ ___
 
Monetary damages
116)
€Compensate nonbreaching party for the loss of the bargain. •Place nonbreaching party in as good a position as if the contract had been fully performed. –Award the benefit of the bargain. –The most common of the remedies.___ ____
 
Compensatory damages
117)
€Nonbreaching party has duty to avoid or reduce damages caused by a breach of contract. –E.g., look for comparable replacement job, or fix a defective machine or a leaking roof. •Extent of mitigation depends on the type contract.____ _ ___
 
Mitigation of damages
118)
€Foreseeable damages that arise from circumstances outside the contract. –E.g., lost profits, or injury to person or property. •To be liable for these damages, breaching party must know or have reason to know that the breach may cause such damages. •Also known as special damages___ ___
 
Consequential damages
119)
€Parties agree in advance that certain damages will be available if contract is breached. –E.g., if tenant breaches by late rent payment, tenant shall pay $10/day liquidated damages. •To be valid and enforceable, –Actual damages must be difficult or impracticable to determine, and –Liquidated amount must be reasonable in the circumstances, i.e., not excessive or punitive.____ ____
 
Liquidated damages
120)
€Damages awarded when no financial loss has resulted from breach. •Usually awarded in a small amount, such as $1. •Cases involving nominal damages are usually brought on “principle.”___ ___
 
Nominal damages
121)
€If the breaching party refuses to pay the court-ordered judgment, court may issue: –Writ of Attachment – Sheriff seizes property for auction, with proceeds to satisfy judgment. –Writ of Garnishment – Amount due deducted from wages or bank accounts.
 
122)
€Action to undo the contract. •Available if there has been: –A material breach of contract –Fraud –Undue influence –Mistake
 
Rescission
123)
€Returning of goods or property received from the other party. •If the actual goods or property is not available, a cash equivalent must be paid.
 
Restitution
124)
€____ ___ available if legal remedy (money damages) inadequate. •Also available to prevent unjust enrichment.
 
Equitable remedies
125)
€Court orders breaching party to perform the acts promised in the contract. •Appropriate if subject matter of contract is unique. –E.g., court will order seller of house or particular Picasso painting to perform. •Specific performance of personal contracts
 
Specific performance
126)
€Court rewrites contract to express the parties’ true intentions. •Usually used to correct clerical errors.___
 
Reformation
127)
€Court order prohibiting a party from doing a certain act. –To prevent irreparable injury. •Available in contract actions only in limited circumstances.
 
Injunction
128)
Torts associated with contracts •Intentional Interference with Contractual Relations •Breach of the Implied Covenant of Good Faith and Fair Dealing •Fraud, duress, undue influence, etc
 
129)
€Third party induces contracting party to breach the contract. •Elements: –Valid, enforceable contract between the contracting parties. –Third-party knowledge of this contract. –Third-party inducement to breach the contract.
 
Intentional interferewnce with contractual relations
130)
€Breach of the implied covenant of good faith and fair dealing...Parties held to express terms of the contract, and •Also required to act in good faith, deal fairly in all respects. •A breach of this implied covenant is tort for which tort damages are recoverable.
 
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