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Contracts - Coggle Diagram
Contracts
Step 2: Formation
Mutual assent: Determined by whether there was an offer and an acceptance of that offer.
Types of contracts
Unilateral contract: Formed by a promise in exchange for performance.
In a unilateral contract, the offeree must complete the performance for there to be a contract.
Bilateral contract: formed by an exchange of promises
Offer: An offer exists when there was an intent to enter a contract through a promise or undertaking.
The terms of the deal must be definite and certain, and the offer must be communicated to the offeree, giving her actual knowledge of the offer.
Termination may be done by both offeror and offeree.
If by offeror, then through revocation.
If by offeree, then through rejection or counteroffer.
Counteroffers generally terminates the offer and creates a new offer.
Mirror-image rule: If the acceptance does not contain the exact same terms as the offer, then the new terms are treated like a revocation of the original offer and a counteroffer under common law.
Under UCC, Battle of the forms the nonconforming acceptance is treated as a legally effective acceptance.
Under both the UCC and common law, the offeror can control the method of acceptance by stating conditions.
Acceptance by letter is valid upon dispatch.
Consideration is required for a contract to be legally enforceable.
Consideration is a bargained for exchange. The promise must induce the detriment and the detriment must induce the promise.
One substitute for consideration is promissory estoppel. It requires:
Reliance that is reasonable, detrimental, and foreseeable
Enforcement necessary to avoid injustice
A promise
Statute of Frauds
Requires that these types of contracts be evidenced by a writing signed by the parties sought to be bound.
Service contract not capable of being performed within a year from the time of the contract
Real estate contracts
promise in consideration of marriage
Sale of goods for $500 or more
Promise to pay the debts of another (suretyship)
Defenses to the enforcement of K's
Lack of capacity, the statute of frauds, illegality, misrepresentation, nondisclosure, duress, unconscionability, and mistake of fact whether mutual or unilateral.
Step 3: Interpretation
Generally construe any ambiguities against the drafter.
Warranties
Implied warranty of merchantability: Included with every sale of goods. The goods must be fit for their ordinary purposes.
Sellers can alter implied warranties by explicitly excluding or modifying language mentioning merchantability.
Parol evidence rule: Governs whether the meaning of a document can be determined by the negotiations of the parties prior to the written contract.
The admissibility of this evidence depends on the answers of 2 questions
1) What is the purpose for which the evidence is being introduced?
2) Does the evidence relate to a term or contract that is integrated?
If the purpose of the introduction of extrinsic evidence is to explain or interpret the terms of a written contract, parol evidence is admissible.
Integration: refers to when parties intended the written contract to be the final discussion as to specific terms.
The court will rely on whether there is a merger clause included.
Step 4: Performance
Perform duty required to be discharged from that duty.
Performance is also discharged if performance is illegal , impossible, impractical, frustrated, or rescinded.
Conditions in a contract can be express, implied, or constructive.
Breach: occurs when there is a failure to perform when under a duty to perform,
If material breach, then the non-breaching party is excused form performance and they are entitled to all available remedies.
Minor-breaches do not relieve the non-breaching party from performance, but entitled to damages.
Under UCC if goods or delivery fail to conform in any way with the contract, the buyer may reject, accept, or just accept certain ones. Buyers cannot reject after already accepting by inspecting and indicating the goods do conform or by failing to inspect.
Acceptance may be revoked if the goods are so defective that their value is substantially impaired.
Step One: Common law or UCC?
UCC applies if the contract involves a transaction in goods.
If UCC applies determine if one or both parties are a merchant.
A merchant is "one who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved."
Common law applies to other contracts such as real estate and service contracts.
If a contract is mixed (involving both goods and a service) determine which part is most predominant and apply that law to the entire contract
Third parties
Beneficiaries
Arise when the promisor's performance was intended to benefit that third party. They have no rights against the promisee in the event the performance is not forthcoming.
Assignments
To transfer a right to receive a performance under a contract. The owner of the right must manifest an intention to make a present transfer of the right.
Certain rights are not assignable: Those that substantially change the contract's risks/duties, those that are for future rights to arise under future contracts, and those that are illegal.
Delegations
Occurs when a third party agrees to satisfy a performance obligation owed by one of the parties to a contract.
A delegation does not relieve the delegator from his obligations under the contract and the delegator remains liable for its performance unless there has been a novation.
Remedies
Monetary
Under common law:
Reliance
Restitution
Expectation
liquidated
Under UCC: The seller's remedies depend on whether the goods have been delivered.
Equitable
Specific performance: Only available when a monetary award would be inadequate to grant relief to the aggrieved party.
Usually not available for personal services contracts or contracts requiring ongoing cooperation between the parties.
Must consider if party asking for remedy has clean hands or if they have sat on the issue to rack up damages (laches).
Restitution
unjust enrichment
Negative injunctive relief