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Contracts Rule Statements
Terms in this set (11)
The UCC governs all contracts involving the sale of goods, and common-law rules govern contracts involving services. When a contract includes both goods and services, whichever one predominates will determine the governing law.
In addition, special rules apply to merchants under the UCC. A merchant includes not only a person who regularly deals in the type of goods involved in the transaction, but also any business person when the transaction is of a commercial nature.
A binding contract is created through the process of mutual assent (i.e., offer and acceptance) and consideration, and when no valid defenses to contract exist.
For a contract to exist, the terms of the contract must be certain and definite, or the contract fails for indefiniteness. Under common law, all essential terms (i.e., the parties, subject matter, price, and quantity) must be covered in the agreement.
An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree. The offer must express the present intent to be legally bound to a contract, and must be communicated to an identified offeree.
An acceptance is an objective manifestation by the offeree to be bound by the terms of the offer. An offeree must know of the offer upon acceptance for it to be valid. In addition, the offeree must communicate the acceptance to the offeror.
In addition to an offer and acceptance, there must be legal detriment, or a bargained-for change in the legal position between the parties. Valuable consideration must exist on both sides of the bargain to make it fully enforceable.
Defenses to Formation
A person who is asserted to be in breach of a contract can defend the action by showing that there has not been a valid offer and acceptance or that valid consideration was not exchanged. The agreement will also not be enforced if a party can show that there was no "meeting of the minds."
o Undue influence
o Lack of capacity
o Public policy
The promisor may not be liable for nonperformance if some supervening event or change in circumstances arises after the formation of the contract that discharges the promisor's duty to perform.
o Frustration of purpose
o Destruction/damage to identified goods
Statute of Frauds
Contracts that fall within the Statute of Frauds are unenforceable unless they are in writing. The memorandum must be in writing, be signed by the party to be charged (i.e., the person against whom enforcement is sought), and contain the essential elements of the deal.
Ks that cannot be performed within one year (common law) Sale of goods Ks for $500 or more (UCC)
Real property Ks
Parol Evidence Rule
The parol evidence rule generally prevents a party to a written contract from presenting prior extrinsic evidence that contradicts the terms of the contract as written.
When parol evidence is inapplicable:
Raising an excuse
Establishing a defense
Proving condition precedent to existence of the K
Interpreting/clarifying ambiguity in K
UCC—trade usage or course of dealings
A condition is a future and uncertain event that must take place before a party's contractual rights or obligations are created, destroyed, or enlarged.
Once a duty to perform exists, nonperformance is a breach of contract. Under common law, a breach is material when the non-breaching party does not receive the substantial benefit of its bargain. A breach is minor if the breaching party has substantially performed.
The doctrine of anticipatory repudiation is applicable when a promisor repudiates a promise before the time for performance arises or elapses. The repudiation must be clear and unequivocal (as opposed to mere insecurity) and may be by acts or words.
Upon repudiation, the promisee can treat the repudiation as a breach or ignore it and demand performance. If the repudiation is ignored, then continued performance by the promisee must be suspended if the performance would increase the damages of the promisor. If the date of performance has not passed and the only performance left is payment, the aggrieved party must wait until performance is due before filing suit.
Expectation damages are intended to put the injured party in the same position as if the contract had been performed. To calculate expectation damages, subtract the contract price from the market value of performance.
Consequential damages are reasonably foreseeable losses to a non-breaching party that go beyond expectation damages, such as loss of profits. Damages are foreseeable if they are natural and probable consequences of breach or if they were contemplated by the parties at K formation. Defendant's breach must have caused plaintiff's losses. Finally, the dollar amount of the damages must be proven with reasonable certainty.
THIS SET IS OFTEN IN FOLDERS WITH...
Community Property Rule Statements
Property Rule Statements
Torts Rule Statements
Remedies Rule Statements
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