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Basic Requirements of a contract
- Agreement
- between competent parties
- genuiness of assent
- consideration
- legal
- in proper legal form, if any
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Bilateral contract
Exchange of promises
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privity of contract
people are in a contract, and if one party doesn't live up to their expectations the other party can sue
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Promise
- Express (oral, written)
- Implied (based on conduct)
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Consideration
- bargained for legal detriment
- (giving up something, even a promise counts)
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agreement
offer + acceptance
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Unilateral contract
promise for an act
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general rule in unilateral contracts
you have to complete the act
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Express contract
oral or written
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implied contract
based on the conduct of the parties
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Quasi-contract
- missing one or more of the requirements of a contract
- courts will enforce it based on unjust enrichment (get reasonable value)
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Defense to quasi-contracts
Volunteer
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Valid contract (definition)
good binding contract that meets all six requirements
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Void contract (definition)
not a contract, usually because the contract is illegal
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Voidable contract (definition)
can get out of the contract, but you might get stuck with it if you ratify it
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elements of fraud
- misrepresentation
- of a material fact
- knowledge or reckless indifference to the truth
- intent to deceive
- reliance
- injury
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Equitable remedy of recission
parties return to status quo ante (original positions before the contract)
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If fraud was committed
plaintiff must disaffirm within a reasonable time, otherwise it is implied ratification
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ratification
agreed to contract (express or implied)
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Executed contract
both parties completed performance
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Executory contract
- neither party has completed performance
- (contract exists but neither party has done anything yet)
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Partially Executory/executed contract
only one party has completed performance
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Offer
- present, serious contractual intent
- sufficiently definite
- communicated to the offeree
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Situations that aren't offers
- future offers (needs to be present)
- offers made in jest
- preliminary negotiations
- invitations
- invitations to offer
- inquiry
- answers to inquiries
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Things that can happen to an offer
- Accepted by offeree
- rejected by offeree
- revoked by offeror
- terminated
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Revocation general rule
an offer can be revoked at any time prior to acceptance
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Exceptions to revocation general rule
- option contract (common law or sales contract)
- Firm offer (sales law)
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Sale
present transfer of title to goods (tangible personal property)
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Common law contracts
- contract for sale of real property
- contract for sale of intangible
- contract for services
- contract for sale of business
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Option contract
When you promise to keep an offer open for some consideration from the other party
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Firm offer
- offer
- promise to keep offer open
- in writing
- for 3 months or less
- made by a merchant (person in the business of selling things)
- ????????? missing 6th piece?
Don't need consideration
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Types of offer rejections by offeree
- flat rejection (say no)
- counteroffer (offer something else)
- qualified acceptance (when offer and acceptance aren't identical)
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Things that terminate offers
- revocation
- rejection
- lapse of time
- condition subsequent
- death of offeror or offeree
- subsequent illegality
- impossibility
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Offer is effective when:
received
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rejection is effective when:
received
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revocation is effective when:
received
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Acceptance is effective when (general rule):
- sent
- exceptions: offer states otherwise, implied agency rule, acceptance following prior rejection
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Doctrine of consideration
a promise is not binding unless supported by consideration
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exceptions to doctrine of consideration
- promissory estoppel
- promises made to charitable institutions
- composition agreements
- promises made after the statute of limitations has run
- promises made after a discharge in bankruptcy
- unforseeable difficulties rule
- modification of sales contract
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Preexisting duty rule
you already have the duty to carry out what you are offering as new consideration, so it isn't consideration
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Requirements for unforeseeable difficulties rule
- construction contract
- unforeseeable event
- promise to pay additional amount
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Modification of sales contract
both parties have to agree but only one has to give new consideration
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Situations that are not consideration
- preexisting duty rule
- past consideration
- illusory promises
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forbearance
promise to do nothing or refrain from doing something
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Defenses to genuineness of assent
- mistake
- misrepresentation
- concealment
- fraud
- duress
- undue influence
- unconscionability
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Unilateral Mistake
one party is mistaken
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Bilateral mistake
both parties are mistaken
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unilateral mistake of fact general rule
- has no effect on contract (caveat emptor)
- exception: other party knows of the mistake and says or does nothing, then contract is voidable
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unilateral mistake of law general rule
- no effect on contract (ignorance of the law is no excuse)
- sometimes laws get treated as facts, so you have the same exception as a mistake of fact
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unilateral mistake of expectation
no effect on contract
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bilateral mistake of fact
contract is voidable by either party
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bilateral mistake of law
no effect on contract
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bilateral mistake of expectation
no effect on contract
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innocent misrepresentation
contract is voidable, plaintiff can get equitable remedy of recission, but no damages
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concealment general rule
no duty to disclose
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exceptions to concealment general rule
- one person knows the other person is walking into a trap (K is voidable)
- statutory (some laws make you disclose info)
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Duress (threats)
- extreme duress (contract is void)
- mild duress (contract is voidable)
- threat of a civil suit or economic duress (no effect on contract generally)
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Undue influence
- (K is voidable)
- confidential relationship between parties
- one person is in a dominating position
- dominating person takes advantage of the other person
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Unconscionably (catchall)
- situations where K doesn't fall in other categories but is fundamentally unfair (e.g. unequal bargaining power)
- contract is void (in rare cases it's voidable)
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Things you can do with voidable contracts
- dissafirm
- avoid
- recission
- ratification
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Lack of capacity
- minors (<18)
- insane
- too intoxicated
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Total incapacity: Minors
<7 years old
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Total Incapacity: Insanity
adjudged insane, has appointed guardian
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Partial incapacity:minors
7-17 years old
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Partial incapacity: insanity
only insane in certain occasions, and the contract involved that occasion
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Partial incapacity: intoxication
you were so drunk you don't know what you signed
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duty of restoration
- party brings back whatever they can of the object and they can get back their consideration
- e.g. minor purchasing non-neccesary and destroying it
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duty of restitution
- get back the current value of the item you bought when you return it
- e.g. minor lied about age, crushed motorcycle, then disaffirmed contract
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Illegality
- Lottery (gambling)
- Usury
- Licenses
- Contracts in restraint of trade
- exculpatory clause
- Contract in violation of statutes
- Contract in violation of public policy
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Exceptions to Usury
- small loan association
- installment payments
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Licenses primarily for revenue raising
contracts are valid even though you don't have the license
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Licenses primarily to protect the public
if you don't have the license then the contract is void
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Anti-competitive covenants (contracts in restraint of trade) are legal if:
- ancillary
- consideration
- reasonable as to time and space
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Exculpatory clauses are legal if:
- clear and unequivocal
- consideration
- equal bargaining power
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exceptions to general rule of illegality
- voidable by statute
- executory contract and party to perform backs out before performance
- parties are not in pari delicto (not equally at fault)
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Statute of Frauds (time when oral contract must be evidence by writing in order to be enforced)
- contract for sale of land or an interest therein
- contracts that cannot be completed within one year
- promise to pay the debt or default of another
- promises made in consideration of marriage
- promises made by an executor/executrix or administrator/trix to pay the debts of hte estate out of his/her own pocket
- contract for the sale of goods over $500
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Promise to pay debt or default of another
- oral promise
- made to creditor
- secondary promise (not you promising to pay their debt)
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Primary purpose exception
if the promise to pay debt of another was made primarily to benefit themselves then the promise does not have to be in writing
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Written evidence
- memorandum
- written contract
- letter of confirmation
- letter to third party
- check
- invoice
- etc.
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6 exceptions to statute of frauds
- part performance doctrine
- primary purpose exception
- goods received and accepted
- money received and accepted
- specially manufactured goods
- admissions in court or in pleadings
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Part performance doctrine (majority view)
- buyer puts money down
- buyer moves onto the property
- buyer makes substantial improvements
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uniquivocably referrable doctrine (minority view ohio)
- you wouldn't do what you did if you hadn't bought the property
- courts will look at the parties behavior
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Third party contract (when C can sue for breach of contract even though they aren't in privity of contract themselves)
- a third party beneficiary
- or
- Assignments
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3rd party beneficiary
- donee beneficiary
- creditor beneficiary
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Test of third party beneficiary
was it in the contemplation of both parties at the time the contract was entered into to directly benefit the third party?
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Assignment
transfer of a right or multiple rights
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times an obligor can prevent the assignment or delegation
- contract states otherwise
- personal contract
- substantial change in performance
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Voidable contracts (12)
- Illegality
- Intoxicated
- Minor
- Insane
- Fraud in the inducement
- Undue violence
- mutual mistake of fact
- unconscionably (rare)
- duress
- misrepresentation
- unilateral mistake of fact
- concealment
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Void Contracts (6)
- Illegality
- Minor
- Insane
- Fraud in the execution
- unconscionability
- duress
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Unenforceable contracts (9)
- statute of frauds
- Illegality
- minor
- insane
- fraud in the execution
- statute of limitations
- unconscionability
- duress
- bankruptcy
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No contract (2)
- lack of agreement
- lack of consideration
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Discharge (how you get out of a contract)
- Performance
- Agreement
- Conditions
- Implied Condition subsequent
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Performance (general rule)
total performance
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exception to performance
- substantial performance
- deviation from contract is relatively trivial and unintentional (<3%)
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Agreement
- mutual recission
- substituted contract or agreement
- novation (substitution of parties)
- waiver (voluntarily give up rights)
- Accord and satisfaction
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Conditions
- express or implied
- precedent (triggers obligation)
- subsequent (obligation ends when something happens)
- concurrent (happens at the same time)
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Implied condition subsequent (doctrine of impossibility)
- destruction of the subject matter
- personal contract and party to perform dies
- subsequent illegality
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Remedies
- Legal (damages): ordinary
- equitable: extraordinary
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Types of damages
- compensatory damages (out of pocket loss)
- consequential damages (reasonably foreseeable loss)
- nominal damages
- punitive damages (designed to punish)
- liquidated damages (anticipate breach of contract)
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doctrine of impracticability (sales contract)
- sales contract
- unforseeable event
- at least ten times as expensive to perform
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Mitigation of damages
duty of plaintiff to hold damages down as much as possible
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Equitable remedies
- injunction (stop you from doing something)
- Recission (cancel contract)
- Specific performance
- reformation (reform contract)
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