[REG] Contracts

Three required elements, legally enforceable contracts 1) Offer and acceptance 2) Exchange of consideration 3) No defenses to enforcement(lack of defenses) 4) Capacity 5) legal

 

Methods of formation

1) Express contract

2) Impiled- in-fact contract (ex. pay after doctor's service)

3) Implied-in-law contract/Quasi-Contract

   - not a contract at all

   - a remedy to prevent unjust enrichment of the defendant

4) Unilateral contract and Bilateral Contract

   * A vague advertisement is not an offer

 

Sources of contract law

1) Common law: real estate, insurance, services, employment

2) UCC: sale of goods(moveable things)

 

Terms must be definite and certain

UCC: quantity terms

Common law: offeree, price, time, quantity, and nature of work

 

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Termination of offer

1) Revocation of offeror

    - express

    - implied: conduct, sell to someone else

    * consideration is paid to keep the offer open> option contract is formed

2) Rejection of the offeree

    * mere inquiry is not rejection or counteroffer

    * attempted acceptance is invalid for any reason, it becomes a counteroffer 

3) By operation of law

    - Death

    - Incompetency

    - Destroyed

    - Illegal

 

Acceptance

Mailbox rule, generally effective upon dispatch

   - reasonable means of acceptance(mail, email~)

Offeror can opt up the mailbox rule, stating in the offer that acceptances must be received to be effective

 

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Exchange of Consideration

- the contract must be supported by legally sufficient consideration on both sides

- law will not enforce gratuitous promises

- elements of consideration

   1) legal value given by each party

   2) bargained-for -exchange

 

Elements of legal value

- possible items of consideration include: promise to perform, promise to pay, promises to give

- not need to have monetary value

- courts will not inquire into adequacy

- preexisting legal duties generally not sufficient

 

* Donation to a charity: a promise to donate, justifiably relies on the promise is enforceable

 

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Defenses

- defenses can make a contract unenforceable

Duress, Undue influence, Mutual mistake, Intoxicated, Statue of frauds

Void: 1) Faud in the execution 2) Duress(physical) 3) Illegality 4) Adjudicated incompetency

 

Fraud

1) Misrepresentation of Material Fact by defrauding Party 2) Actual and reasonable reliance 3) Intent to induce reliance 4) Damages 5) Scienter(intent to deceive)

 

Fraud in the Execution(계약인지 모르고 서명한경우) - occurs when a party is deceived into signing something that does not look like a contract - Makes a contract void, there is no "meeting of the minds"

Fraud in the inducement(문제있는계약서에 서명한경우)  - the defrauded party is aware of making a contract, terms are materially mispresented - most fraud is fraud in the inducement - makes a contract voidable

 

 

Innocent Misrepresentation

- Misrepresentation of Material Fact by defrauding Party - Actual and reasonable reliance - Intent to induce reliance - Damages

- misrepresentation is made innocently, not intentionally

- pay for only compensatory damages 손실에 대한 금전적인 보상 ( not punitive damages 잘못해서 벌칙성격으로 내는거)

- contract voidable

 

 

Duress

- the unlawful use of a threat of harm overcomes the party's free will to contract

- taking advantage of the other person's economic condition to negotiate a favorable contract(if no threat), not duress

 

 

 

Undue Influence

- party's free will to contract is overcome by the defendant's abuse of a position of trust or confidence

- the person in the position of trust or confidence(spouse, trustee, guardian, attorney) uses the position to take advantage of the other's weakness, infirmity, or distress

 

 

 

Mutual Mistake

- both parties to a contract are mistaken as to a material fact regarding the contract, the adversely affected party can avoid the contract

- generally does not apply to mistakes as to value

- if the subject matter of the contract is not in existence when the contract is made and neither party knows this, the contract is void

 

 

Unilateral Miskate(mistake made by one party)

- must do diligence before entering the contract 우선 본인이 잘알아보고했어야했어야함

- as to a material fact is a defense if the other party knew or should have known of the mistake 상대방은 문제를 알고 있는데 그냥 넘어가면 디팬스 행사할수있음

 

 

Illegality

- the contract is void

- perform without a license

License is required to raise revenue	License is required to protect the public
Contract is enforceable: Vendor	Contract is void: doctor, attorneys, CPAs

 

 

 

Minors

- minor must return whatever they possess when they disaffirm

- ratification is all or nothing

 

 

 

Intoxication

valid defense only when

intoxication prevents the promisor from knowing the nature and significance of his or her promise

+ other party knew of the impairment

 

 

Adjudicated Mental Incompetency

void contract

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Statute of Frauds

- six contracts must be in writing

- the contract itself need not be in writing( can be informal), but sign by the person being sued

* sale of goods: quantity terms + signature of the defendant

- no requirement that all terms be stated in a single writing

Exception

when it has already been performed, admitted, sale of manufactured goods

 

1) Marriage 2) Contract terms cannot be performed within a year 3) involving interests in land 4) contracts by Executors to pay estate debts out of personal funds 5) sale of goods for $500 or more 6) contract to act as surety

 

Year contracts

- one-year period runs from the date of the contract, not from when performance begins

 

Land contracts

- sale of land or lease of greater than a year(within one year, writing not required)

 

Goods for $500 or more

- sale of goods! not service or land

- if a sales contract has been modified, determine whether writing is required

Common law consideration must be paid to make a modification enforceable

UCC consideration is not required to make a modification enforceable

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Impossibility

a mere increase in the cost of performance does not make performance impossible

- Subject matter of the contract has been destroyed, the contract may be avoided due to impossibility

- Death or incapacity of a person to perform a personal service contract will discharge the contract due to objective impossibility

 

 

 

Accord and Satisfaction and substituted contract > Same parites, new agreement

- accord and satisfaction discharge the original duty. until the accord is satisfied a party may sue under the original contract or the accord

- A substitudted contract is very similar to an accord and satisfaction , but duties under the original contract are discharged immediately

 

 

Novation

available as a defense to a party who has been released from a contract

- requires: new consideration, detrimental reliance to be enforceable

Common law - modification enforceable, the party needs to be compensated - all parties must voluntarily agree

UCC - modification enforceable, not required to be compensated - all parties must voluntarily agree

 

 

Conditions can affect a party's duty to perform

Condition precedent: a condition that must occur before the other party must perform

Condition concurrent

Condition subsequent: a condition that will occur after a party's duty to perform has arisen and will cut off that duty

 

 

 

Prevention of performance is a breach

 

 

Parol Evidence Rule

- makes certain evidence inadmissible

- prohibits any oral or written statements made prior to or contemporaneously with the written contract that contradict the terms of the contract

ex) 계약하면 ~해줄께, 계약할때 포함안함

 

 

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Remedies_Common Law

Major breach material or substantial breach, non-breaching party can be discharged from the contract

Minor breach non-breaching party is not discharged, entitled to damages

 

 

Compensatory Damages(Benefit of the Bargain)

- Standard measure of damages for personal service contracts awards the non-breaching party enough money to obtain substitute performance

 

Consequential Damages if foreseeable

- unforeseeable damages are not compensated

 

Specific performance(used with land or unique items)

- alternative to money damages when money does not fix the problem

- available if int in land or unique personal property are involved(unique real estate, artwork, unique car etc)

- cannot be use to force a party to perform personal service contracts

 

Liquidated Damages(damages agreed to in the contract)

- not a penalty

 

Punitive Damages

- not available for breach of contract

- available for fraud which is a tort cause of action

- intended to punish the defendant for acting in bad faith

 

Rescission or Cancellation

- cancels the contract and restores the parties to their former or original position

- applied as a remedy that could be granted if the contract has not substantially performed

- under the common law, a party cannot rescind or cancel if it is substantially performed

- in case of substantial performance and minor breach, the non-breaching party's only remedy is monetary damages

- if the breaching party acted in bad faith> contact can be canceled, and monetary damages will be awarded

 

Limitations on Monetary Damages

foreseeability

mitigation(reasonable efforts to avoid damages)

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UCC

 

Agreement(Mutual Asset)- offer and acceptance

Firm Offer-Merchant, in writing

- common law, consideration is needed to make an offer irrevocable

- Certain offers by merchants are irrevocable without consideration(no event longer than 3 months)

 

acceptance

Common Law	UCC Sales Articles
Real estate, Insurance, Services, Employment	Sale of goods
terms of the acceptance must mirror the terms of the offer * Mirror Image Rule   - the offeree cannot add, delete, or change anything	acceptance is valid if changes are relatively minor  - acceptance will be effective even if it states new or different terms as long as they are not substantial - new or different terms are ignored unless the contract is bet merchants - the offeror's original terms will govern the contract

 

Promise to ship(Bilateral contract) or Prompt shipment(unilateral contract)

- shipment of nonconforming goods is both an acceptance and a breach of contract

- if the seller reasonably notifies the buyer that nonconforming goods are shipped only as an accommodation to the buyer> not an acceptance, counter offer

- accommodation shipment rule applies only when the shipment is used as the means of acceptance(unilateral contract), not promising to ship(bilateral contract)

 

Auctions

 

 

Consideration

UCC modifications enforceable without consideration

 

 

Defenses

- the party may rescind and sue for monetary damages

- UCC statute of limitations is 4 years

 

 

Fraud

- Misrepresentation of Material Fact by defrauding Party - Actual and reasonable reliance - Intent to induce reliance - Damages - Scienter(intent to deceive)

 

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Statute of Frauds

1) Marriage 2) Contract terms cannot be performed within a year 3) involving interests in land 4) contracts by Executors to pay estate debts out of personal funds 5) sale of goods for $500 or more 6) contract to act as surety

 * exceptions

  - Specially manufactured goods

  - Merchant to Merchant, written confirmation contract, bind sender, bind recipient if no objection within 10 days

  - Admitted in court

  - Performed, to the extent that the performance has been accepted

 

What writing will suffice

- informal writing

- must include quantity

*exception: requirement contract: supply all need, over a period of time,

                  output contract: everything it produces over a period of time

 

 

Impossibility and Impracticability

common law impossibility> contract discharged

UCC - impracticability (extremely more burdensome) than anticipated because of the occurrence of an unforeseen event - contract need not be impossible to perform

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