Glossary of Contracts 2nd Semester Rules
Created by djdinari
- § 12: Capacity to Contract
- 1) No one can be bound by a contract that doesn’t have the legal capacity to “incur at least voidable contractual duties.” Capacity to contract can be partial, and it can also depend on the nature of the contract/transaction, and other surrounding circumstances.
2) Anyone who manifests assent to a K has full capacity to incur contractual duties unless they’re: a) Under Guardianship, b) an infant, c) mentally ill or defective, d) intoxicated.
- § 89: Modification of Executory Contract
- A modification of a duty under a K that’s not fully performed on either side is binding:
a) if the modification is fair & equitable in light of unforeseen circumstances
b) to the extent provided by statute
c) to the extent that justice requires enforcement of the change due to a substantial change in position in reliance on the change.
- § 151: Mistake Defined
- A belief that is not in accord with the facts.
Notes: Mistake refers to the belief, not an action (like entering a K) stemming from that belief.
- §152: When Mistake of Both Parties Makes Contract Voidable (Mutual Mistake)
- 1) When a mutual mistake was a basic assumption that the parties based their agreement upon, and that mistake has a material effect o the agreed exchange of performances (price), the contract is voidable by the adversely affected party unless he bears the risk under §154.
2) In determining whether mistake had a material effect, relief by way of restitution, reformation, or some other way is taken into account.
Notes: Assumptions as to market conditions or ability to pay don’t count.
Material effect on the exchange is usually shown by a benefit to one party and a detriment to the other, but one that was more or less than expected.
- §153: When Mistake of One Party Makes a Contract Voidable (unilateral mistake)
- When a unilateral mistake as to a basic assumption on which a party made the contract has a material effect that is adverse to him, he can void the contract if he doesn’t bear the risk under §154, and
a) The effect of the mistake makes enforcement of the contract unconscionable, or
b) The other party had reason to know of the mistake, or caused the mistake.
- §154: When a Party Bears the Risk of a Mistake
- a) When the risk is allocated to her by agreement (expressly in the K)
b) When he knows at the time of contract formation that his knowledge of the facts to which the mistake pertains is incomplete, but goes ahead anyway
c) The risk is allocated to him by the court because it seems reasonable.
- §160: When Action is Equivalent to an Assertion (concealment)
- Action intended or known to be likely to conceal a fact is equivalent to asserting that the fact doesn’t exist.
- §161: When Non-Disclosure is Equivalent to an Assertion
- a) When the fact has to be disclosed in order to keep a previous assertion from being a misrepresentation
b) When you know that disclosure would correct the other party’s mistake as to a basic assumption, and if failing to disclose would be a breach of the duty of fair dealing
c) When you know that your disclosure will correct the other party’s mistake as to the contents or effect of a writing that embodies all or part of the agreement
d) When the other party is entitled to know the fact because of a special relationship. (fiduciary)
- §164: When Misrepresentation Makes a Contract Voidable
- 1) If a party’s manifestation of assent is induced by a material misrepresentation that they’re justified in relying on.
2) If a party’s assent is induced by a 3rd party not involved with the transaction, who the recipient is justified in relying on; unless the other party has paid value or otherwise relied on the contract, is in good faith, and doesn’t know about the misrepresentation by the third party.
- §167: When a Misrepresentation is an Inducing Cause
- When it substantially contributes to a party’s decision to manifest assent.
- §168: Reliance on Assertions of Opinion
- 1) An assertion is an opinion when it expresses only belief about the existence of a fact, or only a judgment as to quality, value, authenticity, etc.
2) If it is reasonable to do so, a recipient of an opinion can interpret the opinion as an assertion that:
a) The actual facts are compatible with the opinion, and
b) The opinion-giver knows enough facts to be giving such an opinion in the first place.
- §169: When Reliance on an Opinion is Not Justified
- The recipient IS NOT justified in relying on an opinion unless the recipient:
a) has a special relationship with the opinion-giver that justifies reliance,
b) reasonably believes that the opinion-giver, compared to himself, has special skill, judgment, or objectivity with respect to the subject matter, or
c) is for some other reason particularly susceptible to the sort of misrepresentation involved.
- §175: When Duress by Threat Makes a Contract Voidable
- 1) If assent is induced by an improper threat that leaves the victim no alternative, the contract is voidable by the victim.
2) If a party’s assent is induced by a 3rd party not involved with the transaction, the contract is voidable unless the other party has paid value or otherwise relied on the contract, is in good faith, and doesn’t know about the duress by the third party.
- §176: When a Threat is Improper
- 1) A threat is improper if:
a) what is threatened is a crime or a tort, or would be is it resulted in obtaining property,
b) what is threatened is criminal prosecution,
c) a bad faith threat of civil litigation, or
d) the threat is a breach of the duty of good faith and fair dealing.
2) A threat is improper (even if it doesn’t qualify under (1)) if the resulting exchange is not on fair terms and:
a) the threatened act would harm the recipient and not significantly benefit the party making the threat,
b) the effectiveness of the threat is enhanced due to previous shadiness by the party making the threat, or
c) what is threatened is a use of power for illegitimate ends.
- §177: When Undue Influence Makes a Contract Voidable:
- 1) Undue influence is unfair persuasion of a party who is under the domination of a person, or who has reason to believe, because of a special relationship, that the person won’t act against their interests.
2) If a party’s assent is obtained using undue influence by the other party, the contract is voidable by the victim.
3) If assent is obtained through undue influence by a 3rd party not involved with the transaction, the contract is voidable by the victim unless the other party has, in good faith & without knowledge of the undue influence, paid value or otherwise materially relied on the transaction.
- §205: Duty of Good Faith & Fair Dealing
- Every contract imposes upon each party a duty of good faith and fair dealing
in its performance and its enforcement.
- §208 Unconscionability:
- If a contract or one of its terms is unconscionable, the court may choose to void the contract, void the unconscionable term(s), or modify limit the application of the unconscionable term(s) so as to avoid the unconscionable result.
- §209: Integrated Agreements
- 1) An Integrated Agreement is a writing or writings constituting a final expression of one or more terms of an agreement.
2) Whether there is an integrated agreement is to be determined by the court as before the question of interpretation or the application of the parol evidence rule.
3) Where the agreement is reduced to a writing that appears on its face to be integrated, it’s presumed to be integrated unless there’s evidence that the writing was not the final expression of the agreement.
- §213: Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)
- 1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.
2) A binding integrated agreement discharges prior agreements to the extent that they are within its scope. (collateral agreement exception)
3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement, but may be effective to nullify a term that would have been part of the agreement had it not been integrated.
- §214: Evidence of Prior Contemporaneous Agreements and Negotiations
- Agreements & negotiations prior to or contemporaneous with the adoption of a writing are admissible to establish:
a) whether the writing is integrated
b) that the agreement is fully or partially integrated
c) the meaning of the writing, whether or not it’s integrated
d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause.
- §215: Contradiction of Integrated Terms
- Except as stated in 214, when an agreement is partially or fully integrated, prior/contemporaneous agreements are not admissible to contradict a term in the writing.
- §216: Consistent Additional Terms
- 1) Evidence of a consistent additional term is admissible unless the agreement is fully integrated.
2) A writing is not completely integrated if the writing omits a consistent additional agreed term which is
a) Agreed to for separate (fresh) consideration, or
b) The term is one that would have been naturally omitted from the writing (natural omission test).
- §224: Condition Defined
- A condition is an event, not certain to occur, whose occurrence is required before contract performance is due (unless non-occurrence is excused).
- §225: Effects of Non-Occurrence of a Condition
- 1) Performance of a duty subject to a condition cannot become due unless the condition occurs or it’s non-occurrence is excused.
2) Unless it’s been excused, non-occurrence of a condition discharges the duty when the condition can no longer occur.
3) Non-occurrence of a condition is not a breach, unless a party is under a duty that the condition occur.
- §226: How an Event May Be Made a Condition
- By agreement of the parties or by a term supplied by the court.
- §229: Excuse of a Condition to Avoid Forfeiture
- To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence unless the condition was a material part of the agreed exchange.
- §234: Order of Performances
- 1) Where all or part of the performances can be rendered simultaneously, they are to that extent due simultaneously, unless the language or the circumstances indicate otherwise.
2) Except as stated in (1), where the performance of only one party requires a period of time, his performance is due first, unless the language or the circumstances indicate otherwise. (work-before-pay; performance must be substantially complete)
- §235: Effect of Performance as Discharge and Non-Performance as Breach
- 1) Full performance of a duty under a contract discharges the duty.
2) When performance of a duty under a contract is due any non-performance is a breach.
- §237: Effect on Other Party’s Duties of a Failure to Render Performance
- Except as stated in §240, it is a condition of each party’s remaining duties to perform under a contract that there be no uncured material failure by the other party to perform at an earlier time. (performance of your duties under the K up to this point is a condition on my continuing performance from this point)
- §240: Part Performance a Agreed Equivalents
- If the performances to be exchanged are agreed upon as equivalents, each performance is regarded as if there was a contract regarding just that pair of performances. (other party’s past failures don’t justify non-performance)
- §241: Circumstances Significant in Determining Whether a Failure is Material
- a) The extent to which the injured party will be deprived of the benefit which he reasonably expected
b) The extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived
c) The extent to which the party failing to perform or to offer performance will suffer forfeiture
d) The likelihood that the party failing to perform or to offer performance will cure his failure, taking account of all the circumstances including any reasonable assurances
e) The extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
- §250: When a statement or an Act is a Repudiation
- A repudiation is:
a) a statement by the obligor to the obligee that the obligor will commit a breach that would give rise to a claim for total breach
b) A voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach.
- §251: When a Failure to give Assurance may be Treated as a Repudiation
- 1) Where reasonable grounds arise to believe that the obligor will commit a breach of non-performance that would be a total breach, the obligee may demand adequate assurance of due performance and may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance.
2) Failure to provide such assurance that is adequate in the circumstances within a reasonable time can be treated as a repudiation.
- §256: Nullification of Repudiation or Basis for Repudiation
- 1) A repudiation (by statement or failure to give assurance) can be retracted as long as the other party has not materially changed their position in reliance on the repudiation or indicated that they consider the repudiation to be final.
2) The effect of events other than those in §§250 & 251 that constitute a repudiation is nullified if, to the knowledge of the injured party, those events have ceased to exist before they’ve materially changed their position in reliance on the repudiation or indicated that they consider it final.
- §261: Discharge by Supervening Impracticability
- Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.
- §265: Discharge by Supervening Frustration
- Where, after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.
- §281: Accord & Satisfaction
- 1) An accord is a contract under which an obligee promises to accept a stated (substitute) performance in satisfaction of the obligor’s existing duty. Performance of the accord discharges the original duty.
2) The original duty is suspended until the accord is performed. If there’s a breach of the accord, the obligee can enforce the original duty or any duty under the accord.
3) Breach of the accord by the obligee does not discharge the original duty, but the obligor may maintain a suit for specific performance of the accord, in addition to any claim for damages for partial breach.
- §302: Intended & Incidental Beneficiaries
- 1) Unless otherwise agreed upon by the parties, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate and either
a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
2) An incidental beneficiary is one who is not an intended beneficiary.
Notes: Intended beneficiaries get a right to performance, incidentals do not.
- §317: Assignment of a Right
- 1) An assignment of a right is a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires a right to such performance.
2) A contractual right can be assigned unless
a) The substitution of a right of the assignee for the right of the assignor would materially change the duty of the obligor, or materially increase the burden or risk imposed on him by the contract, or materially impair his chance of obtaining return performance, or materially reduce its value to him, or
b) The assignment is forbidden by statute or is otherwise inoperative on the grounds of public policy, or
c) Assignment is validly precluded by contract.
- UCC§ 2-612: Installment Contract; Breach
- 1) An installment contract is one which requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause “each delivery is a separate contract” or its equivalent.
2) The buyer may reject any installment which is nonconforming if the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of his cure the buyer must accept the installment.
3) Whenever the non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a breach of the whole. But the aggrieved party reinstates the contract if he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.
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