Contracts â€“ See Other Outline for Specifics
I. General Rule: An offer exists when there is a manifestation of an intent to be bound.
1. Exception: Advertisements are not offers
2. Indefinite quantity will nullify an offer (requirement contracts ok; missing price ok).
II. General Rule: An offer will terminate if:
1. It lapses, either after a stated term or a reasonable time has passed.
2. It is revoked, at any time before acceptance expressly or indirectly if the offeree has notice.
3. Exception: An offer cannot be revoked if it was a paid for option.
4. Exception: An offer cannot be revoked if it was a firm offer between merchants and it is in writing, and is under 3 months
5. Exception: An offer cannot be revoked if it is foreseeable that you will create reliance before acceptance (sub-contractor).
6. Exception: An offer cannot be revoked if the offeree has started performance on a unilateral contract.
III. General Rule: A revocation is effective when it is received.
IV. General Rule: An offer terminates when the offeree rejects it.
1. By counteroffer
2. By conditional acceptance
3. By acceptance, but with changes
4. Exception: Under Article 2 changing terms will not count as a rejection AND additional terms may enter if:
A. Both parties are merchants
B. There is no material change
C. There is no rejection within a reasonable time
V. General Rule: Death of either party before acceptance terminates a revocable offer but not an irrevocable offer, the decedentâ€™s estate would then be bound.
VI. General Rule: The language of an offer controls the means of acceptance
VII. General Rule: Starting performance is a means of acceptance
1. Exception: Not under a unilateral contract
2. Exception: Improper performance is both acceptance and breach.
A. Note: Accommodation under Article 2.
VIII. General Rule: An acceptance is effective when mailed.
1. Exception: Irrevocable offers terminate when the option is up.
2. Exception: When both a rejection and an acceptance are sent whichever arrives first is effective.
IX. General Rule: An incapacitated defendant may void the contract, it is voidable.
1. Exception: If the incapacitated defendant keeps the benefit once incapacity is cured they cannot void it.
2. Exception: An incapacitated defendant is liable for contracts for necessities.
X. General Rule: Economic Duress is not a defense against formation.
1. Exception: Holdout fact pattern when plaintiff has no other options.
XI. General Rule: A misrepresentation or non-disclosure of a material fact defeats a contract.
XII. General Rule: Ambiguity or misunderstanding of an essential element will void a contract
1. Exception: If a party knew of the ambiguity they are bound to the understanding of the innocent party.
XIII. General Rule: Mutual mistake about a material fact will void the contract
1. Exception: Mutual mistake about value is not material
XIV. General Rule: Unilateral mistake of a material fact is not a defense unless the other party knew of your mistake.
XV. General Rule: A contract made for no consideration is not enforceable.
1. Note: Past consideration is not consideration.
A. NY: Except when in writing
2. Note: Illusory promises are not enforceable
XVI. General Rule: New consideration is required to modify a contract. (Pre-existing duty rule).
1. Exception: Canâ€™t use pre-existing duty rule on 3d parties.
2. Exception: Under Article 2 consideration is not required, but good faith is.
3. Note: Partial payments of debts that are early or disputed count as consideration.
4. Exception: Statute of limitations on debts: reaffirming the obligation in a writing renews the debt, no consideration required.
XVII. General Rule: Foreseeable reliance may make a promise enforceable even without consideration.
XVIII. General Rule: Public policy grounds may render a contract unenforceable if:
1. A covenant not to compete is too broad (in restraint of trade).
2. There is an exculpatory clause (eliminates liability for negligence), and the defendant committed gross negligence.
3. The contract is unconscionable, either substantively or procedurally.
XIX. General Rule: A writing is required under the statute of frauds for each of the following contracts
1. A transfer of an interest in real property
2. Performance cannot possibly be completed within a year.
A. Exception: In NY a â€œlifetime contractâ€ must be in writing.
3. A sale of goods for $500 or more
4. A lease of good for $1,000 or more
5. A suretyship
XX. General Rule: A contract that is modified must be in writing if the contract as modified would need to be in writing.
XXI. General Rule: Parties may not ban oral modifications
1. Exception: Under Article 2 they can.
XXII. General Rule: Any contract in writing is sufficient if it contains all material terms and is signed by the defendant.
1. Exception: A writing for the lease of goods is sufficient if it states itâ€™s a lease, includes the quantity, duration, and rental payments, and is signed by the defendant.
2. Exception: A writing for the sale of goods is sufficient if it contains a quantity term and is signed by the party to be bound.
XXIII. Exceptions to the Statute of Frauds
1. Leases of one year or less
2. Transfer of property does not require a writing if (2 of 3)
A. Buyer is in possession
B. Buyer made some payment
C. Buyer made improvements on the property.
3. The contract was for more than a year, but one party has fully performed.
4. Goods over $500 that are already accepted OR paid for
A. Note: Applies only to the goods accepted, not the whole contract.
B. Note: Deposit on non-apportionable goods counts.
5. Custom made goods that were substantially started, and that are not suitable for sale to others in the ordinary course.
6. Contracts that are admitted in a judicial setting
7. If there is a merchantâ€™s confirmatory memo one party may use their own signed writing against the other if:
A. Both parties are merchants
B. The writing includes a quantity
C. There is no written objection within 10 days.
8. If the main purpose of the suretyship was to benefit the one giving it.
A. Note: No exception in NY.
XXIV. General Rule: The parol evidence rule keeps out evidence of a prior or contemporaneous agreement that contradicts a later writing.
1. Exception: To correct a clerical error
2. Exception: When one party is seeking to void the contract completely, not rewrite it.
3. Exception: To interpret a vague or ambiguous term
4. Exception: To supplement a final but incomplete writing.
A. Note: A merger clause (this is the only writing that matters) is valid, no Parol Evidence at all.
XXV. General Rule: Only a merger clause will keep out parol evidence under Article 2.
XXVI. General Rule: Subsequent developments are not kept out by the parol evidence rule.
XXVII. General Rule: Conduct can help with interpretation in three big ways:
1. Course of performance: what actually happens
2. Course of dealing: what the parties usually do
3. Usage of trade: what others usually do
XXVIII. General Rule: A seller is liable for an express warranty. An express warranty is either:
1. A statement of fact
2. A promise
3. A description of goods
4. A use of a sample
XXIX. General Rule: A seller is liable for an implied warranty of merchantability, which means the goods are fit for their ordinary purpose if the seller is a merchant that deals in products of that kind.
XXX. A seller is liable for an implied warranty of fitness for a particular purpose if the seller knew the buyer had a special purpose and relied on the sellerâ€™s help picking out the goods.
XXXI. General Rule: A leasor is subject to the same types of warranties
1. Exception: In a finance lease (when youâ€™re borrowing a product en route to buy) only the manufacturer is liable.
XXXII. General Rule: A seller can disclaim implied, but not express warranties.
XXXIII. General Rule: A seller can limit buyerâ€™s remedies under a warranty if it is not unconscionable.
1. Exception: Limitations for personal injury.