LAW 3220: EXAM 4
59 Cards in this Set
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What 3 types of law is contract law composed of?
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1. Statutory law
2. Common Law
3. State law
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does common contract law relate to specific contracts? what about statutory contract law?
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Common law = all contracts
Statutory law = goods by merchants
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What does article 2 deal with?
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contracts that deal with goods from merchants. It can trump common law
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what is a contract?
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a legal relationship between parties
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what is a binding contract?
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a contract under common law that meets 5 requirements
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what is a non binding contract?
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a contract that doesn't meet the 5 requirements of a binding contract
it isn't enforceable
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what are the 5 requirements for a binding contract?
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1. Agreement (offer is clearly communicated, not conditional, acceptance is clear/not conditional)
2. consideration (exchange something of value)
3. legal capacities of contract (no minors or intoxicated/insane people...contract is voidable)
4. subject matter is legal
5. genuine conse…
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what does it mean for a contract to be voidable?
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it is still enforceable but it doesn't have to be
usually encountered with contracts signed by minors or intoxicated/insane people
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what is a void contract?
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a contract that never really existed (ex: contract for illegal activities)
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what is the statute of frauds under common law?
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**Applies to all contracts, says that 5 types MUST be in writing:
1. Sale of real property
2. Anything not performed in 12 months
3. promise to pay some one else's debt
4. marriage promises
5. promise by administrator to pay some one's estate
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what is a counter offer?
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if one party in a contract offers a different offer, it's a counter offer
**GETS RID OF ORIGINAL OFFER!!!
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what is parole evidence under common law?
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No oral evidence/testimony may be given if it contradicts the terms of the written contract
**You can only introduce this testimony if fraud was involved or if the contract terms are vague
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How can a contract be discharged?
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if both parties substantially perform
The only exception is if there is a material breach
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what are the options in a contract if there is a material breach?
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The non breaching party is entitled to damages.
Remedies:
-monetary damages
-equitable damages
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what are the types of monetary damages for contract law?
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1. Compensatory (most common)
2. expectancy damages (profits you expected to make from the contract)
3. liquidated damages (damages that are specifically put into the contract)
-the court WILL enforce this unless it seems
punitive
**Punitive damages are rare unless fraud …
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what are the types of equitable remedies for contract law?
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1. specific performance (used if the contract deals with unique property)
-NOT for services
2. Injunction (even more rare)
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what is restitution? how is it achieved under contract law?
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the act of restoring something
Achieve through Quasi Contract
-technically not a contract but
the court will find one, esp if you're being
unjustly enriched
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what is the mitigation of damages?
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non breaching party must mitigate (minimize damages)
Ex: find another supplier
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what is the UCC? Why does it exist?
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Uniform Commercial Code (under Article 2). Only applies to sale of goods by merchants (tangible/personal property)
Exists to:
1. Promote uniformity
2. Clarify the law
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What is the difference between common law and article 2?
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Common law:
-contracts must meet 5 requirements
-no gaps allowed in contracts
Article 2:
-more flexible
-fills in holes in contracts
-applies to any reasonable agreement between
parties
-Wants to find contract to promote business
transactions
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what is the statute of frauds under Article 2?
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*Applies to any contract for sale of goods >= $500
*MUST be in writing to be enforceable
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what is the parole evidence rule under Article 2?
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no oral evidence/testimony may be given that contradicts terms of contract UNLESS:
fraud is involved
being given to fill in gaps in contract
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what is the seller's obligation under article 2?
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deliver goods in accordance with contract
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what is the buyer's obligation under the terms of the contract?
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pay for goods in accordance with contract
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what happens if the seller delivers non conforming goods?
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Buyer can:
1. reject all goods
*Must tell seller
*if still time to perform, seller can try to fix
problem
2. Accept all goods
3. Accept only the conforming goods, reject others
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what are the 4 express warranties under Article 2?
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1. Warranty of title
-for every contract for sale of goods
-seller warrants good clean title
2. promise of facts about goods
3. Description of product given by seller
4. sample of product given to buyer
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do warranties under article 2 carry strict liability?
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Yes they do!!
This means that the court doesn't want excuses, they just want to move on to damages
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what are the 2 types of implied warranties under article 2?
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1. Implied warranty of merchantibility
-applies to every contract
-goods are fit for ordinary purpose
-goods are sellable (equal kind/quality)
2. Implied warranty of fitness for particular purpose
-buyer relies on seller's knowledge of product to
say if it'll work for an…
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what does article 2 apply to?
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the sale of goods (tangible property) by merchants
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can a seller limit the warranties of a product given under article 2? If so, how?
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YES!
There must be a written contract signed by the buyer stating what warranties are limited
OR
Buyer and seller put cap on damages
Buyers do this b/c only care about warranties important to them
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What are the remedies/damages available if the buyer breaches the contract?
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Seller can:
1. cancel contract
2. repossess goods
3. sue buyer for purchase price/lost profits (any economical loss)
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What are the remedies/damages available if the seller breaches the contract?
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Buyer can:
1. cancel contract
2. reclaim deposits
3. find another supplier (cover)
-can get price difference from seller
4. get any economic losses back
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does article 2 contain language for punitive damages?
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NO
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does article 2 apply to international goods?
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NO!
Applies only to goods sold in US.
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what should you do for contracts concerning International goods?
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1. Get contract in writing
2. Look to International Convention
-similar to article 2
-doesn't have statute of frauds
2. Specify how disputes are to be resolved
-binding arbitration is common
-state who has jurisdiction
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what is a negotiable instrument? what is it governed by?
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Something that is transferred for value.
Governed by Article 3
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what are the 6 requirements for a negotiable instrument?
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1. must be in writing
2. unconditional
3. signed by maker/drawer
4. payable on demand or within specified time
5. specific amount of money
6. pay to order of or payable to bearer
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what are the 4 types of negotiable instruments?
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1. Drafts (broad, drawee can be anyone)
2. Checks (type of draft, drawee is bank, payable on demand only)
3. Notes (promissory note=states amount, interest, payment dates; Collateral note=pledge assets to promise to repay)
4. Certificate of deposit (investment opportunity. Bank promise…
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is a check a draft?
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Yes, it's a type of draft.
2 limitations:
1. payable on demand
2. drawee must be bank
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what is a payee?
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person who receives funds (person who cashes check)
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what is a drawer?
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person who creates document (check writer)
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what is a drawee?
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person who makes payment in accordance to instrument (like a bank)
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what are the types of 3 party instruments? 2 party instruments?
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3 PARTY
-drafts
-checks
2 PARTY
-notes
-certificate of deposit
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what is credit used for?
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as a way to expand business
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what is a creditor?
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a person who sells on credit.
They must have a credit policy stating amount loaned, interest rate, repayment dates
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what is a debtor?
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person who owes money
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what is a secured creditor? how do they achieve this status?
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some one who is in perfect security interest (WILL get paid)
Achieve this by getting a financing agreement signed and filing a copy with the secretary of state
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what are the 2 types of cosigners?
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1. Surety
-primarily liable
-can be directly sued
2. Guarantor
-secondarily liable
-will get sued if person isn't satisfied after suing
the debtor
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is bankruptcy state or federal law?
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Federal!
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what 3 changes were made to bankruptcy law to make it harder for some one to file?
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1. Before you file, must take credit counseling course
-determine if you're really in debt beyond repair
2. take a debtor education course
-how to budget your life better
3. If file for Ch 7 and get debts discharged, can't ask for another discharge for 8 years
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what are the 3 types of bankruptcy?
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1. Ch 7
2. Ch 13
3. Ch 11
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what is Ch 7 Bankruptcy?
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Applies to individuals and businesses
AKA liquidation
*pursue when hopelessly in debt
*Businesses CEASE TO EXIST
*sell all non-exempt assets to pay debt
*all debts not paid are legally discharged
*trustee in bankruptcy maximizes value of assets to pay creditors (works for creditor…
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what does it mean to be under the protection of the bankruptcy court?
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once you file, the court protects you
creditors rights are frozen. everything comes to a halt
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which type(s) of bankruptcy can discharge debts?
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Ch 7 only!
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what is Ch 13 bankruptcy?
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Individuals only!
*not hopelessly in debt
*take plan to court to pay debt within 5 years
*if court agrees, creditors must live with it
*if plan fails, can switch to Ch 7
**AKA Court Protected Debt Repayment Plan
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what is Ch 11 bankruptcy?
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Businesses only!
*not hopelessly in debt
*take plan to court, have reasonable amount of time to pay (no set time limit like Ch 13)
*trustee/judge become business partners (must approve all business decisions
**Business is still up and running!
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what are the first and last priority classes of creditors?
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1. Secured creditors
LAST: general unsecured creditors
-bottom of food chain
-AND must prove claim
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what 4 types of debts are not discharged?
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1. child support and alimony
2. taxes
3. student loans
4. debts incurred right before you file for bankruptcy
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what are the 2 non bankruptcy options?
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1. extended time
2. take less than 100 cents on the dollar
**These are totally voluntary
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LAW 3220: EXAM 4