NCDC Contracts Outline

8/18/2019 NCDC Contracts Outline

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What is the governing law?

• UCC (Article 2) – applies to contracts for sale of goods. Goods are all

things movable @ the time they are identied as the goods to be sold under

the K. UCC doesn’t apply to the sale of real estate, services, or intangibles, or

to construction K.

• Common Law – applies to most K’s except for the sales of goods. Any K not

involving the sale of goods should be treated under CL contract principles.

o For K’s involving both goods services, the predominant purpose of

the K dictates. !o"ever, if divide payment b#" goods services, apply

$%% to goods %& to the remainder.

Is K Valid?

'n order to form a valid K, there must be ()* o+er, (* acceptance, (-* consideration,

and (* no valid defenses.

• Oer! manifestation of present intent to K demonstrated by a promise,

underta/ing, or commitment "ith denite certain term0 and communicated

to o+eree.

• Ad"s generally not o+ers, unless highly specic as to 1uantity clearly

indicates "ho may accept. 2% ad can be an o+er if ()* terms are

certain denite (must contain 1uantity* and (* o+eree is clearly

identied.

• Oer (UCC)! 1uantity must be certain or capable of being made certain, i.e.

re1uirements#output K’s

• #ermination o$ Oer! an o+er cannot be accepted after it’s terminated.

• %evocation! retraction of an o+er by o+eror by either direct

communication or indirectly if the o+eree receives (&) correct information

(2) from a reliable source

(') of acts by o+eror that "ould indicate to a reasonable person

that the o+eror no longer "ishes to ma/e the o+er.

• 3evocation is e+ective "hen received.

• 4+ers can be revo/ed at the "ill of the o+eror $2&566 it

irrevocable b#c7o ()* otion K "here o+eree gives consideration for

a promise by the o+eror not to revo/e0 oro (* UCC merchant rm o+er "here a merchant

o+ers to buy or sell goods in a signed

writing, and gives ass*rances that it will +e held

oen. 2ot revocable for lac/ of consideration

for time stated but 248 to exceed 9: days

unless supported by considerationo (-* detrimental reliance occurs "here


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o+eror reasonably expect o+eree "ould rely

to her detriment on the o+er, and o+eree does rely

• o+er "ill be irrevocable as an option K

for reasonable length of time.

2% promissory estoppel is 42&; a defenseargument for breach and not as a substitute

for consideration.o (* +eginning er$ormance (True Unilateral K

Oer) K becomes irrevoca+le once er$ormance

has +eg*n

• 4+eror must give o+eree reasona+le

time to comlete.o 4+eree not +o*nd to completeo 6ubstantial prep. 8o perform


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• Accetance! manifestation of assent to the terms of an o+er by any

reasonable manner by any medium reasonable under the circumstances,

unless other"ise provided in the o+er.

• Acceptance must mirror the o+er’s terms0

• 4nly person to "hom o+er is addressed can accept.

•

4+eree must /no" of o+er to accept, regardless of "hether it’s abilateral or unilateral K.

Accet Unilateral Oer! not accepted until full performance

is completed. Accetance 1ilateral Oer! accepted by either a promise to

perform or by beginning of performance. 6ilence can also be an

acceptance if by prior dealings or trade practices, it "ould be

commercially reasonable for the o+eror to consider silence as

acceptance. Accetance thro*gh ail (ail 1o/ %*le)! acceptance by

mail is e+ective upon dispatch, provided mail is properly

addressed stamped unless7). o+er stipulates acceptance not e+ective until received0

or. option K involved (acceptance under option 42&;

e+ective on receipt*0 or-. o+eree send reection then sends acceptance (rst

to arrive is e+ective*0 or. o+eree send acceptance then a reection,

acceptance is e+ective *nless re,ection arrives rst

3 o+eror detrimentall- relied on reection.

• Consideration! must be +argained $or e/change b#" parties and must

constitute a benet to the promisor 43 detriment to promisee.

• Pre-existing Legal Duty a promise to perform a preexisting legal

duty is 248 valid consideration, $2&566 ()* it’s a ne" "ritten promise to fulll a debt obligation0

(* promise is to ratify a voida+le o+ligation (e.g. promise to

ratify minor’s K*0 (-* preexisting duty o"ed to -rd party and not promisor0

(* there’s an honest dispute as to the duty0 or

(>* unforeseen circumstances suBcient to discharge a party

(e.g. impracticability*, or under modern vie", if the modication

is $air 3 e4*ita+le in view o$ circ*mstances not

anticiated "hen K "as formed.

• Also, a good faith agreement to modify a K subect to $%%

needs no consideration to be binding.

• Consideration 5*+stit*tes

• 6romissor- .stoel (see a+ove %eliance)

7O 8e$ense ./ist (K


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• isreresentation

• 9ra*d*lent isre0! if party induces another to K by using

$ra*d*lent misre0, the K is voidable by innocent party 'F she

,*stia+l- relied on fraudulent misrep.

• Illegalit-! if the consideration or subect matter of K is illegal, the K is void.

•

Lac: o$ Caacit-! person’s under )C generally lac/ capacity to K. ho"ever,K promises of an adult made to a child are binding on the adult.

• A minor may disaBrm or aBrm K any time before#shortly after

reaching )C. 'f disaBrm, must return everything received under K that still

remains at time of disaBrm. ?A; disaBrm necessary items (food, shelter, clothing, and

medical care* but "ill be liable in restit*tion for value

benetted. 'f aBrm (expressly or by conduct, i.e. failing to disaBrm "#n

reasonable time after )Cth =


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• 3eal 5state7 part performance by buyer satises if buyer

has

• ()* full or part perform, and#or

• (* possession of property, and#or

• (-* improvements to property.

o ?ust have out of -

1reach7 occurs "hen a party fails to perform under the K. the nonbreaching party

"ho sues must sho" that he is willing 3 a+le to er$orm butfor the breaching

party’s failure to perform.

• aterial 1reach7 occurs if the oblige does not receive the s*+stantial

+enet o$ her +argain.

•


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• 'f seller becomes insolvent "#n ): days after receiving

buyer )st payment0 or

• Goods "ere purchased for personal, family, or household

purpose0 or

• if after reasonable e+ort, buyer unable to secure

ade1uate substitute goods (i.e. cover*. 5ecic 6er$ormance! "here the goods are uni1ue or in other

proper circumstances "here goods not yet identied.

• 5eller %emedies

Withhold


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custody of goods rightfully reected and other expense reasonably

incident to seller’s breach, and by seller in storing, shipping, returning, and reselling the goods

as a result of buyer’s breach.

• 6*nitive 8amages! generally not a"arded in K cases

•

7ominal 8amages! may be a"arded "hen breach is sho"n but noactual loss is proven.

• Li4*idated 8amages! must be in an amount that is reasonable in

vie" of actual or anticipated harm caused by breach. 8o be enforceable

damages must7 have been diBcult to estimate or ascertain @ time K "as

formed0 and amount agreed upon must have been a reasonable forecast of

compensation damages in case of breach

• onetar- 8amages UCC

• 1reach +- 5eller 3 1*-er Kees

NCDC Contracts Outline

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