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Bar Prep > 01. Contracts & Sales > Flashcards

01. Contracts & Sales Flashcards

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1
Q

What are the 3 Big Questions of Contracts?

A

1) Has en enforceable contract been formed?
2) Has the contract been performed?
3) What are the remedies for breach?

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2
Q

What are the methods of disclaimer for implied warranties under the UCC?

A

1) Oral or conspicuous written statement specifically disclaiming “merchantability”
2) Expressions like “as is” or “with all faults”
3) Buyer’s inspection of goods or refusal to do so, but only for defects that inspection would reveal
4) Course of dealing, course of performance, trade usage
5) Conspicuous written statement

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3
Q

What is the implied warranty of merchantability?

A
  • Applies if seller is a merchant
  • Promises goods are fit for ordinary purpose & conforms to seller’s representations
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4
Q

What is the implied warranty of fitness for particular purpose?

A
  • Applies if seller (merchant or not) knows buyer has particular use for goods & is relying on seller’s skill
  • Promises that goods are fit for buyer’s particular purpose
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5
Q

Under the UCC, what is required for a contract modification?

A

1) Party agreement
2) Good faith

NOTE: No new consideration is required

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6
Q

If the timing of a firm offer lapses, does this mean that the offer has been revoked?

A

No; this means that the offeror may rescind the offer, but it doesn’t automatically mean the offer has been revoked.

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7
Q

How is the nonoccurrence of a condition precedent excused by waiver?

A

When the party who benefits from the condition waives it by words or conduct (e.g., by choosing to perform despite the nonoccurrence). Once the condition is waived, the waiving party cannot raise it as a defense.

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8
Q

What is a condition precedent?

A

A future event that must occur before a contracting party’s performance becomes due.

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9
Q

What is a condition subsequent?

A

A future event that must occur before a party’s performance is discharged

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10
Q

How may the nonoccurrence of a condition be excused?

A

If the party who benefits from the condition waives it by words or conduct

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11
Q

When may restitution damages be available under a contract to perform an illegal act?

A

If the claimant conferred a benefit on the other party AND:
1) was justifiably ignorant of the facts that made the contract illegal;
2) was less culpable than the other party; OR
3) withdrew before the contract’s illegal purpose was achieved and did not engage in serious misconduct

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12
Q

What is a reformation?

A

A modification by a court of a written contract that fails to reflect the contracting parties’ intent.

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13
Q

When may a court reform a written contract due to mutual mistake?

A

1) If there was a prior agreement;
2) The parties agreed to put the prior agreement in writing; AND
3) There is a difference between the prior agreement and the writing due to the mistake

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14
Q

What is the preexisting duty rule?

A

Under the preexisting-duty rule, a promise to perform a duty that a party is already legally bound to perform is not consideration.

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15
Q

T or F: Consenting to a delegation creates a novation

A

False: mere consent does not create a novation. A delegator remains liable to the other contracting party if the delegatee fails to perform.

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16
Q

When may the winning bidder avoid the sale or pay the price of the last good-faith bid at an auction?

A

If the auctioneer:
1) Knowingly accepted a bid by the seller or on the seller’s behalf; OR
2) Procured the seller’s bid to drive up the price of the goods
However, the winning bidder may NOT do so if:
1) The seller bid at a forced sale (e.g., foreclosure); OR
2) The seller gave notice reserving the right to bid

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17
Q

What are the 3 types of compensatory damages?

A

1) Expectation Damages
2) Consequential Damages
3) Incidental Damages

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18
Q

What are expectation damages?

A

Value of performance without breach (what was promised) minus value of performance with breach (what was received)

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19
Q

What are consequential damages?

A

Compensation for losses that do not flow directly & immediately from other party’s breach, including lost profits, so long as losses are not too speculative. These must be foreseeable consequences of the breach.

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20
Q

What are incidental damages?

A

Compensation for commercially reasonable expenses incurred due to other party’s breach.

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21
Q

What happens if a seller ships nonconforming goods with notice of accommodation?

A

This is considered a rejection of the initial offer + counteroffer, so the buyer may accept or reject the goods

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22
Q

What happens if a seller ships nonconforming goods WITHOUT notice of accommodation?

A

This is considered acceptance of the initial offer + breach, so the buyer may accept or reject the goods + sue for breach

23
Q

How may a buyer’s request for immediate or prompt shipment of goods be interpreted?

A

Under the UCC, the request is construed as an offer. The seller may accept in 3 ways:
1) Promising the ship the goods;
2) Shipping conforming goods; OR
3) Shipping nonconforming goods without notice of accommodation (acceptance + immediate breach)

If a seller ships nonconforming goods with notice of accommodation, this is considered a rejection of the offer and a counteroffer.

24
Q

What is a charitable subscription?

A

A written promise to contribute money or property to a charitable institution

25
Q

What is required to show promissory estoppel by a charity?

A

1) A charitable subscription
2) Proof that the promisor reasonably expected to induce reliance on the promise

NOTE: Do NOT need proof of detrimental reliance or substantial injustice

26
Q

What are the elements of promissory estoppel?

A

1) Expected = Promisor reasonably expected to induce reliance on promise
2) Reliance = Enforcing party reasonably relied on promise
3) Detriment = Reliance caused enforcing party to suffer substantial detriment
4) Injustice = Injustice can be avoided only be enforcing promise

27
Q

What is a gratuitous assignment?

A

An assignment of rights made without consideration

28
Q

When can a gratuitous assignment be revoked?

A

A gratuitous assignment can always be revoked by the assignor UNLESS:
1) The obligor has already performed;
2) A document symbolizing the assigned right has been delivered;
3) A written assignment signed by the assignor has been delivered; OR
4) The assignee has detrimentally relied on it

29
Q

In an auction, when does a bidder have the right to withdraw a bid?

A

A bidder always has the right to withdraw a bid until the auctioneer announces the completion of the sale

30
Q

What are the two types of auctions?

A

1) Reserve
2) No-Reserve

31
Q

What is a reserve acution?

A

An auction during which the auctioneer may withdrawn the goods any time before announcing the completion of the sale (this is the default)

32
Q

What is a no-reserve auction?

A

An auction during which goods cannot be withdrawn after the auctioneer calls for bids unless no bid is received within a reasonable time.

33
Q

What is course of performance?

A

The sequence of conduct relevant to understanding the CURRENT transaction between the parties if:
1) The agreement involves repeated occasions for performance by a party; AND
2) The other party accepts performance without objection

34
Q

What is course of dealing?

A

The sequence of conduct concerning PREVIOUS transactions between parties that establishes a common basis of understanding for interpreting their conduct

35
Q

What happens if performance becomes impracticable?

A

Performance by both parties is discharged, and restitution damages are recoverable for benefits conferred before performance was discharged.

36
Q

When could an acceptance act as a counteroffer?

A

If the acceptance is conditioned upon the offeror’s assent to different or additional terms (common-law mirror-image rule)

37
Q

When may contractual obligations NOT be delegated?

A

1) Delegation is prohibited by the terms of the contract; OR
2) The non-delegating party has a substantial interest in having the delegating party perform (e.g., the contract is for personal services involving taste or a special skill)

38
Q

What is a contract?

A

A legally enforceable agreement

39
Q

What are the 2 universes in contract world?

A

1) Common Law
2) UCC (Article 2)

40
Q

What does the common law govern in contracts?

A

Services or Real Estate

41
Q

What does the UCC govern in contracts?

A

Sale of Goods

REMEMBER: Doesn’t have to be from a merchant!!

42
Q

What universe are you in if the contract has elements of both services and goods?

A

Predominant Purpose Rule: Whichever part of the contract plays the bigger role (service or good) governs

EXCEPTION: Divisible contracts = divide into mini-contracts

43
Q

Has an enforceable contract been formed?

A

A - Agreement (offer + acceptance)
C - Consideration (bargained-for exchange)
D - Defenses to formation
S - Statute of Frauds (enforceability)

“All Contracts Don’t Stink”

44
Q

What is an “offer”?

A

A manifestation of a willingness to enter into an agreement (by the offeror) that creates a power of acceptance (in the offeree)

REMEMBER: An offer is like a caterpillar

45
Q

For offers & acceptance: what kind of intent is needed?

A

An objectively serious or reasonably intent

Subjective of secret intentions don’t count

46
Q

Direction of Offer

A
  • Offer must be directed to a specific offeree
  • You cannot accept an offer unless it is directed at you

EXCEPTION: contests or rewards

47
Q

Offer Specificity

A

All essential terms must be covered in the agreement:
- Common Law: Essential Terms = parties, subject, price, quantity (Who? What? How Many? How Much?)
- UCC: Essential Terms = quantity (could be relative)

48
Q

What is a Requirements Contract?

A

The buyer is offering to buy 100% of whatever amount is needed from an individual seller

The seller can sell to other buyers, but the buyer cannot buy from other sellers

49
Q

What is an Output Contract?

A

The seller is offering to sell 100% of whatever amount is produced to this individual buyer

The buyer can buy from other sellers, but the seller can only sell to this buyer

50
Q

What is an Invitation to Deal?

A

A preliminary communication that reserves a final right of approval with the speaker. It does not convey a power of acceptance to the other side.

51
Q

What is an Advertisement?

A

Usually understood as an invitation to deal.

EXCEPTIONS:
1) Reward advertisements
2) Advertisements that are very specific and leave nothing open to negotiation, including how acceptance can occur (e.g., ““First come, first served.””)

52
Q

How are damages for failing to perform a real estate sales contract measured?

A

By the difference between the contract price and the market value on the date of the breach.

53
Q

If a contract prohibits assignment, may a party still assign?

A

Yes; it is considered a breach, but this doesn’t mean the other party (non-breaching party) may ignore the assignment

Bar Prep (33 decks)

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