BLAW EXAM 2

Question 1

What is a Contract

Answer 1

An agreement between two or more persons that is enforceable

Question 2

Elements of Contract

Answer 2

• mutual assent or agreement to enter a contract (offer, acceptance)
• consideration
• capacity
• legality

Question 3

Defenses to Contract Formation

Answer 3

• Lack of Mutual Assent (Mistakes, Misrepresentation, Duress, Undue Influence)
• Lack of Consideration
• Legality
• Capacity

Question 4

Parties to a Contract

Answer 4

Offeror = person proffering the offer
Offeree = person to whom the offer is presented

Question 5

Bilateral contract

Answer 5

a promise for a promise

Question 6

Unilateral Contract

Answer 6

one party makes a promise, that the other may on

Question 7

Express Contract

Answer 7

the parties to a contract explicitly state all of the important terms to the contract

Question 8

Implied Contracts

Answer 8

Words and/or conduct of the parties indicate that the parties intend to create an enforceable contract

Question 9

Executory Contract

Answer 9

An agreement where one of more of the parties has not fulfilled their obligations under the contract

Question 10

Executed Contract

Answer 10

An agreement where both parties have fulfilled all of their requirements under the contract

Question 11

Valid

Answer 11

all necessary elements are present making the contract binding and enforceable

Question 12

Enforceable Contract

Answer 12

a valid contract that can be enforced because there are no preexisting legal defenses

Question 13

Voidable Contract

Answer 13

is otherwise binding but may be voided at the option of one party
- ex. Fraud, Minor

Question 14

Unenforceable Contract

Answer 14

A contract exists, but it cannot be enforced because of a legal defense
- K is not written and should be

Question 15

Void

Answer 15

No contract exists or it is without legal obligations
- illegal

Question 16

Where do we get Contract Law

Answer 16

Common Law
- state specific case law regarding
- Pertains to all contracts EXCEPT for the sale of goods
Restatement 2nd of Contracts
- not directly binding in any state but is persuasive
Uniform Commercial Code (UCC)
- Not federal or state law!
-Article 2-applies to the sale of goods

Question 17

UCC Article 2(Sales) and Article 2A

Answer 17

• Pertains ONLY to contracts for the sale of gods
  -NOTE: article 2 does not displace what the parties have agreed to or other substantive law (such as consumer protection)

Question 18

Definition of Goods

Answer 18

• Tangible, moveable items
• Does NOT include investment securities, copyright
• Includes
  -personal property attached to real estate if it can be removed without harm
• Minerals or structures severed by seller;
  -growing crops or timber regardless of who severs them
• born or unborn animals
• food at a restaurant

Question 19

Merchants under the UCC

Answer 19

1. one who deals in a specific good or set of goods on a regular basis (ex. manufacturer, wholesale, retailer(
2. one who holds themselves out as having specialized knowledge of goods (ex. banks)
3. someone who employs a merchant as their agent (ex. boat broker)

The UCC treats transactions between merchants differently than transactions with non-merchnants

Merchants are subjects to different standards and rules b/c they have special knowledge of the relevant commercial practices and often need to have greater flexibility and speed in their transactions

Question 20

Examples of Merchants

Answer 20

• a car dealership selling a car
• a car salesman selling his own car to an individual when he represents his knowledge about the car

Question 21

Good Faith

Answer 21

-All parties must preform their obligations under the code in good faith
- honesty in fact
- in the case of a merchant,it means observing reasonable commented standards of fiar dealing in the trade
- not a cause of action by itself

Question 22

Formation Rules

Answer 22

• UCC does not completely cancel the common law contact rules
• If the UCC does not state a different rule, then the common law rules of contract will apply

Question 23

Hybrid Contracts

Answer 23

involve both the sale of goods and the provision of services
- ex. a contract calling for the construction of a house includes both services (skilled labor, design work) and goods (building materials)

Question 24

Predominant Factor Test

Answer 24

A totality of the circumstances test that asks whether the purpose of the contract is primarily for goods or services. Factors
- what is the language of the contract
- the nature of the business of the supplier
- reasons the parties entered into the contracts (what exactly have they bargained to receive)
- cost involved in contract (i.e. goods vs. services)

Question 25

Defenses to Contract Formation

Answer 25

Defenses to contract formation that make a contract “unenforceable”
- capacity
- legality
- lack of mutual assent
- form of contract

Question 26

Capacity

Answer 26

some are legally incapable of incurring binding contractual obligations. One who lacked capacity to enter into a contract can assert such as a defense thereby making the contract voidable at their election

Question 27

Minors

Answer 27

• age of majority
• contracts entered into between a minor and an adult are voidable by the minor and binding on the adult
• Minors cannot avoid contracts that:
• are for necessities
• are set by statutes (ex. insurance, student loans)

Question 27

Intoxicated Persons

Answer 27

One who is so intoxicated as not to understand the nature and significance of his promise may be held to have made only a voidable promise if the other party had reason to know of the intoxication

Question 28

Mental Incapacity

Answer 28

If ones mental capacity is so deficient that he is incapable of understanding the nature and significance of a contract and may affirm or disaffirm when lucid

Question 28

True/False: ilegal consideration or subject matter renders a contract void and unenforceable

Answer 28

True

Question 29

Contracts that are illegal b statue

Answer 29

Ex. Usury; Price-fixing agreements contrary to antitrust laws, bribes
- state requried licensing (if a party does not have a required license (ex. contractors chauffers, etc) then the other party does not have to fulfil their side of the bargain) (ex. payment)

Question 30

Contracts that violate public policy

Answer 30

• restraints on trade
• exculpatory clauses
• unconscionable contracts

Question 31

Noncompete Agreement: contracts that violate public policy

Answer 31

Is legal and enforceable if it is ancillary to a legitimate bargain (it must be a part of a larger agreement)

Noncompete agreements that are part of a contract for the sale of a business must be
- reasonable in time (not too long(
- reasonable geographical area (not an unfairly large amount of area)
- for an activity the agreeing party has done before

Noncompete Agreements that are part of an employment contract must be
- essential to the employer (ex. Trade Secrets; Customer Lists)
- fair to the employee (ex. never work for a competitor in this state)
- harmless to the general public

Question 32

An Exculpatory Clause

Answer 32

is a contractual provision that attempts to release one party from liability in the event the other party is injured

“I agree to hold ___ and its employees harmless in the event that I am injured”

Generally, such clauses are unenforceable when they attempt to exclude:
- Intentional or Gross Negligence (ordinary negligence may be ok)
- activities in the public interest (waivers of liability for medical treatment, public transportation, and other essential services)
- where the parties have unequal bargaining power
- unless such clause is clearly written and readily visible (not buried in page 27 of a contract)

Question 33

Unconscionable Contract

Answer 33

is one that a court refuses to enforce because of fundamental unfairness. This unfairness should “shock the conscious of the court
ex. contracts that require racial discrimination

Two factors the court will look to:
-one party used its superior power to a contract on a weaker party. The weaker party did not fully understands the agreement

Adhesion Contracts = form contract that is given by one party to another on a “take it or leave it” basis (ex. Contracts given to a consumer who has no ability to negotiate or bargain)

Question 34

Mistake of Fact

Answer 34

incorrect understanding of a contracts terms at the time the contract is entered

Question 35

Unilateral Mistake

Answer 35

One party misunderstands

General Rule - Does not trigger Rescission UNLESS
- OTHER PARTY KNEW OF THE MISTAKE
- mistake was merely a clerical error
- mistake was so serious that the contract is made unconsionable

Question 36

Mutual Mistake

Answer 36

all parties misunderstands and thus Rescindable

Question 37

Misrepresentation

Answer 37

Where a party makes an untruthful representation about a material fact of a contract

Question 38

Innocent Misrepresentation

Answer 38

party making the untruthful representation believed it to be true. Results in Rescissions, but no damages

Question 39

Negligent Misrepresentation

Answer 39

party making the untruthful representation may have believed it to be true, but a reasonable person in that party’s position would have known otherwise. Results in Rescission possibly damages

Question 40

Fradulent/Intentional Misrepresentation

Answer 40

purposely misleading another party. Results in Rescission, possibly damages
- Ex. Concealment of material facts

Question 41

Undue Influence

Answer 41

where a party in a dominant position interferes with a subservient party’s ability to make their own decision

Question 42

Duress

Answer 42

where a party is forced into an agreement against their will
ex. Extortion, Economic Duress (unless our sign another contract with me, I will not perform under our first contract)

Question 43

Statute of Frauds

Answer 43

A contract must be in writing and signed if it falls within the Statute of Frauds
- agreements made in the consideration of marriage
- agreements that cannot be performed within one year an interest in land
- an interest in land
- agreements made by the executor of an estate
- sale of goods for $500 or more
- specifically manufactured goods
- acting as a surety

Other exceptions
- promissory estoppel
- admissions

Question 44

True/False: If a contract could be performed in 1 year then it does NOT have to be in writing

Answer 44

True:
Ex. you can have off every Friday as long as you work here -> Does not have to be in writing)