Chapter 16-18

Question 1

Things that fall under Statute of Frauds

Answer 1

1) Interests of Land - includes all property attached to soil
2) Contracts that cannot be performed within 1 year from the date of formation - If performance was possible within 1 year, oral contract is enforceable
3) Collateral (secondary) contracts
4) Prenups and Dowries
5) Contracts for sale of goods price at $500 or more - must be signed by the party that is paying

Question 2

Collateral (secondary) Contracts

Answer 2

Promise that is ancillary to a primary contractual relationship. Ex. Abel promises to loan Ben $100 with interest. Cathy promises to pay Abel if Ben doesn’t.
A promise to pay another’s debt only if the party fails to pay is a collateral contract.

Question 3

When do promises to pay another’s debt fall under the statute of frauds?

Answer 3

If the promise is made to the creditor, it must be in writing. If the promise is made to the debtor, statute of frauds does not apply.

Question 4

“Main Purpose Rule” Exception

Answer 4

If the main purpose of the secondary promisor is to protect or advance is own interest, an oral contract is enforceable.
Ex. Abel contracts with Ben for Ben to make 10 suits for $10,000. Ben goes to Cathy looking for a $5000 loan to start making the suits, but Cathy doesn’t think that Ben can make the loan payments. Abel guarantees the loan payments, and although oral and to the creditor, it was to benefit himself, because he wanted the suits. So Abel’s oral contract to Cathy is enforceable.

Question 5

Exceptions to the Statute of Frauds

Answer 5

1) Partial Performance - Contract has been partially performed and the parties cannot be returned to their original positions
2) Admissions - If the party against whom enforcement of an oral contract is sought admits under oath that a contract was made, the contract will be enforced.
3) Promissory Estoppel - to avoid injustice

Question 6

Essential terms of a contract

Answer 6

Quantity, signed by the party the defendant, names of parties, subject matter, consideration

Question 7

Parol Evidence Rule

Answer 7

If a written contract represents the complete statement of the parties’ agreement, neither party can present oral evidence in court. Cannot present any communication between the parties that is not in the contract.

Question 8

Exceptions to Parol Evidence Rule

Answer 8

1) Contract is subsequently modified
2) Voidable or void contracts
3) Contracts containing ambiguous terms
4) Incomplete Contracts

Question 9

Integrated Contract

Answer 9

A contract that is intended to be the complete and final statement of the terms of the agreement

Question 10

Completely vs. Partially Integrated

Answer 10

Completely: Contains all the terms of the agreement
Partially: Contains some of the terms of the agreement. Can use parol evidence to add to the contract.

Question 11

Rule of Privity

Answer 11

Only the parties in the contract have rights and duties under the contract

Question 12

Assignment definition

Answer 12

A transfer of contractual rights

Question 13

Delegation Definition

Answer 13

A transfer of contractual duties. Delegation does not relieve the delegator from the obligation to perform in the event the delegatee fails to perform.

Question 14

Who can the wronged party sue in the event a delegatee does not perform the other side of the contract?

Answer 14

Can sue either the delegatee or the delegator if their duty is not performed.

Question 15

Duties that cannot be delegated

Answer 15

1) When special trust has been placed in the obligor or performance depends on personal skill
2) When performance by a third party will vary materially from that expected by the obligee
3) When the contract expressly prohibits delegation

Question 16

If 2 people were assigned rights to a contract, who has the right to performance?

Answer 16

Whoever was assigned first

Question 17

Assignor vs. Assignee

Answer 17

Assignor: Party assigning rights to a third party
Assignee: 3rd party receiving those rights.

Question 18

Assignment and statute of frauds

Answer 18

If the original contract had to be in writing, so does the assignment

Question 19

Rights that cannot be assigned

Answer 19

1) The assignment is illegal
2) The contract prohibits assignment
3) The contract is personal (personal insurance rate)
4) The assignment significantly changes the risk or duties of the obligor

Question 20

Obligor vs. Obligee

Answer 20

Obligor: Person who is now obligated to perform the duty
Obligee: Original party of the contract to whom a duty is owed.

Question 21

Which 3rd parties can sue a nonperforming party?

Answer 21

Intended 3rd party beneficiaries can sue, NOT incidental beneficiaries

Question 22

2 Types of Intended Beneficiaries

Answer 22

1) Creditor Beneficiary
2) Donee Beneficiary

Question 23

Creditor Beneficiary

Answer 23

Promisor promises the promisee to pay a debt the promisee owes to the third party. Creditor receives money that would go to the debtor, garnishing wages. If the employer doesn’t pay the debtor, the creditor can sue the employer.

Question 24

Donee Beneficiary

Answer 24

The contract is made for the express purpose of the promisor giving a gift to a 3rd party

Question 25

3rd party beneficiaries cannot enforce a contract against the original until:

Answer 25

Until the rights have vested, or taken full effect and cannot be taken away.
Ex. Life insurance policy finishes, but dad does not die.

Question 26

Elements to prove an intended beneficiary

Answer 26

1) Would a reasonable person assume the 3rd party was to benefit?
2) Whether performance under the contract is rendered directly to the 3rd party beneficiary
3) Whether the 3rd party beneficiary has the right to control the details of the performance
4) Whether the 3rd party beneficiary is expressly designated as so in the contract

Question 27

Conditions Precedent

Answer 27

A condition that must be fulfilled before a party’s performance can be required

Question 28

Conditions Concurrent

Answer 28

When each party’s performance is conditioned or dependent on the other party’s performance. Both parties must perform simultaneously.

Question 29

Tender of Performance

Answer 29

An offer to perform by a party that is ready and willing to do so. If the tendering party’s tender is not accepted, he can sue for breach of contract.
Ex. Comes to mow lawn and is ready with $50.

Question 30

Requirements to be considered substantial performance

Answer 30

1) Party must have performed in good faith
2) Performance must not vary greatly from the performance promised in the contract; and
3) Performance must create substantially the same benefits as those promised in the contract

Question 31

Performance to the satisfaction of another

Answer 31

1) When the contract is personal, the performance must actually satisfy the party, and only personal satisfaction fulfills the condition
2) Other contracts need to be performed to where a reasonable person would be satisfied.

Question 32

Breach of contract vs. Material Breach

Answer 32

Breach of Contract: not performing a contractual duty
Material Breach: When the breaching party fails to perform to a point that it breaks the contract
Ex. used car dealer promises the Camry from the movie “Drive” but gives you a random Camry. Breaks the point of the contract

Question 33

Material breach vs. minor breach discharge

Answer 33

Material: Nonbreaching party is discharged from performance.
Minor: Nonbreaching party is still required to perform.

Question 34

Anticipatory Repudiation

Answer 34

One of the parties refuses to carry out his contractual obligations before they have a duty to perform. Considered a Material Breach

Question 35

Anticipatory Repudiation recovery of damages

Answer 35

Nonbreaching party can sue for damages immediately, even if performance isn’t due yet

Question 36

Time “of the essence” effect on consideration

Answer 36

1) If not stated as “of the essence”, a delay in performance will not destroy the performing party’s right to payment
2) If time is “of the essence”, then performance must be completed before the deadline to receive payment

Question 37

Discharge by mutual rescission

Answer 37

1) If one party has already performed, agreement to rescind must have additional consideration
2) Rescission of contracts involving property must be in writing

Question 38

Novation Definition

Answer 38

Original parties agree to substitute a 3rd party for one of the original parties. The subbed party becomes discharged of their duties

Question 39

Discharge by accord and satisfaction

Answer 39

Parties agree to accept performance that is different from the performance originally promised.

Question 40

Accord Definition

Answer 40

A new executory contract to perform some act in order to satisfy an existing contractual obligation

Question 41

Satisfaction (in accord and satisfaction) Definition

Answer 41

The actual performance of the accord agreement

Question 42

Recovery for non performance of accord and satisfaction agreement

Answer 42

Nonbreaching party can sue for the rights of the original contract or the accord.

Question 43

Instances to be Discharged by Operation of Law

Answer 43

1) Material Alteration: Contract is changed substantially
2) Statute of Limitations: Must sue for breach of contract within time frame
3) Bankruptcy: Declaring bankruptcy prevents creditors from enforcing the debtor’s contracts