Contract

Question 1

Theory of Promissory estoppel

Answer 1

“a promise which the promisor should reasonably expect to induce action or forbearance . . . and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.” This is known as the doctrine of promissory estoppel. Under this doctrine, a promise may be partially or fully enforced, even if it is not supported by consideration.

Here, the man already had decided to retire when the company promised him a pension. Therefore, the promise did not induce the man to leave his job earlier than he would have otherwise, and he will likely be unable to recover under a theory of promissory estoppel. If the man had decided to retire early based on a promise of a lifetime pension, he likely would have a case. Therefore, this issue will be dispositive in determining the outcome of the case.

Question 2

Statute of frauds

Answer 2

The Statute of Frauds forbids the enforcement of a contract unless it is set down in a signed writing. There are six classes of contracts that fall within the Statute of Frauds, which means that they require a signed writing in order to be enforceable. You can remember these six classes of contracts using the mnemonic “MY LEGS.” The six classes of contracts are: marriage contracts, contracts that cannot be performed within 1 year, land contracts, executor-administrator contracts, sale of goods contracts for $500 or more, and suretyship contracts. Let’s take a closer look at each of these classes of contracts.

Question 3

Breach

Answer 3

When performance of a duty under a contract is due, any non-performance is a breach.” In other words, a breach occurs when a party has failed to fully perform by the due date of the performance. If a total breach has occurred, in that the party has not performed at all, then the injured party may sue for a remedy. For example, suppose that Jack has agreed to paint Jill’s house within three days of the contract. If Jack fails to paint Jill’s house within three days, then Jack has breached the contract, and Jill may sue for a remedy. But what if the party has already rendered part of the performance? The injured party may still sue for a remedy, but only if the breach is material. So if Jack has only painted part of Jill’s house, then he has likely committed a material breach, and Jill may sue for a remedy. However, if Jack has painted Jill’s house the wrong shade of blue, and the difference is not discernible, then it is unlikely that he has committed a material breach, and Jill may not sue for a remedy.

No MATERIAL Breach if substantial performance has been completed

Consider even party has offered to cure for example rainstorm unable to complete the painting the house and assures that will complete at a later point of time

Question 4

Anticipatory repudiation

Answer 4

So, if Jack calls Jill and says, “I’m not sure if I’ll be able to paint your house tomorrow,” then Jill may not sue Jack for a remedy until Jack has actually failed to perform. Second, the repudiating party may take an action that renders him unable to perform. The action must be voluntary and affirmative. For example, if Jack shuts down his house painting business before his time of performance, then his action repudiates his original contract with Jill, who may sue for a remedy.

Will not sue if notice of retraction or events occur to take back the repudiation. Any anticipatory repudiation that has not become final may be retracted, and the injured party may no longer sue before a breach occurs. The injured party must either receive notice of the retraction or know that events causing the repudiation have ceased to exist.

retraction not possible if material change of events. For example,For example, if Jill has already hired another painter based on Jack’s anticipatory repudiation, then Jack may no longer retract his repudiation. The second is where the injured party has indicated to the repudiating party that the anticipatory repudiation is considered final.

Question 5

Material breach

Answer 5

There are four circumstances that must be considered in determining whether a breach of contract is material: (1) the loss of benefit to the nonbreaching party, (2) the adequacy of compensation for the nonbreaching party’s loss, (3) the likelihood of a cure by the breaching party, and (4) the extent of forfeiture by the breaching party if the breaching party is denied the bargained-for compensation or benefit. See Restatement (Second) of Contracts § 241 (1981).

Question 6

anticipatory repudiation final once non breaching party accepts notice of retraction?

Answer 6

he anticipatory repudiation is considered final when either the injured party has materially changed position in reliance on the repudiation or where the injured party has indicated to the repudiating party that the anticipatory repudiation is considered final. Id. at § 256.

Here, the chef anticipatorily repudiated the contract when he notified the woman that he would be unable to perform. The woman accepted his repudiation and canceled the contract. At that point, the repudiation was final and the chef could not retract it.

Question 7

Interpretation

Answer 7

Typically, courts will consider the terms of the agreement, as well as the intent of the parties regarding those terms. Also, as a general rule, the purpose of the parties is given significant weight, and their words and conduct are interpreted in light of the circumstances
reasonable, lawful, and effective meaning to all of the terms.
specific over general
Third, courts will give greater weight to negotiated or added terms than to non-negotiated or standard terms. For example, if Jack and Jill print out a standard agreement and add a handwritten provision before signing the contract, then the court will give greater weight to the handwritten provision. Finally, courts will interpret the contract against the drafter when choosing among reasonable meanings. So, if Jack wrote the contract, then the court will be more inclined to interpret the contract in favor of Jill.

interpretation often involves determining the meaning of indefinite, ambiguous, or even omitted terms.

The terms of a contract may be indefinite in that they are left open or uncertain. If so, then courts may void the contract for indefiniteness, depending on the importance of the terms. If the indefinite terms are essential, then the court will conclude that the parties never intended to make a contract.

Minor indefinite terms- Court sets them ex reasonable time
Ambiguous terms: If so, then courts may void the contract for a lack of mutual assent, depending on what the parties understood. er minivan, then the court will interpret the term “car” to mean Jill’s convertible. If the parties had different meanings for the term due to a misunderstanding, then the court will typically find a lack of mutual assent and void the contract. However, if one party knew of the misunderstanding, then the court will interpret the contract based on the other party’s meaning.

nally, the terms of a contract may be omitted in that the parties have not provided for what should happen in a given situation. If so, then courts will usually fill in the gaps of the contract by supplying a reasonable term under the circumstances. Courts will also impose a duty of good faith in the performance and enforcement of the contract

Question 8

open and indefinite terms

Answer 8

Under the U.C.C., “Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.” U.C.C. § 2-204(3) (2002). If the price is left to be agreed or nothing is said about price, the price can be set at a reasonable price at the time for delivery. See id. § 2-305. If the contract is silent on the place of delivery, the place of delivery can be the seller’s place of business (or residence). See id. § 2-306. If the time of delivery is not provided, it can be set at a reasonable time. See id. § 2-309. Quantity, however, is more difficult and is often unable to be filled in by the courts. See id. § 2-306.

Question 9

Parol evidence rule

Answer 9

The rationale behind the parol evidence rule is that the parties to an agreement will include all of their terms in a written contract, so any terms that are not in the written contract were not intended to be part of the final agreement.his means that a completely integrated agreement may not be supplemented by a prior agreement or a contemporaneous spoken agreement.

For instance, any related documents that were also signed by Molly when she signed her lease contract would be considered part of the same integrated agreement. A completely integrated agreement is a writing that has been adopted by the parties as a final and complete statement of the terms. A partially integrated agreement, on the other hand, is a writing that has been adopted by the parties as a final but incomplete statement of the terms. For example, if Molly’s lease contract contains all of the final terms of her agreement, except for the amount of her security deposit, then her contract will be a partially integrated agreement. For the parol evidence rule to apply, an integrated agreement must also be binding. For example, if Molly’s lease contract is not supported by consideration, or if it is merely a draft or proposal, then it will not be considered binding and the parol evidence rule will not apply.

Question 10

Exceptions to Parole evidence

Answer 10

First, extrinsic evidence may be used to establish whether a written contract is an integrated agreement, as well as whether an integrated agreement is completely or partially integrated.
Second, extrinsic evidence may be used to clarify the meaning of an ambiguous term.
Third, extrinsic evidence may be used to support a defense to enforceability, such as illegality – for instance, if the leasing office previously agreed to lease Molly an apartment for the purpose of storing stolen goods, then their prior agreement may be used as evidence of illegality. Finally, extrinsic evidence may be used to determine whether a remedy should be granted or denied to one of the parties. For example, the leasing office may have previously agreed that Molly would receive a discount on her first three months of rent, and that Molly has the right to modify any integrated contracts to include the discount. Evidence of their agreement may be used to prove that Molly should receive the discount.

See less

Question 11

Material misrepresentation

Answer 11

contract is voidable by the recipient.Normally, a party’s silent failure to mention a fact will not constitute a misrepresentation as to that fact. But intentional acts of
concealment are deemed to be equivalent to misrepresentations

Question 12

Defense of impracticability

Answer 12

a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a
basic assumption on which the contract was made, his duty to render
that performance is discharged, unless the language or the
circumstances indicate the contrary

Question 13

Manifestations of assent

Answer 13

Manifestations of assent that are in themselves sufficient to conclude
a contract will not be prevented from so operating by the fact that the
parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the
agreements are preliminary negotiations.”

Question 14

specific priority of express terms, trade usage etc.

Answer 14

among express terms, course of performance, course of
dealing, and trade usage, trade usage has the lowest (not highest)
priority. Rest. 2d of Contracts § 203(b). So if the case involves either
an express term, a course of performance or a course of dealing, the
presence of a trade usage on the same issue will be irrelevant.

Question 15

Hadley v Baxdale

Answer 15

Under the principle of Hadley v. Baxendale, the breaching party is
responsible only for those types of damages that, as of the making of
the contract, he had reason to foresee as a likely result of breach. In
the case of a contract to lend money, the lender is usually entitled to
presume that an alternative source of loan money will be readily
available, unless the borrower has brought home to the lender at the
time of the loan contract the borrower’s likely inability to borrow
elsewhere

Question 16

creditor beneficiary

Answer 16

See, e.g., Rest. 2d of Contracts § 302(b): putting
aside the creditor-beneficiary scenario (not present here), the
beneficiary is an intended one only if “the circumstances indicate that
the promisee intends to give the beneficiary the benefit of the
promised performance.” So, unless there is affirmative evidence that
the hospital intended to give its patients the benefit of the promise (an
intent that would presumably have to include an intent to give the
patient the right to sue the janitorial service if it didn’t perform), each
patient would merely be an incidental beneficiary.

Question 17

condition and

Answer 17

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”
Rest. 2d of Contracts § 205. Where a duty of one party is subject to
the occurrence of a condition and that party’s cooperation is necessary
for the condition to occur, a court will typically conclude that such
cooperation is part of that party’s duty of good faith. See Rest. 2d §
245, Comment a. That’s the case here: The buyer’s duty was
conditional upon receipt of financing, and that financing could not
occur without the cooperation of the buyer (by his making an
application). So the court will find an implied term requiring the buyer
to make a good-faith application for the financing. Since the buyer did
not fulfill this duty to make good-faith efforts, he has breached.
Furthermore, “Where a party’s breach by non-performance contributes
materially to the non-occurrence of a condition of one of his duties,
the non-occurrence is excused.” Rest. 2d § 245. See also Illustr. 3 to §
245, which is exactly on point (buyer’s failure to make mortgage
application causes him to lose the benefit of the mortgage-financing
contingency in the contract). So when the buyer failed to make
reasonable efforts to get financing, he lost the right to assert the lack
of bank financing as the non-occurrence of a condition to his duty to
close

Question 18

doctrine of accord and satisfaction

Answer 18

An ‘‘accord’’ is an agreement under which a
party to a contract agrees to accept, as complete satisfaction of the
contract, some performance different from that originally due under
the contract. ‘‘Satisfaction’’ is performance of the accord, and once
satisfaction takes place, both the accord and the original contractual
duty are discharged. Here, there was a good-faith (although mistaken)
dispute as to whether the architect had produced defective plans. The
‘‘accord’’ was the client’s offer to pay $7,500 for the settlement of the
claim. ‘‘Satisfaction’’ of the accord occurred when the architect
accepted the payment. As a result, the original obligations under the
contract were discharged,

Question 19

Expectation damages

Answer 19

The most common measure of damages sought by a party as the
result of the other party’s breach is expectation damages, which seek
to put the non-breaching party in the same position as he would have
been had there been no breach. W

Question 20

Reliance damages

Answer 20

A non-breaching party may seek reliance damages, which aim to
repay the plaintiff for expenses that he has undergone in reliance on
the breaching party’s promise. Notably, this does not allow the
plaintiff to recover expected profits, so it is unlikely to afford the
plaintiff the greatest measure of damages when expectation damages
are available.

Question 21

SOF

Answer 21

Contracts for the sale of an interest in land fall within the Statute
of Frauds, and thus require a writing in order to be enforceable (unless
they are partially performed). In order to suffice, the writing must
specify with reasonable certainty:
1. the contract’s subject matter;
2. the parties’ identities;
3. promises, by whom and to whom made, and essential terms and
conditions; and
4. the signature of the party to be charged (the one who denies the
contract’s existence).

Question 22

Is a unilateral performance revocable?

Answer 22

An offer is unilateral if it allows acceptance only by performing
the requested act. Here, the bank’s offer of $25 is unilateral since it is
only acceptable by actually standing in line for five minutes, not by
promising to do so. A unilateral offer becomes irrevocable once the
offeree begins performance. As a result, the offer from the bank to the
customer became irrevocable the moment the customer got in line.
Since the offer was irrevocable, the bank manager’s attempt to revoke
it was ineffective. The statement on the sign that ‘‘This offer may be
withdrawn at any time’’ has no effect.

Question 23

intended beneficiary

Answer 23

If he meets this test, he must
further fit into one of the two following categories: (1) either the
performance of the promise will satisfy an obligation of the promisee
to pay money to the beneficiary; or (2) the circumstances indicate that
the promisee intends to give the beneficiary the benefit of the
promised performance

Question 24

assignment

Answer 24

n assignment is not a contract, but rather is a present transfer of contractual rights. See Restatement (Second) of Contracts § 317, with comments; 29 Williston on Contracts § 74:47 (4th ed.). Any contractual right may generally be assigned, with or without either a writing or the obligor’s assent. See Restatement (Second) of Contracts §§ 317, 323 cmt. a. However, where there is no contractual right, any language purporting to create an assignment is ineffective. Therefore, here, because the debtor had no right to $500 from her roommate, her writing created no assignment. Therefore, the creditor may only recover damages from the debtor.

Question 25

Donee beneficiary

Answer 25

However, most modern
courts agree with the Rest. 2d of Contracts § 311, which ignores the
donee/creditor distinction and, rather, views the rights of both as
vesting when one of these three events occurs:
1. The beneficiary manifests assent to the promise;
2. The beneficiary sues to enforce the promise; or
3. The beneficiary justifiably relies on the promise to his detriment.
Here, the stepson didn’t even know about the contract when it was
modified, so he can’t contest the modification.

Question 26

contracts with minor

Answer 26

recoverable only to the extent of ratification on attaining majority

Question 27

modification under UCC and modern law

Answer 27

Under common law, modification to be supported by consideration. Modification to be ineffective under preexisting duty rule
While under UCCprovides that, under certain circumstances, a
good-faith modification may be effective even absent consideration.

Question 28

acceptances

Answer 28

acceptances are effective when mailed

Question 29

unconscionable

Answer 29

Unconscionability will generally
be found only in cases where no reasonable person would have agreed
to the terms of the contract after fair negotiations. There will normally
have to be grossly unfair terms in the contract and the bargaining
process would have to be characterized by a substantial inequality in
bargaining power. Here, the buyer could have had his own mechanic
examine the car, so there was a procedural safeguard to protect the
buyer from the dealer’s advantage in knowledge

Question 30

perfect tender rule and installment contract

Answer 30

In one-shot (non-installment) cases, UCC § 2-601 essentially
applies (though with some important exceptions) the “perfect tender”
rule — the buyer can reject the whole delivery, or any commercial
units, if the goods “fail in any respect to conform to the contract[.]”
But § 2-601 explicitly says that it does not apply to installment
contracts, and the contract here is an installment contract

“the buyer may reject any installment
which is non-conforming if the non-conformity substantially impairs
the value of that installment and cannot be cured[.]” The final clause
of that section then adds a proviso dealing further with cure: If the
non-conformity of the installment does not substantially impair the
value of the whole contract, then “if . . . the seller gives adequate
assurance of [the non-conformity’s] cure the buyer must accept that
installment.”

Question 31

UCC- additional term in contract

Answer 31

This is a classic battle-of-the-forms problem under the UCC.
Because the buyer’s offer was silent on the issue of whether disputes
were to be arbitrated, the arbitration clause contained in the seller’s
acknowledgment (i.e., the seller’s acceptance) was what the UCC
refers to as an “additional” term. Under § 2-207(2), in a contract
between merchants, the acceptance’s proposed additional terms
become part of the contract unless one of three things happens: (1) the
offer expressly limits acceptance to the term of the offer; (2) the
proposed term materially alters the contract; or (3) the offeror
promptly notifies the offeree of an objection to the proposed term. (It’s
clear that both parties are “merchants,” because non-merchants don’t
buy or sell 50 tons of cotton.)

Question 32

Output contracts

Answer 32

UCC § 2-306 authorizes requirements and output contracts. The
contract here is enforceable, because the company’s promise to buy all
of its requirements for lawn care products during the coming year
furnished consideration for the supplier’s promise to give it a 10
percent discount off its published prices. A

Question 33

anticipatory contracts under UCC

Answer 33

But under
UCC § 2-609(1), the party who wishes to demand assurances may do
so only “when reasonable grounds for insecurity arise with respect to
the performance of [the other] party.” Since we’re told that the general
contractor had no reason to doubt the subcontractor’s ability to
perform, the general contractor had no right to demand assurances,
and the subcontractor’s failure to provide them was therefore not an
anticipatory repudiation.

Question 34

Article 2 of UCC

Answer 34

First, notice that this agreement, since it is for the sale of goods, is
governed by Article 2 of the UCC. Article 2’s version of the parol
evidence rule makes it clear that even a term in a total integration may
be supplemented or explained by a trade usage. When the sub-sections
of § 2-202 are viewed together, the result is that even where the
writing is a total integration (i.e., it was “intended . . . as a complete
and exclusive statement of the terms of the agreement,” § 2-202(b)),
the meaning of terms in it may still be “explained or supplemented (a)
by course of performance, course of dealing, or usage of trade[.]” (

Question 35

Restitution

Answer 35

in form of benefit conferred to the other party so it will be the downpayment which can be demanded apart from the expectation interest

Question 36

Irrevocable offers under UCC

Answer 36

UCC § 2-205 allows merchants to make ‘‘firm offers,’’ i.e., offers
that are irrevocable for a limited period even without consideration.
Section 2-205 says that the period of irrevocability ‘‘in no event may .
. . exceed three months.’’ So by April 15, the offer was no longer
irrevocable, and the stationer was therefore free to revoke it

Question 37

When does risk of loss pass on to the buyer

Answer 37

Because the subject of this contract is the sale of goods (the
bracelets), Article 2 of the UCC applies. UCC § 2-509 provides that,
as a default rule, when a third-party carrier is used, the risk of loss of
the goods passes to the buyer upon the seller’s delivery of the goods to
the carrier. The parties to the contract are free to alter this allocation
of risk by providing otherwise in the contract. However, since the
contract of sale is silent on this matter, § 2-503 will apply, and the risk
of loss passed when the bracelets were delivered to the carrier

Question 38

waiver of condition. Does modification of sale of goods contract to be in writing according to statute of frauds?

Answer 38

Waiver is a party’s manifestation of willingness to forego the
benefit of a condition that occurs after the contract is formed but
before the condition fails to occur. So here, the pharmacist’s oral
agreement on August 1 that the cabinets didn’t have to be delivered
until August 20 meets the requirement of a waiver.
The real issue in this question is the effect of the Statute of Frauds.
Under § 2-201(1), a sales contract for $500 or more must be supported
by a signed writing.
The question is whether, in a contract that falls within § 2-201(1)’s
Statute of Frauds requirement (because it’s for more than $500) and
that initially satisfies that requirement, any modification must be in
writing. Section 2-209(3), on modifications, says that ‘‘the
requirements of the statute of frauds section . . . must be satisfied if
the contract as modified is within its provisions.’’ Courts are in
confusion about whether and when this sentence requires the
modification itself to be in writing. But on these facts it doesn’t matter,
because, according to § 2-209(4), ‘‘[a]lthough an attempt at
modification or rescission does not satisfy the requirements of [the
Statute of Frauds], it can operate as a waiver.’’ So the pharmacist’s oral
promise to take a later delivery, although oral, will still act as a
waiver. Although the pharmacist might have had the power to retract
the waiver (see § 2-209(5), allowing retraction unless retraction would
be ‘‘unjust in view of a material change of position in reliance on the
waiver’’), there’s no indication in these facts that the pharmacist ever
retracted. So he’s bound by the waiver, and the furniture store will
win

Question 39

delivery contract when can buyer reject goods

Answer 39

Under the UCC, the general rule is that the buyer in a single
delivery contract has the right to reject the goods if they ‘‘fail in any
respect to conform to the contract.’’ UCC § 2-601. In fact this is not
the panacea it seems, since the seller has a right to cure defects,
pursuant to § 2-508, if he notifies the buyer of the intent to cure, and:
1. The time for performance has not run out, and the seller can cure
within that time; or
2. The seller has reason to believe that the buyer would accept nonconforming goods — in which case the seller can go reasonably
beyond the time allowed for performance in curing the defects

Question 40

Lost Volume seller

Answer 40

A ‘‘lost volume’’ seller is one who can obtain as many items from
a supplier as she can sell. When the customer of such a seller breaches
his contract, and the seller resells the item to another customer at the
same price, the seller will end up making one fewer sale because of
the breach. This is because the new customer would have bought the
item anyway, regardless of whether the first customer had breached.
Damages available to a lost volume seller under the UCC are the
profits, including reasonable overhead, which the seller would have
made from full performance by the buyer, together with any incidental
damages. UCC § 2-708(2)

Question 41

UCC’s non carrier rule

Answer 41

UCC § 2-706(1) provides that if a buyer wrongfully rejects goods,
“the seller may resell the goods concerned or the undelivered balance
thereof. Where the resale is made in good faith and in a commercially
reasonable manner the seller may recover the difference between the
resale price and the contract price.”

Question 42

Prohibition against assignment

Answer 42

You can assign rights to receive payments even if you can’t delegate duties.UCC § 9-406(d)
provides that a clause prohibiting such an assignment doesn’t prevent
the assignment from taking effect and the prohibited assignment does
not constitute a default under the contract.