Contract

Question 1

Ways to discharge contractual obligation (FIRM SCAN)

Answer 1

• Full performance
• impossibility, impracticability, or frustration of purpose
• release (in writing only)
• mutual rescission
• substitute contract
• contract or covenant not to sue
• accord and satisfaction
• novation

Question 2

accord and satisfaction

Answer 2

contracting party agrees to accept performance that differs from what was promised in an existing contract in satisfaction of the other party’s existing duty.

Question 3

impracticability

Answer 3

• unanticipated or extraordinary event made performance impracticable
• contract was formed under the basic assumption that event would not occur
• nonperforming party was not at fault in causing event to occur.
• if a party assumed the risk of the event happening, then the party’s duty will not be discharged.

Examples: incapacity or death, destruction of thing needed for performance, prohibition or law.

Question 4

novation: the substitution of a new contract for an old one when a party to the original contract agrees to release the other party and substitute a new party.

Answer 4

A novation can be express or it can be implied after delegation if:
the delegator repudiates liability to the other party to the original contract and
that party accepts performance from the delegatee without reserving rights against the delegator.

Question 5

UCC statute of frauds

Answer 5

applies to contracts for the sale of goods valued at $500 or more.

Question 6

UCC statute of fraud - merchant exception

Answer 6

a written confirmation need only be signed by one perchant and sent to the other. If the recipient has reason to know the confirmation’s contents and does not object within 10 days, then K is enforceable against both merchants.

Question 7

How to satisfy UCC statute of fraud

Answer 7

a writing that:
* provides a reasonable basis to believe a contract was formed.
* identifies the parties
* lists the quantity of goods
* signed by the party against whom enforcement is sought.

Question 8

what can nonrepudiating party do in anticipatory repudiation

Answer 8

1. treat the repudiation as a breach of contract; or
2. ignore the repudiation and demand performance.
3. HOWEVER, this does not apply when the date of performance has not passed and the nonrepudiating party has fully performed. (must wait until performance due date before filing lawsuit).

Question 9

consequential damages: losses that arose from the nonbreaching party’s special circumstances that were reasonably foreseeable to the breaching party when K was made.

Answer 9

can recover if the breaching party:
1. knew about the nonbreaching party’s special circumstances; or
2. could have reaosnably foreseen the harm that would result from a breach.

Question 10

shipment contract vs destination contract

Answer 10

shipment contract: K that does not require delivery at a particular location. Risk of loss passes to the buyer when the goods are delivered to the carrier.
destination contract: K that requires delivery at a particular location. Risk of loss passes to the buyer when the goods are delivered at the named location.

Question 11

Parol Evidence Rule

Question 12

Gratuitous Assignment: the transfer of contractual rights to a third party, not supported by consideration.

Answer 12

revocable and automatically revoked upon death, incapacity, or bankruptcy of the assignor.
Unless:
* obligor already performed
* document symbolizing assigned right (e.g. stock certificate) delivered
* written and signed assignment delivered
* promissory estoppel applies

Question 13

unconscionability

Answer 13

**procedural: ** party induced to enter K without meaningful choice due to deception, compulsion, or significantly unequal bargaining power.
substantive: substance of the contract itself is duly unfair.

Question 14

substitute contract

Answer 14

parties form a second agreement that immediately discharges the original contract, after breach, a party can sue under the substitute contract only.

Question 15

retraction of repudiation

Answer 15

a repudiation can be retracted if the non-repudiating party receives notice of the retraction before
* cancelling the contract
* materially changing position in reliance on the repudiation or
* indicating that he/she considers the repudiation to be final.

Question 16

Condition Precedent

Answer 16

a contracting party’s obligation to perform arises only upon the occurrence of an uncertain future event. If the parties expressly agree to a condition precedent, then the condition precedent will be strictly enforced. This means that a contracting party must fully comply with the condition before the other party’s performance is due.

Question 17

entrustment

Answer 17

entrustment gives the merchant the power to convey good title. Good title can be conveyed to a buyer in the ordinary course of business, i.e. someone who buys goods in good faith, without knowledge that the sale violates the owner’s rights to the goods; and from a merchant in the business of selling goods of that kind.

Question 18

Consequential damages

Answer 18

reasonably foreseeable to the breaching party when the contract was formed.

Question 19

Nondelegable contractual duties

Answer 19

Duties can generally be delegated to another unless:
1. other contracting party has a substantial interest in having delegating party perform; or
2. delegation is prohibited by contract.

Question 20

Termination of Offer

Answer 20

An offer can be accepted at any time before the offer is revoked. The offeror can revoke the offer by manifesting an intent not to enter into the proposed contract. This can occur in two ways:

expressly – when the offeror communicates the revocation directly to the offeree

constructively – when the offeree acquires reliable information that the offeror has taken definite action inconsistent with the offer

Question 21

Exceptions to parol evidence rule

Answer 21

Evidence of prior or contemporaneous oral or written agreement is admissible to establish:

whether writing is integrated and, if so, completely or partially
meaning of ambiguous term
defense to formation or enforcement (eg, fraud, duress, mistake)
ground for granting or denying remedy (eg, rescission, reformation)
subsequent contract modifications
condition precedent to effectiveness

Question 22

UCC Assurance

Answer 22

mere insecurity about the party’s prospective ability to perform is not a repudiation, but it does give the other party the right to demand assurance of performance.

Under the UCC, the demand for assurances must be made in writing. Failure to provide adequate assurance within a reasonable time—not to exceed 30 days under the UCC—constitutes a breach.

Question 23

Course of performance

Answer 23

Sequence of conduct that is relevant to understanding agreement between parties if:

agreement involves repeated occasions for performance by one party

	 AND

other party accepts performance without objection

Question 24

Course of dealing

Answer 24

Sequence of conduct concerning previous transactions between parties that establishes common basis of understanding for interpreting their conduct

Question 25

Trade usage

Answer 25

Practice or method of dealing in parties’ business or industry that is observed with enough regularity to justify expectation that it will be observed in instant case

Question 26

expectation damages

Answer 26

• damages that arise naturally and obviously from the breach
• Place nonbreaching party in same position as if contract had been performed
  Expectation measure includes:
• Expectation damages
• Incidental damages
• Consequential damages
  majority/primary rule

Question 27

reliance damages

Answer 27

foreseeable expenses that the nonbreaching party incurred in reasonable reliance on the promise that the other party would perform
* When expectation measure too speculative, place nonbreaching party in same position as if no contract had been formed

Reliance measure includes:
* Reliance damages
* Liquidated damages
* Restitution

Question 28

Sellers bidding at auction

Answer 28

Winning bidder can avoid sale, or pay price of last good-faith bid, if auctioneer:
* knowingly accepts bid by or on behalf of seller or
* procures seller’s bid to drive up price of goods

Exceptions – seller can bid:
* at forced sale or
* if seller gives notice reserving right to bid

Question 29

Completion of Sale in an Auction

Answer 29

when auctioneer announces end of sale (e.g. by fall of hammer)
if bid is made contemporaneously with end-of-sale announcement, auctioneer has discretion to continue bidding.

Question 30

Auction (UCC and CL)

Answer 30

Reserve (default type) – auctioneer may withdraw goods prior to completion of sale. presumed if not mentioned

No-reserve (special announcement required) – goods cannot be withdrawn after auctioneer calls for bids unless no bid is received within reasonable time

Question 31

Acceptance of Offer

Answer 31

The offeror can dictate the manner and means by which the offer may be accepted.
But if the offeror does not do so, then the offeree can accept the offer in any reasonable manner and by any reasonable means—e.g., delivering the acceptance by mail.

Under the mailbox rule, an acceptance sent by mail or similar means is generally effective upon dispatch, while a rejection is effective upon receipt.

Question 33

Offer to satisfy debt with check

Answer 33

Question 34

Promises binding without consideration

Answer 34

• Promise to pay debt that would be enforceable absent technical defense to enforcement (eg, statute of limitations, bankruptcy)
• Promise to perform voidable duty, provided that new promise is not also voidable (eg, minor reaffirms promise to perform contract after reaching age of majority)
• Promise to pay for material benefits received in the past & not intended as a gift (eg, promise to pay for emergency services previously received)
• Promissory estoppel
  Any promise (eg, promise of future gift) if:
• promisor should reasonably expect promisee to rely on promise
• promisee relies on promise to his/her detriment and
• injustice can be avoided only by enforcement of promise

Question 35

UCC Battle of the forms rule

Answer 35

The UCC, which governs contracts for the sale of goods (here, a swing set), uses the battle-of-the-forms rule for contract formation.

Under this rule, an acceptance that contains new or revised terms is still an acceptance (not a counteroffer) so long as it does not require assent to new or revised terms.

And if at least one party is a nonmerchant, then the new or revised terms are merely treated as proposed additions to the contract.

Question 36

UCC Statute of Frauds Signature Requirement

Answer 36

General rule – handwritten signature from, or other mark identifying, party to be charged (eg, letterhead, electronic signature, initials)

Merchant exception – between merchants, written confirmation that satisfies statute of frauds as to sender will bind both parties if no written objection within 10 days

Question 37

Suretyship

Answer 37

a three-party contract in which a surety promises to be secondarily responsible to a creditor (the obligee) for another’s (the principal’s) debt or other obligation if that person fails to perform.

A suretyship falls within the statute of frauds and therefore must generally be in writing and signed by the party against whom enforcement is sought. However, a suretyship is excepted from the statute of frauds if it was made mainly for the surety’s economic advantage or to indemnify (i.e., reimburse) the creditor for monetary loss.

Question 38

availability of reformation as a remedy

Answer 38

1. misrepresentation
2. mutual mistake
3. unilateral mistake (from fraudulent misrepresentation)

Question 39

Promissory Estoppel = a promise is binding without consideration

Answer 39

Requirements:
1. the promisor reasonably expected to induce reliance on the promise
2. the promisee reasonably relied on the promise
3. such reliance caused the enforcing party to suffer a substantial detriment and (charity is an exception)

4. injustice can be avoided only be enforcing the promise.

Question 40

course of performance vs. course of dealing

Answer 40

Course of performance – 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

Course of dealing – sequence of conduct concerning previous transactions between the parties that establishes a common basis of understanding for interpreting their conduct