Contract Fundamentals (72%)

Question 1

UCC governs what?

Answer 1

sales + goods

Sales = transfers of full title of goods to a buyer of value

Question 2

What are examples of goods the UCC covers?

Answer 2

-Any movable item

(a) Growing crops (while crops are still growing & after harvest)
(b) Uncut Timber
(c) Unborn Animals
(c) Computer software and other electronic information

Question 3

In hybrid cases, which involve both the sale of goods and a services contract, what law applies?

Answer 3

Law determined by the predominate purpose of the transaction: is it more about the good or more about the service

Question 4

To determine the predominant purpose of a contract (goods or service) the following factors are used:
(3)

Answer 4

1)	Factor #1:
Language of the contract	
2)	Factor #2:
Nature of the supplier’s business (Best Buy v. Landscaper)	
3)	Factor #3:
Relative values of goods v. service

Question 5

Even in a sale of goods, the common law will apply unless:

Answer 5

the UCC provides contrary provisions

Question 6

Implied-in-fact contractual obligations are formed by

Answer 6

conduct rather than words

Question 7

An implied-in-law contractual obligation arises where:

Answer 7

One party bestows a benefit on another and it is unjust to retain the benefits without paying

(e.g. emergency services)

Question 8

What is Quantum Meruit?

Answer 8

The cause of action for an implied-in-fact contract to recover the reasonable value of the services provided

EXAMPLE:
The plumber who was hired to fix Homeowner’s leak without first discussing the price.

Question 9

In order to constitute an offer, a party’s communication must meet two requirements.

Answer 9

1. An outward manifestation (oral, written, or conduct)

+

2. A signal that acceptance will conclude the deal
   (nothing left to do but say “yes” to conclude the deal)

Question 10

What is the American advertising offer rule?

Exception?

Answer 10

Ads, catalogues, & price lists are not offers

=Invitations for offers

EXCEPTION:
Language that identifies: (1) who gets the limited supply of goods in an excess of demand situation

EXAMPLE:
Advertisements that say, “first come, first served” or “first 10 customers only” are construed as offers.

Question 11

What are two types of reward offers?

Answer 11

1. Self-limiting rewards

2. Open-field rewards

Question 12

Self-limiting awards are offers that

Answer 12

indicate the task to be rewarded can be performed only once

EXAMPLE:
“Will pay $100 for finding my lost dog.”

Question 13

Are offers for rewards offers?

Answer 13

Generally, reward offers are treated as:
Are treated as offers
because they offer money in exchange for a specified task

Question 14

Who is the offeror in an auction

Answer 14

The auctioneer are inviting offers and the responsive bidders are the offerors

Question 15

What is the legal effect of an offer?

Answer 15

An offer creates the power of acceptance in the offeree

Question 16

Four ways to terminate power of acceptance

Answer 16

Lapse,
Death or Incapacity,
Revocation by Offeror, or
Rejection by Offeree

Question 17

A power of acceptance is terminated due to Lapse if?

3

Answer 17

1. An offer lapses after the time stated in the offer
2. After a reasonable time (subject matter, market conditions, degree of urgency)
3. Face-toFace Conversation rule

Question 18

What is the face-to-face conversation rule?

Answer 18

An offer made in a face-to-face conversation generally lapses at the end of the conversation; unless, the offer states otherwise

Question 19

A power of acceptance is terminated due to death or incapacity if?

Answer 19

(a) Death:
Death of either party terminates the power of acceptance

(b) Incapacity:
If either party becomes mentally incompetent, the power of acceptance is terminated

Question 20

A power of acceptance is terminated due to offeror’s revocation if?
(2)

Answer 20

1. Revoked before the offer is accepted

2. Revocation communicated to the offeree

Question 21

Direct revocation occurs when?

Answer 21

Offeror directly communicates to the offeree an intent to withdraw the offer

Question 22

Indirect revocation occurs when?

2

Answer 22

1. Offeror takes an action that is inconsistent with the intention to go through with the offer
2. The offeree learns about such action + from a reliable source

Question 23

What is the functional equivalents rule?

Answer 23

The Offeror revokes by communicating the revocation in a functionally equivalent manner to how the offer was made.

thus,

Terminates the power of acceptance even if the offeree is unaware of the revocation

Question 24

Ways to prevent offeror revocation?

2

Answer 24

1. option contract; or,

2. firm offer under the UCC

Question 25

Preventing Revocation by Means of a Common Law Option Contract (3)

Answer 25

1. An offer 2. 2nd promise to keep the offer open until X 3. Consideration for the 2nd promise

Question 26

The majority rule is where a general contractor uses a particular subcontractor’s bid to formulate his own:

Answer 26

Promissory estopple applies to protect the general contractor from revocations of the subcontractors

Question 27

Preventing Revocation by Means of a “Firm” Offer under the UCC (3)

Answer 27

1. offer is made by a merchant 2. offer is made in a signed writing by the merchant 3. offer expressly states by its terms that it will be held open A firm offer that meets all of these requirements becomes irrevocable for: the period of time stated; or, if not stated, a reasonable time

Question 28

How long can a "firm offer" remain open?

Answer 28

3 months, if > 3 months, you need consideration

Question 29

How can an Offeree reject an offer? | 3

Answer 29

1. outright rejection 2. counteroffer 3. Non-conforming acceptance

Question 30

What is the mirror image rule? When does it apply?

Answer 30

Common law contracts Acceptance must mirror the offer and any variation results in a counter offer

Question 31

Bilateral contracts seek? Who is bound?

Answer 31

I make a promise and seek from you: a promise in exchange | Once promises are exchanged: we are both bound

Question 32

Unilateral contracts seek? Who is bound?

Answer 32

I make a promise and seek from you: only your performance in exchange The offeror is bound only when: offeree’s performance is completed—offeree is never bound

Question 33

When can an offeror revoke a unilateral contract?

Answer 33

Once the offeree begins performance, an option contract is created and the Offeror may not revoke. -Acceptance of the offer is still effective only upon the completion of performance

Question 34

Acceptance under the common law occurs when? | 2

Answer 34

1. The acceptance mirrors the terms of the offer | 2. the acceptance is communicated to the offeror

Question 35

If the offer stipulates a particular means of communicating acceptance then,

Answer 35

that is the required means

Question 36

If the offer is silent as to the means of communication for acceptance, the offeree can accept by: (3)

Answer 36

1) Means used by the Offeror 2) Means customarily used in similar transactions 3) A means of communication that equivalent in speed in reliability to the means used by the Offeror

Question 37

When does acceptance by silence occur in common law contracts? (3)

Answer 37

1. Where the offeree takes the benefit of the offeror’s services with: + Reasonable opportunity to reject them; and, + Reason to know that compensation was expected. 2. Where the Offeror gives to the offeree reason to understand that acceptance may be communicated by silence; the offeree’s silence will be effective if intended as such. + Offeree intends to accept 3. Where because of pervious dealings it is reasonable that the offeree should notify the Offeror when he does not intend to accept.

Question 38

In a unilateral contract setting acceptance is effected by

Answer 38

only completing performance

Question 39

What does the mailbox rule not apply to?

Answer 39

i. Offers ii. Rejections iii. Revocations iv. Option contracts

Question 40

What does the mailbox rule apply to?

Answer 40

**acceptance** by mail is effective upon dispatch; so long as properly posted Does not matter if lost in the mail

Question 41

When a rejection, offer, or revocation is put in the mail, when is it communicated?

Answer 41

Upon receipt ≠ have to be read

Question 42

What carrier services does the mailbox rule apply to?

Answer 42

Mailbox applies to any means of transmission that involves a foreseeable delay between dispatch and receipt.

Question 43

In a situation where the parties simultaneously dispatch identical offers, what is the effect?

Answer 43

offers are only effective upon receipt; therefore, dispatch of simultaneous offers is not legally relevant

Question 44

What happens when an offeree dispatches two responses to an offer, the first purporting to reject the offer and the second purporting to accept it?

Answer 44

i) If the acceptance reaches the offeror first: then, there is a contract by virtue of the communicated acceptance ii) If the rejection reaches the offeror first: then, there is no contract. The power of acceptance ahs been terminated

Question 45

How can seller accept buyers offer under the UCC? | 3

Answer 45

(a) First way: A promise to ship goods in conformance with the offer (b) Second way: Prompt or current shipment of the goods in conformance with the offer (c) Third way: Shipping non-conforming goods (unless sent as an accommodation)

Question 46

A UCC seller’s shipment of nonconforming goods does two things at once:

Answer 46

a) Accepts the offer forming the binding contract | b) Puts the seller in breach of the contract

Question 47

UCC will allow for a binding contract to be formed with a non-mirror acceptance when?

Answer 47

1. both parties are merchants + Additional Terms 2. Terms address a new topic not addressed by the offer + not expressly limited to nor objected to + does not materially alter the contract or Different Terms 3. Terms that change an existing term in the offer + If different, then cancel each other out.

Question 48

Under the UCC what is a term that materially alters a contract (3)

Answer 48

Terms that would result in surprise or hardship if incorporated without the express consent of the other party i) Warranty Disclaimers ii) Clauses that materially shorten the deadline for raising complaints iii) Clauses that change industry standard or past courses of dealing

Question 49

Under the UCC, what must the parties be for non-mirror acceptance to be binding?

Answer 49

Both merchants If one is a consumer, then mere proposals

Question 50

UCC acceptance when the acceptance is made expressly conditional on assent to the additional or different terms

Answer 50

≠ contract To make expressly conditional, must have: “acceptance is expressly made conditional on assent to the additional or different terms”

Question 51

What are the terms of a UCC contract formed by Conduct? | 2

Answer 51

1) the terms upon which the writings of the parties agree 2) together with: Default terms provided by the UCC a) Note: The express terms in the parties’ communications which do not match or agree are omitted.

Question 52

What is the legal effect of agreements that consumers find once they open the boxes or packaging containing the goods

Answer 52

in consumer transactions, they are mere proposals that the consumer can accept or reject