Contract law MEE

Question 1

Article II of the Uniform Commercial Code UCC application to:

forming a contract under the UCC

Answer 1

Article 2 of the Uniform Commercial Code (UCC) applies to transactions in goods. Goods are “things moveable” at the time of identification to the contract.

A contract under Article 2 may be made in “any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

Question 2

Offer

Answer 2

Offer: A person makes an offer when the person communicates to another a statement of “willingness to enter into a bargain” so that the other understands that “his assent to the bargain is invited and will conclude it.” The terms of an offer need to be reasonably certain (e.g., as to parties, subject matter, price, etc.)

Question 3

counteroffer:

Answer 3

under common law, a statement is a counteroffer, rather than an acceptance, when the terms of the initial offer are changed—e.g., when a condition is added to the purported acceptance (mirror-image rule)

Question 4

Promise to hold offer open

Answer 4

: Generally, an offer may be revoked before acceptance. A promise to hold an offer open requires consideration in order to be binding (unless the UCC firm offer exception applies)

Question 5

Acceptance

Answer 5

: An acceptance is a manifestation of assent to the terms of an offer made in a manner invited by the offer. It is effective upon dispatch (the mailbox rule)

Question 6

rejection: of an offer

when is it effective?

Answer 6

A rejection is a manifestation of intent to not accept the offer that terminates the offeree’s power to accept .

It is effective when received by the offeror. Note: if a rejection is sent and then an acceptance is sent, whichever the recipient receives first is effective.

Question 7

Consideration:

Answer 7

Consideration is a legal detriment or bargained-for exchange. A promise to make a gift does not constitute consideration

Question 8

Preexisting-duty rule: under the CL, promising to perform a legal duty already owed to a promisor is not ______ ____________.
What are the exceptions?

Answer 8

valid consideration.

Exceptions include if the duty is changed (even slightly), unforeseen circumstances, etc.

Question 9

Material benefit exception to past consideration limitations

Answer 9

Material benefit: some states recognize an exception to past consideration limitations in which a promise is made after receipt of a significant benefit (usually the promise arises after a benefit received in an emergency situation).

Question 10

UCC modification

Answer 10

under the UCC, only good faith is needed to modify a contract

Question 11

Promissory estoppel is a substitute for consideration. If there is

Answer 11

(1) a promise,
(2) reliance that is foreseeable and justifiable, and
(3) enforcement is necessary to avoid injustice, the
promise will be enforced.

Question 12

Performance obligations Common law and UCC

Answer 12

Performance obligations: Under common law, a party must “substantially perform” its contractual obligations in order to demand performance (usually payment) from the other party. Courts will look at several factors to determine whether performance was substantial.

Note that this is different from UCC Article 2, which requires perfect tender for one-shot deals.

Question 13

performance obligations

Exception —divisible contracts:

Answer 13

A contract is divisible so long as

(1) it is apportionable and
(2) the parties would have contracted for each part separately.

note: A party that performs one or more parts of the contract may collect payment for those parts even if he does not substantially complete performance of his duties.

Question 14

Rejection of Goods

Answer 14

Rejection of goods: A buyer can generally reject goods for any reason under the perfect-tender rule. (There are exceptions to this—e.g., installment contracts.)

Question 15

Revocation of acceptance of goods:

Answer 15

If a buyer accepts the goods, he can no longer reject them.

exceptions:
(1) the nonconformity of goods substantially impairs the value to him;

(2) he accepted the goods because he had a reasonable belief that the nonconformity would be cured (and it was not), or he did not discover the nonconformity because the nonconformity was difficult to discover, or because of the seller’s assurances;
(3) he revokes within a reasonable time after he discovers or should have discovered the nonconformity; and
(4) he revokes before any substantial change in condition of the goods which is not caused by their own defect. A buyer who revokes acceptance of goods may recover the purchase price that has been paid.

Question 16

Anticipatory repudiation:

Answer 16

Anticipatory repudiation: This occurs when there is an unequivocal manifestation by one party to the other that the party cannot or will not perform its obligations under the contract (a mere expression of doubt is not enough) and this statement is made before the repudiating party’s performance is due.

The other party may wait for a reasonable time for performance or resort to any remedy for breach of contract

Question 17

Prospective inability to perform:
This occurs when a party has reasonable grounds for insecurity that the other party is unable or unwilling to perform. This is merely doubt, it does not rise to the level of an anticipatory repudiation.

What can a party under the UCC do if this happens?

Answer 17

This occurs when a party has reasonable grounds for insecurity that the other party is unable or unwilling to perform.

Under the UCC, the party may then, in writing, demand adequate assurance of performance,

and until she receives such assurance, may suspend her performance.

If such assurance is not given within a reasonable time, not exceeding 30 days, the other party may treat it as a repudiation

Question 18

Retracting a repudiation:

Answer 18

the party who has repudiated can retract his repudiation unless the other party cancelled the contract, materially changed his position in reliance on the repudiation, or indicated that she considers the repudiation to be final.

Question 19

Common law: Statute of Frauds: “A contract within the Statute of Frauds satisfies that statute and is enforceable if it is evidenced by a writing signed by ‘the party to be charged,’ which

Contracts that are within the statute include (mnemonic=MYLEGS):

Answer 19

(1) reasonably identifies the subject matter of the contract,
(2) is sufficient to indicate that a contract has been made, and
(3) states with reasonable certainty the essential terms of the contract.”

MY LEGS
Marriage- contracts made in consideration of marriage, Year- contracts that cannot be performed in a year,
Land- contracts for the sale of an interest in land,
Executor- promises by an executor to pay a debt of an estate out of his personal funds,
Goods- sale of goods over $500, and
Suretyship contracts.

Question 20

UCC: A contract for the sale of goods for a price of $500 or more is not enforceable unless

Answer 20

there is a writing signed by the party against whom enforcement is sought that is sufficient to indicate that a contract for the sale of goods has been made between the parties.

The writing need not contain all terms of the contract, but it is not enforceable beyond the quantity of the goods shown.

Exceptions to be aware of are the merchant confirmatory memo exception,
the part performance exception,
the specially manufactured goods exception, and
the judicial admissions exception

Question 21

Define Duress:

what is its legal effect on a contract?

Answer 21

when party’s manifestation of assent or agreement to the terms are induced by an improper threat that leaves the party no reasonable alternative.

a contract is voidable

Question 22

What is an express warranty under the UCC what what promises does it affirm?
when is there a breach of an express warranty?

Answer 22

Under Article 2, affirmations of fact relating to the goods that are part of the basis of the bargain create express warranties that the goods will conform to those affirmations and descriptions.

This warranty is breached if they do not conform

Question 23

General damages for breach of contract:

Answer 23

“The normal measure of damages for breach of contract is expectation damages, which aim to give the non-breaching party the benefit of his bargain.” Expectation damages must be foreseeable and proved with reasonable certainty. This is similar to the UCC rule, which puts the aggrieved party “in as good a position as if the other party had fully performed.”

Question 24

Punitive damages

Answer 24

Punitive damages: note that punitive damages are not generally recoverable in a breach of contract action “unless the conduct constituting the breach is also a tort for which punitive damages can be recovered.

Question 25

Restitution (also called unjust enrichment and quantum meruit):

Answer 25

a party may be able to recover restitution for any benefit conferred by way of part performance in excess of the loss that he caused by his own breach.

Question 26

Mitigation:

Answer 26

as a general rule, a party cannot recover damages for a loss that the party could have avoided by reasonable efforts.

Question 27

General rule: Parol Evidence Rule PER states that under most circumstances, when a contract clearly indicates that it is a final, complete agreement, outside evidence or extrinsic evidence of any negotiations prior to the contract in conflict with the proposed contract must be excluded.

what are the exceptions where the parol evidence rule does not apply?

Answer 27

exceptions where PER does not apply:

PER does not apply when:

1. a party attempts to introduce evidence related to a defense to contract formation,
2. a defense to contract enforcement,
3. a condition precedent to the contract,
4. a condition explaining an ambiguous term, or
5. evidence of a separate agreement not in conflict with the current one.

Question 28

PER implements a hierarchy for resolving disputes based on extrinsic evidence.

UCC: hierarchy. Mnemonic “Express Course on how to Perform on negotiating a Deal in a Trade show! “

CL: hierarchy.

Answer 28

PER also implements a hierarchy for resolving disputes based on extrinsic evidence.
The rule states that the express language of the contract must come first;
when this express language is not clear, parties must next look to the course of performance in this transaction.
Parties must look next to the course of dealing, if there is a history of transactions, and finally to the general trade usage.

A contract under the common law requires parties to specify price, quantity, subject matter, and parties. A contract under the UCC, by contrast, requires only quantity, with UCC “gap-filler” provisions accounting for the rest of the contract.

Question 29

Generally, under common law, additional consideration is required to modify a contract because taking an action that the person is already legally obligated to do is not new consideration. The legal detriment or forbearance must be new to be valid consideration unless:

Answer 29

1. An addition or change in performance - any change will qualify as new consideration;
2. Unforeseen difficulty if fair and equitable and unforeseen at the time of K formation; or
3. Third party promise to pay: the pre-existing duty rule does not apply when promisee owes pre-existing duty to a third party instead of promisor.

Question 30

Third party beneficiaries: two parties make a K with the shared intent to benefit a 3rd party, the beneficiaries have a legal right to enforce the contract.

modification: generally, the parties who make a contract for an intended beneficiary retain the right to modify the duty with a subsequent K. However, when does that right terminate?

Answer 30

However, the power to modify terminates when when the intended beneficiary materially changes her position in reliance on the promise.

Question 31

requirements / elements for a beneficiary to be able to enforce a contract.

Answer 31

1. for K rights, 3rd party beneficiary must have known and relied upon the K.
2. Intended beneficiary v. Incidental beneficiary
   intended beneficiary = contract rights
   types of: Donee beneficiary - when promisee intended to make a gift on 3rd party
   Creditor beneficiary: if promisee intended to discharge an obligation she owed to 3rd party. (only if 3rd party was already a creditor of 3rd party)

Incidental beneficiary= has no rights!! may not sue the promisor

Question 32

Promissory estoppel is a substitute for consideration If there is: elements

Answer 32

(1) a promise,
(2) reliance that is foreseeable and justifiable, and
(3) enforcement is necessary to avoid injustice, the
promise will be enforced.

Question 33

What is required to modify a K under the UCC

Answer 33

good faith, no consideration required

Question 34

performance obligations under CL to demand performance from other side?

Exception: divisible contracts

Answer 34

Under common law, a party must “substantially perform” its contractual obligations in order to demand performance (usually payment) from the other party.
Note that this is different from UCC Article 2, which requires perfect tender for one-shot deals.

Question 35

A contract is divisible so long as

Answer 35

(1) it is apportionable and
(2) the parties would have contracted for each part separately.

A party that performs one or more parts of the contract may collect payment for those parts even if he does not substantially complete performance of his duties

Question 36

If a buyer accepts the goods, he can no longer reject them. However, in certain circumstances a buyer can revoke his acceptance of the goods. The buyer can do this when

Answer 36

: (1) the nonconformity substantially impairs the value to him;
(2) he accepted the goods because he had a reasonable belief that the nonconformity would be cured (and it was not), or he did not discover the nonconformity because the nonconformity was difficult to discover, or because of the seller’s assurances;

(3) he revokes within a reasonable time after he discovers or should have discovered the nonconformity; and
(4) he revokes before any substantial change in condition of the goods which is not caused by their own defect. A buyer who revokes acceptance of goods may recover the purchase price that has been paid

Question 37

Under the CL can a party assign performance in the K to an assignee? If so what is the general rule?

What are the exceptions

Answer 37

The general rule is that parties to a contract can assign performance in the K. This is true even if the K prohibits assignment (although could be a K breach).
Once assigned the assignee steps into the shoes of the obligor’s and is entitled to performance and can sue for breach even if obligee fails to perform.

Exceptions:

1. if performance is personal to the obligor
2. if assignment would materially alter the obligee’s burden under the K, or
3. if the assignment is against public policy