Contracts

Question 1

What is a “good” for the purposes of the UCC?

Answer 1

A good is movable, personal property

Question 2

What is an offer?

Answer 2

An objective manifestation of an intention to be bound

Question 3

If a buyer agrees to pay more for services after a contract has been formed, is that agreement binding?

Answer 3

No. A modification solely for the benefit of one of the parties is generally unenforceable in contracts not governed by the UCC.

Question 4

Can a party assign contractual rights even if the contract prohibits assignment?

Answer 4

Assignment of contractual rights, such as the right to be paid, is effective even if the contract prohibits it, unless the clause makes assignments “void” or the assignee had notice of the assignment.

A court also might find that the contract is not assignable if assignment would: materially change the duty of the obligor; increase the obligor’s burden or risk; or impair the value of the contract to the obligor or impair the chance of the obligor receiving the performance it bargained for, which are also not present.

Question 5

If a contract does not state the place of delivery, where must the products be delivered?

Answer 5

Unless the contract specifies otherwise, under UCC § 2-308, the place of delivery is the seller’s place of business, and payment is due at the time and place where the buyer is to receive the goods

Question 6

Under what circumstances does a sale of >=$500 in goods not require a written contract under the Statute of Frauds?

Answer 6

When the goods are:

(1) delivered and accepted,
(2) paid for, or
(3) where the contract is for “specially manufactured” goods not suitable for resale in the ordinary course of the seller’s business and the seller has made a substantial beginning of their manufacture or commitments for their procurement

Question 7

When can a seller enforce an oral land sale contract?

Answer 7

A seller can enforce an oral land sale contract only if the seller conveys the property to the buyer

Question 8

Under the UCC, when will a seller be given extra time to make a conforming tender?

Answer 8

The UCC provides that in cases where a buyer rejects a tender of nonconforming goods that the seller reasonably believed would be acceptable “with or without money allowance,” the seller, upon a reasonable notification to the buyer, has a further reasonable time beyond the original contract time within which to make a conforming tender.

A seller will probably be found to have had reasonable cause to believe that the tender would be acceptable if the seller can show that trade practices or prior dealings with the buyer led the seller to believe that the goods would be acceptable, or the seller could not have known of the defect despite proper business conduct.

Question 9

When may a nonbreaching party not seek specific performance?

Answer 9

For breach of a service contract. Otherwise, a nonbreaching party may seek specific performance when the legal remedy is inadequate, for example when the subject matter of the contract is land or otherwise unique

Question 10

When is specific performance unavailable as to a land contract?

Answer 10

If the subject matter of a goods or land contract has already been sold to another who purchased for value and in good faith, the right to specific performance is cut off. This is known as the equitable defense of sale to a bona fide purchaser.

Question 11

Are there any exceptions to the pre-existing duty rule?

Answer 11

An exception to the pre-existing duty rule arises when a pre-existing legal duty was owed to a third party. Traditionally, when a pre-existing duty was owed to a third party, a new promise to perform the same duty would not constitute consideration. However, under the prevailing modern rule, the new promise WILL constitute consideration when the original promise was owed to a third party.

Question 12

Under what circumstances can an obligator delegate the performance of their duty to another?

Answer 12

When the delegation is not contrary to public policy or the terms of the promise

Question 13

Can parole evidence be allowed to clarify terms in a completely integrated contract when a term’s meaning is ambiguous?

Answer 13

Yes

Question 14

If party A promises X in exchange for party B promising Y, is Y a condition precent to X?

Answer 14

Yes, Y is a condition precedent to X and vice versa

Question 15

When does a tenancy at will terminate?

Answer 15

Such a tenancy terminates by operation of law if:

1. Either party dies;
2. The tenant commits waste;
3. The tenant attempts to assign his tenancy;
4. The landlord transfers her interest in the property; or
5. The landlord executes a term lease to a third person

Question 16

What happens when an easement owner uses the easement in a way that exceeds its scope?

Answer 16

When the owner of an easement uses it in a way that exceeds its legal scope (i.e., the easement is surcharged), the servient landowner may enjoin the excess use and possibly collect damages

Question 17

If a buyer says “I accept your offer, provided that you agree to a 10% discount if payment is made within 10 days from date of billing” is a contract formed?

Answer 17

No. The reply is a conditional acceptance, which is a rejection of the offer.

Question 18

When do the rights of a TPB vest, thereby preventing the original contracting parties to modify the contract without the TPB’s consent?

Answer 18

The rights of the third-party beneficiary do not vest until: (i) it manifests assent in a manner invited or requested by the parties; (ii) it learns of the contract and detrimentally relies on it; or (iii) it brings a lawsuit to enforce its rights

Question 19

Can a party withdraw their repudiation?

Answer 19

A repudiating party may at any time before his next performance is due withdraw his repudiation unless the other party has canceled, materially changed his position in reliance on the repudiation, or otherwise indicated that he considers the repudiation final.

Question 20

When are reliance damages appropriate?

Answer 20

When expectation damages are too speculative. For example, if P sues a lender for failing to provide the loan they promised to P to build a retailer, the value of the retailer (i.e., the expectation damages) are too difficult to accurately calculate - thus, reliance damages are appropriate.

reliance damages are designed to put the performing party in the same economic position they would have been in if the contract had never been performed.

Question 21

How do courts interpret clauses prohibiting assignment of a contract?

Answer 21

Unless there are circumstances suggesting otherwise, a clause prohibiting the assignment of the “contract” will be construed as barring only the delegation of the assignor’s duties

Question 22

When is a party’s contractual right “personal” for the purposes of assignment?

Answer 22

a party’s contractual right is only personal where the nature of the contract is such that the assignment would impair the other party’s reasonable expectations or would offend public policy.

Question 23

When a debt amount is in dispute, can the debtor send a check marked “payment in full” as an accord and satisfaction of the debt?

Answer 23

Yes. Under the rules of accord and satisfaction, a debtor may make an offer to settle a dispute by offering a check marked “payment in full.” If the notation was sufficiently plain that the creditor should have understood it, and if the amount owed to the creditor is an unliquidated sum, then cashing the check without protest amounts to an acceptance of the offer of an accord and satisfaction of the debt. Although mere payment of a lesser sum would not be sufficient consideration to support the accord, consideration is furnished where the amount owed to the creditor is genuinely in dispute

Question 24

When is a communication an offer?

Answer 24

For a communication to be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.

Courts usually hold that if a statement is made broadly, such as in an advertisement or catalog, it will not constitute an offer because it is not reasonable to expect that the sender intended to make offers to all who received the advertisement; rather, the courts usually find such advertisements to be invitations seeking offers. However, price quotations may be considered as offers if given in response to a specific inquiry

Question 25

Does a short delay in transferring the deed to land constitute a breach?

Answer 25

It constitutes a partial, but not a material breach. Under common law, less than perfect performance, or a minor breach, by one party does not excuse performance in the other party. Barring a “time is of the essence” clause in a contract for land, failure to perform by the time stated in the contract is neither a substantial nor material breach

Question 26

When is a person discharged from their duty under a personal services contract?

Answer 26

Death or incapacity of the person

Question 27

When is a person’s nondisclosure of fact = misrepresentation?

Answer 27

A person’s nondisclosure of fact may be tantamount to a misrepresentation of fact sufficient to allow rescission of a contract where the person knows that disclosure of the fact would correct the other party’s mistake with respect to a basic assumption of the contract, and where nondisclosure amounts to a failure to act in good faith

Question 28

Can a party get attorneys fees in their damages award?

Answer 28

The “American Rule” is that each party bears the burden of his own attorney’s fees. This rule can be modified for example by statute, agreement, or through an equity judgment – but it is the rule. Any time you see a remedy problem that wants to include attorney’s fees, look at the facts. If there is no exception to this rule, like a fee-shifting statute or contract clause, then do not pick an answer that includes attorney’s fees.

Question 29

When can course of performance, course of dealing or trade usage be admitted to interpret a completely integrated contract?

Answer 29

Where course of performance, course of dealing or trade usage be admitted can’t be reasonably reconciled with express terms of the contract.

Question 30

When is a condition considered waived?

Answer 30

If one party indicates via words or conduct that he is waiving a provision of a contract prior to completion of performance and the other party detrimentally relies on those words or conduct, the first party is estopped from claiming a breach of that provision

Question 31

What is the difference between a void and voidable contract?

Answer 31

A void contract is unenforceable, whereas an aggrieved party may elect to enforce a voidable contract

Question 32

On an essay question, if the prompt does not tell you that a contract was formed, what are the elements to the creation of a contract that you should discuss?

Answer 32

(1) Mutual assent (offer + acceptance)
(2) Consideration (bargained for exchange or substitute like promissory estoppel / detrimental reliance)
(3) Defenses to creation (mistake, lack of capacity, illegality, SOF)

Question 33

Is it ok to have missing terms in a contract?

Answer 33

For real property: price and land are required.

For goods: quantity is required (unless it’s an output contract)

Question 34

What is the difference between a promise and a condition?

Answer 34

The failure of a promise is a breach (giving rise to liability) whereas the failure of a condition relieves the party of the obligation to perform

Question 35

What are the differences in circumstances required for demanding assurances vs. anticipatory repudiation

Answer 35

Demand assurances: reasonable grounds for insecurity

Anticipatory repudiation: clear indication that the other party will not perform

Question 36

How does one establish a claim for promissory estoppel?

Answer 36

1) Promise would reasonably be expected to induce action or forbearance on the part of the promisee
2) The promisee actually acted or forebeared in reliance on the promise
3) Injustice can only be avoided by enforcing the promise

Question 37

Is a requirements contract assignable?

Answer 37

Only if the assignee acts in good faith not to alter the terms of the contract (i.e., the assignee promises not to order dramatically more than the original buyer’s quantity)

Question 38

When is a liquidated damages provision enforceable?

Answer 38

A liquidated damages clause is enforceable if: (i) damages are difficult to ascertain at the time of the making of the contract, and (ii) the damages are a reasonable forecast of compensatory damages.

Question 39

Who can be held liable when a party delegates a duty to a obligee?

Answer 39

A properly-delegated duty under a contract does not absolve the delegator of liability for performance of the duty absent a novation or express agreement by the obligee to use the delegate AND release the delegator.

Additionally, if the party was an intended third-party beneficiary of the delegation agreement (because the delegatee agreed to perform the obligation to the party), the party may sue the delegator or delegatee as a third-party beneficiary

Question 40

When can a party avoid a contract on the basis of a mutual mistake?

Answer 40

There are three requirements that must be satisfied before the adversely-affected party may avoid the contract on the account of a mutual mistake: (i) the mistake must concern a basic assumption on which the contract was made; (ii) the mistake must have a material effect on the agreed exchange of performances; and (iii) the party seeking avoidance did not assume the risk of the mistake.

Question 41

What happens to a lease when the land is partially condemned?

Answer 41

In partial condemnation cases, the landlord-tenant relationship continues, as does the tenant’s obligation to pay the entire rent for the remaining period of the lease.

The tenant is, however, entitled to share in the condemnation award to the extent that the condemnation affected the tenant’s rights under the lease

Question 42

When is a promise to pay the debt of another not covered by the statute of frauds?

Answer 42

One type of agreement that is covered by the Statute of Frauds is a promise to answer for the debt or default of another where the promise is collateral rather than primary. However, where the main purpose or leading object of the promisor is to secure an advantage or pecuniary benefit for himself, the contract is not within the Statute of Frauds, even if the effect is still to pay the debt of another

Question 43

Does late completion of a services K constitute a material breach?

Answer 43

Only if time was of the essence.

A minor breach (where the obligee gains the substantial benefit of her bargain despite the breach) affords a remedy to the aggrieved party but does not relieve him of his duty of performance under the contract. If the breach is material, the nonbreaching party may treat the contract as at an end (i.e., any duty of counterperformance owed by him is discharged) and will have an immediate right to all remedies for breach of the entire contract.

Generally, failure of a promisor to render timely performance, although a breach, will not be material. However, where the contract by its terms, in conjunction with the surrounding circumstances, establishes that time is of the essence, failure of timely performance will be a material breach.