Contracts

Question 1

CONTRACTS: SOURCES OF LAW?

Answer 1

Common Law

• Majority of Bar Questions: anything but sales of goods or leases.

UCC Art. 2

• Contract is primarily for the sale of goods
• Personal AND Commercial transactions

UCC Art. 2A - NYBE

• Lease of GOODS + Sale of Interest in Real Property (NOT buildings/land)
• Art. 2 Rules ALSO apply to 2A

Question 2

INTRODUCTION
What are the 8 types
of contracts question
on the bar exam?

Answer 2

8 General Types of Contracts Questions on the Bar

• Enforcement & Remedies
• Finding Existence of Agreement
• Enforceability of Agreement Process (flaw in process)
• Enforceability of Content of Contract
• Dispute of Terms of Contract
• Dispute over Performance of Contract
• Enforceability Based on 3rd Party Performance
• 3rd Parties Enforcing Agreements They Didn’t Make

Question 3

IDENTIFYING OFFERS: In a Request for Offer where Delivery Terms + Price Terms sent in response, how is it interpreted?

Answer 3

Price Terms:

Request for offer containing delivery terms + prices sent in response = read together to equal an offer

Question 4

IDENTIFYING OFFERS: Importance of Price Terms under the UCC - K for Sale of Goods?

Answer 4

Price Terms:

UCC for SOG: missing price OK; BUT vague price = NO offer (neg)

• Requirements: B promises to buy from S all of the goods Buyer requires and S agrees to sell that amt.
• Outputs: S promises to sell to a certain B all fo the goods Se produces, and B agres to buy that amt.
• Request for offer containing delivery terms + prices sent in response = read together to equal an offer

Question 5

IDENTIFYING OFFERS: Role of Price Terms in Land Contracts, SOG and Request for Offer?

Answer 5

Price Terms:

• C/L Contract for Land: must describe land & state price (Requirement)
• UCC for SOG: missing price OK; BUT vague price = NO offer (neg
  
  • Requirments: B promises to buy from S all of the goods Buyer requires and S agrees to sell that amt.
  • Outputs: S promises to sell to a certain B all fo the goods Se produces, and B agres to buy that amt.
  • (Fillable by Court if Missing)
• Request for offer containing delivery terms + prices sent in response = read together to equal an offer (Creates Offer alongside Other Terms)

Question 6

IDENTIFYING OFFERS: Requirement of Price Terms in Contract for Sale of Land?

Answer 6

Price Terms:

• C/L Contract for Land: must describe land & state price

Question 7

IDENTIFYING OFFERS: Words/Conduct, Content + Price Terms?

Answer 7

IDENTIFYING OFFERS

• Manifestation of commitment (words/conduct)
• Create reasonable expectation of willingness to enter into contract.
• Context relevant to existence of offer: Ads NOT offers (construed as merely invitation)

Content of Offers:

• Vague Material Terms = NO Offer (“reasonable” “fair”)
• BUT “all “only” “solely” (“all A’s cars”) often DO= offer; requisite certainty b/c exclusivity (requirement contract)
  
  • Reasonably proportionate demands in requirements contracts; NO unprecedented increases
• Offeror is master: carefully read requirements of offer.

Price Terms:

o C/L Contract for Land: must describe land & state price

o UCC for SOG: missing price OK; BUT vague price = NO offer (neg)

• Requirments: B promises to buy from S all of the goods Buyer requires and S agrees to sell that amt.
• Outputs: S promises to sell to a certain B all fo the goods Se produces, and B agres to buy that amt.

o Request for offer containing delivery terms + prices sent in response = read together to equal an offer

Question 8

TERMINATION OF OFFER
What are the 4 ways which a valid offer can be revoked?

Answer 8

Termination of Contract Offer

• Death of Party: offer dies w/party UNLESS option contract (promise not to revoke with consideration)
• Lapse of Time: +1 month between offer and purported acceptance will terminate offer (unless explicit provision)
• Revocation: unless irrevocable, offer can be revoked if both parties are aware (conduct/words) –> Express or Implied (good sold to another buyer)
• Offeree’s Response: conditional acceptance, express rejection, counteroffer, C/L mirror image rule can terminate offer

Question 9

TERMINATION OF OFFER:
OFFEREE’S RESPONSE TO THE OFFER
What are the 3 possible offeree responses that can terminate an offer?

Answer 9

Termination of Offer B/c of Offeree’s Response

Counteroffers:

• Statement will kill ( “I will only pay…”; BUT a question will NOT kill (“Will you accept…?”)
• Option Contract: counteroffer won’t kill offer during period of option (unless there is detrimental reliance by offeror on offeree’s rejection)

Conditional Acceptance:

• Clear statement of condition (“provided that” “so long as” “on condition that”) kills offer (MUST be absolutely clear conditional language)
  
  • o BUT conditional statement can be accepted by original offeror’s compliance w/condition
  • o 2 Merchants Rule: immaterial condition does NOT terminate

C/L Mirror Image Rule:

• C/L acceptances must be mirror image of offer (Same terms)

Question 10

ACCEPTANCE:
PERFORMANCE AS ACCEPTANCE - When does Part Performance constitute Acceptance?

Answer 10

Offer CAN Control Method of Acceptance: if it does, the method is the exclusive means of accepting the offer.

• Part Performance As Acceptance:
  
  • Bilateral Contract: start of performance implies agreement to complete, so constitutes acceptance. So, part performance followed by **stop is breach. **
  • Unilateral Contract: acceptance only on completion so part performance followed by stop is NOT breach.

Question 11

ACCEPTANCE:
PERFORMANCE AS ACCEPTANCE - When does Improper Performance constitute Acceptance?

Answer 11

Offer CAN Control Method of Acceptance: if it does, the method is the exclusive means of accepting the offer

Improper Performance as Acceptance:

• Improper performance IS performance.
• If performance = acceptance then there IS a contract and offeror can sue for breach.
• Accommodation (Art. 2): If S tries to accommodate B by shipping improper item w/Express Acknowledgment of impropriety; NOT acceptance –> No Contract
• Otherwise shipping improper item=acceptance+breach
  
  • But if S promises to ship before sending –> Breach can Occur
  • Accomodation only applies when Shipment used as form of Acceptance to Offer

Question 12

ACCEPTANCE:
PERFORMANCE AS ACCEPTANCE

Answer 12

Offer CAN Control Method of Acceptance: if it does, the method is the exclusive means of accepting the offer.

• Unilateral Contract: requires explicit acceptance-only-by-performing language
  
  • Any conduct/statement OTHER than what is prescribed is NOT acceptance; so NO contract = NO breach
• Part Performance As Acceptance:
  
  • Bilateral Contract: start of performance implies agreement to complete, so constitutes acceptance. So, part performance followed by stop is breach.
  • Unilateral Contract: acceptance only on completion so part performance followed by stop is NOT breach.

 Improper Performance as Acceptance:

•  Improper performance IS performance.
•  If performance = acceptance then there IS a contract and offeror can sue for breach.
•  Accommodation (Art. 2): If S tries to accommodate B by shipping improper item w/express acknowledgment of impropriety; NOT acceptance –> No Contract
• • Otherwise shipping improper item=acceptance+breach
    
    • But if S promises to ship before sending –> Breach can Occur
    • Accomodation only applies when Shipment used as form of Acceptance to Offer

Question 13

REMEDIES: IN REM REMEDIES What are the 3 forms of
In Rem remedies for breach of contract?

Answer 13

Specific Performance

• Equitable Remedy: monetary damages inadequate
• Almost NEVER available to ∏; NEVER for employment: indentured servitude
• Exceptions: (1) land tranxn; (2) unique goods; (3) injunctions (negative specific performance)

_Reclamation (Art. 2) _(excludes all other remedies)

• Recover goods by unpaid S from B who was insolvent at the time of delivery of the goods; w/i 10 days of receipt; from B NOT 3rd party NOR proceeds if sold
• Generally, NO right for unpaid S to get goods back (damages); must qualify for reclamation for goods

Entrustment

• Generally entrusting owner has NO right to recover goods from BFP (sue for conversion) (e.g. watch to jeweler for repairs and jeweler sells).

Question 14

DAMAGES: MONETARY DAMAGES
What are the 6 types of monetary damage remedies for breach of contract?

Answer 14

(1) Expectation Damages

Benefit of Bargain: put Π in the position as if contract had been performed: (1) what would Π have w/o breach? (2) what does Π have after breach? (3) difference?

Lost Volume Seller: proveable lost profit from lost sale (+1 of the good breached on, so if S sells good, but loses profit)

(2) Punitive Damages

NEVER available; contract damages = compensation

(3) Liquidated Damages Provision

(1) Damages Difficult to Forecast AND (2) Provision Reasonably Forecasts Damages (flexible/NOT lump sum)

(4) Consequential/Special Damages (Specific to Particular Π)

Reasonably Foreseeable: Π can recover damages in parties’ contemplation (should have been) at time of contract

(5) Incidental Damages

Cost of replacement deal: ALWAYS recoverable

(6) Restitution (Quasi-K Remedy)

Not really part of K-Law

Restitution: Used to prevent Unjust Enrichment by providing value of benefit ocnferred (i.e. increase in ∆’s property value or value of goods B received)

Used When: 1) Party rescinds K & sues instead for restitution (only works if π has not fully performed) 2) Breach by P; 3) Unenforcable K 9∆ dies before performance in service K0; 3) No K but π conferred benefit on ∆ who knew of π’s reasonable expectation to get $ and would benefit if retain w/o pay

Question 15

FLAWS IN THE AGREEMENT PROCESS: SUMMARY
What are the 6 primary flaws in the agreement process that can render an agreement unenforceable?

Answer 15

Flaws in the Agreement Process

• Lack of Capacity (infancy, intoxication, mental; CAN enforce; Exception for Necessaries; implied reaffirmation)
• Duress (physical or economic – threat to breach existing contract when other party has no other option)
• Misrepresentation Induces Agreement (including good faith/honest misrepresentations)
• Mutual Mistake of Material Fact At Time of Agreement: mutual mistake about what something actually is (NOT its value) shared by BOTH parties at the time of agreement.
• Statute of Frauds (SOF): prop. interest +1yr; services +1yr; goods +$500; lease+$1k tot.; debt of other w/i SOF, requires writing unless in exception (full perform svc contract; prop. payment+; already-delivered goods; judicial admission).
• Lack of Consideration/Consideration Substitute: peppercorn AND no preexisting duty or past consideration; NYS: written substitute always OK)

Question 16

ACCEPTANCE:
MAILBOX RULE - When does it apply and not apply?

Answer 16

Mailbox Rule for Contract Acceptance

Acceptance by mail is effective on deposit in the mailbox

• ONLY Applies to Acceptance
  
  • Rule DOES apply when offeree sends acceptance (1st) THEN rejection(2nd): acceptance effective on deposit in mailbox, so rejection is ineffective.
  • UNLESS rejection arrives 1st & offeror detrimentally relies
  • Exception to Mailbox Rule for Acceptance: if rejection is sent first THEN acceptance is sent, whichever arrives first is effective.(Mailbox Rule Does Not Apply)
• Does Not Apply When:
  
  • Offer stipulates that acceptance is not effective until received
  • Option K is involved (acceptance only through receipt)
  • Does not apply to revocation/rejection.
• Note: If Offeror sends Revocation before Offeree sends Acceptance –> Result: No Contract b/c revocation terminates power of acceptance.

Question 17

SOF: AGREEMENTS W/I SOF
What 8 types of agreements are w/i the SOF?

Answer 17

Statute of Frauds: Agreements Are Within SOF

1. Transfer of Real Estate** **Interest in Land of MORE than 1-YR (366 days)
2. Services K & Performance Impossible w/t 1 Yr of Agreement (NOT start of performance).
   
   1. “Lifetime” Deal:
      
      1. MBE NOT w/i SOF;
      2. NYBE: w/i SOF
3. Sale of Goods +$500 (Or Lease of Goods +$1k total)
   
   1. Both Merchants & Non-merchants
4. Promise to Answer for the Debts of Another (Suretyship)
   
   1. Express “if X doesn’t pay, I will” language
   2. Estate rep. personally paying estate expenses.
   3. BUT: main purpose exception if direct benefit to surety
5. Promise in Consideration of Marriage (e.g. prenup)
6. NYBE: Assignments of insurance policy; promise to name insurance beneficiary; commissions/finder’s fees
7. Alleged K Modifications: ONLY when contract WITH alleged modification would come w/i SOF (courts ignore provisions purporting to require modifications in writing)
8. Written Authority to Sign Real Estate Agreement (Equal Dignity Rule): ONLY if underlying agreement is w/i SOF

Note: SOF doesn’t req K to be in writing, only that 1 or more writings signed by **a PERSON **sought to be held liable on K reflect material terms (letter, receipt, check w/ quanity of goods could be sufficient)

Question 18

SOF: SATISFYING SOF
WITHOUT A WRITING
What are the 4 ways a party can satisfy the
SOF w/o a writing?

Answer 18

Satisfying SOF WITHOUT a Writing

• 1) Full Performance of Services Contract
  
  • NOT partial=quasi-contract recovery ONLY
• 2) Real Estate: Payment + Improvement OR Possession (2/3)
  
  • NOT full payment if no improvement/possession
• 3) Already-Delivered Goods +$500 (rcvd/accepted)
  
  • Applies ONLY to portion of good already delivered by S to B (not the whole contract)
  • Exception: specially manufactured goods not suitable for resale if S substantially begins production
• 4) Judicial Admission
  
  • Party asserting SOF admits contract in pleading, depo, testimony

Question 19

SOF: Exceptions?

Answer 19

Exceptions to SOF

• Real Property: leases of one year or less; “part performance.”
• One-Year: full performance.
• Sale of Goods:
  
  • i) goods accepted by or paid for by the buyer;
  • ii) custom-made goods;
  • iii) judicial admissions; and a
  • iv) merchant’s confirmatory memorandum.
• Suretyship: “main purpose” exception. NYBE: No main purpose exception.

Question 20

SOF: SATISFYING THE SOF
WITH A WRITING
What is required to satisfy the SOF WITH a writing for Sale of Goods, Lease of Goods, Real Estate, Services and Guarantees?

Answer 20

Satisfying the SOF WITH a Writing

• Sale of Goods: Writing must include: (1) quantity; (2) signature of person asserting SOF;
  
  • BUT NOT price
  • 2-Merchant Exception: B/M sends signed letter to S/M confirming agreement, & S/M does NOT respond (later raises SOF); Result: B/M letter admissible. (Confirmatory Memo Rule)
    
    • Binding if B/M has reason to know of contents + No Objection
• Lease of Goods (NYBE): (different from sales): writing must state: (1) it is a lease; (2) number of items leased; (3) length of lease, and (4) amount of lease.
• Real Estate/Services/Guarantees: (1) all material terms: who and what AND signed by person against whom enforcement is sought.

Question 21

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Does adequacy matter?

Answer 21

• *Consideration/Consideration Substitutes**
• Consideration = bargained-for exchange*
• Peppercorn: adequacy irrelevant

Question 22

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Past consideration count?

Answer 22

• *Consideration/Consideration Substitutes**
• Consideration = bargained-for exchange*
• No, Past Consideration NOT bargained for exchange

Question 23

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Does a Pre-Existing duty count as new consideration?

Answer 23

• *Consideration/Consideration Substitutes**
• Consideration = bargained-for exchange*
• Pre-existing duty id NOT new consideration (req. some new benefit/detriment), BUT:
  
  • TP Exception: promise to pay from 3rd party not part of original agreement

Question 24

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Do you need new consideration for a modification of Contract for the Sale of GOods?

Answer 24

• *Consideration/Consideration Substitutes**
• Consideration = bargained-for exchange*
• Under UCC Art. II, new consideration is unnecessary for modification of a K for SOG but party must show GOOD FAITH reason for change. (e.g. agreement to ↑ price w/o consideration OK if GF present)

Question 25

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Is Part Payment consideration for a Due & Undisputed Debt?

Answer 25

• *Consideration/Consideration Substitutes**
• Consideration = bargained-for exchange*
• Due & Undisputed Debt: part payment is NO consideration
• BUT written promise to pay debt barred by SOL is Enforceable w/o** **conisderation
• Payment of sum smaller than debt due not sufficient consideration UNLESS New/Diff Consideration** **
  
  • (1)paid Earlier or
  • (2) in Stock instead of cash

Question 26

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Does Promissory Estoppel count as consideration?

Answer 26

• *Consideration/Consideration Substitutes**
• Consideration = bargained-for exchange*
• Promissory Estoppel = Consideration Substitute: though no consideration, Foreseeable and Detrimental reliance will make promise enforceable (w/o consideration)

Question 27

CONSIDERATION: LACK OF CONSIDERATION/SUBSTITUTE - Exceptions to the Requirement of Consideration under the NYBE?

Answer 27

• *Consideration/Consideration Substitutes**
• Consideration = bargained-for exchange*

NYBE (NY Law of General Obligations):

• If debt due and undisputed –> No consideration req. if Promise to Forgive in signed writing.
• If debt is time-barred –> Signed writing is substitute for consideration (NYBE + MBE)
• If it is a contract modification –> No consideration req. as long as Modification Embodied in signed writing

Question 28

PAROL EVIDENCE RULE: Meaning and Exceptions

Answer 28

• *Parol Evidence Rule**
• For integrated agreement, a court cannot consider parol evidence that contradicts that agreement.*
• Integrated: written final deal
• Parol Evidence: written OR spoken prior to or contemporaneous with writing (not after)
• Merger Clause: highly persuasive only

Exceptions: Parol Evidence Admissible

• Reformation (Scrivener’s Error): NOT different deal; parol evidence to prove clerical error
• Rescission: NOT different deal; parol evidence to prove flaw in process makes deal unenforceable.
• Explanation: parol evidence explains vague terms
• Additional Words Rule: parol evidence adds term to contract; ONLY for partially integrated agrmnt

Question 29

UNENFORCEABILITY B/C OF CONTENT OF AGREEMENT:

What areas raise public policy concerns? What is Unconscionability?

Answer 29

Unenforceable B/c of Content of Agreement

Illegality:

Public Policy:

• Covenants Not to Compete: (1) time limitation, (2) geographic limitation; (3) business need
• Exculpatory Clause: usually negligence OK BUT NOT intentional torts/gross negligence

Unconscionability:

• Oppressive terms; unfair surprises at the time of contract in substance/process

Question 30

UCC AS GAP FILLER IN
SALE/LEASE OF GOODS
DELIVERY OBLIGATION AND RISK OF LOSS - Risk of Loss Rule on NYBE for Lease of Goods

Answer 30

UCC as Gap-Filler in Sales/Leases of Goods

For Risk of Loss in Sale of Goods:

(NYBE_)_ Rules: For a Lease of Goods, owner/lessor retains risk of goods in hands of lessee, UNLESS Finance Lease (e.g. Bank buys, leases to lessee).

Question 31

UCC AS GAP FILLER IN
SALE/LEASE OF GOODS
DELIVERY OBLIGATION AND RISK OF LOSS - Risk of Loss Rules - What Controls? Who is Liable? Who retains ROL in Shipment, Destination or Lease of Goods K? Any Wrinkles?

Answer 31

UCC as Gap-Filler in Sales/Leases of Goods

Risk of Loss in Sale of Goods:

Rule:

1. Agreement Controls
2. Breaching Party is Liable (EVEN if breach unrelated to loss)
3. Shipment Contract: S retains risk until obligation complete
4. Destination Contract:
   
   1. Merchant S retains risk until B physically receives
   2. Non-merchant S has risk until she tenders (makes goods available to B: how, where, when to get goods)

Lease of Goods(NYBE): owner/lessor retains risk of goods in hands of lessee, UNLESS finance lease (e.g. Bank buys, leases to lessee).

Question 32

UCC AS GAP FILLER IN
SALE/LEASE OF GOODS
DELIVERY OBLIGATION AND RISK OF LOSS -

Delivery Obligations in Common Carrier K for (1) Shipment or (2) Destination vs. (3) Non-Carrier K? Who has ROL?

Answer 32

UCC as Gap-Filler in Sales/Leases of Goods

S’s Delivery Obligation in:

Common Carrier Contracts

• (1) Shipment-K: S obligation compete before receipt
  
  • (1) goods to carrier;
  • (2) delivery arrangements;
  • (3) notify B
• (2) Destination-K: S has obligation to get goods to B @ *specific destination *; “FOB (Buyer’s City)”
• Note: FOB always followed by location and Risk of Loss (“ROL”) pases to B @ named location.
  
  • If Seller’s location –> Shipment
  • If Buyer’s location –> Destination

Non-Carrier Case

• (3) No Use of Common Carrier-K:. B either picks up or S delivers depending on whether S is S=M or S≠M –>
  
  • If S/M –> ROL passes when B takes physical possession.
  • BUT If S≠M, ROL passes to B upon Tender of Delivery. (Pay then)

Question 33

DISPUTE OVER
AGREEMENT TERMS
How is conduct relevant to contract interpretation? And what is the Order of Importance for conduct?

Answer 33

Conduct Can:

• Explain Words in the Contract
• Fill Gaps in the Contract
• *Order of Importance of Conduct:**
• *1. Course of Performance:** what parties have done under this contract?
• *2. Course of Dealing:** what these parties have done in earlier similar contracts
• *3. Custom & Usage:** what is the custom in the industry in similar situations?

Question 34

PERFORMANCE DISPUTES IN
SALE OF GOODS CONTRACT: When can Seller “Cure”? How? When is it available?

Answer 34

• Cure: S can CURE less-than-perfect tender before contract Deadline Date
• S can cure by re-attempting perfect tender
• Availability: If S can show that B had previously accepted imperfect tender, S will get opportunity to cure.

Question 35

PERFORMANCE DISPUTES IN
SALE OF GOODS CONTRACT: Perfect Tender?

Answer 35

Performance in Sales of Goods Contracts

• Perfect Tender: general standard for sales of goods;
  
  • less-than perfect tender = breach and B has option to reject and not pay

Question 36

PERFORMANCE DISPUTES IN
SALE OF GOODS CONTRACT: Contracts not subject to perfect tender? Rule and Principle?

Answer 36

Installment Sales Contract are Not Subject to Perfect Tender

Rule: ONLY if explicit in contract language (NOT just b/c S made installment delivery);

Principle: Continuing relationship = mistakes can be fixed in future

Question 37

PERFORMANCE DISPUTES IN
SALE OF GOODS CONTRACT: When can Goods no longer be Rejected?

Answer 37

• Acceptance of Goods: Once goods accepted goods CAN’T be rejected
  
  • Req.: reasonable time for opportunity to inspect and payment before inspection is NOT acceptance.

Question 38

PERFORMANCE DISPUTES IN
SALE OF GOODS CONTRACT: When is the Revocation of Accepted Goods permissible? What is the Buyer’s Obligation to Pay? Consequences for Buyer?

Answer 38

• GENERAL RULE: B cannot revoke acceptance of goods
• **EXCEPTION: Revocation of Acceptance OK when ** (1) something really wrong with goods(non-confirmity substantially impairs value) & (2) that was difficult to discover (latent defect).
  
  • Note: Immediate act=rejection; Later act=revocation
• B’s Payment Obligation: check OK by deadline, but S’s allowed to refuse it (reasonable time allowed)
• Consequence of Rejection/Revocation of Acceptance
  
  • Return: Buyer can return goods to seller at seller’s expense
  • Refund: Buyer can get back any $$ paid for the goods
  • Dmgs: Buyer can get dmgs from seller for K-breach

Question 39

PERFORMANCE DISPUTES IN
SALE OF GOODS CONTRACT: Define Perfect Tender & Cure, Exceptions to Perfect Tender and General Rules/Exceptions Governing the Rejection/Revocation of Accepted Goods

Answer 39

Performance in Sales of Goods Contracts

• Perfect Tender: general std for sales of goods; less-than perfect tender (breach): B has option to reject and not pay
• Cure: less-than-perfect tender before contract deadline date: S can cure by re-attempting perfect tender
  
  • If S can show that B had previously accepted imperfect tender, S will get opportunity to cure.
• Installment Sales Contract Not Subject to Perfect Tender Rule: ONLY if explicit in contract language (NOT just b/c S made installment delivery);
  
  • Continuing relationship = mistakes fixed in future
• Acceptance of Goods: accepted goods CAN’T be rejected
  
  • Requires reasonable time for opportunity to inspect and payment before inspection is NOT acceptance.
• Revocation of Acceptance: (1) something really wrong with goods, (2) that is difficult to discover.
  
  • Immediate act=rejection; later act=revocation
• Payment: check OK by deadline, but S’s option to reject

Question 40

UCC AS GAP FILLER IN SALE/LEASE OF GOODS
EXPRESS & IMPLIED WARRANTIES - Express warranties?

Answer 40

Express Warranties: statement of fact or promises, NOT opinions (puffing) CANNOT be Disclaimed [Seller]

Question 41

UCC AS GAP FILLER IN SALE/LEASE OF GOODS
EXPRESS & IMPLIED WARRANTIES - Define Implied Warranty of Merchantability

Answer 41

Implied Warranty of Merchantability: goods sold by merchant who regularly sells such goods, must be fit for their ordinary purpose [Merchant]

Question 42

UCC AS GAP FILLER IN SALE/LEASE OF GOODS
EXPRESS & IMPLIED WARRANTIES - Define Implied Warranty of Fitness for a Particular Purpose

Answer 42

Implied Warranty of Fitness for Particular Purpose: if B has particular purpose known to merchant [Seller]

Question 43

UCC AS GAP FILLER IN SALE/LEASE OF GOODS
EXPRESS & IMPLIED WARRANTIES - Do Leases have warranties?

Answer 43

(NYBE)Leasesdo have warranties of fitness/merchantability.

Question 44

UCC AS GAP FILLER IN SALE/LEASE OF GOODS
EXPRESS & IMPLIED WARRANTIES - How to disclaim warranties?

Answer 44

Disclaimer of Implied Warranties:

• Magic Phrases: “as is” “w/all faults”
• Conspicuous Writing of Disclaimer

Question 45

UCC AS GAP FILLER IN SALE/LEASE OF GOODS
EXPRESS & IMPLIED WARRANTIES - Scope of Limits on Remedies

Answer 45

• Remedies for BOTH implied & express warranties can be limited UNLESS unconscionable
• Limitations on personal injuries in consumer goods is prima facie unconscionable

Question 46

EXCUSE OF CONTRACT B/C OF LATER AGREEMENT
What are the 4 forms of later agreements that will excuse performance?

Answer 46

4 LATER AGREEMENTS that EXCUSE Contract PERFORMANCE

Accord and Satisfaction:

• New agreement between parties which agrees to discharge old contract if accord is satisfied instead.
• Breach of Accord: sue on original deal OR accord
• Cashing check marked “paid in full” of disputed debt

Modification → Substituted Agreement:

• New agreement immediately discharges old contract, regardless of performance on modification

Novation:

• Mutually-agreed upon substitution of a new party to the contract: steps into the shoes of the existing party

Rescission → Cancellation:

• If neither party has accomplished full performance both parties can mutually agree to rescind contract.

Question 47

PERFORMANCE OF
C/L CONTRACTS -
Define Anticipatory Repudiation

Answer 47

Performance of C/L Contracts

• Anticipatory Repudiation: unequivocal indication of non-performance (not just a request for more money).

Question 48

PERFORMANCE OF
C/L CONTRACTS
Substantial Performance & Partial Performance - General Rule and Role of Materiality & Damages

Answer 48

Performance of C/L Contracts

• Substantial performance makes breach immaterial and non-breaching party must still perform (sue for damages)
  (e. g. use of Reading Pipe instead of Cohoe Pipe)*
• General Rule: Any breach, even immaterial breach = damages
• Partial performance that is NOT substantial performance is a breach so there is NO contract, and non-breaching party does NOT have to perform (pay)
  
  • BUT breaching party can sue in quasi-contract for work completed.
• Express divisible contract divides payment on per-unit basis, so –> examine performance on per-unit basis.

Question 49

PERFORMANCE:
EXCUSE OF PERFORMANCE
When is contract performance excused b/c of impossibility? Generally? UCC Art. II - SOG?

Answer 49

Impossibility

• Increased cost is NOT an excuse
• Destruction of necessary object (concert hall) IS an excuse
• Death of necessary person is only an excuse where the person is unique (e.g. architect)

Frustration of Specific Known Purpose:

• At time of contract both parties know specific purpose for contract which is then frustrated: Performance Excused (e.g. rent apt to see parade which is then cancelled).

Sale of Goods

• S has Risk of Loss: destruction of goods excuses
• B has Risk: destruction does not excuse (must pay)
• Fungible Good: destruction of S’s quantity of fungible good NOT an excuse: can be replaced
• Commercial Impracticability: may excuse (1) crop failures for specifically ID’able crop; (2) labor strike; (3) weather problems; (4) trade embargoes.

Question 50

CONTRACT DELEGATION:
PERFORMANCE OF CONTRACT DELEGATED TO 3RD PARTY NOT ASSOCIATED
WITH THE ORIGINAL CONTRACT - General Rule, Exceptions and Breach + Liability

Answer 50

Delegation: Transfer of Duties

General Rule: contract can be delegated to 3rd party(3P) for performance

Exceptions:

• Contract prohibits delegation/assignment
• Contracting party has specific skills/rep (artist).

Breach:

• Delegating Party is liable to other contracting party for breach by delegatee (3P).
• Delegatee (3P) is NOT liable to original non-delegating party for breach, UNLESS delegatee assumes the duty by promising to perform.

Question 51

ASSIGNMENTS
Requirements, Prohibitions, & Invalidations, Rights & Defenses and Multiple Assignments

Answer 51

• *Assignment: Transfer of Benefits**
• Assignor assigns contract benefits; obligor must perform*

Requires: present (NOT future) lang. (“I assign” NOT “I promise to assign.”; NO CONSIDERATION; +$5k must be in writing

Restrictions in Contract (Prohibition vs. Invalidation)

• Prohibition: “not assignable”: assignee w/o knowledge of prohibition CAN still enforce against obligor.
• Invalidation: “assignments are void”: NO enforcement against obligor (regardless of knowledge)
• ** C/L Limitation:** assignment cannot change obligor’s duties significantly

Rights and Defenses: assignee steps into obligor’s shoes, so

• Assignee CAN sue obligor for breach
• Obligor has same defenses vs. assignee as vs. assignor
• Payment to assignor OK until obligor knows of assignment

Multiple Assignments: gift assignments (no consid) = last in time wins; but if consid, 1st assignee wins, but 2nd can sue assignor

Question 52

CONTRACT FORMATION: When does a Quasi-Contract arise?

Answer 52

Contract Formation

Quasi Contract: 2 Situations

• No contract but detriment to one party
• No express contract provision to deal with problem (e.g. what to do with deposit if contract is breached).

Question 53

CONTRACT FORMATION: Implied in Fact Contract?

Answer 53

Contract Formation

Implied in Fact: implied through party conduct (e.g. patient undergoes surgery after repeated promises of success by doctor

Question 54

3RD PARTY BENEFICIARIES - What are they? Do they have Rights?

Answer 54

• *3rd Party Beneficiary (TPB)**
• Promisee contracts with promisor that promisor will render some performance that will benefit TPB.*

TPB must be explicitly named in the contract, or else she is ONLY an incidental beneficiary w/no contract right of enforcement

Rights Vest in TPB ONLY if TPB has(1) knowledge PLUS (2.a) detrimental reliance OR (2.b) assent as requested

Rights of TPB

• TBP has contract law right of enforcement even w/o consideration w/ promisor.
• However, TPB is subject to any defenses promisor has against promisee.
• TPB also has NO right to sue promisee unless TPB is a creditor of promisee.

Question 55

UNILATERAL VS.
BILATERAL CONTRACTS: General Difference

Answer 55

Contracts usually Bilateral (an exchange of promises: promise for a promise)

Unilateral: exchange of act for promise;
MUST clearly state that performance is the ONLY means of acceptance.

Question 56

VALIDITY: 3 Categories of Contested Contracts

Answer 56

Void Contract

• Void K has no legal efect from beginning and Cannot be Enforced by either party.

Voidable Contract

• Voidable K is one that one or both parties may elect to avoid (ex. by raising a defense that makes it voidable like infancy or mental illness). An aggrieved party may elect to ENFORCE a Voidable K

Uneforceable Contract

• Unforceable K is an agrmt that is otherwise invalid but may not be enforceable b/c of an extraneous defense to K formation (ex. SOL or SOF).

Question 57

REVOCATION: Limits on Offeror’s Power to Revoke

Answer 57

Irrevocable Offers

• Options: Offeree gives consideration for a promise by the offeror not to revoke an outstanding offer.
  
  • Can be held open for as long as parties specify.
• Merchant’s Firm Offer under Art 2: If (i) merchant, (ii) offers to sell goods in a signed writing and (iii) writing gives assurance that it will be held open –> Offer is not revocable for lack of consideration duringtime stated, or if no time stated,for reaosnable time (that cannot exceed 3 months).
  
  • 3 Month Limit ONLY applies to offers W/O support by Consideration
  • If consideration –> prob Option and thus no time limit.

Question 58

CONTRACT CREATION: 3 Basic Questions

Answer 58

CREATION OF CONTRACT

When seeking to enforce a k or obtain damages ct must determine existing of a K

Questions to Always Ask:

1. Was there mutual assent?
2. Was there consideration or substitute for consideraiton?
3. Are there any defenses to the creation of the contract?

Question 59

CONTRACT BREACH: When does a Breach Occurs and What makes it a material/minor breach (NYBE)?

Answer 59

A Breach of K occurs when:

• (1) an absolute_ Duty to Perform_, And
• (2) Duty has Not been Performed

ONLY for NYBE: Know Whether Breach is MInor or Material

• Amt of Benefit Received by Non-Breaching Party
• Adequacy of Compensation
• Extent of Part Performance
• Hardship to Breaching K
• Negligent or Willful Behavior of Breaching K
• Likelihood Breaching Party w/ Perform Remainder of K

Nonbreaching K must show (1) willing and (2) able to perform

Question 60

CONTRACT BREACH: If purchaser of real estate is not ready or unwilling to perform, can seller keep down payment? If so, when?

Answer 60

Yes, if down payment constitutes a valid liquidated dmg clause

Req. for Valid Liquidated Dmgs Clause: difficult to ascertain and amount must be a reasonable forecast

Question 61

CONTRACT BREACH: Start of a Material Breach (NYBE)?

Answer 61

Material Breach Occurs: when non-breaching party does not receive the Substantial Benefit of bargain b/c of

• (a) Non-Performance or
• (b) Defective Performance

Ex: H sells interest in Company-D for 5-yr employement K w/ Company-E for salary of $3K a month and special position. Company-E removes H from special positon.

• Benefit: Salary and Position
• Benefit not realized when Company-E removed H from position.

Question 62

CONTRACT MODIFICATION: Consideration and Writing - Availability and Requirements?

Answer 62

CONTRACT MODIFICATION

Consideration: CL reqs. modification w/ consideration but UCC permits new/diff terms to sales K w/o consideration

Writing: Written can be modified orally but if SOG modified for $500 or more in w/t SOF –> writing needed

• Only UCC Ks can prohibit oral modification

Question 63

PERFORMANCE: When Duty to Perform becomes absolute? - Condition vs. Remedies

Answer 63

Analysis: Ct looks to intent to determine whether condition or promise exist. If doubtful –> Ct construe as promise.

Absolute Promise v. Condition

**Absolute Promise: **Commmitment to do or refrain form doing something.

• If promise is unconditional–> failure to perform to term is breac of k
• Result: Gives rise to liability

**Condition: **Condition is a promise modifier. Tells you that If: (1) X occurs or fails to occur OR (2) if X occurs party is released from duty to perform.

• Types: Condition Precedent, Conidtion Concurrent; Condition Subsequent
• NO breach of promise UNTIL promisor is under an immediate duty to perform (condition may create duty)
  
  • Failure of contractual provision that is only a condition is not a breach
  • But discharges liability of promisor whose obligation was based on the condition
• Result: Relieves a part of the obligation ot perform

Remedy: (1) If conditions fails/occurs + (2) one party fully/partially performed –> recovery through unjust enrichment

Question 64

DAMAGES: Contracts for Sale of Goods - Buyer’s Damages

Answer 64

Buyer’s Dmgs

• Measured @ time B learns of breach*
  (1) S does not deliver or B reject goods/revoke accept:
• K-$ (MINUS) MP-$ OR Cost of Replace
• [PLUS] Incident or Consequential Dmgs
• If any, less expenses save as result of S’ breach

(2) S delivers NonConforming Goods that B accepts:

• Value of Delivered Good (MINUS) Value of Good in K
• [PLUS] Incident or Consequential Dmgs

(3) S antiicpatorily breaches K:

• **MP-$ **@ time B knows of breach (MINUS)
• K-$

Note: For Consequential dmgs, If S knew of B’s general or particual req. and loss could not be covered then S liable

Question 65

DAMAGES: Contracts for Sale of Goods - Seller’s Damages

Answer 65

Sellers’s Dmgs

• Seller’s Dmgs: Measured @ time for Delivery*
  (1) B wrongfully Repudiates or Refuses to Accept Conforming Goods:
• (i) MP-$ (@ Time & Deliv Pl) [MINUS] K-$
• (ii) Resell Goods(RSP) gets diference of MP-$ [MINUS] **RSP-$ **
• (iii) If S is Loss Volume Seller –>* Lost Profits Rule* Applies then K-$ [MINUS] $ to S
  
  • ONLY applies when S has Unlimited Inventory (ex. would have sold 2 widgets instead of 1)
  • If S’ supply limited, then must use other two measures –> (i) or (ii)

(2) B Accepts Goods - Action for Price

Circumstance: (i) B does not pay or (ii) B does not accept Goods and S cannot resell at Reasonable Price or (iii) Goods lost/damaged when risk of loss is on B

• Action for Full K-$

Question 66

DAMAGES: Contracts for Sale of Land/Real Estate Contract

Answer 66

Land Sale

Contract Price [MINUS] Fair Market Value of Land

Question 67

DAMAGES: Sale of Land; Employment & Construction

Answer 67

Employment Contract

• Breach by Employer: Full K-$
• Breach by Employee: $ to Replace Employee

Construction Contract

• Breach by Owner: B gets profits from K-$ [PLUS] Costs Expended
• Breach by Builder: $ of Completion [PLUS] Reasonable Comp for Delay

Question 68

MITIGATION: Duty to Mitigate

Answer 68

Mitigation (Δ Affirmative Defense)

Π must mitigate or recovery (comparable benefit) –>* **Only reduces recovery and No Duty if Specially Mfg*

Duty for Types of K:

• Employment: RC to find same Kind/Rank/Grade
• K for SOG: S cannot bring Action a/gst Pf for Full K-# Unless no reasonable sell-$ or dmg/risk loss on B
• Mfgr: Stop Working but if completionn reduces dmgs –> work
• Construction K: Stop Working

Question 69

CONTRACTS: SOURCES OF LAW -

The Common Law covers?

Answer 69

The Common Law covers anything but sales of goods or leases.

Question 70

CONTRACTS: SOURCES OF LAW - UCC Art. 2A covers?

Answer 70

UCC Art. 2A covers leases of GOODS + Sale of Interest in Real Property (NOT buildings/land)

Question 71

IDENTIFYING OFFERS: Offer includes a manifestation of…. a

Question 72

DAMAGES: Buyer’s remedy when seller does not deliver goods?

Answer 72

Difference between K price and cost of replacement goods = COVER

Req: Reasonable K for substitute goods in good faith and without delay

Availability: Not available if Buyer bore risk of loss

Question 73

UCC DELIVERY: When a Contract says “F.O.B., Buyer’s location,” to which party and when does the risk of loss shift?

Answer 73

This is a Destination Contract

• Seller bears initial ROL until GOODs DELIVERED to Buyer’s DOOR
• ROL shifts to Buyer as soon as carrier delivers.

Question 74

UCC DELIVERY: When a Contract says “F.O.B., seller’s location,” to which party and when does the risk of loss shift?

Answer 74

This is a Shipment Contract

• Seller bears initial ROL until DELIVERY to CARRIER
• ROL shifts to Buyer as soon as Seller completes delivery obligations.
• Note:
  
  • applies under the UCC,
  • Seller must deliver goods to licensed carrer +send docs + notify of hopment

Question 75

UCC DELIVERY: F.O.B.

Answer 75

F.O.B.: Free on Board