Contracts

Question 1

SOF writing requirements

Answer 1

(i) identify the subject matter,
(ii) indicate that a contract was made,
(iii) specify the essential terms, and
(iv) it/they must be signed by the person whose promise we are trying to enforce

Question 2

Define merchant

Answer 2

A person who regularly deals in goods of the kind sold or who otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction

Question 3

Parol evidence rule

Answer 3

bars extrinsic evidence of a prior agreement where the prior agreement contradicts the terms of a final written agreement or where the prior agreement purports to add to a completely integrated agreement

**need a writing

EXCEPTIONS: extrinsic evidence is offered to prove

(1) the written agreement is to take effect only upon the occurrence of a stated condition
(2) correct clerical error
(3) establish defense against formation
(4) interpret a vague or ambiguous term
(5) add to a partially integrated writing

Question 4

Expectation damages

Answer 4

intended to put the injured party in the same position as if the contract had been performed.

In a case of willful breach, where only the completion of the contract will enable the nonbreaching party to use the land for its intended purposes, the cost of completion may be considered the appropriate damage award.

Question 5

Consequential damages

Answer 5

consist of losses beyond those covered by the standard measure that a reasonable person would have foreseen would occur as a result of the breach.

Often the availability of consequential damages turns on the breaching party’s awareness of the other party’s circumstances.

Question 6

Foreseeability of contract damages

Answer 6

Contract damages must be foreseeable to be recoverable. Damages are foreseeable if a reasonable person in the position of the breaching party would have known at the time the contract was made that the damages were likely to occur as a result of the breach.

Question 7

Certainty of contract damages

Answer 7

To recover, damages must be certain and not speculative; i.e., they must be ascertainable with reasonable certainty.

Traditionally, courts would not allow recovery of lost profits from a business not yet started; they were considered too speculative. The modern trend, however, is to allow recovery if there is sufficient evidence to determine profits with reasonable certainty.

Question 8

Cost avoided bc of breach

Answer 8

Contract damage awards must take into account costs avoided because of the breach.

Question 9

Avoidable damages

Answer 9

A nonbreaching party cannot recover avoidable damages. He must refrain from piling up losses after the breach. He should make reasonable efforts to cut down the losses after breach, and if he does not, he will not be permitted to recover those damages that might have been avoided.

Question 10

No Mirror Image Rule (Sale of Goods)

Answer 10

offeree’s adding or changing a term doesn’t prevent acceptance under Article 2

Offeree’s Term is Included Only If:

(1) both parties are merchants
(2) not a material change, AND
- - likely to cause hardship or surprise;
- - Material change EX: disclaimer of warranties
- - If the term is customary in the industry, it’s not material
(3) no objection to it within a reasonable time

Question 11

4 methods of termination

Answer 11

(1) lapse of time - offer lapses after a stated term or after a reasonable time has passed
(2) revocation - offer terminates when
(1) the offeror revokes the offer
(2) any time before acceptance and
(3) the offeree has awareness
- - direct (offeror indicates directly to the offeree) or
- - indirect (offeror engages in conduct that indicates she’s changed her mind & offeree is aware of the conduct)
- 4 Exceptions (offer can’t be revoked)
(1) Option
(2) Firm offer (3 months max)
(3) Foreseeable reliance after acceptance
(4) Starting to perform a unilateral K
- effective on receipt
(3) rejection - when the offeree rejects it
(a) Counteroffer
(b) Conditional acceptance - rejection & counteroffer
(c) Acceptance adding terms/varying offer
(4) death - death of either party BEFORE acceptance

Question 12

Rejection sent first then acceptance

Answer 12

Whichever arrives first; effective on receipt

Question 13

Consideration

Answer 13

bargained-for legal detriment/benefit

past consideration is not consideration

Modification

• CL: new consideration required
• UCC: must have good faith

Time-Barred Debt as an Exception to Consideration Rule: A written promise to may a debt, collection of which is barred by SOL, is enforceable even w/o consideration

Promissory Estoppel as a Substitute for Consideration:
Foreseeable reliance may make a promise enforceable, even w/o consideration
(1) promise
(2) reasonable foreseeable detrimental reliance
** right answer only if no consideration

Question 14

Unconscionability

Answer 14

empowers a court to refuse to enforce all or part of an agreement

(1) Unfair surprise and oppressive terms are
(2) tested as of the time the agreement was made**
(3) by the court

Question 15

Conduct as source of terms

Answer 15

(1) course of performance - how parties performed previous installments of this K
(2) course of dealing - what parties did under prior Ks w/ each other
(3) usage of trade - what others in trade do in similar Ks

Question 16

Seller’s Warranties of Quality in a Sale of Goods

Answer 16

Express Warrant

• describes the goods, promise facts about the goods, showing a sample or model
• not an opinion
• can’t be waived

Implied Warranties

• Implied Warranty of Merchantability
  
  • • goods are fit for their ordinary purpose
  • • merchant who deals in goods of the kind
• Implied Warranty of Fitness for a Particular Purpose
  
  • • goods are fit for the buyer’s particular purpose
  • • seller knows buyer has special purpose & is relying on seller to select suitable goods
  • • seller doesn’t have to be a merchant

Question 17

What does the court look at to determine if a breach is material?

Answer 17

(1) amount of benefit received,
(2) adequacy of damages,
(3) extent of performance,
(4) hardship to the breaching party, and
(5) whether the breach was negligent or willful.

a reasonable delay in performance is usually considered a minor breach unless the nature of the contract is such as to make performance on the exact day of vital importance or the contract, by its terms, provides that time is of the essence. If time is of the essence, any delay will be a material breach. To determine whether time is of the essence, the trier of fact looks at the instrument itself as well as all of the surrounding circumstances.

Question 18

Divisible contract

Answer 18

If a contract is divisible, a party who has performed one or more parts is entitled to collect the contract price for those parts even if it breaches the other parts. It is not a condition precedent to the other party’s liability that the whole contract be performed. However, the non-breaching party has a cause of action for each of the unperformed units and may withhold counter performance for those units. For a contract to be divisible, (i) the performance of each party must be divided into two or more parts under the contract, (ii) the number of parts due from each party must be the same, and (iii) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party. Divisibility questions involve contract interpretation and generally turn on fairness.

Question 19

Restitution

Answer 19

If the plaintiff is the party who breached the contract, it may still recover in quasi-contract the value of the services performed minus any damages incurred as a result of the breach.