Contracts

Question 1

What is a merchant?

Answer 1

someone who regularly deals in goods of the kind sold, or

who otherwise by his profession holds himself out as a having special knowledge or skills as to the practice or goods involved

NB: has to be acting in a mercantile capacity - a party is not a merchant for purposes of sales that are solely personal

Question 2

What is good faith under the UCC and where is it imposed?

Answer 2

1) honesty in fact, and 2) observance of reasonable commercial standards.

performance and enforcement of contract.

cannot be waived.

Question 3

What is a quasi-contract?

Answer 3

Not a contract at all, but a construction by the court to avoid unjust enrichment, allowing a plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant

Question 4

Under the modern view, what are the two scenarios where a unilateral contract is formed?

Answer 4

1) when the offeror clearly indicates that completion of performance is the only manner of acceptance.
2) where there is an offer to the public, such as a reward

Question 5

What standard is used to determine whether there was mutual assent in a contract?

Answer 5

Objective standard - did words or conduct manifest a present intent to enter into a contract

Question 6

What is an offer?

Answer 6

Creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms, thereby creation the power of acceptance in the offeree.

Need: 1) promise, undertaking, or commitment; 2) certainty and definiteness of terms; and 3) communication of above to offeree (i.e. need to identify offeree or class of offeree)

Question 7

Are price quotations offers?

Answer 7

Generally no, unless they are included with a quantity term

Question 8

What will courts look to to determine if a valid offer was made?

Answer 8

1) Circumstances surrounding the language - how was it reasonably understood in the context?
2) Prior practice and relationship of the parties

Question 9

What constitutes definite and certain terms?

Answer 9

Whether enough of the essential terms have been provided so that a contract would be capable of being enforced

Question 10

What is the effect of missing terms?

Answer 10

Does not prevent formation if parties intended to make a contract and there is reasonably certain basis for giving a remedy.

Majority of jurisdictions and UCC hold that a court can supply reasonable terms for those missing.

NB: not the case if terms are included but deemed vague

Question 11

When is an offer irrevocable?

Answer 11

1) Option K (consideration)
2) Merchant’s Firm Offer (by merchant & no consideration)
3) Detrimental Reliance (reasonably foresee - substantial preparation maybe)
4) Start of Performance for Unilateral K
5) Start of Performance for Offer Indifferent to Manner of Acceptance (notice to offeror may be required)

Question 12

Does a rejection of a option K offer terminate the offer?

Answer 12

No, unless the offeror has detrimentally relied on the rejection.

Question 13

What is an acceptance?

Answer 13

A manifestation of assent to the terms of the offer

Question 14

What is the right to accept transferable?

Answer 14

When an option K is created

Question 15

When does the “beginning” of performance constitute an acceptance?

Answer 15

Bilateral contract where form of acceptance is not articulated.

Question 16

When is silence adequate acceptance?

Answer 16

Generally never, unless based on prior dealings or trade practice, it would be commercially reasonable for the offeror to consider silence as acceptance.

Also potentially when recipient of service knows the service is occurring and that compensation would be required, and knows that a word is needed to stop the service.

Question 17

What is the method of acceptance for: “an offer to buy goods for current or prompt shipment” ?

Answer 17

Construed as inviting acceptance either by:

1) promise to ship
2) current or prompt shipment of (non)conforming goods

Question 18

What is the effect of a shipment of non-conforming goods in response to an offer?

Answer 18

Acceptance AND breach, unless offered only as an accommodation

Question 19

What is the effect of accepting non-conforming goods as an accommodation?

Answer 19

Seller as not breached, as buyer has not accepted original offer, and so is entitled to reclaim goods

Question 20

When does the accommodation rule applu?

Answer 20

ONLY when shipment is used as a form of acceptance

Question 21

Can offer that results from a conditional acceptance be accepted by performance?

Answer 21

No.

If parties ship or accept goods after a conditional acceptance, a contract is formed by conduct, and the new terms are not included

Question 22

What are the exceptions to the pre-existing legal duty rule? (7)

Answer 22

1) new or different consideration
2) promise to ratify a voidable obligation
3) pre-existing duty is owed to a third person
4) honest dispute as to the duty
5) unforeseen circumstances sufficient to discharge a party (impracticability)
6) modern view - where modification is fair and equitable in the view of new circumstances not anticipated
7) good faith modification to UCC contract

Question 23

When is a misrepresentation material?

Answer 23

1) it would induce a reasonable person to agree, OR
2) the maker knows that for some special reason it is likely to induce the particular person to agree, even if a reasonable person would not

Question 24

When is a contract NOT void despite the consideration and/or subject matter being illegal?

Answer 24

1) P is unaware of the illegality while the D knows of it
2) the parties are not in pari delicto (one party is not as culpable as the other)
3) the illegality is the failure to obtain a license when the license is for revenue-raising purposes rather than the protection of the public.
4) If only the PURPOSE of the contract was illegal, then the contract is voidable by a party who was 1) unaware of the purpose, and b) aware but did not faciliatet the purpose AND the purpose does not involve serious moral turpitude

Question 25

Define mental incapacity as a lack of capacity defense?

Answer 25

One whose mental capacity is so deficient that he is incapable of understanding the nature and significance of a contract.

Question 26

When does taking advantage of someone's economic needs constitute duress?

Answer 26

Generally, taking advantage of someone's economic needs or wants will not constitute duress. However, withholding something someone wants or needs will constitute economic duress if: 1) the party threatens to commit a wrongful act that would seriously threaten other party's property or finances 2) there are no adequate means available to prevent threatened loss

Question 27

What must be included in a writing so satisfy the SoF

Answer 27

1) reasonably identify subject matter 2) indicate a contract has been made 3) state with reasonable certainty the essential terms

Question 28

What are the remedies for a contract that violates the SoF?

Answer 28

Party can sue for the reasonable value of the services or part performance rendered, OR sue on the contract for the expectation damages, OR sue in restitution of the benefit conferred

Question 29

What is a partially integrated agreement?

Answer 29

A writing the parties intended to be final, but doesn’t express the full understanding of the parties. Extrinsic evidence of prior or contemporaneous agreements that contradict the written agreement are barred, but additional terms or agreements that supplement the written agreements are admissible

Question 30

What is the effect of acceptance by performance?

Answer 30

Where an offer invites acceptance by performance, the offer’s beginning of performance creates an option contract that precludes the offeror from revoking its offer

Question 31

What is the effect of a merger clause under the UCC?

Answer 31

Under the UCC parol evidence rule, a merger clause does not conclusively establish that an agreement is completely integrated, and a finding that an agreement is completely integrated does not necessarily bar admission of extrinsic evidence. Such evidence is admissible to explain the terms of an agreement. Modern trend.

Question 32

What is the effect of a mutual mistake?

Answer 32

Performance is excused when there is a mutual, material mistake of an existing fact, and whoever is seeing relief did not bear the risk of mistake

Question 33

What are the general rules of construction for interpreting Ks?

Answer 33

1) construed as a whole 2) words given their ordinary meaning 3) written/typed > printed 4) try to make K valid and enforceable 5) ambiguities construed against the drafting party 6) Ranked: a) express terms, b) course of performance, c) course of dealing, d) usage of trade

Question 34

What is the naturally omitted terms doctrine?

Answer 34

Doctrine allows evidence of terms that would naturally be omitted from the written agreement. A term would be naturally omitted if: 1) it does not conflict with the written integration, and 2) it concerns a subject that similarly situated parties would not ordinarily be expected to include in the written instrument.

Question 35

What are the UCC default terms when parties leave them open in the K?

Answer 35

1) price - reasonable price at time of delivery 2) delivery - seller's place of business 3) time for delivery - reasonable time 4) time for payment - time and place at which the buyer is to receive the goods

Question 36

When a K does not contain an FOB term or any other term explicitly allocating the risk of loss, what is the K?

Answer 36

Presumed to be a shipment K - when K requires seller to ship the goods by carrier but does not require him to deliver them to a particular destination. Risk of loss passes to the buyer when the goods are delivered to carrier

Question 37

List all the possible implied warranties under the UCC

Answer 37

1) warranty of title (all sellers) 2) warranty against infringement (merchant seller) 3) warranty of merchantability (merchant seller) 3) warranty of fitness for a particular purpose (any seller)

Question 38

When is a disclaimer "conspicuous"?

Answer 38

So written, displayed or presented that a reasonable person against whom it is to operate ought to have noticed. It is conspicuous if: 1) it is in larger type than the surrounding text, 2) it is in contrasting font or color, 3) it is set off from the text by marks that call attention to it. COURT decides any fact question as to conspicuousness

Question 39

List the ways to disclaim warranties

Answer 39

1) specific, conspicuous disclaimers 2) "as is" language 3) by examination or refusal to examine (no warranty as to defects that a reasonable examination would have revealed) 4) by course of dealing, of performance, or usage of trade

Question 40

Are warranty disclaimers that limit damages for personal injury caused by a breach of warranty on consumer goods enforceable?

Answer 40

No, they are prima facia unconscionable

Question 41

When must a disclaimer of warranty or limitation on remedies be agreed?

Answer 41

During the bargaining process - only a minority of courts will hold that a disclaimer or limitation on remedy included in the packaging of goods is effective against the buyer

Question 42

What is "Alternative A"

Answer 42

Standard adopted by most states, used to determine to whom the warranty liability extends beyond the initial buyer. Extends to any natural person who is in the family or household of the buyer, or who is a guest in the buyer's home if it is reasonable to expect that the person may use, consumer or be affected ny the goods AND that person suffers personal injury because of the breach of warranty.

Question 43

Under common law, are provisions prohibiting oral modification effective?

Answer 43

No

Question 44

Under the UCC, are no-modification clauses effective?

Answer 44

Usually, yes. If between a merchant and non-merchant, provision requires non-merchant's separate signature

Question 45

What is a promise?

Answer 45

A promise is a commitment to do or refrain from doing something. If a promise is unconditional, the failure to perform according to its terms is a breach of contract.

Question 46

What is a condition?

Answer 46

Either an event that must occur or fail to occur before a party has a duty to perform OR an event, the occurrence or nonoccurrence of which releases a party from his duty to perform. A condition is a promise modifier - there can be no breach of contract until the promisor is under an immediate duty to perform. Failure of a condition to occur discharges the promisor from liability.

Question 47

What is the measure of satisfaction of a condition precedent

Answer 47

Generally, according a reasonable person (objective standard), unless the K involves personal taste or judgment or a third party satisfaction is required (i.e. engineer or architect) in which case it is when the party is personally satisfied (subjective standard) - but still requires honesty and good faith, which if not satisfied excuses the condition.

Question 48

When might a condition be excused?

Answer 48

1) Hindrance or Failure to cooperate 2) Actual breach 3) Anticipatory Repudiation

Question 49

What may a non-repudiating party do in the face of an unequivocal anticipatory repudiation

Answer 49

1) treat as breach and sue immediately 2) suspend performance and wait to sue until performance is due 3) treat as offer to rescind and discharge contract 4) urge promisor to perform

Question 50

When is a contract divisible?

Answer 50

1) performance of each party is divisible into two or more parts 2) number of parts due from each party is the same 3) performance of each part by one party is agreed on as the equivalent of the corresponding part

Question 51

Can an election waiver be withdrawn?

Answer 51

No, even if the other party has not relied upon it

Question 52

What is the test for impracticability?

Answer 52

1) extreme and unreasonable difficulty and/or expense | 2) nonoccurrence was a basic assumption of the party

Question 53

When does frustration exist?

Answer 53

1) supervening act 2) parties did not reasonably foresee 3) purpose of the K has been completely (or almost completely) destroyed 4) purpose of the K was realised by both parties at the time the K was formed

Question 54

When is rescission effective in a unilateral K?

Answer 54

1) an offer of new consideration by a nonperforming party, or 2) elements of promissory estoppel, or 3) manifestation of intent by the original offeree to make a gift of the obligation owed to her

Question 55

What is the consideration involved in a rescission K?

Answer 55

The giving up by each party of her right to counterperformance from the other

Question 56

What is needed for unilateral rescission?

Answer 56

adequate legal grounds (mistake, misrepresentation, duress and failure of consideration). If other party refuses, rescinding party may file an action in equity to obtain it

Question 57

What are the elements of a valid novation?

Answer 57

1) prior valid K 2) an agreement among all parties (existing and new) to the new K 3) immediate extinguishment of the old K 4) valid and enforceable new K

Question 58

When is a breach considered material?

Answer 58

1) When the obligee does not receive the substantial benefit of her bargain. 2) Minor breach + anticipatory repudiation

Question 59

What are the factors considered for a material breach?

Answer 59

1) amount of benefit received 2) adequacy of compensation 3) extent of part performance 4) hardship to breaching party 5) negligent or willful behavior 6) likelihood that the breaching party will perform the remainder of the contract

Question 60

When may a buyer revoke acceptance?

Answer 60

1) the goods defect substantially impairs their value, AND a) buyer accepted on the reasonable belief that the defect would be cured, OR b) buyer accepted because of the difficulty of discovering defects or due to assurances of the seller that they conformedx

Question 61

Does a liquidated damages clause make a legal remedy adequate?

Answer 61

No

Question 62

When is a non-compete covenant reasonable?

Answer 62

1) reasonably necessary to protect a legitimate interest of the person benefitted by the covenant 2) reasonable as to geographic scope and duration 3) must not harm the public

Question 63

Defenses to an action for specific performance

Answer 63

1) laches - claim that P has delayed bringing the action to the prejudice of the D 2) unclean hands - party seeking performance is guilty of wrongdoing in the transaction being sued upon 3) sale to BFP - subject matter was sold to BFP (value and in good faith()

Question 64

When can a buyer replevy goods?

Answer 64

1) seller becomes insolvent within 10 days of receiving buyer's first payment, 2) goods were purchased for personal, family or household purposes, or 3) buyer unable to adequately secure substitute goods (i.e. cannot cover)

Question 65

When are liquidated damages clauses enforceable?

Answer 65

1) damages for contractual breach are difficult to estimate or ascertain at the time the contract was formed, AND 2) amount is a reasonable forecast of the compensatory damages in the case of breach. If unreasonable, courts will construe as a penalty

Question 66

When there is a breaching party attempting to collect on a partially performed K, what should you consider in order

Answer 66

1) substantial performance doctrine 2) divisibility 3) restitution

Question 67

When is restitution available in a quasi-contract action where there was no contractual relationship?

Answer 67

1) P conferred a benefit on D 2) P conferred benefit with reasonable expectation of being compensated with value 3) D knew or should have known of P's expectation 4) D would be unjustly enriched

Question 68

How do you determine if a TPB is intended or incidental?

Answer 68

1) identified in K 2) receives performance directly from promisor 3) has some relationship with the promisee to indicate intent to benefit

Question 69

What is created when a delegate promises he will perform a delegated duty?

Answer 69

This is an assumption of the duties and creates a contract between the delegator and the delegate in which the obligee is a TPB

Question 70

What are the requirements for entrustment?

Answer 70

1) merchant must be one who ordinarily deals in goods of the kind, 2) the sale must be in the ordinary course of business

Question 71

When does the mailbox rule not apply?

Answer 71

1) offers 2) revocations 3) counteroffers 4) acceptance of option K 5) acceptance of irrevocable offers 6) when acceptance deemed effective upon receipt per the terms of the offer

Question 72

When does impracticability exist?

Answer 72

Where a party encounters extreme and unreasonable difficulty and/or expense, and such difficulty was not anticipated. The facts giving rise to impracticability must be such that their nonoccurrence was a basic assumption on which the contract was made

Question 73

What is the consideration in Novation?

Answer 73

when the party being substituted out gives up his rights under the original K, the remaining party implicitly agrees to give up his right to expect performance from the substituted out party, and the new party agrees to perform

Question 74

When is a mortgage on the property for sale deemed an encumbrance rendering title unmarketable?

Answer 74

Where a land contract notes that “time is of the essence” since the exercise of the right of the seller to use the proceeds if the sale to pay off the mortgage may take some time.

Question 75

What damages are available to a contractor for an owner's breach mid-performance? What damages for the owner in the reverse?

Answer 75

owner breach + contractor damages: 1) profits would have earned, 2) costs incurred to date contractor breach + owner damages: 1) cost of completion, 2) reasonable compensation for any delay in performance - UNLESS completion would involve undue economic waste

Question 76

What is a good faith reason to modify a K?

Answer 76

discovering an error

Question 77

When is a promise to surrender a legal claim valid consideration?

Answer 77

Yes, so long as the person has a good faith belief in the claim's validity

Question 78

When is conditionally accepted NOT considered a counteroffer/rejection?

Answer 78

When the condition is one ordinal.y included in the kind of K (i.e. implied warranty, duty of good faith)

Question 79

Under the UCC, how is price determined if no price is mentioned in the K?

Answer 79

reasonable price at the time of delivery

Question 80

When can an article be withdrawn for bidding at an auction

Answer 80

auction with reserve

Question 81

In the formation process, what are catalogues containing price quotations?

Answer 81

Invitations to offer

Question 82

Is the benefit of "peace of mind" or the "gratification of influencing the mind of another" valid consideration?

Answer 82

Yes, provided that the promisee is not already legally obligated to perform the requested act

Question 83

When does a K lack mutuality?

Answer 83

When there isn't consideration on both sides

Question 84

When is payment by the debtor of a smaller sum due valid consideration?

Answer 84

If the payment is in any way different (e.g., stock instead of cash) or if the debt was honestly disputed

Question 85

For sole distributor Ks, what is the consideration?

Answer 85

The court will imply a promise to use best efforts to sell the product —> valid under common law and UCC