Contracts

Question 1

Where a contract is completely integrated:

Answer 1

Parol evidence can be used to prove the existence of a separate collateral agreement supported by its own consideration

No prior extrinsic evidence at all!

Question 2

The power of acceptance:

Answer 2

Belongs only to persons with whom the offeror intended to contract

Question 3

A contract is voidable for undue influence if:

Answer 3

Assent was the product of: (i) unfair or excessive persuasion by (ii) someone who dominated or shared a special relationship of trust and confidence with the party

Question 4

Although expectancy damages normally are awarded in a breach of contract action, restitutionary damages are permitted where:

Answer 4

the nonbreaching party has partially performed a below market value contract

*Nonbreaching party may recover amount breaching party would have had to pay to secure the same performance as the nonbreaching party rendered

Question 5

Express Warranty

Answer 5

Any promise, affirmation, description, or sample made by the SELLER that is part of the BASIS for the bargain

Question 6

Implied warranty of merchantability

Answer 6

Implied when seller is merchant - goods must be fit for their ordinary purpose

*Oral or written disclaimer MUST be conspicuous and use the term “merchantability”

Question 7

Implied warranty of fitness for a particular purpose

Answer 7

Implied whenever seller has reason to know buyer:

(1) has particular use for goods and
(2) is relying on seller’s skill to select the goods

*Can be disclaimed with general language through conspicuous writing

Question 8

Anticipatory Repudiation:

Answer 8

CL: promisor repudiates before performance is due through clear and unequivocal words or acts - Non breaching party can treat as breach, ignore and demand performance, or wait until time for performance to sue

UCC: Occurs when there has been an unequivocal refusal of buyer/seller to perform or when reasonable grounds for insecurity arise and the other party fails to provide adequate assurances within 30 days

Question 9

Liquidated damages are enforceable if:

Answer 9

(1) Intended to agree in advance to damages that might arise,
(2) reasonable at the time of the K, bearing some relation to damages that might be sustained, and
(3) actual damages would be uncertain in amount and difficult to prove

Question 10

UCC Right to Cure

Answer 10

Seller has right to cure defective tender if TIME OF PERFORMANCE under K has not yet elapsed or seller had REASONABLE GROUNDS to believe that buyer would accept the nonconformity (this option is available even after time of performance)

Question 11

If a seller delivers an unmarketable title, a buyer may:

Answer 11

(1) rescind the contract and recover payments,
(2) sue for breach of contract, or
(3) bring an action for specific performance with an abatement in purchase price

Question 12

When a seller of goods fails to make a perfect tender:

Answer 12

The buyer may accept or reject all or part of the goods

*Buyer must promptly notify seller of its rejection but is not required to return shipped goods unless seller requests buyer do so

Question 13

Fraudulent Misrepresentation

Answer 13

Person defrauded can avoid the contract with the person who made the fraudulent assertion

*Nondisclosure of a known fact is tantamount to an assertion that the fact does not exist, IF the party not disclosing the fact knows that the failure to disclose would constitute lack of good faith and fair dealing

Question 14

Generally, when a contract is breached:

Answer 14

Nonbreaching party is entitled to expectation damages

Question 15

When a construction contract is breached by the party who sought the construction:

Answer 15

Builder is entitled to expected profits + costs already incurred - payments already made by owner - materials purchased and used on another job

Question 16

Generally, unless consideration is given to keep an offer open:

Answer 16

the offeror can withdraw an offer at any time prior to its acceptance by the offeree, even an offer that the offeror states is irrevocable

Question 17

Merchants Firm Offer

Answer 17

A firm offer made by a merchant in a signed writing is irrevocable for the stated time period, where such period is three months or less

Question 18

Promissory Estoppel

Answer 18

A promise is binding if:

(1) promisor should reasonably expect it to induce action or forbearance on the part of the promisee or a third person,
(2) the promise does induce such action or forbearance, and
(3) injustice can be avoided ONLY by enforcement of the promise

*Generally reliance damages instead of expectation damages

Question 19

Under K for sale of goods, default buyer is entitled to refund of any payments made on the K less damages provable by the seller and either:

Answer 19

(1) the amount which the seller is entitled by virtue of an enforceable liquidated damages provision, or
(2) a penalty of 20% of the value of the total performance for which the buyer is obligated under the K, or $500, whichever is smaller

Question 20

Suretyship

Answer 20

Three-party contract, wherein one party (surety) promises a second party (obligee) that the surety will be responsible for any debt of a third party (principal) resulting from the principal’s failure to pay as agreed

SOF generally requires suretyship agreements be in writing to be enforceable UNLESS the main purpose of the surety in agreeing to pay the debt of the principal is the surety’s own economic advantage, rather than principal’s benefit

Question 21

Accord

Answer 21

Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s pre-existing duty

• When a party agrees to accept a lesser amount in full satisfaction, there must be consideration or a consideration substitute for the party’s promise to accept the lesser amount (other party honestly disputes the claim or agrees to forego asserted defense)

Question 22

Satisfaction

Answer 22

Performance of the accord agreement that discharges both the original and the accord contract

When a claim is subject to a dispute, it can be discharged if the person against whom the claim is asserted in good faith tenders a negotiable instrument (check) that is:

(1) accompanied by a conspicuous statement indicating the instrument was tendered as full satisfaction of the claim, and
(2) claimant obtains payment of the instrument (evidenced by cashing)

Question 23

A party’s demand for performance for a term not contained in the contract, accompanied by an unequivocal statement that the demanding party will not perform a contractual duty unless the other party meets the additional term:

Answer 23

Constitutes anticipatory breach of contract and excuses performance by the other party

Question 24

An assignment that is not supported by consideration is;

Answer 24

revocable unless the obligor has already performed or promissory estoppel applies

Question 25

Additional Terms as Between Merchants

Answer 25

As between merchants, an additional term contained in the acceptance is automatically included in the contract unless:

(i) the offer expressly limits acceptance to the terms of the offer,
(ii) the offeror has already objected to the additional terms or does so within a reasonable time, or (iii) the term materially alters the original contract.

Question 26

The sale of goods by auction is complete when:

Answer 26

The auctioneer accepts the highest bid by the fall of the auctioneer’s hammer or in any other customary way

Question 27

Modification that requires different performance can be sufficient:

Answer 27

Consideration for modification

Question 28

Defense of mistake is not available when:

Answer 28

The party seeking to assert the mistake has assumed the risk of mistake

Question 29

Perfect Tender Rule

Answer 29

In a contract for the sale of goods, both the goods and the time of delivery must conform to the requirements of the contract

Question 30

A mutual mistake occurs when:

Answer 30

Both parties are mistaken as to an essential element of the contract

May be voidable by the adversely affected party upon showing of the following:

(1) mistake of fact existing at the time the K was formed,
(2) the mistake relates to basic assumption of the K,
(3) mistake has a material impact on the transaction, and
(4) the adversely affected party did not assume the risk of mistake