Contracts

Question 1

Intended Third Party Beneficiary

Answer 1

Either: (1) one who, if the promise is performed, will satisfy some obligation of money owed to that third party; or (2) circumstantial facts indicate that one of the parties intends to give the third party the benefit for a promised performance.

Only intended beneficiaries have rights under contracts.

Question 2

Factors to determine if third party is intended beneficiary

Answer 2

Whether (1) the beneficiary could have reasonably relied on the fact that a purpose of the contract was to confer a right to him; (2) performance is supposed to run directly from a contracting party to the third party, rather than from the promisor to the promisee and only indirectly benefitting the third party; and (3)if part of the overall object of the parties to the contract was to benefit the third party.

Question 3

Incidental Third Party Beneficiary

Answer 3

Those who may benefit from the contract, but that is not the primary purpose of the contract.

No contractual rights even tho they may have received a gift or some other benefit form one of the contracting parties.

Question 4

Valid Offer

Answer 4

(1) Manifestation of a present intent to contract demonstrated by a promise, undertaking, or commitment;
(2) Communicated to an intended offeree; and
(3) Definite and certain terms.

Question 5

Mirror Image Rule

Answer 5

Common law rule. Acceptance of each and every term of the offer.

Question 6

Battle of the Forms

Answer 6

UCC rule. Between merchants, the additional terms become part of the contract unless they materially alter the contract, the offeror objects, or the offer is limited to its terms.

Question 7

Unilateral Mistake

Answer 7

Contract is voidable if nonmistaken party knew or should have known of mistake.

Question 8

Mutual Mistake

Answer 8

Contract is voidable by adversely affected party: (1) mistake concerns basic assumption on which the contract was made; (2) mistake has material effect; and (3) party seeking avoidance did not assume risk.

Question 9

MYLEGS

Answer 9

Statute of Frauds - certain contracts must be in writing, signed by the parties to be charged.

Marriage
Year (cannot be completed in 1 year)
Land
Executors and administrators
Goods ($500 or more)
Suretyship

Question 10

Parol Evidence Rule

Answer 10

When parties intend that a writing is the final expression of their bargain, no prior (oral or written) or contemporaneous (oral) expressions are admissible to vary the terms of the writing.

Question 11

Modification of Terms

Answer 11

Traditional CL - additional consideration needed

Modern CL - no consideration if due to circumstances that were unanticipated by the parties when the contract was made and it is fair and equitable

UCC - no consideration so long as in good faith, but must be in writing if modified for $500+

Question 12

Perfect Tender Rule

Answer 12

If goods or delivery fail to conform to contract in any way, buyer generally may reject all, accept all, or accept any commercial units and reject rest

Question 13

Liquidated Damages

Answer 13

Allowed if: (1) actual damages difficult to calculate at the time of contracting; and (2) amount is a reasonable forecast of the likely damages.

Question 14

UCC Buyer’s Available Damages

Answer 14

(1) Contract price - cost of replacement of goods (cover)
(2) Contract price - market price
(3) Warranty damages
(4) Consequential damages

Question 15

UCC Seller’s Available Damages

Answer 15

(1) Contract price - resale price
(2) Contract price - market price
(3) Lost profits (lost volume seller)

Question 16

Rescission

Answer 16

Contract voidable/rescinded if mutual mistake of fact, unilateral mistake that other party knew or should have known or extreme hardship, misrepresentation of material factor, or duress, undue influence, illegality, incapacity, or failure of consideration.

Question 17

Reformation

Answer 17

Writing changed to conform to parties’ original intent if mutual mistake, unilateral mistake and party knows of it and does not disclose, or misrepresentation.

Question 18

Third party rights are vested if he…

Answer 18

(1) manifested assent;
(2) brought suit to enforce the promise; or
(3) materially changed position in justifiable reliance

Question 19

Assignment

Answer 19

All contract rights are assignable unless assignment materially alters the obligor’s duty or risk or it is prohibited by law.

Contract provision prohibiting assignment bars only delegation of duties.

Question 20

What types of duties cannot be delegated?

Answer 20

(1) Those involving personal judgment or skill;
(2) Those involving special trust in delegator (doctor, lawyer, etc.);
(3) Those restricted by contract;
(4) Those the performance of which by a delegate materially changes the obligee’s expectancy.

Question 21

Advertisements

Answer 21

Usually considered to be an invitation to deal rather than an offer, because advertisements usually fail to confer a power of acceptance to the other side.

However, advertisements that are very specific and leave nothing open to negotiation may constitute offers.

Question 22

Termination

Answer 22

If any of the following occur at any time before acceptance:

(1) Offeror revokes the offer by express communication to the offeree;
(2) The offeree learns that the offeror has taken an action that is absolutely inconsistent with a continuing ability to contract;
(3) The offeree rejects the offer by express communication to the offeror;
(4) The offeree expressly communicates a counteroffer to the offeror;
(5) The offeror dies or otherwise becomes incapacitated;
(6) A reasonable amount of time passes; or
(7) The subject matter of the offer becomes illegal or is destroyed.

Question 23

4 types of irrevocable offers

Answer 23

(1) Option contract;
(2) Firm offers - merchant can make a firm offer to buy or sell goods, and will be good for as long as stated (no more than 90 days) as long as it is: (i) in writing; (ii) contains an explicit promise not to revoke; and (iii) is signed by the merchant;
(3) Offeree has started performance; or
(4) Detrimental reliance.

Question 24

Doctrine of Promissory Estoppel

Answer 24

Promises that lack consideration may still be enforced under the doctrine of promissory estoppel if:

(1) The promisor should reasonably expect the promise to induce action or forbearance from the promisee;
(2) The promise does induce such action or forbearance to the promisee’s detriment; and
(3) Injustice can be avoided only by enforcement of the promise.

Question 25

Quasi-Contracts

Answer 25

May be enforced without consideration to avoid unfair results if:

(1) The plaintiff confers a measurable benefit on the defendant;
(2) The plaintiff reasonably expected to get paid; and
(3) It would be unfair to let the defendant keep the benefit without paying.

Recovery limited to restitution.

Question 26

Accord

Answer 26

An agreement between two contracting parties to accept alternate performance to discharge a preexisting legal duty between them.

Question 27

Satisfaction

Answer 27

Is subsequent performance of an accord. If satisfaction never occurs, the other side can sue on either the original obligation or the accord.

Question 28

Novation

Answer 28

Arises when both parties agree that a substitute person will take over the contractual obligations. If there is a valid novation, the original promisor will be excused from performance.

Question 29

Illusory Promise

Answer 29

A statement that appears to be promising something but does not actually commit the promisor to anything at all.

Ex: Promisor reserves the right to change his mind.

Question 30

Expectation Damages

Answer 30

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

One measure is cost of restoration, another is difference in value.

If the breach was willful and only the completion of the contract will enable the non-breaching party to use the land for it intended purposes, the cost of completion may be considered the appropriate damage award.