Contracts

Question 1

Some courts allow modification without consideration if

Answer 1

modification is “fair and equitable” in view of circumstances not anticipated when the K was made.

Question 2

K can be voided based on duress when

Answer 2

the party’s assent is induced by improper threat.

Question 3

Economic duress is (1) (2) elements

Answer 3

(1) the party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances and (ii) there are no adequate means available to prevent the threatened loss.

Question 4

Under Article II, if the term of an offer assuring that the offer will be held open is on a form supplied by the offeree,

Answer 4

that term must be separately signed by the offeror (like by initialing the sentence) to be enforced as a firm offer.

Question 5

What are goods under the UCC?

Answer 5

Goods are all things movable at the time they are identified to be goods to be sold under the contract.

Question 6

What is a merchant?

Answer 6

A merchant is one 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 goods involved.

Question 7

What is an offer?

Answer 7

• An offer is an acceptance of willingness to enter into a bargain, made in a way that the other party could reasonably believe that he could conclude the bargain by accepting.

Thus an offer must show the offeror’s intent to enter into a bargain and must have definite terms.

Question 8

1. What is an acceptance?
2. Must it be communicated?

Answer 8

1. An acceptance is an assent to the terms of the offer.
2. Generally, acceptance of an offer must be communicated to the offeror and must be unequivocal.

Question 9

What is consideration?

Answer 9

1. A contract requires the presence of consideration on both sides of the bargain.
2. Consideration is a bargained-for exchange, and that which is bargained for must have legal value.

Question 10

What is the Statute of Frauds?

Answer 10

Under the Statute of Frauds, certain agreements must be evidenced by a writing that is signed by the party to be charged to be enforceable.

Question 11

What does the UCC require in contracts?

Answer 11

The UCC requires only a signed writing indicating that a contract has been made and specifying the quantity.

Question 12

What is the signature requirement under the UCC?

Answer 12

1. The signature requirement is liberally construed by the courts.
2. It need not be handwritten; it can be printed or typed.
3. Under the UCC any mark made with the intent to authenticate the writing is a signature, including a party’s initials or letterhead.

Question 13

What is the merchant’s confirmatory memo?

Answer 13

1. In contracts between merchants, if one party, within a reasonable time after an oral agreement is made, sends to the other party a written confirmation of the agreement that is sufficient under the SOF to bind the sender, it will also bind the recipient if: (1) he has reason to know of the confirmation’s contents and (2) he does not object to it in writing within 10 days of receipt.

Question 14

When can part performance take a sale of goods K out of the SOF?

Answer 14

Part performance is sufficient to take a sale of goods contract out of the SOF when (1) the goods have been specially manufactured or (2) the goods have been either paid for or accepted.

Question 15

What are expectation damages?

Answer 15

For breach of K, the injured party may be entitled to expectation damages. These damages are intended to put the injured party in the same position as if the contract had been performed.

Question 16

What are consequential damages?

Answer 16

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

Question 17

When are damages measured by the differences in value?

Answer 17

1. Often where the cost to restore is many times greater than the difference in value of the property in its unrestored condition, damages are measured by the differences in value.
2. Courts are split on which measure to use because the value measure encourages breach.

Question 18

If there’s a willful breach

Answer 18

In a case of willful breach, where only the completion of the K 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 19

What does it mean for a K to be divisible?

Answer 19

If a contract is divisible, a party who has performed one or more parts is entitled to collect the K price for those parts even if it breaches other parts.

Question 20

What elements does a K need to be divisible? (3)

Answer 20

For a K to be divisible,

(1) the performance of each party must be divided into two or more parts under the contract
(2) the number of parts due from each party must be the same
(3) the performance of each part by one party is agreed on as the equivalent, of the corresponding part from the other party.

Question 21

How speculative can damages be?

Answer 21

1. To recover, damages must be certain and not speculative; ie they must be ascertainable with reasonable certainty.
2. Traditionally courts would not allow recovery of lost profits from a business not yet started; they were considered too speculative.
3. The modern trend, however, is to allow recovery if there is sufficient evidence to determine profits with reasonable certainty.

Question 22

Contract damage awards must

Answer 22

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

Question 23

Can you recover on avoidable damages?

Answer 23

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

Question 24

In contracts not involving the sale of goods, the condition of complete performance may be excused if

Answer 24

In contracts not involving the sale of goods, the condition of complete performance may be excused if the party has rendered substantial performance.

Question 25

How do you know if the performance is substantial?

Answer 25

You determine if the performance was substantial by looking at whether the breach is minor or material. If the breach is minor, performance is substantial, if the breach is material, performance is not substantial.

Question 26

What is a reasonable delay in performance?

Answer 26

• A reasonable delay in performance is usually a minor breach, unless the K contains terms that shows time is of the essence.
• If time is of the essence, any delay will be a material breach.

Question 27

What do courts look at to determine if the breach was material?

Answer 27

To determine whether a breach is material; courts look at:

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

Question 28

Adequate assurances

Answer 28

Under article to if a party has reasonable ground for insecurity with respect to the other parties performance he may demand assurances that the performance will be forthcoming out of proper time A demand for assurances must be in writing Until the party demanding assurances receives such assurances they may suspend their own performance The other party must give adequate assurances within a reasonable amount of time

Question 29

Failure to give adequate assurances

Answer 29

If proper assurances aren’t given within a reasonable amount of time not to exceed 30 days the party demanding assurances may treat the contract as repudiated

Question 30

Repudiation: non-repudiating parties options

Answer 30

The non-repudiating party may: 1. Treat the reputiation of a total breach and sue immediately 2. Suspend their own performance and wait to see you until the performance date 3. Treat the repudiation as an offer to resend and treat the contract as discharged 4. Ignore the repudiation and urge the other party to perform

Question 31

Revocation of repudiation

Answer 31

A repudiating party made it anytime before his performances do withdrawal his reputiation unless the other party has canceled the contract, materially changed their position in reliance on the reputiation, or otherwise indicated that they consider the reputation final With drawl of the reputiation may be in any manner that clearly indicates an intention to perform but must include any insurances justifyly demanded Retraction of the repudiation reinstates the repudiating party’s rights under the contract

Question 32

What is the warranty that goods are merchantable?

Answer 32

Implied in every contract for sale by a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable

Question 33

What does it mean for a good to be merchantable?

Answer 33

To be merchantable, goods must be adequately contained, packaged, or labeled according to the contract and must conform to any promises or affirmations of fact made on the label.

Question 34

STARTING POINT: what law governs

Answer 34

Contracts for services are governed by the common law of contracts

Contracts for the sale of goods are covered by Article 2 of the UCC

Question 35

modifications/pre-existing legal duty [2 approaches]

Answer 35

• under CL, every L requires consideration to be enforceable, and any modification requires new consideration
  
  • consideration is a bargained-for exchange of something of legal value
• under the pre-existing duty rule, the promise to perform a legal duty already owed is NOT consideration
• the modern approach allows a contract to be modified without additional consideration if the modification is “fair and equitable” in view of circumstances not anticipated when the K was made
  
  • usually means a party encountered difficulties in performing bordering on impracticability

Question 36

Article 2 of the UCC: definition + modifications

Answer 36

• Ks for the sale of goods are governed by A2 of the UCC
• under A2, K modifications sought in good faith are binding without consideration
  
  • good faith means that there must be a legitimate commercial reason for the modification

Question 37

duress

Answer 37

• a K can be voided based on duress when a party’s assent to the K is induced by an improper threat by the other party that leaves the victim no reasonable alternative
• withholding something someone wants/needs will constitute economic duress if:
  
  • the party threatens to commit a wrongful act that would seriously threaten the other K’ing party’s property or finances; and
  • there are no adequate means available to prevent the threatened loss

Question 38

ability to revoke an offer + irrevocable offers

Answer 38

• generally, an offeror is free to revoke their offer any time prior to acceptance
• EXCEPTIONS:
  
  • option K: an option contract is one in which the offeree gives consideration for the offeror to keep the offer open
  • merchant’s firm offer: if a merchant offers to sell goods in a signed writing and the writing gives assurances that the offer will be held open, the offer is not revocable for lack of consideration during the time stated
    
    • no consideration; time stated, not exceeding 3 months
  • detrimental reliance: when an offeror could reasonably expect the offeree to rely to their detriment on the offer, and the offeree does so rely, the offer is irrevocable as an option K for a reasonable length of time

Question 39

what is a merchant?

Answer 39

a merchant is one who regularly deals in the goods of the kind sold or who otherwise holds themselves out as having knowledge or skill peculiar to the practices or goods involved