Contracts

Question 1

Merchant’s Firm Offer

Answer 1

A merchant’s firm offer arises when

1) person is a merchant
2) Offer was written signed, containing assurances that the offer will remain open

• If no time frame explicit, the offer remains open for a reasonable time, no longer than 3 months
• Equals a contract formation when accepted
• FIRMLY IRREVOCABLE

Question 2

Option Contract

Answer 2

An option contract is when

1) the Offeree gives consideration in exchange for;
2) the offeror not to revoke an outstanding offer for a period of time

-The mailbox rule does not apply to acceptance

Question 3

Unilateral Contract

Answer 3

An offer for a unilateral contract is one that can be accepted only by full performance.

Beginning performance may create an option, thus rendering the offer irrevocable.

Starting performance does not make full performance required by the offeree because only full performance suffices acceptance.

Question 4

Confirmatory Memo

Answer 4

satisfies Statute of Frauds if

1) one party
2) within a reasonable time after an oral agreement was made
3) sends a written confirmation of the understanding

Recipient is then bound if

1) he has reason to know of the confirmation’s contents; and
2) he does not object to the writing within 10 days of receipt

Question 5

Impracticability

Answer 5

1) When performance is possible, but can be accomplished only with extreme and unreasonable difficulty or expense
2) and the event was not a basic assumption at the time of K FORMATION
3) thus neither party allocated the risk
4) Usually due to unanticipated or extraordinary events.

Question 6

Frustration

Answer 6

When the purpose of the contract becomes valueless by virtue of a supervening event.

Question 7

Impossibility

Answer 7

1) occurs when it is objectively impossible to perform
2) and the event was not a basic assumption at the time of K FORMATION
3) thus neither party allocated the risk
4) Usually due to unanticipated or extraordinary events.

This discharges the contractual duties of both parties, but each party may recover the reasonable value of their performance through quasi contract

• unjust enrichment of P; or
• detriment suffered by P

Question 8

Third-Party Beneficiary Vesting of Rights

Answer 8

a) assent is manifested in a manner invited or requested by the parties
b) he learns of the contract and detrimentally relies on it
c) a lawsuit is brought to enforce it

Question 9

Expression of Doubt

Answer 9

An expression of doubt is language amounting to prospective inability to perform, but is not an anticipatory repudiation.

The innocent party may suspend performance until he receives adequate assurance that performance if forthcoming.

Question 10

anticipatory Repudiation

Answer 10

1) Occurs when a promisor
2) PRIOR to the TIME for PERFORMANCE of his promise
3) indicates that he will NOT PERFORM when the time comes
4) Must be an
a) executory
b) bilateral K
c) where neither party has yet performed

• repudiation must be unequivocal
• nonrepudiating party can treat as a TOTAL BREACH and immediately sue
• if one party has acted, it is still a breach and must wait until the time to perform has come
• damages calculated at the time of learning of the breach

Question 11

Preexisting Duty Rule

Answer 11

The promise to perform, or the performance of, an existing legal duty is not consideration. There must be some new or different obligation.

Exception:
a promise to perform a duty is valid consideration as long as the duty of performance is not already owed to the promisee.

Question 12

Rejection of Defective Goods

Answer 12

Seller may, within the original time frame, cure by

1) giving notice of intention to cure
2) tendering conforming goods

which the buyer must accept

Question 13

Rejection of Non comforting Goods the Seller Thought would be sufficient

Answer 13

1) Seller reasonably believes the goods would be acceptable
2) notifies the buyer of intent to cure
3) Seller gets further reasonable time beyond the original contract time to make a conforming tender

Question 14

Consideration

Answer 14

1) Consideration is a bargained for exchange of something of legal value.
2) Things have legal value if it would cause the promise to incur a detriment.
3) Both parties must have consideration.
4) One promise can be consideration for another promise, unless it is an illusory promise.

Question 15

Governing Law - Goods

Answer 15

Contracts for the sale of goods are governed by Article 2 of the UCC.

Goods are all things movable at the time they are identified to the contract.

Question 16

Merchants

Answer 16

1) A merchant is one who DEALS
2) in goods of the kind sold or
3) who by his occupation holds himself out
4) as having knowledge or skill peculiar to the practices or
5) goods involved in the transaction.

Question 17

Contract

Answer 17

A contract requires mutual assent and consideration.

Question 18

Offer

Answer 18

An offer is

1) an expression of willingness to enter into a contract
2) with certain and definite terms; (in a sale of goods the quantity must be certain or capable of being made certain)
3) communicated to an offeree
* estimates are usually considered invitations to deal

Question 19

Continuing Offer

Answer 19

A continuing offer is revocable at will unless made irrevocably by statute or by payment of consideration.

Question 20

Acceptance

Answer 20

1) An acceptance is a MANIFESTATION of ASSENT to the terms of an offer

2) Mirror Image Rule : CL requires UNEQUIVOCAL acceptance of EVERY term of the offer.
* any different or additional terms in the acceptance make the response a rejection and counteroffer

Question 21

Mailbox Rule

Answer 21

An acceptance by mail is effective at the moment of dispatch, and a revocation of an offer is effective only when received.

Question 22

Promissory Estoppel

Answer 22

A promise is enforceable without consideration if necessary to prevent injustice if

1) the promisor should reasonably expect to induce action or forbearance; and
2) action of forbearance is actually induced
* reliance damages given

*also available in cases of misrepresentation
when AT THE TIME the statement was made,
the speaker INTENDED to INDUCE the other party to enter the agreement and KNEW the assertion was untrue

Question 23

Statute of Frauds UCC

Answer 23

A contract for the sale of goods of $500 or more must be evidenced by a signed writing indicating

1) a contract was made and
2) specifying the quantity

Question 24

Cover Damages

Answer 24

When a buyer buys replacement goods, it can then sue the breaching seller for the cost of cover

Which is

K price - cover price

Question 25

Offer Lapse

Answer 25

Offer may be terminated by offer’s failure to accept within time specified in offer. If no deadline, then within a reasonable time.

Question 26

Offer Termination

Answer 26

An offer can be terminated by the death of either party.

Question 27

Bilateral Contract

Answer 27

Can be accepted by either a promise to perform or the beginning of performance

Question 28

Not consideration

Answer 28

Gifts

Past or Moral consideration: promise or exchange for something you have already done, material benefit conferred on a promisor and the benefit was not intended as a gift.

Question 29

Defense: Statute of Frauds - Year

Answer 29

Contracts for services that will take longer than a year must be in writing and signed by the party to be charged.

There is an exception where the contract is for lifetime services, because that person may die within a year.

Question 30

Defense: Lack of Capacity to K

Answer 30

Contract is voidable if a party’s mental capacity is so deficient that he is incapable of understanding the nature of the agreement.

Question 31

Defense: Unilateral Mistake

Answer 31

If only one party is mistaken, contract can still be formed

Question 32

Acceptance: Implied in Fact

Answer 32

Implied contracts are formed by manifestation of assent by conduct rather than oral or written language.

Question 33

Breach

Answer 33

1) Failure to PERFORM in ACCORDANCE with the contract terms
3) Material
a) Obligee has no received the substantial BENEFIT of his bargain

Question 34

Modification

Answer 34

1) CL: must be agreed to by BOTH parties and supported by CONSIDERATION
2) Modern law: both parties agree and the agreement is reasonable

Question 35

Statute of Frauds

Answer 35

1) the contract itself does not need to be in writing but there must be one or more writings
2) SIGNED by the party to be bound
3) the writing must evidence that there is a contract and state the ESSENTIAL TERMS with reasonable certainty
4) If essential terms are not included, its does not satisfy SOF and extrinsic evidence cannot be submitted to supply the missing terms

Question 36

SOF Land Requirements

Answer 36

a) description of land
b) parties
c) price

Question 37

SOF Defenses

Answer 37

1) Full performance of a K that cannot be performed within one year will usually take the K out of SOF

2) Partial Performance of Land Sales indicates a K
a) payment
b) possession
c) valuable improvement

3) Estoppel

Question 38

Damages General

Answer 38

1) Damages should put the NONBREACHING party in the position he would have been in had the K been PERFORMED
2) Damages must be certain, proved by P
2) Breach of employment = full K price
3) Land sale K = K price - FMV

Question 39

Mitigation for Damages

Answer 39

1) A non breaching party may NOT recover AVOIDABLE damages
2) Employment: a non breaching party must accept a COMPARABLE job if available
3) Goods: damages decreased by cost SAVED and replacement goods

Question 40

Specific Performance

Answer 40

an EQUITABLE remedy in which a court orders a BREACHING party to PERFORM that which he has promised to perform under the contract.

Requires:

1) parties have entered a K
2) P must have ALREADY PERFORMED or be READY and ABLE to perform
3) legal remedy must be INADEQUATE
* UCC will grant specific performance if after reasonable effort, the buyer is unable to secure substitute goods

Question 41

BFP

Answer 41

Purchaser

1) purchased for VALUE
2) in GOOD faith

Question 42

Restitution

Answer 42

1) Remedy to prevent unjust enrichment
2) when a defendant RECEIVES a BENEFIT of an UNENFORCEABLE K
3) Defendant may be required to PAY the cost of services performed
4) for the unjust gain
* here, K rate is evidence of value of the services but actual damages may be different

Question 43

Governing Contract

Answer 43

1) Contracts for the sale of goods are governed by Article 2 of the UCC.
a) goods are all things MOVABLE at the time they are identified to the K

Question 44

Reliance Damages

Answer 44

The amount the PROMISEE spent in reliance on the promise.

Question 45

Expectation Damages

Answer 45

1) Damages for what the promisee was promised
2) flow directly from the contract
3) Under UCC: K price less (market price or replacement goods price)

Question 46

Consequential Damages

Answer 46

1) SPECIAL Damages OVER and above standard EXPECTATION damages
2) Result from non-breaching party’s particular circumstances
3) Can be recovered if only at the TIME of K FORMATION, a reasonable person would have FORESEEN the damages as a PROBABLE RESULT of breach
* lost profits of an existing or new business counts but must be certain and not speculative

Question 47

Incidental Damages

Answer 47

Expenses reasonably incurred by the buyer incident to the seller’s breach.

Question 48

SOF for Goods K

Answer 48

Quantity must be determined

If indefinite, must be able to be made certain by reference to OBJECTIVE, EXTRINSIC facts

Question 49

Replevin

Answer 49

A buyer can bring an action

1) to RECOVER the goods if
2) the goods are IDENTIFIED to the contract; and
3) the buyer, after reasonable EFFORT,
4) is unable to secure ADEQUATE SUBSTITUTE goods

Question 50

Injunction

Answer 50

An order to refrain from acting

Question 51

Preliminary Injunction

Answer 51

To preserve the STATUS QUO until a full trial on the merits is held.

Party seeking the preliminary injunction must show:

1) it will suffer IRREPARABLE injury if injunction is not granted;
2) its harm OUTWEIGHS the harm the defendant will suffer if granted
3) it is LIKELY to PREVAIL on the merits.

Question 52

Unclean Hands Defense

Answer 52

1) When the party seeking SPECIFIC PERFORMANCE is GUILTY of some wrongdoing in the transaction.
2) the defending party must not be guilty go any inequitable or wrongful conduct.

Question 53

Unfairness in K formation

Answer 53

1) Equity is a system of justices administered according to fairness rather than strictly formatted rules.
2) It is discretionary on the part of the courts
3) The courts will consider whether a contract is unfair or unconscionable when deciding whether to grant specific performance.

Question 54

Illusory Promise

Answer 54

1) an APPARENT commitment that in facts DOES not limit the party’s options; or
2) any agreement the does not actually provide a mutuality of obligation
2) does not qualify as consideration

Question 55

Punitive Damages

Answer 55

1) available for intentional torts

2) awarded to punish a defendant for wrongful conduct

Question 56

Equitable Lien

Answer 56

1) Imposed when a defendant’s RETENTION of property would result in his UNJUST ENRICHMENT
2) Plaintiff is not entitled to any INCREASE over the value of the property that was misappropriated
3) Puts the lien holder AHEAD of unsecured creditors the proceeds of the property
4) if proceeds are worth LESS than the property misappropriated, the plaintiff can seek the deficiency from defendant
5) Doctrine of tracing used to find misappropriated fund’s current form

Question 57

Laches

Answer 57

a defense used to say that the

1) plaintiff has UNREASONABLY DELAYED
2) asserting an EQUITABLE Claim; and
3) the delay has resulted in PREJUDICE or HARM to the defendant
4) thus relief should be BARRED
* looks at whether the passage of time has harmed defendant such as in loss if witnesses, evidence, etc.

Question 58

Constructive Trust

Answer 58

1) Imposed when a defendant’s RETENTION of property would result in his UNJUST ENRICHMENT
2) under a constructive trust, the property is held by the defendant in TRUST FOR THE PLAINTIFF
3) with the sole obligation being to CONVEY property to the plaintiff
4) Tracing is used to impose a constructive trust on the PROCEEDS of WRONGFULLY ACQUIRED PROPERTY that has INCREASED in value

Question 59

Purchase Money Resulting Trust

Answer 59

1) a person/TRUSTEE takes legal title; and
2) the BENEFICIARY gives consideration BEFORE OR AT THE SAME TIME title is taken
3) TRUSTEE’S sole duty it to convey possession
4) where only part of the purchase price is given, the resulting trust is in a pro rata share of the title

Question 60

Fraudulent Misrepresentation

Answer 60

Is representation of

1) MATERIAL fact
2) Past or present
3) made with knowledge of the FALSITY and with
4) INTENT to DECEIVE
5) upon which the plaintiff actually RELIES
* P can
a) RESCIND the K and restore the status quo from before the K
b) seek RESTITUTION for unfair benefit defendant received
c) AFFIRM the k and seek damages

Question 61

Innocent Misrepresentation

Answer 61

Defendant

1) honestly and in good faith
2) asserts a MATERIAL FACT
3) that is NOT TRUE
4) and the plaintiff RELIES on it
* P can RESCIND the K and restore the status quo from before the K

Question 62

TRO

Answer 62

To preserve the STATUS QUO until a REGULAR ADVERSARY-type HEARING can be held on a motion for a preliminary injunction.

The moving party must:

1) give the other party NOTICE of the TRO (unless the moving party can make a strong showing why notice should not be required such as reason to think evidence or subject matter of TRO will be destroyed)
2) it will suffer IRREPARABLE injury if injunction is not granted;
3) its harm OUTWEIGHS the harm the defendant will suffer if granted
4) it is LIKELY to PREVAIL on the merits.
* expire automatically when a motion for preliminary injunction is granted or denied