Contracts

Question 1

Define “express contract” and “implied contract”

Answer 1

Express - formed by words (promises communicated by language [oral or written])
Implied - formed by conduct (parties’ conduct indicated that they assented to be bound)

Question 2

Define quasi-contract

Answer 2

Not a contract!
But restitution action allowed when an unenforceable K leads to unjust enrichment - P can recover restitution action to recover amount of benefit conferred on D
(Restitution is a remedy of last resort)

Question 3

bilateral K

Answer 3

exchange of a promise for a promise

Question 4

unilateral K - what it means and how to ID it

Answer 4

offeror asks for performance rather than a promise - offeror/promisor promises to pay upon completion of performance by the offeree/promisee → Once the act is COMPLETED, a K is formed.

can only accept unilateral K by performance - not return promise

Occurs only when:

• offeror clearly (unambiguously) indicates that completion of performance is the only manner of acceptance → look for words “offer only by” e.g. “My offer can be accepted only by…” (means offerree has to perform in order to accept)
• there is an offer to the public → look for a reward offered (e.g. reward for missing dog)

Question 5

When does Article 2 of UCC apply?

Answer 5

when there is a sale of goods: anything movable when identified to the contract

• For all sales of goods at any price - UCC Article 2 applies
• goods = tangible personal property

Everything else is common law!

Question 6

What does “merchant” mean under Article 2 of UCC?

Answer 6

• One who regularly deals in goods of the kind sold, or
• Holds themselves out as having special knowledge or skills as to the practices or goods involved

NB: A merchant must be acting in their “mercantile capacity” (that is, relating to their business) in order for merchant rules to apply

Question 7

When a K applies both goods and services, what law applies?

Answer 7

• apply ALL article 2 or ALL common law depending on the more important part of the transaction

Question 8

If K divides payment between goods and services, what law applies?

Answer 8

• UCC applies to the goods portion, common law applies to the services portion

Question 9

What is “good faith”? What is typically involved in a breach of “good faith and fair dealing”?

Answer 9

good faith = honesty in fact and the observance of reasonable commercial standards

breach usually involves exercising discretion in a way that deprives the other party of the fruits of the K

Question 10

What is included in “mutual assent,” and how what is the standard for mutual assent?

Answer 10

Offer + Acceptance

• objective standard - did words or conduct manifest a present intention to enter into a K?

Question 11

Offer

Answer 11

• must create a reasonable expectation in the offerree that the offeror is willing to enter into a K with those terms

1. promise, undertaking, or commitment
2. with definite and certain terms
3. communicated to the offerree”

• NOT just an invitation to negotiate
• objective standard - did words or conduct manifest a present intention to enter into a K?

Question 12

Acceptance must be made before ____

Answer 12

termination by revocation, rejection, or operation of law

Question 13

When are advertisements offers?

Answer 13

• typically, ads are announcements of prices at which the seller is willing to receive offers (invitations to offers)
• exception:

1. ad contains a promise,
2. terms are certain and definite, and
3. the offerree is clearly identified

Question 14

How to know if an offer is definite and certain in its terms

Answer 14

A K including the terms would be capable of being enforced

Typically needs to include:

1. Offerree’s name
2. Offer’s subject matter
3. Price

Question 15

Land sale offers must include

Answer 15

1. price - most courts will not submit a missing price term for realty
2. description of land - with some particularity, but does not need deed description

Question 16

Sale of goods offers must include…

what if price is missing?

Answer 16

• quantity term
• Article 2 states that if price is missing on a sale of goods offer, the price will be a reasonable price at the time of delivery

Question 17

define “requirement” Ks and “output” Ks

What assumptions are implicit in these Ks?

Answer 17

Requirements K - buyer promises to buy from seller all goods B requires

Output K - seller promises to sell to B all goods S produces

• these are both Ks for sale of goods
• assumed that parties will act in good faith: cannot be a tender of/demand for a quantity unreasonably disproportionate to 1) any stated estimate or 2) (in the absence of a stated estimate) any normal or otherwise comparable prior output or requirements (okay if requirements jump a percentage or so, but not a bunch)

Question 18

What is required for employment/other services Ks?

Answer 18

• Employment K: if the duration not specified, offer - if accepted - construed as creating at-will K (terminable at the will of either party)
• Other services: nature of the work must be included in the offer

Question 19

What happens if there are missing terms in a K?

1. generally
2. price
3. time

Answer 19

1. missing terms do not prevent the formation of a K if it appears that the parties 1. intended to make a K and 2. there is a reasonably certain basis for giving a remedy → court can supply reasonable terms for those that are missing
2. price - except for real property Ks, failure to state a price does not prevent formation of K if parties intended to form a K without the price being settled
3. time - law implies it needs to be performed within a reasonable time

Question 20

What happens if a K has vague terms?

Answer 20

• if parties have included a term that makes the K too vague to be enforced, no presumption that intent was to include reasonable term (cf. missing terms)
• but uncertainty may be cured by part performance that clarifies the vague term or acceptance of full performance

N.B. if a MATERIAL term is vague/ambiguous → not an offer either at common law or under the UCC (watch for terms like “appropriate”, “fair,” and “reasonable)

Question 21

What happens if K contains terms to be agreed on later?

Answer 21

• if the term to be agreed upon later is MATERIAL → too uncertain, not an offer

Question 22

Types of termination of offer by offerree:

Answer 22

1. Lapse of time: if no deadline specified, failure to accept within reasonable period → termination (N.B. on bar exam, if more than a month has passed, raise this issue)
2. Rejection: effective when received by offeror
   
   1. express rejection
   2. counteroffer as rejection: offer made by offerree that contains same subject matter, but different terms → rejection and new offer (but cf. “mere inquiry” or “mere bargaining” - there, q is whether reasonable person would believe offer was rejected)

Question 23

What is the effect of a counteroffer?

Compare counteroffer and conditional acceptance.

What is the effect of a “mere inquiry”?

Answer 23

“A counteroffer is a killer”

counteroffer (offer made by offerree that contains same subject matter, but different terms) → rejection and new offer

conditional acceptance is a type of counteroffer that imposes a new condition → rejection and new offer

but cf. “mere inquiry” or “mere bargaining” - there, q is whether reasonable person would believe offer was rejected

Question 24

Revocation (termination of offer by offeror)

How may an offer be revoked?

What if the offer was made in a publication?

When is revocation effective?

Answer 24

1. Offeror directly communicates revocation to offerree
2. Indirect communication: offerree receives:
   
   1. correct information
   2. from a reliable source
   3. of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer (e.g. if there was one of an item and it was sold)

For direct and indirect communications, revocation effective when received by the offerree (does not matter if offerree actually reads it though) - (NO MAILBOX RULE FOR REVOCATION - that’s only for acceptance)

• Offer made by publication may only be revoked by publication through comparable means (e.g. the same newspaper) - revocation effective when published

Question 25

Generally, offers can be revoked at will by the offeror, even if she promised not to revoke for a certain period.

What are the 4 limitations on an offeror’s power to revoke?

Answer 25

1. Option Ks
2. Merchant’s firm offer under Article 2
3. Detrimental reliance
4. Beginning performance (either in response to true unilateral contract offer OR offer indifferent as to manner of acceptance)

Question 26

define option K

Answer 26

offerree gives consideration for a promise by the offeror not to revoke the outstanding offer for a period of time

this takes away the offeror’s power to revoke

Question 27

define “Merchant’s Firm Offer Rule” under Article 2

Answer 27

1. Merchant promises
2. to buy or sell goods in signed writing (including own stationery)
3. to keep offer open for time stated or reasonable time - up to 3 months

→ if these requirements met, not revocable for lack of consideration

Question 28

Detrimental/foreseeable reliance

Answer 28

When the offeror could reasonably expect that the offerree would rely to their detriment on the offer, and the offerree does so rely→ offer is an irrevocable option K for a reasonable length of time

Question 29

Offerree begins to perform under a unilateral K offer - what are offeror’s obligations? What are offerree’s obligations?

Compare with making preparations to perform

Answer 29

= irrevocable offer for a reasonable time necessary to complete performance

• but the offerree is not bound to complete performance
• making preparations to perform - does not make offer irrevocable, BUT may constitute detrimental reliance sufficient to make offeror’s promise binding

Question 30

Beginning performance on bilateral K where the offer is indifferent to the manner of acceptance

obligations of offeror

obligations of offerree

Answer 30

where offer indifferent to manner of acceptance - bilateral K may be formed by start of performance

offeror may not revoke

offerree may have to notify offeror of the start of performance

Question 31

3 types of termination by operation of law

Answer 31

1. Death or insanity of either party → termination. do NOT need to communicate to the other party (if K already formed, becomes binding on estate - death ONLY terminates revocable offers)
2. Destruction of the proposed K’s subject matter OR
3. Supervening illegality

Question 32

Who may accept? Under what conditions is right transferable?

Answer 32

Generally, only the person to whom an offer is addressed has the power of acceptance. A member of a class to which an offer has been directed also has the power to accept.

Offeree’s power of acceptance cannot be assigned unless offeree paid consideration to keep the offer open (an option contract)→the right to accept is transferable.