Contracts

Question 1

Express contracts

Answer 1

Formed by language, oral or written

Question 2

Implied contracts

Answer 2

Formed by conduct

Question 3

Quasi-contract

Answer 3

Not contracts. An unenforceable contract results in unjust enrichment.

Question 4

Bilateral contracts

Answer 4

Exchange for mutual promises. A promise for a promise.

Offer can be accepted in any reasonable way.

Question 5

Unilateral contract

Answer 5

Offeror requests performance rather than a promise. Offeror/promisor promises to pay upon the completion of the requested act by the promisee. Once the act is completed, a contract is formed.

Ex: reward offer.

Question 6

Goods under Article II of the UCC

Answer 6

Goods are all things movable at the time they identified as the items to be sold under the contract. Article II applies to most tangible things (i.e. cars, horses, hamburgers).

Question 7

Merchants under Article II of the UCC

Answer 7

Merchant is one who regularly deals in goods of the kind sold or who otherwise by their profession hold themselves out as having special knowledge or skills as to the practices or goods involved.

A merchant must be acting in their mercantile capacity in order for the merchant rules to apply.

Question 8

Mutual assent (offer and acceptance)

Answer 8

For an enforceable contract to be formed, one party must accept the other’s offer. Whether mutual assent present is determined by an objective standard: did words or conduct manifest a present intention to enter into a contract.

Question 9

Offer

Answer 9

Promise, undertaking, or commitment with definite and certain terms communicated to the offeree. Must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.

Cannot be a mere invitation to begin preliminary negotiations. There must be an intent to enter into a contract. Ex: “I quote,” “I am asking for,” “I would consider selling for” are not construed as invitations to deal, not offers.

Definite and certain terms- have enough essential terms been provided so that a contract including them is capable of being enforced?

Question 10

Real estate transaction offers

Answer 10

Must identify land and the price terms. Land must be identified with some particularity but a deed description isn’t required.

Question 11

Sale of goods offers

Answer 11

Quantity being offered must be certain or capable of being made certain.

Question 12

Requirements contract

Answer 12

Buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer.

Question 13

Output contract

Answer 13

Seller promises to sell to a certain buyer all of the goods that the seller produces and the buyer agrees to buy that amount from the seller.

Question 14

Employment and other services offers

Answer 14

If the duration of the employment is not specified, contrued as creating at will contract. For other services, nature of the work must be included in the offer.

Question 15

Missing terms

Answer 15

Fact that one or more terms left open does not prevent formation of a contract if it appears parties intended to make one and there is reasonably certain basis for providing a remedy. Court can supply reasonable terms for those that are missing.

If contract for sale of goods is missing a price, Article II provides that the price will be reasonable price at time of delivery.

If missing performance term, performance within a reasonable time.

Question 16

Power of acceptance

Answer 16

To have the power to accept, the offeree must have knowledge of the offer. The proposal must be communicated to them.

Question 17

Termination of offer

Answer 17

An offer cannot be accepted after it has been terminated. May be terminated by act of either party or by operation of law.

Question 18

Termination by offeree

Answer 18

Lapse of time- offeree fails to accept within time specified or within a reasonable period.
Rejection- express or counteroffer as rejection. Offering definite new terms is a counteroffer and kills the offer but mere bargaining is not a rejection. Rejection is effective when received by the offeror.

Question 19

Termination by offeror

Answer 19

Revocation- retraction of offer by the offeror. Can be direct or indirect. Indirect revocation if:

(1) offeree receives 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

A revocation is generally effective when received by the offeree.

Question 20

Option

Answer 20

Offeree gives consideration for a promise by the offeror not to revoke an outstanding offer

Question 21

Merchant’s firm offer

Answer 21

(1) merchant
(2) offers to buy or sell goods in a signed writing and
(3) the writing gives assurances that it will be held open

The offer is not revocable for lack of consideration during the time stated, or if no time stated, for a reasonable time (cannot exceed three months)

Remember that merchants can still create offers longer than 3 months if they provide consideration.

Question 22

Termination of an offer by operation of law

Answer 22

Death or insanity of either party
Destruction of the proposed contract’s subject matter OR
Supervening illegality

Question 23

Acceptance

Answer 23

Manifestation of assent to the terms of an offer.

Only the person to whom an offer is addressed has the power of acceptance. Generally power of acceptance cannot be assigned. But if the offeree paid consideration to keep the offer open, the right to accept is transferrable.

Unless an offer specifically provides that it may be accepted only through performance, it will be construed as an offer to enter into a bilateral contract and may be accepted either by a promise to perform or by the beginning of performance.

Must be communicated to offeror. Silence can be acceptance because of prior dealings or trade practices.

Question 24

Acceptance of offers to buy goods for current or prompt shipment

Answer 24

Construed as inviting acceptance either by a promise to ship or by current or prompt shipment of conforming or nonconforming goods.

Question 25

Acceptance of offer for unilateral contract

Answer 25

No accepted until performance is completed. Generally offeree is not required to give offeror notice that he has begun performance performance but is required to notify the offeror within a reasonable time after performance has been completed. No notice required if (1) offeror waived notice or (2) offeree performance would normally come to offeror’s attention within a reasonable time.

Question 26

Shipment of nonconforming goods

Answer 26

This is an acceptance creating a bilateral contract as well as a breach of contract unless seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accomodation. Buyer not required to accept accomodation goods and may reject them.

Question 27

Battle of the forms

Answer 27

No mirror image rule under Article 2. Inclusion of additional or different terms by offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but is effective as an acceptance, unless the acceptance is expressly made conditional on assent to the different terms.

If any party is not a merchant, additional or different terms are considered mere proposals to modify the contract and do not become part of the contract unless offeror expressly agrees.

Between merchants- additional terms included in contract unless they materially alter the original terms of the offer (change risk or remedies), expressly limit acceptance to the terms of the offer or offeror has already objected to the particular terms of objects within a reasonable time after notice of them is received.

Differences in price, quantity, or quality terms likely indicate there is not sufficient meeting of the minds to constitute a contract.

Question 28

Mailbox rule

Answer 28

Acceptance by mail or similar means is effective at the moment of dispatch, provided that the mail is properly addressed and stamped, unless an exception applies:

• offer stipulates acceptance not effective until received
• Option contract (acceptance under an option is effective only on receipt)
• offeree sends rejection and acceptance, whichever arrives first is effective
• offeree sends an acceptance and then a rejection, in which case the acceptance is effective unless the rejection arrives first and the offeror detrimentally relies on it

Acceptance transmitted by unauthorized means or improperly transmitted by authorized means may still be effective if it is actually received by the offeror while the offer is still in existence.

Question 29

Consideration

Answer 29

Consideration requires

(1) bargained-for exchange between the parties
(2) legal value (must constitute a benefit to the promisor or a detriment to the promisee)

No consideration when one party gives a gift to another. Also a promise given in exchange for something already done does not satisfy the bargain requirement.

An act or forbearance by the promisee is sufficient consideration to form a contract if it benefits the promisor.

Question 30

Preexisting legal duty

Answer 30

Traditionally, performing or promising to perform an existing legal duty is insufficient consideration. Exceptions:

• New or different consideration promised
• Promise to ratify a voidable obligation
• Preexisting duty owed to third person rather than the promisor
• Honest dispute as to duty OR
• Unforeseen circumstances sufficient to discharge a party (impracticability), or under modern view the modification is fair and equitable in view of circumstances not anticipated when the contract was made.

Good faith agreement modifying a contract under the UCC needs no consideration to be binding.

Question 31

Modifications

Answer 31

Under common law, contract cannot be modified unless modification supported by new consideration.

Modern view permits modification without consideration if:

(1) modification due to circumstances that were unanticipated by the parties when the contract was made AND
(2) modification was fair and equitable

Under UCC, consideration isn’t necessary to modify, all the parties need are good faith promises of new and different terms.

Question 32

Promissory estoppel

Answer 32

Consideration not necessary if the facts indicate that the promisor should be estopped from not performing. Promise is enforceable if necessary to prevent injustice if:

(1) promise should reasonably expect to induce action or forbearance
(2) Such action or forbearance is in fact induced.

Question 33

Legal incapacity to contract

Answer 33

Infants generally lack capacity to enter into a contract binding on themselves but contractual promises of an adult made to an infant are binding on the adult.

Infant can disaffirm a contract any time or shortly after reaching the age of majority. Will be liable in restitution for value of benefits received for contracts for necessaries (food, shelter, clothing, medical care).

Minor can choose to be bound by the contract when they reach majority. Can affirm expressly or by conduct (failing to disaffirm the contract within a reasonable time after reaching majority.

Question 34

Voidable contracts

Answer 34

Minors
Incapacitated
Intoxicated- one who is so intoxicated that they don’t understand the nature and significance of their promise may be held to have made only a voidable promise if the other party had reason to know of the intoxication. Can affirm upon recovery.

Contracts induced by duress or undue influence.

Question 35

Economic duress

Answer 35

withholding something someone wants or needs will constitute economic duress if

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

Question 36

Misunderstanding due to ambiguous contract language

Answer 36

If the contract includes a term with at least two possible meanings, the result depends on the parties’ awareness of the ambiguity:

• neither party aware- no contract unless both parties intended the same meaning
• both parties aware- no contract unless both parties intended the same meaning or
• one party aware- binding contract based on what the ignorant party reasonably believed to be the meaning of ambiguous words.

You need meeting of the minds.

Question 37

Mutual mistake as to existing fact

Answer 37

If both parties entering into a contract are mistaken about existing facts relating to the agreement, the contract may be voidable by the adversely affected party if

• the mistake concerns a basic assumption on which the contract is made
• the mistake has a material effect on the agreed upon exchange AND
• the party seeking avoidance did not assume the risk of the mistake

Mistake as to value is generally not a defense

Question 38

Unilateral mistake

Answer 38

If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a contract. But if the nonmistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party.

• Mistake must have a material effect on the agreed upon exchange
• Mistaken party must not have borne the risk of the mistake

Question 39

Fraudulent misrepresentation

Answer 39

If a party induces another to enter into a contract by using fraudulent misrepresentation, the contract is voidable by the innocent party if they justifiably relied on the fraudulent misrepresentation. This is fraud in the inducement.

Question 40

Material misrepresentation

Answer 40

Whether or not a misrepresentation is fraudulent, the contract is voidable by the innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentation was material. A misrepresentation is material if:

(1) it would induce a reasonable person to agree or
(2) the maker knows that for some special reason it is likely to induce the particular person to agree, even if a reasonable person would not

Remember that fraudulent misrepresentation can be inferred from conduct. (concealing a fact, frustrating investigation of a fact, or falsely denying knowledge of a fact)

Question 41

Illegality

Answer 41

If the consideration or subject matter of a contract is illegal the contract is void. Exceptions:

(1) plaintiff unaware of illegality while defendant knows
(2) parties are not in pari delicto (one party not as culpable as the other)
(3) the illegality is the failure to obtain a license when the license is for revenue-raising purposes rather than protection of the public

If only the purpose behind the contract is illegal, the contract is voidable by a party who

(1) was unaware of the purpose or
(2) aware but did not facilitate the purpose and the purpose does not involve serious moral turpitude

Question 42

Unconscionability

Answer 42

Court can modify or refuse to enforce an entire contract or a provision in it to avoid unfair terms, usually due to some unfairness in the bargaining process. Determined by the circumstances as they existed at the time the contract was formed.

Examples: boilerplate risk shifting provisions, contracts of adhesion, exculpatory clauses that release contracting party from liability, clauses limiting remedies

Question 43

Statute of Frauds

Answer 43

Certain agreements, by statute, must be evidenced by a writing signed by the party sought to be bound.

Marriage
Year (performance not within one year of the contract)
Land
Goods (500+)
Executor
Surety

Noncompliance with the statute renders the contract unenforceable at the option of the party to be charged. Party being sued may raise the lack of sufficient writing as an affirmative defense. If the statute isn’t raised as a defense, it is waived.

Question 44

Statute of frauds- marriage

Answer 44

Prenuptial contracts. Promises that induce marriage by offering something of value other than a return promise to marry.

Question 45

Statute of frauds- performance not within one year

Answer 45

A promise that by its terms cannot be performed within one year is subject to the statute of frauds. Date runs from the date of the agreement.

Even if the contract can’t be performed within one year, full performance will remove it from the statute.

Question 46

Statute of frauds- land

Answer 46

Agreements for sale of property, leases for more than one year, easements for more than one year, mortgages and other security liens, fixtures, minerals or structures.

Full performance by the seller will take the contract out of the SOF. Part performance by the buyer may also remove the contract from the statute. Most jurisdictions require at least two of the following:

• payment
• possession
• valuable improvements

Writing must contain a description of the land and the price.

Question 47

Statute of frauds- executor

Answer 47

A promise by an executor or administrator to pay the estate’s debts out of their own funds must be evidenced by a writing.

Question 48

Statute of frauds- goods priced at $500 or more

Answer 48

A contract for the sale of goods for a price of $500 or more is within the SOF and must be evidenced by a signed writing to be enforceable.

Things that take a contract for goods out of the SOF:

• specially made goods (seller has made a substantial beginning)
• goods paid for or accepted
• written confirmation by a merchant
• admission in court
• performance

Writing must indicate that a contract is made and contain a quantity term.

Question 49

Statute of frauds- suretyship

Answer 49

A promise to answer for the debt or default of another must be evidenced by a writing.

Question 50

Modifications- statute of frauds

Answer 50

A written contract can be modified orally, but the modification must be writing if the contract as modified falls within the statute of frauds.

Common law- even if written contract expressly provides that it may be modified only by a writing, the parties can orally modify.

UCC- no oral modification clauses are effecive. If between merchant and nonmerchant, this provision requires nonmerchant’s separate signature.

Question 51

Merchant’s confirmatory memo

Answer 51

Oral contract for sale of goods 500+ satisifies the SOF if between merchants and one sends the other a written confirmation of the understanding.

This is sufficient to bind the sender and will also bind the recipient if:

(1) they have reason to know of the confirmation’s contents
(2) they do not object to it in writing within 10 days of receipt

Question 52

Parol evidence rule

Answer 52

When parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an integration. Any other expressions, oral or written, made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing.

When can parol evidence be used?

• to prove formation defects like fraud, duress, mistake, illegality, etc.
• Prove condition precedent
• Collateral agreements and naturally omitted terms
• Interpretation issues
• Showing of true consideration
• Reformation
• to show subsequent modifications

Question 53

Additional terms under UCC Article II

Answer 53

Party can’t contradict a written contract but may add consistent additional terms unless:

(1) merger clause
(2) courts find from all of the circumstances that the writing was intended as a complete and exclusive statements of the terms of the agreement.

Written contract’s terms may be explained or supplemented by evidence of course of performance, course of dealing, and usage of trade, regardless of whether the writing appears to be ambiguous.

Express terms > course of performance, dealing, and trade usage
Course of performance > course of dealing > trade usage

Question 54

Express warranty

Answer 54

Any affirmation of fact or promise made by the seller to the buyer, any description of goods, and any sample or model creates the an express warranty if it is part of the basis of the bargain.

Statements of value or opinion do not create express warranties.

Express warranties are extremely difficult to disclaim.

Question 55

Implied warranty of merchantability

Answer 55

Implied in every contract for sale by a merchant who deals in goods of the kind sold. To be merchantable, the goods must at least be fit for the ordinary purpose for which such goods are used.

Can be specifically disclaimed or modified only by mentioning merchantability. If the sales contract is in writing, disclaimer must be conspicuous. A term is conspicuous when it is so written, displayed, or presented that a reasonable persona against whom it is to operate ought to have noticed it.

Can also be disclaimed through language like “as is” or “with all faults.”

Question 56

Implied warranty of fitness for particular purpose

Answer 56

Will be implied in contract for sale of goods whenever
(1) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment to select suitable goods and (2) the buyer in fact relies on the seller’s skill or judgment

Can only be disclaimed in a conspicuous writing. Can also be disclaimed through language like “as is” or “with all faults.”

Question 57

Provisions limiting damages

Answer 57

Parties can include a clause limiting damages available in the case of a breach of warranty. (“remedy for breach of warranty is limited to repair or replacement of the defective goods.”)

These limitations will not be upheld if a court finds them unconscionable. (ex: cannot limit personal injury damages for defective consumer goods.)

Question 58

Damages for breach of warranty

Answer 58

Generally difference between value of the goods accepted and the value of the goods as warranted. Appropriate incidental and consequential damages.

If warranty of title breached, the goods are reclaimed by true owner or lienholder. Buyer can then rescind the contract, revoke acceptance, or sue for damages. Damages are the value of the goods as warranted.

Question 59

Warranty of title

Answer 59

Applies to any seller of goods. Assures that title is good, transfer is rightful, no liens or encumbrances.

Can disclaim by specific language or circumstances showing seller does not claim title.

Question 60

Who bears the risk of loss?

Answer 60

Defective goods- if the buyer has a right to reject the goods, the risk of loss doesn’t pass to the buyer until the defects are cured or the buyer accepted the goods in spite of their defects.

Revocation of acceptance- if buyer rightfully revokes acceptance, risk of loss is treated as having rested on the seller from the beginning to the extent of any deficiency in buyer’s insurance coverage.

Noncarrier case- if the seller is a merchant, risk of loss passes to buyer only when they take physical possession of the goods. If the seller is not a merchant, risk of loss passes to the buyer upon tender of delivery.

Carrier case- shipment contract risk of loss passes to buyer when goods are delivered to the carrier. Seller must (1) make reasonable contract with carrier on behalf of the buyer, (2) deliver goods to the carrier, (3) promptly notify the buyer of the shipment, (4) provide the buyer with any documents needed to take possession of the goods.

Carrier case- destination contract if the contract requires the seller to deliver the goods at a particular destination, risk of loss passes to the buyer when the goods are tendered to the buyer at the destination.

Question 61

Goods destroyed before risk of loss passes to buyer

Answer 61

If the goods that were identified when the contract was made are destroyed (1) without fault by either party and (2) before the risk of loss passes to the buyer, the contract is avoided and seller’s performance is excused.

Question 62

Performance at common law

Answer 62

Party’s basic duty is to substantially perform all that is called for in the contract

Question 63

Performance under Article II

Answer 63

Article II requires perfect tender. Deliver and condition of the goods must be exactly as promised in the contract.

Question 64

Condition

Answer 64

Words such as provided, if, and when usually indicate a condition. Failure of a condition relieves a party of the obligation to perform.

Note on conditions of satisfaction- if the contract involves mechanical fitness, utility, or marketability, a condition of satisfaction is fulfilled by a performance that would satisfy a reasonable person.

Condition will not excuse performance if the party having a duty to perform wrongfully prevented the condition from occurring.

Question 65

Anticipatory repudiation

Answer 65

A promisor, prior to the time set for performance, indicates they won’t perform when the time comes.

Nonrepudiating party has 4 alternatives:

• treat it as total repudiation and sue immediately
• suspend their own performance and wait to sue until the performance date
• treat the repudiation as an offer to rescind and treat the contract as discharged or
• ignore the repudiation and urge the promisor to perform

A repudiating party may at any time before their next eprforamcne is due, withdraw their repudiation unless the other party has cancelled, materially change their position in reliance, or otherwise indicated they consider the repudiation final.

Question 66

Prospective inability or unwillingness to perform

Answer 66

Party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due. This is not anticipatory repudiation because it is not unequivocal.

Innocent party can suspend further performance on their side until they receive adequate assurances that performance will be forthcoming. If other party fails to provide adequate assurances, the innocent party may be excused from their own performance and may treat the failure to provide assurances as a repudiation.

Question 67

Recission

Answer 67

Express agreement between the parties to rescind. Agreement to rescind is a binding contract supported by consideration, the giving up by each party of their right to counterperformance from the other. Contracts can be orally rescinded unless their subject matter falls within the SOF.

Note that if the rights of a third party beneficiary have already vested, cannot mutually rescind.

Question 68

Partial discharge by modification of contract

Answer 68

If a contract is subsequently modified by the parties, this will serve to discharge those terms of the original contract that are the subject of the modification. It will not serve to discharge the entire contract. Courts usually find consideration to be present because each party has limited their right to enforce the original contract as is.

Question 69

Discharge by release

Answer 69

A release or contract not sue will serve to discharge contractual duties. The release must be in writing and supported by new consideration or promissory estoppel elements.

Question 70

Accord and satisfaction

Answer 70

An accord is an agreement in which one party to an existing contract agrees to accept, in lieu of performance that they are supposed to receive from the other party, some other different future performance. The accord taken alone does not discharge the prior contract, it just suspends the right to enforce it. Satisfaction is the performance of the accord agremeent. Its effect is to discharge not only the original contract but the accord contract as well.

In general, an accord must be supported by consideration.

Question 71

Novation

Answer 71

New contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract. Elements:

(1) previous valid contract
(2) agreement among all parties, including the new party or parties to the new contract
(3) the immediate extinguishment of contractual duties as between the original contracting parties and
(4) a valid and enforceable new contract

Question 72

Impossibility

Answer 72

The occurrence of an unanticipated or extraordinary event may make contractual duties impossible or impracticable to perform or may frustrate the purpose of the contract. Where the nonoccurrence of the event was a basic assumption of the parties in making the contract and neither party has expressly or impliedly assumed the risk of the vent occurring, contractual duties may be discharged.

Impossibility must be objective. Must arise after contract entered into. Temporary impossibility suspends contractual duties, it does not discharge them.

Death or physical incapacity of a person necessary to effectuate the contract serves to discharge it. Applies if contract was for unique personal services. If services were not unique, death or incapcaity does not make the contract impossible to perform.

Note contractor’s duty to construct a building not discharged by destruction of a work in progress. A contract to repair or remodel a building is discharged if the building is destroyed and the contractor can recover restitution for value of work done prior to building’s destruction.

Question 73

Impracticability

Answer 73

Party to perform has encountered:

(1) extreme and unreasonable difficulty and/or expense and
(2) nonoccurrence was a basic assumption of the parties

Events sufficient for discharge include shortage of raw materials or inability to convert them into the seller’s product because of contingencies such as war, strike, embargo, or unforeseen shutdown of major supplier. Increases in costs are rarely sufficient for discharge unless they change the nature of the contract.

Question 74

Frustration

Answer 74

Purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seeking discharge.

(1) supervening act or event leading to the frustration
(2) at the time of entering into the contract, the parties did not reasonably foresee the act or event occurring
(3) purpose of the contract has been completely or almost completely destroyed by this act or event
(4) purpose of the contract was realized by both parties at the time of making the contract

Question 75

Breach

Answer 75

(1) promisor under an absolute duty to perform and
(2) this absolute duty of performance has not been discharged

Then failure to perform in accordance with contractual terms will amount to a breach of contract. Nonbreaching party must show they willing and able to perform but for the breaching party’s failure to perform.

Question 76

Material breach vs. minor breach

Answer 76

If obligee does not receive the substantial benefit of their bargain, breach is considered material. If breach is material the nonbreaching party may treat the contract as at an end (any of their duties are discharged, and will have an immediate right to all remedies for breach of the entire contract including total damages. Factors for material breach: amount of benefit received by nonbreaching party, adequacy of compensation for damages to injured party, extent of part performance by breaching party, hardship to breaching party, negligent or willful behavior of breaching party, and likelihood that breaching party will perform remainder of contract.

A breach of contract is minor if the obligee gains the substantial benefit of their bargain despite the obligor’s defective performance. Does not relieve the aggrieved party of their duty of performance under the contract, it merely gives them a right to damages (setoff) for the minor breach.

Question 77

Perfect tender rule

Answer 77

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

Right to reject is cut off by acceptance. Buyer acepts when

• After reasonable opportunity to inspect, they indicate to the seller that the goods conform to requirements or that they will keep the goods even though they fail to conform
• they fail to reject within a reasonable time after tender or delivery of the goods or fail to seasonably notify the seller of their rejection OR
• they do any act inconsistent with the seller’s ownership.

Buyer can revoke acceptance if the goods have a defect that substantially impairs their value to the buyer and

• they accepted the goods on reasonable belief defect would be cured and it has not been OR
• they accepted the goods because of difficult of discovering defects or because of seller’s assurance that goods conformed to the contract

Question 78

Exceptions to perfect tender rule

Answer 78

Seller can cure within the time originally provided for performance by giving reasonable notice of their intention to do so and making a new tender of conforming goods that the buyer must then accept.

Seller generally has no right to cure beyond original contract time. But if the buyer rejects tender of nonconforming goods the seller reasonably believed would be acceptable without or without money allowance, the seller, upon reasonable notification to the buyer, has further reasonable time beyond the original contract time within which to make a conforming tender.

Question 79

Specific performance

Answer 79

The legal remedy (money damages) is inadequate. Specific performance is an order from the court to the breaching party to perform or face contempt of court charges. Awlays available for land sale and rare or unique goods. Not available for breach to provide services.

Question 80

Nonmonetary remedies under Article II

Answer 80

Cancellation.
Replevy if buyer has made part payment and seller insolvent within 10 days after receiving payment or goods purchased for personal, family, or household purposes. Or if after reasonable efforts they cannot cover.

Seller can withhold goods if buyer fails to make payment due on or before delivery. Seller can reclaim goods if buyer has received delivery on credit while insolvent on demand made 10 days after buyer’s receipt of goods. 10 day limit doesn’t apply if misrepresentation of solvency made in writing to the particular seller within 3 months before delivery.

Question 81

Compensatory damages

Answer 81

Goal of damages for breach of contract is to put the nonbreaching party in the position they would have been in had the promise been performed.

Plaintiff’s standard measure of damages will be based on an expectation measure. Sufficient damages to buy a substitute performance or benefit of the bargain damages.

Reliance damages- if plaintiff’s expectation damages are too speculative to measure, they can elect to recover those damages they have suffered based on reasonable reliance on the contract. Award cost of performance and put plaintiff in the position that they would have been in had the contract never been formed.

Question 82

Incidental damages

Answer 82

Commonly associated with contracts for the sale of goods. Expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to seller’s breach and by the seller in storing, shipping, returning, and reselling goods as a result of buyer’s breach.

Question 83

Consequential damages

Answer 83

Special damages and reflect losses over and above standard expectation damages. Most often consist of lost profits. Recoverable only if at the time the contract was made, a reasonable person would have foreseen the damages as a probable result of breach.

For sale of goods, only buyer can recover consequential damages.

Plaintiff must prove that the losses suffered were certain and not speculative.

Question 84

Liquidated damages

Answer 84

parties to a contract may stipulate what damages are to be paid in event of breach. Must be an amount that is reasonable in view of the actual or anticipated harm caused by the breach. Will be enforceable if:

• Damages for contractual breach are difficult to estimate or ascertain at the time the contract is formed and
• the amount agreed to is a reasonable forecast of compensatory damages in the case of breach.

Question 85

Buyers damages in goods contract

Answer 85

If seller does not deliver or buyer rejects/revokes- CONTRACT PRICE- MARKET PRICE or COVER PRICE plus incidental and consequential damages less any expenses saved as a result of breach.

If buyer choses to cover must make a reasonable contract for substitute goods in good faith and without unreasonable delay.

If buyer accepts nonconforming goods. Difference between value of goods as delivered and value they would have had if they had been according to contract plus incidental and consequential damages. Must notify the seller of the defect or you lose your right to sue.

When seller anticipatorily breaches- difference between market price at the time the buyer learned of the breach and the contract price.

Question 86

Seller’s damages in goods contract

Answer 86

Where buyer wrongfully repudiates or refuses to accept conforming goods, seller gets incidental damages and can

(1) resell the goods and recover difference between contract price and resale price
(2) recover difference between market price at delivery and contract price or
(3) recover under lost profits measure if they could have made another sale (lost volume sellers)

Where buyer accepted goods and has not paid, or has not accepted goods and seller cannot resell them at any reasonable price, or if goods lost or damages when risk of loss on buyer, seller can maintain an action against buyer for full contract price.

Question 87

Damages in contract for sale of land

Answer 87

difference between contract price and fair market value of land

Question 88

Damages in construction contracts

Answer 88

Breach by owner- builer entitled to profits that would have resulted from contract plus costs expended

Breach by builder- owner entitled to cost of completion plus reasonable compensation for the delay

Question 89

Restitution

Answer 89

Value of benefit conferred. Restitution may be available in a quasi-contract action when a contract was made but it is unenforceable and unjust enrichment otherwise would result.

Also available when

• plaintiff conferred benefit by rendering services or expending properities
• plaintiff conferred benefit with reasonable expectation of being compensated
• defendant knew or had reason to know of plaintiff’ expectation
• AND defendant would be unjustly enriched if they were allowed to retain the benefit without compensating the plaintiff.

Question 90

Recission

Answer 90

Original contract considered voidable and rescinded. Mutual mistake, unilateral mistake, misrepresentation, duress, undue influence, lack of capacity, failure of consideration.

Question 91

Reformation

Answer 91

Writing setting forth agreement of the parties is changed so that it conforms to the original intent of the parties.

• Mistake
• misrepresentation

Question 92

Entrustment

Answer 92

you entrust goods to a merchant who deals in goods of that kind and then they have the power but not the right to transfer all rights to buyer in the ordinary course of business. Cannot recover the goods from a good faith purchaser for value but you can sue the merchant you entrusted the goods to.

Question 93

Third party beneficiaries

Answer 93

Only intended beneficiaries have contractual rights. A beneficiary may sue the promisor on the contract. Promisor can raise any defense that they have against the promisee.

Third party can enforce only after rights have vested:

• manifest assent to a promise in the manner requested by the parties
• bring a suit to enforce the promise
• materially change position in justifiable reliance on the promise.

Before vesting the promisee and promisor can modify or rescind the beneficiary’s rights under the contract.

Question 94

Assignment

Answer 94

generally, all contractual rights can be assigned. Exceptions:

• assignment would substantially change the obligor’s duty or risk
• assignment of future rights to arise from future contracts
• assignment prohibited by law

Assignor must manifest an intent to immediately and completely transfer their rights. Writing usually not required.

Assignments for value (done for consideration or taken as security for payment of preexisting debt) cannot be revoked. Gratuitous assignments are revocable.