Contracts

Question 1

Contracts for the Sale of Goods

Answer 1

Contracts for the Sale of Good are governed by article 2 of the Uniform Commercial Code (UCC). Goods are all things moveable at the time they are identified to the contract.

Question 2

To form a contract, there must be:

Answer 2

An offer, an acceptance (before revocation or acceptance), and bargained for consideration. An offer is a promise, undertaking, or commitment to enter into a contract.

Question 3

Add intro paragraph from PFTBE Contracts

Answer 3

add here

Question 4

An offeror is entitled to revoke an offer…

Answer 4

at will any time before acceptance, even if he has promised not to revoke for a certain time, unless an exception applies which limits the offeror’s power to terminate.

Question 5

Option Contract

Answer 5

An option contract is distinct contract in which the offer gives consideration for a promise by the offeror not to revoke an outstanding offer.

Question 6

Merchant’s Firm Offer

Answer 6

Under the UCC, if a merchant (as offeror) offers to sell goods in a signed writing and the writing gives assurances that it will be held open, the offer is not revocable for lack of consideration during the time stated.
BUT if the promise to keep the offer open is on a form supplied by the offeree, it is effective only if it is signed separately by the offeror.

Question 7

Merchant

Answer 7

Under the UCC, 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 practices or goods involved.

Question 8

Detrimental Reliance r/t Irrevocable Offers

Answer 8

In some cases, an offeror may be prevented from revoking an offer based on detrimental reliance. When an offeror could reasonably expect that the offeree would rely to her detriment on an offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.

Question 9

Pure Comparative Negligence with Joint and Several Liability

Answer 9

The entire amount can be collected from any one of the defendants. That defendant can then seek to recover a proportional share of the damages from the other defendants.

Question 10

Pure Comparative Negligence with Joint and Several Liability

Answer 10

The entire amount can be collected from any one of the defendants. That defendant can then seek to recover a proportional share of the damages from the other defendants.

Question 11

For sale of goods contracts, a modification must be

Answer 11

in writing if the contract as modified falls within the Statute of Frauds; i.e., if the contract as modified is for $500 or more.

Under Article 2 of the UCC, a modification sought in good faith is enforceable even without consideration.

Question 12

Under the parol evidence rule

Answer 12

if a contract is reduced to an integrated writing (i.e., a writing reflecting the whole deal), a party may not introduce prior or contemporaneous oral statements (or prior written statements) seeking to vary the terms of the contract.

Question 13

When a nonbreaching buyer does not receive the contracted goods, it has several options:

Answer 13

it can cancel the contract and recover any incidental damages, or it can purchase replacement goods and sue for the cost of replacement-“cover.” Damages under the latter option are measured by the difference between the contract price and the amount the buyer actually has to pay for the replacement goods.

Question 14

Under the preexisting legal duty rule

Answer 14

the promise to perform or the performance of an existing legal duty will not be sufficient consideration.

Under the CL, consideration generally is necessary to modify a contract. Where a modification would operate to the benefit of only one of the parties, it generally will be unenforceable unless some consideration is being given to the other party.

Even where unsupported by consideration, a promise is enforceable under the promissory estoppel doctrine to the extent necessary to prevent injustice if: (i) the promisor should reasonably expect to induce action or forbearance; and (ii) such action or forbearance is in fact induced.

An exception to the preexisting legal duty rule provides that, if the scope of the legal duty owed is the subject of honest dispute, a modifying agreement relating to it will be given effect.

Question 15

Merchants Firm Offer Rule

Answer 15

Under the UCC, an offer by a merchant to buy or sell goods in a signed writing that, by its terms, gives assurances that it will be held open is not revocable for lack of consideration during the time stated (not to exceed three months). If the stated period extends beyond three months, the firm offer will stand, but it will only last for the three-month maximum. If the term assuring that the offer will be held open is on a form supplied by the offeree, it must be separately signed by the offeror.

A writing is required for a firm offer under the UCC regardless of the value of the goods offered.

Question 16

A writing will be construed against the drafter

Answer 16

only as a last resort to address ambiguous language.

If the K is silent on an issue/has a gap, that is not ambiguous language, so the court will supply a term that is reasonable for both parties under the circumstances.

Question 17

A party is entitled to restitutionary relief regardless of whether

Answer 17

the parties’ performance was excused by impracticality or frustration of purpose.

Question 18

impracticiabilty

Answer 18

the non-occurrence of the event that happened was a basic assumption of the contract.

Question 19

Divisible contracts

Answer 19

Treated as multiple contracts. Performance of each part entitles a party to payment for that part. Not necessary to look to restitution to provide a remedy.

[Allows a party to recover contractual damages even though that party breached the contract. The breaching party is entitled to recover the agreed upon price for the services performed bc it is a divisible portion of the K.]

[When performance under a K can be divided into multiple tasks, each with a corresponding price that the other party must pay when the task is completed, one party’s perfomance of a task triggers the other party’s duty to pay for it, even if the performing party breaches another part of the K.]

Question 20

Sample Outline for Hypo about Construction Contracts or Land-related Service Contracts

Answer 20

• Ask if cost of restoration is the correct measure of damages (consider whether waste doctrine applies to make diminution in value the correct measure).
• Ask if P is entitled to consequential damages (did P make D aware of their intended special use of the bldg/land?).
• If entitled to consequential damages, where those damages ascertainable (certain versus being speculative)?
• If ascertainable, should P’s award have been reduced (e.g. to take into acct costs saved bc of breach or by P’s failure to mitigate)?

Question 21

Expectation Damages

Answer 21

For BOC, the injured/non-breaching party may be entitled to expectation damages (the preferred damages).

EDs arise directly from the breach, and are meant to put the non-breaching party in the same position it would have been in but for the breach.

[To recover, damages must be →

(1) caused by D (actual cause);
(2) foreseeable (proximate cause);
(3) certain (not speculative); AND
(4) unavoidable (reasonable steps were taken to mitigate damages).]

Question 22

Cost of Restoration / Completion

Answer 22

One measure of expectation damages is the cost of restoration or completion. Often, under the waste doctrine, where the cost to restore is substantially more expensive than the difference in value of the property in its unrestored condition (diminution in value), damages are measured by the difference in value.

However, courts are split on courts are split on the measure of damages to use bc the diminution in value method encourages breach.

Thus, in a case of willful breach, where only the completion of the K will enable the non breaching party to use the land for its intended purpose, the cost of completion may be considered the appropriate damage award.

Question 23

Consequential Damages

Answer 23

Arise indirectly from the breach and consist of additional losses (beyond compensatory) resulting from the breach (e.g., lost profits).

To recover, consequential damages must be →

(1) reasonably foreseeable at the time of contract formation (a reasonable person in D’s position would have known at time of K formation that the damages were likely to occur as a result of breach);
(2) arise from P’s special circumstances that D knew of (or had reason to know of); AND
(3) reasonably certain (not speculative).

Traditionally, courts would not allow recovery of lost profits from a business not yet started, they were considered too speculative. But the modern trend is to allow recovery if there is sufficient evidence to determine profits with reasonable certainty.

*May be limited or excluded by agreement unless it’s
unconscionable.

Question 24

In general, to recover, contract damages must be

Answer 24

To recover, damages must be →

(1) caused by D (actual cause);
(2) foreseeable (proximate cause);
(3) certain (not speculative); AND
(4) unavoidable (reasonable efforts were taken to mitigate damages; P cannot recover avoidable damages).

Further, K damage awards must take into account costs avoided bc of the breach (i.e. damages should be reduced to the net amount P would have earned after expenses).

The presence of reasonable alternatives would reduce the award by the amount P would earn from those alternatives less the costs incurred by engaging in those alternatives.