Contracts

Question 1

Defenses to K Formation (Is the K Enforceable?)

Contracts (Defenses to Formation)

Answer 1

UNPAID M&MS + CC

1. Unconscionability
2. Non-Disclosure
3. Public Policy
4. Ambiguity of Words in K
5. Illegality
6. Duress/Undue Influence
7. Mistake
8. Misrepresentation
9. Statute of Frauds
10. Consideration (lack thereof)
11. Capacity

Question 2

Unconscionability

Contracts (Defenses to Formation)

Answer 2

Procedural: Unfair bargaining process

Substantive: Harsh or oppressive terms

NOTE: Court more likely to void if both procedural and substantive unconscionability.

Question 3

Non-Disclosure

Contracts (Defenses to Formation)

Answer 3

• Party has no duty to disclose what they know
• Exceptions:
  
  • Fiduciary-type relationships
  • P attempts to hide/conceal something.

Question 4

Public Policy

Contracts (Defenses to Formation)

Answer 4

1. Exculpatory Agreements (removes liability) for reckless or intentional wrongful conduct = NOT ENFORCEABLE
2. Covenant Not to Compete: Enforceable if 3 Part Test is met:
   
   1. Reasonable need for protection by the non-compete clause
   2. Effective for reasonable time
   3. Effective for reasonable geographical area.

Question 5

Ambiguity

Contracts (Defenses to Formation)

Answer 5

No K if:

1. Material term
2. Open to at least two reasonable interpretations
3. Neither party knew or had reason to know the term has two reasonable interpretations

Question 6

Illegality

Contracts (Defenses to Formation)

Answer 6

1. Illegal subject matter = unenforceable
2. Illegal purpose = enforceable, so long as other party did not know of the illegal purpose.

Question 7

Mutual Mistake

Contracts

Answer 7

= When both parties are mistaken about the same material fact within the contract.

• Contract is voidable (rescission)
• Contract reformation is a proper equitable remedy used to rewrite the contract to express the parties’ true intent.
• Rescission is also a proper remedy which cancels the contract.

Question 8

Duress

Contracts (Defenses to Formation)

Answer 8

= party forced to enter into a contract via unlawful threats or coercion.

• Rescission is a possible equitable remedy which cancels the contract.

Question 9

Undue Influence

Contracts (Defenses to Formation)

Answer 9

1. Special relationship between parties
2. Improper persuasion by the stronger party on the weaker party

• Remedy = rescission (K is cancelled)

Question 10

Misrepresentation

Contracts (Defenses to Formation)

Answer 10

= a false statement of a material fact by one party that induces the other party’s into entering the contract.

• Remedies = Rescission and K Reformation (equitable remedies)
• NOTE: Misrepresenting P is not required to know that the statement is false (no malice/bad faith requirement).

Question 11

Mistake

Contracts (Defenses to Formation)

Answer 11

• Mutual Mistake:

1. Both parties mistaken as to a basic assumption on which the K is made
2. Mistake is material to K
3. Person asserting defense of mistake did not bear the risk of the mistake.
4. Relief available.

• Unilateral Mistake:

1. No relief.
2. Exception: One party makes mistake of material fact and the mistake is obvious to the other party.

Question 12

Quiet Title and Ejectment

Remedies (Contracts)

Answer 12

= Types of equitable remedies (awarded when no legal remedies available)

1. Quiet Title: Concerns the right of ownership (“who owns this property?”)
   * RULE: A party brings a quiet title action to resolve who rightfully owns a piece of property.
2. Ejectment: Concerns the right of possession.
   * RULE: A party brings an ejectment action to remove a party who wrongfully occupies or possesses property.

Question 13

Unjust Enrichment (and Quasi Contract) vs. Quantum Meruit

Remedies (Contracts)

Answer 13

= Types of equitable remedies (awarded when no legal remedies available)

NOTE: With a quasi-contract, D is required to behave as if there was a legal K with P. It is designed so that one party is not unjustly enriched.

1. Unjust Enrichment (and Quasi Contracts): In the absence of a valid contract, is an appropriate remedy when a party seeks to prevent another from receiving a benefit without also paying its reasonable value. Damages are measured by the value of what was inequitably retained.
   * RULE: Plaintiff can recover the reasonable value of a benefit rendered if he/she can show: (1) P conferred a benefit to D; (2) D retained that benefit; and (3) it would be unfair for D to retain that benefit without paying for its reasonable value.
2. Quantum Merit (and Implied-in-Fact Contracts): Identical to unjust enrichment, except applies to services rendered. Damages are measured by the value of the services rendered. Ex. Emergency services rendered by a doctor.
   * RULE: Plaintiff can recover the reasonable value of a services rendered if he/she can show: (1) P rendered services to D; (2) D willingly accepted benefit of those services; and (3) D was aware that P expected to be compensated for those services.

Question 14

Legal Remedies (List 3)

Remedies (Contracts)

Answer 14

1. Compensatory Damages
2. Expectation damages
3. Liquidated Damages

Question 15

Compensatory Damages

Remedies (Contracts)

Answer 15

= Measure of damages typically in a tort action.

• Attempts to make the injured party whole by compensating them for the loss incurred.
• Covers expenses incurred as a result of the loss, lost wages or income, and replacement or repair of damaged property.

Question 16

Expectation Damages

Remedies (Contracts)

Answer 16

= The measure of damages typically in a tort action (same as compensatory)

• Attempts to put the non-breaching party in the same position they would have been in had the contract been fully performed.
• To be recoverable, MUST BE CALCULABLE TO A REASONABLE CERTAINTY.
• Not recoverable if party was able to mitigate damages
• Not recoverable if damages were foreseeable.
• Formula: Loss of breaching performance + any incidental damages caused by breach - any payments received by breaching party AND any costs saved = Expectation Damages

Question 17

Reliance Damages

Remedies (Contracts)

Answer 17

1. Seeks to put aggrieved party in the same position he was in before the K was performed.
2. Formula: costs/Expenditures made in reliance of contract being performed - any losses the party would have suffered anyways if the K was fully performed.

Question 18

Liquidated Damages

Remedies (Contracts)

Answer 18

= The amount of damages awardable that was pre-determined at the time of contracting (usually a clause)

• If a K includes a liquidated damages clause, the breaching party will be liable for the amount of damages specified therein s long as the amount is reasonable.
• Liquidated damages clause will be voided if the amount specified therein is deemed a penalty.
• NOTE: If clause is voided, non-breaching party must seek recovery based on actual damages incurred by the breach.

Question 19

Monetary Damages Under the UCC:

Seller’s Remedies if Buyer Wrongfully Rejected or Repudiates

Contracts (Remedies)

Answer 19

1. Seller’s Remedies: No Delivery or Acceptance (due to wrongful rejection or repudiation)

• If seller re-sold goods: Obligated to received difference between resale price and K price.
• If seller did not resell goods: Seller can receive difference between K price and market price.
• Lost volume seller: Can recover profit that would have been made on the lost sale.

Question 20

Monetary Damages Under the UCC:

Damages if Buyer Accepts Non-Conforming Goods of Lower Value

Contracts (Remedies)

Answer 20

1. Available if buyer receives and accepts non-conforming goods.
2. Buyer is entitled to receive the difference in value of the goods received and the goods contracted for.

Question 21

Monetary Damages Under the UCC:

Incidental Damages

Contracts (Remedies)

Answer 21

Buyer or seller can recover expenses incurred in:

• Seller dealing with the goods after buyer’s breach
• Buyer arranging for cover

Question 22

Requirements of K Formation

Contracts

Answer 22

1. Offer: An outward manifestation of an intent to enter into an agreement under specified terms; signals that acceptance with conclude the deal.
2. Acceptance: A manifestation of assent and desire to be bound to the specified terms of the offer. Must be mirror image of the terms (under Common law) and communicated to offeror. NOTE: In a unilateral K, n communication needed because only full performance = acceptance)
3. Consideration: A bargained for exchange or either a legal benefit or a legal detriment.
4. No affirmative defenses to formation.

Question 23

Statute of Frauds (UCC)

Contracts (S of F)

Answer 23

1. Applies to K’s for $500 or more AND property K’s
2. K’s not enforceable unless in writing and signed by the party against whom enforcement is sought (or their agent)
3. Writing is not insufficient if it omits or wrongly states a term. However, it will only be enforceable in regards to the quantity of goods shown in the writing.
4. Confirmatory Memo: (Between Merchants): S of F is satisfied IF:

• Writing in confirmation of contract is sent
• Within a reasonable time
• Writing is signed by the sender (enforceable against sender)
• Received by party
• and party does not object IN WRITING WITHIN 10 DAYS

Question 24

Parol Evidence Rule

Contracts (Parol Evidence)

Answer 24

1. Must be completely integrated. (Court decide, look at whether contract includes are of the necessary terms contained in a contract of the type)
2. Bars the admissibility of extrinsic evidence of prior or contemporaneous agreements which terms contradict, modify, or vary the terms of a completely integrated agreement.
3. Admissible to clarify ambiguities or supplement terms of partially integrated agreements.

Question 25

Common Law vs. UCC-2 Differences

Contracts

Answer 25

1. Acceptance: Mirror Image Rule vs. Battle of the Forms
2. Modification: Common law requires consideration, UCC does not.
3. Promise to Keep Offer Open: Common law has options contracts, UCC has Firm offer, no consideration required, requires it to be in writing and for offer to be made by a merchant.
4. Essential Terms: Common requires parties, price, quantity, timing for performance. UCC requires only quantity and gap fillers apply everything else.

Question 26

How Can an Offer be Terminated?

(Contracts)

Answer 26

1. Lapse of time:

• After time stated or within reasonable time)
• Offer made in a face-to-face conversation is typically said to lapse at end of convo.

2. Death or incapacity of either party:
3. Revocation by offeror

• Can be revoked at any time for any reason before acceptance, unless option contract.
• Direct = direct communication with offeree
• Indirect = Offeror takes any action inconsistent with intent to enter into K, and offeree learns oof such action through reliable source.

4. Rejection by offeree:
   * Direct objection or counter offer.

Question 27

Revocation of Unilateral Contracts

Answer 27

1. Unilateral K = Performance in exchange for promise (Bilateral = promise for a promise.)
2. Offeror not bund until performance is complete.
3. Offeror not bound until performance is completed
4. Offeree never bound.
5. Once performance begins, option K is created.
6. Mere preparations do not constitute an option K.

Question 28

Common Law - Mailbox Rule

Contracts

Answer 28

1. APPLIES ONLY TO ACCEPTANCES
2. Acceptance by mail effective upon DISPATCH.
3. Applies unless offeror provides otherwise.
4. When REJECTION is mailed BEFORE ACCEPTANCE, whichever arrives first will be effective.

Question 29

Acceptance (UCC)

Contracts (UCC)

Answer 29

Acceptance can be by:

1. Seller’s promise to ship goods;
2. Seller shipping non-conforming goods, unless seller ships shipment as accommodation ( = a counter offer)
3. Seller shipping conforming goods.

Question 30

UCC Battle of the Forms

Contracts (UCC)

Answer 30

• Rejection of the common law’s mirror image rule.
• An offeree’s nonconforming acceptance or confirmation will operate as a valid acceptance of the offer.
• Additional Terms:
  
  • BETWEEN MERCHANTS, additional terms in acceptance or confirmation become part of contract
  • EXCEPTIONS: (1) Offer limits acceptance to offers terms; (2) Offeror objects within reasonable time, or (3) Additional terms material alter new terms.
• Different Terms:
  
  • Terms in the two writings dealing with same subject knock each other out.

Question 31

Consideration

Contracts

Answer 31

1. A bargained-for exchange (something was promised in exchange for something of value); OR
2. A benefit to the promisor and a legal detriment to the promisee (Benefit/Detriment test)
3. Illusory Promise: An unenforceable promise that is vague and not clear or that one party has consideration while the other does not. (NOT VALID CONSIDERATION) ex. A contract with a bike merchant t buy “as many clothes as I want.”
4. Gratuitous Promise: Generally not enforceable.

Question 32

Illusory Promise

Contracts (Consideration)

Answer 32

Illusory Promise:

An unenforceable promise that is vague and not clear or that one party has consideration while the other does not. (NOT VALID CONSIDERATION)

Ex. A contract with a bike merchant to buy “as many bikes as I want.”

Question 33

Promissory Estoppel

Contracts

Answer 33

A gratuitous promise that a party relied to to their detriment can be enforced as consideration if:

1. A promise
2. Reliance was foreseeable
3. Promisee was induced to rely on promise to his detrimental.
4. Unjust if not enforced (“not fair”)

NOTE: DAMAGES ARE LIMITED TO RELIANCE DAMAGES.

NOTE: CAN BE A SUBSTITUTE FOR CONSIDERATION.

Question 34

5 Ways to Satisfy SofF under the UCC?

Contracts (UCC)

Answer 34

1. Signed Writing (writing, quantity, and signed by charged party)
2. Merchant Confirmation (Sender & receivers are merchants, writing that is signed and contains quantity, and recipient does not send a written objection within 10 days)
3. Judicial Admission (party admits to K formation in court)
4. Performance (payment made/accepted or goods have been received/accepted.
5. Specially manufactured goods (goods are unique and cannot be resold in the ordinary course of business)
6. Detrimental reliance.

Question 35

UCC Gap Fillers (Default Provisions)

Implied Warranties

Contracts (UCC)

Answer 35

1. Implied Warranty of Title (applies to property): Title is good, no encumbrances
2. Implied Warranty of Merchantability: Goods are fit for ordinary purpose for which they are used. NOTE: Seller must be a merchant. Ex. A toaster is going to toast.
3. Implied Warranty of Fitness for a Particular Purpose: Goods are fit for the particular purpose for which buyer intends to use the. NOTE: Seller must know the particular purpose and buyer relies on seller’s expertise.

Question 36

UCC Gap Fillers (Default Provisions)

Express Warranties

Answer 36

= when seller expressly makes promises as a part of the basis of the bargain.

• Any affirmation of promise or fact
• Any description of the goods
• No need to use the words “warranty” or guarantee. However, vague “sales talk” statements are considered puffery.

Question 37

Gap Fillers - Trade Usage Under the UCC

Contracts (UCC)

Answer 37

1. Trade Usage: What all members oof the trade do; Any practice or method of dealing having such regularity in a trade as to justify an expectation that it would be observed in respect to the transaction in question.
2. Regular Course of Dealing: _What the parties did in their previous conduc_t that is expected to establish a common basis of understanding in interpreting their subsequent transactions.
3. Regular course of Performance: How the parties acted under their current contract; When a contract involves repeated occasions for performance by a party and the other party accepts it, with knowledge of the performance and opportunity to object.

• Admissible to supplement terms and explain ambiguities
• Inadmissible to contradict express terms.
• If conflict: Course of Performance > Course of Dealing > Trade Usage

Question 38

Merger Clause

Contracts

Answer 38

= a clause providing that the terms of a contract is the complete and final agreement between the parties. (Parole Evidence Rule)

Question 39

When does Parol Evidence Rule NOT apply?

Contracts

Answer 39

1. Does NOT apply to subsequent agreement (these are allowed)
2. Does NOT apply too collateral agreement (agreements made that are entirely distinct from the subject agreement are allowed)
3. Does NOT apply to attacks on the validity of the agreement (allowed to show duress, fraud, mistake, for failure of a condition precedent.)
4. UCC Exceptions: Evidence course of performance, course oof dealing, and trade usage allowed in too supplement, even if completely integrated.

Question 40

Risk of Loss (UCC)

Contracts

Answer 40

Buyer has obligation to accept and pay for goods, seller has obligation to deliver goods. Risk of Loss allocates loss in the event that something happens to the goods before buyer receives them.

1. Carrier: When parties of a K agree to use a common carrier:
   * ROL transfers to buyer when goods are delivered to the carrier, and buyer bears ROL if goods are damaged in transit.
2. Non-Carrier: When parties do not agree to use a common carrier:

• If seller is a merchant, ROL shifts to buyer once goods are delivered. (HIGHER STANDARD FOR MERCHANTS, RESPONSIBLE FOR LONGER AMOUNT OF TIME)
• If seller is not a merchant, ROL transfers to buyer as soon as goods are made available (tendered).

Question 41

Contract Modification - Pre-Existing Duty Rule

(Common Law)

Contracts

Answer 41

1. Common Law Pre-Existing Duty Rule: A promise to increase compensation for duties already owed in unenforceable because there is no consideration for the modification (NO BARGAINED-FOR EXCHANGE)

• EXAMPLE: Contractor and homeowner enter into K for one price. Contractor asks for more money because price to materials increase, and owner agrees to pay more. Owner’s promise to pay more is NOT enforceable because contractor has pre-existing duty.
• EXCEPTIONS: Reliance (homeowner agrees and contractor acts in reliance) or mutual modification due to unforeseen circumstances (ex. Strikes, shortages, economic depression, war, and changed construction conditions like a sinkhole, etc.)

Question 42

Contract Modification - Pre-Existing Duty Rule

(UCC)

Contracts

Answer 42

An agreement modifying a contract needs to additional consideration, as long as it is made in good faith.

• Good Faith = honesty in fact in the conduct or transaction
• Purpose: To allow contracting parties to freely adapt to changing circumstances

Question 43

Excusing Performance (Present Events)

Mistake

Contracts (Performance)

Answer 43

1. Unilateral Mistake: When at least one party is mistaken about material fact(s)
   * Voidable when unconscionable (Ex. Party miscalculated bid by error, r other party realizes bid was significantly lower than all other bids)
2. Mutual Mistake:

• Mistake is made by both parties at the time the K was made
• Mistake involved a basic assumption on which the contract as made
• Mistake material affects the contract
• K is avoidable only by adversely affected party.
• Example: Contract for sale of farm land. Both parties believed there was an adequate water source to water the plants being grown, but it wasn’t. Voidable by buyer.

NOTE: Does not apply when party assumes the risk.

Question 44

Excusing Performance (Present Events)

Misunderstanding

Contracts (Performance)

Answer 44

• Occurs when both parties attach a different meaning to the same term.
• When one party is aware of the other party’s assumption, the first party will be bound by the other party’s assumption.

Parties enter into K for chickens. Party #1 thinks there is only one type of chicken (broiler chickens). Party #1 Knows there is two types of chickens, broiler and stew chickens, AND KNOWS PARTY #1 EXPECTS BROOILER CHICKENS. Party #2 is bound by Party #1’s assumption.

Question 45

Excusing Performance (Current Events)

Misrepresentation Defense

Contracts (Performance)

Answer 45

= incorrect or fraudulent misrepresentations of facts during contract negotiations that causes reliance on the part of the other party.

• Misrepresentation MUST BE INTENTIONAL AND MATERIAL for defense to apply
• If misrepresentation, K is VOIDABLE or able to be REFORMED.
• Example: Misrepresenting a cubic zirconia as a diamond in a transaction.

Question 46

Excusing Performance (Future Events)

Impossibility

Contracts (Performance)

Answer 46

1. The occurrence of an event, the non-occurrence which was a basic assumption of the contract.
2. Party must not have caused the occurrence.
3. Party must not have assumed the risk.
4. Events that cause impossibility:

• Illegality fo subject matter
• the subject matter (property) is destroyed
• One of the parties die/become incapacitated
• Natural forces interrupt the K
• Performance will put party is substantial risk of physical harm (ex. Hired t out shingles on a roof, but them it is discovered that the roof is unsound.)

Question 47

Excusing Performance (Future Events)

Commercial Impracticability Defense

Contracts (Performance)

Answer 47

1. Occurrence of a contingency (future event), the non-occurrence of which was a basic assumption of the contract
2. Contingency was unforeseen
3. Contingency caused a serious financial burden
4. Party claiming the defense did not cause the supervening event or assume the risk.

Question 48

Excusing Performance (Future Events)

Frustration of Purpose

Contracts (Performance)

Answer 48

= when an unforeseen event undercuts a party’s purpose of entering into the contract in the first place.

Question 49

Accord and Satisfaction

Contracts (Performance)

Answer 49

• Accord: A NEW AGREEMENT in which the promisor in a contract promises to perform a different obligation than the one he is contractually bound t operfoorm, and the proomisee agrees to oaccept the different obligation.
• Satisfaction: The performance of the accord.
• Consideration required. (Is usually less in value than the original consideration)

Question 50

Reliance Damages

Contracts (Remedies)

Question 51

Anticipatory Repudiation and Adequate Assurance

Contracts (Performance)

Answer 51

1. Anticipatory Repudiation can be established by either:

• Party’s definitive statement that it will breach; or
• Voluntary act that render’s a party unable to perform.
• Revocation: Can be revoked unless other party acts in reliance of the repudiation (ex. orders from another seller), commences an action for breach, or accepts the repudiation by communicating acceptance to party.
• RIGHTS AFTER REPUDIATION: Party can cancel the K, ignore the repudiation, or commence an action for breach or specific performance.

2. If AR cannot be established but party has reason to suspect repudiation by another party, party has a right to make a demand for adequate assurances.

• If adequate assurances not given = repudiation
• Under UCC: Adequate assurances must be made within 30 days.

Question 52

Material Breach vs. Substantial Performance

Contracts (Performance)

Answer 52

1. Material Breach: If breach is serious enough, court will treat it as a breach oof an express condition and the aggrieved party is generally discharged from his contractual obligations.
2. Substantial Performance: If breach is less serious and party has rendered substantial performance, court will treat performance as “close enough” and the aggrieved party will not be discharged.

Question 53

Divisibility of Contract

Contracts (Performance)

Answer 53

Failure for the performance of one aspect of the contract will not necessarily result in a breach of the entire contract. These concepts are similar to the concept of an installment contract.

Ex.

• For the first month, the company will purchase 500 bushels of Gala apples at a rate of $7 per bushel.
• In month two, the company will require a shipment of 500 bushels of Fuji apples at a rate of $8 per bushel.
• In month three, they will receive 500 bushels of Pink Lady apples at $9 per bushel.
• After that, the same cycle continues throughout the next three years.
• If the vendor supplying the fruit were to accidentally ship the customer pomegranates in the third month instead of the apples, they would have breached the contract. However, since they had successfully performed the first three months of the contract, they will be entitled to payment for that since the breach did not occur until the delivery in month four.

Question 54

Perfect Tender Rule (UCC)

Contracts (Performance)

Answer 54

Under the Perfect tender rule, terms of a contract are enforced exactly, with each term treated as an express condition.

If seller fails to make perfect tender, buyer has 3 options:

1. Accept the goods

• Buyer must have reasonable time to inspect the goods and signify acceptance by: (1) stating that good conform; (2) accepting the non-conforming goods; or (3) not accepting the non-conforming goods but failing to reject.
• If buyer accepts, he is obligated to pay K price.
• Buyer can revoke acceptance if non-conformity substantially impairs value of goods and EITHER the buyer accepted because he did not know of nonconformity OR seller promised too but failed to cure defect.
• Right to Cure: Must be before K deadline. If after K deadline, must have reasonable belief that delivery was acceptable (due to trade usage, course of dealing, or course of performance) must give reasonable notice to buyer and deliver within reasonable time.

2. Reject the goods

• Must reject within a reasonable time and notify seller. if not, it is deemed accepted.
• Buyer then has option to sue for damages unless cure applies.

3. Accept in part, reject in part
   * Can one do s oil commercial units of shipment

Question 55

Incapacity: Minors vs. ental Incompetence

Contracts (Performance)

Answer 55

1. Minors:

• K is voidable by minor, but can be ratified once they turn 18.
• If K was for necessities (ex. hotel when minor is stranded) the minor is NOT liable for damages or the value of the goods/services, but must returns any goods received.

2. Mental Incompetence:

• Lacks capacity to contract if mentally incompetent at time of K
• Can ratify if later becomes competent
• Obligated to return goods and (UNLIKE MINORS) is liable for damages and value of goods/services
• Same as for necessities

Question 56

Defenses

Contracts

Answer 56

1. Fraudulent Misrepresentation
2. Non-fraudulent (Negligent) Misrepresentation
3. Fraudulent Non-disclosure
4. Duress
5. Undue Influence
6. Unconscionability
7. Public Policy (K was illegal or done for purpose of committing crime)

Question 57

Defenses: Unconscionability

Contracts (Defenses)

Answer 57

Two Types:

1. Procedural (Unfair bargaining process): Created an absence of choice for aggrieved party.
2. Substantive (Unfair terms): Terms are unreasonably favorable for one party.

Legal Consequences: Refuse to enforce K or cut out offending clause and enforce remainder.

Question 58

Monetary Damages Under the UCC

Contracts (Remedies)

Answer 58

Only buyer can recover.

Applies to damages that were reasonably foreseeable by seller at the time of contracting.

Question 59

Cover

Contracts (UCC)

Answer 59

When there is a breach, buyer can cover the loss by acting in good faith and without reasonable delay by contracting with another party for the purchase off replacement goods.

Question 60

Reasonable Listener Standard

Contracts

Answer 60

Offers and acceptances are held to a reasonable listener standard.

This means that a statement or action will constitute an offer or acceptance if a reasonable person listening or viewing would conclude it was an offer or acceptance.

Question 61

Collateral Agreements

Contracts (PAR)

Answer 61

A collateral agreement (separate agreement) is allowed in as extrinsic evidence if:

• It does not contradict the final, written agreement, and
• the agreement does not contains terms that would normally be included in the ofinal agreement.

Question 62

Completely Integrated

Contracts (PAR)

Answer 62

• Courts decide
• Will look at factors such as the use of merger clauses, or whether it contains all the usual terms that are normally included in a contract of the such. (All necessary terms present)

Question 63

Basic Framework

Contracts

Answer 63

1. UCC or Common Law?
2. 2. Is there a K?
3. Is K legally enforceable? (Defenses to formation)
4. What are the terms to K? (Interpretation, gap fillers, default rules)
5. Was K properly performed? (breach, assignment, delegation, TBP)
6. Any excuse for non0performance? (then, no breach)
7. Remedies

Question 64

Step 1: What Law Applies?

Contracts

Answer 64

1. Common Law: K’s for services, real property
2. UCC Art. 2: K’s for sale of goods (tangible, moveable)

Question 65

Step 2: Was there an Offer?

Contracts

Answer 65

= A manifestation of willingness to enter into a bargain made as to justify another person in understanding that his assent to that bargain is invited to conclude it.

Requires material terms

• Must not be vague
• CL requires price, parties, and subject;
• UCC only says K must have a quantity term.

Question 66

Advertisements

Contracts

Answer 66

= no offer.

Exceptions:

1. Advertisement for reward = unilateral offer
2. Advertisement IS an offer IF it specifies limited quantity & who can accept
3. Price quote can be offer if sent in response to inquiry.

Question 67

4 Ways to Terminate an Offer

Contracts

Answer 67

1. Lapse of time: Reasonable time OR Time stated in offer passes
2. Death/incapacity of a party before acceptance (Exception: irrevocable offers)
3. Revocation before acceptance
4. Rejection

• Counteroffer
• Conditional acceptance
• Additional Terms (rejection = CL only, mirror image rule)

Question 68

UCC Firm Offer

Contracts (Irrevocable Offers)

Answer 68

Offer is irrevocable for up to 3 months if:

• Offer is for sale of goods (UCC);
• Offeror is a merchant; and
• Promise to keep offer open is in writing, signed by offeror

NOTE: No consideration necessary.

NOTE: Differs from Option K under CL

Question 69

Option Contract

Contracts (Irrevocable Offers)

Answer 69

1. Offeror promises not to revoke or to hold offer open; AND
2. Promise is supported by payment or other consideration

Question 70

Unilateral K + Offeree’s Performance

Contracts (Irrevocable Offers)

Answer 70

1. Unilateral offer by offeror
2. Start of performance by offeree
3. Makes offer irrevocable for reasonable amount of time to complete performance

NOTE: Mere preparation is not enough to meet requirements for start of performance. [However, mere preparation may be enough for detrimental reliance.]

Question 71

Detrimental Reliance

Contracts (Irrevocable Offers)

Answer 71

1. Offeree relied on offer
2. Reliance was to offeree’s detriment
3. Reliance was reasonably foreseeable

NOTE: Often comes up with GC and Sub-C contracts when GC bids on larger K

Question 72

Methods of Acceptance

Contracts (Acceptance)

Answer 72

1. Offeree starts to perform
2. Delayed Communications
   
   1. All communications other than acceptance = effective when received
   2. Acceptance generally effective when mailed (Mailbox Rule)
   3. Rejection mailed before acceptance = first to be received is effective
   4. Cannot use mailbox rule to meet an option K deadline - actual receipt must be by deadline.
3. UCC Seller of Goods send Wrong Goods
   
   1. General rule: Sending wrong good is a simultaneous acceptance and breach of K
   2. Exception: When sending nonconforming goods is made as an accommodation, then it is a counteroffer and no breach; seller must give reasonable notice that it is sending nonconforming goods.

Question 73

Consideration

Contracts

Answer 73

= a bargained for exchange (look for a promise or a detriment).

Question 74

Is K Enforceable?

Question 75

Promissory Estoppel

Contracts (Is K Enforceable?)

Answer 75

= substitute for consideration (only use if there isn’t any)

1. A promise by offeror
2. Reliance on promise by offeree that is reasonable, foreseeable, and detrimental, and
3. Enforcement of promise is necessary to avoid injustice.

Question 76

Parties Lacking Capacity

Contracts (Is K Enforceable?)

Answer 76

1. Minors
2. Mental incompetents (lack ability to understand K)
3. Intoxicated persons (IF other party knew of intoxication)

Question 77

4 Types of K’s that Fall Under Statute of Frauds

Contracts (Is K Enforceable?)

Answer 77

1. Promises to answer for debts of another (Suretyship)
2. K for services not capable of full performance within 1 year
3. Transfer of interest in real estate (except leases 1 year or less)
4. Sale of goods $500 or more

Question 78

Satisfaction of S of F

Contracts (Is K Enforceable?)

Answer 78

Common Law:

1. K must contain all material terms (parties, price, and subject)
2. Signed by party against whom enforcement is sought

UCC Art. 2:

1. Writing must indicate K for sale of goods
2. Contains a quantity term
3. Signed by the defendant
4. Exception b/tw Merchants: signed writing by one merchant to another where the recipient does not timely respond is enough to satisfy S of F. Also means merchants cannot reject by failing to respond.

Judicial Admission:

D asserting S of F defense admits in a pleading or testimony (under oath) that a K existed = satisfied (even if not in writing)

Question 79

Obligation of Good Faith and Fair Dealing Contracts (UCC)

Answer 79

Contracts for the sale of goods (UCC) Good faith = honesty in fact and observance of reasonable commercial standards of fair dealing Performance of K: UCC imposes obligation; seller general must make perfect tender and fulfill delivery obligations

Question 80

Equitable Remedies vs. Legal Remedies

Remedies (Contracts)

Answer 80

NOTE: On an essay, make sure to distinguish between and separate equitable and legal remedies.

RULE: A court will ONLY award equitable remedies when there is no adequate legal remedies.

Question 81

Equitable Remedies (List 4)

Remedies (Contracts)

Answer 81

NOTE: Only awarded when there is no adequate legal remedy available.

1. Specific Performance and Injunctions
2. Rescission and Contract Reformation
3. Quiet Title and Ejectment (Property Contracts)
4. Unjust Enrichment and Quasi-Contract

Question 82

Specific Performance and Injunctions

Remedies (Contracts)

Answer 82

= Types of equitable remedies (awarded only when no legal remedy available)

1. Specific Performance: Court is ordering a party to do something

• RULE: Court will award specific performance when the subject matter of the contract is unique.
• NOTE: NOT available for employment K’s or contract involving personal services.
• NOTE: More liberal under the UCC - “Unique” = cannot find substitute.

2. Injunction: Court is ordering a party not to do something

• RULE: A court will award an injunction when it is necessary to prevent irreparable harm
• NOTE: In property K’s, a piece of land is automatically considered unique.

Question 83

Rescission and Contract Reformation

Remedies (Contracts)

Answer 83

= Types of equitable remedies (awarded only when no legal remedies)

1. Rescission: Contract is cancelled and parties are put back into same position they were in before they entered into the contract.
   * RULE: Court may rescind a contract when a party can successfully assert an affirmative defense such as misrepresentation, mutual mistake, duress, or undue influence.
2. Contract Reformation: Is the rewriting of a contract by a court to represent the “true intent” of the parties.
   * RULE: Court may reform a contract when a party can successfully assert an affirmative defense such as misrepresentation or mutual mistake.