Contracts

Question 1

When does common law apply to contracts

Answer 1

The common law governs if a contract deals with services or real estate (e.g., hiring someone to mow your lawn).

Question 2

When does the UCC apply to contracts

Answer 2

The UCC governs if a contract deals with goods (e.g., agreement to buy 100 reams of paper from a paper supply company).

Question 3

what is the rule for mixed contracts classification

Answer 3

mixed contracts must fall into one class or the other but there is a limited exception for divisible contracts (contracts that can divide the goods and services portions into separate mini-contracts)

generally, predominant purpose of the contract determines whether the common law or UCC governs

If the predominant purpose of the contract involves the purchase or sale of goods, the UCC applies. If the predominant purpose of the contract involves services or real estate, the common law applies.

Question 4

3 requirements to form a valid contract

Answer 4

A traditional, enforceable contract is formed when there is:

(1) Mutual assent (a valid offer + valid acceptance of that offer);
(2) Consideration; AND
(3) No defenses to formation that would invalidate the otherwise valid contract.

Question 5

what are two parts of the mutual assent

Answer 5

offer and acceptance

Question 6

what is a valid offer

Answer 6

the offeror must: manifest an OBJECTIVE willingness to enter into an agreement; AND Create a power of acceptance in the offeree (i.e., the offeree can simply say, “I accept” and know that he has concluded the deal)

Question 7

the offer is governed by an __________ test

Answer 7

The offer is governed by an objective test, which means that outward appearances of words and actions are determinative – not subjective hidden intentions (e.g., If a person makes an offer as a practical joke with his fingers crossed behind his back but his outward words and actions demonstrate willingness to enter the agreement, it is a valid offer. The offeror’s subjective intent is irrelevant).

Question 8

Advertisements are considered ________ rather than offers

Answer 8

invitation to deal

However, advertisements that are very specific and leave nothing open to negotiation may constitute offers.

Question 9

an offer must be directed at a _______ offeree

Answer 9

specific

Generally, an offer must be directed to a specific offeree. However, there is a limited exception for contest offers and reward offers that promise something to anyone who accomplishes a certain task (e.g., a posted sign that offers a cash reward for finding lost puppy is a valid offer).

Question 10

what are the terms required in an offer (compare common law and UCC)

Answer 10

Certain terms MUST be specified in the offer in order for the offer to be valid.

Under the common law, all essential terms must be specified in the offer. Generally, this includes the following four terms: parties, subject, quantity, and price

Under the UCC, the law is more willing to plug the gaps. Unlike the common law, PRICE IS NOT REQUIRED in the offer. Generally, only three terms are required under the UCC: parties, subject quantity)

Question 11

UCC requirements and output contracts rule

Answer 11

Requirements and output contracts are valid under the UCC even though they do not specify an exact quantity.

In a requirement contract, the seller agrees to sell as much as the buyer would require.

In an output contract, the seller agrees to sell his entire production to the buyer.

Question 12

how can an offer be terminated

Answer 12

If a valid offer is terminated at any time before acceptance, the offer is invalidated.

An offer is terminated if any of the following occur at any time BEFORE acceptance: revocation, constructive revocation, offeree rejects offer, counteroffer, offeror dies, reasonable amount of time passes, OR subject matter of the offer becomes illegal or is destroyed.

Question 13

define irrevocable offers

Answer 13

there are four types of offers that are irrevocable: option contracts, firm offers, unilateral contact where performance has started, and detrimental reliance

Question 14

define option contracts

Answer 14

An agreement where consideration is given in exchange for a promise to keep an offer open (e.g., “I promise not to revoke this offer for one week if you pay me an additional $100 to keep the offer open.”).

Question 15

define firm offers

Answer 15

UCC only

a merchant (someone who regularly deals in the type of good at issue – i.e., a businessperson) can make a firm offer to buy or sell goods. A firm offer will either last as long as stated in the offer or for a reasonable time period not to exceed 90 days.

A firm offer MUST: be in writing, contain an explicit promise not to revoke and be signed by the merchant

Question 16

define acceptance

Answer 16

An acceptance is a manifestation of a willingness to enter into the agreement by the offeree

must be according to the rules of the offer

Question 17

is silence a form of acceptance

Answer 17

silence generally does not manifest willingness unless there is a past history of silence serving as acceptance

Question 18

acceptance for bilateral contracts

Answer 18

For bilateral contracts, the start of performance manifests acceptance.

Question 19

acceptance for unilateral contracts

Answer 19

For unilateral contracts, the start of performance only makes the offer irrevocable – the offer is only accepted once performance is complete

Question 20

define mailbox rule

Answer 20

An ACCEPTANCE that is sent by mail, email, or fax is valid at the moment of dispatch (not when the letter is received), UNLESS:

The offeree-sender uses the wrong address or has improper postage,
offeror expressly stipulates that the acceptance is valid upon receipt,
option contract is involved,
offeree-sender sends a termination letter BEFORE the acceptance letter
OR offeror detrimentally relies on a termination BEFORE he receives the acceptance letter.

Question 21

define counteroffer

Answer 21

A counteroffer operates as both a rejection that terminates the original offer AND as a formation of a new offer.

Question 22

what is the mirror image rule

Answer 22

Under the common law, the terms in the acceptance MUST match the terms of the offer exactly – otherwise it is not an acceptance, it is a counteroffer (i.e., the terms of the offer and acceptance must mirror each other exactly).

Question 23

UCC 2-207 determines

Answer 23

whether there is a valid acceptance and whether the addtional terms will be part of the contract

Question 24

what is the UCC 2-207 battle of the forms rule

Answer 24

Under the UCC, the acceptance does NOT have to mirror the offer. UCC § 2-207(1) determines whether the purported acceptance (containing new terms) will operate as an acceptance or as a counteroffer:

A definite and seasonable expression of acceptance or written confirmation;
Which is sent within a reasonable amount of time;
Operates as an ACCEPTANCE even though it states terms additional to or different from those offered or agreed upon;
UNLESS acceptance is expressly made conditional upon assent to the additional or different terms.

Question 25

under the UCC, the ADDITIONAL terms will govern the contract if BOTH parties are merchants UNLESS

Answer 25

The initial offer expressly limited acceptance to its terms;
The additional terms materially alter the deal; OR
The offeror objects to the additional terms within a reasonable amount of time.

Question 26

define the knockout rule

Answer 26

Most courts apply the knockout rule with UCC § 2-207(2) to determine whether the new terms control or whether UCC gap fillers must be implemented.

Under the knockout rule, a distinction is made between “different” and “additional” terms.

Question 27

different vs additional terms for purposes of knockout rule

Answer 27

A different term is a term that was not included in the original offer that conflicts with the terms of the original offer (e.g., offeree changes the price term from $5,000 to $4,000 and sends it back to the offeror).

An additional term is a term that was not included in the original offer that does NOT conflict with the original offer (e.g., offeree adds a choice of law provision that was not included in the original offer and sends it back to the offeror).

Question 28

what happens to different terms under the UCC knockout rule

Answer 28

different terms in the original offer and acceptance knock each other out creating a gap in the contract

UCC gap fillers are then used to plug this gap (regardless of whether the parties are merchants).

Question 29

what happens to additional terms under the knock out rule of the UCC

Answer 29

The knockout rule does not apply to additional terms added by the offeree. UCC § 2-207(2) will determine whether the additional terms control or whether UCC gap fillers must be implemented.

Question 30

define consideration

Answer 30

Consideration involves a transfer of legal value in a bargained-for exchange.

Question 31

consideration if present if:

Answer 31

promisee incurs a legal detriment OR the promisor receives a legal benefit and the promise induces the detriment AND the detriment induces the promise

Question 32

define legal detriment for the purposes of consideration

Answer 32

A legal detriment generally consists of: promising to do something the party has no prior legal duty to do,

performing an action that the party is not otherwise obligated to undertake;

OR refraining from or promising to refrain from exercising a legal right which the party is otherwise entitled to exercise.

Question 33

Promising not to sue will constitute a legal detriment as long as ___________________________

Answer 33

the party promising not to sue has an honest and good faith belief in the validity of the claim

Question 34

gift promises are _______________

Answer 34

NOT consideration

A promises to give B his truck for free. Here, B incurs no legal detriment and A’s promise to give B his truck is not induced by any action or forbearance from B. This is a gift promise, not bargained-for consideration.

Question 35

conditional promises are __________

Answer 35

NOT consideration

A promises to give B his truck if B will drive 30 minutes away to pick the truck up from A’s house. Here, A’s promise to give B his truck is not induced by B coming to pick the truck up. Thus, A is not bargaining for B to come. This is a conditional gift, not bargained-for consideration.

Question 36

Preexisting legal duties are _________________

Answer 36

NOT consideration

A promises to pay B $100 if B refrains from smoking crack-cocaine for 6 months. Here, B already has a preexisting legal duty imposed by law to refrain from smoking crack-cocaine. Thus, B incurs no legal detriment, which means consideration is not present.

Question 37

Past consideration is _________________

Answer 37

NOT consideration

A’s truck catches fire as A is
demonstrating the truck’s safety features to B. After the fire erupts, B rushes over and saves A. A promises to pay B $100 for therescue. Here, B’s detriment (saving A’s life) was not induced by A’s promise. This is past consideration, not bargained-for consideration.

Question 38

pretense of consideration is ____________

Answer 38

not consideration

A and B are cousins. A wishes to
give B his truck that is valued at $10,000 as a gift for B’s birthday. Attempting to form an enforceable contract, A “sells” B his truck for $1 solely to meet the consideration requirement. Here, A is not induced to give B his truck for the $1. This is merely a pretense of consideration, not bargained-for consideration

Question 39

illusory promises are ____________

Answer 39

NOT consideration

A promises to buy B’s truck if “he feels like it.” Here, A is not committing to the deal. This is an illusory promise, not bargained-
for consideration.

Question 40

contract modification under common law

Answer 40

Under the common law, contract modifications MUST be supported by consideration.

The common law follows the preexisting duty rule, which means that a promise to do something that a party is already legally obligated to do (by contract or otherwise) is NOT consideration.

Question 41

contract modification under UCC

Answer 41

Under the UCC, there is no consideration requirement. A contract modification is valid if it is made in good faith (i.e., the UCC does NOT apply the preexisting duty rule).

Question 42

three consideration substitutes

Answer 42

promissory estoppel, quasi-contract, moral obligation + subsequent promise

Question 43

define promissory estoppel

Answer 43

promises may still be enforced without consideration if:
promisor should reasonably expect the promise to induce action or forbearance from the promisee
The promise does induce such action or forbearance to the promisee’s detriment; AND
Injustice can be avoided only by enforcement of the promise.

recovery usually limited to reliance damages

Question 44

define quasi contracts

Answer 44

may be enforced to avoid unfair results if: The plaintiff confers a measurable benefit on the defendant; The plaintiff reasonably expected to get paid; AND It would be unfair to let the defendant keep the benefit without paying.

recovery is limited to restitution

Question 45

define Moral Obligation + Subsequent Promise

Answer 45

moral obligation plus a subsequent promise can be binding

Tom’s truck catches fire. Brady rushes over and extinguishes the flames saving Tom’s life. Grateful, Tom promises to pay Brady $100 for the rescue. Here, this is NOT bargained-for-consideration. However, Brady could argue that the promise should be enforced due to the strong moral obligation involved.

Question 46

list the six defenses to contract formation

Answer 46

incapacity, mistake, misrepresentation, duress and undue influence, illegality, and unconscionability

Question 47

list the three types of incapacity

Answer 47

infancy, mental illness, and intoxication

Question 48

infancy

Answer 48

Unless a statute provides otherwise, a person has the capacity to incur only voidable contractual duties until the beginning of the day before the person turns 18.

Question 49

can a minor rescind a contract

Answer 49

yes, a minor may disaffirm (rescind) the contract and avoid liability under it

If the minor chooses to disaffirm the contract, the minor must return anything that he received under the contract that still remains in his possession at the time of disaffirmance

no obligation to return anything that has been negligently squandered or destroyed

Question 50

can a minor affirm a contract?

Answer 50

yes a minor can affirm (enforce) the contract and hold the adult party liable under it

A minor may affirm the contract expressly or implicitly by failing to disaffirm the contract within a reasonable amount of time after turning 18 thereby ratifying the contract.

Question 51

mental illness

Answer 51

A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect, the individual is unable to:

Understand in a reasonable manner the nature and consequences of the transaction, OR

Act in a reasonable manner in relation to the transaction AND the other party has reason to know of his condition.

Question 52

a party to a contract who is mentally ill CANNOT disaffirm the contract if:

Answer 52

The contract was made on fair terms; AND

The other party is without knowledge of the mental illness or defect (e.g., the
the mentally ill party is in a lucid state at the time of contracting).

Question 53

A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that due to intoxication, the individual is unable to:

Answer 53

Understand in a reasonable manner the nature and consequences of the transaction, OR

Act in a reasonable manner in relation to the transaction.

Question 54

If the intoxicated party wishes to avoid liability under the contract, he must…

Answer 54

he must act promptly upon recovery to disaffirm the contract and is required to return any value received, if possible

Question 55

Necessaries Doctrine

Answer 55

When necessaries (e.g., food, shelter, clothing, healthcare, etc.) are furnished to a party who lack capacity (minors, mentally ill, and intoxicated parties), the party who lacks capacity is liable for the reasonable value of the services or goods (not the agreed-upon price) under a quasi-contract theory of restitutionary recovery.

Question 56

two types of mistake

Answer 56

mutual and unilateral

Question 57

define mutual mistake

Answer 57

occurs when both parties are mistaken as to a basic assumption on which the agreement is made

Question 58

who many rescind due to mutual mistake and for what reason

Answer 58

The adversely affected party may rescind the deal if: mistake of fact that existed at the time the deal was made, mistake relates to a basic assumption of the contract, mistake has a material impact on the deal, AND impacted party did not assume the risk of mistake

Question 59

impacted party assumes the risk of mistake when

Answer 59

He is aware, at the time the contract is made, that he has only limited knowledge regarding the facts to which the mistake relates but treats his limited knowledge as sufficient; OR

The risk is allocated to him by agreement of the parties (e.g., “as is” contracts).

Question 60

define unilateral mistake

Answer 60

A unilateral mistake is a mistake made by one party that is unknown to the other party.

Question 61

how may a contract be rescinded if there is a unilateral mistake

Answer 61

The adversely affected party may rescind the deal if:

(1) There is a mistake of fact, existing at the time that the deal is made;
(2) The mistake relates to a basic assumption of the contract;
(3) The mistake has a material impact on the deal;
(4) The impacted party did NOT assume the risk of mistake; AND
(5) The mistake would make the contract unconscionable OR the other side knew of, had reason to know of, or caused the mistake.

Question 62

define misrepresentation

Answer 62

A misrepresentation is a statement at the time of contracting that is NOT TRUE. It can be intentional (fraudulent) or accidental.

Question 63

what must a party to show to assert the defense of misrepresentation

Answer 63

To assert this defense, the party must show:

(1) A misrepresentation of a present fact (not opinion);
(2) That is material OR fraudulent (knowingly or reckless); AND
(3) That is made under circumstances in which it is justifiable to rely on the representation.

Question 64

define duresst

Answer 64

A contract is VOID if a party to the contract is compelled by physical duress, such as the threat to inflict physical harm

Question 65

a contract is viodable if ____________

Answer 65

A contract is VOIDABLE by the adversely affected party if the
adversely affected party’s assent is induced by an improper threat that leaves the
adversely affected party no reasonable alternative.

Question 66

define threat for the purposes of duress as a contract defense

Answer 66

a threat is improper if:

(1) What is threatened is a crime or tort,
(2) What is threatened is a criminal prosecution;
(3) What is threatened the use of civil process AND the threat is made in bad faith;
(4) The threat is a breach of the duty of good faith and fair dealing under a contract with the recipient; OR
(5) The resulting exchange is NOT on fair terms; AND: threatened act would harm the recipient and would not significantly benefit the party making the threat; effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat; OR What is threatened is otherwise a use of power for illegitimate ends.

Question 67

define undue influence as a contract formation defense

Answer 67

A contract is VOIDABLE by the adversely affected party if the adversely affected party’s assent is induced:
Due to the adversely affected party’s susceptibility to pressure; AND
The other side’s application of excessive pressure.

Question 68

define illegality as a defense to contract formation

Answer 68

If the consideration or performance under a contract is illegal or contrary to public policy, the contract is VOID and will not be enforced (e.g., a contract to commit murder). However, a contract entered into in furtherance of an illegal purpose will generally be enforced (e.g., hiring an unsuspecting taxi driver to get somewhere in order to commit a murder).

Question 69

Performance will be __________ if a contract that was legal when formed subsequently becomes illegal.

Answer 69

discharged

Question 70

define unconscionability as a contract formation defense

Answer 70

If a contract is so unfair or oppressive to one party such that it shocks the conscience of the court, a court may find it unconscionable and refuse to enforce it.

Question 71

2 types of unconscionability

Answer 71

procedural - occurs when there is a defect in the bargaining process
substantive - terms of the deal are grossly unfair and one-sided in one party’s favor.

Some courts will only refuse to enforce a contract if both types of unconscionability are present. Other courts may refuse to enforce a contract if only one type is present.

Question 72

2 types of unconscionability

Answer 72

procedural - occurs when there is a defect in the bargaining process
substantive - terms of the deal are grossly unfair and one-sided in one party’s favor.

Some courts will only refuse to enforce a contract if both types of unconscionability are present. Other courts may refuse to enforce a contract if only one type is present.

Question 73

Statute of Frauds definition

Answer 73

The following contracts are NOT valid unless they satisfy the statute of frauds (usually requires that the contract be a signed writing):

marriage
suretyship
contracts that cannot be performed within one year
UCC - a contract for the purchase/sale of goods for more than $500
Real estate

Question 74

modifications and statute of frauds rule

Answer 74

The statute of frauds applies to a modification ONLY IF the contract as modified (not the original contract) falls within the statute of frauds.

Question 75

how is the statute of frauds satisfied?

Answer 75

by writing and by performance

Once it is determined that the statute of frauds is triggered the next issue is whether the statute of frauds has been satisfied. There are two main ways to satisfy the statute of frauds – by writing and by performance.

Question 76

statute of frauds satisfaction by writing

Answer 76

A writing will satisfy the statute of frauds if the writing:

(1) Is signed by the party against whom enforcement is sought;
(2) Shows that a contract was formed; AND
(3) Includes the requisite terms. (The requisite terms under the common law are parties, subject, quantity, and price. The requisite terms under the UCC are parties, subject, and quantity.)

Question 77

statute of frauds satisfaction by performance for service contracts under one year provision rule

Answer 77

Under the common law, FULL performance of a services contract by either side satisfies the statute of frauds. Part performance does NOT satisfy the statute of frauds.

Question 78

statute of frauds for real estate contracts

Answer 78

In most jurisdictions, real estate contracts can satisfy the statute if:
(a) The seller FULLY performs (i.e., conveys the land to the buyer); OR

(b) The buyer performs two of the following three actions:
(i) The buyer takes possession of the property;
(ii) The buyer makes payment in full or part; AND/OR
(iii) The buyer makes substantial improvements to the land.

Question 79

statute of frauds satisfaction for UCC goods contracts for $500 or more

Answer 79

satisfied by PAWS:

performance, admission in court, written confirmation between merchants, or specially manufactured goods

Question 80

PAWS

define performance

Answer 80

Under UCC § 2-201(3)(c), the statute of frauds is satisfied for the quantity of goods for which payment has been made and accepted or which have been received and accepted

(the contract is not enforceable under this provision beyond the quantity of goods for which payment has been made and accepted or which have been received and accepted).

Question 81

PAWS define admission in court

Answer 81

Under UCC § 2-201(3)(b), the statute of frauds is satisfied if the party against whom enforcement is sought admits in his pleading, testimony, or otherwise in court that a contract for sale was made

(the contract is not enforceable under this provision beyond the quantity of goods admitted).

Question 82

PAWS

define written confirmation between merchants

Answer 82

Under UCC § 2-201(2), the statute of frauds is satisfied if:

After an oral agreement between merchants;

Either party sends a signed, written confirmation of the oral
contract (must be signed by the sender); AND

The written confirmation is received by the other merchant to the oral agreement; UNLESS

The party receiving the written confirmation gives a written notice of objection within 10 days after receipt of the written confirmation.

Question 83

PAWS

define specially manufactured goods

Answer 83

Under UCC § 2-201(3)(a), the statute of frauds is satisfied when a seller makes a “substantial beginning” toward manufacture of custom goods that are to be specially made for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business under circumstances that reasonably indicate that the goods are for the buyer.

Question 84

complete integration (parol evidence rule)

Answer 84

If the writing completely expresses all of the terms of the parties’ agreement, then it is a complete integration.

ALL other expressions or statements, written or oral, made prior to the writing, as well as any oral expressions made contemporaneously with the writing, are inadmissible.

Question 85

_____________ is usually strong evidence that the writing is a complete integration.

Answer 85

Merger Clause

Question 86

partial integration (parol evidence rule)

Answer 86

f the writing sets forth the parties’ agreement about some terms, but not all the terms, then it is a partial integration.

Other expressions or statements, written or oral, made prior to the writing, as well as any oral expressions made contemporaneously with the writing, are admissible to supplement the writing so long as the evidence does NOT contradict the terms of the writing.

Question 87

Parol evidence rule does not apply if any of the follow exceptions exist

Answer 87

Defenses. Extrinsic evidence may be offered to establish a defense to the formation or enforcement of a contract (e.g., incapacity, mistake, duress, lack of consideration, etc.).

Separate Deals. Extrinsic evidence may be offered if it represents a distinct and separate contract.

Condition Precedents. Extrinsic evidence may be offered if a party asserts that there was an oral agreement that the written contract would not become effective until a condition occurred.

Ambiguity and Interpretation. Extrinsic evidence may be offered for the purpose of interpreting or clarifying an ambiguity in the agreement.

Question 88

how are express warranties created under the UCC

Answer 88

Any affirmation of fact or promise, any description of the goods, or any sample or model which is made part of the basis of the bargain

Question 89

Disclaimers that grossly conflict with express warranties are _____________

Answer 89

unenforceable

e.g., broad disclaimers such as, “all warranties, express or implied, are disclaimed” are not enforceable

A seller is liable for breach of contract if she violates an express warranty.

Question 90

Implied Warranty of Merchantability

Answer 90

Under the UCC, all merchants make an implied warranty (unless disclaimed) that the goods being sold are fit for their ordinary commercial purposes.

Question 91

disclaimers for implied warranties of merchantability

Answer 91

A merchant can disclaim the implied warranty of merchantability if the language used to disclaim is conspicuous.

Language of “as is” or “with all faults” or language that puts the buyer on notice will be sufficient for disclaiming the implied warranty of merchantability.

Question 92

The disclaimer may be made orally so long as the term _________________ is used.

Answer 92

“merchantability”

Question 93

inspection for implied warranty of merchantability

Answer 93

If the buyer, before entering into the contract, has examined the goods or a sample as fully as the buyer desires, or has refused to examine the goods, then there is NO implied warranty of merchantability with respect to defects that an examination ought to have revealed to the buyer.

Question 94

Implied Warranty of Fitness for a Particular Purpose definition

Answer 94

A warranty that the goods are fit for a particular purpose is implied whenever the seller has reason to know that the buyer has a particular use for the goods, and the buyer is relying upon the seller’s skill to select the goods.

seller need NOT be a merchant for this warranty to apply

Question 95

Disclaimers for an implied warranty of fitness for a particular purpose

Answer 95

can be disclaimed by general language (e.g., “as is”), but the disclaimer MUST be in writing and conspicuous

Question 96

define conditions

Answer 96

A condition is another way to shift risk by stating that one party’s contractual obligations will kick in only if some future event takes place.

Question 97

what is an express condition

Answer 97

An express condition in a contract makes performance conditional upon the completion of the condition (look for language like: “only if,” “provided that,” “on the condition that,” or “only in the event that,” etc.).

Question 98

Express conditions must be __________, unless the condition is ___________

Answer 98

satisfied strictly

excused by waiver (party receiving protection waives with words or conduct OR party receiving the protection of the condition wrongfully interferes or hinders the occurrence of the condition when judged by a good faith standard)

Question 99

good faith and faith dealing

Answer 99

All contracts contain an implied obligation which requires the parties to a contract to act in good faith and deal fairly with one another without:

(1) Breaking their word;
(2) Using deceptive means to avoid obligations; OR
(3) Denying what the other party obviously understood.

Question 100

substantial perforamance

Answer 100

Under the common law, substantial performance is required, which means that performance will be satisfied so long as there is NOT a material breach of the contract.

If there is a material breach, the non-breaching party’s performance is excused. If the breach is not material, the non-breaching party’s performance is not excused.

Question 101

perfect tender rule

Answer 101

Under the UCC, perfect tender is required, which means that a seller must deliver conforming goods in accordance with the terms of the contract

smallest nonconformity is a breach that allows the buyer to reject all or a portion of the goods.

Question 102

exceptions to the perfect tender rule

Answer 102

The parties can contractually change the default rules to include discussion of substantial performance instead of perfect tender

installment contracts

If the seller fails to tender perfect goods, the buyer MUST give the seller a chance to cure the nonconformity if: time for performance under the contract has NOT yet expired OR seller has reasonable grounds to believe that the buyer would accept a replacement for the nonconformity.

Question 103

If a buyer fails to reject nonconforming goods after having had a reasonable opportunity to inspect the goods, the buyer is deemed to have ______________.

Answer 103

accepted the goods

Question 104

revocation of acceptance under perfect tender rule

Answer 104

buyer may revoke his acceptance if:
the nonconformity substantially impairs the value of the goods;
revocation occurs within a reasonable time after buyer discovers defect;
AND either buyer accepted the goods:

1) on the reasonable assumption that the nonconformity would be cured and it has not been seasonably cured;
2) OR without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.

Question 105

list all excuses

Answer 105

Impossibility and Impracticability

Frustration of Purpose

Accord and Satisfaction

Novation

Question 106

define anticipatory repudiation

Answer 106

Under the common law, anticipatory repudiation occurs when a promisor clearly and unequivocally repudiates a promise before the time for performance is due (by words or conduct).