contracts

Question 1

Applicable law

Answer 1

UCC = sale of goods (all things moveable at time of identification of k)
common law = all other k

mixed k = the predominate purpose of the k determines which law governs

Question 2

requirements to form valid k

Answer 2

mutual assent, consideration, and no defenses to formation

Question 3

mutual assent

Answer 3

offer by one party and acceptance by another party

Question 4

offer

Answer 4

manifestation of intent to enter into a k with definite or reasonably certain terms, communicated to an identified offeree

Question 5

termination of offer

Answer 5

offers can be terminated before acceptance by rejection/counter offer, lapse of time, revocation, or death/incapacity

Question 6

revocation of an offer

Answer 6

an offer may be revoked at any time before acceptance through unambiguous words or conduct indicating an unwillingness or inability to k

indirect: when offeror takes definite action inconsistent with entered into k and offeree has knowledge of that action

Question 7

irrevocable offers

Answer 7

option k - consideration given to keep offer open for a certain period

exception: rejection of or counter offer does not constitute termination of option k or firm offer - the offeree can accept within that time as long as offeror has not detrimentally relied on the rejection

merchant firm offer - offer by merchant, in signed writing, stating offer will be held open for certain period not greater than 3 months

beginning performance on unilateral k makes the offer irrevocable – must give reasonable time to perform

Question 8

acceptance

Answer 8

manifestation of assent to terms of the offer

performance may be adequate:
bilateral k –> start of performance manifests acceptance
unilateral k –> acceptance occurs on completion

Question 9

timing of acceptance and revocation

Answer 9

acceptance –> offer is accepted when sent or communicated (mailbox rule: acceptance sent by mail is deemed accepted once placed in mail unless option k where acceptance must be received by date specified)

revocation –> offer is revoked when received by offeree. cannot revoke after acceptance

Question 10

battle of the forms

Answer 10

Common law: mirror image rule - acceptance must exactly mirror the offer; any variations is a counter offer

UCC: acceptance does not have to mirror offer. additional terms are included only if:

1. both parties are merchants
2. term is not a material change (likely to cause hardship/surprise)
3. offer does not expressly limit acceptance to exact offer and
4. no objection was made within reasonable time

if one party is not merchant, then additional terms are not included, and viewed as proposal to modify the k

different terms: either treated same as additional terms or knock out rule applies
knock out rule: conflicting terms in offer and acceptance are knocked out and filled by gap fillers in UCC

Question 11

implied in fact contract

Answer 11

created by conduct if the conduct is intentional and each party knows or has reason to know the other party will interpret the conduct as an agreement

Question 12

indefinite or absence of terms

Answer 12

if terms of an agreement are not certain, then it is not enforceable.

indefinite duration = invalid

UCC - if both parties are merchants, only essential term is quantity. if no agreement on price, reasonable price term will be supplied by UCC

Question 13

consideration

Answer 13

bargained for exchange of any act or forbearance that benefits promisor or causes detriment to promisee

past/moral consideration –> not sufficient
merchant firm offer –> no consideration req
illusory promise –> invalid; occurs when one party has no obligation to perform (both must be bound or neither are bound)

Question 14

exceptions to consideration

Answer 14

material benefit/unjust enrichment rule: a promise made in recognition of a benefit previously received is binding to extent necessary to prevent injustice but not applied when conferred as gift or value of promise is disproportional to benefit conferred

promissory estoppel: applies when a party reasonably and foreseeably relied to his detriment on other party promise, the promisor reasonably expected reliance, and it is necessary to avoid injustice

Question 15

modification of k

Answer 15

pre-existing duty rule: at common law, past performance or pre-existing duty is not adequate consideration
exceptions: an addition or change in performance or fair and equitable modification due to severe unanticipated circumstances & k isnt performed by either party

UCC: no additional consideration req to modify k as long as in good faith
must be in writing is SOF or OG k states modifications have to be in writing

Question 16

defenses to enforceability

Answer 16

1. incapacity: persons under 18 (unless k for necessaries), lack of mental capacity (cannot understand meaning and effect of k)
   effect: k is voidable by person lacking capacity
2. duress: two types
   physical compulsion: contract is void if a person physically compels another to agree to sign k
   economic duress: contract is voidable when improper threat is made, that induces party, who has no reasonable alternative, to enter into a k
   *mere threat to breach a k without more is insufficient
3. undue influence: unfair persuasion of a person who is either under the domination of a person exercising influence or justified in assuming the other person will act in their best interest b/c of relationship b/t them
   effect: k is voidable by victim
4. mistake: two types
   mutual: k is voidable (rescinded) if both parties are mistaken as to a basic assumption, the mistake is material, and the person asserting the mistake did not bear risk of the mistake (no meeting of minds)
   unilateral: generally not a defense - mistake by one party, that is unknown to the other party, concerning basic assumption, that has material effect on k
   - -> k is voidable by mistaken party if one party knew or had reason to know of the mistake or the mistake makes k unconscionable
5. misrepresentation: k is voidable by injured party where person knowingly made a false representation of material fact and the other party reasonably relied on the representation
   generally, no duty to disclose unless fid relationship, necessary to correct earlier mistake, active concealment, or seller of real property knows material facts affecting value
6. illegality/public policy: will not be enforced. void if the illegality existed at the time of k formation. performance is discharged if k subsequently became illegal. if one party did not know of illegality, then the k is voidable by innocent party
7. unconscionability: when k term shocks the consciousness of the court. usually need both procedural unconscionability ( one party has superior bargaining position and uses it to advantage) and substantive unconscionability (k terms so obviously unfair and one-sided)
   effect: court may enforce w/o unfair terms or limit application of term

Question 17

SOF

Answer 17

k is not valid unless in writing signed by party to be charged.
writing must reasonably identify subject matter and state essential terms

applies to

1. marriage k
2. suretyship: promise to pay debt of another (no writing req if purpose was to benefit surety himself)
3. k that cannot be fully performed in one year
4. sale of real property or interest in land (exception: 2/3 payment, possession, improvement of prop)
5. promise to pay estate debt from personal funds of the executor
6. sale of goods for $500+ (exceptions: merchant confirmatory memo, goods accepted or paid for, custom made, admission during judicial proceeding)

• K modifications: a written k can be modified orally, but the modification must be in writing if the modification falls within the SOF
o Further, if an oral modification to an oral k puts the k into the SOF, then it must be in writing

Question 18

equal dignity rule

Answer 18

when giving or entering an agreement authorizing someone to enter the deal on your behalf, it will fall into SOF if the underlying deal would fall into SOF

Question 19

parol evidence

Answer 19

party cannot introduce a prior or contemporaneous agreement that contradicts a later final and exclusive written k 
must be (1) intended to be final expression of k and (2) fully integrated 

exceptions:
1. correct clerical error
2. est defense against formation
3. interpret vague or ambiguous terms (but court will use plain meaning rule)
4. supplement partially integrated writing
5. reformation - party may seek reformation of unilateral mistake where there is misrepresentation

partially integrated writing = writing does not contain complete statement of all the terms (proof allowed if not contradicting)

fully integrated = complete and exclusive statement of terms that discharges any prior agreements
merger clause is evidence that writing is fully integrated

**does not apply to subsequent agreements

Question 20

condition precedent

Answer 20

makes performance conditional upon completion of condition

condition is excused when the protected party fails to make good faith effort to satisfy the condition or waiver (voluntarily giving up condition), but waiver can be retracted if other party has not relied on it

Question 21

obligation of good faith and fair dealing

Answer 21

every k contains implied obligation of good faith and fair dealing

UCC requires honesty in fact and observance of reasonable commercial standards of fair dealing

Question 22

impossibility

Answer 22

performance is discharged when it is objectively impossible to perform b/c of death or incapacity of a person necessary to k, unanticipated destruction of subject matter, or a new, unanticipated law or regulation making performance extremely and unreasonably difficult or expensive

Question 23

impracticability

Answer 23

performance is discharged when an event occurs after k formation that is unanticipated by both party making performance extremely and unreasonably expensive or difficult

Question 24

frustration of purpose

Answer 24

discharges performance when the purpose of k no longer exists. occurs when a party’s principal purpose is substantially frustrated by an unforeseeable superseding event outside their control and both parties knew of the purpose at the time of formation

Question 25

common law breach

Answer 25

requires material breach. occurs when a party does not render substantial performance. material breach excuses non-breaching party from performance.

consider: extent of performance, adequacy of compensation for loss to non-breaching party, hardship, likelihood breaching party will cure, and whether breach was intentional

Question 26

UCC perfect tender

Answer 26

seller must deliver conforming goods; smallest non-conformity is breach allowing buyer to reject all or portion of the goods within reasonable time.

exceptions:
1. right to cure: seller has right to cure when time for performance has not yet expired or
the seller will have further reasonable time to cure if seller had reasonable grounds that substitute goods would be accepted (same type of non-conforming goods had been accepted in past, etc.)

2. installment k: can only be canceled when an installment is so defective that is substantially impairs the value of entire k. buyer can reject installment only if the non-conformity substantially impairs that installment and the time to cure has passed.

Question 27

UCC acceptance of goods

Answer 27

occurs when

1. after reasonable opportunity to inspect, buyer signifies to seller that goods are conforming or that it will retain goods despite non-conformity
2. fails to reject after reasonable opportunity to inspect
3. does any act inconsistent with seller ownership of goods

buyer is obligated to pay for goods once accepted unless revocation of acceptance is allowed

Question 28

UCC revocation of acceptance is allowed when

Answer 28

after acceptance, buyer may later revoke acceptance only if

1. non-conformity substantially impairs the value of goods and
2. either (a) latent defect or (b) acceptance induced by seller assurances, or (c) buyer had a reasonable assumption defect would be cured

must occur within a reasonable time after discovery or should have discovered the nonconformity

• • not effective until buyer notifies seller
• • must occur before any substantial change in goods not caused by defects

Question 29

anticipatory repudiation

Answer 29

occurs when party unequivocally communicates that they are unable or unwilling to perform under k

if occurs, non-breaching party may:

1. treat k as repudiated and sue for damages before performance is due
2. treat k as discharged
3. wait until performance is due and sue
4. urge the other party to perform

party can retract repudiation and restore k unless non-breaching party has

1. cancelled
2. materially changed position or
3. indicated that they consider repudiation final

Question 30

adequate assurances

Answer 30

if there are reasonable grounds for being insecure about performance, a party may make a written request for adequate assurances from the other party that it will perform

if the other party does not give assurances after asked, the requesting party may treat it as anticipatory repudiation

Question 31

accord & satisfaction

Answer 31

accord - an executory k b/t parties promising to relieve a party of their k obligations in return for specific act

satisfaction - upon satisfaction of the accord (new act), the party is excused from further performances under OG k

if the party fails to satisfy the accord, the other party may sue either under OG k or the accord terms

Question 32

express warranty

Answer 32

created when seller makes affirmation of fact, promise, description, or provides sample relating to goods and that becomes a basis of the bargain

opinion is not warranty – no intent or special words needed

seller is liable for breach of express warranty

Question 33

implied warranty of merchantability

Answer 33

all goods sold by merchants (dealing in goods of the kind) must be fit for their ordinary purpose

disclaimer –> must do so expressly in conspicuous writing (as is, or with all faults)

Question 34

implied warranty of fitness for particular purpsoe

Answer 34

applies when seller knows or has reason to know of the buyers particular purpose for which goods are required and buyer relies on seller skill or judgment to select or furnish suitable goods

may be disclaimed by: conspicuous writing, waiver by buyer (if defects can be discovered by reasonable inspected) or by course of dealing, performance, or usage of trade

Question 35

warranty of title

Answer 35

warrants that title should be good/rightful and is free from security interests, liens, or encumbrances

may be expressly disclaimed by specific language or circumstances

Question 36

limiting damages for breach of warranty in k

Answer 36

allowed as long as it is not unconscionable at the time k was formed.

exceptions:
1. limiting buyer remedy for personal injury for consumer goods is presumed unconscionable
2. the limited remedy fails of its essential purpose

Question 37

intended third-party beneficiary

Answer 37

not a party to k, but has rights b/c the k parties performances were intended to benefit the identified third-party

Question 38

incidental third party beneficiary

Answer 38

someone who just happens to benefit from k, but has no legal rights

Question 39

third party enforcement of rights

Answer 39

a third party beneficiary may enforce rights under k only if the rights have been vested. vesting occurs when the third-party

1. manifests assent to the promise in k
2. detrimentally relies or
3. sues to enforce

once vested, the k cannot be changed or modified without consent of third-party

Question 40

assignment of rights in k

Answer 40

rights and benefits may be transferred to third-party if:

1. assignor manifests intent to transfer and
2. assignee assents to the assignment

consideration is not required for assignment. if consideration is given, the assignment is irrevocable. gratuitous assignments may be revoked.

limitations: assignment is valid UNLESS
1. materially alters what is expected (changes duty of obligor, increased burden or risk imposed on obligor, materially impairs obligor chance of obtaining return performance, or materially reduces value of return performance)
2. prohibited by law/pub policy or
3. precluded by k –> if prohibition, assignment is valid and the assignor is liable for damages; if invalidation, assignment is void

Question 41

rights of assignee against assignor

Answer 41

assignee may sue obligor for non-performance
any defense against assignor may be used against assignee
assignee may sue assignor for wrongful revocation of an assignment or for breach of implied warranty

Question 42

multiple assignments priority

Answer 42

if gratitutious –> last assignee prevails

if for consideration –> first assignee prevails unless the later assignee has no notice and is the first to obtain payments or indication of ownership

Question 43

delegation

Answer 43

all k duties are delegable unless

1. k prohibits
2. delegation against pub policy
3. personal service k that calls for exercise of personal skill or discretion or
4. delegation materially alters the expectancy of obligee

the delegating or assigning party remains liable for non-performance unless a novation occurs

Question 44

expectation damages

Answer 44

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

to recover, damages must be caused by D, foreseeable, certain, and unavoidable (mitigation)

Question 45

consequental damages

Answer 45

arise indirectly from breach (lost profits)

to recover, damages must be reasonably foreseeable at time of k formation, arise from P special circumstance that D knew of or had reason to know of and reasonably certain

may be limited or excluded by k unless unconscionable

Question 46

punitive damages

Answer 46

meant to punish wrongdoing of a party

not available for breach of k
may be awarded for breach of k involving fraud or tort claims

Question 47

specific performance

Answer 47

is an equitable remedy; only available if monetary damages are inadequate to compensate an injured party

awarded for sale of land

Question 48

seller remedy for breach of k by buyer UCC

Answer 48

when buyer breaches, seller may do any of following:

1. withhold delivery
2. cancel k
3. cover damages - different b/t the resale price and the k price (used when resold in good faith)
4. market damages - difference b/t market price and k price
5. lost volume seller - can recover lost profits if sale of goods at issue has unlimited inventory or
6. replevy identified goods from an insolvent buyer in certain circumstances

seller is also entitled to incidental damages - the commercially reasonable costs as a result of the breach

Question 49

right to replevy identified goods

Answer 49

a seller is allowed to replevy goods when buyer was insolvent when it received the goods and seller makes a demand within 10 days of buyer receiving goods

a buyer’s misrepresentation of solvency in writing within 3 months prior to delivery of goods removes the 10-day limitation above

Question 50

UCC buyer remedy for seller breach

Answer 50

a buyer who never recieved the goods, rightfully rejected, or justifiably revoked acceptance may

1. cancel the k
2. recover any amount paid (refund) - even if buyer does not cancel
3. recover incidental and consequently damages and/or
4. recover either: cover damages (diff b/t k price and price of substitute goods if purchased in good faith) or market damages (diff b/t market price and k price if not in good faith or no cover at all)

if buyer keeps non-conforming goods, then buyer is entitled to loss in value damages = diff b/t value as promised and the value of the non-conforming goods

Question 51

waste doctrine

Answer 51

when an award for cost of completion is wasteful, a court may award damages for diminution in value (diff in value of property) - may be awarded instead of expectation damages

waste doctrine applies if:

1. contractor performs in good faith, but defects exists and
2. remedying the defects would entail economic waste (cost of completion greatly exceeds value of completed work)

normally in construction k

Question 52

restitution/unjust enrichment

Answer 52

awarded to prevent unjust enrichment when one party confers benefit
damages = value of benefit conferred
party cannot recover both restitution and expectation damages

Question 53

rescission of k

Answer 53

treats OG k as cancelled

available when problem with k formation

a k will not be rescinded if
there is valid equitable defense or
plaintiff sued for damages under the k in a prior action

a party may sue for both damages and rescission at the same time

Question 54

mitigation of damages

Answer 54

a party must take reasonable step to mitigate losses
- if party fails to mitigate, the court will reduce the total damages by amount that could have been avoided

affirmative steps to avoid loss are not required if they involve undue risk, burden, or humiliation

Question 55

merchant

Answer 55

one who regularly deals in the goods of the kind sold or holds themselves out as having special knowledge/skill as to practices or goods involved

Question 56

output or requirement k

Answer 56

output = party agrees to buy all output produced

requirement = party agrees to supply an unknown quantity of something to another or be the sole supplier of goods

nonperformance is excused where there’s an unreasonably disproportionate increase in quantity – changes in market should be anticipated

Question 57

acceptance rule – UCC shipment of nonconforming goods

Answer 57

ucc: applied where acceptance is done via shipment - shipment of nonconforming goods is acceptance and breach unless the seller notifies the buyer that the shipment of nonconforming goods is an accommodation
- -> buyer can still reject the goods and if rejected there is no breach b/c there was no k formed since the warning was given – if no warning, then breach

Question 58

merchant confirmatory memo

Answer 58

method of satisfying the SOF
requires both parties are merchants, party asserting SOF defense received signed writing memorizing the agreement and essential terms and failed to respond in 10 days

Question 59

shipment k

Answer 59

seller only obligated to ship goods to buyer
this is presumed type of k

FOB + seller location

liability passes as soon as it is in the hands of carrier - only has the duty to use reasonable carrier, delivery to carrier promptly, etc.

Question 60

destination k

Answer 60

seller obligated to ensure goods reach buyer
ROL passes when buyer takes delivery/possession

FOB + non-seller location

Question 61

non-carrier delivery ROL

Answer 61

merchant seller - ROL passes to buy when he takes physical possession

nonmerchant seller - ROL passes upon tender of delivery

Question 62

methods of excusing performance of a condition

Answer 62

hindrance in performing condition
waiver
actual breach of k when performance is due
anticipatory repudiation
impossibility, impracticability, or frustration