Contracts

Question 1

Article 2

Answer 1

“Article 2 of the Uniform Commercial Code (UCC) applies to
transactions in goods.

Question 2

Goods

Answer 2

are ‘things moveable’ at the time of identification to the contract.

Question 3

A
contract under Article 2 may be made

Answer 3

in ‘any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.’ ”

Question 4

Offer

Answer 4

A person makes an offer when the person communicates to another a statement of “willingness to enter into a bargain” so that the other understands that “his assent to the bargain is invited and will conclude it.”

The terms of an offer need to be reasonably certain (e.g., as to parties, subject matter, price, etc.).

Question 5

Counteroffer

Answer 5

at common law, a statement is a counteroffer, rather than an acceptance, when the terms of the initial offer are changed (mirror-image rule).

Question 6

Promise to hold open an offer:

Answer 6

Generally, an offer may be revoked before acceptance. A
promise to hold an offer open requires consideration in order to be binding (unless the UCC firm offer exception applies)

Question 7

An acceptance

Answer 7

is a manifestation of assent to the terms of an offer made in a manner invited by the offer. It is effective upon dispatch (the mailbox rule).

Question 8

Rejection

Answer 8

A rejection is a manifestation of intent to not accept the offer. It terminates the offeree’s power to accept an offer. It is effective when received by the offeror.

Question 9

If a rejection is sent and then an acceptance is sent - which is effective?

Answer 9

whichever the recipient receives first is effective.

Question 10

Consideration

Answer 10

Consideration is a legal detriment or bargained-for exchange. A promise to make a gift does not constitute consideration.

Question 11

Prexisting Duty Rule

Answer 11

Under common law, promising to perform a legal duty already owed to a promisor is not valid consideration.

Exceptions include if the duty is changed (evenslightly), unforeseen circumstances, etc.

Question 12

Material Benefit Exception to Prexisting Duty Rule

Answer 12

some states recognize an exception to past consideration limitations in which a promise is made after receipt of a significant benefit (usually promise arises after a benefit received in an emergency).

Question 13

Modification under UCC

Answer 13

under the UCC, only good faith is needed to modify a contract. (July 2014)

Question 14

Promissory Estoppel

Answer 14

a substitute for consideration. If there is

1. apromise,
2. reliance
3. that is foreseeable and justifiable, and
4. enforcement is necessary to avoid injustice, the promise will be enforced.

Question 15

Gap Fillers

Answer 15

A contract for the sale of goods doesn’t fail because one or more terms are missing if the parties intended to make a contract and there is an appropriate remedy for breach. Gap fillers include course of performance, course of dealing, and trade usage.

Question 16

Performance Obligations

Answer 16

Under common law, a party must “substantially perform” its contractual obligations in order to demand performance (usually payment) from the other party. Courts will look at several factors to determine whether performance was substantial. (Feb 2020, Feb 2012)

• Note that this is different from UCC Article 2, which requires perfect tender for one-shot deals.

Question 17

Divisible Contracts Exception to Performance Obligations under Common Law

Answer 17

A contract is divisible so long as

(1) it is apportionable and
(2) the parties would have contracted for each part separately.

A party that performs one or more parts of the contract may collect payment for those parts even if he does not substantially complete performance of his duties. (Feb 2012)

Question 18

Rejection of Goods

Answer 18

A buyer can generally reject goods for any reason under the perfect-tender rule. (There are exceptions to this—e.g., installment contracts.)

Question 19

Revocation of Accepted Goods

Answer 19

a buyer accepts the goods, he can no longer reject them. But, a buyer can revoke his acceptance of the goods when:

1. the nonconformity substantially impairs the value to him;
2. he accepted the goods because he had a reasonable belief thenonconformity would be cured (and it wasn’t), or he didn’t discover the nonconformity because the nonconformity was difficult to discover, or because of seller’s assurances;
3. he revokes within a reasonable time after he discovers or should’ve discovered the nonconformity; and
4. he revokes before any substantial change in condition of the goods which is not caused by their own defect.

A buyer who revokes his acceptance may recover the purchase price paid. (Sept 2020, July 2010)

Question 20

Anticipatory Repudiation

Answer 20

This occurs when there is an unequivocal manifestation by one party to the other that the party cannot or will not perform its obligations under the contract (a mere expression of doubt is not enough) and this statement is made before the repudiating party’s performance is due. The other party may wait for a reasonable time for performance or resort to any remedy for breach of contract. (July 2015, Feb 2013)

Question 21

Prospective inability to perform:

Answer 21

This occurs when a party has reasonable grounds for insecuritythat the other party is unable or unwilling to perform. This is merely doubt, it does not rise to the level of an anticipatory repudiation. Under the UCC, the party may then, in writing, demand adequate assurance of performance, and until she receives such assurance, may suspend her performance. If such assurance is not given within a reasonable time, not exceeding 30 days, the other party may treat it as a repudiation.

Question 22

Retracting Repudiation

Answer 22

the party who has repudiated can retract his repudiation unless

1. the otherparty cancelled the contract,
2. materially changed his position in reliance on the repudiation, or
3. indicated that she considers the repudiation to be final.

Question 23

A contract within the Statute of Frauds satisfies that statute and is enforceable if it is

evidenced by a writing signed by ‘the party to be charged,’ which (1) reasonably identifies the

subject matter of the contract, (2) is sufficient to indicate that a contract has been made, and (3)

states with reasonable certainty the essential terms of the contract.”

Answer 23

evidenced by a writing signed by ‘the party to be charged,’ which:\

1. reasonably identifies the subject matter of the contract,
2. is sufficient to indicate that a contract has been made, and
3. states with reasonable certainty the essential terms of the contract.

Question 24

Contracts subject to SOF include

Answer 24

1. contracts made in consideration of marriage,
2. contracts that cannot be performed in a year,
3. contracts for the sale of an interest in land,
4. promises by an executor to pay a debt of an estate out of his personal funds,
5. sale of goods for $500 or more (subject to additional UCC rules, see next), and
6. suretyship contracts.

Question 25

UCC - Sale of Goods for $500+

Answer 25

a contract for the sale of goods for a price of $500 or more is not enforceable unless there’s a writing signed by the party against whom enforcement is sought that is sufficient to indicate that acontract for the sale of goods has been made between the parties. The writing need not contain all terms of the contract, but it’s not enforceable beyond the quantity of the goods shown.

Question 26

Exception to the SOF for goods $500+

Answer 26

merchant confirmatory memo

part performance,

specially manufactured goods,

judicial admissions.

Question 27

Duress

Answer 27

Duress: a contract is voidable when it is established that a party’s manifestation of assent is nduced by an improper threat that leaves the party no reasonable alternative.

Question 28

Breach of Express Warranty

Answer 28

Under Article 2, affirmations of fact relating to the goods that are part of the basis of the bargain create express warranties that the goods will conform to those affirmations and descriptions. This warranty is breached if they do not conform.

Question 29

Common Law General Damages

Answer 29

The normal measure of damages for breach of contract is expectation damages, which aim to give the nonbreaching party the benefit of his bargain.” Expectation damages must be foreseeable and proven with reasonable certainty.

Question 30

UCC General Damages

Answer 30

UCC rule, which puts the aggrieved party “in as good a position as if the other party had fully performed.” A buyer may recover the difference between the cost to “cover” by purchasing in good faith substitute goods and the contract price.

Question 31

Restitution

Answer 31

a party may be able to recover restitutionfor any benefit conferred by way of part performance in excess of the loss that he caused by his own breach.

Question 32

Mitigation

Answer 32

• Mitigation: as a general rule, a party cannot recover damages for a loss that the party could have avoided by reasonable efforts.