Contracts

Question 1

Quasi-contract

Answer 1

Not a contract but rather a restitution remedy designed to prevent unjust enrichment.

1) P has conferred a benefit to D;
2) P reasonably expects to be paid;
3) D knowingly accepted the benefit; and
4) D will be unjustly enriched if P is not compensated.

Question 2

Implied-in-Fact Contracts

Answer 2

A contact is created by conduct if:

1) The conduct is intentional; and
2) Each party knows or has reason to know the other party will interpret the conduct as an agreement.

Question 3

Promissory Estoppel

Answer 3

1) A party reasonably and foreseeably relied to his detriment on the other party’s promise;
2) The promisor reasonably expected a change of position in reliance on the promise; and
3) It’s necessary to avoid injustice.

Question 4

Economic Duress

Answer 4

Contract is voidable.

1) An improper threat is made;
2) That induces a party;
3) Who has no reasonable alternative;
4) To enter into a contract.

Question 5

Undue Influence

Answer 5

1) Unfair persuasion of a person;
2) Who is either:

a) Under the domination of a person exercising influence; or
b) Justified in assuming the other person will act in their interest/welfare because of the relationship between them.

Question 6

Mutual Mistake

Answer 6

Contract is voidable (may be rescinded/reformed).

1) Both parties are mistaken;
2) Concerns a basic assumption of fact;
3) That materially affects the agreed-upon exchange; and
4) The adversely affected party did not assume risk of the mistake.

Question 7

Unilateral Mistake

Answer 7

Generally, NOT a valid defense.

1) A mistake by one party;
2) That is unknown to the other party;
3) Concerning a basic assumption;
4) That has a material effect.

BUT, a contract is voidable by the mistake party if:

a) One party knew or had reason to believe of the mistake; or
b) The mistake makes the contract unconscionable.
(a mistake to price/value is not material).

Question 8

Misunderstanding

Answer 8

1) The parties use an ambiguous term that is open to two or more reasonable interpretations;
2) Each side attaches a different meaning to the term;
3) Neither party knows nor should know of the confusion.

Question 9

Fraudulent Misrepresentation

Answer 9

1) When D knowingly;
2) Made a false representation;
3) Of material fact; and
4) The other party reasonably relies on the misrepresentation to his detriment.

Question 10

Non-Fraudulent Misrepresentation

Answer 10

1) When a party/agent;
2) Makes a statement of material fact;
3) That is false (no wrongdoing required); and
4) The other party reasonably relies on the misrepresentation to his detriment.

Question 11

No Duty to Disclose UNLESS

Answer 11

1) A fiduciary relationship exists;
2) It’s necessary to correct an earlier mistake;
3) Active concealment occurs; or
4) A seller of real property knows material facts that affect the value of the property (that buyer is unaware of and cannot reasonably discover).

Question 12

SOF Writing Requirement

Answer 12

Writing must:

1) Be signed by the party to be charged;
2) Reasonably identify the subject matter;
3) Indicate a contract was made; and
4) State the essential terms.

Question 13

Exceptions to SOF Writing Requirement

Answer 13

1) Merchant’s Confirmatory Memorandum (must be 2 merchants);
2) Goods accepted or paid for;
3) Custom Made Goods; and
4) Admission during a judicial proceeding.

Question 14

Exceptions to Parole Evidence Rule

Answer 14

1) To correct a clerical error or typo;
2) To establish a defense to formation;
3) To interpret vague or ambiguous terms; or
4) To supplement a partially integrated writing.

Question 15

Condition Precedent

Answer 15

Makes the performance conditional upon the completion of the condition.

Excused when:
The protected party fails to make a good faith effort to satisfy the condition; or
Waiver (voluntarily given) – but can retract the waiver if the other party has not relied on it.

Question 16

Good Faith

Answer 16

UCC requires:

1) Honesty in fact; and
2) Observance of reasonable commercial standards of fair dealing.

Question 17

Impossibility

Answer 17

Performance is discharged when it’s objectively impossible to perform because of:

1) Death or incapacity of a person necessary to effectuate the contract;
2) Unanticipated destruction of the subject matter of the contract; or
3) A new, unanticipated law/regulation making performance extremely and unreasonably difficult/expensive.

Question 18

Impracticability

Answer 18

Performance is discharged when:

An event occurs after contract formation;
That is unanticipated by both parties; and
making performance extremely and unreasonably difficult/expensive.

Question 19

Frustration of Purpose

Answer 19

Discharges performance when the purpose of the contract no longer exists.

1) A party’s principal purpose is substantially frustrated;
2) By an unforeseeable superseding event outside their control; and
3) Both parties knew the purpose at the time of formation.

Question 20

To determine if the breach is material

Answer 20

Courts analyze:

1) Extent of performance;
2) Adequacy of compensation for loss to the non-breaching party;
3) Hardship;
4) Likelihood the breaching party will cure; and
5) Whether the breach was intentional.

Question 21

Right to Cure

Answer 21

A seller has a right to cure when:
1) Time for performance has not yet expired; OR
2) The seller will have further reasonable time to cure if seller had reasonable grounds that substitute goods would be accepted.

If Installment Contract
May only be cancelled when an installment is so defective that it substantially impairs the value of the entire contract.

Buyer can reject an installment only if the non-conformity substantially impairs that installment and the time to cure has passed.

Question 22

Acceptance occurs when

Answer 22

a) After reasonable opportunity to inspect, buyer signifies to seller that goods are conforming or that it will retain them despite a non-conformity;
b) Fails to reject the goods after reasonable opportunity to inspect; or
c) Does any act inconsistent with seller’s ownership of the goods.

Question 23

UCC Revocation of Accepted Goods

Answer 23

1) The non-conformity substantially impairs the value of the goods; and
2) Either
a) The defect was difficult to discover (a latent defect);
b) Acceptance was reasonably induced by seller’s assurances; or
c) The buyer had a reasonable assumption the defect would be cured.

Question 24

Anticipatory Repudiation

Answer 24

Occurs when a party unequivocally communicates that they are unable or unwilling to perform under the contract.

If occurs, non-breaching party may:
1) Treat the contract as repudiated and sue for damages before the time of performance is due;
2) Treat the contract as discharged;
3) Wait until performance is due and then sue; or
4) Urge the other party to perform.

A party may retract its repudiation unless non-breaching party did what?
1) Cancelled;
2) Materially changed its position; or
3) Indicated that they consider the repudiation final.

Question 25

How is an Express Warranty Created.

Answer 25

1) Seller makes an affirmation of fact, promise, description, or provides a sample;
2) Relating to the goods; and
3) That becomes part of the basis for the bargain.

Question 26

Implied Warranty of Fitness for a Particular Purpose

Answer 26

1) Buyer has a particular purpose;
2) Buyer relies on seller to select suitable goods; and
3) Seller has reason to know of Buyer’s purpose and reliance on seller.

May be disclaimed by:
a) A conspicuous writing;
b) Conspicuous “as is” type language;
c) Waiver by the buyer (if defects can be discovered by a reasonable inspection); or
d) By course of dealing, performance, or usage of trade.

Question 27

Modifying/Revoking away a third-party’s right to enforce a contract

Answer 27

If third-party was not aware of the rights, they may be modified/revoked.

Cannot if:

1) Beneficiary relied on the rights;
2) Beneficiary manifested assent to the contracts/rights; and
3) Beneficiary files suit to enforce the contract.

Question 28

Assignments of Rights

Answer 28

Rights and benefits may be transferred to a third party if:

1) Assignor manifests his intent to transfer; and
2) Assignee assents to the assignment.

Question 29

An assignment is valid UNLESS

Answer 29

1) It materially alters what is expected:
i) Changes the duty of Obligor;
ii) Increases the burden/risk imposed on Obligor;
iii) Materially impairs Obligor’s chance of obtaining return performance; or
iv) Materially reduces the value of return promise.

2) It’s prohibited by law or public policy; or
3) It’s precluded by contract.

Question 30

Multiple Assignments

Answer 30

If gratuitous- last assignee prevails.

If for consideration- First assignee prevails unless the later assignee:
1) Has no notice; and
2) Is the first to obtain payment/indicia of ownership.

Question 31

Delegation of Duties

Answer 31

All contract duties are delegable unless:

a) The contract prohibits delegation or assignment;
b) Delegation is against public policy;
c) It’s a personal service contract that calls for exercise of personal skill/discretion; or
d) The delegation materially alters the expectancy of the obligee.

Question 32

UCC Seller’s Remedies upon Buyer Breach

Answer 32

a) Withhold delivery;
b) Cancel the contract;
c) Cover damages between the resale price and contract price;
d) Market damages- between the market price and contract price;
e) Lost Volume Seller- can recover lost profits on a sale if the seller regularly sells the goods at issue and has unlimited inventory;
f) Stop delivery; or
g) Replevy.

Question 33

Right to Replevy Identified Goods

Answer 33

A seller is allowed to replevy goods when:

1) The buyer was insolvent when it received the goods; and
2) Seller makes a demand within 10 days of buyer receiving the goods.

A buyer’s misrepresentation of solvency in writing within 3 months prior to the delivery of goods REMOVES the 10-day limitation.

Question 34

UCC Buyer’s Remedies

Answer 34

A buyer who never received, rightfully rejected, or justifiably revoked acceptance may:

1) Cancel the contract;
2) Recover any amount paid (refund);
3) Recover incidental and consequential damages; and/or
4) Recover either: Cover; or Market Damages.

If buyer keeps the non-conforming goods, then buyer is entitled to Loss-in-Value-Damages- difference between the value as promised and the value of the non-conforming goods.

Question 35

Waste Doctrine

Answer 35

When an award for cost of completion is wasteful, a court may award damages for diminution in value (the difference in value of the property/land). This may be awarded instead of expectation damages.

Waste Doctrine applies if:

Contractor performs in good faith, but defects exist; and
Remedying the defects would entail economic waste (the cost of completion greatly exceeds the value of the completed work).

Question 36

Expectation Damages

Answer 36

Put you in the position had the contract been performed.

Need to be foreseeable with a reasonable certainty.

Look to what non-breaching party would have received absent the breach.

General Formula = Loss in Value + Other Loss — Cost Avoided — Loss Avoided

Question 37

Reliance Damages

Answer 37

Alternative measure of damages when expectation damages are too speculative or uncertain.

Recover money spent from having relied on a promise.

Designed to compensate P based on the value of her performance.

Question 38

Restitution Damages

Answer 38

Value of the benefit already given.

Generally when contract is partially performed.

Measured by market value of the services.

At option of non-breaching party in lieu of expectation damages.

Question 39

Consequential Damages

Answer 39

Recoverable by buyer only if:

1) Damages are foreseeable result of the breach; and
2) When K was formed, D had reason to know P would suffer special, unpreventable, or unexpected damages in the event of a breach.

Question 40

Incidental Damages

Answer 40

Commercially reasonable expenses incurred by the non-breaching party in UCC K’s.

Question 41

Liquidated Damages

Answer 41

Damages determined at time contract was made.

Enforceable if reasonable and don’t act as a penalty.

Generally 10% or less of the value of the contract is reasonable.

The higher it gets, the more it looks like a penalty.

Question 42

Quantum Meruit

Answer 42

Reasonable value of your services minus any damages incurred.

Breaching party can recover.

Question 43

Rescission

Answer 43

The cancellation of a K.

The purpose is to restore parties tot heir positions before K was made.

Often arises where there is a mistake, misrepresentation, duress, or some other defense to K enforcement or formation.

Question 44

Offer

Answer 44

An objective manifestation of a present intent to contract.

1) Demonstrated by a promise, undertaking, or commitment;
2) definite and certain terms; and
3) communication to an offeree.

Question 45

Acceptance

Answer 45

Arises upon offeree’s clear expression of assent to the terms of the offer.

Question 46

Revocation

Answer 46

Unambiguous statement by the offeror to the offeree.

Offeree becomes aware of offeror’s unambiguous conduct or statement indicating an unwillingness or inability to contract.

Question 47

UCC acceptance by prompt shipment

Answer 47

A merchant may accept an offer to buy goods by either:

Providing a promise to ship goods (usually by written confirmation); or
Promptly shipping conforming goods.

Shipping nonconforming goods is an acceptance, but also may give rise to a breach.

Question 48

Unilateral K

Answer 48

Complete performance required.

Offeree is not obligated to complete performance;

Offeree’s failure to perform does not constitute a breach;

Offer may become irrevocable upon the start of performance until completion;

Offeree is not required to give notice upon start of performance but must notify offeror within a reasonable time upon completion.

Question 49

Consideration

Answer 49

The bargained-for exchange of legal value between parties.

The promise must induce the detriment and the detriment must induce the promise.

Question 50

Shipment K

Answer 50

Seller only obligated to ship goods to buyer.

Seller’s obligation satisfied when she delivers goods to common carrier and notifies buyer; risk of loss then passes to buyer.

Question 51

Destination K

Answer 51

Seller obligated to ensure goods reach buyer.

Risk of loss passes to buyer only when buyer takes delivery.

Question 52

Non-common carrier deliveries

Answer 52

If goods or lost or destroyed by no fault of either party, below factors determine who assumes risk of loss:

Prior agreement of the parties;
If one party is in breach, they are liable for any uninsured loss, even if unrelated to the breach;
Default (apply if other two are inapplicable):
Merchant Seller- risk of loss ships to buyer once buyer takes physical possession of goods.

Non-merchant seller- risk of loss shifts to buyer upon delivery.

Question 53

Insecurity

Answer 53

The prospective inability to perform as demonstrated by a party to a K.

1) Demand adequate assurances; and
2) Suspend performance until adequate assurances are provided.

Question 54

Accord and Satisfaction

Answer 54

Accord- agreement to accept alternative performance in satisfaction of the existing obligation.

Satisfaction- completion of the alternative performance.