Contracts

Question 1

start your essay with this if Article 2 is tested:

Answer 1

“Article 2 of the Uniform Commercial Code (UCC) applies to transactions in goods. Good are ‘things movable’ at the time of identification to the contract. A Contract under Article 2 may be made in ‘any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”

Question 2

contract formation is heavily tested: what is needed to form a contract?

Answer 2

-offer, acceptance, and consideration are needed to form a contract

Question 3

offer

Answer 3

-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 (eg. as to parties, subject matter, price, etc.)

Question 4

counteroffer

Answer 4

-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 5

promise to hold an offer open

Answer 5

-generally, an offer may be revoked any time before acceptance.
-a promise to hold an offer open requires consideration in order to be binding (unless the UCC firm offer exception applies)

Question 6

acceptance

Answer 6

-an acceptance 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 7

compare – rejection

Answer 7

-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
*Note: if a rejection is sent and then an acceptance is sent, whichever the recipient receives first is effective

Question 8

Consideration

Answer 8

-consideration is a legal detriment or *bargained-for exchange
-a promise to make a gift does NOT constitute consideration

Question 9

pre-existing duty rule

Answer 9

-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 (even slightly), unforseen circumstances, etc.

Question 10

material benefit

Answer 10

-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 11

UCC modification of a contract

Answer 11

-under the UCC, only good faith is needed to modify a contract

Question 12

promissory estoppel

Answer 12

-promissory estoppel is a substitute for consideration
-if there is: (1) a promise; (2) reliance that is foreseeable and justifiable; and (3) enforcement is necessary to avoid injustice, then the promise will be enforced

Question 13

gap fillers

Answer 13

-a contract for the sale of goods that doesn’t fail bc one or more terms are missing if the parties intended to make a contract AND there is an appropriate remedy for the breach
-gap fillers include: course of performance; course of dealing; and trade usage

Question 14

the difference between performance obligations under common law and Article 2

Answer 14

-under common law, a party must “substantially perform” its contractial obligations in order to demand performance (usually payment) from the other party.
-courts will look at several factors to determine whether performance was substantial
*Note that this is different from Article 2, which requires perfect tender for one-shot deals

Question 15

exception: divisible contracts

Answer 15

-a contract is divisible so long as (1) it is apportionable and (2) the parties would have contracted for each party separately
-a party that performs one or more parts of the contract may collect payment for those parties even if he does not substantially complete performance of his duties

Question 16

the difference between a buyer’s ability to reject goods vs. his revocation of acceptance of goods

Answer 16

-rejection of goods: a buyer can generally reject goods for any reason under the perfect-tender rule (there are exceptions to this ie. an installment contract)
-revocation of acceptance of goods: if 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 bc he had a *reasonable belief the nonconformity would be cured (and it wasn’t); or he didn’t discover the nonconformity bc the nonconformity was difficult to discover; or *bc 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 foods which is not caused by their own defect
*a buyer who revokes his acceptance may recover the purchase price paid

Question 17

the difference between anticipatory repudiation and prospective inability to perform (the difference is one of degree):
-anticipatory repudiation

Answer 17

-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

Question 18

prospective inability to perform

Answer 18

-this occurs when a party has reasonable grounds for insecurity that 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 ay then, in writing, demand adequate assurances of performance, adn until she receives such assurance, may suspend her performance.
-if such assurance is NOT given within a reasonable time, not to exceed 30 days, then the other party may treat it as a repudiation

Question 19

retracting a repudiation

Answer 19

-the party who has repudiated can retract his repudiation unless the other party cancelled the contract, materially changed his position in reliance on the repudiation, or indicated that she considers the repudiation to be final

Question 20

Statute of Frauds: statement at the beginning of the essay:

Answer 20

“A contract within the Statute of Frauds satisfies that statute and is enforceable if it is evidence by a writing sign 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 21

Contracts that are within the statue of frauds: (MY LEGS)

Answer 21

-contract made in consideration of Marriage;
-contracts that cannot be performed in a Year;
-contracts for the sale of an interest in Land;
-promises by an Executor to pay a debt of an estate out of his personal funds;
-sale of Goods for $500 or more (subj to additional UCC rules, see next);
-Suretyship contracts

Question 22

UCC rules

Answer 22

-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 the enforcement is sought that is sufficient to indicate that a contract for the sale of goods has been made between the parties
-the writing need not contain all of the terms of the contract, but it’s not enforceable beyond the quantity of the goods shown
*exceptions: merchant confirmatory memo, part performance, specially manufactured goods, and judicial admissions

Question 23

duress, misrepresentation, and other contractual defenses:
-duress

Answer 23

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

Question 24

breach of express warranty

Answer 24

-Under Article 2, affirmations of fact relating to the goods that are a 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 25

general damages principles:
-general damages for breach of contract: state in the essay:

Answer 25

-“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.
-This is similar to the 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 26

punitive damages

Answer 26

-punitive damages are generally not recoverable in a breach of contract action, “unless the conduct constitutin g the breach is also a tort for which punitive damages can be recovered.”

Question 27

restitution (also called unjust enrichment or quantum meruit)

Answer 27

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

Question 28

mitigation

Answer 28

-as a general rule, a party cannot recover damages for a loss that the party could have avoided by reasonable efforts