Contracts

Question 1

What are the elements of a quasi-contract (implied-in-law K)?

Answer 1

• 1) P has conferred a benefit to D
• 2) P reasonably expects to be paid
• 3) D knowingly accepted benefit
• 4) D would be unjustly enriched if P is not compensated

Question 2

What are ways to revoke an offer?

Answer 2

1) Express revocation by offeror
2) Constructive revocation
3) Offeree rejects offer
4) Counteroffer
5) Offeror dies/becomes incapacitated
6) Lapse of time or reasonable time passes
7) Subject matter of offer becomes destroyed or becomes illegal

Question 3

Are advertisements considered to be offers?

Answer 3

Usually no. Ads are instead considered as invitations to deal bc they usually fail to confer a power of acceptance to the other party. But an exception applies if ad is very specific/leaves nothng open to negotiation

Question 4

Firm Offer

Answer 4

UCC > applies only to merchants
Firm offer must be (1) written (2) signed by merchant and (3) contain an explicit promise not to revoke

Question 5

Option K

Answer 5

A promise to keep an offer open w/ given consideration

Question 6

mirror image rule

Answer 6

CL: acceptance must mirror the offer. An acceptance that contains additional terms will be treated as a rejection and counteroffer

Question 7

§2-207 when both parties are merchants

Answer 7

K is formed with additional terms unless:
* Additional terms materially alter the offer
* Offeror expressly limits acceptance to the offer’s terms or
* Offeror objects within a reasonable time
If any of the above apply, the K will still be formed, just w/out the additional terms

Question 8

§2-207 when both parties are NOT merchants

Answer 8

• K is formed without additional terms
• Additional terms are considered mere proposals to modify the K

Question 9

Mailbox rule

Answer 9

An acceptance sent by mail is effective when the letter is sent

Question 10

Does the mailbox rule apply to rejections, revocations, counteroffers, UCC firm offer?

Answer 10

No.

Question 11

A rejection sent by mail is effective when?

Answer 11

A rejection sent by mail is effective only upon receipt

Question 12

What are the defenses to formation [DUMMM-IS-I?]

Answer 12

Duress
Unconscionability
Misunderstanding
Mistake/Ambiguity
Misrepresentation/Fraud/Non-disclosure
Incapacity
Statute of Frauds
Illegality

Question 13

Duress (2 types)

Answer 13

A threat that deprives a party from making a meaningful choice to contract

Economic duress : when one party makes threats to induce another party to contract or modify a contract

Undue influence: arises when a party puts very intense sales pressure on another party, who often seems weak-minded or susceptible to high-pressure sales tactics.

Question 14

Unconscionability

Answer 14

A K that shocks the conscience. The K so unfair to one party that no reasonable person in that party’s position would have agreed to it.

Two types:

• Procedural: a defect in the bargaining process itself usually

1. A hidden (surprise) term or terms difficult to understand
2. An absence of meaningful choice (take-it-or-leave-it contract, no other contracting option) when parties have greatly unequal bargaining power

• Substantive: substance of contract itself is a rip-off, unfair

1. One-sided terms
2. Gross disparity in value of consideration exchanged

(Some jurisdictions require both to be present for deal to be struck down. Others only require one to be present)

Question 15

Mistake

Answer 15

Mutual Mistake (affecting both parties): Allows the adversely affected party to rescind if:
* (1) There is a mistake of fact, existing at the time the deal is made
* (2) mistake relates to a basic assumption of K and has a material impact on the deal
* (3) the impacted party didn’t bear the risk of mistake

Unilateral mistake (affecting one party). Allows the adversely affected party to rescind if:
(1) party can prove all the elements of mutual mistake AND
(2) mistake would make K unconscionable OR other side knew of/had reason to know of/caused the mistake

Question 16

Impracticability/Impossibility

Answer 16

a party’s duty to perform may be discharged if (1) an unforeseeable event occurs that makes performance impractical or impossible (2) the nonoccurrence of the event was a basic assumption on which the contract was made, and (3) the party seeking to discharge the contract was not at fault.

Question 17

frustration of purpose

Answer 17

applies when an unexpected event occurs that destroys a party’s purpose in entering into the K, even if performance of the K is not rendered impossible.

If the unexpected event is not the frustrated party’s fault and nonoccurrence of the event was a basic assumption of the contract, the frustrated party is entitled to rescind the contract without paying damages.

Question 18

Parol Evidence Rule

Answer 18

CL
* Complete integration: PER bars evidence of prior agreements that supplement or contradict the K. The use of a merger clause is generlly proof of complete integration.
* Partial Integration: Evidence used to supplement the terms of a written K is admissible, but evidence that contradicts the K is not.

UCC
* Presumes that a K for the sale of goods is only partially integrated (unless K contains merger clause indicating otherwise). Evidence that supplements the K is admissible but evidence that contradicts it is not.

Question 19

What are the exceptions to the parol evidence rule?

Answer 19

To show:
- Whether writing is integrated (partially or completely)
- Meaning of an ambiguous term
- Defense to contract formation or enforcement (fraud, duress, mistake, misrepresentation)
- Grounds for granting or denying remedy (rescission, reformation)
- Modifications (oral or written) made after the writing
- Condition precedent to the existence of a contract

Question 20

What is a major breach (material breach)? Is the non-breaching party still required to perform?

Answer 20

• Material breach occurs when one party’s failure to perform under K substantially deprives the other party of the benefit they bargained for
• Material breach by one party excuses performance by the other
• The breaching party can only recover in restitution for any benefit conferred on the nonbreaching party, minus damages for the breach

Question 21

What is a minor breach (substantial performance)? Is the non-breaching party still required to perform?

Answer 21

• A minor breach occurs if the breaching party has substantially performed, and the non-breaching party will receive the substantial benefit of the bargain.
• In a minor breach, the non-breaching party is still obligated to perform, but can still sue for damages
• The substantially performing party can generally recover the contract price minus any cost that the nonbreaching party incurred to receive full performance
  Nonbreaching party can only recover expectation damages

Question 22

Is a failure to perform by time stated in K considered a material breach? What about if there is a “time is of the essence” clause?

Answer 22

• Failure to perform by time stated in K is not a material breach if performance is rendered within a reasonable time after the time stated
• If a “time is of the essence” clause is included in K, making timely performance essential, then failure to perform by that time is a material breach

Question 23

If a party adds an express condition to forming a K and then decides to waive it, can the other party refuse to K?

Answer 23

No. The party who added the express condition did it for their own protection/benefit. If they decide to waive the condition (either expressly or through conduct like continuing to perform), that’s ok and the K is formed.

Question 24

When is an assignment/delegation not permitted?

Answer 24

(1) expressly prohibited by K or
(2) other contracting party has a substantial interest in having delegating party perform (ex: personal services K involving taste or skill)

Question 25

What is specific performance and what types of Ks is it limited to?

Answer 25

• When a non-breaching party asks a court to order the breaching part to perform a K.
• Specific performance is typically limited to Ks involving real estate and sale of unique goods

Question 26

What are the requirements for a court to mandate specific performance?

Answer 26

• (1) there must be a valid K
• (2) the terms of the K must be certain/clear enough to allow a court to make an order
• (3) the non-breaching party has satisfied any conditions
• (4) money damages are inadequate
• (5) it is feasible for the court to enforce and supervise the breaching party’s performance and
• (6) no defenses exist

Question 27

The court will not grant specific performance if D can assert what?

Answer 27

a court will not grant specific performance if D can assert laches or unclean hands against P
* laches: P waited an unreasonably long time to seek specific performance and the delay resulted in prejudice to D
* unclean hands: P engaged in unethical or immoral acts relating to the K

Question 28

Restitution

Answer 28

A breaching party is entitled to recover in restitution the reasonable value of the benefit conferred on the non-breaching party in the way of part performance, minus any damages the non-breaching party suffered due to the breach

Question 29

Reformation

Answer 29

when a court modifies a written K because K fails to reflect the intent of the contracting parties

Question 30

A court may reform a written K due to mutual mistake if:

Answer 30

• (1) there was a prior agreement
• (2) the parties agreed to put the prior agreement in writing and
• (3) there is a difference between the prior agreement and the writing due to mistake