Contracts

Question 1

When do a third party intended beneficiary’s enforceable rights under the K vest?

Answer 1

When 3rd party detrimentally relies on rights created
When 3rd party manifests assent to the K at one party’s request
When 3rd party files a lawsuit to enforce the K

Question 2

Can a materially breaching party recover restitution damages?

Answer 2

No

Question 3

Can a breaching party recover restitution damages?

Answer 3

Yes so long as it wasn’t a material breach

Question 4

What happens if both parties OR neither parties are aware of an ambiguous material term in a K? (misunderstanding)

Answer 4

The K is void unless both parties intend the same meaning

Question 5

What happens if one party is aware or has reason to know that the other party has a different understanding of an ambiguous material term for a K?

Answer 5

The K is formed based on meaning as understood by the unknowing party

Question 6

What happens if a seller sends a non-conforming good that they had reason to think would be an acceptable substitute, and the time for performance has passed?

Answer 6

Seller still may cure so long as they let the buyer know they plan to cure!

Question 7

What happens if time for performance has NOT yet expired, and seller sends a non-conforming item? Can buyer sue?

Answer 7

No not yet. Seller still has the right to notify buyer of intention to cure + make the conforming delivery

Question 8

What are the 4 kinds of irrevocable offers?

Answer 8

Option Ks, unilateral acceptance (for a reasonable time to complete performance), promissory estoppel, UCC firm offers by merchants (90 days max)

Question 9

What are two exceptions to the mailbox rule of acceptances being valid when sent?

Answer 9

Option Ks and firm offer acceptances are valid when received

Question 10

Has a K formed when there’s an offer and acceptance between two parties in the UCC but the acceptance states terms that don’t match the terms of the offer?

Answer 10

Yes

Question 11

Battle of the Forms - what happens with additional terms between merchants?

Answer 11

If both parties are merchants, additional terms automatically become part of the K unless the new term materially alters the deal, initial offer expressly limits acceptance to the terms of the offer, OR offeror rejects or objects to the terms within a reasonable timeframe

Question 12

Battle of the Forms - what happens with additional or different terms between one merchant and a non-merchant?

Answer 12

Additional/different terms are treated as proposed additions only

Question 13

Battle of the Forms - what happens with different terms between two merchants?

Answer 13

Knocked out by one another and court will use gap-filling provisions

Question 14

What happens when the offer and purported acceptance in a UCC differ too much to create a K but the parties begin to perform anyway?

Answer 14

The terms on which the writings agree become part of the K and any holes will be filled by gap-filling provisions

Question 15

Implied Warranty of Merchantability

Answer 15

When seller is a merchant dealing w/goods they normally sell, it’s an automatic promise that the goods will be fit for ordinary commercial purposes.

If buyer examines goods fully or refuses to examine goods, then no implied warranty w/r/t defects that an examination would have revealed themselves to the buyer

Question 16

Implied Warranty of Fitness for a Particular Purpose

Answer 16

Buyer relies on seller’s expertise that the select good will satisfy some special purpose

If buyer examines goods fully or refuses to examine goods, then no implied warranty w/r/t defects that an examination would have revealed themselves to the buyer

Question 17

What happens if the contract prohibits assignments and the party still assigns?

Answer 17

Assigning party breaches the deal when they make the assignment but the assigned party can still recover

Question 18

What happens if the contract invalidates assignments and the party still assigns?

Answer 18

The assigning party breaches the contract when they make the assignment and the assigned party has no rights

Question 19

What happens if an assignment of the same right happens twice, which one holds?

Answer 19

If the rights are assigned with no consideration, the last assignment holds

If the rights are assigned and the assignee pays consideration, the first assignment to pay consideration will hold unless the second assignee does not know about the first assignment and they are the first to obtain judgment/payment on the rights

Question 20

What happens if an assignment is made for consideration?

Answer 20

It is an irrevocable assignment

Question 21

What happens if an assignment is not made for consideration?

Answer 21

It is revocable and automatically revoked upon the death, incapacity, or bankruptcy of the assignor, unless the assignee has already performed, received a written claim signifying a right to collect, or detrimental reliance

Question 22

When can contracts not be assigned?

Answer 22

The K explicitly prohibits or invalidates it, the assignment materially increases the duty or risk of the obligor

Question 23

What happens when a merchant sells an item to Party A who doesn’t actually pay, and Party A sells the item to Party B who is a BFP?

Answer 23

Party B gets to keep the item so long as they were a BFP

Question 24

How long do you have to give adequate assurances in the UCC?

Answer 24

30 days

Question 25

Risk of loss when a party has breached?

Answer 25

If buyer repudiates or breaches a K that deals with identified goods, risk of loss shifts to buyer. Seller can thus recover any deficiency between seller’s insurance coverage and the K price

If seller breaches (i.e. delivery of non-conforming goods), risk of loss shifts to buyer if buyer accepts non-conforming goods or seller cures AND shifts back to seller if buyer rightfully revokes acceptance to extent buyer lacks insurance coverage

Question 26

Risk of loss when there’s no breach and the goods are being shipped

Answer 26

Risk of loss is with buyer in a shipment K

Risk of loss is with seller in a destination K until goods are delivered at the named location

Question 27

Risk of loss particular rules for when seller is a merchant?

Answer 27

Risk of loss stays with seller until buyer receives the goods (in which case they hold risk), unless buyer is in breach (in which case they hold risk).

Question 28

When are liquidated damages OK?

Answer 28

Reasonable - 15% of purchase price or less

When the liquidated damages is reasonable in relation to actual damages

Actual damages of breach are uncertain in amount and difficult to prove

Question 29

When does a buyer of goods obtain an insurable interest in the goods?

Answer 29

When the goods are identified AKA when the seller puts the shipping label on them/marks them or when the K specifically identifies the goods. If seller doesn’t mark them then they are identified when carrier picks them up for shipping

With cattle to be born within 12 months or crops to be harvested within 12 months of contracting, cattle are identified when conceived and crops are identified when planted

Question 30

When there’s a missing nonessential element in a valid K, how will the court treat that term?

Answer 30

Supply a reasonable term

Question 31

When there’s an ambiguous term in a K, how will the court help resolve that term?

Answer 31

Consider who drafted the K and construe the term against them

Question 32

What is the majority rule for seller’s duty to disclose in the sale of a residential property?

Answer 32

Duty to disclose all known material defects that buyer could not have discovered. Exception is if there’s an as is clause.

Question 33

When is it OK to not have consideration for modification of a CL contract?

Answer 33

When parties experience unforeseen difficulties, when one party changes position in reliance on modification, when theres a tearing up of old K and entering into new one where one party needs to perform more in the new K

Question 34

When does the one year period for the SoF requirement begin?

Answer 34

The day after the K was made/the day after the offer was accepted. So a 1 year employment K has the possibility of not falling within SoF; it must be one year and one day to fall within SoF and have that writing requirement

Question 35

What is the principle of reasonable expectations?

Answer 35

That parties should not be bound by a term that they would not expect to find in the K unless the term was called to their attention

Question 36

What is the difference between what a party can recover when they breach a non-divisible vs. when they fail to perform part of a divisible K?

Answer 36

Breaching non-divisible K - Restitution damages

Failing to perform part of divisible K - Full price of performance of the divisible K that WAS performed

Question 37

What happens if both parties have different meanings as to one term in the UCC?

Answer 37

Parol evidence may come in to explain parties’ express terms through course of performance, course of dealing, trade usage

Question 38

If two parties are in a services contract and one party substantially performs but there is some minor deficiency, must the other party still pay the full price of the service?

Answer 38

No. The other party is entitled to withhold that % incurred to correct the deficiency.

Question 39

When can a party retract an anticipatory repudiation?

Answer 39

As long as other side has not commenced lawsuit, materially acted in reliance on retraction, or cancelled the K