Contracts

Question 1

A new promise to pay a debt after the statute of limitations has run is

Answer 1

enforceable without any new consideration

Question 2

The nonoccurence of a condition may be excused if

Answer 2

the party who benefits from the condition waives it by words or conduct
(once excused / waived the condition cannot be later raised in a defense)

Question 3

A material breach of a contract allows for

Answer 3

the non-breaching party to withhold any promised performance and to pursue remedies for the breach, including damages

Question 4

When the parties expressly agree to a condition precedent (or a concurrent condition) they are generally strictly liable to that condition, meaning

Answer 4

a party must fully comply with that condition before the other party’s performance is due

Question 5

Under the UCC parole evidence rule, express terms of a written contract can be

Answer 5

(1) explained or (2) supplemented by the following evidence (in order of priority): course of performance (current k), course of dealing (prior k), and trade usage (based on industry)

Question 6

The non-breaching party’s failure to mitigate

Answer 6

doesn’t give the breaching party a right to sue the non-breaching party for such failure, it only reduces the non-breaching party’s damages recovery

Question 7

In construction contracts, the general measure of damages for a contractor’s failure to begin or to complete a building project is

Answer 7

the difference between the K price and the cost of construction by another builder, plus any progress payments made to the breaching builder and compensation for the delay in completing the construction

Question 8

In order for a contract to be voidable for duress, there must be

Answer 8

an improper threat that deprives a party of a meaningful choice (generally, threat of civil litigation is not improper unless it is made in bad faith)

Question 9

There is no substantial performance if

Answer 9

the incomplete performance was a material breach of contract (frustrated the significant purpose of the K)

Question 10

Substantial performance is less likely to be found when

Answer 10

a party intentionally furnishes services that are materially different from what was promised

Question 11

Actual damages can be either

Answer 11

direct or consequential

Question 12

Total (material) breach of an installment contract requires

Answer 12

Nonperformance accompanied by repudiation

Question 13

Economic waste occurs when

Answer 13

the cost to fix or complete the construction is clearly disproportional to any economic benefit or utility gained as a result

Question 14

If a party breaches yet substantially performs

Answer 14

the non-breaching party is required to pay whatever remains on the contract price (or perform) but may bring suit later for damages

Question 15

Requirements contracts satisfy UCC contract formation requirements even without naming specific quantities because

Answer 15

A duty of good faith and fair dealing is imposed in all contracts, whether governed by the UCC or common law

Question 16

A party to an illegal contract may recover restitution damages if that party conferred a benefit on the other party and

Answer 16

(1) was justifiably ignorant of the facts that made the contract illegal
(2) was less culpable than the other party, OR
(3) withdrew before the conduct’s illegal purpose was achieved and did not engage in serious misconduct

Question 17

A party to a contract must avoid or mitigate damages to the extent possible by

Answer 17

Taking steps that do not involve undue risk, expense, or inconvenience

Question 18

When a party is suing a third-party beneficiary of a contract, the promisor can

Answer 18

raise any defense against the third party-beneficiary that the promisor had against the original promisee

Question 19

Compensatory damages are meant to compensate the non-breaching party for

Answer 19

Actual economic losses

Question 20

Expectation damages are intended to put the non-breaching party

Answer 20

In the same position as if the contract had been performed (must be calculated with reasonable certainty)

Question 21

Compensatory damages consist of

Answer 21

(1) expectation, (2) consequential, and (3) incidental damages

Note: In real-estate contracts requiring delivery of possession of property, late delivery is a breach that entitles the buyer to expectation damages measured by FMV of the property for the time buyer was denied possession

Question 22

Consequential damages are a direct result of breach but

Answer 22

need not be the usual result of the breaching party’s conduct (but are otherwise reasonably foreseeable in the event of a breach)

Question 23

The primary test of whether a communication is an offer is whether an individual receiving the communication

Answer 23

would reasonably believe that he could enter into an enforceable deal by satisfying the condition

Question 24

Damages are foreseeable if they were

Answer 24

(1) A natural and probably consequence of breach
(2) If they were “in the contemplation of the parties at the time the contract was made” OR
(3) If they were otherwise reasonably foreseeable

Question 25

Non-performance of an installment constitutes a partial breach when

Answer 25

the only remaining duty at the time of the breach (1) is held by the breaching party and (2) is for the payment of money in further (unrelated) installments

Question 26

Under the UCC parole evidence rule, express contract terms can be

Answer 26

(1) supplemented or (2) explained but NOT contradicted

Question 27

The Warranty of Merchantability may be disclaimed for defects that an examination would have revealed if, before entering the contract, the buyer

Answer 27

Examined the goods as fully as desired or refused to examine them

Question 28

Under the pre-existing duty rule, a promise to perform a duty that a party is already legally bound to perform is

Answer 28

void of consideration

Question 29

When the owner breaches a construction contract before or during construction, the builder can recover

Answer 29

lost profits (expectation damages) plus any reasonably incurred costs

Question 30

An illusory promise

Answer 30

cannot supply the necessary consideration for contract formation, and may be exhibited when a party essentially pledges nothing because the promisor can choose whether to honor it

Question 31

No oral modification clauses can be waived through

Answer 31

parties’ words or conduct, and cannot be retracted if a party has materially changed position in reasonable reliance on the waiver

Question 32

To accept an offer, the offeree must

Answer 32

manifest an objective intent to be bound by the terms of the offer AND follow ANY specifications in the offer as to the time, place, and manner of acceptance (overrides mailbox rule)

Question 33

Non-disclosure is equivalent to

Answer 33

an assertion that a fact does not exist if the party not disclosing the fact knows the disclosure is necessary to prevent a previous assertion from being fraudulent

Question 34

To satisfy the SoF, the writing need

Answer 34

not be formal but must be signed by the party to be charged and contain the essential elements of the deal

Question 35

Under the SoF a writing is not required for

Answer 35

(1) specially manufactured goods
(2) goods for which payment has been made and accepted,
(3) goods which are received and accepted, or
(4) when a merchant fails to object to a memorandum from another merchant within 10 days of receipt of the memorandum.

Question 36

How do K modifications differ under the UCC and Common Law

Answer 36

Common Law requires consideration for modification

UCC only requires Good Faith

Question 37

Elements of Mutual Mistake

Answer 37

(1) Mistake of fact existed at the time of K formation
(2) Mistake goes to a basic assumption of fact
(3) Mistake has a material effect on the K
(4) Adversely effected party did not assume the risk of the mistake

Question 38

The implied warranty of merchantability can be disclaimed

Answer 38

Orally if including the word “merchantability” OR in writing if conspicuous (e.g. either explicit disclaimer or language such as “as is”)

Question 39

What is the doctrine of anticipatory repudiation and when/how is it effective

Answer 39

The doctrine of anticipatory repudiation is applicable when a promisor repudiates a promise BEFORE the time for performance is due.

The repudiation must be clear and unequivocal, may be by conduct or words, and, if a statement, must be made to the promisee or a third-party beneficiary or assignee of the promise.

Question 40

Calculation of Expectation Damages

Answer 40

Loss in K value + other losses - costs avoided - losses avoided

Question 41

If the new consideration of an accord is worth less than what was originally promised, then it is sufficient only if

Answer 41

(1) there is a good-faith dispute as to the amount owed or
(2) it is of a different type than what was originally owed.

Question 42

Essential terms in a land-sales contract are

Answer 42

Price and subject matter

Question 43

An assignment may be either

Answer 43

For value or gratuitous.

An assignment for value is not revokable, but a gratuitous assignment is (e.g. assigned again to a different party)

Question 44

If there’s an options contract within another contract, consideration for the greater contract serves as

Answer 44

consideration for the options contract as well (options contract does not independently need consideration)

Question 45

In either type of auction setting, a bidder has the right to retract (i.e., withdraw) a bid until

Answer 45

The auctioneer announces the completion of the sale (e.g., at the fall of the auctioneer’s hammer).

However, the bidder’s retraction will not revive any prior bids.

Question 46

Under the UCC firm-offer rule, an offer is irrevocable if

Answer 46

the offeror is a merchant who provides a signed, written assurance that the offer will remain open.

Question 47

Under the UCC, no-oral-modification clauses are generally enforceable when

Answer 47

contained in a written, signed contract

Question 48

General disclaimers (e.g. “all warranties, express or implied, are hereby disclaimed”) cannot be

Answer 48

construed consistently with an express warranty. When this occurs, the disclaimer is ignored

Question 49

Under the UCC, a seller creates an express warranty in a contract for the sale of goods when the seller

Answer 49

makes an affirmation of fact or promise about the goods that becomes part of the basis of the bargain

(opinions or commendations do NOT create express warranties)

Question 50

An incidental beneficiary is a third party who benefits from a contract, even though

Answer 50

the contracting parties did not intend to benefit the third party (and therefore cannot enforce a contract under any circumstances)

Question 51

Contracts subject to the Statute of Frauds are

Answer 51

Marriage - K in consideration of marriage
Suretyship - promise to pay another’s debts
Over 1 year
UCC goods over $500
Real Property - sales or transfers

Mr. SOUR

Question 52

Damages for Minor vs. Material breach for breaching party

Answer 52

Minor breach: Can recover expectancy or reliance damages

Material breach: Can only cover restitution damages

Question 53

A non-breaching seller may reclaim goods from a buyer when

Answer 53

the seller:
(1) discovers the buyer received the goods on credit while insolvent and
(2) demands the goods be returned within 10 days after their receipt.

(Note: This 10-day limitation does not apply if the buyer misrepresented its solvency in WRITING within three months before delivery)

Question 54

When a buyer repudiates or breaches a contract that deals with specifically identified goods, the risk of loss immediately passes from the seller to the buyer. When this occurs, the seller can recover

Answer 54

any deficiency between the seller’s insurance coverage and the contract price within a commercially reasonable time

Question 55

Punitive damages are rarely available in contract actions and are not typically recoverable unless

Answer 55

the conduct constituting the breach is also a tort for which punitive damages are available

(some statutes allow for the purpose of punishing fraud, violation of fiduciary duty, acts of bad faith, and for deterrence)

Question 56

If, in the course of an assortment of goods for delivery contract, a buyer fails to timely select the assortment, the seller can

Answer 56

(1) proceed in any reasonable manner or
(2) treat the failure as a breach

Note: Failure of buyer to timely select assortment must materially impact the seller’s performance to allow the seller to treat the failure as breach

Question 57

Under a condition precedent, performance is

Answer 57

delayed until a specified event occurs and requires the PLAINTIFF to prove that the event occurred to prevail

Question 58

Under a condition subsequent, performance is

Answer 58

excused if a specific event occurs and requires the DEFENDANT to prove that event occurred to avoid liability

Question 59

Specific performance is an equitable remedy which is appropriate when

Answer 59

a party’s remedy at law (i.e. monetary damages) is inadequate

Question 60

A seller can only recover the contract price of the goods after a buyer failed to pay if

Answer 60

(1) the buyer accepted the goods
(2) the goods were lost or damaged within a commercially reasonable time after the risk of loss passed to the buyer, or
(3) the buyer returned or rejected the goods and the seller could not resell them

Question 61

A buyer acquires an insurable interest in goods upon

Answer 61

(1) the identification of the goods.

Unless: The K is for future goods in which the buyer acquires an insurable interest when the seller designates goods as those to which the contract refers, unless the parties have explicitly agreed otherwise

Question 62

Under a shipment contract, the risk of loss passes to the buyer when

Answer 62

the seller delivers the good to the third party carrier

Note: Shipment is presumed when the K calls for delivery by 3rd party