Contracts

Question 1

A contract is ____

Answer 1

a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law, in some way, recognizes as a duty. It is simply a legally enforceable agreement.

Question 2

For a contract, we need to have an ___ plus ____

Answer 2

agreement; something more that makes it legally enforceable. Typically, that’s going to be consideration or a substitute for consideration

Question 3

TYPES OF CONTRACTS

Answer 3

1. Express contracts are formed by language, oral or written.
2. Implied contracts are formed by conduct.
3. Quasi-contracts (which are not contracts at all)

Question 4

Quasi-Contracts

Answer 4

when an unenforceable contract results in unjust enrichment. Courts permit a plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant.

Question 5

A bilateral contract is one consisting of ___

Answer 5

the exchange of mutual promises; that is, a promise for a promise.

Question 6

A bilateral contract offer can be accepted in ___

Answer 6

any reasonable way.

Question 7

Implied Contract

Answer 7

Parties’ conduct indicates that they assented to be bound.

Question 8

Express Contract

Answer 8

Promises are communicated by language.

Question 9

A unilateral contract is one in which the offeror requests ____

Answer 9

performance rather than a promise.

Question 10

A unilateral contract, which requires full performance, occurs in only two situations:

Answer 10

(1) when the offeror clearly (unambiguously) indicates that completion of performance is the only manner of acceptance; AND (2) where there is an offer to the public, such as a reward offer.

Question 11

A void contract is one that is ___

Answer 11

totally without any legal effect from the beginning (for example, an agreement to commit a crime). It cannot be enforced by either party.

Question 12

A voidable contract is one that ____

Answer 12

one or both parties may elect to avoid, such as by raising a defense that makes it voidable, like infancy or mental illness.

Question 13

An unenforceable contract is ___

Answer 13

otherwise valid but isn’t enforceable due to a defense, such as the statute of limitations or Statute of Frauds.

Question 14

For contracts involving the sale of goods, ___ applies.

Answer 14

Article 2 of the Uniform Commercial Code (“UCC”)

Question 15

“Goods” are ____

Answer 15

all things movable at the time they are identified as the items to be sold under the contract

Question 16

A number of the rules in Article 2 depend on whether the seller and/or buyer are ___

Answer 16

merchants.

Question 17

Article 2 generally defines “merchant” as one who ____

Answer 17

regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved.

Question 18

For Article 2 provisions dealing with general business practices (for example, Statute of Frauds, confirmatory memos, firm offers, modification),
_____. But remember that some Article 2 provisions (for example, the implied warranty of merchantability) are _____.

Answer 18

almost anyone in business can be deemed a merchant; narrower and require a person to be a merchant with respect to goods of the kind involved in the subject transaction.

Question 19

If a sale involves both goods and services, you will _____; However, if the contract divides payment between goods and services, then ____

Answer 19

determine which aspect is dominant and apply the law governing that aspect to the whole contract; Article 2 will apply to the sale portion and the common law will apply to the services portion.

Question 20

Every contract within the UCC imposes an obligation of ____

Answer 20

good faith in its performance and enforcement.

Question 21

The common law also imposes a duty of ____

Answer 21

good faith and fair dealing.

Question 22

“Good faith” is ____

Answer 22

honesty in fact and the observance of reasonable commercial standards

Question 23

For an agreement to be enforced as a contract, there must first be ____

Answer 23

mutual assent

Question 24

Whether mutual assent is present will be determined by an ____

Answer 24

objective standard

Question 25

When a suit is brought in which one party seeks to enforce a contract or to obtain damages for breach of contract, a court must first decide whether there was in fact a contract. In making this determination court will ask the following three basic questions:

Answer 25

1. Was there mutual assent? 2. Was there consideration or some substitute for consideration? 3. Are there any defenses to creation of the contract?

Question 26

For a communication to be an offer, it must _____

Answer 26

create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.

Question 27

In deciding whether a communication creates this reasonable expectation (and thus an offer), ask:

Answer 27

- Was there an expression of a promise, undertaking, or commitment to enter into a contract? - Were there certainty and definiteness in the essential terms? - Was there communication of the above to the offeree?

Question 28

For a communication to be an offer, it must contain a promise, undertaking, or commitment to enter into a contract, rather than ____; that is, there must be an intent to enter into a contract.

Answer 28

a mere invitation to begin preliminary negotiations

Question 29

What is considered by a court in determining if an offer exists:

Answer 29

- Language - Surrounding circumstances - Prior practice and relationship of the parties - Method of communications

Question 30

The broader the communicating media (for example, publications), the more likely it is that the courts will ____

Answer 30

view the communication as merely the solicitation of an offer.

Question 31

Advertisements, catalogs, circular letters, and the like containing price quotations are usually construed as ____

Answer 31

mere invitations for offers.

Question 32

An offer must be definite and certain in its terms. The basic inquiry is whether ____

Answer 32

enough of the essential terms have been provided so that a contract including them is capable of being enforced.

Question 33

What terms need to be in an all offers such that they are capable of being enforced?

Answer 33

- Identification of the Offeree - Definiteness of Subject Matter

Question 34

Requirements for Specific Types of Contracts to be enforceable: Real Estate Transactions

Answer 34

An offer involving realty must identify the (1) land and (2) the price terms. -> The land must be identified with some particularity but a deed description isn’t required

Question 35

Requirements for Specific Types of Contracts to be enforceable: Sale of goods

Answer 35

In a contract for the sale of goods, the quantity being offered must be certain or capable of being made certain

Question 35

Requirements for Specific Types of Contracts to be enforceable: Employment Contracts

Answer 35

In contracts for employment, if the duration of the employment is not specified, the offer, if accepted, is construed as creating a contract terminable at the will of either party.

Question 36

Requirements for Specific Types of Contracts to be enforceable: Other Services

Answer 36

The nature of the work to be performed must be included in the offer.

Question 36

Do requirements/output contracts violate the definite and certain terms requirement?

Answer 36

No! It is assumed that the parties will act in good faith; so, they MAY be enforced

Question 36

In a ____, a buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agrees to sell that amount to the buyer. In an ___, a seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller.

Answer 36

requirements contract; output contract

Question 37

For requirements/output contracts there can’t be a tender of or a demand for a quantity ____

Answer 37

unreasonably disproportionate to (1) any stated estimate, or (2) (in the absence of a stated estimate) any normal or otherwise comparable prior output or requirements.

Question 38

The fact that one or more terms are left open does not prevent the formation of a contract if ____

Answer 38

it appears that the parties intended to make a contract and there is a reasonably certain basis for giving a remedy. In such a case, the majority of jurisdictions and Article 2 hold that the court can supply reasonable terms for those that are missing.

Question 39

If a contract for the sale of goods is missing a price term, Article 2 provides ____

Answer 39

that the price will be a reasonable price at the time of delivery.

Question 40

Except in contracts for ___, the failure to state the ___ doesn’t prevent the formation of a contract if the parties intended to form a contract without the price being settled.

Answer 40

real property; price

Question 41

If an agreement doesn’t specify the time in which an act is to be performed, the law ____

Answer 41

implies that it is to be performed within a reasonable time.

Question 42

The presumption that the parties’ intent was to include a reasonable term goes to supplying ___.

Answer 42

missing terms.

Question 43

The presumption to include reasonable terms cannot be made if the parties have ____. However, this can be cured by ____

Answer 43

included a term that make the contract too vague to be enforced; part performance that clarifies the vague term or by acceptance of full performance.

Question 44

If a material term is vague or ambiguous, it is ____

Answer 44

not an offer at common law or under the UCC

Question 45

Often, an offer will state that some term is to be agreed on at a future date. If the term is ___, the offer is too uncertain.

Answer 45

a material term

Question 46

To have the power to accept, the offeree must have ____ of the offer. Therefore, ___

Answer 46

knowledge; the proposal must be communicated to them.

Question 47

An offer can’t be accepted after it has been ____. This may occur by ___

Answer 47

terminated; an act of either party or by operation of law.

Question 48

Termination by Acts of Parties

Answer 48

- Termination by Offeree - Termination by Offeror—Revocation

Question 49

Termination by Offeree

Answer 49

- Lapse of Time - Rejection

Question 50

The offeree must accept the offer within ____

Answer 50

the time specified or, if no time period is specified, within a reasonable time (A reasonable amount of time is a question of fact that depends on all the circumstances at the time the offer and attempted acceptance are made, such as the nature of the contact, the parties’ purposes, or their course of dealing.)

Question 51

Ways an offer can be rejected

Answer 51

- Express Rejection - Lapse of time - Counteroffer (distinguish mere inquiry) - Conditional Acceptance

Question 52

An express rejection is a statement by the offeree that ____

Answer 52

they do not intend to accept the offer. Such a rejection will terminate the offer.

Question 53

A counteroffer is an offer made by the offeree to the offeror that ____

Answer 53

contains the same subject matter as the original offer, but differs in its terms

Question 54

A counteroffer is both a ____

Answer 54

rejection and a new offer. It terminates the original offer and reverses the roles of the parties

Question 55

Distinguish between a counteroffer (which constitutes a rejection) and a mere inquiry. An inquiry won’t terminate the offer when ____

Answer 55

it is consistent with the idea that the offeree is still keeping the original proposal under consideration --> The test is whether a reasonable person would believe that the original offer had been rejected.

Question 56

When an acceptance is made expressly conditional on the acceptance of new terms, it is a ____ of the offer.

Answer 56

rejection

Question 57

The offer that results from a conditional acceptance ___. If the parties ship or accept goods after a conditional acceptance, a contract is ___.

Answer 57

cannot be accepted by performance; formed by their conduct, and the new terms are not included.

Question 58

A rejection is effective when ____

Answer 58

received by the offeror.

Question 59

Because an option is a contract to keep an offer open, a rejection of or a counteroffer to an option ___ a termination of the offer. The offeree is ___

Answer 59

does not constitute; still free to accept the original offer within the option period unless the offeror has detrimentally relied on the offeree’s rejection.

Question 60

A ____ is the retraction of an offer by the offeror

Answer 60

revocation

Question 61

An offeror may revoke by directly ____

Answer 61

communicating the revocation to the offeree

Question 62

An offer made by publication can be directly revoked only by ____

Answer 62

publication through comparable means

Question 63

An offer may also be revoked indirectly if the offeree receives:

Answer 63

(1) correct information, (2) from a reliable source, (3) of acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer --> For example, after the offeror offers to sell their car to the offeree, the offeree is told by a reliable third party that the offeror just sold the car to someone else.

Question 64

A revocation is generally effective when ____. Where revocation is by publication, it is effective when ___

Answer 64

received by the offeree; published.

Question 65

A written communication is “received” when it is delivered to a place of business through which the contract was made or another location authorized to receive this type of communication. It does not matter whether the recipient ___

Answer 65

actually reads the communication.

Question 66

Offers can be revoked at will by the offeror, even if he has promised not to revoke for a certain period, except in the following circumstances

Answer 66

- Options - Merchant's Firm offer under Article 2 - Detrimental Reliance - Beginning Performance in Response to True Unilateral Contract Offer - Beginning Performance—Offer Indifferent as to Manner of Acceptance

Question 67

An option is a distinct contract in which ____

Answer 67

the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer

Question 68

Merchant’s Firm Offer Under Article 2

Answer 68

Under Article 2: (1) if a merchant, (2) offers to buy or sell goods in a signed writing (includes letter head), and (3) the writing gives assurances that it will be held open --> the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time (but in no event may such period exceed 3 months).

Question 69

In no event may a merchant's firm offer exceed ___

Answer 69

3 months (if you want longer = pay!)

Question 70

Detrimental Reliance on an offer

Answer 70

When the offeror could reasonably expect that the offeree would rely to their detriment on the offer, and the offeree does so rely, the offer will be held irrevocable as an option contract for a reasonable length of time.

Question 71

An offer for a true unilateral contract becomes irrevocable once ____. - The offeror must ____ - The offeree is ___

Answer 71

performance has begun; - give the offeree a reasonable time to complete performance. - not bound to complete performance

Question 72

Substantial preparations to perform (as opposed to the beginning of performance) do not ____ but may constitute ___

Answer 72

make the offer irrevocable; detrimental reliance sufficient to make the offeror’s promise binding to the extent of the detrimental reliance.

Question 73

Most offers are indifferent as to the manner of acceptance, and thus, a bilateral contract may be formed ____; Therefore, once the offeree ___

Answer 73

upon the start of performance by the offeree; begins performance, the contract is complete and revocation becomes impossible. (But note: Notification of the start of performance may be necessary.)

Question 74

An offeree generally cannot reject if they ____

Answer 74

already accepted

Question 75

The following events will terminate an offer by operation of law:

Answer 75

- Death or insanity of either party (unless the offer is of a kind the offeror could not terminate, such as, an option supported by consideration). --> Death or insanity need not be communicated to the other party - Destruction of the proposed contract’s subject matter OR - Supervening illegality

Question 76

An acceptance is a ____

Answer 76

manifestation of assent to the terms of an offer.

Question 77

Only____ has the power of acceptance. A member of a class ____ also has the power to accept.

Answer 77

the person to whom an offer is addressed; to which an offer has been directed

Question 78

Generally, an offeree’s power of acceptance ____ be assigned. But, if the offeree ____, the right to accept is transferable

Answer 78

cannot; paid consideration to keep the offer open (an option contract)

Question 79

The offeree must ____ in order to accept it, and this is true whether the offer is for a bilateral or unilateral contract.

Answer 79

know of the offer

Question 80

Unless an offer specifically provides that it may be accepted only through performance, it will be construed as ____

Answer 80

an offer to enter into a bilateral contract and may be accepted either by a promise to perform or by the beginning of performance

Question 81

Unless the offer provides otherwise, acceptance of an offer to enter into a bilateral contract must be ____

Answer 81

communicated to the offeror.

Question 82

Silence as Acceptance - General Rule

Answer 82

Generally, an offeree can’t be forced to speak or have their silence treated as acceptance.

Question 83

Silence as Acceptance - Exceptions

Answer 83

A court may find silence works as an acceptance if: - Because of prior dealings or trade practices, it would be commercially reasonable for the offeror to consider silence an acceptance. - The recipient of services knows or should have known that the services were being rendered with the expectation of compensation and, by a word, could have prevented the mistake, the recipient may be held to have accepted the offer if they fail to speak.

Question 84

Unless otherwise provided, an offer is construed as inviting acceptance in ____. Any ____ of the offeree’s counterpromise is usually sufficient.

Answer 84

any reasonable manner and by any medium reasonable under the circumstances; objective manifestation

Question 85

Under Article 2, an offer to buy goods for current or prompt shipment is construed as inviting acceptance either by ____

Answer 85

a promise to ship or by current or prompt shipment of conforming or nonconforming goods.

Question 86

Re acceptance, traditional contract law insists on an ____

Answer 86

absolute and unequivocal acceptance of each and every term of the offer (the “mirror image rule”).

Question 87

At common law, ANY different or additional terms in the acceptance make the response a ____

Answer 87

rejection and counteroffer.

Question 88

A unilateral contract is not accepted until performance is ____

Answer 88

completed - Recall that the beginning of performance may create an option so that the offer is irrevocable. - However, the offeree is not obligated to complete performance merely because they have begun performance, as only complete performance constitutes an acceptance of the offer.

Question 89

To accept a unilaterial contract, generally, the offeree is not required to ____ but is required to ____.

Answer 89

- give the offeror notice that he has begun the requested performance - notify the offeror within a reasonable time after performance has been completed.

Question 90

No notice is required of the completion of of performance pursuant to a unilaterla contract if

Answer 90

(1) the offeror waived notice; or (2) the offeree’s performance would normally come to the offeror’s attention within a reasonable time.

Question 91

The shipment of nonconforming goods is an ____ as well as a ____ unless ____.

Answer 91

- acceptance creating a bilateral contract - breach of the contract; the seller seasonably notifies the buyer that a shipment of nonconforming goods is offered only as an accommodation

Question 92

Where a seller sends nonconforming goods, the buyer is ____.

Answer 92

not required to accept accommodation goods and may reject them

Question 93

If the buyer rejects nonconforming goods that the buyer sent as an accommodation and the buyer rejects, the shipper ____

Answer 93

isn’t in breach and may reclaim the accommodation goods, because the tender does not constitute an acceptance of the buyer’s original offer (it is a counter offer!)

Question 94

The accommodation shipment rule applies only when ____

Answer 94

shipment is used as a form of acceptance. If a party accepts verbally and then ships non-conforming goods = breach!

Question 95

Article 2 has ___ the mirror image rule, providing instead that the inclusion of additional or different terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer, but rather is ____

Answer 95

abandoned; effective as an acceptance, unless the acceptance is expressly made conditional on assent to the additional or different terms.

Question 96

Whether additional or different terms in an acceptance become part of the contract under the UCC depends on ____

Answer 96

whether or not both parties are merchants.

Question 97

Under the UCC if ___ to the contract is not a merchant, the additional or different terms in an acceptance are considered to be ____

Answer 97

any party; mere proposals to modify the contract that do not become part of the contract unless the offeror expressly agrees.

Question 98

Under the UCC if ___ parties to the contract are merchants, ADDITIONAL terms in the acceptance ___ unless:

Answer 98

both; will be included in the contract - They materially alter the original terms of the offer, such as by changing a party’s risk or the remedies available (If "customary" in the industry = generally not material, disclaiming warranties is a material change) - The offer expressly limits acceptance to the terms of the offer OR - The offeror has already objected to the particular terms, or objects within a reasonable time after notice of them is received

Question 99

Under the UCC there is a ____ over whether terms in the acceptance that are ___

Answer 99

split of authority; different from (as opposed to in addition to) the terms in the offer will become part of the contract.

Question 100

Approaches under the UCC where different terms are included in teh "acceptance"

Answer 100

- Some courts treat different terms like additional terms (go through the typical test) - Other courts follow the “knockout rule,” which states that conflicting terms in the offer and acceptance are knocked out of the contract, because each party is assumed to object to the inclusion of such terms in the contract. But note = even though a response with different terms can constitute an acceptance under Article 2, there still must be a meeting of the minds or there is no contract. Watch for differences in the price, quantity, or quality terms— they likely indicate that there isn’t sufficient meeting of the minds to constitute a contract.

Question 101

A merchant’s memo confirming an oral agreement that contains different or additional terms is also subject to ____

Answer 101

the battle of the forms provisions. (Additional terms are put through the material alteration test).

Question 102

In situations in which it cannot be determined with certainty which specific communication was the offer and which the acceptance but the parties act as though there is a contract, the UCC considers this a ____

Answer 102

binding contract even though the moment of its making is uncertain

Question 103

Acceptance by mail or similar means is effective at ___, provided that the mail is properly addressed and stamped, unless one of these exceptions applies.

Answer 103

the moment of dispatch (mail box rule)

Question 104

Exceptions to the mail box rule

Answer 104

- The offer stipulates that acceptance is not effective until received. - An option contract is involved (an acceptance under an option contract is effective only upon receipt). - The offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective. - The offeree sends an acceptance and then a rejection, in which case the acceptance is effective (that is, the mailbox rule applies) unless the rejection arrives first and the offeror detrimentally relies on it.

Question 105

Where an offeree sends a rejection and then sends an acceptance, ___ is effective.

Answer 105

whichever arrives first

Question 106

Where an offeree sends an acceptance and then a rejection, the ____ is effective (that is, the mailbox rule applies) unless ____

Answer 106

acceptance; the rejection arrives first and the offeror detrimentally relies on it.

Question 107

The mailbox rule applies only to ____

Answer 107

acceptance. It does not apply to other events in the contract setting, such as rejection or revocation.

Question 108

For option contracts, acceptance of the underling offer is effective when ___

Answer 108

received (mail box rule doesn't apply)

Question 109

An acceptance transmitted by unauthorized means or improperly transmitted by authorized means may _____

Answer 109

still be effective if it is actually received by the offeror while the offer is still in existence.

Question 110

If a contract is not formed by the parties’ communications, but they begin to perform as if they formed a contract, a contract is ___

Answer 110

formed.

Question 111

The UCC provides that a sale by auction is complete when ___

Answer 111

the auctioneer so announces by the fall of the hammer or in another customary manner

Question 112

An auction sale is ___ unless the goods are explicitly put up without reserve.

Answer 112

with reserve (means the auctioneer may withdraw the goods at any time until he announces completion of the sale)

Question 113

Two elements are necessary to constitute consideration:

Answer 113

(1) a bargained-for exchange between the parties; and (2) legal value, meaning that which is bargained for must be considered of legal value or, as it is traditionally stated, it must constitute a benefit to the promisor or a detriment to the promisee.

Question 114

Bargained-For Exchange requires that:

Answer 114

the promise induce the detriment and the detriment induce the promise. There is no bargain involved (meaning, no consideration) when one party gives a gift to another.

Question 115

An act or forbearance by the promisee (or a promise to act or forbear) is sufficient consideration to form a contract if ____

Answer 115

it benefits the promisor. (The benefit, however, need not be economic)

Question 116

A promise given in exchange for something already done ___ satisfy the bargain requirement.

Answer 116

does not

Question 117

Exceptions to past consideration rule

Answer 117

- Where a past obligation is unenforceable because of a technical defense (for example, the statute of limitations), that obligation will be enforceable if a new promise is made in writing or is partially performed. - Also, under the modern trend, if a past act benefited the promisor and was performed by the promisee at the promisor’s request or in response to an emergency, a subsequent promise to pay for that act will be enforceable.

Question 118

In general, courts do not inquire into ____.

Answer 118

the adequacy or fairness of consideration - Note that if there is a possibility of value in the thing bargained for, consideration will be found even if the value never comes into existence.

Question 119

Exceptions to the adequacy of consideration rule:

Answer 119

- If something is entirely devoid of value (token consideration), it is insufficient. - Sham consideration (insignificant sum recited in the contract) is also insufficient if not paid.

Question 120

Legal detriment results if the promisee ___.

Answer 120

does something they are not legally obligated to do or refrains from doing something they have a legal right to do. A legal benefit is the reverse.

Question 121

Traditionally, performing or promising to perform an existing legal duty is ___

Answer 121

insufficient consideration.

Question 122

Exceptions to the pre-exisiting duty (non-consideration) rule

Answer 122

- New or different consideration is promised; - The promise is to ratify a voidable obligation (for example, a promise to ratify a minor’s contract after reaching majority or a promise to go through with a contract despite the other party’s fraud); - The preexisting duty is owed to a third person rather than to the promisor; - There is an honest dispute as to the duty; OR - There are unforeseen circumstances sufficient to discharge a party (such as impracticability), or under the modern view, if the modification is fair and equitable in view of circumstances not anticipated when the contract was made.

Question 123

A good faith agreement modifying a contract subject to the UCC needs ____ to be binding.

Answer 123

no consideration

Question 124

Payment of a smaller sum than due on an existing debt is generally ____ for a promise by the creditor to discharge the debt

Answer 124

not sufficient consideration - BUT check the facts for new or different consideration given (for example, payment earlier than required or payment in stock instead of cash)

Question 125

Under general/traditional contract law, a contract can’t be modified unless the modification is ___. The modern view, however, permits modification without consideration if:

Answer 125

supported by new consideration. - (1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and (2) it is fair and equitable. (assume MBE is using this rule = majoirty)

Question 126

For a modification of a contract under the UCC, consideration ____

Answer 126

isn’t necessary to modify; all the parties need are good faith promises of new and different terms.

Question 127

A debtor’s offer to make a partial payment on an existing debt will suffice for an accord and satisfaction if ____

Answer 127

there is some “bona fide dispute” as to the underlying claim or there is otherwise some alteration, even if slight, in the debtor’s consideration.

Question 128

A promise to refrain from suing on a claim constitutes consideration if ____

Answer 128

the claim is valid or the claimant in good faith believed the claim was valid.

Question 129

MUTUAL AND ILLUSORY PROMISES—REQUIREMENT OF MUTUALITY

Answer 129

Consideration must exist on both sides of a contract (although the benefit of the consideration generally need not flow to all parties)

Question 130

If only one party is bound to perform, the promise is ___ and ___

Answer 130

illusory; will not be enforced. -> Courts often supply implied promises (for example, a party must use their best efforts) to infer mutuality.

Question 131

The following are common examples of contracts that satisfy the mutuality requirement:

Answer 131

- Requirements and output contracts - Conditional promises, unless the condition is entirely within the promisor’s control - Contracts where a party has the right to cancel, if that right is somehow restricted (for example, a party must give 60 days’ notice) - Exclusivity agreements (for example, exclusive marketing agreements) because the court will find an implied promise to use best efforts - Voidable promises (for example, one made by an infant) - Unilateral and option contracts, and - Gratuitous suretyship promises made before or at the same time that consideration flows to the principal debtor

Question 132

A promise to choose one of several alternative means of performance is illusory unless ___

Answer 132

every alternative involves legal detriment to the promisor.

Question 133

A promise to choose one of several alternative means of performance will not be found illusory if: ____

Answer 133

(1) at least one alternative involves legal detriment and the power to choose rests with the promisee or a third party, or (2) a valuable alternative (that is, one involving legal detriment) is actually selected.

Question 134

Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing. A promise is enforceable if:

Answer 134

- It is necessary to prevent injustice - The promisor should reasonably expect to induce action or forbearance, and - Such action or forbearance is in fact induced.

Question 135

If the elements for promissory estoppel are present, some jurisdictions will award ____ (that is, what was promised under the contract), but the Second Restatement provides that the remedy “may be limited as justice requires.”, Thus, these courts might award ___

Answer 135

expectation damages; reliance damages

Question 136

Even if an agreement is supported by valuable consideration or a recognized substitute, contract rights may still be unenforceable because ___

Answer 136

- there is a defect in capacity (making the obligations voidable by one of the parties) - there is a defense to formation of the contract, - or because a defense to enforcement of certain terms exists.

Question 137

Legal Incapacity to Contract implicates:

Answer 137

Minors, mental incapacity, intoxication

Question 138

____ generally lack capacity to enter into a contract binding on themselves. But, contractual promises of an adult made to an infant are binding on ___

Answer 138

Infants/minor (in most jurisdictions, anyone under the age of 18); the adult

Question 139

An infant (minor) may choose to ___ a contract any time before (or shortly after) reaching the age of majority. - The contract must be disaffirmed as ___

Answer 139

disaffirm; a whole; it can’t be affirmed in part and disaffirmed in part.

Question 140

If an infant chooses to disaffirm, they must ____

Answer 140

return anything that they received under the contract that still remains at the time of disaffirmance. - However, there is no obligation to return any part of the consideration that has been squandered, wasted, or negligently destroyed.

Question 141

Is being mistaken as two a minors age an exception to the defense of capacity?

Answer 141

NO!

Question 142

Statutory exceptions to incapacity of minors

Answer 142

student loans, insurance contracts, and agreements not to reveal an employer’s proprietary information.

Question 143

CL exception to incapacity of minors/mental incapacity/intoxicated persons

Answer 143

“Necessaries” are items necessary for subsistence, health, or education (including food, shelter, clothing, and medical care).

Question 144

A minor may disaffirm a contract for necessaries but will be liable in ___

Answer 144

restitution for the FM value of benefits received.

Question 145

An minor may ___, that is, choose to be bound by the contract in whole, upon reaching majority. A minor affirms either ___.

Answer 145

affirm - expressly or by conduct, such as by failing to disaffirm the contract within a reasonable time after reaching majority.

Question 146

One whose mental capacity is ___ may disaffirm when lucid or by a later appointed legal representative.

Answer 146

so deficient that they are incapable of understanding the nature and significance of a contract

Question 147

Someone who had no mental capacity when they entered a contract may affirm during ____

Answer 147

a lucid interval or upon complete recovery, even without formal restoration by judicial action

Question 148

A mentally incompetent person has no ability to contract once ____Any attempted contracts by an incapacitated person who is under a guardianship are ___

Answer 148

a guardian has been appointed; void.

Question 149

One who is so intoxicated that they don’t understand the nature and significance of their promise may be held to have made only a ___ if ____.

Answer 149

voidable promise; the other party had reason to know of the intoxication.

Question 150

Contracts induced by duress or undue influence are ____

Answer 150

voidable and may be rescinded as long as they are not affirmed.

Question 151

Generally, taking advantage of another person’s economic needs is not duress, but withholding something someone wants or needs will constitute economic duress if:

Answer 151

(1) the party threatens to commit a wrongful act that would seriously threaten the other contracting party’s property or finances; and (2) there are no adequate means available to prevent the threatened loss.

Question 152

Elements of undue influence are:

Answer 152

(1) undue susceptibility to pressure by one party, and (2) excessive pressure by the other party. -> Undue influence concerns often arise when the dominant party is in a confidential or caregiver relationship with the influenced party.

Question 153

Defenses to enforcement/formation

Answer 153

- Lack of capacity - Absence of Mutual assent - Absence of Consideration - Public Policy/illegality - Unconscionability - Statute of Frauds

Question 154

Defenses going to ABSENCE OF MUTUAL ASSENT

Answer 154

- Misunderstanding—Ambiguous Contract Language - Mutual Mistake as to Existing Facts - Unilateral Mistake - Mistake by the Intermediary (Transmission) - Misrepresentation

Question 155

If the contract includes a term with at least two possible meanings, the result depends on the parties’ awareness of the ambiguity:

Answer 155

A - Neither party aware = no contract unless both parties intended the same meaning (two ships peerless); B. Both parties aware = no contract unless both parties intended the same meaning; or c. One party aware = binding contract based on what the ignorant party reasonably believed to be the meaning of ambiguous words.

Question 156

Ambiguity in the contract is one area where ___ is taken into account.

Answer 156

subjective intent

Question 157

If both parties entering into a contract are mistaken about existing facts (not future happenings) relating to the agreement, the contract may be voidable by the adversely affected party if:

Answer 157

- The mistake concerns a basic assumption on which the contract is made - The mistake has a material effect on the agreed-upon exchange - The party seeking avoidance did not assume the risk of the mistake

Question 158

Mutual mistake is not a defense if the party asserting mistake as a defense ____

Answer 158

bore the risk that the assumption was mistaken. -> This commonly occurs when one party is in a position to better know the risks than the other party

Question 159

If the parties to a contract make assumptions as to the value of the subject matter, mistakes in those assumptions will generally not be remedied—even though the value of the subject matter is generally a basic assumption and the mistake creates a material imbalance—because ____

Answer 159

both parties usually assume the risk that their assumption as to value is wrong.

Question 160

Generally, If only one of the parties is mistaken about facts relating to the agreement, the mistake will ____

Answer 160

not prevent formation of a contract

Question 161

(exception to general rule) For a unilateral mistake if the nonmistaken party ____, the contract is voidable by the mistaken party.

Answer 161

knew or had reason to know of the mistake made by the other party - As with mutual mistake, the mistake must have a material effect on the agreed-upon exchange, and the mistaken party must not have borne the risk of the mistake.

Question 162

When there is a mistake in the transmission of an offer or acceptance by an intermediary, the prevailing view is that the message ___ is operative unless ____

Answer 162

as transmitted; the other party knew or should have known of the mistake.

Question 163

Fraud by inducement: If a party induces another to enter into a contract by using fraudulent misrepresentation (that is, by asserting information they know is untrue), the contract is ____

Answer 163

voidable by the innocent party if they justifiably relied on the fraudulent misrepresentation.

Question 164

Whether or not a misrepresentation is fraudulent, the contract is voidable by the innocent party if the innocent party ____

Answer 164

justifiably relied on the misrepresentation and the misrepresentation was material.

Question 165

A misrepresentation is material if: ___

Answer 165

(1) it would induce a reasonable person to agree, or (2) the maker knows that for some special reason it is likely to induce the particular person to agree, even if a reasonable person would not.

Question 166

A fraudulent misrepresentation need not be spoken or written; it can be ___

Answer 166

inferred from conduct

Question 167

Concealing a fact, frustrating investigation of a fact, or falsely denying knowledge of a fact is the same as ___.

Answer 167

asserting the fact does not exist;

Question 168

However, nondisclosure of a fact is not misrepresentation unless ____

Answer 168

it is material or fraudulent

Question 169

A party is not entitled to relief if the reliance on a misrepresentation was ___. However, just because a misrepresentation could have been revealed by the exercise of reasonable care ____. Failure to read a contract or use care in reading it does not necessarily preclude a party from avoiding a contract for misrepresentation.

Answer 169

unreasonable under the circumstances; does not mean that reliance was unjustified

Question 170

An innocent party that meet the requirement for misrepresentation doesn’t have to wait until they’re sued on the contract but may ____. In addition, they may ___

Answer 170

take affirmative action in equity to rescind the agreement; pursue all remedies available for breach of contract

Question 171

If the promises exchanged at the formation stage lack the elements of bargain or legal detriment, ____

Answer 171

no contract exists. In this situation, one of the promises is always illusory.

Question 172

If the consideration or subject matter of a contract is illegal (for example, a contract to commit a murder), the contract is ___

Answer 172

void

Question 173

Illegaility doesn't void a contract where:

Answer 173

(1) the plaintiff is unaware of the illegality while the defendant knows of the illegality; (2) the parties are not in pari delicto (that is, one party is not as culpable as the other); or (3) the illegality is the failure to obtain a license when the license is for revenue-raising purposes rather than for protection of the public.

Question 174

If only the purpose behind the contract is illegal, the contract is voidable by a party who was ____

Answer 174

(1) unaware of the purpose; or (2) aware but did not facilitate the purpose and the purpose does not involve serious moral turpitude.

Question 175

The concept of unconscionability allows a court to modify or refuse to enforce an entire contract or a provision in order to ____.

Answer 175

avoid “unfair” terms, usually due to some unfairness in the bargaining process (that is, procedural unconscionability).

Question 176

Unfair price alone is ___ for unconscionability.

Answer 176

not a ground

Question 177

Common Instances of Procedural Unconscionability

Answer 177

- Inconspicuous Risk-Shifting Provisions - Contracts of Adhesion—“Take It or Leave It” - Exculpatory Clauses - Limitations on Remedies

Question 178

Courts have invalidated boilerplate Risk-Shifting Provisions provisions as unconscionable because they are ____

Answer 178

inconspicuous or incomprehensible to the average person, even if brought to their actual attention.

Question 179

Courts will deem a clause unconscionable and unenforceable if the signer is unable to procure necessary goods, such as an automobile, from ____

Answer 179

any seller without agreeing to a similar provision.

Question 180

An exculpatory clause releasing a contracting party from liability for their own ____ is usually found to be unconscionable because such a clause is against public policy in most states.

Answer 180

intentional wrongful acts

Question 181

Exculpatory clauses for negligent acts may be found to be unconscionable if the clauses are ___, but they commonly are upheld if they are in contracts for activities that ___

Answer 181

inconspicuous; are known to be hazardous

Question 182

A contractual clause limiting liability for damages to property generally will not be found unconscionable unless ____. But, a contract that limits a party to a certain remedy and that remedy fails of its essential purpose (for example, the contract limits remedies to repair and the item cannot be repaired), the limitation may be___

Answer 182

it is inconspicuous; found unconscionable and courts will ignore it.

Question 183

Unconscionability is determined by the circumstances as they existed at ___

Answer 183

the time the contract was formed.

Question 184

If a court finds as a matter of law that a contract or any clause of the contract was unconscionable when made, the court may: ____

Answer 184

(1) refuse to enforce the contract; (2) enforce the remainder of the contract without the unconscionable clause; or (3) limit the application of any clause so as to avoid an unconscionable result.

Question 185

Statute of frauds covers:

Answer 185

MY LEGS - Marriage - > 1 Year - Land - Executor - Goods > $500 - Surety promises

Question 186

A promise the consideration for which is ___ must be evidenced by a writing.

Answer 186

marriage (e.g., pre-nup), but doesn't cover mere promise to marry (but no court would enforce)

Question 187

A promise that by its terms cannot be performed within ____ is subject to the Statute of Frauds. Part performance does not satisfy the Statute of Frauds in this case.

Answer 187

one year (The date runs from the date of the agreement and not from the date of performance.)

Question 188

Even if the contract can’t be performed within a year, _____ will remove it from the Statute.

Answer 188

full performance by one party

Question 189

A promise to “employ until I die” or “work until I die” is ___ the Statute because ___

Answer 189

not within; it is capable of performance within a year—a person can die at any time.

Question 190

A promise creating an interest in land must be evidenced by a writing. This includes:

Answer 190

- agreements for the sale of real property - Leases for more than one year - Easements of more than one year - Mortgages and most other security liens - Fixtures - Minerals (or the like) or structures if they are to be severed by the buyer

Question 191

Items that Do Not Create an Interest in Land

Answer 191

Contracts to build a building or to find a buyer for a seller (for example, a broker’s contract) do not create an interest in land.

Question 192

Effect of Performance on Land Contracts subject to the SOF

Answer 192

Full performance by the seller will take the contract out of the Statute of Frauds. Part performance by the buyer may also remove the contract from the Statute.

Question 193

SOF Equal dignity rule

Answer 193

the authorization to enter into a contract on behalf of someone else ONLY IF the underlying deal would be subject to the SOF

Question 194

A promise by an executor or administrator to pay the estate’s debts out of ___ must be evidenced by a writing.

Answer 194

their own funds

Question 195

A contract for the sale of goods for a price ____ is within the Statute of Frauds and generally must be evidenced by a signed writing to be enforceable.

Answer 195

of $500 or more -> Note that a writing is sufficient even though it omits or incorrectly states a term, but the contract is not enforceable beyond the quantity of goods shown in the writing.

Question 196

A promise to answer for the debt or default of another must be evidenced by a writing. The promise may arise as a result of a tort or contract, but it must be ____. However, if the main purpose or leading object of the promisor is ____, the contract is not within the Statute of Frauds even though the effect is still to pay the debt of another

Answer 196

collateral to another person’s promise to pay, and not a primary promise to pay; to serve a pecuniary interest of his own

Question 197

Noncompliance with the Statute of Frauds renders the contract ____

Answer 197

unenforceable at the option of the party to be charged.

Question 198

The party being sued may raise the lack of a sufficient writing (SOF) as an affirmative defense. If the Statute isn’t raised as a defense, it is __

Answer 198

waived

Question 199

When Contract Is Removed from Statute of Frauds

Answer 199

- Contract modification - Performance - Circumstances When Writing Not Required - Equitable and Promissory Estoppel - Judicial Admission

Question 200

A written contract can be modified orally, but the modification must be in writing if ____

Answer 200

the contract as modified falls within the Statute of Frauds.

Question 201

Provisions Prohibiting Oral Modification - treatment under the CL/UCC

Answer 201

CL = even if a written contract expressly provides that it may be modified only by a writing, the parties can orally modify the contract. UCC = if a contract explicitly provides that it may not be modified or rescinded except by a signed writing, that provision is given effect. -> If the contract is between a merchant and nonmerchant, however, this provision requires the nonmerchant’s separate signature.

Question 202

If the parties attempt to orally modify a contract that requires written modification (either because of a contract clause or the Statute of Frauds), it is technically ineffective as a modification but can ___

Answer 202

operate as a waiver = A waiver will be found whenever the other party has changed position in reliance on the oral modification. - However, a party who makes a waiver affecting an executory (not yet performed) portion of the contract may retract the waiver if they notify the other party that strict performance of the waived terms is required

Question 203

If a seller ____ (that is, they fully perform), the seller can enforce the buyer’s oral promise to pay.

Answer 203

conveys property to the buyer

Question 204

A buyer may seek to specifically enforce an oral land sale contract under the doctrine of part performance. Part performance that unequivocally indicates that the parties have contracted for the sale of land takes the contract out of the Statute of Frauds. Most jurisdictions require ___

Answer 204

at least two of the following: payment (in whole or in part), possession, and/or valuable improvements.

Question 205

Is an oral installment land contract subject to the 2/3 part performance rule:

Answer 205

No! In the absence of other facts, such as a large down payment, possession plus payment does not unequivocally indicate a contract for the sale of land. - Those facts are also consistent with a lease; thus, the purchaser cannot enforce the contract.

Question 206

An oral contract that cannot be completed within one year but has been fully performed by one party is ___

Answer 206

enforceable. (if not fully performed = not available, but may get restitution)

Question 207

Part performance takes a sale of goods contract out of the Statute of Frauds when:

Answer 207

(1) the goods have been specially manufactured, or (2) the goods have been either paid for or accepted.

Question 208

If an oral sales contract is only partially paid for or accepted, the contract is enforceable only ___. But for a single good, partial payment takes ___

Answer 208

to the extent of the partial payment or acceptance (done on a commercial unit basis); full amount out of SOF

Question 209

If goods are to be specially manufactured for the buyer and ____, the contract is enforceable if the seller has, under circumstances that reasonably indicate that the goods are for the buyer, made a ____

Answer 209

- are not suitable for sale to others by the seller in the ordinary course of their business - substantial beginning in their manufacture or commitments for their purchase before notice of repudiation is received.

Question 210

If the party against whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made, the oral contract is ____

Answer 210

enforceable without a writing

Question 211

In contracts between merchants, if one party, within a reasonable time after an oral agreement has been made, sends to the other party a ____of the understanding that is sufficient under the Statute of Frauds to bind the sender, it will also bind the recipient if:

Answer 211

- written confirmation - (1) they have reason to know of the confirmation’s contents; and (2) they do not object to it in writing within 10 days of receipt.

Question 212

Merchants—Confirmatory Memo Rule gives power to ___ to enforce the contract

Answer 212

both the buyer and the seller (merchant using its own confirmation to satisfy the Statute of Frauds against another merchant)

Question 213

Statute to defeat a meritorious claim. Examples include situations where ____

Answer 213

the defendant falsely and intentionally tells the plaintiff that the contract is not within the Statute or induces the plaintiff to change position in reliance on an oral agreement.

Question 215

There are three situations in which contracts are enforceable without the writing described above (pursuant to the SOF):

Answer 215

- Specially Manufactured Goods - Admissions in Pleadings or Court - Merchants—Confirmatory Memo Rule - Equitable and Promissory Estoppel Estoppel may be applied if it would be inequitable - Judicial Admission

Question 216

The Statute of Frauds requires only one or more writings that:

Answer 216

- (1) reasonably identify the subject matter of the contract - (2) indicate that a contract has been made between the parties, and - (3) state with reasonable certainty the essential terms.

Question 217

General Essential or Material Terms to be included in a writing complying with the SOF

Answer 217

The key is that there be something in writing evidencing the essential terms. - What is essential depends on the agreement, its context, and the subsequent conduct of the parties, including the dispute that has arisen. --> There must be enough in the writing to enable a court to enforce the contract - Examples of essential terms include: identity of the parties, description of the subject matter, and the terms necessary to make the contract definite.

Question 218

Specific Essential or Material Terms to be included in a writing complying with the SOF for certain contract types

Answer 218

Land sale contracts = must contain a description of the land and the price Employment contracts = must state the length of employment Sales of goods contracts (UCC) = must indicate that a contract has been made and specify the quantity term

Question 219

To use a writing against a party it must be ___ by them

Answer 219

signed! (can lead to disparities in enforceability)

Question 220

A signature is ____.

Answer 220

any mark or symbol made with the intention to authenticate the writing as that of the signer - It need not be handwritten; it can be printed or typed. - Under the UCC, a party’s initials or letterhead may also be sufficient. - An electronic signature is also sufficient.

Question 221

If a contract violates the Statute of Frauds, in almost all cases a party can ____

Answer 221

sue for the reasonable value of the services or part performance rendered, or the restitution of any other benefit that has been conferred.

Question 222

When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an ____. Any other expressions—written or oral—made prior to the writing, as well as any oral expressions contemporaneous with the writing, are ____

Answer 222

“integration”; inadmissible to vary the terms of the writing.

Question 223

There are two components to whether a Writing is an “Integration”?

Answer 223

(1) whether the writing was intended as the final expression of the agreement; and (2) whether the integration was intended to be complete or partial. -> Evidence is admissible to show the parties’ intent.

Question 224

If an integration is complete, the writing cannot be ___. If, however, the integration is partial, the writing may ____

Answer 224

contradicted or supplemented; not be contradicted but may be supplemented by proving consistent additional terms.

Question 225

The UCC presumes all writings are ___ integrations.

Answer 225

partial

Question 226

A ___ recites that the agreement is the complete agreement between the parties.

Answer 226

merger clause

Question 227

The presence of a merger clause is usually determinative in ____. For most contracts, however, the modern trend is to ____

Answer 227

large commercial contracts; consider it as one factor in determining integration.

Question 228

Because the rule prohibits admissibility only of extrinsic evidence that seeks to vary, contradict, or add to an “integration,” other forms of extrinsic evidence may be admitted if they won’t bring about this result, that is, they will fall outside the scope of the parol evidence rule. Including:

Answer 228

- Validity Issues - Collateral Agreements and Naturally Omitted Terms - Interpretation - Showing of “True Consideration” - Reformation - Subsequent Modifications - Additional Terms Under Article 2

Question 229

A party to a written contract can attack the agreement’s validity. The party acknowledges (concedes) that the writing reflects the agreement but asserts, most frequently, that the agreement never came into being because of any of the following: (and this doesn't violate the parol evidence rule)

Answer 229

- Formation Defects - Conditions Precedent to Effectiveness

Question 230

If a party asserts that there was an oral agreement that the written contract would ____, all evidence of the understanding may be offered and received without violating the PER.

Answer 230

not become effective until a condition occurred

Question 231

Parol evidence is often said to be admissible if the alleged parol agreement is ____ to the written obligation (that is, related to the subject matter but not part of the primary promise) and ____

Answer 231

collateral; does not conflict with it.

Question 232

The Restatements of Contracts allows parol evidence in that would naturally be omitted from the written agreement. A term would naturally be omitted if:

Answer 232

(1) it does not conflict with the written integration; and (2) it concerns a subject that similarly situated parties would not ordinarily be expected to include in the written instrument.

Question 233

If there is ____, parol evidence can be received to aid the fact finder in reaching a correct interpretation of the agreement.

Answer 233

uncertainty or ambiguity in the written agreement’s terms or a dispute as to the meaning of those terms

Question 234

The parol evidence rule will not bar extrinsic evidence showing the ____ paid

Answer 234

“true consideration” (such as evidence that the consideration stated in the contract was never paid).

Question 235

If a party to a written agreement alleges facts (for example, mistake) entitling him to ____, the parol evidence rule is inapplicable.

Answer 235

reformation of the agreement

Question 236

Parol evidence can be offered to show subsequent ____ of a written contract.

Answer 236

modifications

Question 237

Article 2 generally follows the rules discussed above, providing that a party can’t contradict a written contract but may add consistent additional terms unless:

Answer 237

(1) there is a merger clause, or (2) the courts find from all of the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement.

Question 238

Article 2 also provides that a written contract’s terms may be explained or supplemented by evidence of ____—regardless of whether or not the writing appears to be ambiguous

Answer 238

course of performance, course of dealing, and usage of trade

Question 239

Hierarchy of interpretation

Answer 239

1 - The contract itself 2 - Course of performance (Parties conduct under prior instalment of the CURRENT contract) 3 - Course of dealing (parties conduct in PRIOR contracts) 4 - Trade usage/customer (Industry norms that parties are aware of)

Question 240

Contracts will be construed as a ____; specific clauses will be subordinated to the contract’s ___

Answer 240

“whole”; general intent.

Question 241

The courts will construe words according to their ___ meaning unless it is clearly shown that they were meant to be used in a technical sense.

Answer 241

“ordinary”

Question 242

If provisions appear to be inconsistent, ____ provisions will prevail over printed provisions

Answer 242

written or typed

Question 243

The courts generally will try to reach a determination that a contract is ____

Answer 243

valid and enforceable.

Question 244

Ambiguities in a contract are construed against ____, absent evidence of the intention of the parties.

Answer 244

the party preparing the contract

Question 245

UCC Supplemental (“Gap-Filler”) Terms, cover (only need subject and quantity):

Answer 245

- Price - Place of Delivery - Timing of Shipment/Delivery - Time for payment - Assortment

Question 246

Under the UCC If: (1) nothing has been said as to price; (2) the price is left open to be agreed upon by the parties and they fail to agree; or (3) the price is to be fixed in terms of some standard that is set by a third person or agency and it is not set, then the price is _____

Answer 246

a reasonable price at the time for delivery.

Question 247

Under the UCC If the place of delivery isn’t specified, the place usually is ____

Answer 247

the seller’s place of business, if they have one; otherwise, it’s the seller’s home.

Question 248

Under the UCC If the time for shipment or delivery isn’t specified, shipment/delivery is due ____

Answer 248

within a reasonable time.

Question 249

Under the UCC if the time for payment isn’t specified, payment is due ____

Answer 249

at the time and place at which the buyer is to receive the goods.

Question 250

If a contract provides that an assortment of goods is to be delivered (for example, blouses in various colors and sizes) and doesn’t specify which party is to choose, the assortment is at the ____. If the party who has the right to specify the assortment doesn’t do so seasonably, the other party is ___

Answer 250

buyer’s option; excused from any resulting delay and may either proceed in any reasonable manner (for example, choose a reasonable assortment) or treat the failure as a breach.

Question 251

Types of warranties

Answer 251

Express, Implied (by law)

Question 252

Express Warranties include

Answer 252

Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain.

Question 253

For the statement, description, sample, or model to be a part of the basis of the bargain (and thus be an express warranty), it need only come at such a time that ___

Answer 253

the buyer could have relied on it when they entered into the contract. (intent is not relevant) -> The buyer does not need to prove that they actually did rely, although the seller may negate the warranty by proving that the buyer as a matter of fact did not rely.

Question 254

A statement relating ____, doesn’t create an express warranty.

Answer 254

merely to the value of the goods, or a statement purporting to be only the seller’s opinion or commendation of the goods (mere puffery)

Question 255

Implied in ___ contract for sale by a ____, there is a warranty that the goods are merchantable.

Answer 255

every; merchant who deals in goods of the kind sold

Question 256

To be merchantable, goods must at least be ___

Answer 256

“fit for the ordinary purpose for which such goods are used.”

Question 257

As in all implied warranty cases, it makes no difference that the seller ____. Implied warranties aren’t based on negligence but rather on ___ that is imposed on certain sellers.

Answer 257

didn’t know of the defect or that they couldn’t have discovered it; absolute liability

Question 258

Implied Warranty of Fitness for a Particular Purpose: A warranty will also be implied in a contract for the sale of goods whenever ___

Answer 258

(1) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment to select suitable goods; and (2) the buyer in fact relies on the seller’s skill or judgment.

Question 259

Warranty of Title

Answer 259

Any seller of goods warrants that the title transferred is good, that the transfer is rightful, and that there are no liens or encumbrances against the title of which the buyer is unaware at the time of contracting. -> Any seller of goods warrants that the title transferred is good, that the transfer is rightful, and that there are no liens or encumbrances against the title of which the buyer is unaware at the time of contracting.

Question 260

Warranty of Title applies to ___

Answer 260

any seller

Question 261

Warranty Against Infringement

Answer 261

A merchant seller regularly dealing in goods of the kind sold also automatically warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims. -> But a buyer who furnishes specifications for the goods to the seller must hold the seller harmless against such claims

Question 262

Warranty Against Infringement applies to

Answer 262

A merchant seller regularly dealing in goods of the kind sold

Question 263

The title warranty can be disclaimed or modified only by ____

Answer 263

specific language or by circumstances that give the buyer notice that the seller does not claim title or that they are selling only such rights as they or a third party may have (for example, a sheriff’s sale).

Question 264

The implied warranties of merchantability and fitness for a particular purpose can be disclaimed by ____

Answer 264

either specific disclaimers or general methods of disclaimer.

Question 265

The warranty of merchantability can be specifically disclaimed or modified only by mentioning ___. If the sales contract is in writing, the disclaimer must be ____

Answer 265

merchantability; conspicuous.

Question 266

The warranty of fitness for a particular purpose can be specifically disclaimed only by a ___ writing.

Answer 266

conspicuous (A written disclaimer is sufficient if it says, for example, “there are no warranties which extend beyond the description on the face hereof.”)

Question 267

A term is conspicuous when it is ____

Answer 267

“so written, displayed, or presented that a reasonable person against whom it is to operate ought to have noticed it.”

Question 268

Language in the body of a writing is conspicuous if: ____

Answer 268

(1) it is in larger type than surrounding text; (2) it is in a contrasting type, font, or color; or (3) it is set off from the text by marks that call attention to it.

Question 269

Unless the circumstances indicate otherwise, the implied warranties of merchantability and fitness can be disclaimed by expressions such as ____ or other expressions that in common understanding call the buyer’s attention to the fact that there are no implied warranties. Although this type of disclaimer ____, a hidden or fine-print disclaimer of this type is not effective.

Answer 269

“as is,” “with all faults,” (magic words); does not have to be conspicuous

Question 270

Can you disclaim express warranties?

Answer 270

No!

Question 271

If the buyer, before entering into the contract, has examined the goods or a sample or model as fully as they desire or has refused to examine, there is ____

Answer 271

no warranty as to defects that a reasonable examination would have revealed.

Question 272

Implied warranties may also be disclaimed by the ___

Answer 272

course of dealing, course of performance, or usage of trade.

Question 273

The UCC provides that words or conduct relevant to the creation of express warranties and words or conduct tending to negate such warranties shall wherever possible be construed as consistent with each other, but ____

Answer 273

“negation or limitation is inoperative to the extent that such construction is unreasonable.”

Question 274

Parties ___ include in their contract a clause limiting the damages available in the case of breach of warranty. However, such a limitation won’t be upheld if it’s ___

Answer 274

may; unconscionable

Question 275

Warranty disclaimers that limit damages for ___ caused by a breach of warranty on consumer goods are ____

Answer 275

personal injury; prima facie unconscionable.

Question 276

To be effective, a disclaimer of warranty or limitation on remedies must be agreed to ____. Thus, although a few courts hold otherwise, most hold that a warranty disclaimer or limitation on remedy included inside the packaging of goods is ____

Answer 276

during the bargaining process; not effective against the buyer.

Question 277

Computer software often comes with terms that appear on the user’s computer screen during the installation process, and the purchaser must click to agree to the terms before installing. Such limitations and disclaimers typically are ____

Answer 277

upheld on the rationale that the purchaser can return the software if they disagree with the conditions.

Question 278

Generally, the measure of damages for breach of any warranty is ____

Answer 278

the difference between the value of the goods accepted and the value of the goods as warranted, measured at the time and place of acceptance. + In addition, the buyer can recover appropriate incidental and consequential damages.

Question 279

If the warranty of title is breached, the goods are reclaimed by the true owner or lienholder, thus dispossessing the buyer. The buyer may then ____. The value of the goods accepted is deemed to be nothing; so the damages are ____

Answer 279

rescind the contract, revoke acceptance of the goods, or sue for damages; the value of the goods as warranted (generally purchase price)

Question 280

If there are special circumstances, the value of the goods is measured at the time of the ____

Answer 280

dispossession rather than at the time of acceptance.

Question 281

Determining to whom warranty liability extends beyond the initial buyer approach

Answer 281

Majority = the seller’s warranty liability extends to any natural person who is in the family or household of the buyer or who is a guest in the buyer’s home if it is reasonable to expect that the person may use, consume, or be affected by the goods and that person suffers personal injury because of a breach of warranty.

Question 282

A contract’s delivery terms are important because they determine when ____ if the goods are damaged or destroyed.

Answer 282

risk of loss passes from the seller to the buyer

Question 283

If the buyer has a right to reject the goods, the risk of loss doesn’t pass to the buyer until ____

Answer 283

the defects are cured or the buyer accepts the goods in spite of their defects.

Question 284

If the buyer rightfully revokes acceptance, the risk of loss is treated as having rested ___

Answer 284

on the seller from the beginning to the extent of any deficiency in the buyer’s insurance coverage.

Question 285

Noncarrier Case: if the seller is a merchant, risk of loss passes to the buyer only when ____. If the seller is not a merchant, risk of loss passes to the buyer ____

Answer 285

they take physical possession of the goods; upon tender of delivery.

Question 286

Tender of delivery means for non-merchant cases:

Answer 286

When buyer knows where the goods are and how to get them

Question 287

There are two types of carrier cases:

Answer 287

shipment contracts and destination contracts.

Question 288

If the contract authorizes or requires the seller to ship the goods by carrier but does not require them to deliver the goods at a particular destination, it is a ___ and risk of loss passes to the buyer when ____

Answer 288

shipment contract; the goods are delivered to the carrier.

Question 289

In the absence of a contrary agreement, Article 2 presumes a contract is a ____ (shipment or destination)

Answer 289

shipment contract.

Question 290

In a shipment contract, the seller must:

Answer 290

(1) make a reasonable contract with the carrier on behalf of the buyer; (2) deliver the goods to the carrier; (3) promptly notify the buyer of the shipment; and (4) provide the buyer with any documents needed to take possession of the goods.

Question 291

If the contract requires the seller to deliver the goods at a particular destination it is a ___ contract, the risk of loss passes to the buyer when the goods are ___

Answer 291

destination; tendered to the buyer at the destination.

Question 292

FAS stands for “free alongside.” The term is generally used only when goods are to be shipped by ___. Risk of loss passes to the buyer ___

Answer 292

boat; once the goods are delivered to the dock.

Question 293

FOB stands for “free on board.” The letters FOB are always followed by a location (for example, a city name), and the risk of loss passes to the buyer ___

Answer 293

at the named location. The seller bears the risk and expense of getting the goods to the named location.

Question 294

A contract that doesn’t contain an FOB term or any other term explicitly allocating the risk of loss is a ____

Answer 294

shipment contract.

Question 295

What type of contract based on FOB terms

Answer 295

- if seller's city = shipping - if any other city = destination contract

Question 296

For the purpose of determining the risk of loss, a sale or return contract (meaning, the buyer takes goods for resale but may return them if they are unable to resell the goods) is treated as ___ for the risk of loss rules. If the goods are returned to the seller, the risk ____while the goods are in transit.

Answer 296

an ordinary sale; remains on the buyer

Question 297

In a sale on approval (that is, the buyer takes goods for use but may return them even if they conform to the contract), the risk of loss does not pass to the buyer until ___. If buyer decides to return the goods, return is at the ___ risk.

Answer 297

they accept; seller’s

Question 298

- If goods that were identified when the contract was made are destroyed ____ the contract is avoided (that is, the seller’s performance is excused). - If the goods were not identified until after the contract was made, the seller in this situation would have to prove ____.

Answer 298

(1) without fault by either party and (2) before the risk of loss passes to the buyer, impracticability.

Question 299

As noted above, a buyer often bears the risk of loss before receiving the goods purchased. To aid buyers in this situation (and a few others) Article 2 gives buyers a special property interest in goods as soon as they are identified as the ones that will be used to satisfy the contract (for example, as soon as the seller sets them aside for the buyer). This special property interest is ___

Answer 299

insurable.

Question 300

At common law, the contract includes the terms of the ____

Answer 300

last communication sent to the party who performed.

Question 301

A contract may be formed by the parties’ performance where the mirror image rule isn’t satisfied and under certain circumstances under Article 2’s “battle of the forms” provision. In such cases, under Article 2, the contract includes ___. Any necessary missing terms are ___

Answer 301

all of the terms on which the writings of both parties agree; filled in by the supplemental terms provided for in Article 2.

Question 302

A party’s basic duty at common law is to ____ all that is called for in the contract

Answer 302

substantially perform

Question 303

Article 2 generally requires a ___

Answer 303

perfect tender—the delivery and condition of the goods must be exactly as promised in the contract. -> can reject the entire shipment (even if 1/00 is wrong)

Question 304

Article 2 requires all parties to act in good faith, which is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.” This obligation ___ waived by the parties.

Answer 304

cannot be

Question 305

Seller’s Obligation of Tender in Noncarrier Cases

Answer 305

The seller must put and hold conforming goods at the buyer’s disposition for a time sufficient for the buyer to take possession. - The seller must give the buyer notice reasonably necessary to enable the buyer to take possession of the goods. - The tender must be at a reasonable hour.

Question 306

Seller’s Obligation of Delivery in Noncarrier Cases

Answer 306

In the absence of an agreement otherwise, the place of delivery generally is the seller’s place of business, or if he has none, his residence.

Question 307

A carrier case is a sale in which, due either to the circumstances or to the express terms of the agreement, it appears that the parties intended that ___

Answer 307

a carrier be used to move the goods (inverse is true for non-carrier case)

Question 308

Seller’s Obligation of Tender for carrier cases: Shipment Contracts—Where Seller Has Not Agreed to Tender at Particular Destination

Answer 308

In the absence of an agreement otherwise, the seller need not see that the goods reach the buyer, but need only: - Put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer - Obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession, and - Promptly notify the buyer of the shipment

Question 309

Seller’s Obligation of Tender for carrier cases: Destination Contracts—Where Seller Has Agreed to Tender at Particular Destination

Answer 309

If the contract requires the seller to tender delivery of the goods at a particular destination (for example, FOB buyer’s warehouse), the seller must, at the destination, put and hold conforming goods at the buyer’s disposition.

Question 310

In noncarrier cases, unless the contract provides otherwise, a sale is for ___ and the price is due ___

Answer 310

cash; concurrently with tender of delivery.

Question 311

Unless otherwise agreed, when goods are shipped by carrier, the price is due ____

Answer 311

only at the time and place at which the buyer receives the goods. -> In a shipment case the price is due when the goods are put in the hands of the carrier; and in a destination contract the price is due when the goods reach the named destination.

Question 312

In an installment contract (that is, one that requires or authorizes delivery in separate installments), the seller may demand payment for ____, unless a contrary intent appears.

Answer 312

each installment if the price can be so apportioned

Question 313

The buyer has a right to ___ before they pay unless the contract provides for payment C.O.D. or otherwise indicates that the buyer has promised to pay without inspecting the goods.

Answer 313

inspect the goods

Question 314

Buyer acceptance can be implied where they are

Answer 314

kept after reasonable time to inspect (even if they didn't say they accept) - Merely paying for goods u front is not acceptance

Question 315

Tender of payment by check is ____. If a check is given, the buyer’s duty to pay is suspended until the check is either ___

Answer 315

- sufficient unless the seller demands cash and gives the buyer time to get it - Paid or dishonored --> If the check is paid, the buyer’s duty to pay is discharged. --> If the check is dishonored, the seller may sue for the price or recover the goods.

Question 316

A contract may provide that a party does not have a duty to perform unless some condition is fulfilled. In that case, the party’s failure to perform is justified if ____

Answer 316

the condition was not fulfilled.

Question 317

A person is ___ if there has been an offer, an acceptance, and an exchange of consideration. However, the contract may provide (impliedly or explicitly) that a party who is bound does not have a duty to perform ____

Answer 317

bound; unless or until some specified condition occurs.

Question 318

A ___ is a commitment to do or refrain from doing something. If it is ____ the failure to perform according to its terms is a breach of contract.

Answer 318

promise; unconditional

Question 319

“Condition” normally means either: ____

Answer 319

(1) an event or state of the world that must occur or fail to occur before a party has a duty to perform; or (2) an event or state of the world, the occurrence or nonoccurrence of which releases a party from their duty to perform.

Question 320

A condition is a ___. There can be no breach of promise until the promisor is under an immediate duty to perform.

Answer 320

“promise modifier.”

Question 321

The failure of a contractual provision that is only a condition is not ___, but it discharges the liability of the promisor whose obligations on the conditional promise never mature.

Answer 321

a breach of contract

Question 322

What determines whether a contract provision is a promise or a condition is the ___. In doubtful situations, most courts will hold that the provision in question is a ___.

Answer 322

“intent of the parties”; promise.

Question 323

If a condition doesn't occur that excuses a promisor's performance, the promisor may __

Answer 323

waive the condition.

Question 324

Words such as “provided,” “if,” and “when” usually indicate a ___, whereas “promise” and “agree” usually indicate a ____.

Answer 324

condition; promise.

Question 325

____ normally refers to an explicit contractual provision.

Answer 325

“Express condition”

Question 326

Many contracts include an express condition that a party will pay only if “satisfied” with the other party’s performance. Because it is a condition, the promisor is under no duty to pay unless ____

Answer 326

they are satisfied.

Question 327

In contracts involving mechanical fitness, utility, or marketability (for example, construction or manufacturing contracts), a condition of satisfaction is fulfilled by a performance that would satisfy a ____

Answer 327

reasonable person. It is therefore immaterial that the promisor was not personally satisfied if a reasonable person would have accepted and approved the performance tendered.

Question 328

If the contract involves personal taste or personal judgment (for example, portraits, dental work), a condition of satisfaction is fulfilled only if the promisor is ____.

Answer 328

personally satisfied. But note: Even if a condition requires personal satisfaction, a promisor’s lack of satisfaction must be honest and in good faith.

Question 329

When the satisfaction of a third person is a condition, most courts require the ___. However, the condition will be excused if the third person’s dissatisfaction is ____

Answer 329

actual personal satisfaction of that person; not honest and in good faith.

Question 330

When it is clear that the purpose of a condition is to protect or benefit only one of the parties, the other party’s duty will ____

Answer 330

not be subject to the condition.

Question 331

____ is one that must occur before an absolute duty of immediate performance arises in the other party.

Answer 331

A condition precedent

Question 332

____ are those that are capable of occurring together, and that the parties are bound to perform at the same time (for example, tender of deed for cash).

Answer 332

Conditions concurrent

Question 333

____ is one that, when it occurs, cuts off an already existing absolute duty of performance.

Answer 333

A condition subsequent

Question 334

The most important and common implied condition is that the duty of each party to render performance is conditioned on ____

Answer 334

the other party either rendering their performance or making a tender of their performance.

Question 335

Constructive (Implied) Conditions

Answer 335

- Constructive Conditions of Performance - Constructive Conditions of Cooperation and Notice - Order of Performance

Question 336

Under a constructive condition of cooperation, the obligation of one party to render performance is impliedly conditioned on ____. - Also, it’s often a condition to one party’s performance that the other party ____.

Answer 336

the other party’s cooperation in that performance - give notice that the performance is due

Question 337

An implied condition of notice is most commonly applied where a party ____ unless notice was given.

Answer 337

couldn’t reasonably be expected to know a fact (for example, need for repair) that triggered the duty to perform

Question 338

The courts sometimes imply constructive conditions relating to the ___ for performing under the contract.

Answer 338

time/order

Question 339

Order of Performance: Simultaneous Performance Possible

Answer 339

If both performances can be rendered at the same time, they are constructively concurrent -> absent excuse, each party must first tender their own performance if they wish to put the other under a duty of immediate performance that would result in breach if they fail to perform.

Question 340

Order of performance: One Performance Takes Time

Answer 340

If one performance will take a period of time to complete while the other can be rendered in an instant, completion of the longer performance is a constructive condition precedent to execution of the shorter performance.

Question 341

If a contract is not enforceable due to the failure or occurrence of a condition, and one of the parties has fully or partially performed, they can usually recover under ___

Answer 341

unjust enrichment theories (although the measure of damages in that case may be less advantageous than the contract price)

Question 342

A duty of immediate performance with respect to a conditional promise doesn’t become absolute until the conditions ____

Answer 342

(1) have been performed or (2) legally excused

Question 343

Excuse of conditions can arise in a variety of ways:

Answer 343

- Excuse of Condition by Hindrance or Failure to Cooperate - Excuse of Condition by Waiver or Estoppel - Excuse of Condition by Actual Breach - Excuse of Condition by Anticipatory Repudiation - Excuse of Condition by Prospective Inability or Unwillingness to Perform - Excuse of Condition by Substantial Performance - Excuse of Condition by “Divisibility” of Contract - Excuse of Condition by Impossibility, Impracticability, or Frustration

Question 344

If a party having a duty of performance that is subject to a condition (that is, the party protected by the condition) prevents the condition from occurring, the condition will be excused if the prevention is ___

Answer 344

wrongful (they forfeit the protection of the condition)

Question 345

One having the benefit of a condition under a contract may indicate by ___that they will not insist on that condition’s being met. Consideration is ___ for a valid waiver of condition.

Answer 345

words or conduct; not required

Question 346

Whenever a party indicates they are waiving a condition before it is to happen, or they are waiving some performance before it is to be rendered, and the person addressed detrimentally relies on the waiver, the courts will hold this to be a ____ -> Note, however, that the promise to waive a condition may be retracted at any time____

Answer 346

binding (estoppel) waiver; before the other party has changed their position to their detriment

Question 347

When a condition doesn’t occur or a duty of performance is broken, the beneficiary of the condition or duty must make an election; they may: (1) terminate their liability, or (2) continue under the contract. -> If they choose to continue, they will be deemed to have waived the condition or duty, referred to as an ___.

Answer 347

election waiver

Question 348

An election waiver requires neither ____ (although estoppel elements are often present). Note that an election waiver ____ withdrawn—even if the other party has not relied on it.

Answer 348

consideration nor estoppel; cannot be

Question 349

If no consideration is given for the waiver, the condition must be ____ for the waiver to be effective.

Answer 349

ancillary or collateral to the main subject and purpose of the contract -> In other words, you cannot “waive” entitlement to the entire or substantially entire return performance

Question 350

In an installment contract, if a waiver isn’t supported by consideration, the beneficiary of the waived condition can insist on strict compliance with the terms of the contract for ____ (so long as there has been no detrimental reliance on the waiver) by ____

Answer 350

future installments; giving notice that he is revoking the waiver.

Question 351

a waiver severs only the right to treat the failure of the condition as a ____ excusing counter-performance. However, the waiving party does not thereby waive her right to ____

Answer 351

total breach; damages.

Question 352

An actual breach of the contract when performance is due will ____. Note, however, that counter performance will be excused at common law only if the breach is ___.

Answer 352

excuse the duty of counter performance; material (A minor breach may suspend this duty, but it won’t excuse it)

Question 353

____ occurs if a promisor, prior to the time set for performance of their promise, indicates that they won’t perform when the time comes.

Answer 353

Anticipatory repudiation

Question 354

Requirements of anticipatory repudiation

Answer 354

- applies only if there is a bilateral contract with executory (unperformed) duties on both sides. - stems from the words or conduct of the promisor unequivocally indicating that he cannot or will not perform when the time comes.

Question 355

In the case of an anticipatory repudiation, the nonrepudiating party has 4 alternatives:

Answer 355

1. Treat the anticipatory repudiation as a total repudiation and sue immediately 2. Suspend their own performance and wait to sue until the performance date 3. Treat the repudiation as an offer to rescind and treat the contract as discharged 4. Ignore the repudiation and urge the promisor to perform (but note that by urging the promisor to perform, the nonrepudiating party is not waiving the repudiation—they can still sue for breach and are excused from performing unless the promisor retracts the repudiation)

Question 356

A repudiating party may at any time before their next performance is due ____ unless the other party has _____

Answer 356

withdraw their repudiation; canceled, materially changed their position in reliance on the repudiation, or otherwise indicated that they consider the repudiation final.

Question 357

____ of condition occurs when a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performance is due.

Answer 357

Prospective failure

Question 358

Prospective inability or unwillingness to perform is not an anticipatory repudiation because such a repudiation must be ____, whereas prospective failure to perform involves conduct or words that ___

Answer 358

unequivocal, merely raise doubts that the party will perform.

Question 359

The effect of prospective failure is to allow the innocent party to ____. If the other party fails to provide that, the innocent party may be ____

Answer 359

suspend further performance on their side until they receive adequate assurances that performance will be forthcoming; excused from their own performance and may treat the failure to provide assurances as a repudiation

Question 360

Adequate assurances should be requested in ___

Answer 360

writing.

Question 361

Adequate assurances cannot ____

Answer 361

Modify the contract

Question 362

Retraction of Repudiation: As with anticipatory repudiation, retraction is possible if the defaulting party regains their ability or willingness to perform. However, this fact must be ____ in order to be effective.

Answer 362

communicated to the innocent party

Question 363

Generally, the condition of complete performance may be excused if the party has rendered ____

Answer 363

substantial performance. -> It should be noted, however, that courts generally apply this doctrine only if a constructive (implied in law) condition is involved. They won’t apply it when there is an express condition for fear this would defeat the express intent of the parties.

Question 364

Most courts won’t apply the substantial performance doctrine if the breach was ___

Answer 364

“willful."

Question 365

Even though the party who has substantially performed is able to enforce the contract, the other party will be able to ___

Answer 365

mitigate by deducting damages suffered due to the first party’s incomplete performance.

Question 366

The doctrine of substantial performance doesn’t apply to contracts for the sale of goods because ____

Answer 366

perfect tender is generally required.

Question 367

If a contract is divisible and a party performs one of the units of the contract, they are entitled to ____.

Answer 367

the agreed-on equivalent for that unit even if they fail to perform the other units. However, the other party has a cause of action for failure to perform the other units and may withhold their counter performance for those units. -> It isn’t a condition precedent to the other party’s liability that the whole contract be performed.

Question 368

What Is a “Divisible” Contract? (that can be pro rated for how much is performed by excuse of condition)

Answer 368

Three tests must be concurrently satisfied to make a contract divisible: a) The performance of each party is divided into two or more parts under the contract. b) The number of parts due from each party is the same. c) The performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party, meaning each performance is the quid pro quo of the other. --> Whenever you see a common law contract that contains a price per unit, you should immediately consider divisibility as an issue.

Question 369

Like the common law, Article 2 assumes that a contract is not divisible unless____, in which case, the contract is called an installment contract. In These contracts, the price, if it can be apportioned, ____ unless a contrary intent appears.

Answer 369

it authorizes deliveries in several lots; may be demanded for each lot

Question 370

Conditions (like performance) may be excused by ____

Answer 370

impossibility, impracticability, or frustration of purpose

Question 371

Once it is determined that a party is under an immediate duty to perform, the duty to perform must ___

Answer 371

be discharged.

Question 372

The most obvious way to discharge a contractual duty is, of course, by ____. Good faith tender of performance ___ will also discharge contractual duties.

Answer 372

full and complete performance; made in accordance with contractual terms

Question 373

Ways THE ABSOLUTE DUTY TO PERFORM may be DISCHARGED?

Answer 373

- Discharge by Performance or Tender of Performance - Discharge by Occurrence of Condition Subsequent - Discharge by Illegality - Discharge by Rescission - Partial Discharge by Modification of Contract - Discharge by Cancellation - Discharge by Release - Discharge by Substituted Contract - Discharge by Accord and Satisfaction - Discharge by Novation - Discharge by Impossibility, Impracticability, or Frustration - Discharge by Account Stated - Discharge by Lapse - Effect of Running of Statute of Limitations

Question 374

The occurrence of a ___ will serve to discharge contractual duties.

Answer 374

condition subsequent

Question 375

If the subject matter of the contract has become illegal ____, performance will be discharged.

Answer 375

due to a subsequently enacted law or other governmental act - Note: If the illegality existed at the time the agreement was made, no contract was formed because of the illegality

Question 376

Rescission will serve to discharge contractual duties. Rescission may be either ____

Answer 376

mutual or unilateral

Question 377

The contract may be discharged by an ____ to rescind. -> The agreement to rescind is itself a binding contract supported by consideration, namely, the giving up by each party of their right to counter performance from the other.

Answer 377

express agreement between the parties

Question 378

If the rights of a third-party beneficiary have already vested, the contract ____ by mutual rescission by the promisor and promisee

Answer 378

cannot be discharged

Question 379

If the contract is unilateral (meaning only one party owes an absolute duty), a contract to mutually rescind where one party still has a duty to perform will ___

Answer 379

be ineffective.

Question 380

For an effective rescission in a unilateral contract situation where the offeree has already performed, the rescission promise must be supported by one of the following:

Answer 380

- An offer of new consideration by the nonperforming party - Elements of promissory estoppel, meaning detrimental reliance, or - Manifestation of an intent by the original offeree to make a gift of the obligation owed them

Question 381

A mutual agreement to rescind will usually be enforced when a bilateral contract has been ____. Whether that party will be entitled to compensation _____

Answer 381

partially performed; depends on the terms of the rescission agreement.

Question 382

Under CL mutual rescission may be made orally. This is so ____, unless the subject matter of the contract to be rescinded falls within the Statute of Frauds (for example, transfer of land) or the contract is for the sale of goods.

Answer 382

even though the contract to be rescinded expressly states that it can be rescinded only by a written document

Question 383

Article 2 requires a written rescission or modification if ____

Answer 383

the original contract to be rescinded or modified expressly requires a written rescission

Question 384

For unilateral rescission to be granted, the party desiring rescission must have ___. If the nonassenting party refuses to voluntarily grant rescission, the other party may____.

Answer 384

adequate legal grounds. Most common among these are mistake, misrepresentation, duress, and failure of consideration. file an action in equity to obtain it.

Question 385

If a contract is subsequently modified by the parties, this will serve to discharge ____. It will not serve to discharge ____.

Answer 385

those terms of the original contract that are the subject of the modification; the entire contract.

Question 386

Like the original agreement, an agreement modifying a common law contract requires ____. Courts usually find consideration to be present because ____

Answer 386

mutual assent and consideration; each party has limited their right to enforce the original contract as is.

Question 387

The destruction or surrender of a written contract will not usually, by itself, discharge the contract. If, however, the parties ____, it will usually have this effect if consideration or one of its alternatives is present.

Answer 387

manifest their intent to have these acts serve as a discharge

Question 388

A release and/or contract not to sue will serve to discharge contractual duties. The release or contract not to sue usually must be ____

Answer 388

in writing and supported by new consideration or promissory estoppel elements.

Question 389

A contract may be discharged by a substituted contract. This occurs when the parties to a contract ____

Answer 389

enter into a second contract that immediately revokes the first contract expressly or impliedly.

Question 390

Whether a second contract will constitute a substituted contract depends on whether the parties intend ____.

Answer 390

an immediate discharge or a discharge only after performance of the second contract - If an immediate discharge is intended = there is a substituted contract. If the parties intend the first contract to be discharged only after performance of the second contract, there is an executory accord rather than a substituted contract.

Question 391

An ___ is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that they are supposed to receive from the other party, some other, different future performance.

Answer 391

accord

Question 392

The accord, taken alone, ____; it ____ in accordance with the terms of the accord contract.

Answer 392

won’t discharge the prior contract; merely suspends the right to enforce it (can still sue pursuant to the original contract)

Question 393

___ is the performance of the accord agreement. Its effect is to discharge not only the original contract but also the accord contract as well.

Answer 393

Satisfaction

Question 394

In general, an accord must be supported by ___. Even if this is of a lesser value than the originally bargained-for consideration in the prior contract, it will be sufficient if ____

Answer 394

consideration; the new consideration is of a different type or if the claim is to be paid to a third party.

Question 395

The majority view is that a debtor’s offer to make a partial payment on an existing debt will suffice for an accord and satisfaction if ____

Answer 395

there is some “bona fide dispute” as to the underlying claim or there is otherwise some alteration, even if slight, in the debtor’s consideration.

Question 396

If a monetary claim is uncertain or is subject to a bona fide dispute, an accord and satisfaction may be accomplished by ____

Answer 396

a good faith tender and acceptance of a check when that check (or an accompanying document) conspicuously states that the check is tendered in full satisfaction of the debt.

Question 397

If the debtor breaches an accord agreement, the creditor may sue ____

Answer 397

either on the original undischarged contract or for breach of the accord agreement

Question 398

If a creditor breaches an accord agreement by suing on the original contract, the debtor has two courses of action available:

Answer 398

(1) raise the accord agreement as an equitable defense and ask that the contract action be dismissed; or (2) wait until they are damaged (meaning, the creditor is successful in their action on the original contract) and then bring an action at law for damages for breach of the accord contract

Question 399

In an accord, the parties to an existing obligation agree to _____ -> if the accord’s agreed-to performance is carried out as promised (satisfaction), the duty under the original contract is discharged; but if it is no carried out, the original contract remains enforceable CF: in a modification, the parties to an existing obligation want to change their agreement so they ____. -> The duties of the parties change immediately, and the original terms are no longer in effect and can no longer be enforced.

Answer 399

accept a different future performance in satisfaction of the original obligation. agree to a different agreement

Question 400

Accord and satisfaction is usually triggered by ____

Answer 400

a dispute of an amount due.

Question 401

A novation occurs when a new contract ____

Answer 401

substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract.

Question 402

A novation will serve to ____ the old contract

Answer 402

discharge

Question 403

The elements for a valid novation are:

Answer 403

(1) a previous valid contract; (2) an agreement among all parties, including the new party (or parties) to the new contract; (3) the immediate extinguishment of contractual duties as between the original contracting parties; and (4) a valid and enforceable new contract.

Question 404

The occurrence of an unanticipated or extraordinary event may make contractual duties impossible or impracticable to perform or may frustrate the purpose of the contract. Where the nonoccurrence of the event was a ____ in making the contract and ____, contractual duties may be discharged.

Answer 404

basic assumption of the parties; neither party has expressly or impliedly assumed the risk of the event occurring

Question 405

For MBE purposes, the term “impracticability” includes both ____

Answer 405

impossibility and impracticability - Impracticability = generally the term for goods

Question 406

To discharge a duty pursuant to impracticability, the impossibility must be ____

Answer 406

“objective”; that is, the duties could not be performed by anyone.

Question 407

To discharge a duty pursuant to impracticability, the impossibility must arise ___

Answer 407

after the contract has been entered into. (otherwise = contract formation issue)

Question 408

If a contract is discharged because of impossibility, each party is ____. Either party may sue for ____

Answer 408

excused from duties arising under the contract that are yet to be fulfilled; rescission and receive restitution of any goods delivered, payments made, etc.

Question 409

If the performance to be rendered under the contract becomes only partially impossible, the duty may be discharged ___

Answer 409

only to that extent. The remainder of the performance may be required according to the contractual terms.

Question 410

Temporary impossibility ___ contractual duties.

Answer 410

suspends (it does not discharge them) -> When performance once more becomes possible, the duty “springs back” into existence unless the burden on either party to the contract would be substantially increased or different from that originally contemplated.

Question 411

If a party partially performed before the impossibility arose, that party will have a right to recover in ____

Answer 411

quasi-contract at the contract rate or for the reasonable value of his performance if that is a more convenient mode of valuation.

Question 412

Death or the physical incapacity of a person ___ serves to discharge it.

Answer 412

necessary to effectuate the contract - If another person can do it = not excused - Payor is not essential = estate can pay

Question 413

___ may serve to discharge a contract. Many courts treat this as a form of impossibility.

Answer 413

Supervening illegality

Question 414

If the contract’s subject matter is ____, contractual duties will be discharged.

Answer 414

destroyed or the designated means for performing the contract are destroyed -> Note that destruction of the subject matter will render a contract impossible only if the very thing destroyed is necessary to fulfill the contract.

Question 415

A contractor’s duty to construct a building is ____ by destruction of the work in progress. However, if the destruction was not caused by the contractor, most courts will ___

Answer 415

not discharged; excuse the contractor from meeting the original deadline (but still has to perform at original contract price).

Question 416

A contract ___ a building that is destroyed after work has begun is discharged (there is nothing left to repair), and to the extent the contractor has already performed, the contractor is entitled to ____.

Answer 416

to repair or remodel; recover in restitution for the value of the work done prior to the building’s destruction.

Question 417

The rules relating to discharge because of destruction of the subject matter will not apply if ___

Answer 417

the risk of loss has already passed to the buyer.

Question 418

The test for a finding of impracticability is that the party to perform has encountered:

Answer 418

- Extreme and unreasonable difficulty and/or expense, and - Its nonoccurrence was a basic assumption of the parties.

Question 419

Article 2 generally follows the above rules for impossibility and impracticability. If performance has become ____ the seller will be discharged to the extent of the impossibility or impracticability.

Answer 419

impossible or commercially impracticable,

Question 420

Article 2 Generally, provides that the seller assumes the risk of ____. However, if it’s fair to say that if the parties would not have placed on the seller the risk of the extraordinary occurrence, ____

Answer 420

the occurrence of unforeseen events and must continue to perform; the seller will be discharged.

Question 421

Under the UCC Events sufficient to excuse performance include a shortage of raw materials or the inability to convert them into the seller’s product because of contingencies such as war, strike, embargo, or unforeseen shutdown of a major supplier. Catastrophic local crop failure (as opposed to a mere shortage) also is sufficient for discharge. However, ___ are rarely sufficient for discharge unless they change the nature of the contract.

Answer 421

mere increases in costs (an increase in costs of more than 50% has been held to be insufficient.)

Question 422

If the seller’s inability to perform as a result of the unforeseen circumstance is only partial, they must ____

Answer 422

allocate deliveries among their customers and, at their option, may include in the allocation regular customers not then under contract.

Question 423

Frustration will exist if the purpose of the contract has become ____

Answer 423

valueless by virtue of some supervening event not the fault of the party seeking discharge. -> If the purpose has been frustrated, a number of courts will discharge contractual duties even though performance of these duties is still possible.

Question 424

The elements necessary to establish frustration are as follows:

Answer 424

- There is some supervening act or event leading to the frustration. - At the time of entering into the contract, the parties did not reasonably foresee the act or event occurring. - The purpose of the contract has been completely or almost completely destroyed by this act or event. - The purpose of the contract was realized by both parties at the time of making the contract. (BIG ONE)

Question 425

A seller of land, goods, or services will raise ___ as a defense that discharges performance. By contrast, the party who is supposed to pay (usually the buyer) will raise ___ as a defense discharging performance.

Answer 425

impossibility or impracticability; frustration of purpose (paying money is never impracticable)

Question 426

An ___ is a contract between parties whereby they agree to an amount as a final balance due from one to the other. - This final balance encompasses a number of transactions between the parties and serves to ___

Answer 426

account stated; merge all of these transactions by discharging all claims owed.

Question 427

If the duty of each party is a condition concurrent to the other’s duty it is possible that on the day set for performance, neither party is in breach and their contractual obligations ___. If the contract states that time is “of the essence,” the lapse will occur ___; otherwise the contract will lapse after ___.

Answer 427

lapse; immediately; a reasonable time.

Question 428

If the statute of limitations on an action has run, it is generally held that an action for breach of contract may be barred. Note, however, that only ___ are barred; the running of the statute does not ____.

Answer 428

judicial remedies; discharge the duties

Question 429

If it is found that ____, then this failure to perform in accordance with contractual terms will amount to a breach of the contract.

Answer 429

(1) the promisor is under an absolute duty to perform, and (2) this absolute duty of performance has not been discharged

Question 430

Under the CL once you have determined that there is a breach of contract, the next step is ___

Answer 430

to determine whether that breach is material or minor.

Question 431

In determining whether a breach is material or minor under the CL, courts look at:

Answer 431

- The amount of benefit received by the nonbreaching party - The adequacy of compensation for damages to the injured party - The extent of part performance by the breaching party - Hardship to the breaching party - Negligent or willful behavior of the breaching party AND - The likelihood that the breaching party will perform the remainder of the contract

Question 432

A breach of contract is minor if the obligee ____. A minor breach does not relieve the aggrieved party of their duty of performance under the contract; it merely ____

Answer 432

gains the substantial benefit of their bargain despite the obligor’s defective performance; gives them a right to damages (setoff) for the minor breach.

Question 433

If the obligee does not receive the substantial benefit of their bargain, the breach is considered ___.

Answer 433

material

Question 434

If the breach is material, the nonbreaching party ____

Answer 434

(1) may treat the contract as at an end; that is, any duty of counterperformance owed by them will be discharged, and (2) will have an immediate right to all remedies for breach of the entire contract, including total damages

Question 435

If a minor breach is coupled with ____, the nonbreaching party may treat it as a material breach. Indeed, the courts hold that the aggrieved party must not continue on, because to do so would be a failure to mitigate damages.

Answer 435

an anticipatory repudiation

Question 436

In a divisible contract, recovery is available for ____ even though there has been a material breach of the entire contract.

Answer 436

substantial performance of a divisible part

Question 437

Failure to perform by the time stated in the contract is generally not a material breach if ____

Answer 437

performance is rendered within a reasonable time.

Question 438

If the nature of the contract makes ____ then failure to perform on time is usually a material breach.

Answer 438

timely performance essential, or if the contract expressly provides that time is of the essence -> Merely including a date for performance does not make time of the essence. -> modern courts look at all of the circumstances to determine whether performance on the specified date was vitally important and whether the parties truly intended it to be so.

Question 439

A buyer’s right to reject under the perfect tender doctrine generally is cut off by ____

Answer 439

acceptance

Question 440

Under Article 2, a buyer accepts when:

Answer 440

- After a reasonable opportunity to inspect the goods, they indicate to the seller that the goods conform to requirements or that they will keep the goods even though they fail to conform; - They fail to reject within a reasonable time after tender or delivery of the goods or fail to seasonably notify the seller of their rejection; OR - They do any act inconsistent with the seller’s ownership.

Question 441

After rejecting goods in their physical possession, the buyer must not treat the goods as if they own them. The buyer has an obligation to:

Answer 441

hold the goods with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them.

Question 442

If the seller has no agent or place of business within the market area where the goods are rejected, a merchant buyer has a further obligation to _____.

Answer 442

obey any reasonable instructions as to the rejected goods (for example, arrange to reship the goods).

Question 443

If the seller gives no instructions within a reasonable time for what to do with rejected goods, the buyer may ____

Answer 443

(1) reship the goods to the seller, (2) store them for the seller’s account, or (3) resell them for the seller’s account in a public sale or a private sale after giving the seller reasonable notice of the intent to resell.

Question 444

If the buyer properly resells the rejected goods, they are entitled to recover ____. If the buyer wrongfully exercises ownership over the rejected foods, the seller has ____

Answer 444

their expenses and a reasonable commission; an action against the buyer for conversion.

Question 445

Once goods are accepted, the buyer’s power to reject the goods generally is ____ and the buyer is obligated to pay ___

Answer 445

terminated; the price less any damages resulting from the seller’s breach.

Question 446

The buyer may revoke their acceptance of goods if:

Answer 446

- the goods have a defect that substantially impairs their value to the buyer, and - They accepted the goods on the reasonable belief that the defect would be cured and it has not been OR - They accepted the goods because of the difficulty of discovering the defects or because of the seller’s assurance that the goods conformed to the contract.

Question 447

Revocation of acceptance of goods must occur: ____

Answer 447

(1) within a reasonable time after the buyer discovers or should have discovered the defects; and (2) before any substantial change in the goods occurs that is not caused by a defect present at the time the seller relinquished possession.

Question 448

Exceptions to the Perfect Tender Rule

Answer 448

- Seller’s Right to Cure - Installment Contracts

Question 449

If the buyer has rejected goods because of defects, the seller may within the time ____ “cure” by giving ____ that the buyer must then accept.

Answer 449

originally provided for performance; reasonable notice of their intention to do so and making a new tender of conforming goods

Question 450

Ordinarily, the seller has no right to cure beyond the original contract time. However, if the buyer rejects a tender of nonconforming goods that the seller ____ the seller, upon a reasonable notification to the buyer, has a further reasonable time ____ within which to make a conforming tender

Answer 450

reasonably believed would be acceptable “with or without money allowance,”; beyond the original contract time

Question 451

A seller will probably be found to have had reasonable cause to believe that the tender would be acceptable (and thus get time beyond original contract for rejected foods) if the seller can show that ____

Answer 451

(1) trade practices or prior dealings with the buyer led the seller to believe that the goods would be acceptable, or (2) the seller could not have known of the defect despite proper business conduct (for example, packaged goods purchased from a supplier).

Question 452

In an installment contract situation under the UCC, an installment can be rejected only if ____. In addition, the whole contract is breached only if ____

Answer 452

the nonconformity substantially impairs the value of that installment and cannot be cured; the nonconformity substantially impairs the value of the entire contract.

Question 453

Sellers give warranties as to the condition of the goods that apply even ___ acceptance. Failure to live up to these warranties constitutes a breach of warranty, for which a remedy is available.

Answer 453

after

Question 454

Two broad branches of remedies available in breach of contract situations

Answer 454

nonmonetary and monetary.

Question 455

If the legal remedy (that is, money damages) is ____, the nonbreaching party may seek specific performance, which is an order from the court to the breaching party to ____

Answer 455

inadequate; perform or face contempt of court charges

Question 456

Specific performance is always available for ___ contracts, because ____. It is also available for goods that are ____

Answer 456

land sale; all land is unique; rare or unique at the time performance is due

Question 457

Specific Performance is not available for breach of a contract to provide ____, even if _____

Answer 457

services; the services are rare or unique.

Question 458

Even though specific performacne is unavailable a court may ____ a breaching employee from working for a competitor throughout the duration of the contract if ____

Answer 458

enjoin; the services contracted for are rare or unique.

Question 459

Most courts will grant an order of specific performance to enforce a contract not to compete if:

Answer 459

(1) the services to be performed are unique (thus rendering money damages inadequate); and (2) the covenant is reasonable.

Question 460

For a covenant not to compete unique services to be reasonable it must:

Answer 460

- be reasonably necessary to protect a legitimate interest of the person benefited by the covenant (that is, an employer or the purchaser of the covenantor’s business); - The covenant must be reasonable as to its geographic scope and duration (meaning, it cannot be broader than the benefited person’s customer base and typically cannot be longer than one or two years); and - The covenant must not harm the public.

Question 461

In addition to standard contract defenses, an action for specific performance is subject to the equitable defenses of:

Answer 461

Laches: a claim that the plaintiff has delayed bringing the action and that the delay has prejudiced the defendant; - Unclean hands—a claim that the party seeking specific performance is guilty of wrongdoing in the transaction being sued upon; and - Sale to a bona fide purchaser—a claim that the subject matter has been sold to a person who purchased for value and in good faith.

Question 462

Buyer’s Nonmonetary Remedies

Answer 462

- Cancellation - Buyer’s Right to Replevy Identified Goods - Buyer’s Right to Specific Performance

Question 463

If a buyer rightfully rejects goods because they do not conform to the contract, one of her options is simply to ____

Answer 463

cancel the contract.

Question 464

If a buyer has made at least part payment of the purchase price of goods that have been identified under a contract and the seller has not delivered the goods, the buyer may replevy the goods from the seller in two circumstances:

Answer 464

1 - The seller becomes insolvent within 10 days after receiving the buyer’s first payment; or 2 - The goods were purchased for personal, family, or household purposes. -> In either case, the buyer must tender any unpaid portion of the purchase price to the seller.

Question 465

If the buyer fails to make a payment due on or before delivery, the seller may ____.

Answer 465

withhold delivery of the goods

Question 466

The buyer may replevy undelivered, identified goods from the seller if the buyer, after reasonable effort, is ____

Answer 466

unable to secure adequate substitute goods

Question 467

A buyer has a right to specific performance “where the goods are ___ or in other proper circumstances.” The court may order specific performance even where ___

Answer 467

unique; the goods have not yet been identified to the contract by the seller.

Question 468

Seller’s Nonmonetary Remedies

Answer 468

- Seller’s Right to Withhold Goods - Seller’s Right to Recover Goods - Seller’s Ability to Force Goods on Buyer (limited)

Question 469

The seller may also withhold goods when the goods are sold on credit and, ____. However, in such a case, the seller must deliver the goods if the buyer ____

Answer 469

before the goods are delivered, the seller discovers that the buyer is insolvent; tenders cash for their payment.

Question 470

If a seller learns that a buyer has received delivery of goods on credit while insolvent, the seller may reclaim the goods upon demand made ____. However, this time limitation does not apply if a misrepresentation of solvency has been made ____

Answer 470

within 10 days after the buyer’s receipt of the goods; in writing to the particular seller within 3 months before delivery.

Question 471

The seller may stop delivery of goods in the possession of a carrier or other bailee if they discover that the buyer is ____. Of course, the seller must deliver the goods if the buyer ___

Answer 471

insolvent; tenders cash for their payment.

Question 472

The seller may stop delivery of carload, truckload, planeload, or larger shipments of goods if the buyer ____

Answer 472

breaches the contract or the seller has a right to withhold performance pending receipt of assurances.

Question 473

The seller’s ability to force goods on a buyer is limited to an action for price when the seller is ____

Answer 473

unable to resell the goods to others at a reasonable price.

Question 474

Actions or circumstances that increase the risk of nonperformance by a party to a contract but don’t ___ may not be treated immediately as an anticipatory repudiation

Answer 474

clearly indicate that performance will not be forthcoming;

Question 475

if there are reasonable grounds for insecurity (but there is not a clear indication performance will not be forthcoming) with respect to a party’s performance, the other party may ____. Until they receive this, the party may ____.

Answer 475

demand in writing assurances that the performance will be forthcoming at the proper time; suspend their own performance.

Question 476

If the proper assurances are not given within a reasonable time (that is, within ____), they may then treat the contract as ____.

Answer 476

30 days after a justified demand for assurances; repudiated.

Question 477

What constitutes an adequate assurance depends on ____.

Answer 477

the facts of the case

Question 478

Damages can be recovered only to the extent they can be proved with _____

Answer 478

reasonable certainty and could not be avoided with reasonable effort.

Question 479

The usual goal of compensatory damages for breach of contract is to put the nonbreaching party in the position they ____

Answer 479

would have been in had the promise been performed, so far as money can do this.

Question 480

In most cases, the plaintiff’s standard measure of damages will be based on an ____ measure.

Answer 480

“expectation” that is, sufficient damages for them to buy a substitute performance. This is also known as “benefit of the bargain” damages.

Question 481

If the plaintiff’s expectation damages are ____ , the plaintiff may elect to recover those damages they have suffered based on ____

Answer 481

too speculative to measure; their reasonable reliance on the contract

Question 482

Reliance damages award the plaintiff the ___

Answer 482

cost of their performance; that is, they are designed to put the plaintiff in the position that would have been in had the contract never been formed.

Question 483

Compensatory damages may also include ____ damages.

Answer 483

incidental

Question 484

____damages are most commonly associated with contracts for the sale of goods and typically include expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach.

Answer 484

Incidental

Question 485

____ damages are special damages and reflect losses over and above standard expectation damages.

Answer 485

Consequential

Question 486

Consequential damages arise because of the nonbreaching party’s particular circumstances, and most often they consist of ____

Answer 486

lost profits.

Question 487

Consequential damages may be recovered only if, ____

Answer 487

at the time the contract was made, a reasonable person would have foreseen the damages as a probable result of a breach. (Foreseeability is the key issue for consequential damages) -> the breaching party must have known or had reason to know of the special circumstances giving rise to the damages.

Question 488

In contracts for the sale of goods, only a ____ may recover consequential damages.

Answer 488

buyer

Question 489

The plaintiff must prove that the losses suffered were certain in their nature and ____

Answer 489

not speculative.

Question 490

Traditionally, if the breaching party prevented the nonbreaching party from setting up a new business, courts would not award lost profits from the prospective business as damages, because they were too speculative. However, modern courts may allow lost profits as damages if they can be made more certain by ____

Answer 490

observing similar businesses in the area or other businesses previously owned by the same party.

Question 491

____ damages are generally not awarded in contract cases.

Answer 491

Punitive

Question 492

____ damages may be awarded when a breach is shown but no actual loss is proven.

Answer 492

Nominal (token)

Question 493

The parties to a contract may stipulate what damages are to be paid in the event of a breach. These ____ damages must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach.

Answer 493

liquidated

Question 494

Liquidated damage clauses will be enforceable if the following two requirements are met:

Answer 494

1. Damages for contractual breach are difficult to estimate or ascertain at the time the contract is formed; AND 2. The amount agreed on is a reasonable forecast of compensatory damages in the case of breach. -> The test for reasonableness is a comparison between the amount of damages prospectively probable at the time of contract formation and the liquidated damages figure.

Question 495

If the liquidated damages amount is unreasonable, the courts will construe this as a ____ and will not enforce the provision.

Answer 495

penalty

Question 496

If the requirement for a liquidated damages clause are met, the plaintiff will receive the liquidated damages amount. Most courts hold this is so even if ____

Answer 496

no actual money or pecuniary damages have been suffered.

Question 497

If the seller doesn’t deliver, or the buyer properly rejects the goods or revokes acceptance of the goods, the buyer’s basic damages consist of the difference between the contract price and either: ____, plus ____, less ___

Answer 497

(1) the market price or (2) the cost of buying replacement goods (cover), plus incidental and consequential damages, if any, less expenses saved as a result of the seller’s breach.

Question 498

If the buyer of goods chooses the cover measure (the difference between contract price and cost of buying replacement goods), the buyer must ____

Answer 498

make a reasonable contract for substitute goods in good faith and without unreasonable delay (don't need to get exactly at prevailing market prive)

Question 499

Under the UCC the buyer’s damages are measured as of the time ___, while the seller’s damages are measured as of the time ____

Answer 499

they learn of the breach; for delivery.

Question 500

If the buyer accepts goods that breach one of the seller’s warranties, the buyer may recover as damages “loss resulting in the normal course of events from the breach.” The basic measure of damages in such a case is ____

Answer 500

the difference between the value of the goods as delivered and the value they would have had if they had been according to contract (not market value), plus incidental and consequential damages.

Question 501

To recover damages for any defect as to accepted goods, the buyer must, within a reasonable time after they discover or should have discovered the defect, ____

Answer 501

notify the seller of the defect. If they do not notify the seller within a reasonable time, they lose their right to sue.

Question 502

Under the UCC the measure of damages when the seller anticipatorily breaches the contract is the difference between ____

Answer 502

the market price at the time the buyer learned of the breach and the contract price.

Question 503

Under the UCC a seller is liable for consequential damages arising from their breach if:

Answer 503

(1) they had reason to know of the buyer’s general or particular requirements, and (2) the subsequent loss resulting from those needs could not reasonably be prevented by cover.

Question 504

For consequentialist damages under the UCC if the buyer is in the business of reselling the goods, the seller is deemed to ___

Answer 504

have knowledge of the resale.

Question 505

For consequentialist damages under the UCC if a seller knows that the goods they provide are to be used in the manufacturing process, they should know that their breach would cause ____

Answer 505

a disruption in production leading to a loss of profits.

Question 506

The Code provides three measures for damages for when the buyer wrongfully repudiates or refuses to accept conforming goods. In addition to incidental damages (for example, costs of storing, shipping, reselling), the seller can:

Answer 506

(1) Resell the goods and recover the difference between the contract price and the resale price (ii) Recover the difference between the market price (measured as of the time and at the place of delivery) and the contract price, or (iii) If the above measures are inadequate because the seller could have made an additional sale, recover under a “lost profits” measure the difference between the contract price and the cost to the seller.

Question 507

Other damages measures will never be adequate if the seller is a ____

Answer 507

lost volume seller.

Question 508

To determine whether the lost profits measure is appropriate, look at the seller’s supply. If the seller’s supply of goods is ___ , then they are a lost volume seller, and the lost profits measure can be used.

Answer 508

unlimited(that is, they can obtain all the goods they can sell)

Question 509

If the buyer has accepted the goods and has not paid, or has not accepted the goods, and the seller is unable to resell them at any reasonable price, or if the goods have been lost or damaged at a time the risk of loss was on the buyer, the seller may ____

Answer 509

maintain an action against the buyer for the full contract price.

Question 510

For a seller of land the standard measure of damages for breach of land sale contracts is ___

Answer 510

the difference between the contract price and the fair market value of the land.

Question 511

Breach by Employer: Irrespective of when the breach occurs—before performance, after part performance, or after full performance—the standard measure of the employee’s damages is ____

Answer 511

the full contract price

Question 512

If an employee materially breaches an employment contract, the employer is entitled to recover ____. The breaching employee may offset money owed for ____

Answer 512

the cost of replacing the employee (that is, the wages the employer must pay to a replacement employee minus the breaching employee’s wages); work done to date.

Question 513

When employment is at will ("permanent"), it may be terminated at any time for any reason. Thus termination of at-will employment by either party ____ in breach.

Answer 513

does not result

Question 514

If a construction contract is breached by the owner, the builder will be entitled to ____. If the contract is breached after construction is completed, the measure is ____.

Answer 514

profits that would have resulted from the contract plus any costs expended; the full contract price plus interest.

Question 515

If the contract is breached by the builder, the owner is entitled to ____. Most courts allow the builder to offset or recover for ____ to avoid unjust enrichment of the owner.

Answer 515

the cost of completion plus reasonable compensation for the delay; work performed to date

Question 516

If the breach on a construction by a builder is only late performance, the owner is entitled to ____.

Answer 516

damages incurred because of late performance.

Question 517

When a building contract is not properly performed, the owner is entitled to the cost of ____. However, unless there is ____, a court will not order a remedy that results in undue economic waste.

Answer 517

fixing the defect; special significance attached to use of a particular item and that significance is communicated to the builder

Question 518

If a contract calls for payments in installments and a payment is not made, there is only a ___. The aggrieved party is limited to recovering ____

Answer 518

partial breach; only the missed payment, not the entire contract price. -> However, the contract may include an acceleration clause making the entire amount due on any late payment, in which case the aggrieved party may recover the entire amount.

Question 519

Under the common law, the nonbreaching party cannot recover damages that could have been ____. Should they not do so, they will not be allowed to recover those damages that ___ after the breach.

Answer 519

avoided with reasonable effort; might have been avoided by such mitigation

Question 520

Generally, a party may recover the ____ of mitigation.

Answer 520

expenses

Question 521

If the breaching employer can prove that _____ was available, then contract damages against that breaching employer for lost wages will be reduced by the wages that the plaintiff would have received from that job.

Answer 521

a comparable job in the same locale

Question 522

Generally, in a contract to manufacture goods, if the person for whom the goods are being manufactured breaches, the manufacturer is under a duty to mitigate by ____. However, if the facts are such that completion of the manufacturing project will ____, the manufacturer has a right to continue.

Answer 522

not continuing work after the breach; decrease rather than increase damages

Question 523

For Construction Contracts a builder does not owe a duty to avoid the consequences of an owner’s breach by ____, for example, but does have a duty to mitigate by ____. Again, however, if ____, it will be allowed.

Answer 523

securing other work; not continuing work after the breach; completion will decrease damages

Question 524

Under Article 2, the rule of mitigation generally ____ apply. ____ damages are always available if the buyer does not cover or the seller does not resell.

Answer 524

does not; Market

Question 525

Even though there is no duty to mitigate under the UCC the seller generally cannot bring an action against the buyer for the full contract price unless the ____

Answer 525

goods cannot be resold at a reasonable price or were damaged or lost when the risk of loss was on the buyer.

Question 526

As an alternative to the contract damages, ___ may be available in a contract-type situation.

Answer 526

restitution (not really part of contract law, but rather is a distinct concept)

Question 527

Restitution is based on preventing ___ when one has conferred a benefit on another ___

Answer 527

unjust enrichment; without gratuitous intent.

Question 528

Restitution can provide a remedy not only when ___

Answer 528

a contract exists and has been breached, a contract is unenforceable, and in some cases when no contractual relationship exists at all between the parties.

Question 529

When a contract is unenforceable or no contract between the parties exists, an action to recover restitutionary damages often is referred to as an action for an implied in law contract, an action in ___, or an action for quantum meruit.

Answer 529

quasi-contract

Question 530

Generally, the measure of restitution is the ____

Answer 530

value of the benefit conferred.

Question 531

Restitution is usually based on the ____, recovery may also be measured by the ____ if the benefits are difficult to measure or the “benefit” measure would achieve an unfair result.

Answer 531

benefit received by the defendant; “detriment” suffered by the plaintiff

Question 532

When a contract has been breached and the nonbreaching party hasn’t ___, they may choose to cancel the contract and sue for restitution to prevent unjust enrichment. Note that if the plaintiff has ____, they are limited to their damages under the contract.

Answer 532

fully performed; fully performed

Question 533

Under some circumstances, a plaintiff may seek restitution even though the plaintiff is the party who breached. If the breach was intentional, some courts ____; modern courts, however, will permit restitutionary recovery but limit it to ___

Answer 533

won’t grant the breaching party restitution; the contract price less damages incurred as a result of the breach.

Question 534

If the buyer has paid part of the purchase price in advance and then breaches the contract, they can usually recover some of the payments. Unless the seller can prove greater damages, they may keep advance payments totaling ____. The balance must be returned to the buyer. If there is a valid liquidated damages clause, the seller need refund only ____

Answer 534

20% of the purchase price or $500, whichever is less; the excess of the buyer’s payments over the amount of liquidated damages.

Question 535

Restitution may also be available in a quasi-contract action when there is no contractual relationship between the parties if:

Answer 535

- The plaintiff has conferred a benefit on the defendant by rendering services or expending properties; - The plaintiff conferred the benefit with the reasonable expectation of being compensated for its value; - The defendant knew or had reason to know of the plaintiff’s expectation; AND - The defendant would be unjustly enriched if they were allowed to retain the benefit without compensating the plaintiff.

Question 536

___ is a remedy whereby the original contract is considered voidable and rescinded. The parties are left as though a contract had never been made.

Answer 536

Rescission

Question 537

The grounds for rescission must have occurred ____ was formed

Answer 537

either before or at the time the contract (not after!)

Question 538

The grounds for recission are:

Answer 538

(i) Mutual mistake of a material fact (ii) Unilateral mistake if the other party knew or should have known of the mistake (iii) Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the contract (iv) Misrepresentation of fact or law by either party as to a material factor in the negotiations that was relied upon, and (v) Other grounds, such as duress, undue influence, illegality, lack of capacity, and failure of consideration

Question 539

Generally all ___ are available in a rescission action. Note that the plaintiff’s ___ isn’t a defense.

Answer 539

equitable defenses (including laches and unclean hands), negligence

Question 540

If the plaintiff has paid money to the defendant, they are entitled to ___

Answer 540

restitution in addition to rescission.

Question 541

____ is the remedy whereby the writing setting forth the agreement between the parties is changed so that it conforms to the original intent of the parties.

Answer 541

Reformation

Question 542

To reform a contract because of mistake, there must be:

Answer 542

(1) an agreement between the parties, (2) an agreement to put the agreement in writing, and (3) a variance between the original agreement and the writing.

Question 543

If a writing is inaccurate because of a misrepresentation, the plaintiff can choose between ___.

Answer 543

reformation and avoidance

Question 544

To qualify for reformation, the misrepresentation must ____. Misrepresentations as to the ____ aren’t grounds for reformation; rescission and damages are the proper remedy for that

Answer 544

relate to the content or the legal effect of the record; subject matter of the agreement

Question 545

Failure to read the record of the agreement ___ party from obtaining reformation.

Answer 545

doesn’t preclude a (In nearly every case in which the record doesn’t reflect the agreement, either one or both parties have failed to read it.)

Question 546

The ___ rule isn’t applied in reformation actions. Likewise, the majority rule is that the ___ does not apply—but many courts will deny reformation if it would add ___.

Answer 546

parol evidence; Statute of Frauds; land to the contract

Question 547

In addition to the general equitable defenses, the existence of a ____ is also a defense to reformation.

Answer 547

bona fide purchaser for value

Question 548

Eeformation isn’t permitted if ____

Answer 548

the rights of third parties will be unfairly affected.

Question 549

For sales contracts, the UCC provides for a ___ statute of limitations. The parties may shorten the period by agreement to no less than ___, but they can’t ___.

Answer 549

4-year; one year; lengthen it.

Question 550

The statutory period begins to run when ____— that is, when breach occurs. The period begins to run regardless of whether ____

Answer 550

a party can bring suit; the aggrieved party knows about the breach.

Question 551

For a breach of warranty action, the breach occurs and the limitations period begins to run upon ____. This is true even if the buyer ___

Answer 551

delivery of the goods; doesn’t discover the breach until much later

Question 552

If there is an express warranty that explicitly extends to future performance of the goods, the 4-year period doesn’t begin to run until ____

Answer 552

the buyer should’ve discovered the breach.

Question 553

Entrusting goods to a merchant who ___ gives them the power (but not the right) to ____

Answer 553

deals in goods of that kind; transfer all rights of the entruster to a buyer in the ordinary course of business.

Question 554

Entrusting includes both ____

Answer 554

delivering goods to the merchant and leaving purchased goods with the merchant for later pickup or delivery.

Question 555

For entrusting buying in the ordinary course means buying ____

Answer 555

in good faith from a person who deals in goods of the kind without knowledge that the sale is in violation of the ownership rights of third parties.

Question 556

Entrustment passes only the rights of the ____

Answer 556

entruster (that is, if the entruster isn’t the owner, ownership cannot pass)

Question 557

Generally, if a sale is induced by fraud, the seller can rescind the sale and recover the goods from the fraudulent buyer (meaning, it is a voidable title). However, the defrauded seller may not recover the goods from ____

Answer 557

a good faith purchaser for value who bought from the fraudulent buyer.

Question 558

If a thief steals goods from the true owner and then sells them to a buyer, the thief is ____

Answer 558

unable to pass title to the buyer (because their title is void).

Question 559

A seller can transfer only the title they have or have power to transfer. Therefore, even a good faith purchaser for value generally cannot cut off the rights of the true owner if the seller’s title was ___. An exception to this rule may apply, however, if the buyer has ____

Answer 559

void; made accessions (valuable improvements) to the goods or the true owner is estopped from asserting title (for example, if the true owner expressly or impliedly represented that the thief had title).

Question 560

Only ___ beneficiaries have contractual rights, not incidental beneficiaries.

Answer 560

intended

Question 561

In determining if a beneficiary is intended, consider whether the beneficiary ___

Answer 561

(1) is identified in the contract, (2) receives performance directly from the promisor, or (3) has some relationship with the promisee to indicate intent to benefit.

Question 562

If promisee breaches, the third party beneficiary ___ enforce

Answer 562

cannot

Question 563

There are two types of intended beneficiaries:

Answer 563

(1) a creditor beneficiary— a person to whom a debt is owed by the promisee, and (2) a donee beneficiary—a person whom the promisee intends to benefit gratuitously.

Question 564

A beneficiary may sue the ___ on the contract.

Answer 564

promisor

Question 565

The promisor may raise against the third-party beneficiary any defense that ____

Answer 565

the promisor has against the promisee.

Question 566

Whether the promisor may use the defenses the promisee would have against the third-party beneficiary depends on whether the promisor made ____.

Answer 566

an absolute promise to pay or only a promise to pay what the promisee owes the beneficiary - If the promise is absolute, the promisor cannot assert the promisee’s defenses - If the promise is not absolute, the promisor can assert the promisee’s defenses.

Question 567

A ___ beneficiary can sue the promisee on the existing obligation between them. They may also sue the promisor, but may obtain only ___

Answer 567

creditor; one satisfaction.

Question 568

A donee beneficiary has ___ to sue the promisee unless grounds for a ___ remedy exist.

Answer 568

no right; detrimental reliance

Question 569

A third party can enforce a contract only if their rights have ___

Answer 569

vested.

Question 570

Third party beneficary right vest when they:

Answer 570

(1) manifest assent to a promise in the manner requested by the parties (2) bring a suit to enforce the promise; or (3) materially change position in justifiable reliance on the promise.

Question 571

Prior to vesting of third party beneficiary right, the promisee and promisor are ___ the beneficiary’s rights under the contract without consulting the third party.

Answer 571

free to modify or rescind (including removing the third-party beneficiary altogether)

Question 572

Once the third party’s rights vest, the promisor and promisee cannot vary his rights without ___

Answer 572

his consent.

Question 573

In the typical ___ situation, X (the obligor) contracts with Y (the assignor). Y assigns his right to X’s performance to Z (the assignee).

Answer 573

assignment

Question 574

Generally, ___ contractual rights may be assigned. Exceptions to this include:

Answer 574

all (1) an assignment that would substantially change the obligor’s duty or risk (for example, personal service contracts where the service is unique); (2) an assignment of future rights to arise from future contracts (not future rights in already existing contracts); and (3) an assignment prohibited by law (including wage assignments in some states).

Question 575

The effect of an assignment is to establish privity of contract between ___ while extinguishing privity between the ___

Answer 575

the obligor and the assignee; obligor and the assignor.

Question 576

Once the obligor has knowledge of the assignment, they must ____

Answer 576

render performance to or pay the assignee.

Question 577

If the obligor renders performance to or pays the assignor, they do so ___. Typically, one of the parties (usually the assignee) will ___.

Answer 577

at their own risk; notify the obligor of the assignment.

Question 578

For an assignment to be effective, the assignor must

Answer 578

- manifest an intent to immediately and completely transfer their rights - The right being assigned must be adequately described.

Question 579

These things are not required for a valid assignmnent:

Answer 579

- A writing is usually not required to have an effective assignment. - It is not necessary to use the word “assign”; any accepted words of transfer will suffice. - A gratuitous assignment is effective; consideration is not required.

Question 580

Assignments are divided into two categories:

Answer 580

assignments for value and gratuitous assignments.

Question 581

An assignment is for value if it is:

Answer 581

(1) done for consideration, or (2) taken as security for or payment of a preexisting debt.

Question 582

Assignments ____ cannot be revoked.

Answer 582

for value

Question 583

An assignment not for value (a gratuitous assignment) generally is ___

Answer 583

revocable (but there are exceptions)

Question 584

A gratuitous assignment is irrevocable if:

Answer 584

(1) the obligor has already performed; (2) a token chose (that is, a tangible claim, such as a stock certificate) is delivered; (3) an assignment of a simple chose (that is, an intangible claim, such as a contract right) is put in writing; or (4) the assignee can show detrimental reliance on the gratuitous assignment (that is, estoppel).

Question 585

A revocable gratuitous assignment may be terminated by:

Answer 585

(1) the death or bankruptcy of the assignor; (2) notice of revocation by the assignor to the assignee or the obligor; (3) the assignor taking performance directly from the obligor; or (4) subsequent assignment of the same right by the assignor to another.

Question 586

A clause prohibiting assignment of “the contract” will be construed as ___

Answer 586

barring only delegation of the assignor’s duties.

Question 587

A clause prohibiting assignment of “contractual rights” generally doesn’t bar ___, but rather merely ___

Answer 587

assignment; gives the obligor the right to sue for damages.

Question 588

However, if the contract provides that attempts to assign ___, the parties can bar assignment

Answer 588

will be void

Question 589

If the assignee has notice of the nonassignment clause (even if "void" langauge not used), an assignment will be ___

Answer 589

ineffective.

Question 590

The assignee can sue the obligor, as the assignee is the ___. The obligor has as a defense against the assignee any defense ____. The obligor cannot raise by way of defense any defenses the assignor might have ____

Answer 590

real party in interest interest; inherent in the contract; against the assignee.

Question 591

In every assignment for value, the assignor warrants that:

Answer 591

(1) they have not made a prior assignment of the same right; (2) the right exists and is not subject to any undisclosed defenses; and (3) they won’t interfere with the assigned right -> The assignee may sue the assignor for breach of any of these warranties.

Question 592

The assignor won’t be liable to the assignee if ____

Answer 592

the obligor is incapable of performing.

Question 593

If the first assignment is revocable, a subsequent assignment ___

Answer 593

revokes it

Question 594

The last gratuitous assignee prevails over ___ because ____

Answer 594

earlier gratuitous assignees; a later gift assignment revokes an earlier one.

Question 595

Later assignment for consideration prevails if:

Answer 595

- Don't know about the earlier assignment - The first to get payment from or judgment against obligor

Question 596

___ language is ineffective as an assignnent.

Answer 596

"promise"

Question 597

In the typical ___ situation, Y (the obligor/delegator) promises to perform for X (the obligee). Y delegates their duty to Z (the delegate).

Answer 597

delegation

Question 598

Generally, ____ duties may be delegated. Exceptions to this rule:

Answer 598

all (1) the duties involve personal judgment and skill; (2) delegation would change the obligee’s expectancy (for example, requirements and output contracts); (3) a special trust was reposed in the delegator by the other party to the contract; and (4) there is a contractual restriction on delegation.

Question 599

What Is Necessary for Effective Delegation?

Answer 599

The delegator must manifest a present intention to make a delegation. -> There are no special formalities to be complied with to have a valid delegation (It may be written or oral)

Question 600

A prohibition against assignment is construed as a prohibition against ___ as well

Answer 600

delegation

Question 601

The obligee must accept performance from the delegate of ____.

Answer 601

all duties that may be delegated

Question 602

The delegator ___ on the contract; thus, the obligee may sue the ___ for nonperformance by the delegate.

Answer 602

remains liable; delegator

Question 603

The obligee may require the delegate to perform only if there has been an ____. This promise creates a contract between ____ in which the ___ is a third-party beneficiary.

Answer 603

assumption (that is, the delegate expressly or impliedly promises they will perform the duty delegated and this promise is supported by consideration or its equivalent). the delegator and the delegate; obligee

Question 604

The obligee can sue the delegate only if ___

Answer 604

he receives consideration from the delegor.

Question 605

___ substitutes a new party for an original party to the contract.

Answer 605

Novation

Question 606

Novation requires ____.

Answer 606

assent of all parties

Question 607

Novation ___the original party.

Answer 607

and completely releases the original party