Contracts

Question 1

When is a revocation of a contract effective?

Answer 1

Upon receipt.

(Example: On day 1, A mails an offer to B. On day 2, A mails a revocation to B. If B receives the offer and accepts before receiving the revocation, a contract is formed.)

Question 1

What is an output contract?

Answer 1

a contract under which a seller agrees to sell all that she manufactures of a product to the buyer.

Question 2

what is a requirements contract

Answer 2

Inverse of output contract. Buyer agrees to buy all that they need of a product from a seller

Question 3

What is the difference between contract modification under the UCC and under the common law?

Answer 3

Under common law, modification requires new consideration given. Under the UCC, only good faith is required to modify.

Question 4

What is an illusory promise?

Answer 4

a promise that essentially pledges nothing because it is vague or because the promisor can choose whether to honor it.

Question 5

What must be present to void a contract via mutual mistake?

Answer 5

(i) Mistake of fact existing at the time the contract was formed;

(ii) The mistake relates to a basic assumption of the contract;

(iii) The mistake has a material impact on the transaction; and

(iv) The adversely affected party did not assume the risk of the mistake.

Question 6

When can if the defense of impracticability be raised?

Answer 6

(i) An unforeseeable event has occurred;
(ii) Nonoccurrence of the event was a basic assumption on which the contract was made; and
(iii) The party seeking discharge is not at fault.

Question 7

when is specific performance available as a breach remedy?

Answer 7

When damages are inadequate to remedy the injury

Question 8

What is constructive condition of exchange?

Answer 8

When a party’s performance can be rendered at the same time as the other party’s performance, each party’s performance is conditioned on the other party’s performance; both parties’ performances are due simultaneously, unless the language or circumstances indicate otherwise.

Question 9

What types of contracts fall within the Statute of Frauds?

Answer 9

(M Sour)
Marriage contract
Suretyship
One year: contract could not possibly be performed within 1 year
UCC sale of goods of $500 or more
Real property sale

Question 10

Under the UCC, what other aspects can be introduced to clarify the terms of the contract?

Answer 10

trade usage, course of dealing, course of performance

If the express contract terms are inconsistent with the course of performance, or trade usage, priority is given to the express terms, followed by course of performance, course of dealing and trade usage.

Question 11

Expectation damages formula

Answer 11

loss in value + other loss - cost avoided - loss avoided

Question 12

what is anticipatory repudiation?

Answer 12

When one of the parties, before their performance is due, informs the other party that they won’t perform their contractual obligations when time comes

Question 13

What is an implied-in-fact contract?

Answer 13

A contract presumed to exist based off the conduct/actions of a party.

The party is presumed to have assented to an offer based on their actions.

Question 14

What is a quasi contract?

Answer 14

A contract that the court presumes to exist, when:
1) the plaintiff conveyed a measurable benefit to the defendant
2) the plaintiff reasonably expected to get paid
3) it would be unfair to let the defendant keep the benefit without paying.

Also called an “implied-by-law” contract. Can be created in the absence of normal consideration.

Question 15

What are identifiable goods under the UCC?

Answer 15

Goods that are specifically identified within the scope of the deal (ex. a specific painting or car)

Question 16

What happens if an identifiable good is damaged?

Answer 16

If it’s totally destroyed, then all parties’ obligations to performed are excused so long as 1) neither party caused the destruction and 2) the risk of loss hadn’t yet passed to the buyer.

If it’s only partial destruction, the buyer can demand inspection and either 1) treat the contract as avoided or 2) accept the damaged goods but at a reduced price (this kills any future claims they’d have against the seller under the contract)

Question 17

With UCC contracts for goods, when does the risk of loss/damage get placed on the buyer?

Answer 17

In a contract where the seller is directly delivering the goods to the buyer, once the buyer is physically given the goods

If the goods are shipped through a common carrier, the risk of loss passed onto the buyer when the seller gives the goods to the common carrier

Question 18

What are assignment and delegation?

Answer 18

Assignment is when someone transfers their contractual rights to a third party

Delegation is when someone transfers their contractual duties to a third party

Question 19

When is assignment and/or delegation not allowed?

Answer 19

1) If the contract explicitly says assignments aren’t allowed, or

2) if the assignment materially reduced the non-assigning party’s chance of receiving performance or materially increases their duties/risks

Question 20

Can a breaching party still be entitled to damages?

Answer 20

Yes, although the damages they’re entitled to depend on whether their breach was material or minor

Question 21

What damages is a breaching party entitled to for a minor breach?

Answer 21

Expectation damages, i.e., placing the parties in the same position as if the contract had been fully performed; and

Reliance damages to put the parties in the same position as if the contract had never been formed (e.g., by paying out-of-pocket expenses) and are used when expectancy damages are too speculative

Question 22

What damages is a breaching party entitled to if they materially breached?

Answer 22

Only restitution damages to ensure that the nonbreaching party is not unjustly enriched by the breaching party’s work.

The breaching party is entitled to recover the reasonable value of the benefit conferred less any damages suffered by the nonbreaching party due to the breach.

Question 23

What happens if a buyer repudiates or breaches a contract for identifiable goods?

Answer 23

The risk of loss immediately passes from the seller to the buyer. The seller can then recover any deficiency between the seller’s insurance coverage and the contract price within a commercially reasonable time.

Question 24

What are the 2 implied warranties a seller can have in a sale-of-goods contract?

Answer 24

implied warranty of merchantability and implied warranty of fitness for a particular purpose

Question 25

What is the implied warranty of merchantability

Answer 25

In a sale of goods, if the seller is a merchant who sells those goods, it’s implied that the goods are fit to be used for their ordinary purpose.

Question 26

What is the implied warranty of fitness for a particular purpose?

Answer 26

If the buyer is relying on the seller’s expertise/judgment when buying the specific goods, it’s implied that the goods are fit for that special purpose

Question 27

When is an express warranty created in a sale of goods?

Answer 27

When the seller makes a statement of fact or promise about the goods that becomes a basis of the bargain

Seller stating opinions (ex. I love this brand of tools) about the goods doesn’t count

Question 28

Under the UCC, can a nonbreaching seller reclaim goods?

Answer 28

Yes, a nonbreaching seller can reclaim the goods they’ve already sold to the breaching buyer when:
1) the seller discovers that the buyer received the goods on credit while insolvent—i.e., the buyer could not pay debts when they became due; and
2) the seller demands the goods’ return within 10 days after the buyer received them.

Question 29

What is the firm offer rule?

Answer 29

Only applies in UCC. If the party is a merchant and states, in a signed writing, that they won’t revoke their offer for a certain time period, that offer is irrevocable

Question 30

What is the battle of the forms?

Answer 30

UCC rule relating to acceptance. It states that if an acceptance doesn’t perfectly mirror the offer, the additional terms in the accept govern the deal, if:

1) both parties are merchants
2) none of the parties timely object/reject the additional term
3) the additional term doesn’t materially change the terms of the contract
4) the initial offer didn’t expressly limit its acceptance to its own terms

Question 31

What is the difference between a reserve auction and a no reserve auction?

Answer 31

In a reserve auction, the auctioneer can withdraw the goods at any time before announcing the sale’s completion.

In a no reserve auction, the auctioneer cannot withdraw the goods unless they’re no bids.

Question 32

Can bidders in an auction withdraw their bids?

Answer 32

Yes, at any time before the sale’s completion.

Question 33

What happens to the older bids in an auction if the highest bidder retracts their bid?

Answer 33

All the junior bids die off. A retraction of a bid won’t revive the prior bids.