Contracts

Question 1

Common Law vs. UCC

Answer 1

The gateway issue in all contracts and sales essay questions will be to determine whether the common law or Article 2 of the UCC governs:

The common law governs if a contract deals with real estate or services;
The UCC governs if a contract deals with goods.

Question 2

K Formation

Answer 2

A traditional, enforceable contract is formed when there is:

• Mutual assent (an offer + valid acceptance of that offer);
• Consideration; AND
• No defenses to formation that would invalidate the otherwise valid contract.

Question 3

Expectation Damages

Answer 3

The goal of expectation damages is to put the non-breaching party in the same economic position that it would be in if the contract had been performed as promised.

Expectation damages are measured by comparing the value of the performance without the breach to the value of the performance with the breach.

Question 4

SOF (Types of Ks)

Answer 4

The following contracts are not valid unless they satisfy the statue of frauds:

• A contract made in consideration of marriage;
• A contract promising to guarantee the debt of another (Suretyship);
• A contract that by its terms cannot be performed within one year from its making;
• A contract involving the purchase or sale of goods for $500 or more; AND
• A contract to transfer, receive, or create an interest in real estate.

Question 5

Terminating the Offer

Answer 5

If a valid offer is terminated at any time before acceptance, the offer is invalidated. It CANNOT be accepted or revived unless a new offer is made.

There are seven main ways that the offer can be terminated:

• The offeror can revoke the offer by express communication to the offeree at any time before acceptance;
• The offeree learns that the offeror has taken an action that is absolutely inconsistent with a continuing ability to contract;
• The offeree rejects the offer;
• The offeree makes a counteroffer;
• The offeror dies;
• A reasonable amount of time passes; OR
• The subject matter of the offer becomes illegal or is destroyed.

Question 6

Terms Required in the Offer

Answer 6

Under the common law, all essential terms must be specified in the offer.

Generally, this includes the following four terms:

• Parties;
• Subject;
• Quantity; AND
• Price.
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Under the UCC, the law is more willing to plug the gaps. Unlike the common law, PRICE IS NOT REQUIRED in the offer. Generally, only three terms must be specified in the offer:

Parties;
Subject; AND
Quantity.

Question 7

SATISFYING THE STATUTE OF FRAUDS WITH A WRITING

Answer 7

A writing will satisfy the statute of frauds if the writing:

1. Is signed by the party to be charged;
2. Shows that a contract was formed; AND
3. Contains all the requisite terms of the deal.

Question 8

ATISFYING THE STATUTE OF FRAUDS WITH PERFORMANCE OF A SERVICES CONTRACT

Answer 8

Full performance of a services contract by either side satisfies the statute of frauds.

Question 9

SATISFYING THE STATUTE OF FRAUDS WITH PERFORMANCE OF A REAL ESTATE CONTRACT

Answer 9

Part performance of a real estate contract can satisfy the statute of frauds if any two of the following three are met:

Buyer takes possession of the property;
Buyer makes payment in full or part; AND/OR
Buyer makes substantial improvements to the land.

Question 10

SATISFYING THE STATUTE OF FRAUDS WITH PERFORMANCE OF A GOODS CONTRACT

Answer 10

Part performance on a goods contract satisfies the statute of frauds, BUT ONLY for the quantity received and accepted.

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Admission in Court. Under UCC § 2-201(3)(b), the statute of frauds is satisfied if the party against whom enforcement is sought admits in his pleading, testimony, or otherwise in court that a contract for sale was made (the contract is not enforceable under this provision beyond the quantity of goods admitted).

Written Confirmation between Merchants. Under UCC § 2-201(2), the statute of frauds is satisfied if:

1. After an oral agreement between merchants;
2. Either party sends a signed, written confirmation of the oral contract (must be signed by the sender); AND
3. The written confirmation is received by the other merchant to the oral agreement; UNLESS
4. The party receiving the written confirmation gives a written notice of objection within10 days after receipt of the written confirmation.

**Specially Manufactured Goods. **Under UCC § 2-201(3)(a), the statute of frauds is satisfied when a seller makes a “substantial beginning” toward manufacture of custom goods that are to be specially made for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business under circumstances that reasonably indicate that the goods are for the buyer.