Contracts

Question 1

Mirror Image Rule (Common Law)

Answer 1

Terms of acceptance must exactly match terms of offer - otherwise, it is a counteroffer

Question 1

UCC 2-207(1)

Answer 1

If at least 1 non-merchant - an acceptance with different terms will function as an acceptance unless the offeree makes the acceptance expressly conditioned on the different terms (so valid acceptance unless the acceptor says that the acceptance is only functional with the different terms).

New terms do not get in unless offeror agrees

Question 2

UCC 2-207(2)

Answer 2

If both parties are merchants, additional terms may still be valid acceptance and new terms will be part of contract unless (1) offeror objects, (2) they materially alter deal, or (3) the offer expressly limited condition to the terms of the offer

When there are different terms - majority of jurisdictions apply the knockout rule

Question 3

Promissory estoppel

Answer 3

A promise may be enforceable even when there is no consideration if (1) the promisor knew or should have know the promise would reasonably induce action or forbearance, (2) the promise did induce action or forbearance, (3) it would be unjust to not enforce promise

Damages - usually limited to reliance damages (money spent on reliance of promise)

Question 4

Misunderstanding - Defense to Formation

Answer 4

Elements:
Each party assigns different meanings to a material term that is ambiguous, and neither party has reason to know of the other’s misunderstanding

Question 5

Mutual mistake - Defense to Formation

Answer 5

If both parties are mistaken, can void or reform

Elements:
(1) A mistake of fact that existed when contract was formed (2) as to a basic assumption of the contract, (3) that is material, (4) where the impacted party did not assume the risk of the mistake

Other type of mutual mistake (forgot to include term):

If a writing that purports to reflect the parties’ prior agreement does not in fact do so, then that writing may be reformed to conform to the intended prior agreement if both parties were unaware of the mistake.

Question 6

Unilateral mistake - Defense to Formation

Answer 6

Same elements as above except - with two additions:

(1) mistake of fact, (2) as to a basic assumption of the contract, (3) that is material, and (4) where the impacted party did not assume the risk of the mistake, and

(5) mistake makes enforcement of contract unconscionable, OR (6) other party knew or caused mistake

Question 7

Fraud/Intentional Misrepresentation - Defense to Formation

Answer 7

Fraudulent - D (1) intentionally misrepresented a material fact (2) with the intent of inducing P’s reliance, (3) and P did rely.

Fraud in the factum - fraudulent misrepresentation prevents party from knowing the essential terms of transaction; renders contract void

Fraud in the inducement - fraudulent misrepresentation induces another into contract; contract is voidable

Non-Fraudulent - an unintentional misrepresentation of material fact that the innocent party justifiably relies on and induces the innocent party’s agreement - renders contract voidable.

Question 8

Undue Influence - Defense to Formation

Answer 8

One party exerts undue pressure or persuasion on the other party, esp. in circumstances where innocent party is susceptible to persuasion

Question 9

Duress - Defense to Formation

Answer 9

When a party is improperly threatened and has no meaningful choice but to agree to the
contract. This is a subjective test, so the defendant must actually feel like s/he has no choice
but to agree.

Question 10

Illegality - Defense to Enforcement

Answer 10

When performance becomes illegal or when consideration is illegal

Question 11

Unconscionability - Defense to Enforcement

Answer 11

When contract is SO unfair, a reasonable person would not agree to it. Can either refuse to enforce entire contract, or just strike provision

Procedural - imbalance in bargaining process
Substantive - imbalance in actual terms

Question 12

Statute of Frauds - Defense to Enforcement

Answer 12

Note - writing does not have to be a formal contract (can be letters or receipts). Also, writing does not need to exist at time of promise. Can be created after promise is made.

Exceptions
- UCC - full performance by one party, part performance (to the extent of that performance), substantial beginning towards manufacturing of special goods, confirmatory memo (failure to object to a confirming within 10 days)

• Service Contracts (CL) - full performance by either side
• Sale of Land (part performance - 2 of the following: payment of part or all of the purchase price, possession, substantial improvement to the land)

Question 13

Estoppel - Defense to Enforcement

Answer 13

If a party reasonably and detrimentally relies on a promise made by the party to be charged, a court may enforce the contract despite the failure to meet the SOF requirement.

Question 14

Modifications

Answer 14

Under the common law, a provision requiring a modification to be in writing even though the modification would not otherwise fall within the Statute of Frauds is not enforceable

Question 15

Accord and Satisfaction

Answer 15

if there is a dispute over the validity of the contract or the amount owed, a
party can agree to accept a different performance than what was agreed upon in the contract.

The “accord” is the new agreement where a party agrees to accept a different performance
than what was agreed upon.

The “satisfaction” occurs when the different performance is completed by the other party,
which discharges the original contract duties and the accord agreement duties.

Consideration is found to support this type of agreement as follows: The party performing the different performance is incurring a legal detriment. The party that is agreeing to accept the different performance is giving up the right to dispute the original contract and sue for breach.

Question 16

PER/Integration

Answer 16

The court will look at the words in the contract to determine if the parties intended for
it to be a total/partial integration.

Merger clause: If the contract has a “merger” clause stating that the contract is the
final and complete understanding of the parties, it is likely to be a total integration.

Exceptions:
(1) defense to formation,
(2) defense to formation
(3) ambiguity
(4) condition precedent
(5) collateral deal
(6) Course of performance, course of dealing, trade usage

Question 17

Impraticability

Answer 17

Discharges duty to perform. Elements:
An unforeseeeable event occurs, the nonoccurence which was a basic assumption of the contract, which renders performance impracticable + party seeking discharge was not at fault

Question 18

Impossibility

Answer 18

An unforeseeable event occurs making performance impossible

Question 19

Frustration of Purpose

Answer 19

An unforseeable event occurs that destroy’s a party’s performance for entering into the contract. The nonoccurence of the event had to be a basic assumption of the contract and the party seeking discharge may not be at fault.

Question 20

Express warranty

Answer 20

Any promise or description that is part of the basis of the bargain is an express warranty, unless it is merely the seller’s opinion or commendation of the value of the goods.

Disclaimer clauses that conflict with express warranties are ignored

Question 21

Implied Warranty of Merchantability

Answer 21

Applies when the seller is a merchant. To be
merchantable, goods must be fit for their ordinary purpose.

Can be disclaimed through written as is statement, or through oral/written statement that uses the term “merchantability”

Question 22

Anticipatory Repudiation

Answer 22

One party unequivocally indicates through words or conduct that it will not perform.

Non-breaching party can either:
(1) rescind contract
(2) wait until performance is due and sue
(3) sue immediately
(4) demand performance

Retraction OK so long as non-breaching party has not detrimentally relied on repudiation, accepted the repudiation, or filed a breach of contract action is response to repudiation

Question 23

Implied warranty of fitness for a particular purpose

Answer 23

A warranty that the goods are fit for a particular purpose is implied when the seller has reason to know that the buyer has a particular use for the goods, and the buyer is relying upon the seller’s skill to select the goods. Seller need not be merchant to apply

Can be disclaimed with “as is” language if conspicuous.

Question 24

Adequate assurance of performance

Answer 24

A party with REASONABLE grounds for insecurity may request, in writing, an adequate assurance of performance from the other party. If the other party fails to reply in 30 days, it is treated as a repudiation.

Question 25

Common Law

Answer 25

Material Breach - when a party fails to substantially perform, and/or the non-breaching fails to receive the substantial benefit of the bargain.

Minor breach - non-breaching party still receives substantial benefit of bargain, and thus is still obligated to perform

Question 26

UCC Breach

Answer 26

Perfect Tender Rule

Non-conforming Tender:
-Buyer may inspect goods, and once he accepts them, has an obligation to pay
-Under UCC, if tender or goods are nonconforming, buyer has the right to accept or reject all or party of the goods

• if a buyer rejects goods as nonconforming but there is still time to perform OR seller reasonably thought buyer would accept goods, seller may cure
• buyer may revoke acceptance if goods seemed OK when delivered but a defect is discovered within a reasonable time

Question 27

Shipment contract (FOB seller’s place of business)

Answer 27

seller must (1) deliver goods to a common carrier, (2) make arrangements for delivery, and (3) notify buyer that goods have been shipped. Risk of loss during delivery rests with buyer

Question 28

Destination contract (FOP buyer’s place of business)

Answer 28

seller must get the goods to the buyer and notify the buyer. Risk of loss during delivery rests with buyer

Question 29

Quasi-contract

Answer 29

1. The plaintiff must confer a measurable benefit on the defendant;
2. The plaintiff acted without gratuitous intent (s/he intended to be paid); and
3. It would be unfair to let the defendant retain the benefit because the defendant had an
   opportunity to decline the benefit but did not do so, or the plaintiff had a reasonable
   excuse for not giving the defendant such an opportunity (example, an emergency arose
   and plaintiff could not consult with defendant).

Question 30

Limits on Remedies (UCC)

Answer 30

Limits on consequential damages are fine in UCC contracts unless unconscionable

Question 31

Ambiguous term/trade usage

Answer 31

If a term is ambiguous, evidence of trade usage or even local custom may be used to show that a particular word or phrase had a particular meaning.

Question 32

Nondisclosure

Answer 32

In order for non-disclosure to be the basis for rescission, there must be a duty to disclose and the seller must have failed to disclose.

Can apply when a seller fails to disclose all know material latent defects to a buyer.

Question 33

UCC Counter-Offer

Answer 33

Under the UCC, a counter-offer arises, per 2-207(1), when a party’s acceptance expressly conditions acceptance on the offeror’s assent to new terms contained in the acceptance