Contracts

Question 1

Merchants

Answer 1

The UCC has special provisions that apply to merchants. A merchant is one who deals with the relevant goods or has specialized knowledge and skills regarding the practices and goods involved.

Question 2

Statute of Frauds

Answer 2

Under the UCC, a contract for the sale of goods of $500 or more must be in writing.

Question 3

Offer

Answer 3

An offer requires (1) the present intent to be bound;
(2) has definite and certain terms; and
(3) an identified offeree

Question 4

Effect of New Terms On Acceptance

Answer 4

An acceptance is an assent to the terms of the offer made by one with the power to assent.

Under the UCC, if acceptance is conditioned upon the offeror’s asset to additional terms, it is not an acceptance. It is a rejection and counter offer.

Question 5

Acceptance By Shipment

Answer 5

Where a buyer requests that goods be shipped, the request will be construed as acceptance by the seller by shipment `of the goods or a promise to do so.

Question 6

Breach

Answer 6

A contract breach occurs when a party fails to perform once (1) conditions precedent are met or excused, (2) time to perform arrives, and (3) performance is not discharged.

Question 7

Implied Warranty of Merchantability

Answer 7

A warranty of merchantability is implied in every contract for the sale of goods that warrants that the goods are fit for the ordinary purposes.

Question 8

Warranty of Fitness For A Particular Purpose

Answer 8

A warranty of fitness for a particular purpose is implicated in every sale of goods when the seller knows or has reason to know the buyer wants the goods for a particular purpose and the buyer relies on the seller’s judgment to choose a suitable project.

Question 9

Perfect Tender Rule

Answer 9

The UCC requires perfect tender such that all goods must be delivered per the contract specifications or the buyer can reject the goods.

Question 10

Rejection of Goods/Right to Cure

Answer 10

A buyer may reject goods by giving the seller notice within a reasonable time after delivery.

A seller has a right to cure a defective delivery or tender if:
(1) the time performance under the contract has not arrived;
(2) the seller reasonably believed the buywr would accept the nonconforming goods;
(3) the seller notifies the buyer of intent to cure.

Question 11

Limitations on Damages

Answer 11

1. Forseeability
2. Duty to Mitigate
3. Certainty
4. Causation

Question 12

UCC Expectation Damanges

Answer 12

Seller Breach:
- If buyer has goods - difference between market value of perfect goods and value as tendered.
- if seller has goods: difference between K price and the cover price

Question 13

Applicable Law

Answer 13

Contracts are governed by the UCC or by Common Law. Contracts for the sale of goods are governed by the UCC. The Common Law governs every other kind of contract, like service contracts and contracts for real property.

Question 14

Offer

Answer 14

An offer is an objective willingness to enter into a contract with the offeree, that creates a power of acceptance in the offeree.

Advertisements are not generally offers, unless they are (1) specifically directed at a person; (2) detail the terms of the contract; and (3) tell the person how they can accept it.

Termination: Offers can terminate with lapse of time, death of offeror, revocation (actual or constructive), rejection (including CL counteroffers).

Question 15

Acceptance

Answer 15

An objective manifestation of assent to enter into the contract with the offeror.

Cannot usually be accepted by silence, but can be sometimes

CL Mirror Image: Under the CL, the acceptance must exactly mirror the offer, else, it is a rejection + counteroffer.

Mailbox Rule: Acceptance valid on delivery, Rejection valid on receipt.

Question 16

Irrevocable Offers

Answer 16

UCC Firm Offers: Both parties merchants; signed writing; assurance to keep open for given time (period of irrevocability can’t be longer than 3 months)

Option Contracts: Options contracts require that consideration is paid for a promise to keep open

Unilateral Contracts: Unilateral contracts are irrevocable once the offeree party begins performance.

Question 17

Consideration

Answer 17

Bargained for exchange of legal value

Consideration not valid for past consideration; pre-existing duty; or illusory

Promissory Estoppel can serve as a consideration substitute as can surrendering a claim.

Question 18

Battle of the Forms

Answer 18

One Merchant: Additional/different terms are mere proposals and not part of K unless offferor agrees to modified terms

If Both Merchants (Additional Terms)
* Acceptance is made conditional on offeror’s assent (counteroffer + rejection)
* Original expressly limits acceptance on offer terms; new terms materially alter original terms; offeror object w/in reasonable time -> **terms dropped but K is formed. **
*
Both Merchants (Different Terms)
* Knockout Rule (Majority) Conflicting terms are omitted, use gap fillers
* Alternatively, analyze as additional terms

Question 19

Contract Defenses

Answer 19

Formation
* Unconscionability
* Undue Influence
* Mental Insantiy: Contract is void
* Age: Contract is voidable by the minor, minor can ratify once 18
* Illegality
* Duress: Must be a threat
* Capacity
* Misrepresentation: Knowingly; making a false representation; to induce reliance; it causes reliance; damages
* Mistake (Mutual + Unilateral)
* Mutual - Mistake existed at time of contract; relates to basic assumption of contract; has material fact; party didn’t assume the risk
* Unilateral - Party knows of mistake by the other party; doesn’t inform the other party; + mutual factors.
* Non Disclosure - Typically seller doesn’t need to disclose, unless knows of material latent defect.

Execution
* Impracticability: Performance would result in severe burden, cost, or risk (war, unforseen natural disasters, NOT increased costs)
* Impossibility: Literally impossible (death, destruction of good). Temporary impossibility merely suspends performance unless unreasonable burden
* Frustration of Purpose: Principal purpose of contract no longer can occur.

Question 20

Statute of Frauds

Answer 20

The Statute of Frauds requires certain contracts be in writing and signed by party to be charged.

Includes:
Marriage,
Suretyship,
One Year - Contracts that can’t occur in one year,
UCC Contracts for Sale of Goods > $500;
Real Property

Question 21

Conditions

Answer 21

A condition is an event that must occur before performance. Can be express or implied. Express requires strict compliance, implied requires substantial performance

Waiver of conditions can occur: failure to insist on compliance, estopppel, or anticipatory repudiation.

Question 22

Parole Evidence Rule

Answer 22

The PER limits the extent to which evidence of discussions or writings made prior to, or contemporaneous with, the signed written contract can be admitted and considered as part of the agreement.

It depends on whether the writing is a total integration or partial integration.

1. Partial or fully integrated? If full (merger clause) nothing comes in. If partial, PER can be used to supplement a term but NOT contradict.
2. Exception?
   * The PER does not bar evidence of K defects
   * Condition(s) Precedent - The PER does not bar evidence of conditions precedent to the contract’s
   effectiveness.
   * Ambigious Terms: Use Course of Performance; Course of Dealing; trade Usage

Question 23

Contract Modification

Answer 23

Common Law: Needs consideration
UCC: Needs good faith

The parties must:
- Mutually agree
- SOF must be met if the modfication falls

Question 24

Third Party Beneficiary

Answer 24

Intended: 3rd Party who promisor intends to benefit. Prevents modification if rights have vested (they know they are beneficiary)

Incidental: A party who happens to benefit from the contract has no right to sue

Question 25

Assignment/Delegation/Novation

Answer 25

Assignment: An assignment is when a party to an existing contract transfers her rights under the contract to a third party. The assignor (party receiving performance) assigns to the assignee (third party) the performance due under the contract from the
obligor (party performing). The general rule is that all rights are assignable.

Delegation: A existing party may also delegate their obligations to another. This is generally permittted, though can be prohibited. Delegation is not allowed if the K is for a specific purpose or special skill.

Novation: When the obligee expressly agrees to accept the performance of the new party and releases the delegator from liability

Question 26

Anticipatory Repudiation

Answer 26

A party unequivocally expresses before the time for performance they will no longer perform

Non-breaching party can:
* sue immediatly
* suspend performance and wait until it is due to sue
* Treat the contract is discharged and the repudiation as an offer to rescind
* Urge performance and sue later

Adequate Assurances if not quite unequivocal but does give rise to reasonable insecurity, non-breaching party can demand adequate assurances IN WRITING within a reasonable period.

Question 27

Breach (CL and UCC)

Answer 27

Substantial Performance
* Material: Party did not receive substantial benefit of the bargain. Performance excused.
* Minor: Party did receive substantial benefit of the bargain, performance not excused

Perfect Tender: Perfect tender applies to contracts for single delivery. Goods tendered must conform to contract with every respect. If not, buyer can:
* Reject the whole within reasonable time
* Accept in whole
* Accept in part and reject the rest
If seller tenders goods that are not in conformity,

But not for installment contracts, use substantial performance instead.

UCC Seller Right to Cure
A seller may cure defect any time before performance is due OR after performance if the seller has a reasonable belief that this would be acceptable to the buyer.

Question 28

Warranties

Answer 28

Express: Made explicitly, can’t revoke with general revocation

Implied Merchantability: warrants goods will be fit for ordinary purpose. Can be disclaimed, writing and conspicuous OR “as is”

Warranty of Fitness Particular Purpose: buyer relies on seller’s judgment to select appropriate goods for stated purpose, writing and conspicuous

Good Faith and Fair Dealing

Question 29

Accord and Satisfaction

Answer 29

Accord: Agreement where one party promises to render substitute performance and the other promises to accept. Requires satisfaction.

Satisfaction: Performance of the accord which discharges the original agreement. If this fails, can sue under original or accord.

Question 30

Common Law
Legal Remedies & Defenses

Answer 30

Expectation Damages: Expectation Damages compensate a plaintiff for the value of the benefit the bargain expected to received.

Consequential Damages: Consequential damages compensate for damages that are a direct and foreseeable consequence of the breach.

Incidental Damages: Reasonable expenses incurred

Reliance Damages: Put P in the same position they would be in had the K never been made.

Restitution: Get back whatever value you gave already to breaching party

Liquidated Damages: Determined in contract, enforced if reasonable, and not a penalty

Quantum Meruit: Breaching party can recover (reasonable value of services) - damages incurred.

Defenses
* Duty to mitigate

Question 31

Equitable Remedies & Defenses

Answer 31

Specific Performance: Valid contract; definite and clear terms; condition precedents waived/satisfied; money damages inadequate (unique goods); feasability of enforcement

Recision: permits a party to u**ndo a bargain **where there is no meeting of the minds.
Allowed where a contract has resulted from fraud, misrepresentation, duress, or mistake.fraud,

Reformation: Reformation permits the contract to be **rewritten **to accurately reflect the agreement of the parties where the parties have a meeting of the minds, but the writing is in error, such as a scrivener’s error

Injunction: Imminent (for TRO) irreparable harm; balance of hardships; likelihood to win on merits; feasibilty of enforcement

Defenses
Laches: Untimely delay by nonbreaching party to bring suit
Unclean Hands: Nonbreaching party engages in unfair dealing or bad-faith

Question 32

UCC Monetary Damages

Answer 32

Lost Volume Seller: A “lost volume” seller is one who has a virtually unlimited supply of good to sell. A lost volume seller can recover lost profits if the seller:
* Has a big enough supply to make both the contracted sale and the resale
* Would have likely made both sales,
* Would have made a profit on both sales.

UCC Seller Damages: If Buyer breaches and has goods: The measure of damages is the full contract price.
* Good delivered & accepted = Contract Price
* Some/No Goods delivered = Contract Price - Market price
* Good resold = K price - Resale Price

UCC Buyer Damages: Seller Breach.
* NO replacement goods = Contract Price - MP at time of breach
* Purchased replacement goods = Contract Price - New Good Price