Contracts

Question 1

Choice of Law

Answer 1

The UCC applies to contracts for the sale of goods. The common law applies to contracts for services and real property.

Question 2

Merchant

Answer 2

A merchant is someone who regularly deals in goods of the kind involved

Question 3

Predominant Purpose Test

Answer 3

For contracts where there is both a goods and services component, the predominant purpose of the contract determines which rules apply.

Question 4

Valid Contract

Answer 4

A valid contract requires offer, acceptance, consideration, and terms.

Question 5

Offer

Answer 5

An offer is a manifestation of a present intent to be bound that creates the power of acceptance in the offeree. An offer must be communicated to a specific offeree. The offer must contain definite and essential terms.

Question 6

Essential terms

Answer 6

Common law: parties, subject matter, price, and quantity
UCC: just quantity

Question 7

Bilateral v. Unilateral Offer

Answer 7

Bilateral: can accept by either return promise or performance
Unilateral: requires acceptance by performance

Question 8

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Answer 8

Usually an invitation to deal rather than an offer

Question 9

Termination of Offer

Answer 9

1) Revocation
2) Lapse
3) Death/Incapacity (except for option contract)
4) Counteroffer/rejection
5) Destruction/Illegality

Question 10

Option contract

Answer 10

offeree gives consideration to keep the offer irrevocable

Question 11

UCC firm offer

Answer 11

If offeror is a merchant, gives an assurance the offer will remain open, in writing, for a reasonable time not to exceed 3 months

Question 12

Partial Performance of unilateral k

Answer 12

Partial performance of a unilateral contract makes the offer irrevocable
Partial performance of a bilateral contract operates as a promise to render complete performance

Question 13

Acceptance

Answer 13

objective manifestation of intent to be bound by the terms of the offer

Question 14

Means of acceptance

Answer 14

Unless the offeror specifies, the offeree can accept in any reasonable manner.
Silence is not acceptance unless the offeree has a reason to believe the offer could be accepted by silence or prior dealings make it reasonable

Question 15

Shipment of Goods

Answer 15

A buyer’s request for goods to be shipped invites acceptance by promise or by shipment.
If nonconforming goods are shipped, both an acceptance and a breach unless the seller notifies the buyer that goods are an accomodation

Question 16

Revocation of acceptance of goods

Answer 16

A buyer may revoke an acceptance of goods if the nonconformity substantially impairs their value to the buyer.
the buyer accepted the goods without discovery of the nonconformity or such acceptance was reasonably induced either by the difficulty of discovering the nonconformity or because the seller gave assurances that the goods were conforming.
The buyer must inform the seller of its decision to revoke within a reasonable time after the nonconformity is discovered or should have been discovered by the buyer.

Question 17

Mailbox Rule

Answer 17

an acceptance is effective when sent
Rejection following acceptance: acceptance controls but if offeror detrimentally relies on rejection, the offeree is estopped from enforcing
Acceptance following rejection: first one received prevails
Revocations: effective upon receipt
Options/firm offers: mailbox rule doesn’t apply, acceptance must be received

Question 18

UCC battle of the forms

Answer 18

acceptance with a change in terms is valid unless agreement to the changed terms is conditioned on acceptance. Otherwise, new terms are a proposal for change
Between merchants: new or differnt terms control unless the original offer limited acceptance to its terms, the terms materially alter the offer, or the offeror objects within a reasonable time.
Knock out rule: conflicting terms nullify each other

Question 19

Common Law Mirror Image Rule

Answer 19

acceptance must mirror terms of offer or it is a rejection and counter offer, not an acceptance

Question 20

Consideration

Answer 20

Consideration is bargained for exchange
A gift is not consideration but remember promissory estoppel
Past consideration is not consideration (consider material benefit rule)

Question 21

Adequacy of consideration

Answer 21

Need not be equal in value
preexisting duty is not consideration

Question 22

Modification

Answer 22

Common law: must be supported by consideration unless recission and new contract, unanticipated difficulties arise and modification is fair, or new obligations on both sides
UCC: requires only good faith, no consideration

Question 23

Accord and satisfaction

Answer 23

one party agrees to accept a different performance to satisfy the existing duty and discharge the original contract.
A payment of a lower amount/lesser value is not allowed unless there is a dispute as to amount or it is made in a different type of payment (i.e. giving a car instead of money)

Question 24

Illusory promise

Answer 24

not legally binding because it is vague or the promisor can choose whether to honor it

Question 25

Requirement and output contract

Answer 25

requirement: seller agrees to provide all the goods a buyer requires
output: a buyer agrees to buy all that a seller produces

Question 26

Promissory Estoppel

Answer 26

a promise is binding if the promisor should reasonably expect it to induce action, the promise does induce such action, and injustice can only be avoided by enforcement of the promise.

Question 27

Parol Evidence Rule

Answer 27

PER bars extrinsic evidence of a prior or contemporaneous statements that contradict the written agreement if the agreement is integrated. an integrated writing is intended as a final expression of the prateis agreement.
Exception: attack formation, attack enforcement, show condition precedent, or explain ambiguities

Question 28

Completely integrated agreement

Answer 28

parties cannot introduce extrinsic evidence

Question 29

partial integration

Answer 29

cannot introduce extrinsic evidence that contradict the writing. UCC assumes contracts are partial integrations.

Question 30

Express warranties

Answer 30

promise, description (not an opinion) that is a basi sof the bargain. A general disclaimer for an express warranty is not valid

Question 31

Implied warranty of merchantability

Answer 31

if the seller is a merchant, implied warranty that the product is fit for its ordinary purpose. a waiver must use the term merchantability or “as is”, and if in writing, it must be conspicuous

Question 32

Implied warranty of fitness for a particular purpose

Answer 32

if seller knows of the purpose and buyer relies on the sellers representation, any waiver must be in writing and conspicuous

Question 33

Defenses to formation

Answer 33

Incapacity, Mistake, Duress, Undue Influence, Misunderstanding, Misrepresentation
[IM DUMM]

Question 34

Mutual Mistake

Answer 34

Both parties are mistaken about a fact that:
existed at the time of formation
went to a basic assumption of the contract
caused a material impact on the transaction
Did not assume the risk
Neither party can avoid if reformation is possible

Question 35

Unilateral Mistake

Answer 35

One party is mistake and can void if did not assume risk and mistake would make the contract unconscionable or the non mistaken party caused the mistake, had a duty to disclose/failed to disclose the mistake, or knew/should have known the other party was mistaken

Question 36

Misunderstanding

Answer 36

Both parties believe they are agreeing to same material terms but in fact agree to different ones
Neither party knows: no contract
one party knows: contract formed on basis of meaning as understood by the other parties
both parties knew of ambiguity: no contract
can be waived

Question 37

Misrepresentation

Answer 37

untrue representation of fact. Requires
the misrepresentation was made
1) knowingly or recklessly with the
2) intent to mislead
3) the misrepresentation induced assent
4) the other party justifiably relied on the misrepresentation

Question 38

Cure of misrepresentation

Answer 38

a contract is not voidable if the facts are cured before the deceived party has avoided the contract.

Question 39

Undue Influence

Answer 39

unfair persuasion to induce assent
occurs where there are confidential relationships, third party undue influence, etc.

Question 40

Duress

Answer 40

improper threat that deprives a party of meaningful choices

Question 41

Capacity

Answer 41

Infancy: voidable by infant except for reasonable value of necessities
mental illness: void for those adjudicated to be incompetent
intoxication voidable by intoxicated person only if other party knew of intoxication

Question 42

Illegality

Answer 42

contract is unenforceable if ocnsideration/performance is illegal
one party can recover if they are justifiably ignorant of facts
restitution: the less guilty party may be able to recover

Question 43

Unconscionability

Answer 43

if a contract is so unfair to one party that no reasonble person would agree, the contract is not enforceable
Procedural unconscionability
Substantive unconscionability

Question 44

Public policy

Answer 44

a contract that violates significant public policy is unenforceable

Question 45

Statute of Frauds

Answer 45

A contract is required to be in writing and signed against the person it is to be enforced against. Only applies to contracts for goods more than $500, contracts that will take longer than a year, real property contracts, contracts in consideration of marriage, and suretyship.
exception: partial performance, specially manufactured goods

Question 46

Third Party Beneficiary

Answer 46

intended TPB can sue, but incidental cannot
modification is fine until the TPB’s rights best, then need TPB consent
vesting: detrimentally relies, manifests assent at a party’s request, files a lawsuit

Question 47

Assignment

Answer 47

assignee takes all rights of assignor but subjec tto any defense that can be raised against assignor

Question 48

Delegation

Answer 48

generally allowed unless other party has substantial interest in a specific individual’s performance
delegator is not released from liability

Question 49

Impracticality

Answer 49

defense available if
an unforeseeable event has occured,
the non occurence of which was a basic assumption on which the contract was made, and
the party seeking discharge is not at fault (and did not assume the risk).
Examples: performance becomes illegal, subject matter is destroyed

Question 50

Frustration of purpose

Answer 50

unexpected events arise that destroy one party’s purpose in entering into the contract, even if the performance i not impossible

Question 51

Impossibility

Answer 51

performance can be discharged due to death, incapacity, illegality, or destruction of subject matter

Question 52

Order of performance

Answer 52

one party’s performance requires a period of time: that party goes first
both can render performance at same time: both must

Question 53

Condition

Answer 53

a condition is a future event that must take place before rights or obligations are created. a failure of a condiiton releives a party of the obligation to perform

Question 54

Is there a breach

Answer 54

Common law:
Material breach: did not receive substantial beenfit of the bargain, non breaching party may sue and suspend performance
Minor: receive substantial beenfit of the bargain, must still perform
UCC:
perfect tender rule, if goods or delivery are defective in any way, buyer can sue for breach. If a buyer rejects nonconforming goods, seller can cure if time remanining
installment contracts are an exception, apply substantial performance

Question 55

Anticipatory repudiation

Answer 55

express and unequivocal repudication before performance is due.
nonbreaching party can treat it as a breach and sue, can wait and see, but if date of performance has not passed and only performance left is payment, must wait for actual breach to sue

Question 56

Retraction of repudiation

Answer 56

can be retracted until the promisee acts in reliance of the repudiation, accepts the repudiation, or commences an action

Question 57

UCC demand for reasonable assurances

Answer 57

If reasonable grounds for insecurity arise, a party can make a written demand for assurances. If the other party fails to give assurances within a reasonable time (not to exceed 30 days), there is an anticipatory repudiation.

Question 58

Expectation Damages

Answer 58

puts the nonbreaching praty in as good a position as they would have been if the contract had been performed properly, plus reasonably foreseeable incidental and consequential damages, minus mitigation. Must be calcualted with reasonable certainty.

Question 59

Liquidated Damages

Answer 59

allowed if the amount is reasonableand damages would be difficult to ascertain

Question 60

Reliance damages

Answer 60

put the non breaching praty in the position as if the contract were never formed

Question 61

restitution damages

Answer 61

put nonbreaching praty in position as if the contract were never formed
restores the benefit conferred on the otehr party
cannot get restitution if they have fully performed and only remaining performance is payment of definite sum

Question 62

Specific Performance

Answer 62

(i) the contract terms are definite and certain;
(ii) the conditions for the defendant’s performance must be satisfied (mutuality);
(iii) there is an inadequate relief at law; and
(iv) enforceability of the specific performance is feasible.