Contracts

Question 1

Merchants

Answer 1

One who regularly deals in goods of a kind or hold themselves out as having special knowledge or skills as to the goods involved

Question 2

Offer

Answer 2

Words/conduct that objectively manifest intent to enter a K
The terms must be definite and clear
– real estate Ks must include price and identify the land
– UCC Ks must include quantity

Question 3

Termination

Answer 3

Effective when received. Can be by lapse of time (not accepted w/in reasonable time), rejection (express or counteroffer), or by revocation, which can be direct, indirect, or by operation of law
– Indirect - Offeree becomes aware of offeror’s unambiguous conduct or statement from a reliable source
– operation of law - death, insanity, destruction of SM, etc.

Question 4

Option Ks and Firm Offers

Answer 4

CL - offers are irrevocable for the specific time only if offeree gives consideration

UCC Firm offer - offer is irrevocable if
(1) offeror is a merchant,
(2) the offer is in signed writing, and
(3) gives assurances to stay open for time stated (no more than 3m)

Question 5

Acceptance under UCC

Answer 5

Buyer’s order to purchase is an offer, and it can be accepted by
- a return promise to ship the goods
- a prompt shipment of conforming goods

A shipment of non-conforming goods = an acceptance AND a breach UNLESS the seller sends an accommodation notice, which is a counteroffer that can be accepted or rejected as a whole

Question 6

UCC battle of the forms

Answer 6

UCC allows for acceptance to include additional terms if they are not conditional
- For non-merchants, additional terms become proposals for modification that can be accepted
- For merchants, additional terms will be included in K unless they are material or offeror rejects it

Confirmatory memo w additional terms will be subject to the battle of the forms

Question 7

Mailbox rule

Answer 7

Acceptance by mail is effective at dispatch (if properly addressed and stamped)
- Not applicable to option Ks or if the offer stipulates that acceptance is effective upon receipt
- If offeree sends both an acceptance and rejection, the first one to arrive is effective

Question 8

Past consideration / pre-existing duty

Answer 8

Does not satisfy consideration UNLESS:
- If a past obligation is unenforceable, and a new promise is made in writing or partially performed, it will be enforceable
- If new or different consideration is promised,
- If the pre-existing duty is owed to a third party,
- If there is an honest dispute as to duty, or
- If the modification is fair and equitable in view of unforeseen circumstances

Question 9

Absence of Defenses

Answer 9

• Lack of capacity – incapacitated Ds can disaffirm a K – voidable K
• Duress (assent by improper threat) and undue influence (undue susceptibility – excessive pressure) – voidable K
• Misunderstanding - binding K based on ignorant party’s belief
• Mutual mistake of fact – k voidable by adversely affected party if (1) the mistake concerns a basic assumption under which K is made, (2) it has a material effect on the exchange, and (3) the party seeking avoidance did not assume the risk
• Unilateral mistake – K is voidable if the non-mistaken party knew or had reason to know of the mistake
• Misrepresentation – K is voidable by innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentation was material
• Illegality – K is void > BUT exceptions make it voidable, such as P is unaware of illegality while D is aware
• Unconscionability – allows the court to modify or refuse K to avoid unfair terms

Question 10

Statute of Frauds requirements and exceptions for part performance

Answer 10

SOF requires any writing(s) that (1) identify the subject matter of the K, (2) indicate a K has been made by the parties, and (3) state all essential (UCC) / material (common law) terms
– exceptions:
- part performance for land Ks = 2/3 of payment, possession, and valuable improvements
- part performance if the goods are specially manufactured & already paid for/accepted. for specially manufactured goods, enforceable K if seller has made a substantial beginning

Confirmatory memo rule – if merchant sells a written confirmation of the understanding that meets SoF, it will bind recipient if they have reason to know of memo & do not object w/in 10d

Question 11

Parol Evidence Rule

Answer 11

Excludes evidence of prior or contemporaneous agreements contradicting the final writing
- Requires an completely integrated writing intended as a final expression of the K
— Evid. admissible to show intent

Partial integration = additional non-contradictory terms permitted

Question 12

Risk of loss

Answer 12

• Non carrier merchant seller – risk of loss passes to buyer when they take physical possession
• Non carrier non merchant – risk of loss passes to the buyer upon tender of delivery (instructions)
• Carrier shipment Ks – risk of loss passes to buyer when seller delivers goods to carrier
• Destination Ks – risk of loss passes to buyer only when buyer takes delivery

If the goods are destroyed by no fault of either party and the risk of loss has not been passed to buyer, the K is avoided

Question 13

Modification of the contract

Answer 13

CL – requires new consideration UNLESS the modification is fair and equitable in view of unforeseen circumstances

UCC – req. a good faith basis – no consideration needed

Question 14

Promissory estoppel

Answer 14

Consideration not necessary if enforcement is necessary to prevent injustice. Req:
(1) The promisor should reasonably expect to induce action or forbearance, and
(2) Such action or forbearance is in fact induced.

Question 15

Excuses for non-performance

Answer 15

• Insecurity - when a party has reasonable grounds to believe the other party will be unable to perform, they may demand adequate assurances and suspend performance in the meantime
• Anticipatory repudiation – one party makes an unambiguous statement or conduct prior to performance indicating he will not perform
  — can be withdrawn unless other party has either materially changed position in reliance, cancelled the K, or indicated the repudiation is final
• Impracticable – performance is only possible with extreme and unreasonable difficulty /expense b/c of an unforeseen event, which neither party assumed would occur
• Impossible – performance is objectively impossible b/c of an unforeseen event
• Frustration of purpose – when (1) an unexpected event destroys one or both party’s purpose for entering the K; (2) the unforeseen event is not the fault of the frustrated party; and (3) the non-occurrence of the event was a basic assumption of the K
• Rescission – both parties agreement to rescind - in itself a new K supported by consideration

Question 16

Warranties

Answer 16

Express warranty – promise about the quality or feature of a product

Implied warranty of merchantability - merchant automatically warrants goods are fit for ordinary purpose

Implied warranty of fitness for a particular purpose – seller warrants that goods are fit for buyer’s purpose if Buyer has a particular purpose, relies on seller to select suitable goods; and Seller has reason to know of buyer’s purpose and reliance.

Question 17

Accord and satisfaction

Answer 17

Accord - new agreement to accept alternative performance in lieu of the original performance – req. consideration. Satisfaction – performance of the accord agreement

Question 18

Breach

Answer 18

– failure to perform an absolute duty – must be material
— courts look at the amount of benefit received, the adequacy of damages, the extend of performance hardships of the breaching party, and whether the breach was negligent

Under CL, a breach is not material if there was substantial performance

Question 19

UCC Perfect Tender Rules

Answer 19

UCC req. a perfect tender > perfect delivery in perfect conditions

Buyer’s options upon seller’s imperfect tender—buyer can either keep the goods delivered and sue for damages, or reject some or all goods and sue for damages
– Buyer who rejects goods must (1) notify seller of rejection in a reasonable time; (2) hold the rejected goods using reasonable care; and (3) give seller reasonable time to arrange for removal of goods

– Seller may have an opportunity to cure if they give notice of intent to cure and time for performance has not yet expired or if they had reasonable grounds to believe nonconforming goods sent would be acceptable

Question 20

Installment K

Answer 20

Buyer can only reject a delivery/installment if (1) the defect substantially impairs the installment and (2) cannot be cured. Rejection is limited to the defective installment, not the entire K.

Question 21

Monetary remedies

Answer 21

– Expectation damages – puts the parties in the economic position they would be in if the K had been performed – K damages must be ASCERTAINABLE

– Reliance damages – alternative measure used when expectation damages are too speculative

– Consequential damages – foreseeable losses indirectly resulting from breach > under UCC only buyers recover

– Incidental damages – commercially reasonable expenses incurred by the non-breaching party in UCC Ks

Question 22

Liquidated damages

Answer 22

liquidates damages will be enforced if
(1) damages for breach are difficult to estimate at the time of contracting, and
(2) the amount is a reasonable forecast

Question 23

equity remedies

Answer 23

– Specific performance – usually only available for Ks involving real estate or unique goods

– Rescission – cancellation of a K – restores parties to their positions before K was made

– Reformation – K is changed so that it reflects parties’ original intent

– Reclamation – in UCC Ks, unpaid sellers may stop delivery or reclaim goods from an insolvent buyer

– Restitution damages – when a party has been unjustly enriched – awarded based on value of the benefit wrongfully conferred

Question 24

Divisible K

Answer 24

A party who has performed one or more parts is entitled to collect the K price for the parts. Performance must be
(1) divided in parts under K,
(2) the parts due for each party are the same, and
(3) the performance of each part is agree as the equivalent of the corresponding part from the other party

Question 25

Third party beneficiaries (TPB)

Answer 25

A third party that benefits from a K entered into between other parties – Intended TPBs (those identified in the K, receive performance directly + relationship w promisee) have rights under the K once their rights have vested, which is when:
-Accepts the benefits of the K in a manner requested by the parties to the K,
- Sues to enforce the K, or
- Detrimentally relies on the K

Question 26

Assignments

Answer 26

Transfer of rights under a K to a third party after the K is formed
– Assignor can only transfer the rights they have in a K at the time of assignment
– Common law bars any assignment that substantially changes the duties of the obligor
– Ks may contain non-assignment clauses, but they are read narrowly
– Gratuitous assignments may be revocable unless obligor has already performed, Assignee has received tangible object with right to collect, or detrimental reliance by assignee