Contracts

Question 1

Contracts:

Allgemeines Prüfungsschema Contracts

Answer 1

1. Applicable Law
2. Formation
3. Defenses to formation
4. Statute of frauds
5. Performance/breach
6. Excuses for nonperformance
7. Third-party beneficiaries (siehe separat)
8. Remedies (siehe dort)

Question 2

Contracts: 1. Applicable law

Analyse

Answer 2

a) UCC: when sale of goods is involved
b) CL: if K does not deal with sale of goods
c) hybrid: determine predominant purpose of transaction

Question 3

Contracts: 1. Applicable law

Definition merchant für UCC

Answer 3

someone who regularly does business with knowledge and experience in particular goods

if selling/buying high volume: assume merchant
if unknown: assue non-merchant

Question 4

Contracts: 2. Formation

Definition formation

Answer 4

mutual assent:
1. offer
2. termination of offer?
3. acceptance
4. consideration

Question 5

Contracts: 2. Formation

Bilaterial vs. Unilateral Ks

Answer 5

Bilateral:
a) exchange sougth: promise for promise
b) once promise is given: both parties bound
c) offerors revocation: OK before offerees acceptance

Unilateral:
a) exchange sougth: promise for complete performance
b) once promise is given: offeror bound only when performance completed, offeree never bound to finish
c) offerors revocation: Once offeree begins performing, offeror may not revoke (option K is created), but: Mere preparation does not trigger irrevocability

Question 6

Contracts: 2. Formation

1. Offer (Def. + Vorauss.)

Answer 6

Def.: An offer must create a reasonable expectation in the offeree that the offeror is willing to enter a contract with the offered terms

Vorauss.
1. Promise: present commitment rather than mere invitation to begin negotiations
2. Definite terms: identity offeree & definite subject matter, Rest kann von Gericht ergänzt werden
a) LSK: land and price (! bei land sale wichtig)
b) service K: nature of work
c) UCC: quantity
3. Communication to the offeree: must have knowledge (not preliminary negotiations or mere invitation)

Question 7

Contracts: 2. Formation

Invitatio ad offerendum Fälle

Answer 7

a) public offers: nur invitations, EXCEPT promises to specific offerees (“first come, first serverd, “only one can win”)
b) puffery: does not create reasonable expectation in offeree (Pepsi Points case)
c) reward offers: offer to enter into unilateral K, EXCEPT limit to how many can accept
d) Auctions: auctioneer is inviting offers, bids are offers, EXCEPT “without reserver”

Question 8

Contracts: 2. Formation

2. Termination of offer

Answer 8

1. Revocation: effective when received by offeree or by publication through comparable means, EXCEPT Fallgruppe irrevocable offer
2. Rejection: Bsp. durch counteroffer oder nonconforing acceptance (mirror image rule)
3. Lapse of time: specified oder reasonable time starting from when offer is received or would have been received if delay and offeree knows or should have known
4. Death/incapacity
5. Destruction of subject matter
6. Unconscionability
7. Invalid party: minor, insane, etc.

Question 9

Contracts: 2. Formation

Fallgruppen irrevocable offers

Answer 9

1. UCC firm offer: Offer by merchant in signed writing to keep offer open during time stated (or, if not stated, reas. time up to 3 months). No payment required
2. Option (promise to keep offer open for a time for consideration (Zahlung um offer offen zu halten)
3. Detrimental reliance
4. Part performance

Question 10

Contracts: 2. Formation

3. Acceptance (Def., ZP, P: unilateral contract)

Answer 10

Def.: offeree must have knowledge of offer and objectively manifest assents to terms and communicate it in any reasonable manner, expressly or by conduct

ZP: Grds. Willenserklärungen müssen zugegangen sein (Bsp. offer, revocation)
aber: mailbox rule: acceptance is effective when dispatched, EXCEPT when exercising option K, dann wieder effective when received

P: unilateral contract: only complete performance constitutes acceptance of offer, completed act forms the K

Question 11

Contracts: 2. Formation

P: Change of terms/battle of forms

Answer 11

Grds. CL: Each and every term of offer must be accepted unequivocally (mirror image rule). Any additional/different terms in the acceptance makes the response a rejection and counteroffer

Aber: UCC § 2-207 (battle of the forms): A contract can be formed between merchants even though terms of acceptance do not match terms of offer. Additional/different terms are effective as an
acceptance, unless acceptance is expressly made conditional on acceptance of proposed terms

Welche Klauseln gelten dann?
a) Both merchants + additional terms? Additional terms become part of K, UNLESS…
(1) Acceptance is made conditional on offeror’s assent to additional or different terms
(2) Original offer expressly limits acceptance to offer terms
(3) New terms materially alter original terms, e.g., arbitration clause, disclaimer,
materially shorten deadline, change usage of trade or past method of dealing
(4) Offeror objects to the change within reasonable time

b) Both merchants + different terms? Knockout rule (majority): Conflicting terms are omitted from K; gaps left are filled by UCC default terms
Minority rule: Alternatively, analyze as if additional terms (see (b) above)

c) No acceptance but parties perform anyway? Use knockout rule

Question 12

Contracts: 2. Formation

4. Consideration (Def.)

Answer 12

Def.: There must be a bargained-for exchange between the parties. Each side must give up something they wouldn’t have but for the promise. That which is bargained for must be of legal value

Legal value: a mere peppercorn will suffice
auch: peace of mind, personal satisfaction, surrendering a claim, selbst wenn (!) selbst wenn er invalid ist, wenn surrendering party (regardless of other party) believes that the claim is well founded
aber: bei geringen Dingen immer an unconscionability defense denken!

nicht:
bei illusory promise, wenn nur eine party boudn to perform ist (dann keine consideration und beide sind nicht bound)
bei gratuitous promise bzw. gifts, ABER A properly executed gift is completely binding and irrevocable even in the complete absence of consideration
bei past/moral considerations: promise in exchange for something already given or performed, ABER wiederum consideration wenn neues promise

Question 13

Contracts: 2. Formation

4. Fallgruppen ohne Consideration bzw. to enforce a promise in the absence of consideration

Answer 13

1. Promissory estoppel: allows a plaintiff to recover damages, despite no actual contract, when the defendant made a promise that the plaintiff detrimentally relied upon, and the plaintiff’s reliance on that promise was reasonable and injustice without enforcement (willfulness of breach, relative pt positions, detriment, alternatives)
2. Quasi-K = restitution, quantum meruit, implied-in-law K: plaintiff may be entitled to recover the value of the benefit conferred
3. Implied best efforts: party darf exclusive distributor sein und verspricht dafür als consideration ihre implied best efforts, CL & UCC

Question 14

Contracts: 3. Defenses to formation

Übersicht Defenses to formation

Answer 14

1. Absence of mutual assent
2. Absence of consideration
3. Incapacity
4. Misrepresentation
5. Fraudulent nondisclosure
6. Duress
7. Undue influence
8. Unconscionability
9. Public policy

Question 15

Contracts: 3. Defenses to formation

1. Absence of mutual assent

Answer 15

a) Mutual mistake: K voidable by adversely affected party only if
(1) mistake concerns basic assumption of K
(2) mistake has material effect on agreement and
(3) affected party did not assume the risk of the mistake (one party is in position to better know the risks?)

b) Unilateral mistake: K only voidable if non-mistaken party knew of had reason to know of mistake by other party

Question 16

Contracts: 3. Defenses to formation

2. Absence of consideration

Answer 16

No K exists

Question 17

Contracts: 3. Defenses to formation

3. Incapacity

Answer 17

Infancy (under 18) oder mental incompetence at time of K: incapacitated party may enter into K, can enforce it, but K is voidable only by that party!

SonderP: minor turns 18, may expressly/impliedly ratify and be bound to K
EXCEPTION: can recover reasonable value for necessaries (food, clothing, shelter)

Question 18

Contracts: 3. Defenses to formation

4. Misrepresentation

Answer 18

K voidable by innocent party:
a) fraudulent misrepresentation: inducing another party to enter into K by asserting untrue information bzw. conduct that infers untrue information, aber: K only voidable if justifiably relid on misrepresentation

b) nonfraudulent misrepresentation: K voidable if justifiably relid on material misrepresentation (material = objectively likely to induce a reasonable person to agree with asserted information or subjectively the maker of assertion had reason to know it was likely to cause someone to agree)

Question 19

Contracts: 3. Defenses to formation

5. Fraudulent Nondisclosure

Answer 19

K voidable if:
1. Nondisclosure of material facts
2. Duty to disclose (fiduciary relationship, assertion later made untrue, good faith)
3. reasonable reliance on nondisclosure

Question 20

Contracts: 3. Defenses to formation

6. Duress

Answer 20

K voidable if:
1. Intent to inflict harm
2. Wrongful threat
3. No reasonable means to prevent threat

Question 21

Contracts: 3. Defenses to formation

7. Undue influence

Answer 21

K voidable if:
1. Unfair persuasion
2. Against vulnerable party (e.g. aged, ill)

Question 22

Contracts: 3. Defenses to formation

8. Unconscionability

Answer 22

in light of the general commercial background and needs of the particular parties: K is so one sided as to be unconscionable nder the circumstances at time of formation

RF: court may
a) refuse to enforce K
b) enforce K withouht unconscionable parts
c) limit clauses to avoid unconscionable result

Question 23

Contracts: 3. Defenses to formation

9. Public poliy

Answer 23

K void if subject matter illegal or crime (bribery, prostitution, murder) or performance itself is a tort

Question 24

Contracts: 4. Statute of frauds

Prüfung Statue of frauds

Answer 24

1. Anwendungsbereich MY LEGS
2. Voraussetzungen bzw. Einhaltung der Schriftform
3. Rechtsfolge

Question 25

Contracts: 4. Statute of frauds

1. Anwendungsbereich MY LEGS

Answer 25

1. Anwendungsbereich: MY LEGS
   a) Marriage K
   b) Year bar: K that cannot be performed within 1 year of agreement
   c) Land sale: EXCEPTION part performance, improvements, payments,
   d) Executor promise: executor/administrator promises to pay estate’s debt out of own funds
   e) Guaranty K: promise to guarantee (not assume) the obligation/debt of another person, EXCEPT main purpose rule: if guarantors main purpose is for his own economic advantage (eg as a shareholder), writing not required
   f) Sale of goods for $500+, EXCEPT: merchant confirmation (KBS) a merchant sends written confirmation after oral agreement w/in reas.
   time, binds recipient if reason to know of contents and no written objection w/in 10 days of receipt, enforceable to extent of quantity of goods shown in writing or paid for (including partial payment)

Question 26

Contracts: 4. Statute of frauds

2. Voraussetzungen bzw. Einhaltung der Schriftform

Answer 26

Grds. One or more signed writings that reflect material terms signed by party to be charged. Signature may be typed, initialed, on a letterhead, or electronic.

Besonderheiten Common law: Writing includes nature and subject matter of K, essential terms of agreement
SonderP: Several writings: Entire set of writings may be combined into one sufficient to satisfy SOF if 1) signed writing is attached to other writing by party to be charged, 2) signed writing refers to the unsigned writings, or 3) signed and unsigned docs clearly refer to the same subject matter.

Besonderheiten UCC: Requires quantity of goods. Enforceable up to stated quantity
EXCEPTIONS: Writing signed by charged party not required for sale of goods if SWAP:
1. Specially manufactured goods: Goods manufactured to buyer’s specs, substantial reliance by seller
2. Written confirmation by merchant (merchant’s confirmation): Between merchants, signed written confirmation of an oral agreement sent w/in reasonable time will also bind recipient, if recipient has reason to know of confirmation’s contents (quantity) + does not object in writing w/in 10 days + actually received by the party to be charged
3. Admission in court up to quantity admitted
4. Partial performance, e.g., payment made & accepted, goods received & accepted

Question 27

Contracts: 4. Statute of frauds

3. Rechtsfolge

Answer 27

a) defense to formation and enforcement if some portion of the K has yet to be performed
b) andere Rechtsgebiet: Promissory/equitable estoppel: Reliance on a promise of creating signed writing. Quasi-contract: Recovery of value for benefits conferred where there is unjust enrichment

Question 28

Contracts: 5. Performance and Breach

Rechtsinstitute rund um Performance and Breach

Answer 28

1. Parole evidence rule
2. Conditions
3. Breach of contract
4. Modification
5. UCC perfect tender rule

Question 29

Contracts: 5. Performance and Breach

1. Parole Evidence Rule (PER)

Answer 29

Grds. When parties to a contract have put in writing the final and complete expression of their agreement (“completely integrated”), evidence of any other prior or contemporaneous oral or written agreements (negotiations) are not admissible to vary or contradict the terms of the writing

Ausn.
1. Oral condition precedent: Oral agreement that K would not be effective until a condition occurs
2. Subsequent agreements or modifications (PER only applies to prior/contemporaneous expressions)
3. Collateral agreements (distinct from completely integrated written agreement)
4. Attack validity of written agreement (show it did not become proper K): ambiguous terms, no consideration, mistake, duress, fraud, reformation to correct mistake

Question 30

Contracts: 5. Performance and Breach

PER: Bedeutung “completely integrated” und was gilt, wenn nur “partially integrated”?

Answer 30

Completely integrated:
eA: if within the plain meaning of the four corners of the contract it appears intended to be the final and complete expression of their agreement. A merger clause
aA: the existence of extrinsic evidence of an additional term (like an oral
statement) shows that the original agreement was not meant to be an integrated contract

Wenn nur partially integrated (d.h. when it is a final but not complete expression of the agreement (only reflects a part of the agreement, e.g., missing terms): Evidence may only be used to supplement (not contradict) partially integrated writing with consistent additional terms

Question 31

Contracts: 5. Performance and Breach

Default gap filler provisions if terms are missing from K
(Achtung: an PER denken, d.h. gap fillers greifen, wenn anderer Beweis wegen PER ausgeschlossen ist)

Answer 31

Under CL:
a) price: reasonable value
b) duration: employment at will, given assurance of job security

Under UCC:
a) price: reasonable price as of delivery
b) time of delivery: reasonable time
c) time of payment: time and place of receipt by buyer
d) place of delivery: seller’s place of business
e) quantity: Achtung: definite certain term required in writing (s.o.) inkl. Ausn. (s.u.)

Question 32

Contracts: 5. Performance and Breach

Weitere Besonderheiten UCC

Answer 32

1. Implied warranties of good title, merchantability (for merchants, goods are fit for ordinary purposes, unless displaced by “as is” language), fitness for a particular purpose buyer intends to use them for (seller has good reason to know the purpose + buyer relies on seller’s skill/judgment). Any disclaimer must be in conspicuous writing so that a reasonable person can notice it
2. Express warranties created by seller’s affirmation/promise, description of good
3. Open quantity term: fatal to a K. EXCEPTIONS under UCC:
   (1) Output K: Buyer agrees to purchase all of a supplier’s output
   (2) Requirements K: Supplier agrees to supply all of the goods required by buyer
   Beachte: Quantity demanded may not be unreasonably disproportionate (higher/lower) to a stated estimate or comparable prior numbers, Actual “requirement” may be zero (e.g., if company out of business)
4. Satisfaction clause where one party pays only if satisfied may be considered illusory, but UCC requires “best efforts” or “good faith effort” by both parties
5. If delivery by common carrier other than seller (e.g., FedEx), it may be a** shipment K** (states “FOB [free on board] seller”) where risk of loss (ROL) passes to buyer when goods are delivered to carrier, or it may be a destination K (states “FOB buyer”) where ROL is on buyer upon delivery
   if K doesn’t specify: shipment K, wenn delivery durch common carrier erfolgen soll
   (bei delivery by non-carrier insb seller must deliver himself, destination K)
6. UCC perfect tender rule: terms are enforced exactly
   wenn Mängel:
   a) buyer may reject goods within reasonable time of delivery
   b) accept goods (aber: right to revoke acceptance within reasonable time if acceptance relied on (1) assurance that defect would be cured, (2) difficulty of discovering defect, (3) sellers assurance that goods conformed to K
   c) accept some units

aber: seller has right to cure and make conforming delivery (quasi Nacherfüllung) after seasonable notice

7. Good faith and fair dealing

Question 33

Contracts: 5. Performance and Breach

Auslegungshierarchie

Answer 33

course of performance within K > express terms K > course of dealing (previous transactions) > trade usage (industry practice)

Question 34

Contracts: 5. Performance and Breach

Conditions

Answer 34

1. There is an absolute duty to perform if there is no condition, or condition has been excused (!) or satisfied
2. Constructive conditions: Conditions may be constructively implied, where the duty of each party to render performance is conditioned on the other party doing so.
   a) If simultaneous performance is possible, each party must tender, to put other under duty to perform
   b) If one performance will take longer, its completion is due first as constructive condition precedent

Question 35

Contracts: 5. Performance and Breach

Breach of contract

Answer 35

I. Actual/present breach:
1. Material breach: if the obligee does not receive the substantial benefit of the bargain. Nonbreaching pt is discharged from duty and has a right to remedies
(time: Grds. not material if done w/in reasonable time. Ausn. If timely performance essential to K, or K expressly provides time is of essence, failure is material)
2. Minor breach: Breach is minor if obligee receives the substantial benefit of the bargain despite obligor’s defective performance. Nonbreaching pt still has duty to perform but may seek damages

II. Anticipatory repudiation: Unequivocal (not merely prospective inability to perform, manifested by doubt) statement/conduct indicating pt will commit a breach (before deadline) can be treated as immediate breach
1. Failure to provide reasonable assurances w/in reasonable time (30 days) is treated as a repudiation
2. Retraction: Repudiating party may retract repudiation, UNLESS other party acts in reliance under repudiation, accepts repudiation (signals it to repudiating party), or brings suit
3. Effects: If repudiated, aggrieved pt may sue immediately, wait, discharge K, or urge pt to perform

(If repudiation cannot be established, but there are reasonable grounds for insecurity, the insecure party may demand adequate assurance of performance)

III. Wrongful prevention/hindrance of condition. Gross forfeiture: Fulfilling condition results in a large loss.
Waiver or estoppel: Material change of position of one party in reliance of waiver indicated by other party

Question 36

Contracts: 5. Performance and Breach

Modification

Answer 36

Request for modification (after K) must be supported by new consideration (CL) or good faith (UCC)

Under CL: Preexisting duty rule—if one already owes a duty to perform, that performance cannot be used as consideration for another promise. EXCEPTIONS:
1. Duty owed to 3P: Modernly, a duty is preexisting only if it is owed directly to a promisee. Promise to perform a duty is valid consideration as long as the duty is not already owed to the promisee
2. Unforeseen burdens: Promise of increased compensation is given in exchange for a promised performance substantially more burdensome than reasonably anticipated at formation
3. Mutual modification: Parties agree to a different performance that is not a mere pretense

Under UCC: Only good faith (usually there) needed to modify. Mod must be in writing if regarding sale > $500

Abgrenzung zur novation: All parties expressly agree to release and substitute a party. No writing require

Question 37

Contracts: 6. Excuses for Nonperformance

Arten von Excuses for Nonperformance

Answer 37

I. Discharge of duties in unforeseen events
1. Objective Impossibility (temporary merely suspends performance)
2. Impracticability: not if assuming risk of market fluctuations, fault of pt seeking relief, promisor must allocate production among multiple customers in manner that is fair and reasonable
3. Frustration of purpose: principal purpose in entering K is substantially/totally frustrated

II. Mistakes if material
a) unilateral: only voidable if other party knew or had reason to know of mistake or serious lcerical error (Schreibfehler) by mistaken party
b) mutual: voidable by disadvantaged party who did not bear the risk of mistake

III. Excuses by agreement
a) Rescission: Consideration is provided mid-performance by each party to discharge the other’s duties
b) Accord & satisfaction: New agreement (accord suspends duty; cf. modification alters) where obligee promises to accept substituted performance in satisfaction of obligor’s original, existing duty

Question 38

Contracts: 7. Third party beneficiaris

Wann hat 3P beneficiary standing to enforce K? Und when does right to sue vest?

Answer 38

Terminologie: promisor verspricht etwas an promisee, dass er an 3P leistet

3P must:
1. receive performance directly from promisor
2. be expressly designated in K or have relationship with promisee implying intent to benefit

When does right to sue vest (becomes absolute, fixed):
a) 3P brings suit to enforce
b) changes position in reliance on K
c) manifests assent to K at request of promisee of promisor or
d) expressly vested under K

Question 39

Contracts: allgemein

What is not assignable/delegable?

Answer 39

1. personal service
2. requirement Ks
3. public-policy violation (bei assignment)
4. by K clause? a) delegation kann verhindert werden, b) aber anti-assignment clause can only prevent transfer of duties, but not right to performance, assignor may be liable for breach, but assignee may enforce against obligor