Contracts

Question 1

Statute of Frauds

Answer 1

Contracts for the sale of goods over $500 must be in writing.

Contracts involving interstate commerce might invoke federal regulations, like the Uniform Commercial Code (UCC), which Georgia also adopts with state-specific provisions.

Georgia requires contracts involving real property, guarantees, marriage considerations, and agreements not performable within one year to be in writing.
Georgia courts strictly enforce these requirements, with limited exceptions such as partial performance.

Question 2

Modification

Answer 2

Contract modifications do not require consideration under federal UCC.

Georgia follows this rule but requires modifications to be in writing for sales over $500.

Question 3

Implied Warranty

Answer 3

Implied warranty of merchantability applies unless expressly disclaimed.

Georgia limits disclaimers of implied warranties to writing that is conspicuous and uses explicit language like “as is.”

Question 4

Offer

Answer 4

A manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that their assent is invited and will conclude the bargain.

Question 5

Acceptance

Answer 5

An unequivocal agreement to the terms of an offer.

Question 6

Consideration

Answer 6

A bargained-for exchange; something of legal value given by both parties.

Georgia law emphasizes that consideration must be mutual and not illusory.

Question 7

Promissory Estoppel

Answer 7

A promise is enforceable without consideration if there is reliance by the promisee that is reasonable, detrimental, and foreseeable.

Question 8

Parole Evidence Rule

Answer 8

Prohibits the admission of prior or contemporaneous oral or written agreements that contradict a fully integrated written contract.

Question 9

Material Breach

Answer 9

A breach that goes to the essence of the contract and excuses the non-breaching party from performance.

Question 10

Covenant Not To Compete

Answer 10

Georgia enforces restrictive covenants in employment contracts if they are reasonable in time, geographic scope, and activity.

Question 11

Liquidated Damages

Answer 11

Enforceable in Georgia if they are a reasonable estimate of actual damages at the time the contract was formed and not a penalty.

Question 12

UCC Article 2

Answer 12

Georgia follows the UCC but imposes stricter requirements for disclaiming implied warranties (e.g., disclaimer must be conspicuous and explicitly mention “merchantability”).

Question 13

Anticipatory Repudiation

Answer 13

Georgia allows the non-breaching party to demand adequate assurances of performance if there are reasonable grounds for insecurity.

Question 14

Exceptions to Statute of Frauds

Answer 14

Partial performance or equitable estoppel can be used in Georgia to enforce contracts that would otherwise fall under the statute of frauds.

Question 16

UCC vs. Common Law

Answer 16

UCC Article 2 governs transactions for the sale of goods. Where the UCC is silent, common law applies. A “good” for the purposes of the UCC is any item readily moveable at the time of the agreement.

Common law governs service contracts.

Question 17

Predominant Purpose Test

Answer 17

Where an agreement includes goods and services, the “predominant purpose” of the agreement determines the applicable law. A court will consider the value of the goods vs. services, the contract language, and the nature of the business.

Question 18

Requirements of an Enforceable Contract

Answer 18

Offer, acceptance, and consideration.

Question 19

Offer

Answer 19

An outward manifestation of a present intent to be bound that creates the power of acceptance in an offeree and includes all necessary terms.

UCC Necessary Terms: Description and quantity.
Common Law Necessary Terms: Description, quantity, and price.

Question 20

Reward Offers

Answer 20

Reward offers are valid offers that create a unilateral contract that is accepted upon completion of performance.

Question 21

Commercial Advertisement

Answer 21

Commercial advertisements are not offers, but rather an invitation for offers, since acceptances could exceed the quantity available.

This does not apply in instances in which the advertisement specifies who can accept, such as “first come, first served” or “while quantities last”.

Question 22

Irrevocable Offers

Answer 22

FOUR

Firm offer (UCC)

Option contracts (Common Law)

Unilateral contracts

Reasonably foreseeable substantial detrimental reliance on the offer

Question 23

Rejecting an Offer

Answer 23

Can reject outright; with a counter offer (must be more than a mere inquiry); or with non-conforming acceptance under the mirror image rule.

Question 24

Mirror Image Rule

Answer 24

Under common law, acceptance must mirror the terms of the offer. Any acceptance outside of the offered terms constitutes a rejection and counteroffer.

Question 25

Terminating an Offer

Answer 25

An offer can be terminated prior to acceptance when there is:

1. Lapse (a “reasonable time” has passed to accept)
2. Death/incapacity
3. Revocation (communicated to the offeree, either directly or indirectly, barring any exceptions)
4. Rejection (outright, non-conforming acceptance under the mirror image rule, or a counter offer)

Question 26

UCC Firm Offer

Answer 26

Under the UCC firm offer rule, a merchant can make a firm offer without consideration. A firm offer is irrevocable if it is in writing and signed by the merchant and states expressly that the offer will be held open. Offer is then irrevocable for the time stated, or for a maximum of 90 days.

Question 27

Indirect Revocation

Answer 27

An indirect revocation terminates an offer prior to acceptance.

Requires the offeror to take action inconsistent with the intent to go through with the deal and the offeree to have learned of such inconsistency from a reliable source.

Question 28

Common Law Option Contract

Answer 28

A common law offer with a separate agreement to keep the offer open, secured by consideration, is not revocable.

Question 29

Acceptance

Answer 29

Must be an outward manifestation of assent to the terms of the offer.

Under the common law mirror image rule, the acceptance must mirror the terms of the offer exactly; if the terms of the acceptance vary, it constitutes a rejection and counteroffer.

An acceptance by mail is effective upon dispatch under the mailbox rule.

Question 30

Acceptance with Varying Terms

Answer 30

Under the common law mirror image rule, the acceptance must mirror the terms of the offer exactly; if the terms of the acceptance vary, it constitutes a rejection and counteroffer.

Under the UCC, additional terms in the acceptance are permissible as long as the acceptance was not expressly conditioned on those terms. Additional terms will then become a part of the contract as long as they are not objected to within a reasonable time or materially change the contract.

“Materially alter the contract” = anything that would cause surprise or hardship to the other party if it were incorporated without the other party being aware.

Question 31

UCC Acceptance by Seller

Answer 31

A seller can accept a buyer’s offer in three ways:

1. By promising to ship conforming goods.
2. By actually shipping conforming goods.
3. By shipping non-conforming goods, which constitutes both an acceptance and a breach at the same time.
   3(a). If a seller ships non-conforming goods as an “accommodation”, it constitutes a rejection and counteroffer which the buyer is free to accept or deny.

Question 32

Seller Shipment of Non-Conforming Goods

Answer 32

Shipping non-conforming goods constitutes both an acceptance and a breach at the same time.

If a seller ships non-conforming goods as an “accommodation”, it constitutes a rejection and counteroffer which the buyer is free to accept or deny.

If the buyer keeps the non-conforming goods, it is an acceptance of the counteroffer.

Question 33

Mailbox Rule

Answer 33

Acceptance of an offer is effective upon dispatch as long as it was sent before a rejection.

Rejection/revocation of an offer is effective upon arrival.

When a rejection is mailed first and then an acceptance is mailed, the mailbox rule does not apply. The first to reach the offeror controls.

The mailbox rule does not apply to option contracts, which may only be accepted upon arrival.

Question 34

UCC Acceptance with Additional/Different Terms

Answer 34

Unlike the common law mirror image rule, the acceptance of a contract for the sale of goods can include additional or different terms and still constitute a valid acceptance and create an enforceable contract, unless acceptance was expressly conditioned upon certain terms in the offer.

The effectiveness of the additional/different terms depends on the parties.

Merchant vs. Consumer — Additional/different terms are mere proposals for addition to the contract that do not become enforceable until the offeror expressly agrees.

Merchant vs. Merchant —
- Additional terms become part of the contract unless (1) the offer expressly limits acceptance to only the terms in the offer, (2) the offeror objects to the additional terms within a reasonable time, or (3) the additional terms would materially alter (cause surprise or hardship) the contract.
- Different terms will “knock each other out” and both be omitted; gap fillers will apply.

Question 35

Conditional Acceptance

Answer 35

If an offeree’s acceptance is made conditional upon a new or different term, it is a rejection and counteroffer. Conditional acceptance does not form a contract.

Conditional acceptance must be clear and conspicuous.

Question 36

Consideration

Answer 36

A promise/contract is unenforceable unless it is supported by consideration — a legal detriment or bargained-for exchange.

Courts will not inquire as to the adequacy of consideration; only its existence.

A promise to make a gift (gratuitous promise), an illusory promise, and/or past consideration are not adequate to create an enforceable contract.

Question 37

Past Consideration

Answer 37

A promise in exchange for something already given or performed is not supported by consideration and not binding unless it is (1) a written promise to pay a debt that has expired past the SOL, or (2) a written promise to pay a debt that has been discharged by bankruptcy.

Question 38

Illusory Promise

Answer 38

A promise of performance that leaves the adequacy of performance to the promising party is not supported by consideration and not enforceable.

Example: “I’ll pay you $5 if I feel like it,” or, “I’ll promote your album if I think it’s good enough.”

Question 39

Pre-Existing Duty Rule and the Modification of Contracts

Answer 39

Under the common law pre-existing duty rule, additional consideration is required to modify an existing contract, unless unforeseeable circumstances make performance substantially more burdensome than originally anticipated.

Under the UCC, parties may modify a contract without additional consideration as long as it is modified in good faith.

Question 40

Guarantor/Suretyship Contracts

Answer 40

A promise to answer for the debt of a third party. Must comply with the SOF.

Main Purpose Exception: If the surety/guarantor’s main purpose in entering into the contract is for their own economic benefit/interest, the SOF is not triggered.

Question 41

Performance Exception to the Statute of Frauds

Answer 41

1+ Year Service Contracts: Can satisfy the SOF if fully performed on both sides (not partially performed).

Sale of Goods $500+ Contracts: Can satisfy the SOF with partial performance up to the quantity performed, or by beginning the manufacture process of custom goods.

Real Estate Contracts: Partial performance of a real estate contract will satisfy the SOF if 2 out of 3 of the following are achieved: (1) payment of all or part of the purchase price; (2) taking possession of the land; or (3) making substantial improvements to the land.

Question 42

UCC Satisfaction of the Statute of Frauds

Answer 42

A contract for the sale of goods in excess of $500 must satisfy the Statute of Frauds. A contract for the sale of goods can satisfy the SOF in 5 ways:

1. With a signed writing including the quantity.
2. If the contract is between two merchants, with a signed merchant confirmation that is not objected to within 10 days.
3. With a judicial admission.
4. By partial performance up to the amount paid/delivered.
5. By beginning to manufacture custom goods not suitable for other buyers.

Question 43

Gap Fillers

Answer 43

A contract for the sale of goods does not necessarily fail because a term is missing. Extrinsic evidence regarding the course of performance, course of dealing, or trade usage may supplement or add terms, but never contradict existing terms.

Missing price = Reasonable price at time of delivery.
Missing time/deadline = Reasonable time.
Missing place of delivery = Seller’s place of business.

Question 44

Interpreting Ambiguous Language

Answer 44

Objective meaning trumps subjective intent unless both parties shared the same subjective intent or one party had reason to know of the other’s subjective intent. In such instances, the subjective intent controls.

Contra Proferentem: Ambiguous terms are construed against the drafter.

Question 45

Express Warranties

Answer 45

Any affirmation of promise or fact (including any description of the goods or sample/model of the goods) that was relied upon by the buyer.

Does not include “puffing”/sales talk/opinions.

The words “warranty” or “guarantee” are not required to create an express warranty.

Express warranties are very difficult to disclaim, but warranties are still held to a reasonableness standard under the UCC.

A breach of warranty = breach of contract.

Question 46

Implied Warranty of Title

Answer 46

Implication in all sales contracts that the seller has good title to the goods, that a rightful/lawful transfer of title is occurring, and that there are no liens attached to the goods.

Can be disclaimed with express language, or if the surrounding circumstances would lead a reasonable buyer to believe or suspect that the buyer does not have unencumbered title.

Seller need not have marketable title until the time for closing, for real estate contracts

Question 47

Implied Warranty of Merchantability

Answer 47

Seller must be a merchant, i.e., someone who deals with goods of the kind being sold.

All merchants make an implied warranty that the goods being sold are fit for their ORDINARY COMMERCIAL PURPOSE.

Disclaimed by orally or in conspicuous writing using the word “merchantability”. Also disclaimed if the goods are being sold “as is” or with a patent defect, i.e., “upon buyer inspection, circumstances would lead a reasonable buyer to understand that the warranty is disclaimed.”

Question 48

Implied Warranty of Fitness for a Particular Purpose

Answer 48

An implied warranty that the goods are fit for the PARTICULAR PURPOSE that the buyer intends to use them for, when the seller has REASON TO KNOW of such purpose, and the buyer RELIED on the seller’s expertise when purchasing the goods.

Negated with a written, clear, and conspicuous disclaimer, or if the goods have an easily detectible patent defect.

In Georgia, claims for breach of this warranty are limited to the immediate seller and the buyer’s immediate family or household guests (those reasonable expected to use the product).

Question 49

Common Law vs. UCC Performance

Answer 49

Unless contracted otherwise…

Common law service/real estate contracts require “substantial performance” to satisfy the contract so as to require the other parties’ performance.

UCC contracts for the sale of goods require the seller to deliver “perfect tender” to satisfy the contract.

Question 50

Substantial Performance

Answer 50

Whether a party has substantially performed their duty under a contract is a fact-specific inquiry in which the court will consider many factors:
- Materiality of the breach — did the breach go to the core/essence of the agreement, or was it minor?
- Good faith effort to perform
- Impact of the breach on the other party
- Waiver/acceptance of the breach
- Industry standards
- Remediation/mitigation efforts

If a party has substantially performed, the other party must perform their duty under the contract as well, however, that party may still be able to sue for breach for any uncompleted performance.

Question 51

Perfect Tender Rule

Answer 51

Unless contracted otherwise, the UCC requires a seller to deliver perfectly conforming goods under the perfect tender rule. If a seller delivers perfectly conforming goods, the buyer’s duty is to accept and pay.

If the seller fails to make perfect tender, a buyer may —
1. Accept despite the nonconformity. Buyer must then pay the contract price but is able to sue for damages for the nonconformity if the seller was notified. Buyer can reject acceptance if they didn’t know about the nonconformity.

2. Reject the goods within a reasonable time, notifying the seller and giving them the opportunity to cure if the time for performance has not expired. Can then sue for damages if not cured.
3. Accept in part and reject in part.

Question 52

The Right to Cure

Answer 52

Seller has a right to cure non-conforming goods if the time for performance has not expired or the seller had reason to believe that the goods were perfect tender.

Must give buyer notice of the intent to cure, and cure before performance deadline (unless believed it was perfect tender, in which case they must cure within a “reasonable time”).

Seller may believe that non-conforming goods were perfect tender due to either assurances from the buyer or COP/COD/TP.

Question 53

Performance of Installment Contracts

Answer 53

A buyer can only reject a single installment if the installment’s non-conformance substantially impairs the value of the shipment and cannot be cured.

A buyer can only cancel the entire installment contract if the non-conforming installment substantially impaired the value of the entire contract.

Question 54

Parol Evidence Rule

Answer 54

Traditionally, the court will only consider evidence within the 4 corners of the contract, unless the parol evidence rule applies. The PER governs the admissibility of evidence of negotiations or communications prior to the execution of the contract.

Application of the PER will depend on whether the contract is completely or partially integrated, barring any exceptions:

• Complete Integration — The contract is intended to be a complete and exclusive representation of ALL terms of an agreement (usually includes a merger clause). Parol evidence is not admissible for any reason, unless an exception applies.
• Partial Integration — The contract is intended to be a complete and exclusive representation of only THOSE terms included the contract. Parol evidence is admissible to supplement or explain those terms, but not to contradict.

Question 55

Parol Evidence Rule Exceptions

Answer 55

1. Evidence of course of performance, course of dealing, or trade usage is always admissible to supplement terms in a UCC contract, even if it is complete integration. If it is a partial agreement, the evidence may be used to “qualify” or explain a term.
2. The PER does not apply to communications after integration or any other subsequent agreements.
3. The PER does not apply to evidence of collateral agreements — agreements entirely distinct from the contract at hand.
4. The PER does not apply to attacks on the validity of the agreement, such as duress, fraud, mistake, etc.

Question 56

Risk of Loss - Carrier Cases

Answer 56

When parties agree to use a common carrier for delivery of goods, the risk of loss depends on whether it is a shipment or destination contract.

Shipment Contract (Seller agrees to ship the goods/turn them over to a common carrier) — The risk of loss passes to the buyer upon the seller’s delivery of the goods to the common carrier. Buyer is liable for damage during transit.

Destination Contract (Seller agrees to delivery the goods to a specific location) — The risk of loss passes to the buyer upon delivery of the goods at the specified destination. Seller is liable for damage during transit.

IF NOT SPECIFIED, DEFAULT IS SHIPMENT.

Question 57

Risk of Loss - Non-Carrier Cases

Answer 57

When the parties are not relying on a common carrier for delivery, the risk of loss depends on the classification of the seller as a merchant or otherwise.

If the seller is a merchant: The risk of loss passes to the buyer once the buyer takes possession.

If the seller is not a merchant: The risk of loss passes to the buyer once the item is delivered; even if the buyer does not take possession.

Question 58

Delegation of Duties

Answer 58

When a 3rd party agrees to satisfy a performance obligation owed by a party to a contract.

All services are delegable unless they are personal services or there is a non-delegation clause in the contract.

The delegator remains liable under the contract unless there is a novation. The delegatee is liable to the delegator for potential breach.

Question 59

Retracting Repudiation

Answer 59

A repudiating party may retract their repudiation unless the other party has already cancelled the contract, acted in reliance on the repudiation, or commenced suit.

Question 60

Accord and Satisfaction

Answer 60

When a contract is fulfilled using different terms than originally agreed upon.

Accord = When an obligee agrees to accept substitute performance “in satisfaction of” the obligor’s original duty. The accord suspends the obligor’s duty to perform until the satisfaction.

Satisfaction = Performance of the accord.

Accord + satisfaction = discharge of the original duty.

Consideration is required.

Question 61

Impracticability

Answer 61

Performance excused if there was:
1. An unforeseen act of God; for which,
2. The risk of the unforeseen event was not assumed or allocated for;
3. Which made performance prohibitively expensive or extremely burdensome.

In GA, an act of God is required.

Question 62

Impossibility

Answer 62

Both parties are excused from performance if an event occurs after contract formation that makes performance OBJECTIVELY impossible for both parties.

Objective impossibility occurs when events beyond BOTH parties’ control render performance impossible.

The contingency creating the impossibility must have been unknown.

Question 63

Third Party Beneficiary

Answer 63

When performance of a contract will benefit a 3rd party, that 3rd party’s standing to enforce the contract will depend on the party’s classification —

Incidental third party beneficiaries do not have standing to sue.

Intended third party beneficiaries (creditor or donee, usually named in the contract) can sue the promisors providing the benefit, but not the promisees.
- If their rights under the contract have vested due to (a) justifiable reliance, (b) assent to the contract, of (c) bringing suit, the contract cannot be cancelled or modified without the TPB’s consent.

Question 64

Assignment of Rights

Answer 64

The transfer of the right to receive performance under the contract.

All rights are generally assignable unless it materially alters the rights of the other party, the other party has a personal interest in rendering performance to the transferor, or it is prohibited by the contract or law.

Once a party fully performs, they can assign their right to enforce the contract without consent of the other party, even with a no-assignment clause.

An assignment for consideration = irrevocable.
A gratuitous assignment = revocable.

Question 65

Divisible Contracts

Answer 65

If a contract is “apportionable” and the parties could have contracted for each part separately, the contract is divisible.

Substantial performance of one part of a divisible contract entitles the performer to payment/performance for that part, even if they don’t substantially perform the other parts.

Question 66

Conditions

Answer 66

Generally, if a party doesn’t substantially perform their end of a promise, the other party can sue for breach but still has to perform.
However, if a party fails to meet a condition, performance is discharged altogether.

2 defenses —
* The breaching party can argue that the contract was divisible and they are entitled to performance on at least one part.
* The breaching party may argue under quantum meruit/unjust enrichment to collect the reasonable value of the benefit conferred minus the damages caused by the breach.

Question 67

UCC Revoking Acceptance

Answer 67

Generally, a buyer cannot reject goods after acceptance. However, a buyer can revoke their acceptance afterwards if —

1. The nonconforming goods substantially impairs the value of the contract.
2. The buyer accepted the goods only because they had a reasonable belief that the non-conformity would be cured, or didn’t reasonably discover it.
3. They revoke within a reasonable time after discovery, and
4. Before a change in the condition of the goods unrelated to the nonconformity (i.e. food that expires).

Question 68

Defenses to Formation

Answer 68

Incapacity: Under 18 voidable unless for necessities.
Illegality: Void.
Misrepresentation
Duress: Threat overcomes mind + will of an ordinarily firm person.
Misunderstanding: No meeting of the minds; must be mutual.
Mistake: Mutual = voidable; unilateral = not void.
Undue Influence
Public Policy/Unconscionability

Question 69

Fraudulent Misrepresentation

Answer 69

1. An intentional/accidental/concealed misrepresentation of material fact,
2. Which induced the other party to reasonably rely to their detriment/injury.

Question 70

Default Rule for Contract Damages — Expectation Damages

Answer 70

In general, a court’s default measure of damages is expectation damages, which seek to restore the aggrieved party to the position they would be in had the contract been fully performed.

Expectation damages must be foreseeable (“flow naturally from the breach”) and calculated with reasonable certainty.

Question 71

Reliance Damages

Answer 71

Reliance damages restore the aggrieved party to the position they were in before they entered into the contract. Reliance damages may be available where expectation damages are too uncertain.

Aggrieved party can recover the amount they spent in preparation for performance or in actual performance, reduced by the amount that they would have lost if the contract was fully performed.

Question 72

Restitutionary Damages (Unjust Enrichment/Quantum Meruit)

Answer 72

A party may be able to recover in restitution damages for any benefit conferred onto the other party by way of part performance.

Question 73

Punitive Damages

Answer 73

Punitive damages are generally not recoverable in a breach of contract action unless the conduct constituting breach is also a tort for which punitive damages are recoverable.

Question 74

Consequential Damages

Answer 74

Damages that were reasonably foreseeable at the time of contract formation that result from special circumstances to the parties.

Examples: storing the goods, lost profits as a result of delay of shipment, etc.

Question 75

Incidental Damages

Answer 75

Incidental damages are expenses incurred in either the seller dealing with the goods after the buyer’s breach (storing them) or the buyer arranging for cover.

Question 76

Mitigation

Answer 76

As a general rule, parties cannot recover in damages what they could have avoided with reasonable efforts to mitigate.

In Georgia, landlords do not have a duty to mitigate when a tenant breaches their lease.

Question 77

Specific Performance

Answer 77

An equitable remedy in which the court orders a party to actually perform its promise as closely as possible, because monetary damages are somehow inadequate to fix the harm — generally limited to real property or the sale of unique goods.

If legal damages are inadequate, a court will order specific performance of a contract if the contract was otherwise enforceable, the terms of the contract as certain, all conditions to performance have been met, and ordering performance would not violate public policy.

Not available for personal service contracts, generally.

Question 78

Written Confirmation by a Merchant

Answer 78

A written confirmation of an agreement between two merchants satisfies the statute of frauds if the other merchant does not object to the confirmation within a reasonable time.

Confirmation must be in writing, signed, and include a description and quantity of the goods. (Price not required)

Must be sent to the other merchant within a reasonable time after their agreement and be actually received. A confirmation that was not received is unenforceable.

Question 79

UCC Expectation Damages

Answer 79

Under the UCC, the buyer’s expectation damages are measured by:

• the reasonable market value of the goods that the buyer would have received under the contract,
• minus the actual price of the substituted goods obtained to cover.

Question 80

Restrictive Covenants/Noncompete Clauses

Answer 80

GA law authorizes noncompete clauses for managers, employees engaged in sales, professionals such as doctors or lawyer, or otherwise “key employees”.

The noncompete covenant must be reasonable with respect to time, geographic area, and scope of prohibited activities.

Reasonable scope — if it restricts similar activities or services.

Reasonable time — within 2 years.

Reasonable geographical area — the area in which the previous business was located or services were provided.

Question 81

Blue Pencil Doctrine

Answer 81

In GA, a court is permitted to judicially modify provisions of a noncompete restrictive covenant that would otherwise be unenforceable, however, they cannot add terms (only limit).

Question 82

Nondelegable Duties

Answer 82

Duties for personal services (relying on qualities such as reputation, skill, etc.) generally cannot be delegable.

The attempted delegation of a non-delegable duty operates as an immediate breach of the contract.