Contracts

Question 1

Big Ticket Items

Answer 1

1. UCC v. Common Law
2. Contract Formation
3. Parol Evidence Rule
4. Anticipatory Repudiation v. Prospective Inability to Perform

Question 2

Crossover Topics

Answer 2

1. Remedies
2. Professional Responsibility
3. Real Property

Question 3

UCC v. Common Law

Answer 3

Article 2 governs contracts for the sale of goods.

“Goods” are movable, tangible items.

All other contracts are governed by the common law.

Question 4

Formation of Contracts (Ks)

Answer 4

A binding K requires manifestation of mutual assent, consideration, and lack of valid defenses

Question 5

Offer

Answer 5

An objective manifestation of a willingness by offeror to enter into agreement

Question 6

Terms (CL)

Answer 6

Under common law (CL)

o Essential terms (parties, subject matter, price, quantity) must be covered in K

o If the parties intended to create a K, the court may supply missing terms

Question 7

Terms (UCC)

Answer 7

o Only essential term is quantity

 Exception—requirements or output Ks (UCC implies “good faith”)

 UCC “fills the gap” if other terms are missing

o K formed if both parties intend to K and reasonably certain basis for giving remedy

Question 8

Acceptance

Answer 8

An objective manifestation by the offeree to be bound by the terms of the offer

Question 9

Mailbox rule

Answer 9

• Acceptance—effective when sent (not upon receipt), unless offer provides otherwise
• Rejection following acceptance—acceptance will control even if offeror receives rejection first (but if offeror detrimentally relies on rejection then offeree estopped from enforcing K)
• Acceptance following rejection—mailbox rule does not apply; first one received (i.e., in possession of offeror or her agent, or deposited in mailbox) will prevail; offeror need not actually read the received communication
• Revocation—effective upon receipt
• Options and other irrevocable offers—mailbox rule does not apply; acceptance must be received by offeror by a certain date or before offer expires

Question 10

Consideration

Answer 10

To constitute sufficient consideration, must be bargained-for in exchange for the promise, promise must induce the detriment, and detriment must induce the promise

Question 11

Exceptions to “Consideration”

Answer 11

1.Gratuitous promises
2. Past consideration
3. Moral obligation
4. Inadequate consideration
5. Illusory promise
6. Pre-existing legal duty

Question 12

Modification (CL)

Answer 12

CL—must be supported by consideration, and agreements to modify K are enforceable if:

 Rescission of existing K and entering into of new K

 Unanticipated difficulties arise and modification is fair and equitable, or

 New obligations arise on both sides

Question 13

Parol Evidence

Answer 13

Prevents introduction of prior extrinsic evidence that contradicts terms of written K

Question 14

Integration

Answer 14

Parties intended writing to be their final agreement (P/E rule applies)

Question 15

Total Integration

Answer 15

(complete expression of all terms of parties’ agreement)—parties cannot introduce extrinsic evidence of prior/contemporaneous understandings or negotiations

Question 16

Partial Integration

Answer 16

if writing sets forth only some terms, then parties are permitted to introduce supplementary extrinsic evidence of other terms that are consistent with writing (not contradictory)

Question 17

Intent of the parties

Answer 17

Determines if there is total, partial, or no integration

• CL (“four corners” rule)—can only look to writing itself for intent
• Second Restatement—if an extrinsic term of agreement would naturally be omitted from a writing, then term can be introduced so long as it isn’t contradictory
• UCC—assumes written K is only a partial integration and allows almost any outside terms*

Question 18

When P/E is inapplicable—does not apply

Answer 18

1. Communications occurring AFTER the execution of the written K
2. Raising a defense to formation
3. Raising a defense to enforcement
4. Proving condition precedent to existence of the K
5. Interpreting/clarifying ambiguity in K
6. UCC—supplementing even apparently unambiguous terms by evidence of trade usage or course of dealing (priority,

Question 19

Performance (Common Law)

Answer 19

A party is required to SUBSTANTIALLY perform for the other party’s duty to arise.

Question 20

Performance (UCC)

Answer 20

“PERFECT TENDER” is required. If a party does not provide a perfect tender, the non-breaching party can:

1. Accept all
2. Reject all
3. Accept compliant goods and reject non-compliant goods

Question 21

Modification (UCC)

Answer 21

 Requires only good faith
 No consideration is necessary

Question 22

Anticipatory repudiation

Answer 22

Occurs when there has been an UNEQUIVOCAL refusal of buyer/seller to perform. Statement must be made before the performance is due.

Question 23

If anticipatory repudiation occurs, then non-breaching party can:

Answer 23

o Treat repudiation as a breach and initiate law suit

o Treat K as discharged

o Withhold their own performance under the K and wait for repudiating party to perform

o Urge repudiating party to perform

Question 24

Prospective Inability to Perform (available under the UCC)

Answer 24

Occurs when a party has a REASONABLE ground for insecurity that the other party is unable or unwilling to perform. (reasonable doubt)

• UCC

o A party can demand assurances if reasonable grounds for insecurity about other party’s ability to perform (and may suspend performance until provided); the demand must be in writing

o Failure to provide adequate assurances within reasonable time (limited to 30 days) treated as repudiation

Question 25

Additional or different terms (UCC, since common law has to be mirror image)

• One or both parties not merchants—

Answer 25

acceptance containing additional or different terms generally treated as acceptance

• new/different terms are treated as proposed additions to the K that must be separately accepted by offeror

Exception—an acceptance expressly conditioned on assent to new/different terms is treated as a counteroffer

Question 26

Additional or different terms (UCC, since common law has to be mirror image)

• Both parties are merchants (battle of the forms)

Answer 26

o Additional terms—automatically included in the K, unless:

 Term materially alters original K (i.e., would result in surprise or hardship);

 Offer expressly limits acceptance to terms of the offer; or

 Offeror objects to new terms within a reasonable time after notice of new terms is received.

 If one of these exceptions is met, original terms of offer control.

o Different terms (“knock-out” rule)—different terms in offer/acceptance nullify each other, and court uses Article 2’s gap-filling provisions to patch holes in K

Question 27

Can a repudiating party revoke their repudiation? When?

Answer 27

A repudiating party may revoke repudiation before the performance date if the other party:

(1) hasnt materially changed his position;

(2) has not rescinded the contract; or

(3) has not already initiated a lawsuit.

Question 28

Impossibility excuses performance if:

Answer 28

(1) the subject matter is destroyed; or

(2) the performance becomes illegal.

Question 29

Impracticability excuses performance if:

Answer 29

(1) unforeseen circumstances make performance excessively difficult;

AND

(2) the non-occurence of the event was a basic assumption of the K.