Contracts

Question 0

What is Impracticability?

Answer 0

Performance so impractical or burdensome that performance should be excused.

Requires that a party encounter extreme and unreasonable difficulties or expenses that were not anticipated and makes performance commercially impracticable.

Question 1

What are the Requirements of an Offer?

Answer 1

An offer must be specific as to the price, the item and the manner of acceptance

An offer is an expression of a promise, undertaking or commitment to enter a contact with certainty and definiteness of terms that is communicated to an identified offeree.

Question 2

What is Impossibility?

Answer 2

Something happens after the contract’s formation but before completion that makes performance as originally promised impossible.

The event must have been unforeseen and the event must have made performance impossible.

(E.g. death of necessary actor, subsequent law passed making conduct illegal, destruction of contract’s subject matter).

Question 3

What Are the Rights of a Creditor or Donee Beneficiary in a Contract Between Two Other Parties?

Answer 3

If the promisee’s main reason for entering a contract is to discharge a debt owed to a 3rd party, 3rd party is a creditor beneficiary and may sue promisor.

Otherwise, 3rd party is a donee beneficiary and may sue only if her rights have vested.

Question 4

What Are the Rights of a Third-Party Beneficiary?

Answer 4

A 3rd party named in the contract is an intended beneficiary with legal rights, otherwise 3rd part is incidental and has no rights.

An intended 3rd party beneficiary may sue breaching promisor.

A contract may be modified until an intended 3rd party beneficiary’s rights have vested, the 3rd party knows of the contract, and the 3rd party has taken action to its detriment in reasonable reliance.

Question 5

When May Performance of A Contract Be Excused For Frustration of Purpose?

Answer 5

When an unforeseen supervening event 1) frustrates the buyer’s primary purpose for entering into contract, 2) of which the seller knows of at time of contract.

Question 6

What Type of Privity Is Created By An Assignment?

Answer 6

Creates privity of contract with assignee.

Question 7

What is a Novation?

Answer 7

The Substitution of new party for an existing party.

With the consent of the other party, the original party is released.

Without consent of the other party, it is treated as a delegation.

Question 8

What is an Accord and Satisfaction?

Answer 8

An agreement to accept different performance in satisfaction of an existing duty of performance.

If the accord and satisfaction is not performed, party may hold breaching party to either agreement.

Question 9

What Are the Consequences for a Breach of Contract?

Answer 9

Damages available for any breach, but only a material breach will excuse performance.

An anticipatory repudiation occurs when a party notifies the other of its intent to not perform.

This amounts to a breach and opposing party may recover if they have already taken detrimental action in reasonable reliance.

Question 10

What Are a Seller’s Damages for a Buyer’s Breach for the Sale of Goods?

Answer 10

If seller has goods: difference between contract price and resale value. If the seller cannot resell: contract price is appropriate.

Lost volume sellers are entitled to damages of lost profits in the sale, because they would have sold twice but for the breach.

If buyer has goods: contract price.

Question 11

What Are a Buyer’s Damage for Seller’s Breach of Contract for the Sale of Goods?

Answer 11

If seller has goods: the greater of the difference between reasonable covering price and contract price.

If Buyer keeps goods: difference between fair market value of goods delivered and value of goods promised (not contract price).

Question 12

What Is the Buyer’s Right of Recovery from Insolvent Seller in a Contract for the Sale of Goods?

Answer 12

The buyer can recover for identified, paid-for goods from a seller who becomes insolvent within 10 days of payment.

Question 13

What Is the Seller’s Right of Reclamation from Insolvent Buyer in a Contract for the Sale of Goods?

Answer 13

Seller has a right to force the buyer to return an item where

1) the buyer is insolvent when the goods were received;
2) the seller requests return within 10 days of receipt; and
3) the buyer still has the goods.

Question 14

When May a Buyer Revoke Acceptance of Goods?

Answer 14

Buyer can revoke acceptance of goods only if:

1) the nonconformity substantially impairs the value;
2) the nonconformity is difficult to discover; and
3) revocation occurs within a reasonable time of discovery.

Question 15

What Are a Buyer’s Rights of Revocation of Acceptance in an Installment Contract?

Answer 15

Installment contracts provide for delivery of goods in separate installments.

A Buyer may reject an installment only if there is a substantial impairment and it cannot be cured.

A Buyer can reject the entire delivery if a defect substantially impairs the whole value of the shipment.

Question 16

What is the Perfect Tender Rule?

Answer 16

Seller must deliver perfect goods at the right place and time.

If tender is not perfect, buyer has right to reject goods but must take reasonable care of rejected goods.

Seller can cure if the deadline for performance is still open, or if the parties course of dealing indicates that the seller has previously cured in a similar fashion.

Question 17

What Are the Limits on Warranty Liability?

Answer 17

1) The statute of limitations for warranty claims is four years from delivery.
2) A Buyer’s examination eliminates implied warranties for obvious defects.
3) An express warranty cannot be disclaimed, while implied warranties must be disclaimed with conspicuous language.
4) Courts will enforce limitations of liability as long as they are not unconscionable.

Question 18

What is the Implied Warranty of Fitness for a Particular Purpose?

Answer 18

A warranty providing a remedy where

1) the buyer has a special purpose in mind;
2) the buyer relies on the seller to select suitable goods; and
3) the seller knows both of these facts.

The Seller need not be a UCC “merchant” in order to create liability for breach of this warranty.

Question 19

What is the Warranty of Merchantability?

Answer 19

Warranty that goods are fit for their ordinary purpose.

Arises when a seller is a merchant who regularly deals in goods of the kind at issue.

Question 20

What Interpretive Meaning is Given to Parties’ Course of Conduct?

Answer 20

It is used as evidence to determine ambiguity in a contract. The order in which such history of performance is examined is:

1) Course of performance–this contract;
2) Course of dealing–other contracts between these parties;
3) Usage of trade–other industry participants with similar contracts.

Question 21

What is a Merchant’s Confirmatory Memo?

Answer 21

A Plaintiff may use its own signed writing against a defendant if:

1) both are UCC merchants;
2) the writing notes a prior oral agreement; and
3) recipient doesn’t object in writing within 10 days of receipt.

Because a merchant’s memo is a writing, it is considered an exception to Statute of Frauds.

Question 22

What Are the Requirements for Guarantees of Debt and the Statute of Frauds?

Answer 22

If the main purpose is to benefit guarantor, no writing is required.

If there is a general promise to pay regardless of what another party does, no writing is required.

BUT, A promise to pay someone else’s debt if that person does not MUST be reduced to writing to satisfy the Statute of Frauds.

Question 23

When May Parties Modify a Pre-Existing Duty?

Answer 23

At common law, a promise to pay more for an already agreed-upon performance is unenforceable.

BUT, there is an exception for an addition or change in performance, such as an unforeseen difficulty.

Under the UCC, new consideration is not required if the modification is made in good faith.

Question 24

When May a Promise to Pay for Past Performance Be Enforced?

Answer 24

Only if performance was requested and party knew payment would be expected.

Otherwise unenforceable for lack of consideration.

Question 25

What is the Timing of Acceptance and Revocation?

Answer 25

Revocations are effective when received.

Acceptances are effective when sent.

Acceptances under option contracts are effective when received.

Question 26

What is an Option Contract?

Answer 26

A contract where a promisee may pay money to keep the promisor’s offer open.

Question 27

What is Improper Performance?

Answer 27

Improper performance constitutes an acceptance but is also a breach unless it is accompanied by words of explanation.

These explanations are technically a rejection and a counter-offer to be accepted.

Question 28

What Is the Effect of Starting Performance?

Answer 28

It constitutes acceptance and an implied promise to finish unless the contract is unilateral.

Unilateral contracts require complete performance for acceptance.

Question 29

What Is the Effect of Acceptance with Additional Terms?

Answer 29

It operates as a new counter-offer.

Under the UCC: there is a contract for the original terms if:

1) both parties are merchants;
2) the term is not a material change; and
3) the offeror doesn’t take any steps in reasonable reliance.

Question 30

What is the Effect of a Counter-Offer?

Answer 30

It is a new offer and the offeree may accept either as long as it remains outstanding.

Under the UCC, counter-offers simply terminate the original offer and there is only the possibility of accepting the counter-offer.

Question 31

Are Advertisements Offers?

Answer 31

Not unless:

1) the ad is I n the nature of a reward;
2) it specifies a quantity;
3) it expressly indicates who can accept; or
4) a price quotation is sent in response to an inquiry.

Question 32

What Is a UCC Firm Offer?

Answer 32

A signed offer to buy or sell goods with a promise to keep the offer open by a merchant.

Need not be paid for, stays irrevocable for period in offer for reasonable time not to exceed three months.

Question 33

When May An Offer Be Revoked?

Answer 33

The offeror may revoke an offer any time before acceptance by either unambiguous statement to offeree or unambiguous conduct by offeror indicating unwillingness or inability that offeree is aware of.

Question 34

What is Capacity to Enter a Contract?

Answer 34

Minors, mentally incompetent, intoxicated persons of whom the other party has a reason to know they are intoxicated lack the capacity to enter a contract.

Such individuals can disaffirm, but will be in binding contract if they take action to affirm after gaining capacity.

Question 35

What Is Unconscionability?

Answer 35

At the time of contracting, there is

1) a procedural element subjecting anparty to unfair surprise or unfair negotiating position; and
2) there are substantively oppressive terms.

Question 36

When May a Mutual Mistake of Fact Excuse Performance?

Answer 36

Mutual mistake allows the adversely affected party to void the contract unless it assumed the risk of such a mistake under the terms of the contract.

Question 37

May a Unilateral Mistake of Fact Excuse Performance?

Answer 37

There is no excuse unless other party had reason to know of the mistake.

Question 38

When Will a Misrepresentation of Fact Void a Contract?

Answer 38

If a party is induced to enter a contract based on a misrepresentation of fact, that contract is unenforceable.

Question 39

When is Parol Evidence Admissible?

Answer 39

Evidence of a prior agreement that contradicts a later writing is generally inadmissible except to:

1) Correct minor clerical errors;
2) Establish a defense against the agreement itself;
3) Explain a facially vague or ambiguous term; or
4) To supplement a partially integrated agreement.

A merger clause provides a rebuttable presumption that parol evidence should be excluded.

Question 40

What Are the Requirements of the Statute of Frauds?

Answer 40

Contracts with a term of performance for longer than 1 year or for sale of real estate must be in writing or meet a recognized exception.

Question 41

What is Promissory Estoppel?

Answer 41

An argument for enforcement of a non-contractual agreement where there is:

1) A promise;
2) with action taking in reasonable reliance on the promise;
3) to the plaintiff’s detriment; and
4) enforcement is necessary to prevent injustice.

Question 42

When is a Contract Considered Ambiguous?

Answer 42

A contract is ambiguous where:

1) a material term is open to at least two reasonable interpretations;
2) each party attaches a different meaning to them and neither knows or has reason to know of the ambiguity.

If one party knows of the other party’s interpretation and accepts, the contract is valid to the other party’s understanding.

Question 43

What is Consideration?

Answer 43

Bargained for exchange of legal detriment.

Question 44

What is Acceptance?

Answer 44

Manifestation of an assent to the terms of an offer in a manner that is prescribed in the offer.

A Bilateral Contract may be accepted by starting performance.

A Unilateral Contract may be accepted by completing full performance.

Question 45

When will the UCC apply to a contract question over Common Law?

Answer 45

The UCC applies to sale of goods, while the common law is used to apply to any contract.

Question 46

What is the Difference a Between Conditions Precedent and Promises?

Answer 46

Conditions precedent require strict performance, while a Promise requires only substantial performance.

Conditions require more specific language and courts will usually interpret a contract term to contain a promise rather than a condition.

There is an exception to the Parol Evidence rule, stating that oral statements are admissible on the question of whether a term is a condition or a promise.