Contracts Flashcards
1
Q
What are the seven general issues?
A
“Armadillos from Texas play rap eating tacos”
- Applicable law
- Formation of contracts
- Terms of a contract
- Performance
- Remedies for unexcused performance
- Excuse of nonperformance
- Third party problems
2
Q
When you have a unilateral contract?
A
Two times:
1) When there’s an offer that expressly requires performance as the only possible method of acceptance.
2) reward prize or contest
3
Q
When does Article 2 apply?
A
1) there’s a sale
2) for tangible personal property
Only need the K to be $500 or greater for SoF. The rest of A2 applies even if K price is less than $500.
4
Q
When the contract involves both goods and something covered under common law, such as real estate or services, what is the general rule?
A
More important part of the contract determines whether A2 or common law unless contract divides payment between sale of goods part (UCC governs) and rest (common law governs).
5
Q
Bob agrees with Sam to buy Sam’s car. Sam is also obligated to provide Bob with two lessons in parallel parking. Does A2 apply?
A
Yes.
6
Q
What is a contract?
A
A contract is
- an agreement
- that is legally enforceable.
7
Q
What is an offer?
A
An offer is
1) a manifestation of intent to the offeree
2) to contract on the basis of sufficiently definite offered terms
3) that creates a reasonable expectation in the offeree that agreement thereto would bind the offeror to the promise, undertaking, or commitment.
8
Q
Can there be an offer under common law without a price term?
A
Yes, except for real estate contracts, if parties intended to form a contract.
9
Q
Can there be an offer under A2 without a price term?
A
Yes, the price will be a reasonable price at the time of delivery.
10
Q
Can a communication from seller to a buyer relating to Seller’s sale of her car to buyer be an offer if it provides for the sale “for a fair price?”
A
No. The material terms are too vague or ambiguous. The result would be the same as if the contract was for services, that is under common law.
11
Q
Buyer offers to buy grits from seller for five years. There is no specific quantity term in the offer. It provides that the show purchase all its grits from Seller. Did buyer make an offer?
A
Yes. This is a requirements or output contract. Under article to requirements or output contracts are not vague or ambiguous and are valid. Look for the following words: all, only, exclusively, solely.
12
Q
Under the requirements contract buyer buys 1000 pounds of Chris each of the first three years of the agreement. Buyers and orders 1020 pounds in the fourth year. What is the result?
A
Buyer can increase requirements so long as the increase is in line with prior demands. No unreasonably disproportionate limitation on increases.
13
Q
What is the general rule and the three exceptions concerning whether an advertisement or price quotation is an offer?
A
An advertisement are price quotation is not an offer. Rather, it’s an invitation to deal. There are three exceptions:
1) reward
2) specifies quantity and expressly indicates who can accept. For example “one fur coat $10.00 first, first served.”
3) price quote is sent in response to an inquiry
14
Q
What are the four ways in which an offer can be terminated?
A
- Lapse of stated or reasonable time
- Death of a party prior to acceptance
- Words or conduct of the offeror revoking the offer
- Words or conduct of the offeree rejecting the offer
15
Q
Seller offers to sell a car for $400. The offer fails to indicate how long the offer will be kept open. Can buyer accept the offer five years from now?
A
No. The offer has lapsed because a reasonable amount of time has passed.
16
Q
True or false. Only the death or incapacity of the offeror made after the offer, but before acceptance, terminates the offer.
A
False. Death or incapacity of either party after the offer, but before acceptance, terminates the offer
17
Q
How is an offer revoked?
A
Through either
1) a later unambiguous statement by the offeror to the offeree of unwillingness or inability to contract; or
2) later unambiguous conduct by the offeor indicating an unwillingness or inability to contract that the offeree is aware of.
18
Q
O offers to sell B a car for 400. Next day, O makes the same offer to X. B learns that O made the offer to X. Is the offer to B revoked?
A
No. Multiple offers aren’t a revocation; there’s been no unambiguous communication to B revoking the offer.
19
Q
What are the four situations where an offer cannot be revoked?
A
1) Options
2) UCC firm offer rule
3) Reliance
4) Unilateral contract
20
Q
S offers to sell B her car for 400. B pays S 10 for S’s promise not to revoke the offer for 6 months. Can S still revoke the offer? Why or why not?
A
Offer cannot be revoked because it’s an option contract:
1) S promised to not revoke (or keep the offer open) and
2) the promise is supported by payment or other consideration.
Don’t need to use UCC Firm Offer Rule where option is supported by consideration.
21
Q
S, a used car dealer, offers to sell B a car for 400. The written offer is signed by S. Can S revoke? Why or why not?
A
S can revoke because the offer didn’t include a promise not to revoke.
22
Q
What is the UCC Firm Offer Rule?
A
An offer cannot be revoked for up to 3 months if
1) offer to buy or sell goods;
2) signed written promise to keep offer open; and
3) party is a merchant
23
Q
S offers to sell B a car for 400. The written offer is signed by S and states it will not be revoked but doesn’t state a time period. Can S revoke? Why or why not?
A
No under UCC Firm Offer Rule. Time kept open isn’t necessary to state. Court will supply a reasonable time (not more than 3 months).
24
Q
CSC is a diversified service company who is bidding (offer) on a contract to service the Dept of Ed using multiple subcontractors. Natec, a subcontractor submits a bid to CSC do to the cataloging work for 100k. CSC relies on Natech’s bid in making its bid and is awarded the contract. Can Natech still revoke its bid?
A
No because CSC’s reliance was
1) FORESEEABLE to Natech and
2) without Natech’s bid, CSC will be DETRIMENTED
25
DoE opens a bid to run ERIC for one year 10m. DoE's offer states that it can only be accepted by complete performance for an entire year. CSC begins to hire staff. Can DoE revoke? What if CSC begins to actually run ERIC?
Yes. Although CSC has made preparations to perform, CSC hasn't actually begun to perform. Therefore, DoE can revoke. CSC may have a claim that it detrimentally relied on DoE.
There's still no contract until CSC actually completes the year. If CSC begins to run ERIC, DoE can't revoke. But CSC isn't bound to complete performance.
26
What is the unilateral contract offer rule?
The start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance.
27
A2 "merchant" definition
Anyone in business for:
1) SoF
2) confirmatory memos
3) firm offers
4) modification
Merchant with respect to goods of the kind involved for implied warranty of merchantability.
28
X fills car at Y's gas station. T or F: X has made a quasi-contract with Y.
F. The parties have an implied contract: their conduct indicates that they asset to be bound. A quasi-contract is not a contract.
29
Difference between a contract which is void, voidable, and unenforceable.
Void: without legal effect from the beginning.
Voidable: one or both parties may elect to avoid by raising a defense that makes it voidable.
Unenforceable: otherwise valid contract that is unenforceable due to a defense extraneous to formation.
30
What are the four elements necessary to form a contract?
1) Offer
2) Acceptance
3) Consideration
4) Lack of defenses
31
Is there an offer where price terms are missing?
Yes, except for real property contracts, if it appears that parties intended to contract and there's a reasonable basis for giving a remedy, a court can supply reasonable terms.
32
Can there be an offer where the time in which to perform isn't specified?
Yes. Law implies reasonable time.
33
Is there an offer where terms are vague?
No, but can be cured by part performance.
34
What are the requirements for any indirect revocation of an offer?
Offeree receives
1) correct information
2) from reliable source
3) of the acts of the offeror that would indicate to a reasonable person that the offeror no longer wishes to make the offer.
35
When is a revocation effective?
When received by the Offeree, except if by publication in which case it's when published.
36
In common law contracts, what three actions of an offeree reject the offer, other than an explicit rejection?
1. Counteroffer
2. Conditional acceptance
3. Additional terms
37
S offers to sell land to B for $10000 dollars. B responds " I will pay only $9000." Can B later except S's offer to sell for $10,000?
No
38
S offers land to B for $10000 dollars. B responds "will you take $9000?" Can B later accept A's offeror?
Yes. This is an invitation to bargain.
39
What is the common law rule for conditional acceptance?
Rejects offer but becomes a counteroffer that can be accepted by conduct with conditional term becoming part of the contract.
40
How do you recognize a conditional acceptance?
Look for a response to an offer with the word " accept" followed by one of these words or phrases: if, only if, provided, so long as, but, or on condition that.
41
What is the rule under the UCC for conditional acceptance?
Rejection of offer. Parties' later performance of their promises under the rejected contract will make a contract based upon their conduct. However, such conduct isn't a counteroffer such that the conditional term becomes part of the contract (that's the common law rule).
Distinguish conditional acceptance from a seasonable expression of acceptance.
42
When is a rejection effective?
When received by the offeror.
43
L offers to lease an apartment to T by sending T a signed lease that is silent about arbitration of disputes. T adds a paragraph that states that T "accepts provided that all disputes shall be resolved by arbitration of disputes" and signs.
Has T accepted L's offer creating an express contract?
What if, after receiving T's response, L sends T the keys to the apartment, is there a contract and is a arbitration part of a contract?
T has rejected L's offer. A conditional acceptance, as distinguished from bargaining, generally terminates the offer (rejection) and create a new offer, unless there's an option. Here, there's no language that indicates T's intent to bargain. Rather, T's language of "provided that" is a conditional acceptance which rejects L's offer. Hence, there's no contract.
Yes and T's response is the offer. L's conduct is the acceptance.
44
Using an online form B places an order for pants from S which makes no mention of arbitration. S sends an acknowledgement form that provides for arbitration of disputes and states "accept only if you agree that all disputes shall be submitted to arbitration." No further communications or actions.
1) Has S accepted B's offer creating an express contract?
2) If S sends B the pants and he pays for them is there a contract? And is arbitration part of it?
1. No. A conditional acceptance is a rejection under the UCC. S's offer indicates conditional acceptance by the use of the words "accept only if."
2. Under the UCC, a conditional acceptance isn't a counteroffer (termination) that can be accepted by conduct. While a contract can be formed consisting solely on conduct of the parties, arbitration is not a term.
45
What is the mirror image rule?
A response to an offer that adds new terms is treated it like a counteroffer rather than an acceptance., Common law only .
46
L offers to lease a building to T by sending T a signed lease that is silent about arbitration. T adds a sentence "all disputes shall be resolved by arbitration" and signs.
Has T accepted L's offer creating an express contract? If no, can T later accept L's offer?
Rule: Under the common law's mirror image rule, a response to an offer that adds new terms is treated it like a counteroffer rather than an acceptance. As a counteroffer, T has rejected L's offer; therefore, there's no contract.
Rule: once an offer is rejected, it's terminated and can no longer be accepted. As T's counteroffer was a termination of the offer, T can no longer accept.
47
What is a seasonable expression of acceptance and what does it mean for the contract?
Under A2's seasonal expression of acceptance rule, a response to an offer that adds terms or changes terms (but doesn't make those terms a condition of acceptance), isn't a rejection, regardless of whether the parties are merchants. Rather, there a contract.
The different or additional term is only part of the contract if
(1) both parties are merchants and
(2) the term is not material AND wasn't objected to by the original offeror.
48
O offers to sell his car to B. B replies "I accept. Deliver it on Saturday."
Is there a contract? And if so is Saturday delivery a term?
If B's response were "I accept on the condition that you agree to Saturday delivery" would there be a contract?
Yes, there is a contract but Saturday delivery is not a contract term. UCC seasonable expression of acceptance.
No. A conditional acceptance becomes a counteroffer (termination) that can be accepted by conduct.
49
Where the offer is that silent as the method of acceptance, is starting to perform an acceptance?
Yes, because it is an implied promise to perform. Therefore there is a bilateral contract.
Exception: start of performances is not an acceptance of unilateral contract offers. Completion of performance is required. Offers to enter into a unilateral contracts cannot be accepted by a promise.
50
What are the offer and acceptance timing rules?
1. All communications other than acceptance are effective only when received.
2. Acceptance is generally effective when mailed ("mailbox rule")
3. If a rejection is mailed before an acceptance is mailed, then neither is effective until received.
4. You cannot use the mailbox rule to meet an option deadline.
51
B receives a letter from S offering to sell his car. On January 10, B mails his letter of acceptance. On January 11 B receives a letter from S revoking the offer. Is there a contract?
Yes. Acceptance is effective when mailed while a revocation is effective the only when received.
52
Who makes a rejection? Who makes a revocation?
The Offeree makes a rejection of the offer. The offeror makes a revocation of the offer.
53
Buyer mails a letter rejecting an offer and then changes mind and mails letter of acceptance. What result if the rejection letter arrives first?
No contract.
54
Buyer and seller execute an option contract that gives buyer the option to buy expiring on December 1 at 4:00 PM. Buyer mails seller a letter exercising the option on December 1 at 350 PM. What result?
B did not meet the option deadline because you cannot use the mailbox rule to meet an option deadline.
55
Buyer orders a Panasonic television. Seller sends a Sony television. Is there a contract? If so what is the result?
There is a contract but seller has breached the contract
56
I offer a $500 reward to the person who finds my lost dog. You find in return my dog, not knowing of the reward. Is that acceptance of my offer? Why or why not?
No. An offer can be accepted only by a person who knows about the offer at the time she accepts.
57
I offer to sell you my car. Can you sell the offer to someone else so that he can accept the offer?
No. An offer can be accepted only by the person to whom it was made.
58
You pay me $10.00 for a 10 day option to buy my car. Can you sell the option to another person so that he can now exercise the option and accept the offer?
Yes. While offers cannot be assigned, options can be assigned, unless the option otherwise provides.
59
What is consideration?
Bargain for legal detriment.
60
Must consideration confer an economic benefit?
No
61
A saves B's life. B's father is so grateful that he promises to pay A $10,000. Is the promise the legally enforceable?
No. Past consideration is not considered consideration.
62
Buyer and seller enter into an agreement in which buyer promises to buy Sellers house and the seller promises to sell his house to buyer with buyers payment and Sellers transfer of title. Is there adequate consideration?
Yes. A promise to act is sufficient consideration.
63
Seller promises to sell and buyer promises to buy a car. Seller reserves the right to terminate the agreement at any time without notice. Is there a consideration for B's promise?
If S reserved the right to terminate on 10 days notice, would that be adequate consideration?
No. S is promise is an illusory promise.
Yes.
64
What is the preexisting duty rule and what are the three main exceptions?
Doing what you are already legally obligated to do is insufficient consideration for a new promise to pay more (common law only); new consideration is required such as:
1. Addition to or change in performance
2. Unforeseen difficulty so severe as to excuse performance
3. Third party promise to pay
65
Coke contracts to sell a dozen cases too hot dog stand for $1000. Coke subsequently tells owner that it cannot deliver the dozen for less than $1300. Owner promises to pay the additional $300 and coke delivers the cases. Is the subsequent promise enforceable?
Even though there is no new consideration for owners promise to pay additional, the new promise is legally enforceable if made in good faith because UCC does not have a preexisting legal duty rule.
66
Is part payment consideration for promise to forgive the balance of the debt?
If the debt is due and undisputed, then part payment is not consideration for release.
67
What are the two consideration substitutes?
1 . A written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration.
2. Promissory estoppel.
68
Debtor owes creditor $1000. Collection is barred by the statute of limitations. Debtor promises to pay the $600 of the debt. Is the promise enforceable?
Even though there is no new consideration, the promise is enforceable because the debtor had a legal defense.
69
What are the elements of promissory estoppel?
1. Promise;
2. Reliance that is reasonable, detrimental, and foreseeable; and
3. Enforcement necessary to avoid injustice.
70
Who lacks capacity to contract? What is the consequence of incapacity?
1. Under 18
2. Mental incompetent
3. Intoxicated persons if other party has reason to know
Person without capacity has the right to disaffirm but may have a quasi contract liability.
71
Seller sells car to a drunk who does not pay at the time intoxicated. After sobering, trunk keeps car. Can seller enforce the agreement?
Yes. Drunk implied affirmation by retaining benefits after gaining capacity.
72
What is the consequence of a contract being within the statute of frauds?
Statute of frauds is a defense to the existence of a contract.
Plaintiff must bring objective proof that a contract exists in the form of proof of performance or a writing signed by the defendant before the plaintiff can go to trial.
73
What are the main contracts within the statute of frauds?
```
SaLLY G
Suretyship
Leases
Land
Year
Goods for $500 or more
```
74
Plaintiff sues defendant for breach of an alleged three year employment contract. Defendant files a motion to dismiss based on the statute of frauds. What's the result?
Motion denied because contract cannot be performed within a year.
75
What is the statute of frauds rule regarding one year? And related rules regarding (1) a future date of performance more than one year from the date of contract and (2) lifetime contracts.
A promise that by its terms cannot be performed within one year are within the statute of frauds (objective proof of contract existence required to get to trial).
If a future date of performance is more than one year from the date of the contract the statute of frauds does not apply if the performance itself can be completed within one year.
Lifetime contracts aren't within the statute of frauds because the contract in party may die within one year.
76
What is the statute of frauds rule regarding leases?
Leases for more than one year are within the statute of frauds (objective proof of contract existence required to get to trial)
77
What is the statute of frauds rule regarding suretyship?
Promises to answer for the debts of another are within the statute of frauds (objective proof of contract existence required to get to trial) only if that person does not pay herself and the main purpose of the obligation was not to benefit the guarantor.
78
What is the statute of frauds rule regarding land?
Transfers of interests in real estate (other than the size of one year or less), including options to transfer, with the exception of leases of one year or less are within the statute of frauds (objective proof of contract existence required to get to trial) .
79
Plaintiff claims that defendant agreed to build a house. Is this within the statute of frauds?
Contracts to build a building to not create an interest in land.
80
How does plaintiff satisfy the objective proof burden using performance following the assertion of statute of frauds in a transfer of real estate contract?
Part performance requiring any two of the three: 1 improvements to the land 2 payment, and 3 possession.
81
How does plaintiff satisfy the objective proof burden using performance following the assertion of statute of frauds in a service contract?
Full performance by either party.
82
How does plaintiff satisfy the objective proof burden using performance following the assertion of statute of frauds in an ordinary goods contract?
Seller's part performance but only to the extent of the part performance.
83
How does plaintiff satisfy the objective proof burden using performance following the assertion of statute of frauds in a specially manufactured goods contract?
As soon as the seller makes a substantial beginning.
84
How does plaintiff satisfy the objective proof burden using a writing following the assertion of statute of frauds under a common law contract?
All material terms are included and the writing is signed by the defendant.
85
How does plaintiff satisfy the objective proof burden using a writing following the assertion of statute of frauds under an A2?
The writing indicates:
1. that there is a contract for the sale of goods;
2. contains the quantity term;
3. Is signed by the defendant unless the transaction is between two merchants where there is a delay in responding.
86
Sellers sues buyer for breach of an alleged contract to buy staplers. The only writing says "I agree to buy hundred staplers." Signed B. Does the writing satisfy the statute of frauds?
Yes. Contract doesn't need to name a price in writing under article 2.
87
What is the judicial admission exception to a statute of frauds defense?
Defendants admitted in a pleading for testimony that he entered into a contract with the plaintiff.
88
When is a contract provision requiring modifications to be in writing effective?
Under common law, not effective. Under UCC, effective unless waived.
89
Within contracts, how is misrepresentation used and what its elements ?
Misrepresentation is a defense to the existence of a contract.
1) statement of fact before the contract (doesn't have to be intentional)
2) by one of the contracting parties or her agent
3) that is false; and
4) induces the contract.
90
Seller sells house buyer. Seller knew that house had environmental problems but did not tell buyer. Can buyer rescind?
No. A person making a contract has no duty to disclose what she knows unless there's wrongdoing or a fiduciary relationship or concealment.
91
Within contracts, how is economic duress used and what are the elements?
Economic duress is a defense to the existence of a contract.
1. Improper threat (e.g., to breach the existing contract); and
2. No reasonable alternative (vulnerable) for nonbreaching party.
92
Within contracts, how is undue influence used and what are the elements?
Undue influence is a defense to the existence of a contract.
1. Special relationship between the parties; and
2. Improper persuasion of the weaker by the stronger.
93
Within contracts, how is unconscionability used and what are the elements?
Unconscionability is a defense to the existence of a contract empowering a court to refuse enforcing all or part of an agreement.
1) unfair surprise (procedural) and
2) oppressive terms (substantive)
94
Within contracts, how is ambiguity used and what are the elements?
Ambiguity is a defense to the existence of a contract.
There will be no contract if
1. parties use a material term that is open to at least two reasonable interpretations;
2. Each party attaches different meaning to the term; and
3. Either party knows or has reason to know the term is open to at least two reasonable interpretations.
95
Within contracts, how is mistake of fact used and what are the elements?
Mistake of fact is a defense to the existence of a contract.
1. Mutual mistake: only if both parties are mistaken (not just uncertain) about material existing facts, provided the person seeking relief does not bear the risk of mistake.
2. Unilateral mistake of material fact: the non moving party must have reason to know of the mistake.
96
CSC receives bids from 10 subcontractors. All of them are over $100,000. Bob's bid is for $30,000. Can bob rescind the contract because of its unilateral mistake?
Yes. CSC had reason to know of the mistake.
97
At what stage of a contract dispute does the parol evidence rule come into play?
it's an evidentiary rule to determine whether evidence is admissible to determine the contract terms following the existence of a contract.
98
Within the parol evidence rule what is integration?
A written agreement that court finds is the final agreement, triggering the parol evidence rule.
99
Within the parol evidence rule what is a partial integration?
Written and final, but not complete.
100
Within the parol evidence rule, what is a merger clause?
A contract clause such as " this is the complete and final agreement." A merger clause is treated as persuasive but not conclusive.
101
Within the parol evidence rule, what is parol evidence?
Oral or written words of a party or parties before, or contemporaneous with, integration
102
How does the parol evidence rule apply to changing or contradicting terms of the written deal?
Evidence of earlier agreements cannot be considered for the purpose of contradicting the terms in written contract.
103
How does the parol evidence rule apply to mistake in integration?
A court may consider evidence for the purpose of determining whether there was a mistake in integration, such as a clerical mistake.
104
How does the parol evidence rule apply to contract defenses?
The parol evidence rule does not prevent the court from considering evidence of earlier words of the parties for the purpose of determining whether there is a contract defense such as misrepresentation, fraud, or duress.
105
How does the parol evidence rule apply to explaining a term in the written deal?
The parol evidence rule does not prevent the court from considering evidence of earlier words of the parties for the purpose of explaining a term.
106
How does the parol evidence rule apply to adding consistent, additional terms to a written deal?
The parole evidence rule prevents the court from considering evidence of earlier agreements as a source of consistent, additional terms unless the court finds 1) that the written agreement was only a partial integration or 2) that the additional terms would ordinarily be in a separate agreement.
107
When and how is conduct of the parties used in a contract dispute to supply terms of a contract?
Following a finding of the existence of a contract, courts can supply contract terms based upon
1) course of performance: same people, same contract
2) course of dealing: same people, different but similar contract
3) custom and usage: different but similar people, different but similar contract
108
What are the delivery obligations of seller of goods where delivery is by common carrier?
1. If the contract is a shipment contract:
A) gets goods to a common carrier
B) makes reasonable arrangements for delivery, and
C) notifies the buyer
2. If the contract is a destination contract: Seller completes delivery obligation only when the goods arrive at the destination.
109
How do you tell the difference between a shipment contract and the destination contract?
FOB seller city is a shipment contract. FOB any other city is a destination contract.
110
When do the risk of loss rules apply?
A contract has been formed, but before the buyer receives the goods the goods are destroyed and neither the buyer nor the seller is to blame for the destruction of the goods.
111
What are the risk of loss rules?
Apply in order until resolved:
1) Agreement of the parties controls.
2) Breaching party is liable for any uninsured loss (even if breach unrelated to loss).
3) If delivery by common carrier, shipment or destination K.
4) If seller is merchant, risk of loss shifts from merchant buyer upon receipt of goods; if the seller is not merchant, risk of loss shifts upon tender of goods
112
What are the three main warranties?
1 express warranty
2) implied warranty of merchant ability
3) implied warranty of fitness for a particular purpose
113
What is an express warranty?
Term(s) is added that reflects the words that seller used to promise, describe, or state facts
114
What is an implied warranty of merchant ability?
If the seller is a merchant, a term is added that the goods are fit for the ordinary purpose for which such goods are used
115
Who is a merchant for the implied warranty of merchant ability?
Only a merchant which deals in goods of that kind.
116
What is the implied warranty of fitness for a particular purpose?
A term is added if the Seller has reason to know of buyers particular purpose and that buyer is relying on seller to select suitable goods.
117
What are the four limitations on warranty liability?
1) 4-year SoL from tender of delivery
2) Lack of privity
3) Buyer examined goods (no implied warranties as to defects that would be obvious upon inspection)
4) Disclaimer (except express warranties): (a) "as is" or "with all faults" or (b) in conspicuous typeset.
118
What is the perfect tender rule?
1) only applies to sales of goods
2) goods and delivery must conform to contract terms
3) a less than perfect tender gives buyer option of rejection, as long as buyer acts in good faith
119
What is rejection of the goods?
If seller doesn't meet perfect tender standard, buyer may
1) retain goods and sue for damages or
2) reject goods and sue for damages
Provided buyer doesn't use goods, takes reasonable care of goods, and isn't limited by cure, installment contracts, and acceptance.
120
Buyer and seller enter into a contract for 100 red-handled can openers. Sellers delivers 99 red-handled hand can opener and one blue handled can opener. Is that a perfect tender?
No.
121
Can a buyer compel seller to cure?
No.
122
When can a seller cure?
before the delivery date or even after the contract delivery date where the Seller has "reasonable grounds" to believe that carrying would be acceptable.
123
Buyer and seller enter a contract for seller to deliver five cases of beer every week on Wednesday for the next three months. One week, seller delivers four cases of beer on Thursday. Can buyer reject that installment?
No. Buyer may reject an installment only where there is a substantial impairment in that particular installment that can't be cured.
124
Buyer keeps the goods without objection. Can buyer later reject them?
No. Retention is acceptance.
125
Buyer pays but hasn't yet inspected the goods. Has buyer accepted the goods?
No.
126
What are the requirements for revocation of an acceptance of goods?
1) value of goods substantially impaired by nonconformity;
2) excusable ignorance of nonconformity or reasonable reliance on Seller's assurance of conformity; and
3) reasonable time after discovery of nonconformity revokes.
127
In July, buyer buys a sleeping bag from seller rated at -10°. Byard uses sleeping bag during warm weather camping trips that summer. In January, buyer discovers that the sleeping bag is able to withstand that low temperature. Can buyer reject the goods? Can buyer revoke her acceptance of the goods?
Buyer cannot reject the goods because buyer has accepted by retention, however buyer can revoke acceptance of the goods.
128
When is specific performance or injunction available?
Lack of adequate remedy at law (equitable relief ). For
1) real estate
2) contract for sale of unique goods
3) injunctive relief to prevent breaching noncompete
These remedies are unavailable if the property was transferred to a BFP.
129
When can a seller get reclamation from insolvent buyer of goods?
1) buyer insolvent at time received goods
2) seller demands return of goods within 10 days of receipt or a reasonable time if buyer warranted that solvent
3) buyer still has goods at time of demand
130
When there is a claim for monetary damages what introduction should I use?
Purpose is to compensate the plaintiff by protecting his expectation interest of no breach by defendant by placing plaintiff in the same monetary position as if no breach occurred.
131
How are expectation damages measured?
Compare: what was the dollar value of performance without and with breach.
132
Painter contracts to paint Owner's house for $1000, payable when painter completes work. Painter anticipates making $200 profit from this contract. Owner breaches after painter has started work and used $100 of paint and labor. Painters sues owner for breach of contract. What is a measure of painter damages?
$300.
(Value of performance without breach: $200) - (value of performance with breach (-$100) spent on labor and materials)=$300.
133
What is buyer's measurement of damages for goods where Seller breached and buyer kept the goods?
expectation damages: FMV if perfect - FMV as delivered
134
What is Buyer's measurement of damages for goods where Seller breached and Seller has the goods but Buyer hasn't paid for the goods?
Greater of:
1) FMV at time of discovery of breach - contract price; and
2) Reasonable replacement price - contract price.
135
S sells for $5k and delivers nonconforming goods which B rejects. At time of breach, FMV of comparable goods was $6k but B pays $7 for comparable replacement. What's B's measure of damages?
$2k because the reasonable replacement price - contract price is greater than FMV of goods at time of breach - contract price.
136
What's the Seller's measure of damages for goods where the Buyer breached and kept the goods?
What if Seller has the goods?
Expectation damages in both cases.
Buyer has goods: Contract price
Seller has goods: Contract price less resale, unless seller cannot resell, in which case can recover (i) contract price and (ii) lost profits where sells the same item of inventory to another buyer and could have made another sale.
137
B buys suit worth $500 from S. B breaches and keeps suit without paying. Suit now worth $800. What is S's recovery?
What if seller sells another of the same type of suit to another person following the breach.
$500.
Seller can recover lost profits.
138
What are incidental damages?
Costs incurred in dealing with the the breach (e.g., storing the rejected goods or finding a replacement services contract)
139
What are consequential damages?
(i) Foreseeable damages
(ii) unique to P
(iii) which D had reason to know of at the time of the contract.
(Remember the mill shaft case)
140
What monetary damages are available, generally?
Unless there's a liquidated damages provision, plaintiff can recover:
1) expectation damages (or where too uncertain and upon plaintiff's election, reliance damages: cost of plaintiff's performance),
2) plus incidental damages,
3) plus foreseeable consequential damages,
LESS
4) avoidable damages.
141
When is a liquidated damages provision not valid?
Provision fixing the amount of damages won't be considered too high a penalty if:
1) damages were difficult to forecast at time of contract; and;
2) provision is a reasonable forecast
142
What is an anticipatory repudiation?
If a party made an unambiguous statement or engaged in unambiguous conduct that the repudiating party will not perform prior to the time that performance was due.
143
What are the two effects of an anticipatory repudiation?
Party not making an anticipatory repudiation
1. has an excuse for its nonperformance; and
2. has an immediate claim for damages, unless the claimant has already finished his performance.
144
Can a repudiation be withdrawn?
Yes, provided there has not been a material change in position by the other party.
145
What is the excuse of insecurity?
If words or conduct of a party give the other party reasonable grounds to believe that performance is uncertain, then that party may
1) make written demand for adequate assurance; and
2) if commercially reasonable, suspend performance until it gets adequate
assurance
146
What is the material breach rule?
A common law excuse for performance (A2 has perfect tender rule) which exists when there hasn't been "substantial performance," unless the contract is divisible. Even if there's been no material breach, there's money damages for any kind of breach.
147
P contracts to detail O's 10 cars for $500 each. P breaches after detailing 2 cars. What are the rights of the parties?
O doesn't need to pay P anything because P materially breached the contract giving O an excuse to nonperformance (i.e., payment). P may have an equitable claim for $1000.
148
S offers to sell B his house for $100k. B responds that she accepts "on condition that a mortgage at not more than 4% can be obtained." Is there a contract?
What if S and B enter into an agreement that states that B will buy and S will sell S’s house for $100,000 "on condition that a mortgage at not more than 4% can be obtained." Is there a contact?
No, this is a conditional acceptance. B is not bound because B has made a counteroffer, which is a rejection of S's offer.
Yes, this is an express condition. B is bound under the contract because B's acceptance is consideration for S's offer. However, since there's an express condition, B's obligation to perform under the contract doesn't occur until the condition is fulfilled.
149
What is the standard for determining whether an express condition has been satisfied?
Strict compliance is required for satisfaction of a condition.
150
How can an express condition be eliminated so that its non occurrence does not affect performance obligations?
By a waiver or by prevention.
Waiver occurs when the person protected or benefiting from the express condition gives up the benefits and protection of the express condition.
Prevention occurs when the person protected by the express condition hinders or prevents the occurrence of the express condition.
151
If X promises to pay Y only if X is satisfied with the work, is X's promise illusory?
No, while this is an express condition, conditions of personal satisfaction do not have to be strictly complied with. Courts look to whether a reasonable person would be satisfied.
152
What are the three different types of conditions?
Conditions precedent, concurrent conditions, and conditions subsequent.
153
What is an accord?
Substituted performance: agreement by parties to an already existing contract to accept different performance in satisfaction of the existing obligation.
154
What is a satisfaction?
Satisfaction is performance of the accord.
If there's a satisfaction, then performance of the original obligation is excused.
If there's no satisfaction, then the other party can recover on either the original obligation or the accord, but not both.
155
What are the four different types of later contracts that can serve as excuses to the first contract?
1) Rescission (cancellation)
2) Accord and satisfaction (substituted performance)
3) Modification (substituted agreement)
4) Novation (substituted party)
156
What are the four different types of agreements entered into following the making of a contract that can serve as excuses to performance under the first contract?
1) Rescission (cancellation)
2) Accord and satisfaction (substituted performance)
3) Modification (substituted agreement)
4) Novation (substituted party)
157
D borrows $1000 from P and agrees to repay the loan with interest. Later, D and P agree that D will deliver 20 hair dryers by the end of the month instead of paying back the loan with interest. D does not deliver the hair dryers. Can P recover on the original loan agreement?
No. This is a contract modification and not an accord and satisfaction because there was no if-then language.
158
What is a novation?
Novation is an agreement between both parties to an existing contract to the substitution of a new party.
159
How is a delegation different from a novation?
Novation requires the agreement of both parties to the original contract, and excuses the person replaced from any liability for nonperformance. Delegation does not require the agreement of both parties and does not excuse.
160
Who is liable after a novation?
Party who is substituted for.
161
How is a delegation different from a novation?
Novation:
1) requires agreement of both parties to the original contract, and
2) excuses person replaced from any liability for nonperformance.
Delegation:
1) does not require the agreement of both parties and
2) does not excuse.
162
What is the general rule and the exception to whether the death or disability of one of the parties to a contract is an excuse?
Death does not make that person's contract obligations disappear, unless the contract was for personal services of a unique kind.
163
What is the rule for excuse by impracticality?
1. Extreme and unreasonable difficulty or expense; and
| 2. It's nonoccurrence was a basic assumption of the parties.
164
What is the rule for excuse by illegality?
A later law makes performance of the contract illegal. Treated under the doctrine of impossibility.
165
What is the rule for excuse by frustration of purpose?
1. There is some supervening act or event leading to the frustration;
2. At the time of entering into the contract, the parties cannot reasonably foresee the act or event occurring;
3. The purpose of the contract has been completely or almost completely destroyed by this act or event; and
4. The purpose of the contract was realized by both parties at the time of making the contract.
166
What are the rights of intended and incidental beneficiaries?
Intended beneficiaries (those named in the contract) have contract law rights. Intent of the two parties to contract determines whether intended or incidental.
167
What is the rule for excuse by frustration of purpose?
1. supervening act or event;
2. unforeseeable at time of contract;
3. causing complete (or near complete) destruction of the contract's purpose;
4. which purpose was realized by both parties at the time of contract.
168
Can a contract with a TPB present be canceled or modified?
If the TPB knows of and has relied on , TPB rights have vested, and the contract cannot be canceled or modified without consent of TPB, unless the contract otherwise provides.
169
If buyer and seller enter into a contract in which seller agrees to provide 100 cases of hot dogs to a TPB and buyer will pay seller $100 per case. Can buyer and seller cancel the contract before TPB learns of the contract?
Yes, TPB has contract rights only if TPB knows of the contract before it is modified.
170
Can a contract with a TPB present be canceled or modified?
Not without consent of TPB (unless the contract otherwise provides) if TPB has relied on the contract (TPB rights have vested).
171
Can an offer be assigned?
No. A contract generally can be assigned however an offer cannot be assigned.
172
What is the difference between a prohibition on assignments or invalidation of assignments?
Prohibition (" not assignable") : takes away the right to assign but not the power to assign; assignor is liable for breach of contract, but assignee can still enforce the assignment if the assignee does not know of the prohibition.
Invalidation (" assignments void") : takes away both the right to assign and the power to assign so that there is a breach by the assignor and no rights in the assignee.
173
If there is nothing in the contract language regarding assignability, is it allowed?
Common law bars an assignment that substantially changes the duties of the obligor. Right to payment is not a substantial change.
174
What is the difference between a prohibition on assignments or invalidation of assignments?
Prohibition ("not assignable," takes away the right to assign but not the power to assign):
1) assignor is liable for breach of contract
2) assignee can enforce assignment if unaware of prohibition.
Invalidation ("assignments void," takes away both the right to assign and the power to assign):
1) assignor is liable for breach of contract
2) assignee cannot enforce assignment
175
If there is nothing in the contract language regarding assignability, is it allowed?
Depends on if assignment substantially changes the duties of the obligor:
1) Not allowed if grants assignee rights to receive other party's performance.
2) Allowed if grants assignee the right to payment under the contract.
176
You have a student loan with Sallie Mae. In April, Sallie Mae assigns your loan contract to Citibank. You do not know of the assignment and make your next two loan payments to Sallie Mae. Can Citibank recover if it sues you for payments that has not received?
No. Payment by obligor to assignor is effective until obligor knows of the assignment.
177
What are the implied warranties of the assignor in an assignment for consideration?
1. The rights assigned actually exists;
2. The right assigned is not subject to any then-existing defense by the obligor; and
3. The assignor will do nothing after the assignment to impair the value of the assignment.
178
Which of the assignees in a gratuitous multiple assignment prevail? For consideration?
In the gratuitous assignment, last assignee wins.
In the assignment for consideration, the first assignee wins unless the later assignee does not know of the earlier assignment and is the first to obtain payment, judgment, novation, or indicia of ownership.
179
What is the difference between an assignment and a delegation?
Delegation equals duties: transfer by a party to a contract of his duties or burdens under the contract to a third party who was not a party to the contract.
Assignment is the transfer by a party to a contract of his rights and benefits to a third party who was not a party to the contract.
180
Under what situations are delegations prohibited?
1. Contract prohibits delegations or prohibits assignments; and
2. Personal services contract that calls for very special skills.
181
P contracts with O to paint O's house for $1000. The contract provides "no delegations." P and X agree that X will do the painting and P will pay X $1000. X paints O's house. Can P recover the $1000 from O?
No because there's been a material breach under contract law; however, click the recovery under a quasi contract theory.
182
What happens if the third party delegatee does not perform?
Delegating party always remains liable. If the delegation is for consideration, the delegatee is liable to the delegator and the other party to the original contract, who is a third party beneficiary.
183
P contracts with O to paint O's house for $1000. The contract provides "no delegations." P and X agree that X will do the painting and P will pay X $1000. X paints O's house. Can P recover the $1000 from O?
No because there's been a material breach under contract law; however, could be a recovery under a quasi contract theory.
185
P contracts to paint O's house for $1,000. P and X agree that X will do the work and P will pay X $900. X doesn't do the work. Can O recover from P? Can P recovery from X? Can O recover from X?
Yes to all.
