Contracts

Question 1

How do you determine whether there has been mutual assent?

Answer 1

It is usually determined by an objective standard i.e. did words or conduct manifest a present intention to enter into a contract?

Question 2

What happens if there is a missing price turn in a sales contract in the sale of real estate?

Answer 2

According to common-law price and description are required or else it is not an offer.

Question 3

In reference to the sale of goods, what happens if there is no price description?

Answer 3

According to article 2 of the UCC, there is no price requirement instead, using the gap fillers, a reasonable price will be instituted.

Question 4

When is revocation generally effective?

Answer 4

When received by the offeree however where a revocation is by publication, it is effective when published.

Question 5

What are the limitations on the offerors power to revoke?

Answer 5

An option contract, firm offer, detrimental reliance, and beginning performance in response to a true unilateral contract offer.

Question 6

What is a firm offer?

Answer 6

1. If a merchant offers to buy or sell goods
2. in a signed writing
3. If the writing gives assurances that it will be held open
4. the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for reasonable time not to exceed three months.

Question 7

What is an option contract?

Answer 7

An option contract is where the offeree gives consideration for promise by the offer or not to revoke an offer. The offer or must hold the offer open for as long as the parties specify.

Question 8

What is detrimental reliance?

Answer 8

When the offeror could:

1. reasonably expect that the offeree would rely to her detriment on the offer, and
2. the offeree does so rely,
3. the offer will be held irrevocable as an option contract for a reasonable length of time.

Question 9

When is a rejection effective?

Answer 9

It is effective when received by the offeror.

Question 10

What is the mirror image rule?

Answer 10

The mirror image rule under common law states that both the offer and acceptance must mirror each other. So in acceptance that adds new tires is treated like a counter offer rather than acceptance.

Question 11

What events will terminate an offer by operation of law?

Answer 11

1. Death or insanity of either party,
   (Does not have to be communicated to other party.)
2. destruction of the proposed contracts subject matter, or
3. supervening Illegality.

Question 12

Article 2 Version of the mirror image rule

Answer 12

Article 2 has a band in the mirror image rule.

If the contract involves a non-merchant the terms of their original offer will govern and the additional or different terms are considered to be mere proposals to modify the contract and do not become part of the contract unless the offeror expressly agrees.

If the contract is between merchants meaning both parties to the contract are merchants additional terms in the acceptance will be included in the contract unless:

1. They materially alter their original terms of the offer
2. The offer expressly limits acceptance to the terms of the offer; or
3. The offeror has already objected to the particular times, or objects within a reasonable time after notice of them is received.

Question 13

What is the mailbox rule?

Answer 13

Acceptance by mail or similar means create a contract at the moment of dispatch, provided that the mail is properly addressed and stamped, unless:

1. The offer stipulates that acceptance is not effective until received; or
2. An option contract is involved (effective only upon receipt)
3. If the offeree sends a rejection and then sends an acceptance, which ever arrives first is effective.
4. If the offer he sends an acceptance and then a rejection, the acceptance is effective unless the rejection arrives first and the offeror detrimentally relies on it.

Question 14

What are the two elements necessary to constitute consideration:

Answer 14

1. There must be a bargain for exchange between the parties; and
2. That which is bargain for must be considered of legal value or, as it is traditionally stated, it must constitute a benefit to the promisor or a detriment to the promisee.

Question 15

What is the pre-existing legal duty rule?

Answer 15

Performing or promising to perform an existing legal duty is insufficient consideration.

Question 16

What are the exceptions to the pre-existing legal duty rule?

Answer 16

There is consideration if:

1. New or different consideration is promised;
2. The promise is to ratify avoidable obligation;
3. The pre-existing duty is owed to a third person rather than to the promisor;
4. There is an honest dispute as to the duty; or
5. They are our unforeseen circumstances sufficient to discharge a party, or under the modern view, if the modification is fair and equitable in view of circumstances not anticipated when the contract was made.

*A good faith agreement modifying a contract subject to the UCC needs no consideration to be binding.

Question 17

What is promissory estoppel?

Answer 17

Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing. A promise is enforceable if necessary to prevent injustice if:

1. The promisor should reasonably expect to induce action or forbearance; and
2. Such action or forbearance is in fact induced.

Question 18

What is the concept of mutual mistake?

Answer 18

If both parties entering into a contract on mistaken about existing facts related to the agreement, the contract may be voidable by the adversely affected party if:

1. The mistake concerns a basic assumption on which the contract is made
2. The mistake has a material effect on the agreed-upon exchange; and
3. The party seeking avoidance did not assume the risk of the mistake.

Question 19

What happens to a contract if there is fraudulent misrepresentation or fraud in the inducement?

Answer 19

If a party induces another to enter into a contract by using fraudulent misrepresentation, the contract is voidable by the innocent party if she justifiably relied on the fraudulent misrepresentation.

This is fraud in the inducement.

Question 20

When does the statute of frauds’s apply?

Answer 20

My legs:

1. Promises in consideration of marriage
2. Performance is not within one year – I promise that by its terms cannot be performed within one year
3. Interest in land
4. A promise by an executor or administrator to pay this states that out of his own funds
5. Good’s priced at $500 or more
6. Suretyship Promises– A promise to answer for the debt or default of another.

Question 21

How do you determine whether there has been a contract made?

Answer 21

You look to see if there was mutual assent, consideration or some substitute for consideration, and any defenses to creation of the contract.

Question 22

What is the concept of unconscionability?

Answer 22

It allows the court to refuse to enforce a provision or an entire contract to avoid unfair terms, usually due to some unfairness in the bargaining process.

Question 23

What are the common instances of procedural unconscionability?

Answer 23

1. Boilerplate provisions – courts have invalidated these provisions because they are inconspicuous or in comprehensible to the average person even have brought to his actual attention
2. Contracts of adhesion or take it or leave it clauses
3. Exculpatory clauses – an exculpatory clause releasing a contracting party from liability for his own intentional wrongful acts is usually found to be unconscionable because such a clause is against public policy in most states.
4. Limitations on remedies – such clauses generally will not be found to be unconscionable unless it is inconspicuous. If a contract limits a party to a certain remedy and that remedy fails it’s essential purpose, a court may find that the limitation is unconscionable and ignore it.

Question 24

What options does the court have when an unconscionable clause is present?

Answer 24

1. Refused to enforce the contract;
2. Enforce the remainder of the contract without the unconscionable clause; or
3. Limit the application of any clause so as to avoid an unconscionable result.

Question 25

What is the hierarchy when contract provisions conflict?

Answer 25

Courts will look at the express terms and then they will look to the course of performance course of dealing and last usage of trade.

Question 26

What is a course of performance?

Answer 26

It evidences what the parties have done in the past as it applies or pertains to this particular contract.

Question 27

What is course of dealing?

Answer 27

It evidences with the parties have done in the past with regard to other or prior contracts.

Question 28

What is usage of trade?

Answer 28

Usage of trade is what people in the industry normally do.

Question 29

According to the Parol evidence rule, when does it matter whether a writing is a complete integration or partial?

Answer 29

When there is a consistent additional term.

If an integration is complete, the writing cannot be contradicted or supplemented however if the integration is partial, the writing may not be contradicted but may be supplemented by proving consistent additional terms.

Question 30

What is the basis of the parol evidence rule?

Answer 30

The court deems that when parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain the writing is an integration.

Therefore any other expressions written or oral made prior to the writing, As well as any oral expression is contemporaneous with the writing, are inadmissible to vary the terms of the writing.

Question 31

According to article 2, as it pertains to the sale of goods, what term must be included?

Answer 31

The quantity term must be included. If either turns I’m missing from the agreement the gap filler provisions will fill in the missing terms.

Question 32

What are the article 2 gap fillers?

Answer 32

Price – if nothing has been said as to the price; the price is left to be agreed upon by the parties and they failed to agree; or the price is to be fixed in terms of some standard that is set by a third-party or agency and is not set, then the price is a reasonable price at the time for delivery.

Place of delivery – if the place of delivery is not specified, the place usually is the seller’s place of business, if he has one; otherwise, it is the sellers home.

Time for shipment or delivery – if the time for shipment or delivery is not specified, shipment or delivery is due in a reasonable time.

Time for payment – if the time for payment is not specified, payment is due at the time and place at which the buyer is to receive the goods.

Assortment if I contract provides that an assortment of goods is to be delivered and does not specify which party is to choose; the assortment is at the buyers option.

Question 33

What are the four risk of loss rules?

Answer 33

1. Agreement allocates risk – won’t see on the bar
2. Breach – breaching party is liable for any uninsured loss even though breach is unrelated to problem.
3. Delivery by common carrier other than seller – risk of loss shifts from seller to buyer at the time that the seller completes its delivery obligations.
4. If there is no agreement, no breach, no delivery by carrier – the determining factor is whether the seller is a merchant… risk of loss shifts from emergent seller to the buyer and the buyers receipt of the goods;risk of loss shifts from a non-merchant seller when he or she tenders the goods i.e. tells the buyer where they are.

Question 34

In a shipment contract when does risk of loss shift?

Answer 34

The risk of loss passes to the buyer when the goods are delivered to the carrier. Unless the agreement otherwise specifies.

Question 35

When does risk of loss pass or shift in destination contracts?

Answer 35

When the goods are tended to the buyer at the destination.

Question 36

How is risk of loss allocated in the instance of breach?

Answer 36

1. Defective goods – if the buyer has the right to reject the goods, the risk of loss does not pass to the buyer until the defects are cured or she excepts the goods in spite of their defects.
2. Revocation of acceptance – if the buyer rightfully revokes acceptance the risk of loss is treated as having arrested on the seller from the beginning to the extent of any deficiency in the buyers insurance coverage.

Question 37

What happens if the goods are destroyed before risk of loss passes?

Answer 37

If goods that were identified when the contract was made our destroyed without fought by either party and before the risk of loss passes to the buyer, the contract is avoided.

Question 38

What is warranty of title?

Answer 38

Any seller of goods warrants that title transfer it is good, that the transfer is rightful, and that they are no liens or encumbrances against the title of which the buyer is unaware at the time of contracting.

Question 39

What is the implied warranty of merchantability?

Answer 39

It is implied in every contract for sale by a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable.

To be merchantable, goods must at least be fit for the an ordinary purpose for which such goods are used.

Question 40

What is the implied warranty of fitness for particular purpose?

Answer 40

It applies when any seller whether it be a merchant or not, has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the sellers skill and judgment to select suitable goods; and the buyer in fact relies on the sellers skill or judgment.

Question 41

What are express warranties?

Answer 41

Any affirmation a fact or promise made by the seller to the buyer, any description of the goods, and Annie sample or model create an express warranty if the statement, description, sample, or model, is part of the basis of the bargain.

For it to be part of the basis of the bargain it need only come at such a time that the buyer could have relied on it when she entered into the contract.

Question 42

How many an express warranty be disclaimed?

Answer 42

By not saying anything

Question 43

How many the warranty of title be disclaimed?

Answer 43

The warranty of title can be disclaimed or modified only by specific language or by circumstances that give the buyer notice that the seller does not claim title or that he is selling only such rights as he or a third-party may have.

Question 44

How do you disclaim implied warranties?

Answer 44

Disclaimer of warranty of merchantability – this may be disclaimed or modified only by mentioning merchantability. If the sale contract is in writing, the disclaimer must be conspicuous.

Disclaimer of warranty of fitness for a particular purpose – the warranty of fitness for particular purpose and can be specifically just going only by conspicuous writing for example, “there are no warranties which extend be on the description on the face thereof.”

All implied warranties may be disclaimed by using language such as “as is” or “with all faults.”

Implied warranties may also be disclaimed by the course of dealing, course of performance, or usage of trade.

Question 45

What are the rules concerning modification?

Answer 45

Under the general contract law, a contract cannot be modified unless the modification is supported by new consideration.

The modern view, however, permits modification without consideration if: the modification is due to circumstances that were unanticipated by the parties when the contract was made and it is fair and equitable.

The UC see is even more liberal – good faith promises of new and different terms by the parties to a sales contract are valid without consideration.

Question 46

May a written contract be modified or orally?

Answer 46

Yes, a written contract can be modified orally. However for the sale of goods contracts, the modification must be in writing if the contract as modified falls within the statute of fraud.

Question 47

What are the rules concerning no modification clauses?

Answer 47

Common law – the common-law rule is that even if a written contract expressly provides that it may be modified only by writing, the parties can orally modify the contract.

UCC – under the UC see, if a contract explicitly provides that it may not be modified or rescinded except by a sign writing, that provision is given effect.
*however if the contract is between a merchant and nonemergent this provision requires the non-merchant’s separate signature.

Question 48

When does the breach occur?

Answer 48

When the promisor is under an absolute duty to perform, and the absolute duty of performance has not been discharged, then this value to perform in accordance with the contractual terms will amount to a breach of the contract.

The nonbreaching party who sues for breach of contract must show that she is willing and able to perform but for the breaching party’s failure to perform.

Question 49

A buyers right to reject under the perfect tendered role is limited by acceptance, a buyer excepts when:

Answer 49

1. After reasonable opportunity to inspect the goods, she indicates to the seller that they conform to requirements or that she will keep them even though they failed to conform;
2. She fails to reject within a reasonable time after tender or delivery of the goods or fails to seasonably notify the seller of her rejection; or
3. She does any act inconsistent with the sellers ownership.

Question 50

When may acceptance be revoked?

Answer 50

The buyer may revoke her acceptance if the goods have a defect that substantially impairs their value to her and:

1. She excepted them on the reasonable belief that the defect would be cured and it has not been; or
2. She excepted them because of the difficulty of discovering defects or because of the sellers assurance that the goods conform to the contract.

Question 51

When must revocation of acceptance occur?

Answer 51

1. Within a reasonable time after the buyer discovers or should have discovered the defects; and
2. Before any substantial change in the goods occurs that is not caused by a defect present at the time the seller relinquished possession.

Question 52

In an installment contract, it can be rejected only if:

Answer 52

The nonconformity substantially impairs the value of that installment and cannot be cured.
**In addition, the whole contract is breached only if the nonconformity substantially impairs the value of the entire contract.

Question 53

Sellers right to cure in single delivery contracts?

Answer 53

1. If the buyer has rejected goods because of defects, the seller may within the time originally provided for performance cure by giving reasonable notice of her intention to do so in making a new tender of conforming goods that the buyer must then accept.
2. When the contract time has expired – if the buyer rejects a tender of nonconforming goods that the seller reasonably believed would be acceptable the seller upon a reasonable notification to the buyer has a further reasonable time to make a conforming tender.

Question 54

How may acceptance occur in a unilateral contract?

Answer 54

Only by performance

And offered to form a unilateral contract is not excepted until performance is completed.

Question 55

How does acceptance occur in bilateral contracts?

Answer 55

Unless an offer specifically provides that it may be accepted only through performance, it may be accepted either by a promise to perform or by the beginning of performance.

Generally acceptance of an offer to enter into a bilateral contract must be communicated to the offer or unless the offer advise that acceptance need not be communicated.

Question 56

What is the shipment of nonconforming goods considered?

Answer 56

It is considered as an acceptance as well as a breach.

Question 57

In a contract for the sale of good when you have a 2-207 problem and it is a contract involving a non-merchant what happens if there is an additional or different terms?

Answer 57

The additional or different terms are considered to be mere proposals to modify the contract and do not become part of the contract unless the offeror expressly agrees.

Question 58

2-207- if the contract is between merchants what happens with additional terms?

Answer 58

If both parties to the contract are merchants additional terms and the acceptance will be included in the contract unless:

1. They materially alter their original terms of the offer
2. The offer expressly limits acceptance to the terms of the offer; or
3. But awful war has already objected to the particular terms for objects within a reasonable time after notice of them is received.

Question 59

2-207- if the contract is between merchants what happens with different terms?

Answer 59

They are either treated as additional terms or knocked out.

Question 60

The mailbox rule:

Answer 60

Acceptance by mail or similar means creates a contract at the moment of dispatch, provided the mail is properly addressed and stamped, unless:

1. The offered stipulates that acceptance is not effective until received; or
2. And option contract is involved (and acceptance under an option contract is effective only upon receipt)
3. If the offeree sends and rejection and then sends an acceptance, which ever arrives first is effective.
4. If the offeree sins and acceptance and then a rejection, the acceptance is effective unless the rejection arrives first in the offer or detrimentally relies on it.

Question 61

What are the elements of consideration?

Answer 61

There must be a bargained for exchange between the parties; and that which is bargained for must be considered of legal value or, it must constitute a benefit to the promisor or a detriment to the promisee.

No bargain involved when one party gives a gift

Question 62

Preexisting Legal Duty

Answer 62

Performing or promising to perform an existing legal duty is insufficient consideration.

Question 63

Preexisting Legal Duty Exceptions:

Answer 63

1. New or different consideration is promised;
2. The promise is to ratify a voidable obligation
3. The preexisting duty is owed to a third person rather than to the promisor;
4. There is an honest dispute as to the duty; or
5. There are unfrozen circumstances sufficient to discharge a party, or under the modern view, if the modifications fair and equitable in view of circumstances not anticipated when the contract was made.

**GOOD FAITH AGREEMENT MODIFYING A CONTRACT SUBJECT TO THE UCC NEEDS MO CONSIDERATION TO BE BINDING.

Question 64

What is illusory promise?

Answer 64

When either party gives consideration

“All the widgets I want” or “all you want to sell me”

Question 65

What is promissory estoppel Or detrimental reliance?

Answer 65

Consideration is not necessary in such circumstances. A promise is enforceable if necessary to prevent injustice if:

1. The promisor should reasonably expect to induce action or forbearance; and
2. Such action or forbearance is in fact induced.

Question 66

Mutual mistake: if both parties entering into a contract are mistaken about existing facts relating to their agreement, the contract maybe voidable by the adversely affected party if:

Answer 66

1. The mistake concerns a basic assumption on which the contract is made
2. The mistake has a material effect on the agreed-upon exchange; and
3. The party seeking avoidance did not assume the risk of the mistake.

Question 67

Unilateral mistake:

Answer 67

If only one of the parties is mistaken about facts relating to the agreement, the mistake will not prevent formation of a contract.

However, if the non-mistaken party knew or had reason to know of the mistake made by the other party, the contract is voidable by the mistaken party.

Question 68

What happens when there is a mistake by the intermediary?

Answer 68

When there is a mistake in the transmission of an offer or except in buying into medium airy, the prevailing view is that the message as transmitted is operative unless the other party knew or should have known of the mistake.

Question 69

What happens to a contract when there has been fraudulent misrepresentation or fraud in the inducement?

Answer 69

The contract is voidable by the innocent party if she justifiably relied on the fraudulent misrepresentation.

Question 70

What happens when there has been a misrepresentation but it is not fraudulent?

Answer 70

The contract is voidable by the innocent party if the innocent party justifiably relied on the misrepresentation and the misrepresentation was material.

A misrepresentation is material if:

1. It would induce a reasonable person to agree, or
2. The maker knows that for some special reason it is likely to induce the particular recipient to agree, even if a reasonable person would not.

Question 71

Illegality and contracts:

Answer 71

If the consideration or subject matter of the contract is illegal the contract is void. The exceptions to this are as follows:

1. The plaintiff is unaware of the illegality wow the defendant knows of the illegality;
2. The parties are not in Pari Delicto (One party is not as culpable as the other) or
3. The illegality is the failure to obtain a license when the licenses for revenue raising purposes rather than for protection of the public.

If only the purpose behind the contrite is illegal the contract is voidable by a party who was:

1. Unaware of the purpose; or
2. Aware but did not facilitate the purpose and that purpose does not involve serious moral turpitude.

Question 72

What happens when a contract is made with a minor?

Answer 72

The contract is voidable… However the contractual promises are binding on the adult.

A minor may choose to disaffirm the contract anytime before or shortly after reaching the age of majority. If the person so chooses to disaffirm they must return anything that they received under the contract that still remains at the time of disaffirmance.

Question 73

What is the writing requirement for the statue of fraud?

Answer 73

The statute requires one or more writings that:

1. Reasonably identify the subject matter of the contract,
2. Indicate that a contract has been made between the parties, and
3. State with reasonable certainty the essential terms.

A writing can be a receipt, I letter, a check with details in the memo line, or written offer that was accepted orally.

Question 74

What is the signature requirement of the statue of frauds?

Answer 74

A signature is any mark or symbol made with the intention to authenticate the writing as that of the signer. It can be printed or typed, under the UCC a party’s initials or letterhead May be sufficient and an electronic signature is also sufficient.

The writing need not be signed by both parties only the party to be charged my sign.

Question 75

What is the exception to the signature requirement for the statute of frauds?

Answer 75

Written confirmation by a merchant:

In contracts between merchants if one party within a reasonable time after an oral agreement has been made, since to the other party a written confirmation of the understanding that is sufficient under the statute of frauds’s to bind the sender it will also buy the recipient if:

1. He has reason to know of the confirmations content; and
2. he does not object to it in writing within 10 days of receipt.

Question 76

For the sale of goods priced at $500 on more when is a writing not required?

Answer 76

SWAP

1. Specially manufactured goods: if goods are to be specially manufactured for the buyer and not suitable suitable for the sell to others by the seller in the ordinary course of his business the contract is enforceable if the seller has, made a substantial beginning in their manufacture or commitments for their purchase before notice of repudiation is received.
2. Written confirmation by a merchant
3. Admissions and pleadings or court: if the party whom enforcement is sought admits in pleadings, testimony, or otherwise in court that the contract for sale was made the contract is enforceable without a writing.
4. Payment or delivery of goods: if goods are either received and accepted or paid for the contract is enforceable. However, the contract is not enforceable beyond the quantity of goods excepted are paid for.

Question 77

For goods priced at $500 or more, is a writing sufficient even though he omits or incorrectly states a term?

Answer 77

Yes the writing will be considered sufficient but the contract is not enforceable beyond the quantity of goods shown in the writing.

Question 78

What is the performance standard at common law?

Answer 78

Substantially perform all that is called for in the contract

Question 79

What is the performance standard under article 2?

Answer 79

Perfect tender – the delivery and condition of the goods must be exactly as promised in the contract

Question 80

What are the sellers obligations of tender and delivery in non-carrier cases?

Answer 80

Tender of Delivery:
The seller must put and hold conforming goods at the buyers disposition for time sufficient for the buyer to take possession. The seller must give the buyer notice reasonably necessary to enable her to take possession of the goods. The tender must be at a reasonable hour.

Place of Delivery:
In the absence of an agreement otherwise, the place of delivery generally is the seller’s place of business, or if he has none, his residence.

Question 81

What happens in a situation where A condition of a contract is failed?

Answer 81

The failure of a contractual provision that is only a condition is not a breach of contract, but it discharges the liability of the promisor where obligations on the additional promise never mature.

*failure of a promise is a breach**

Question 82

And contracts we are performance is based on the personal taste or judgment or satisfaction of a party what is the standard?

Answer 82

Personal satisfaction and honest and in good faith.

Question 83

What is anticipatory repudiation?

Answer 83

Occurs if a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes.

The repudiation must be unequivocal indicating that he cannot or will not perform when the time comes.

Question 84

When does an anticipatory repudiation apply? I.e. what kind of contracts

Answer 84

Anticipatory repudiation applies only if there’s a bilateral contract with executory or unperformed duties on both sides.

Question 85

In the case anticipatory repudiation what alternatives does the non-repudiating party have?

Answer 85

1. Treat the anticipatory repudiation as a total repudiation and Sue immediately.
2. Suspend his own performance and wait to see until the performance date;
3. Treat the repudiation as an offer to resend and treat the contract as discharged; or
4. Ignore the repudiation an urge the promisor to perform.

Question 86

May a party retract their anticipatory repudiation?

Answer 86

Yes, I repudiating party may at any time before his next performance is do withdraw his repudiation unless the other party has canceled, materially changed her position and reliance on the repudiation, or otherwise indicated that she consider the repudiation final.

Question 87

When does perspective failure of a condition occur?

Answer 87

When a party has reasonable grounds to believe that the other party will be unable or unwilling to perform when performances due.

Conduct the words that merely raises doubts that the party will perform.

Question 88

What is the effect of perspective failure to perform?

Answer 88

To allow the innocent party to suspend further performance on her side until she receives adequate assurances that performance will be forthcoming.

If the other party fails to provide adequate assurances, the innocent party may be excuse from her own performance and May treat the failure to provide assurances as a repudiation.

Question 89

May the perspective inability to perform be retracted?

Answer 89

Yes, attraction is possible if the defaulting party regains his ability or willingness to perform. However this fact must be communicated to the innocent party in order to be effective.

Question 90

Rules apply to divisible contracts:

Answer 90

If a contract is divisible and a party performs one of the units of the contract, he is entitled to the agreed-upon equivalent for that unit even if he fails to perform the other unit.

Question 91

What is a divisible contract?

Answer 91

Three tests must be concurrently satisfied to make a contract divisible:

1. The performance of each party is divided into two or more parts under the contract;
2. The number of parts do from each party is the same; and
3. The performance of each part by one party is a great one as the equivalent of the corresponding part from the other party, i.e. each before meant is the quid pro quo of the other.

Question 92

What is Discharge by impossibility?

Answer 92

Contractual duties will be discharged if it has become impossible to perform them.

1. The impossibility must be objective i.e. the duties could not be performed by anyone.
2. The impossibility must arise after the contract has been entered into

Examples:

1. Death or physical incapacity: death or physical incapacity of a person necessary to effectuate the contract serves to discharge it.
2. Supervening illegality
3. Subsequent distraction of contract subject matter or means of performance: if the contract subject matter is destroyed or the designated means for performing the contract are destroyed, contractual duties will be discharged.

Question 93

What is discharged by impracticability?

Answer 93

Courts will discharge contractual duties with performance has become impracticable.

Test for impracticability: the test for a finding of impracticability is that the party to perform has encountered:

1. Extreme an unreasonable difficulty and or expense; and
2. It’s non-occurrence was a basic assumption of the parties.

paying money is never impracticable

Question 94

What is discharge by frustration?

Answer 94

Frustration will exist if the purpose of the contract has become valueless by virtue of some supervening event not the fault of the party seeking discharge.

The elements necessary to establish frustration are as follows:

1. There is some supervening act or event leading to the frustration;
2. At the time of entering into the contract, the parties did not 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.

Question 95

What are the rules concerning mutual rescission?

Answer 95

A contract may be discharged by an express agreement between the parties to rescind. The agreement to resend is itself a binding contract supported by consideration i.e. the giving up of each party of her right to counter performance from the other.

If rights of a third-party beneficiary have already vested, the contract cannot be discharged by mutual rescission by the promisor and promisee.

**contract must be executory on both sides

Question 96

Unilateral contracts and rescission rules

Answer 96

If the contract is unilateral a contract to mutually resend where one party still has a duty to perform will be ineffective. For an effective decision in a unilateral contract situation where the offeree has already performed, the rescission promise must be supported by one of the following:

1. An offer of new consideration by the nonperforming party;
2. Elements of promissory estoppel or
3. Manifestation of an intent by the original offeree to make a gift of the obligation owed to her.

Most common grounds are mistake, misrepresentation, duress, and failure of consideration.

Question 97

What is a novation?

Answer 97

A novation occurs when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the regional parties under the terms of the old contract.

The elements for a valid novation are:

1. A previous valid contract;
2. An agreement among all parties, including the new party or parties to the contract;
3. The immediate extinguishment of contractual duties as between the original contracting parties; and
4. A valid and enforceable new contract

Question 98

Discharge by release

Answer 98

A release not to sue will serve to discharge contractual duties. The release or contract not to sue usually must be in writing and supported by new consideration or promissory estoppel Elements.

Question 99

What is an accord?

Answer 99

And accord is an agreement in which one party to an existing contract agrees to except in lieu of the performance that she is supposed to receive from the other party to the existing contract, some other, different performance.

And accord must be supported by consideration

Question 100

What is satisfaction?

Answer 100

Satisfaction is the performance of the court agreement. It’s a fact is to discharge not only the original contract, but also the accord contract as well.

Question 101

What is the effect of breach of accord before satisfaction?

Answer 101

Breach by the debtor: if the debtor breaches an accord agreement, the creditor may sue either on the original undischarged contract or for breach of the accord agreement.

Breach by the creditor: if a creditor breaches an accord agreement The debtor has two courses of action available:1. Raise the accord agreement as an equitable defense and ask the contract action be dismissed; or 2. Wait until she is damaged and then bring an action at mall for damages for breach of the accord contract.

Question 102

What is a minor breach?

Answer 102

A breach of contract is minor if the obligee gains the substantial benefit of her bargain despite the obligors defective performance.

*if coupled with anticipatory repudiation the nonbreaching party may treat it as a material breach.

Question 103

What is a material breach?

Answer 103

If the obligee does not receive the substantial benefit of her bargain.

Options:

1. Treat the contract as at an end
2. Have an immediate right to all remedies for breach of the entire contract including total damages.

Question 104

Factors courts look at it in determining whether a breach is material or minor:

Answer 104

1. The amount of benefit received by the nonbreaching party;
2. The adequacy of compensation for damages to the injured party;
3. The extent of part performance by the breaching party;
4. Hardship to the breaching party;
5. Negligence or willful behavior of the breaching party; and
6. The likelihood that the breaching party will perform the remainder of the contract.

Question 105

Discharge By Rescission

Answer 105

Rescission will serve to discharge contractual duties. May be either mutual or unilateral.

Question 106

Mutual Rescission

Answer 106

A contract may be discharged by an express agreement between the parties to rescind.
Agreement itself is consideration (each party giving up her right to counter performance from the other)

Question 107

Exception to mutual rescission:

Answer 107

If the rights of a third party beneficiary have already vested, the contract CANNOT be discharged by mutual rescission by the promisor and promisee.

Question 108

What is the effect of timeliness and breach of contract?

Answer 108

Failure to perform in the time stated is usually not considered a breach of K if the performance is rendered within a reasonable time.
HOWEVER, if the nature of the K makes timely performance essential, or if the K expressly provides that time is of the essence then failure to perform on time is usually considered a material breach!

Question 109

What is the Perfect Tender Rule?

Answer 109

If goods fail or their delivery fail to conform to the contract in any way, the buyer generally may:

1. reject all
2. Accept all
3. or accept any commercial units and reject rest.

Question 110

Specific Performance

Answer 110

If the legal remedy is inadequate, the non-breaching party may seek specific performance, which is an order form the court to the breaching party to perform or face contempt of court charges.

Always available for land and rare or unique goods NOT SERVICES!

Question 111

Employee and Employer (specific performance)

Answer 111

Although you cannot get SP remedies in service contracts a person may seek an injunction–> Court may enjoin a breaching employee from working for a competitor throughout the duration of the contract the services contracted for are rare or unique.

Question 112

Covenant Not to Compete:

Answer 112

Most courts will grant an order of SP to enforce a K not to compete if:

1. the services to be performed are unique (rendering money damages inadequate); and
2. The covenant is reasonable.

Question 113

For a covenant to be reasonable what is required?

Answer 113

1. The covenant must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant
2. The covenant must be reasonable as to its geographic scope and duration; and
3. The covenant must not harm the public.

Question 114

An action for specific performance is subject to what equitable defenses?

Answer 114

1. Laches: a claim that the P has delayed bringing the action and that the delay has prejudiced the D;
2. Unclean Hands: a claim that the party seeking specific performance is guilty of wrongdoing in the transaction being sued upon; and
3. Sale to a bona fide purchaser: a claim that the subject matter has been sold to a person who purchased for value and in good faith.

Question 115

Cancellation fo a contract:

Answer 115

If a buyer rightfully rejects goods because they do not conform to the contract, one of her options is simply to cancel the contract.

Question 116

Buyer’s right to Replevy Identified Goods on Buyer’s Prepayment:

Answer 116

If a buyer has made at least part payment of the purchase price of goods that have been identified under a contract and the seller has not delivered the goods, the buyer may replevy the goods from the seller in 2 circumstances:

1. The seller becomes insolvent within 10 days after receiving the buyer’s first payment; or
2. The goods were purchased for personal, family, or household purposes.

In either case above, the buyer must tender any unpaid portion of the purchase price to the seller.

Question 117

Buyer’s right to Replevy Identified Goods on Buyer’s inability to cover:

Answer 117

The buyer may replevy undelivered, identified goods from the seller if the buyer, after reasonable effort, is unable to secure adequate substitute goods (cover)

Question 118

Seller’s right to withhold Goods:

Answer 118

If the buyer fails to make a payment due on or before delivery, the seller may withhold delivery of the goods.
Seller may also withhold goods if purchased on credit and seller discovers that buyer is insolvent.

Question 119

Right to recover from buyer on buyer’s insolvency:

Answer 119

If a seller learns that a buyer has received delivery of goods on credit while insolvent, the seller may reclaim the goods upon demand made within 10 days after the buyer’s receipt of the goods.
EXCEPTION: 10 day limitation does not apply if a misrepresentation of solvency has been made in writing to the particular seller within three months before delivery.

Question 120

Right to recover shipped or stored goods from bailee on buyer’s insolvency:

Answer 120

Seller may stop delivery of goods in the possession of a carrier or other bailee if he discovers that the buyer is insolvent.

Question 121

Right to recover shipped or stored goods from bailee on Buyer’s Breach:

Answer 121

Seller may stop delivery of carload, truckload, or planeload, or larger shipments of goods if the buyer breaches the contract or the seller has a right to withhold performance pending receipt of assurances.

Question 122

Seller’s right to force goods on buyer

Answer 122

limited to an action for price when the seller is unable to resell goods to others at a reasonable price.

Question 123

Seller’s right to demand assurances:

Answer 123

Where there are reasonable grounds for insecurity with respect to a party’s performance, the other party may demand IN WRITING assurances that the performance will be forthcoming at the proper time.

Seller may suspend his performance until he receives adequate assurances.

Question 124

What happens if adequate assurances are not given?

Answer 124

If they are not given within a reasonable time (30 days after demand) the seller may treat the contract as repudiated.

Question 125

Compensatory Damages

Answer 125

Usual goal of damages for breach of K: put the non breaching party in the position she would have been in had the promise been performed.

Question 126

Standard measure of damages for compensatory damages:

Answer 126

Expectation Damages: sufficient damages for her to buy a substitute performance. (benefit of the bargain damages)

Question 127

Reliance Damage Measure:

Answer 127

If the P’s expectation damages are too speculative to measure the P may elect to recover damages based on a “reliance” measure, rather than an expectation measure.

Reliance damages award the P the cost of her performance–> designed to put the P in the position she would have been in had the contract never been formed.

Question 128

Consequential Damages:

Answer 128

special damages that reflect losses and above standard expectation damage. Arise because of the non breaching party’s particular circumstances, and most often they consist of lost profits

Question 129

When may consequential damages be recovered?

Answer 129

Only if:

1. at the time the contract was made, a reasonable person would have foreseen the damages as a probable result of a breach,
2. The damages could not have been avoided through reasonable efforts, and
3. the damages can be proved with reasonable certainty.

Question 130

To recover consequential damages the breaching party must have…

Answer 130

known or had reason to know of the special circumstances giving rise to the damages, –>In K’s for the sale of goods - buyer may only recover consequential damages.

Question 131

What are incidental damages?

Answer 131

Incidental damages include expenses reasonably reasonably incurred by:
the buyer: in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to seller’s breach
The seller:in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach.

Question 132

Must damages be certain?

Answer 132

Yes, according to the certainty rule, the P must prove that the losses suffered were certain in their nature and not speculative.

Question 133

Are punitive damages awarded in contract cases?

Answer 133

Generally not

Question 134

When may nominal damages be awarded?

Answer 134

When there has been a breach but no actual loss is proven.

Question 135

May parties place a liquidated damages clause in their contract?

Answer 135

Yes, parties to a contract may stipulate what damages are to be paid in the event of a breach. Such damages must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach.

Question 136

What are the requirements to enforce a Liquidated Damages Clause?

Answer 136

1. Damages for contractual breach must have been difficult to estimate or ascertain at the time the contract was formed; and
2. The amount agreed on must have been a reasonable forecast of compensatory damages in the case of breach.
   * *Test for reasonableness is a comparison between the amount of damages prospectively probable at the time of contract formation and the liquidated damages figure. –> If it is unreasonable the courts will construe this as a penalty and will not enforce the provision.

Question 137

Can a party receive liquidated damages even if there is no actual harm?

Answer 137

Yes, If the requirements are met then the plaintiff will receive liquidated damages.

Question 138

What are the buyer’s basic damages where the seller does not deliver, or the buyer properly rejects or revokes her acceptance of tendered goods?

Answer 138

The difference between the contract price and 1) the market price (at the time or 2) the cost of buying replacement goods (buyer must make a reasonable contract for substitute goods in good faith and without unreasonable delay), plus incidental and consequential damages, less expenses saved as a result of the seller’s breach.

Question 139

When are buyers damages and seller’s damages measured?

Answer 139

Buyer’s damages are measured as of the time she learns of the breach
Seller’s damages are measured as of the time for delivery.

Question 140

What are the buyer’s remedies in the event that the seller delivers nonconforming goods and buyer accepts?

Answer 140

Difference between the value of the goods as delivered and the value they would have had if they had been according to contract, plus incidental and consequential damages.
*To recover such damages, the buyer must within a reasonable time after she discovers or should have discovered the defect, notify the seller of the defect. –> if buyer fails to do so then the buyer loses her right to sue.

Question 141

What are the buyer’s remedies in the event that the seller anticipatorily breaches contract?

Answer 141

Measure of damages are the difference between the market price at the time the buyer learned of the breach and the contract price.

Question 142

When is a buyer liable for consequential damages to the seller?

Answer 142

if: 1) he had reason to know to of the buyers general or particular requirements and
2) the subsequent loss resulting from the needs could not reasonably be prevented by cover.

Question 143

What are the Seller’s Damages when Buyer Repudiates or refuses to accept Conforming Goods?

Answer 143

In addition to incidental damages: the seller can:

1) Recover the difference between the market price (measured as of the time and at the place of delivery) and the contract price;
2) Resell the goods and recover the difference between the contract price and the resale price; or
3) If the above measures are inadequate because the seller could have made an additional sale, recover under a “lost profits” measure the difference between the K price and the cost to the seller. (lost volume seller)

Other damages will NEVER be adequate if seller is a lost volume seller.
If seller’s supply is unlimited=lost volume seller
If seller’s supply is limited= lost profit measure cannot be used and one of the other two measure must be used.

Question 144

What are the Seller’s Damages when Buyer accepts goods but does not pay or has not accepted the goods and seller is unable to resell for a reasonable price or if the goods have been lost or damaged at a time the ROL was on the buyer?

Answer 144

The seller may receive the entire contract from buyer.

Question 145

That is the standard measure of damages for breach of a land contract?

Answer 145

The difference between the contract price and the FMV of the land.

Question 146

Damages for Employer breach

Answer 146

The standard measure of the employee’s damages is the full contract price irrespective of when the breach occurs (i.e. before performance, after part-performance, or after full performance.

*damages may be reduced if employer fails to mitigate.**