Contracts

Question 1

Article 2

Answer 1

UCC Article that governs contracts that are primarily for the sale of goods

Question 2

Offer

Answer 2

An expression of willingness to enter into a bargain, made with definite terms so that the other party could reasonably believe that he could conclude the bargain by accepting

Question 3

Required contents of real estate sale offer

Answer 3

Price term and land description

Question 4

Methods of terminating an offer (4)

Answer 4

(1) Lapse of time (time stated or reasonable time)
(2) Death of a party prior to acceptance (unless offer is irrevocable)
(3) Later unambiguous statement by offeror to offeree of unwillingness or inability to contract
(4) Later unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of.

Question 5

Irrevocable offers (4)

Answer 5

(1) Common law option K (supported by consideration)
(2) UCC “Firm Offer Rule” (offer good for three months if (i) offer to buy or sell goods; (ii) signed written promise to keep the offer open; (iii) party is a merchant)
(3) Reliance that is (1) reasonably foreseeable and (2) detrimental
(4) A unilateral contract under which performance has started makes that offer irrevocable for reasonable time in which to complete performance (mere preparation is not enough, though).

Question 6

Firm Offer

Answer 6

An offer cannot be revoked for three months if (1) offer to buy or sell goods; (2) signed written promise to keep the offer open; and (3) party is a merchant.

Question 7

Methods of indirect rejection of an offer (3)

Answer 7

(1) Counteroffer (except option Ks)
(2) Conditional acceptance
(3) Additional terms to a common law K (mirror image rule)

Question 8

Additional terms to K under UCC

Answer 8

Additional terms that does are not made a condition of acceptance treated as acceptance of K. Additional term is not a part of the K unless both parties are merchants. Even if both parties are merchants, additional term is not a part of the contract if additional term is material or a party objects.

Question 9

Acceptance

Answer 9

Assent to the terms of the offer that is unequivocal and communicated to the offeror.

Question 10

Methods of acceptance (2)

Answer 10

(1) Performance

(2) Verbal acceptance

Question 11

Mailbox rule

Answer 11

All communications other than acceptance are generally effective when received. Acceptance is generally effective when mailed. But if rejection is mailed before an acceptance is mailed then neither is effective until received. Cannot use mailbox rule to meet an option deadline.

Question 12

Options when seller sends wrong goods

Answer 12

(1) Generally, acceptance and breach.

(2) An accommodation (explanation) treated as a counteroffer and not a breach.

Question 13

Consideration

Answer 13

A bargained-for exchange. What is bargained for must have legal value

Question 14

Illusory promise

Answer 14

When there is no contract because one party has not given up consideration having legal value.

Question 15

Pre-existing contractual or statutory duty as consideration

Answer 15

Common law: does not function as consideration (unless addition to or change in performance; unforeseen difficulty so severe as to excuse performance; third-party promise to pay)
Article 2: New consideration is not required to modify sale of goods K. Good faith is the test.

Question 16

Promissory Estoppel

Answer 16

(1) Promise; (2) Reliance that is reasonable, detrimental, and foreseeable; and (3) Enforcement is necessary to avoid injustice.

Question 17

Who lacks capacity to contract? (3)

Answer 17

(1) infants (under 18)
(2) mental incompetents
(3) intoxicated persons if other party has reason to know

Question 18

Contracts within Statute of Frauds (4)

Answer 18

(1) Suretyship (does not apply if main purpose of the guarantee was to benefit guarantor)
(2) Service K not capable of being performed within a year from the time of K
(3) Transfers of interest in real estate (but not leases of ayear or less)
(4) Sale of goods for $500 or more

Question 19

Satisfying the statute of frauds

Answer 19

(1) Performance: (i) real estate –> requires two of (a) improvements; (b) payment; (c) possession; (ii) service Ks –> full performance; (iii) sale of goods –> part performance satisfies, but only to the extent of part performance (unless they are special goods in which case sof is satisfied once seller makes “substantial beginning”
(2) Writing: (i) non-Article 2 –> all material terms must be in writing, must be signed; (ii) Article 2 –> indicate there’s a K for sale of goods and quantity

Question 20

Extrinsic evidence that can be considered despite parol evidence rule (4)

Answer 20

(1) mistake in integration;
(2) earlier statements indicating defense to the enforcement of the agreement
(3) explaining an ambiguous term in a deal
(4) additions to the written deal where the court finds that (a) written agreement was only partial integration or (b) additional terms would ordinarily be in a separate agreement

Question 21

Shipment Contract

Answer 21

Seller completes delivery obligations when it (1) gets the goods to a common carrier and (2) makes reasonable arrangement for delivery and (3) notifies buyer

Question 22

Implied warranty of merchantability

Answer 22

When merchant sells goods, there is an implied warranty that the goods are fit for ordinary purposes.

Question 23

Perfect Tender

Answer 23

Only applies to sales of goods. Goods and deliver must completely comply with K terms.

Question 24

Rejection of Goods

Answer 24

(0) Sale of goods only
(1) Less than perfect tender gives buyer option to reject the goods as long as good faith
(2) Buyer must take reasonable care of the goods and cannot continue to use them
(3) Option of rejection is limited by cure, installment Ks (requires substantial impairment), and acceptance

Question 25

Revocation of acceptance

Answer 25

(0) Sale of goods only
(1) Nonconformity substantially impairs the value of the goods; (2) excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction; and (3) revocation within a reasonable time after discovery of nonconformity.

Question 26

Vesting of Third Party Rights (3)

Answer 26

(1) Notice and assent
(2) Notice and reliance
(3) Notice and suit

Question 27

Purpose of damages

Answer 27

The purposes of the various money damages rules is to compensate the plaintiff. This is done by protecting the expectation interest of the plaintiff. Expectation is what was done without a breach. The law puts the plaintiff in the same dollar position as if there was no breach.

Question 28

Anticipatory Repudation

Answer 28

An unambiguous statement or conduct (1) that the repudiating party will not perform (2) made prior to the time that performance was due. Gives rise to an immediate claim for damages and excuses the other party from performance.

Question 29

Retraction of anticipatory repudation

Answer 29

Anticipatory repudation can be withdrawn so long as there has not been a material change in position by the other party. If the repudiation is timely retracted, the duty to perform is reimposed, but performance can be delayed until adequate assurance is provided.

Question 30

Reasonable grounds for insecurity

Answer 30

If there are reasonable grounds for insecurity of performance, party can make a written demand for adequate assurance, and if it is commercially reasonable can suspend performance until it receives adequate assurance.

Question 31

Accord and satisfaction

Answer 31

New agreement is struck and performed, excusing the obligations of the original agreement

Question 32

Novation

Answer 32

An agreement between both parties to K to the substitution of a new party. Novation excuses the contracted for performance of the party who is substituted or replaced.

Question 33

Impracticability

Answer 33

Party to perform has encountered an extreme and unreasonable difficulty or expense and its nonocurrence was a basic assumption of the parties.

Question 34

Frustration

Answer 34

Purpose or value of a contract has been destroyed by a superseding event that was not reasonably foreseeable at the time the contract was entered into.

Question 35

Modification

Answer 35

At common law, K cannot be modified unless new consideration. Modern view allows for modification if (1) due to circumstances unanticipated by the parties at the time of K and (2) fair and equitable. UCC allows modification if good faith