Contracts

Question 1

three key questions?

Answer 1

a. Has an enforceable contract been formed?
b. Has the contract been performed (or, has the performance been excused)?
c. What are the remedies for breach?

Question 2

contract?

Answer 2

legally enforceable agreement

Question 3

two universes of contracts?

Answer 3

Common law for Real Estate or Services

UCC Article 2 for the deals with goods

Can’t be in two universes at once, only one.

Question 4

divisible contract?

Answer 4

agreement is divided into mini ks. Can split universes that way

Question 5

Predominant purpose test?

Answer 5

To determine your universe in a mixed k, which plays the more dom role? goods or service?

Question 6

Formation, four big topics? Has an enforceable contract been formed?

Answer 6

ACDS, All Ks Don’t Stink

go through these topics to answer Key Question 1

1. Agreement (offer and acceptance)
2. Consideration (and related theories for when you have to keep your promises)
3. Defenses to formation (incapacity, duress, etc.)
4. Statute of Frauds (enforceability)

Question 7

Agreement’s two compenents

Answer 7

offer and acceptance

Question 8

Offer?

Answer 8

manifestation of a willingness to enter into an agreement (by the offeror) that creates a power of acceptance (in the offeree).

invitations to deal don’t convery said power of acceptance. Neither do advertisements usually (unless a reward or very specific without neg needed).

Question 9

Offer and Acceptance test?

Answer 9

objective test:
whether an offeror displays an objective serious intent to be bound

(no humor or anger or opinion)

must be directed at specific offeree. Otherwise can’t accept. Exception for rewards or contests.

Question 10

offer specifics?

Answer 10

under common law –> all essential terms must be covered, price, parties, subject, and quantity

UCC –> relaxed. only essential term is quantity. UCC fills gaps.

Question 11

requirement and output contracts?

Answer 11

req = buyer to buy 100% of amount needed from individ seller

Output = seller offering to sell 100% of whatever produced to individ buyer

Both are ok under the UCC without a quantity term.

Question 12

How to terminate an offer?

Answer 12

6 ways

1. offeror revokes offer by express communication to offeree
2. The offeree learns that the offeror has taken an action that is absolutely inconsistent with a
   continuing ability to contract. This is called a constructive
   revocation.
3. offeree rejects the offer
4. offeree makes a counter-offer (does not mean inquiry or indecision)
5. offeror dies
6. a reasonable amount of time passes

Offers can be revived

Question 13

Irrevocable Offers?

Answer 13

four ways, but generally can revoke offer whenever before acceptance (unless below)

1. option
2. firm offer –> UCC merchant making a consideration free option, binding if written, signed by offeror, and contains an explicit promise not to revoke. Time period is as long as state or a reasonable time not to exceed 90 days.
3. unilateral k and offeree has started performance (but offeree doesn’t have to finish if he doesn’t want to)
4. Detrimental reliance –> when offeree reasonably and detrimentally relies on the offer in some foreseeable manner. contractor/subk thing often.

Question 14

unilateral and bilateral k?

Answer 14

unilateral –> promise that requests acceptance by action

Bilateral –> a promise for a request for a return promise

Question 15

acceptance?

Answer 15

manifestation of willingness to enter into the agreement by the offeree

governed by obejctive test. offeror is master of offer, have to play by his rules.

If ambig to uni or bilat, can do either then.

Question 16

Other acceptance Rules?

Answer 16

Offer must be specifically directed to person trying to accept it.

If open to all offer, must know about it to accept it

Must communicate your acceptance to other party

Question 17

mailbox rule

Answer 17

acceptance sent by mail is effective when the letter is SENT

Does NOT apply if sent something else first, to other types of communications (rejection, revocation), to option ks, OR over other media (unclear as to fax, emails)

If you send reject then acceptance, you don’t get mailbox rule BUT if acceptance opened first, then there is a k

Question 18

Acceptance without Communication?

Answer 18

unilateral rewards of contents, if geo close and see performance has occurred, past history of silence serving as acceptance, or the offer says that acceptance by silence must happen and your silence intends to accept.

Question 19

Implied in fact K

Answer 19

When you accept without writing or speaking. gestures of actions.

Question 20

Counteroffers and UCC 2-207

Answer 20

Common law says mirror image rule, if terms don’t perfectly match, then its a counteroffer. Includes conditional acceptances.

UCC 2-207 –> replaces mirror image rule. Doesn’t need to match perfectly.

Question 21

UCC 2-207 (additional terms)

Answer 21

If acceptance sent within reasonable time, it is ok even if different in UCC. unless acceptance expressly made conditional upon assent to additional or different terms.

New (additional) terms may control, but they may not. Only will if both parties merchants, new term does not materially alter deal, initial offer did not expressly limit acceptance to its terms, AND offeror does not reject new term within reasonable time.

So this is hard to do

Question 22

UCC 2-207 Knock Out Rule (different terms)

Answer 22

different terms are treated differently than additional terms. Knock rule governs them and says (majority) both of the terms are knocked out and general gap-filing will govern.

Min rule is that initial offer controls of the terms.

Under 207(3), if there is no complete k, but firms act as tho there is, only the terms in both writings become the k. Otherwise gap filled.

Question 23

UCC 2-207 - Confirming Memo

Answer 23

verbal agreement then followup confirming memo with additional terms. Work through 207(2) steps. rarely will it come in.

Question 24

Consideration

Answer 24

deal where parties exchange promises involving a legal detriment or benefit

Ask the following

• person making promise is promisor, other is promisee, who is making promise?
• is there a benefit to promisor or a detriment to the promisee? (just need one)
• was this bargained for? (did the parties think they were making a deal)

Gifts and conditional gifts don’t count

Question 25

Tricks on Consideration

Answer 25

pretense of consideration doesn’t count.

illusory promises don’t count. A promisor must clearly commit to the deal or there is no consideration. There must be a way to breach.

Satisfaction ks are NOT illusory. neither are output and req ks.

Past consideration is not consideration

Promising not to sue works ONLY if p has good faith in validity of claim OR reason to doubt validity due to uncertain law.

Question 26

Contract modification?

Answer 26

may need new consideration to be valid

Common Law - preexisting duty rule –> not consideration. Some exceptions.

UCC –> if mod in gf, then binding without consideration.

Question 27

Consideration substitutes

Answer 27

Promissory Estoppel –> key elements are promise made reasonably expected to induce reliance, promisee does take detrimental action in reliance, AND injustice can only be avoided by enforcement.

Quasi-k –> implied in law k, fair to pay for benefit or could not make k but would have. Elements are p confers measurable benefit, p expected to get paid, AND unfair to let d keep benefit without paying. Good reason why no oppo to decline?

Sometimes a moral obligation plus a subsequent promise to pay can be binding (min rule).

Question 28

Seven defenses to ks

Answer 28

misunderstanding
incapacity
mistake
fraud/misrep/nondisclosure
duress
illegality
unconscionability

Question 29

misunderstanding defense

Answer 29

must show parties use a material term that is ambiguous, each side attaches different meaning, AND neither party knows or should know of confusion

Question 30

Incapacity defense

Answer 30

minors, mentally ill, intoxicated people.

If k made with one, k is voidable by incapacitated party, but not for necessities and not if ratified after incapacity.

Question 31

Mistake defense

Answer 31

mutual mistake allows rescinding k if mistake of fact existing at time of deal, mistake relates to basic assumption of k, and impacted party did not bare risk of mistake.

Unilateral mistake if prove above AND either mistake would make k unconscionable OR other side knew, had reason to know, or caused mistake.

Question 32

Fraud, Misrep, and nondisclosure Defense

Answer 32

must show misrep of a present fact, that is material or fraudulent, AND that is made under circs in which justifiable to rely on the misrrep.

Question 33

Duress

Answer 33

deprives a party from making a meaningful choice to contract.

Question 34

Illegality

Answer 34

unenforceable but k in furtherance of illegal act will still be enforced.

some ks against pub policy will not be enforced but rare.

Question 35

unconscionability

Answer 35

depending on jx, need both procedural and substantive. procedural - defenct in bargaining process itself and substantive - a rip off in the terms of the deal.

Question 36

Statute of Frauds

Answer 36

requirements for certain ks. Always ask

(1) does the SOF apply?
(2) if so, was it satisfied?

Question 37

When apply SOF?

Answer 37

M.Sour
Marriage,
Suretyship,
One Year (a k that CANNOT possibly be performed within one year),
UCC above 500, and
Real Property (transferring an interest in real prop)

Question 38

Has the SOF been satisfied?

Answer 38

really depends on the subject. can be done via performance or writing but specifics change.

if a writing, does not need be formal, need sig of party against, must k made, id parties, and contain essential elements of deal.

if real estate, need two of possession, payment, or improvements to show via performance.

If UCC writing, no need to mention price, and writing must mention the quantity. see custom made goods and confirming memo oddities here.

Modification only under SOF according to post mod k.

Question 39

Second Question: Has the contract been performed?

Answer 39

So this is after k was formed

Four big topics

(1) PER
(2) Warrants
(3) Conditions
(4) Excuse of performance obligations

Pizza Crawling With Escargot

Question 40

Parol Evidence Rule

Answer 40

PER. if reduced to comprehensive writing. earlier statements or writings related to k are not part of deal.

complete integration, the contract expresses all terms of the agreement.

UCC is more lenient, assumes partial integration.

Question 41

When PER doesn’t apply?

Answer 41

will not bar evidence about a defense to formation

can introduce evidence for separate deal

Can be used to interpret ambiguous term from integrated k.

Question 42

Warranties

Answer 42

about shifting risk to the party making the promises.

Types: Express. Implied Warranty of Merchantability (ordinary commercial purposes), Implied Warranty of Fitness for a Particular Purpose (seller’s expertise).

Question 43

Conditions

Answer 43

shift risk by stating that one party’s contractual obligation will only kick in if some future event takes place.

these can be waived by words or conduct or by the other party wrongfully interfering.

Question 44

Implied Conditions

Answer 44

Constructive Condition of Exchange

Common Law –> substantial performance = CCE satisfied if no material breach (unless failure willful).

UCC –> need perfect tender. that’s goods and deliver (unless installment).

Question 45

Methods of Tender

Answer 45

tender at seller’s place

Shipment Contract (FOB seller’s place of biz)–> seller must get goods to common carrier, make arrangements for delivery, AND notify buyer

Destination Contract (FOB Buyer’s Place of Biz) Get goods to buyer’s biz and notify buyer.

Question 46

Risk of Loss and Tender

Answer 46

Follow steps for damages goods before received.

If in k, follow k for risk of loss

If not, ask if party breached? if so they bear loss

If none, and goods shipped, type of delivery? if shipment then loss to buyer, if destination, then risk rests on seller.

In all else, is seller merchant? if so the risk stays with seller until buyer receives goods. If not, the risk of loss moves to buyer when seller tends the goods.