Contracts and Sales

Question 1

Key Questions of Contract Law

Answer 1

1. What Law Applies (UCC v. Common Law)?
2. Was a Contract Formed?
3. What are the Terms of the Contract?
4. Was There Performance or Breach?
5. Are There Any Remedies?
   
   1. Are There Any Third-Party Problems?

Question 2

Contracts Problem Walk-Through

Answer 2

1. Is the K for goods or services?
2. Was the K written or oral?
3. Are there any third-party rights?
4. Are there any defenses?
5. What is the remedy?

Question 3

Contracts Formula

Answer 3

K = MA(O+A) + C - D

K = Mutual Assent (which is Offer + Acceptance) + Consideration - (Absence of) Defenses

Question 4

Types of Contracts

Answer 4

1. Express Contracts: formed by language, oral or written
2. Implied Contracts: formed by conduct
3. Quasi-Contracts: Not actually contracts - unenforceable contract resulting in unjust enrichment to one party (permits a party to bring an action for restitution)

Question 5

Bilateral Contract

Answer 5

Promise for Promise - exchange of mutual promises in which each party is both a promisor and a promisee

Can be accepted in any reasonable way, unless expressly indicated otherwise

Question 6

Unilateral Contract

Answer 6

Acceptance by performance

Offeror requests performance rather than a promise, and the promise to pay is upon the completion of the requested act

Contract is formed when the requested act is completed

Question 7

Two Situations Leading to Unilateral Contracts

Answer 7

1. When the offeror clearly (unambiguously) indicates that completion of the performance is the only manner of acceptance
2. Where there is an offer to the public (i.e. a reward offer)

Question 8

Validity of a Contract

Answer 8

1. Void Contract: A void contract is totally without any legal effect from the beginning and cannot be enforced by either party. Example: An agreement to commit a crime
2. Voidable Contract: one or both parties may elect to avoid (such as by raising a defense that makes it voidable) Example: Infancy or Mental Illness
3. Unenforceable Contract: Contract is otherwise valid, but isn’t enforceable due to a defense. Example: statute of limitations or statute of frauds

Question 9

Common Law v. UCC

Answer 9

Common Law: governs contracts generally

UCC: governs contracts concerning the sale of goods. The UCC Article 2 governs the sale of goods and has adopted much of the common law, however, where there is a conflict between the common law and the UCC in a K for the sale of goods, the UCC will control.

Question 10

Goods

Answer 10

Moveable things at the time they are identified as the items to be sold in a contract (includes most tangible things, but does not apply to the sale of real estate, services, construction contracts, or intangibles (like a patent)

Question 11

Merchants v. Non-Merchants

Answer 11

Certain provisions of Article 2 depend on whether one or both parties are merchants

Merchants: one who regularly deals in goods of the kind sold or who otherwise by their profession holds themselves out as having special knowledge or skills as to the practices or goods involved

Question 12

Combination Contracts (Sale of Goods and Services)

Answer 12

When a contract involves both - determine which aspect of the contract is dominant and apply the law govering that aspect to the whole contract

• Example: A buys a 2010 Toyota Prius for $8,000 from B. The price includes a free lesson on making it up hills. Article 2 will apply because the primary aspect of the contract is for the sale of the car, which is a good. The service of providing a lesson is incidental to the sale of goods

If the contract divides payment between goods and services, then Article 2 will apply to the goods portion and the Common Law will apply to the services

Question 13

Good Faith and Fair Dealing

Answer 13

Every K within the UCC imposes an obligation of good faith - meaning honesty in fact adn the observance of reasonable commercial standards

Common Law - implies a duty of good faith and fair dealing

Breach of this duty usually involves exercising discretion in a way that deprives the other party of the fruits of the contract

Question 14

Mutual Assent

Answer 14

Offer and Acceptance

For an agreement to be enforced as a contract, there must be mutual assent - one party must accept the other’s offer

Test: did words or conduct manifest a present intention to enter into a contract

Question 15

Offer

Answer 15

Creates the power of acceptance in another (the offeree) and corresponding liability in the offeror

To be an offer, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms

Must be objective intent (reasonable person standard) to enter into a contract - subjective intent doesn’t matter

Question 16

Requirements for an Offer

Answer 16

Promise, Undertaking, or Commitment - a mere invitation to negotiate is insufficient, there must be intent to enter into a contract

Language

Surrounding Circumstances

Methods of Communication (see additional cards)

Question 17

Use of Broad Communications Media

Answer 17

The broader the communicating media, the more likely it is that the courts will view the communication as a solicitation of an offer rather than an actual offer

Question 18

Advertisements

Answer 18

Ads, catalogs, circular letters…containing price quotations are usually construed as mere invitations for offers

To indefinite and usually addressed to the general public

Exceptions: ad can be an offer if there is a promise with certain and definite terms and the offeree is identified (Think of the Mink Coat case)

Question 19

Certain and Definite Terms

Answer 19

Are enough of the essential terms provided so that a contract including them is capable of being enforced

• Identification of the offeree (must be sufficiently identified)
• Definiteness of Subject Matter (must be certain - a court can only enforce a contract if it ca tell what the promise is)
• Real Estate Contracts: Must identify the land (with some particularity) and the price terms
• Sale of Goods: quantity terms (i.e. the quantity being offered) must be certain or capable of being made certain (note, UCC gap fillers can be used here to fill in a missing price)

Question 20

Requirements Contract

Answer 20

A buyer promises to buy from a certain seller all of the goods the buyer requires, and the seller agress to sell that amount to the buyer

Question 21

Output Contract

Answer 21

A seller promises to sell to a certain buyer all of the goods that the seller produces, and the buyer agrees to buy that amount from the seller

Question 22

Employment and Other Services

Answer 22

If the duration of the employment is not specified, the offer, is construed as creating a contract terminable at the will of either party

For services, the nature of the work to be performed must be included in the offer

Question 23

Missing Terms

Answer 23

One or more missing terms does not prevent formation if it appears that the parties intended to make a contract and there is a reasonably certain basis for giving a rememdy

Majority of states and Art. 2 hold that the court can supply reasonable terms for those that are missing

Question 24

Price

Answer 24

Only prevents formation in a contract for real property

In Art. 2 contracts, price will be a reasonable price at the time of delivery if not specified

Question 25

Vague Terms

Answer 25

If a material term is vague or ambiguous, it is not an offer at common law or under the UCC.

However, uncertain terms can be cured by part performance that clarifies the vague term or by acceptance of full performance

Question 26

Communication to the Offeree

Answer 26

To have the power to accept - a person must have knowledge of the offer - the proposal must be communicated

Question 27

Termination of Offers