Contracts And Sales

Question 1

What is a contract

Answer 1

A contract is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law recognizes as a duty

Question 2

What law are contracts governed by

Answer 2

For contracts involving the sale of goods article 2 of the UCC applies.

For all other contracts common-law rules apply.

Question 3

What are goods for purposes of contract law

Answer 3

Goods are all things movable at the time they are identified as the goods to be sold under the contract.

Question 4

Who is a merchant

Answer 4

A merchant is one who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved.

Question 5

Quasi contracts

Answer 5

Remedy constructed by courts to avoid unjust enrichment by permitting the plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant

Question 6

Unilateral contract

Answer 6

A contract where the offeror clearly indicates that completion of performance is the only manner of acceptance.

Question 7

Bilateral contract

Answer 7

All other contracts that are not unilateral.

On the bar assume contract questions involve bilateral contracts.

Question 8

Void contract

Answer 8

A contract that is totally without any legal effect from the beginning. It cannot be enforced by either party.

Question 9

Voidable contract

Answer 9

A contract that one or both parties may elect to avoid.

Question 10

Seven general contract issues

Answer 10

1) applicable law
2) formation of contracts
3) terms of contracts
4) performance
5) remedies for unexcused nonperformance
6) excuse of nonperformance
7) third-party problems

Question 11

Applicable law mixed deals

Answer 11

The general rule is that the UCC applies to all of the contract or none of the contract. When deciding whether not the UCC applies look to the more important part of the contract.

Exception contracts divides payment, then apply UCC to sale of goods part and common law to the rest of the contract.

Question 12

What is an offer

Answer 12

An offer creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms.

Question 13

How to determine if an offer is made

Answer 13

Ask:

1) was there an expression of a promise, undertaking, or commitment to enter into a contract?
2) were there certainty and definiteness in the essential terms?
3) was their communication of the above to the offeree?

Question 14

Advertisement as offers

Answer 14

Advertisements and the like containing price quotations are usually construed as mere invitations for offers.

Question 15

Missing price term in sales contract

Answer 15

For sale of real estate price and description required or it is not an offer.

For the sale of goods price is not required for an offer.

Question 16

Offers with vague or ambiguous terms

Answer 16

Vague or ambiguous material terms do not constitute an offer under either the common law or the UCC.

Three words that are vague or ambiguous are appropriate, fair, reasonable.

Question 17

Requirement contracts

Answer 17

Contract for the sale of goods can state the quantity of goods to be delivered under the contract in terms of the buyer’s requirements or seller’s output. Look for words like all, only, exclusively, and solely.

Requirements or output contracts are not vague or ambiguous and are valid

Question 18

Increases in requirements

Answer 18

Buyer can increase requirements so long as the increase is in-line with prior demands.

Meaning that the increase is not unreasonably disproportionate.

Question 19

Where advertisements may be an offer

Answer 19

1) an advertisement can be a unilateral offer if it is in the nature of a reward.
2) An advertisement can be an offer if it specifies the quantity and expressly indicates who can accept.
3) Price quotation can be an offer if sent in response to an inquiry.

Question 20

Lapse of an offer

Answer 20

An offer may be terminated by the offeree’s failure to except within the time specified by the offer or, if no deadline was specified within a reasonable period.

Question 21

Death of a party prior to acceptance

Answer 21

Death or incapacity of either party after the offer, but before acceptance, terminates the offer.

Exception: irrevocable offers

Question 22

Revocation of an offer

Answer 22

An offer is revoked:

1) by an unambiguous statement by the offeror to the offeree of unwillingness or inability to contracts, or
2) later unambiguous conduct by offeror indicating an unwillingness or inability to contract that offeree is aware of.

Only an offerer can revoke an offer, requires awareness of the offeree.

Multiple offers does not constitute revocation.

Question 23

Irrevocable offer

Answer 23

1) option contracts
2) firm offer
3) reliance
4) unilateral contract

Question 24

Option contract

Answer 24

An offer cannot be revoked if the offeror has not only made an offer but also (1) promised to not revoke and (2) this promise is supported by payment or other consideration.

Question 25

Firm offer

Answer 25

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

Question 26

Reliance

Answer 26

An offer cannot be revoked if there has been (1) reliance that is (2) reasonably foreseeable and (3) detrimental.

Question 27

Irrevocability of a unilateral contract

Answer 27

Start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance.

Mere preparation does not count as part performance.

Question 28

Three ways to terminate an offer

Answer 28

1) counteroffer
2) conditional acceptance
3) additional terms

Question 29

Counteroffer

Answer 29

Generally a counteroffer terminates the offer and creates a new offer.

Counteroffers do not terminate options.

Bargaining is not a counteroffer. On the bar is always bargaining when what was said was a question.

Question 30

Conditional acceptance

Answer 30

Under the common-law a conditional acceptance rejects the offer and becomes a counter offer that can be accepted by conduct.

Under the UCC a conditional acceptance rejects the offer.

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.

Question 31

Additional terms to a common-law contract

Answer 31

A response to an offer the ads and new terms is treated like a counter offer rather than an exceptions.

This is known as the mirror image rule.

Question 32

Additional or different terms for the sale of goods. (UCC 2-207)

Answer 32

A fact pattern in which there is an offer to buy or sell goods and a response with additional or different terms raises two separate questions:

1) Is there a contract?

Under the UCC a response to an offer that adds additional or different terms, but does not make the new terms a condition of acceptance is generally treated as an excepted.

2) Is the additional term a part of the contract?

The additional term is a part of the contract only if (1) both parties are merchants and (2) additional term is not material and (3) the additional term is not objected to by the original offeror.

Question 33

Acceptance of an offer

Answer 33

The offeror can control the method of acceptance, the times that a distance acceptance is effective, or whether the offeree must give notice that it has accepted by performance.

Question 34

Common acceptance fact patterns

Answer 34

1) offeree starts to perform
2) distance and delay in communications
3) the seller of goods sends the wrong goods

Question 35

Performance as acceptance

Answer 35

General rule is the start of performance is acceptance.

Start of the performance is not acceptance of unilateral contract offers. Completion of performance is required.

Question 36

Distance and delay in communications

Answer 36

All communications other then acceptance effective only when received.

Acceptance is generally effective when mailed.

If a rejection is mailed before an acceptance is mailed, then neither is effective until received.

You cannot use the mailbox rule to meet an option deadline.

Question 37

When a seller of goods sends the wrong good

Answer 37

General rule is that this is an acceptance of the offer and breach of the contract.

When wrong goods are sent with an explanation there is no contract and no breach.

Question 38

Who can accept an offer

Answer 38

Generally an offer can be accepted only by

(1) a person who knows about the offer at that time she accepts it
(2) who is the person to whom it was made.

Offers cannot be assigned; options can be assigned unless the option otherwise provide.

Question 39

Three steps to analyze a consideration problem

Answer 39

1) identify the promise breaker
2) ask whether that person asked for something in return for her promise
3) look at the person who’s trying to enforce a promise and ask what requested legal detriment that person sustained.

Question 40

Adequacy of consideration

Answer 40

Not relevant in contract law.

Question 41

Where consideration can be found

Answer 41

1) it’s bargained for
2) there’s legal detriment
3) promise as consideration.

Question 42

Past consideration

Answer 42

Things done in the past are not consideration unless they are expressly requested by the promissor and expectation of payment by the promisee

Question 43

Pre-existing duty as consideration

Answer 43

Under the common-law doing what you are already obligated to do is not new consideration for a new promise to pay you more to do merely that. Unless there is addition to or change in performance, an unforeseen difficulty so severe as to excuse performance, and third-party promise to pay.

For the sale of goods new consideration is not required to modify a sale of goods contract. Good faith is a test for changes to an existing sale of goods contract.

Question 44

Part payment as consideration for release i.e., promise to forgive balance of debt

Answer 44

Key is whether debt is due and undisputed. If debt is due and undisputed, then part payment is not consideration for release.

Question 45

What are considerations substitutes

Answer 45

1) a written promise to satisfy an obligation for which there is a legal defense is enforceable without consideration.
2) Promissory estoppel.

Question 46

Elements of promissory estoppel

Answer 46

1) promise
2) reliance that is reasonable, detrimental, and foreseeable, and
3) enforcement necessary to avoid in just

Question 47

Capacity to contract

Answer 47

A person must be over the age of 18 to have the capacity to contract.

A mental incompetent or an intoxicated person, the other party has reason to know is intoxicated, lack capacity to contract.

If capacity is lacking the person without capacity has the right to disaffirm the contract unless they gain capacity later and retain the benefits of the contract.

Question 48

Quasi-contract and incapacity

Answer 48

A person who does not have capacity is legally obligated to pay for things that are necessary such as food, clothing, medical care or shelter, but that liability is based on quasi-contract law not contract law.

Question 49

Four contracts within the statute of frauds

Answer 49

1) promises to answer for the debt of another.
2) service contract not capable of being performed within a year from the time of the contract
3) transfers of an interest in real estate (with exception for leases of year or less)
4) sale of goods for $500 or more

Question 50

Promises to answer for the debts of another

Answer 50

Not merely a promise to pay but rather a promise to pay someone if someone else does not. Look for a guarantee. Look also for the main purpose exception.

Question 51

Main purpose exception

Answer 51

If the obligation allegedly guaranteed was to benefit the guarantor, then not even that guarantee is within the statute of frauds

Question 52

Specific contract not capable of being performed within a year from the time of the contract

Answer 52

1) if the contract is for a specific time, more than a year in length the statute of frauds applies.
2) if the contract is for a specific time, more than a year from date of contract the statute of frauds applies.
3) if the contract is for a specific task the statute of frauds does not apply.
4) if the contract is for life statute of frauds does not apply

Question 53

Transfers of interest in real estate

Answer 53

Transfers of interest in real estate with the exception for leases of a year or less fall within the statute of frauds.

Question 54

How is the statute of frauds satisfied

Answer 54

1) performance
2) writing
3) judicial admission
4) estoppel

Question 55

Performance rules for transfer of real estate to satisfy the statute of frauds

Answer 55

Part performance satisfies the statute of frauds in transfers of real estate.

Part performance requires any two of the following three: (1) improvements to land, (2) payment, and (3) possession

Question 56

Performance rules for service contracts to satisfy the statute of frauds

Answer 56

Full performance by either party satisfies the statute of frauds.

Part performance of the services contract does not satisfy the statute of frauds.

Question 57

Performance in contracts for the sale of goods to satisfy the statute of frauds

Answer 57

Generally part performance of a contract for the sale of goods satisfies the statute of frauds, but only to the extent of part performance (Meaning the statute does not apply to the delivered goods)

Question 58

Seller’s part performance in a specially manufactured goods contract to satisfy the statute of frauds

Answer 58

If the contract is for the sale of goods that are to be specially manufactured, then the statute of frauds is satisfied as soon as the seller makes a substantial beginning.

This means that the seller has done enough work that is clear that what she’s working on is specially manufactured, i.e., custom-made or made to order.

Question 59

Requirements for a writing to satisfy the statute of frauds under the common-law

Answer 59

1) writing must contain all material terms.

2) if the writing has been signed by the person who is asserting the statute of frauds defense

Question 60

When a writing contains all material terms

Answer 60

Must be able to look at the writing and determine who the parties are and what they agreed to.

Question 61

Requirements for a writing to satisfy the statute of frauds for the sale of goods

Answer 61

Writing must indicate that there is a contract for the sale of goods and contain the quantity term.

If you are a merchant who receives a writing from another merchant with a quantity in it, you will respond within 10 days or there would be an agreement.

Question 62

Judicial admission to establish statue of frauds

Answer 62

If the defendant asserting a statute of frauds defense admits in a pleading or testimony that he entered into agreement with the plaintiff, the purpose of the statute of frauds is fulfilled and so the statute of frauds is satisfied

Question 63

Estoppel to satisfy statute of frauds

Answer 63

Plaintiff’s reliance on the defendant’s oral promise cannstop the defendant from asserting a statute of frauds defense.

Question 64

When proof of authorization to execute a contract exists

Answer 64

Written proof of authorization to execute a contract for someone else is only required for statute of frauds contracts.

Question 65

Test to determine if written proof of contract modification is required

Answer 65

1) look at the deal with the alleged change
2) determine whether the deal with the alleged change would be within the statute of frauds.

If the deal with the alleged change would be within the statute of frauds, then the alleged modification agreement must be in writing.

Question 66

Contract provisions requiring written modification

Answer 66

Under common law contract provisions requiring that all modifications be in writing are not effective.

Under the UCC contract provisions requiring written modifications are effective unless waived.

Question 67

Illegal subject matter of the

Answer 67

If the subject matter is illegal, the agreement is not enforceable.

Question 68

Illegal purpose of the contract

Answer 68

If the subject matter of the contract is legal, the agreement is enforceable if the plaintiff did not have reason to know of the defendant’s illegal purpose.

Question 69

Not enforcing an agreement because of public policy

Answer 69

Courts can refuse to enforce an agreement because of public policy.

On the bar exam look for exculpatory agreement that exempts intentional or reckless conduct from liability or a covenant not to compete that is unreasonable.

Question 70

Not enforcing a contract due to misrepresentation

Answer 70

1) a statement of fact before the contract
2) by one of the contracting parties or her agent
3) that is false
4) induces that contract.

No wrongdoing required for material misrepresentations.

Question 71

Not enforcing a contract due to non-disclosure

Answer 71

Generally a person making a contract has no duty to disclose what she knows.

Wrongdoing is required for a contract not to be enforced due to nondisclosure.

Look for concealment on the bar exam.

Question 72

Not enforcing an agreement due to duress

Answer 72

Contracts not enforced were entered into for the following reasons:

1) physical address
2) economic direct

Question 73

Elements of economic duress

Answer 73

1) improper threat which is usually threat to breach existing contract
2) no reasonable alternative for person who threat is made to

Question 74

Not enforcing a contract due to undue influence

Answer 74

Look for a special relationship between the parties and improper persuasion of the weaker by the stronger.

Question 75

Unconscionability

Answer 75

Basic test:

1) unfair surprise and oppressive terms
2) tested as of the time the agreement was made
3) by the court

Question 76

Not enforcing an agreement because of ambiguity

Answer 76

There will be no contract if the parties use a material term that is open to at least two reasonable interpretation and each party attaches a different meaning to the term and neither party knows or has reason to know the term is open to at least two reasonable interpretations.

Question 77

Not enforcing an agreement because a mistake of fact

Answer 77

Mutual material mistake of existing fact not legally enforceable.

Unilateral mistake of fact relief is given in cases where the other party had reason to know of the mistake.

Question 78

Parol evidence for contradicting terms

Answer 78

Regardless of whether the writing is a complete or partial integration evidence of earlier agreement is not admissible for the purpose of contradicting the terms in the written contract.

Question 79

Parol evidence for mistake in integration

Answer 79

A court may consider parol evidence for the limited purpose of determining whether there was a mistake in integration, i.e., a mistake in reducing the agreement to writing

Question 80

Parol evidence for rescission

Answer 80

Regardless of whether the writing is a complete or partial integration parole evidence may be used by a court for the limited purpose of determining whether there is a defense to the enforcement of the agreement, such as misrepresentation, fraud, or duress.

Question 81

Parol evidence for ambiguity

Answer 81

Regardless of whether the writing is a complete or partial integration, the parol evidence rule does not prevent a court from admitting evidence of earlier agreements to resolve ambiguities in a written contract.

Question 82

Parol evidence to add to the written deal

Answer 82

Parol evidence rule prevents a court from admitting evidence of the 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.

Question 83

Conduct as a source of contract terms

Answer 83

Courts look first to course of performance, second to course of dealing, third to custom and usage to explain words in contracts or to fill gaps in contracts.

Question 84

Course of performance

Answer 84

If a contract involves repeated occasions for performance by either party and the other party has the opportunity to object to such performance any course of performance accepted or acquiesced to is relevant in determining the meaning of the contract

Question 85

Course of dealing

Answer 85

Sequence of conduct concerning previous transactions between the parties to a particular transaction that may be regarded as establishing a common basis of their understanding

Question 86

Custom and usage

Answer 86

Practice or method of dealing regularly observed in a particular business setting so as to justify an expectation that it will be followed in a transaction.

Question 87

Determining the delivery obligation of seller of goods

Answer 87

Depends on whether it is a shipment contract or a destination contract.

If it is a shipment contract seller’s delivery obligations include (1) gets the goods to a common carrier, (2) make reasonable arrangements for delivery, and (3) notifies the buyer.

If it is a destination contract the seller does not complete its delivery obligations until the goods arrive at the destination.

Question 88

Determining between a shipment and destination contract

Answer 88

If it is FOB followed by a city where the seller is located it is a shipment contract.

If it is FOB followed by any other city it is a destination contract.

Question 89

Risk of loss rules

Answer 89

1) agreement of the parties controls.
2) breaching party is liable for any uninsured loss even though breach is unrelated to problem
3) risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations
4) risk of loss shifts from a merchant seller to the buyer on the buyer’s receipt of the goods. Risk of loss shifts from a nonmerchant seller when he or she tenders the goods.

Tender means makes the goods available.

Receipt means physical possession of the goods.

Question 90

Warranties of quality

Answer 90

1) express warranties
2) implied warranty of merchantability
3) implied warranty of fitness for a particular purpose

Question 91

Express Warranties

Answer 91

Look for words that promise, describe or state facts. Distinguish from sales talk which is more general, an opinions. Or look for sample or model.

Question 92

Implied warranty of merchantability

Answer 92

Warranty that the goods are fit for the ordinary purpose for which such goods are used.

Implied warranty exists where the seller is a merchant which here means it deals in goods of that kind.

Question 93

Implied warranty of fitness for a particular purpose

Answer 93

Warranty that says the goods are fit for a particular purpose.

Implied warranty exists when the buyer has a particular purpose, the buyer is relying on seller to select suitable goods, seller has reason to know purpose and reliance.

Question 94

Limitations on warranty liability

Answer 94

1) four-year statute of limitations
2) plaintiff did not buy the goods from the defendant, there is a possible privity issue
3) No implied warranties as to defects which would be obvious on examination
4) disclaimers

Question 95

Disclaimer to limit warranty liability

Answer 95

1) express warranties cannot be disclaimed.
2) implying warranties can be disclaimed in either of the following ways:

A) conspicuous language of disclaimer mentioning merchantability, or

B) ass is or with all faults.

Question 96

Limitation of remedies for breach of warranties

Answer 96

1) possible to limit remedies even for express warranties
2) general test is Unconscionability
3) prima facie case unconscionable a breach of warranty on consumer goods causing personal injury.

Question 97

Perfect tender

Answer 97

1) perfect tender only applies to sale of goods
2) the goods and the delivery must conform to the contract terms to have perfect tender
3) less than perfect tender by the seller generally gives the buyer the option of rejection of the goods delivered so long as the buyer acted in good faith

Question 98

Rejection of the good

Answer 98

1) need to be able to distinguish rejection of an offer from rejection of the goods
2) if the seller does not meet the perfect tender standard, the buyer has the option to retain and sue for damages or reject all or any commercial unit and sue for damages
3) rejection alternative is limited by cure, installment contract, and acceptance
4) buyer must take reasonable care of the rejected goods

Question 99

Cure

Answer 99

In cases where the seller has reasonable grounds to believe the tender would be acceptable, perhaps with a money allowance or time for performance has not yet expired, a seller who fails to make a perfect tender will be given an option of curing

Question 100

Installment contract exception to perfect tender

Answer 100

Buyer has the right to reject an installment only where there is this a substantial impairment and that installment that can’t be cured.

Question 101

Acceptance exception to perfect tender

Answer 101

If the buyer accepts the goods it cannot later reject them.

Payment without opportunity for an inspection is not acceptance.

Effect of buyer’s keeping goods is implied acceptance.

Question 102

Revocation as acceptance of the goods

Answer 102

In limited circumstances, a buyer can affect a cancellation of the contract by revoking its acceptance of the goods

Question 103

Requirements for revocation of acceptance

Answer 103

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
3) revocation within a reasonable time after discovery of nonconformity

Question 104

Specific performance

Answer 104

Situations where specific performance apply include:

1) contracts for sale of real estate
2) contract for sale of goods if the goods are unique goods meaning they are antiques, art, or custom-made.
3) contract for services no specific performance but possible injunctive relief.

Question 105

Reclamation

Answer 105

A seller can get back it’s good if the buyer was insolvent at the time it received the goods and the seller demands return of goods within 10 days of receipt

Question 106

Buyers recovery of paid for goods

Answer 106

If buyer made payment while seller was solvent and seller has since become insolvent buyer may recover identifiable paid for goods from the seller

Question 107

Expectation damages

Answer 107

Accordingly look for dollar value of performance without breach, look for dollar value of performance with breach, and compare the two to determine the amount of damages.

Question 108

Expectation damages for sale of good

Answer 108

1) If the seller breaches and the buyer keeps the good damages are the fair market value if perfect minus the fair market value as delivered or the cost of repair
2) if the seller breaches and the seller keeps the goods damages are the market price at the time of discovery of the breach minus the contract price or the reasonable replacement price minus the contract price, whichever is higher.
3) if the buyer breaches and the buyer keeps the good damages are the contract price.
4) if the buyer breaches and the seller has the goods damages are the contract price minus resale unless the seller cannot resell in which case the seller can cover the contract price and in some situations provable lost profits

Question 109

When lost profits applies

Answer 109

If the contract called for sale of inventory or regular inventory lost profits applies to allow the seller to recover as if there would have been two sales and two profits

Question 110

Incidental damages

Answer 110

Cost incurred in dealing with the breach such as cost of storing rejected goods in a sale of goods or finding a replacement in a service contract are always recoverable

Question 111

Consequential damages

Answer 111

Consequential damages are limited to damages arising from plaintiff’s special circumstances and recovery of consequential damages is limited to situations in which defendant had reason to know of the special circumstances at the time of the contract

Question 112

Avoidable damages

Answer 112

No recovery for damages that could have been avoided without undue burden on plaintiff

Question 113

Damages and certainty

Answer 113

Damages that cannot be established with reasonable certainty are not recoverable.

On the bar look for plaintiff to be in a new business or a new business activity

Question 114

Liquidated damages

Answer 114

Look for contract provision fixing amount of damages. Concern is whether provision is too high constituting a penalty and therefore being unenforceable.

Test to determine if enforceable:

(1) damages were difficult to forecast at time contract was made and
(2) provision is a reasonable forecast

Question 115

Excuse of performance because of other guys nonperformance

Answer 115

If one party does not perform their duties of the contract the other party does not have to perform

Question 116

Anticipatory repudiation excuse of performance

Answer 116

Unambiguous statement or conduct that the repudiating party will not perform made prior to the time that performance was due will excuse the other parties duty to perform

Question 117

Time of recovery for an anticipatory repudiation

Answer 117

Anticipatory repudiation generally gives rise to an immediate claim for damages for breach unless the claimant has already finished her performance.

Question 118

Retraction of anticipatory repudiation

Answer 118

Anticipatory repudiation can be retracted so long as there has not been a material change in position by the other party.

Question 119

Excuse because of insecurity

Answer 119

In a contract for the sale of goods if the words or conduct of one party give reasonable grounds for insecurity, the other party can in writing demand adequate assurance and if it is commercially reasonable can suspend performance until it gets adequate assurance.

Question 120

Excuse because of improper performance for the sale of goods

Answer 120

If there is not perfect tender than the buyer does not have to perform.

Question 121

Excuse because of improper performance under common-law

Answer 121

1) damages can be recovered for any breach
2) only a material breach by one guy excuses the other guy from performing a contract
3) whether a breach is material is a fact question and therefore not likely to be on the bar
4) if there is a substantial performance than the breach is not material.

Question 122

When a breach in quantity is likely to be material

Answer 122

If less than half of the work has been done it is a material breach because of quantity of performance

Question 123

Divisible contract exception

Answer 123

In a divisible contract there can be a contract law recovery for substantial performance of a divisible part even though there has been a material breach of the entire contract.

Question 124

Excuse because of nonoccurrence of an express condition

Answer 124

The general rule is that strict compliance is required for satisfaction of the condition.

Exception for a condition of personal satisfaction of one of the parties, requires honest and good faith dissatisfaction.

Question 125

Elimination of an express condition

Answer 125

1) waiver

2) prevention

Question 126

Waiver of a condition

Answer 126

Identify the person who benefits from or is protected by the express condition.

Then look for a statement by that person giving up the benefits and protection of the express condition.

Question 127

Prevention

Answer 127

Look for the person protected by the express condition hindering or preventing the occurrence of the express condition

Question 128

Conditions precedent versus condition subsequent

Answer 128

Conditions precedent are conditions that excuse performance until and unless they occur.

Condition subsequent occur subsequent to the start of performance and excuse performance when they occur.

Question 129

Excuse by later contract

Answer 129

1) rescission
2) accord and satisfaction
3) modification
4) novation

Question 130

Accord and satisfaction

Answer 130

An agreement by the parties to an already existing obligation to accept a different performance in satisfaction of the existing obligation.

If the new agreement is performed, performance of the original obligation is excused.

Question 131

Modification

Answer 131

An agreement by parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation

Question 132

Novation

Answer 132

Innovation is an agreement between both parties to an existing contract to the substitution of a new party, i.e., same performance, different party.

Question 133

Who is liable after a novation

Answer 133

A novation excuses the contracted for performance of the party who is substituted for or replaced.

Question 134

Excuse of performance by reason of a later unanticipated event

Answer 134

1) which party is arguing that her performance is excused
2) what her performance is
3) whether post contract occurrence affected her ability to perform not just the cost of her performance

Question 135

Damage or destruction of subject matter of contract

Answer 135

Under the common-law a party is excused if the unanticipated event causes her not to be able to perform.

For the sale of goods do risk of loss first if the risk of loss is on the buyer then the buyer pays. If the risk of losses on the sellers in the buyer does not have to pay.

Question 136

Death after contract

Answer 136

Death does not make a person’s contract obligations disappear.

Death of party to a special person contract excuses performance.

Question 137

Change in subsequent law or regulation

Answer 137

If a later law makes performance of contract illegal excuse by impossibility.

If the later law makes mutually understood purpose of contract illegal excuse by frustration of purpose.

Question 138

Third-party beneficiary

Answer 138

Not a party to the contract.

Able to enforce contract others made for her benefit.

Question 139

Promisor

Answer 139

Look for person who is making the promise that benefits the third party.

Question 140

Promisee

Answer 140

Look for person who obtained the promise that benefits the third-party.

Question 141

Intended beneficiaries

Answer 141

Only intended beneficiaries have contract law right.

Intended beneficiaries are always named in the contract.

Question 142

Creditors/Donee

Answer 142

To be a creditor the third-party must be a creditor of the promisee

Otherwise they are a donee.

Question 143

Ability to cancel or modify a third party beneficiary contract

Answer 143

If the third-party knows of and has relied on or assented as requested to the contract the contract cannot be canceled or modified without her consent unless the contract otherwise provides.

Question 144

Who can sue whom in a third-party beneficiary contract

Answer 144

1) beneficiary can recover from Promisor
2) promisee can recover from Promisor, but beneficiary and promisee cannot both recover from Promisor
3) generally beneficiary cannot recover from promisee unless creditor beneficiary can recover from promisee but only on pre-existing debt.

Question 145

Defense is in third-party beneficiary contract

Answer 145

If the third-party beneficiary sues the Promisor the Promisor can assert any defense that he would have if sued by the promisee.

Question 146

Assignment

Answer 146

An assignment is a transfer of rights under a contract.

Assignment involves two separate steps:

1) contract between only two parties and
2) one of the parties later transfers right under the contract to a third-party.

Question 147

Assignor

Answer 147

Party to the contract who later transfers right under the contract to another.

Question 148

Assignee

Answer 148

Not a party to the contract.

Able to enforce the contract because of the assignment.

Question 149

Obligor

Answer 149

Other party to the contract

Question 150

Limitations on assignment

Answer 150

A prohibition takes away the right to assign but not the power to assign. Meaning the assignor is liable for breach of contract, but an assignee who does not know of the prohibition can still enforce the assignment.

An invalidation 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.

Common law bars an assignment that substantially changes the duties of the obligor. An assignment of the right to payment is never a substantial change, an assignment of right to contract performance other than right to payment is a substantial change

Question 151

Requirements for assignment

Answer 151

General rule is that consideration is not required, but gratuitous assignments and only gratuitous assignments can be revoked.

Question 152

Who can sue whom in an assignment of a contract

Answer 152

1 the assignee can recover from the obligor

2) the assignor for consideration cannot recover from obligor
3) obligor has same defenses against assignee as it would have against assignor
4) payment by obligor to assignee is effective until obligor knows of assignment.
5) in an assignment for consideration the assignor warrant (1) the right assigned actually exists, and (2) the right assigned is not subject to any existing defenses by the obligor, and (3) the assignor would do nothing after the assignment to impair the value of the assignment. Assignor does not want what the obligor will do after the assignment.

Question 153

Multiple assignments

Answer 153

For gratuitous assignments the last assignee generally wins.

For assignments with consideration the first assignee with consideration wins. Unless the assignee does not know of the earlier assignment and is the first to obtain payment, a judgment, a novation, or indicia of ownership.

Question 154

Delegation

Answer 154

Transfer by a party to a contract of his duties or burdens under the contract to a third-party who is not a party to the contract.

Question 155

When are duties delegable

Answer 155

Delegations are permitted unless either (1) contract prohibits delegation or prohibits assignments or (2) personal services contract that calls for very special skills.

Question 156

Nonperformance by delegate

Answer 156

Delegating party always remains liable.

Delegatee liable only if she receives consideration from delegating party.

Question 157

Specially manufactured goods exception to statute of frauds

Answer 157

All three elements required:

1) goods must be specially manufactured for the buyer
2) seller must have started work on the goods or else entered into a commitment to purchase them from someone else
3) good must not be sellable in the seller’s ordinary course of business

Question 158

Rejection of an installment contract for goods

Answer 158

Buyer may reject an installment that is nonconforming only if it substantially impairs the value of that installment and cannot be cured.

If adequate assurances of cure, shipment must be excepted.

Question 159

Consideration in a contract

Answer 159

Look for consideration in the contract as a whole even if two components present.

Question 160

Time in contracts

Answer 160

Unless nature of contract is such to make performance important or contract provides that time is of the essence, failure to perform at the stated time is a minor breach

Question 161

damages for minor breach

Answer 161

Only damages, not an excuse not to perform your obligations.