Contracts - Black Letter Law

Question 1

Contracts

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

Controlling Law

Answer 2

Contracts for the sale of goods are governed by the UCC. Goods are tangible moveable items. Contracts for services are governed by common law.

Question 3

Predominant Purpose Test

Answer 3

A test used by the majority where the primary purpose of the parties entering into a contractual relationship is determined.

Question 4

Gravamen Test

Answer 4

A test used by the minority where the contract is severed into different parts, with the UCC applying to the goods involved in the contract, but not to the non-goods parts of the contract.

Question 5

Goods

Answer 5

Tangible objects that are moveable at the time of identification to the contract.

Question 6

Merchant

Answer 6

A merchant is a person who deals in goods of the kind involved in the contract and who has knowledge or skill related to the goods involved in the transaction.

Question 7

Offer

Answer 7

An offer is a manifestation of present contractual intent to be bound by certain and definite terms, communicated to the offeree.

Question 8

Mutual Assent

Answer 8

Mutual assent consists of a valid offer and acceptance.

Question 9

Acceptance (Common law)

Answer 9

An acceptance is an outward manifestation of assent to the terms of an offer. At common law, the acceptance must be the mirror image of the offer.

Question 10

Acceptance (UCC)

Answer 10

Acceptance or written confirmation with different or additional terms sent within reasonable time operates as an acceptance if it a definite expression of acceptance and is seasonable unless the acceptance is expressly made conditional on assent to the additional or different terms.

Question 11

Mailbox Rule

Answer 11

Pursuant to the mailbox rule, an acceptance is effective upon deposit into the mail if properly stamped and addressed.

Question 12

Revocation

Answer 12

A revocation occurs when the offeror communicates to the offeree that the offeror no longer wishes to be bound by the offer.

Question 13

Indirect Revocation

Answer 13

An offer will terminate if the offeree hears of the offeror’s withdrawal from another reliable source.

Question 14

Shipment as Acceptance

Answer 14

An order or other offer to buy goods for prompt or current shipment is construed as inviting acceptance by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment is not acceptance if seller seasonably notifies buyer that goods offered only as an accommodation to buyer.

Question 15

Battle of the Forms

Answer 15

Where both parties are not merchants, additional terms in an acceptance are construed as proposals for addition to the contract. Where both parties are merchants, additional terms in an acceptance become part of the contract, unless the offer expressly limits acceptance to terms of the offer, the terms “materially alter” the contract or notification of objection to the additional terms is given within a reasonable time.

Question 16

Consideration

Answer 16

Consideration is a bargained for exchange of legal detriment.

Question 17

Statute of Frauds

Answer 17

The Statute of Frauds requires that certain contracts be in writing signed by the party to be charged to be enforceable.

Question 18

Merchant’s Confirmatory Memo

Answer 18

A writing can be enforced against a party who did not sign it, if both parties are merchants and within reasonable time of oral contract, one party sends a written confirmation to the other, signed by the sender that otherwise satisfies the SOF. And the recipient does not object within 10 days.

Question 19

Promissory Estoppel

Answer 19

A promise which the promisor should reasonably expect to induce action or forebearance on the part of the promisee or a third person and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise.

Question 20

Options Contract

Answer 20

A common lawoffer wherein for consideration, the offeror agrees to keep the offer open for a certain time. During this time, the offer is irrevocable.

Question 21

Merchant’s firm offer

Answer 21

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

Question 22

Fraud

Answer 22

Fraud may void a contract where there is an intentional or negligent misrepresentation of a material fact and justifiable reliance on the misrepresentation to plaintiff’s detriment.

Question 23

Unjust Enrichment

Answer 23

When one has conferred property, services or some other economic benefit on another without gratuitous intent and it would be unjust for the beneficiary to keep the benefit of that enrichment without compensating the other party.

Question 24

Duress

Answer 24

Where a contract is induced or modified by an improper threat that leaves the victim with no reasonable alternative, a defense of duress is available to void the contract.

Question 25

Modification (Common Law)

Answer 25

Under common law, contract modification generally requires consideration.

Question 26

Modification ( UCC)

Answer 26

Under the UCC, contract modifications do not require consideration although the duty of good faith applies.

Question 27

Unconscionabiltiy

Answer 27

A contract can be voided based on unconscionability if the transaction is so unfair that it would offend the conscience of the court to enforce it.

Question 28

Undue Influence

Answer 28

Undue influence can void a contract where there is the unfair persuasion of a party under the domination of a more powerful party resulting in the improper detriment to the dependent party or improper dealing.

Question 29

Mental Incapacity

Answer 29

A contract can be voided based on mental incapacity if a party to the contract is unable to understand the nature and consequences of the transaction or is unable to act rationally regarding the transaction and the other party has reason to know of this condition.

Question 30

Course of Performamce

Answer 30

Course of performance is the parties’ prior conduct in a particular contractual relationship.

Question 31

Course of Dealings

Answer 31

Course of dealings is the past conduct of parties in prior contractual transactions.

Question 32

Usage of Trade

Answer 32

Usage of trade is the practice having regularity of observance in a place, vocation or trade justifying expectation that it will be followed in transaction in question.

Question 33

Parole Evidence Rule

Answer 33

When parties intend a writing to be the full and final expression of their agreement, the agreement may not be contradicted or supplemented by any oral or written agreement made prior to the writing.

Question 34

Mutual Mistake

Answer 34

Mutual mistake is grounds for avoiding a contract if the mistake relates to a material fact in existence at the time of the contract, the mistake is shared by both parties, the mistake relates to a basic assumption on which the contract was made, and the complaining party did not bear risk of the mistake.

Question 35

Unilateral Mistake

Answer 35

If a party enters into a contract suffering from a misunderstanding of a material fact that the other party knew or should have known about, the contract is voidable by the mistaken party, as long as that party did not have reason to know of the mistake.

Question 36

Impossibility

Answer 36

Where performance is made objectively impossible by the occurrence of an unexpected event, the contract may be discharged.

Question 37

Impracticability

Answer 37

A party’s performance is excused where it is made impracticable without the fault of the party by occurrence of an event after the contract is made, the non-occurrence of which was a basic assumption of the contract.

Question 38

Frustration of Purpose

Answer 38

A party’s performance is excused if after the contract is made, a party’s principal purpose is frustrated without the party’s fault by the occurrence of an event, the non-occurrence of which was a basic assumption of contract.

Question 39

Promise

Answer 39

A promise is a commitment to act or refrain from acting in a specific way in the future.

Question 40

Condition

Answer 40

A condition is an event or non‐event that is not certain to occur which must occur before performance under a contract becomes due.

Question 41

Breach

Answer 41

Breach occurs when the promisor fails to perform an absolute duty in accordance with the contract terms and the duty has not been discharged.

Question 42

Substantial Performance

Answer 42

Substantial performance occurs when a breaching party substantially provides the non‐breaching party with the expected benefit of the bargain.

Question 43

The Perfect Tender Rule

Answer 43

If goods or tender of delivery fail in any respect to conform to the contract, the buyer may reject the whole, accept the whole or accept any commercial unit(s) and reject the rest.

Question 44

Installment Contract

Answer 44

An installment contract requires delivery of goods in separate lots to be separately accepted.

Question 45

Breach of Installment Contract

Answer 45

A seller has breached an installment contract by delivering non‐conforming goods only if the nonconformity substantially impairs the value of the contract and the non‐conformity cannot be cured.

Question 46

Anticipatory Repudiation

Answer 46

Anticipatory Repudiation occurs when before the date of performance, the promisor makes clear, through words or conduct, that she will not perform material term of contract when the time for performance comes due.

Question 47

Prospective Inability to perform

Answer 47

Prospective Inability to Perform occurs when a party has reasonable grounds to believe the other party will be unable or unwilling to perform when performance is due.

Question 48

Third Party Beneficiary Contract

Answer 48

A third party beneficiary contract is a legally enforceable contract entered into between two parties for the intended purpose of benefitting a third party.

Question 49

Incidental Beneficiary

Answer 49

A third party beneficiary of a contract who is not an intended beneficiary.

Question 50

Creditor Beneficiary

Answer 50

An intended third party beneficiary where the promisee’s purpose in extracting the promise from the promisor was to discharge an obligation owed to the third party beneficiary.

Question 51

Donee Beneficiary

Answer 51

An intended third party beneficiary where the promisee’s purpose in extracting the promise from the promisor was to confer a gift on the third party beneficiary

Question 52

Vesting

Answer 52

The rights of a third party beneficiary vests when: 1. The beneficiary manifests assent to the promise in a manner invited or requested by the parties;2. The beneficiary brings suit to enforce the promise; or 3. The beneficiary materially changes position in justifiable reliance on the promise.

Question 53

Assingment

Answer 53

Transfer of a contractual right

Question 54

Exception-Assignment of Rights

Answer 54

Rights cannot be assigned if the assignment would materially change the obligor’s duty, increase the burden or risk, impair return performance, or reduce the value of performance.

Question 55

Delegation

Answer 55

Transfer of a contractual duty.

Question 56

Exception-Delegation of Duties

Answer 56

Duties generally are delegable, but not if duties involve personal judgment and skill, change obligee’s expectations, if special trust was reposed in delegator, nor if prohibited by contract provision

Question 57

Novation

Answer 57

An express agreement through which the obligee agrees to accept the delegate as a complete substitute for the obligor and release the obligor from her duties under the contract.

Question 58

Accord & Satisfaction

Answer 58

An accord is an agreement by the parties to a contract where one party promises to render a substitute performance and the other promises to accept that substitute in discharge of an existing duty. The accord is satisfied, discharging the previous contractual duty, when the terms of the accord are performed.

Question 59

Compensatory Damages

Answer 59

Compensatory damages based on the benefit of the bargain are available to a plaintiff to compensate the plaintiff for the harm caused by the breach, including expectation damages, as well as incidental and consequential damages.

Question 60

Expectation Damages

Answer 60

Expectation damages are benefit of the bargain damages that put the non-breaching party in the same position that the party would have been in had the contract been performed.

Question 61

Incidental Damages

Answer 61

Compensatory damages in UCC contracts may include incidental damages, including expenses reasonably incurred by the buyer due to the seller’s breach and by the seller as a result of the buyer’s breach.

Question 62

Consequential Damages

Answer 62

Consequential damages consist of losses resulting from a breach that any reasonable person would have foreseen would occur from the breach at the time of entry into the contract.

Question 63

Buyer’s Remedies - When the goods are not received or accepted

Answer 63

The remedy is the difference between the cover price [cost of replacement goods] and the contract price or the difference between the contract price and the market price.

Question 64

Buyer’s Remedies- When the Buyer Accepts Nonconforming Goods

Answer 64

The remedy is damages for deficiency in ordinary course‐the difference in value of goods as warranted and goods that are delivered plus incidental and consequential damages, less expenses saved.

Question 65

Sellers Remedies

Answer 65

The remedy is the difference between the contract price and resale price [requires good faith commercially reasonable sale] or if no resale, the difference between the contract price and market price. If the contract/market remedy is not adequate, seller can recover lost profits +reliance expenses, less salvage.

Question 66

Foreseeable Damages

Answer 66

Foreseeable damages are the natural, usual consequence of a breach OR Contemplated by the parties at the time of the contract as a probable result of the breach.

Question 67

Certainty of Damages

Answer 67

Plaintiff must prove damages with reasonable certainty‐regarding the fact of damages and the amount of damages.

Question 68

Mitigation of Damages

Answer 68

Plaintiff must make reasonable efforts to avoid consequences of a breach.

Question 69

Restitution

Answer 69

Restitution is an equitable remedy based on preventing unjust enrichment when one has conferred a benefit on another without gratuitous intent.

Question 70

Quasi-Contract

Answer 70

Restitution may be available in a quasi‐contract action when a contract was made but is unenforceable and unjust enrichment otherwise would result.

Question 71

Rescission

Answer 71

Rescission is a remedy where the original contract is considered voidable and rescinded and parties are left as though a contract had never been made.

Question 72

Specific Performance

Answer 72

Specific Performance is an equitable remedy where a court may order a party to perform its duties under a contract when monetary damages are inadequate or the subject matter is unique.

Question 73

Liquidated Damages

Answer 73

A liquidated damages clause is an agreement in a contract that in the event of a breach, the remedy of the non‐breaching party will be limited to a specified amount of monetary damages.