CONTRACTS - Fall 2012

Question 1

“Accord & Satisfaction” in CA

Answer 1

CA Civ Code s. 1526 provides that a payment in full check does not operate as an accord and satisfaction if the creditor strikes out the restrictive words or can prove that she cashed the check w/ out knowledge of the restriction.

Question 2

“Accord & Satisfaction” in CA (part 2)

Answer 2

CA Civ Code s. 1526 (b)(2) the debtor must give notice in writing ti the creditor “not less than 15 days nor more than 90 days prior to receipt of the check or draft…”

Question 3

Mutual Assent (Civ Code)

Answer 3

Consent is not mutual, unless the parties all agree upon the same thing in the same sense.
The consent of the parties to a contract must be:
1. Free;

2. Mutual; and,
3. Communicated by each to the other. (Cal.Civ.Code § 1565)

Question 4

Contract

Answer 4

A contract is an agreement to do or not to do a certain thing. (Cal.Civil Code § 1549)

Question 5

Mutual Assent (includes what 2 things)

Answer 5

Mutual assent is ordinarily established by a process of offer and acceptance.

Question 6

objective theory

Answer 6

the mental assent and intent of the parties is irrelevant. The objective theory has been dominant

Question 7

Contract forms

Answer 7

A contract may be oral, written, or partly oral and partly written. Unless some law provides otherwise, an oral, or a partly oral and partly written contract, is as valid and enforceable as a written contract. (Cal.Civil Code § 1622)

Question 8

Express contract

Answer 8

In an express contract, the existence and terms of the contract are stated in words or the writings of the parties.

Question 9

Implied contract

Answer 9

In an implied contract, the existence and terms of the contract are inferred from the conduct of the parties. (Cal.Civil Code § 1619, 1620, 1621)

Question 10

Consideration

Answer 10

Any act or forbearance which is of benefit to the promisor or detriment to the promisee. (Rest.2d §71; Cal.Civ.Code §1605.)

Question 11

Context for Consideration

Answer 11

consideration must arise in the context of a bargained for exchange. This means that the promise must induce the detriment and the detriment must induce the promise.

Question 12

Past Consideration / Moral Obligation

Answer 12

A moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor. (Webb v. McGowin, 27 Ala.App. 82, 168 So. 196 (1935); Cal.Civ.Code §1606.)

Question 13

Promissory Estoppel - Common Law

Answer 13

Reasonably expected reliance may under some circumstances make binding a promise for which nothing has been given or promised in exchange. (Earhart v. William Low Co. (1979) 25 Cal.3d 503, 600 P.2d 1344.)

Question 14

Promissory Estoppel - Rest. 2d.

Answer 14

Where legal consideration is lacking courts sometimes enforce gratuitous promises under the theory of “Promissory Estoppel” (Rest.2d §90)

Question 15

Three elements must exist in order to invoke promissory estoppel:

Answer 15

Foreseeability, Reliance, & Injustice

Question 16

Illusory Promises

Answer 16

A promise which is conditioned upon the whim of the promisor is not consideration. (See, Rest.2d § 77(1).) Such a promise is called an illusory promise.

Question 17

Rest 2d 87 - use of Prom. Est.

Answer 17

Does not impose the requirement that the promise giving rise to the cause of action must be so comprehensive so as to meet the requirements of an offer.

Question 18

Modification to Agreement

Answer 18

A modification of a contract is a change in an obligation by a modifying agreement. With the exception of contracts for the sale of goods, (see UCC 2-209) to be effective the modifying agreement must be supported by additional consideration.

Question 19

Unilateral Contract

Answer 19

A unilateral contract is one in which the offeror is bargaining for a completed performance.

Question 20

Bilateral Contract

Answer 20

A bilateral contract is one inwhich the offeror is bargaining for a promise to perform. Most contracts which have commercial significance are bilateral.

Question 21

CA Statute of Frauds

Answer 21

California’s Statute of Frauds, found at Cal.Civ.Code §1624, provides that certain contracts “are invalid, unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged.”

Question 22

Purpose of Statute of Frauds

Answer 22

Prevent perjured testimony in proof of purported contracts of important types and the statute applies only to those enumerated types.

Question 23

The Parol Evidence Rule

Answer 23

Applies to any type of contract, and its purpose is to make sure that the parties’ final understanding, deliberately expressed in writing shall not be changed.

Question 24

SOF - Performance not to be performed one year

Answer 24

“The question is not what that probable, or expected, or actual performance of the contract was, but whether the contract, according to the reasonable interpretation of its terms, required that it should not be performed within the year. “ (Warner v. Texas & Pacific R. Co., 164 U.S. 418, 17 S.Ct. 147, 41 L.Ed. 495 (1896)

Question 25

At a minimum the memorandum must state with reasonable certainty:

Answer 25

(a) the identity of both contracting parties; (b) the subject matter of the contract so that it can be identified either from the writing or if the writing is not clear by the aid of extrinsic evidence; (c) the essential terms and conditions of all the promises constituting the contract and by whom and to whom the promises are made. (Rest.2d §131)

Question 26

Writing Req’t: The essential elements of a memorandum required by UCC 2-201

Answer 26

1) a writing, 2) signed by the party to be charged, which 3) recites a quantity term. It makes no difference that the writing omits or incorrectly states a term agreed upon. Hence, it is not necessary that the writing state all the terms of the contract or that it state any of them accurately.

Question 27

Signature Req’t

Answer 27

“Signature” merely means any authentication which identifies the party to be charged. Even a letterhead or an “X” will do, provided it is placed on the wriiting with the intent to authenticate it. (Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Cole 457 A.2d 656, 663 (Conn.,1983).)

Question 28

Getting Around the Writing Req’t

Answer 28

Even in the absence of a sufficient memorandum of the existence of an oral contract, such a contract can be enforced where one of the parties admits the existence of a valid oral contract, where the oral promise has been partially performed, or under principles of estoppel.

Question 29

Capacity

Answer 29

Certain classes of persons are deemed by the law to have a limited ability to contract. Typically these classes of persons include “infants” (minors) and the mentally infirm.

Question 30

Minors

Answer 30

With respect to minors, the general rule is that the contract of a minor, other than for necessaries, is voidable at the minor’s option. The rationale behind this rule is that minors are immature and should be protected from their own bad judgment as well as those who would take advantage of them.

Question 31

Mental Capacity

Answer 31

Under Rest.2d §15, a contract is voidable if the party “by reason of mental illness or defect is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of this condition.”

Question 32

Unconscionable Contracts under the UCC

Answer 32

The doctrine of unconscionability permits a court to refuse to enforce a contract if it feels it is unfair. Unconscionability has generally been recognized to include absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.

Question 33

Relief from UCC 2-302

Answer 33

UCC 2-302 authorizes three forms of relief: (1) the court may refuse to enforce the entire contract, (2) or any part of it, or (3) the court may limit the application of a particular clause to prevent an unconscionable result.

Question 34

CA Application RE:

Answer 34

Although California has not adopted UCC 2-302, it has it enacted a nearly identical statute dealing with unconscionability which is found at Cal.Civ.Code § 1670.5.

Question 35

Categories of Unconscionability

Answer 35

Unconscionability may take the form of being either substantive or procedural.

Question 36

Substantial Unconscionability

Answer 36

May result when contract terms are excessively oppressive or harsh.

Question 37

Is there a duty to disclose?

Answer 37

1. Is one of the party’s possessed of superior knowledge? 2. Is the fact in question material? 3. Does the party of superior knowledge have reason to believe that the other party has no other means of discovering the material fact? If the answer to all 3 is “Yes” then there IS a DUTY to DISCLOSE.

Question 38

Procedural Unconscionability

Answer 38

Relates to the manner in which the term in issue was made a part of the contract, i.e., did the term in question find its way into the contract in a manner that was fair and square?

Question 39

Duress

Answer 39

“The word duress implies feebleness on one side, overpowering strength on the other.” (U.S. v. Bethlehem Steel Corp., 315 U.S. 289 (1952)

Question 40

R2C 175 & 176

Answer 40

“If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.” (Rest.2d sec. 175(1)

Question 41

Duress

Answer 41

A contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his free will.

Question 42

For Sales of Real Property in CA

Answer 42

Seller is under an “affirmative duty” to disclose all materials defects with respect to a Property.