Contracts MBE MEE course prep

Question 1

What are the two main types of law that govern contracts?

Answer 1

common law and UCC

Question 2

What are the three requirements of a contract?

Answer 2

Offer, acceptance, and consideration

Question 3

What are the requirements of a valid offer?

Answer 3

requires: objective manifestation of willingness by the offeror to enter into a bargain creates offeree’s the power of acceptance.

Question 4

T or F, subjective manifestations create the offer with power to accept

Answer 4

True

Question 5

Advertisements are generally not offers, what is the exception?

Answer 5

when an advertisement is specific to one person

Question 6

What are the requirements of the UCC firm offer rule?

Answer 6

a. UCC Firm Offer Rule: requires: signed writing by a merchant;
b. terms of signed writing must give assurance that it offer be held open (non-revocable, even if no consideration, for the stated period of time: (can’t exceed 3 months!)

c. requires assurance of keeping the offer open for a stated period of time!
d. no consideration required

Question 7

T or F, 1. For a firm offer by a merchant: When there is an irrevocable offer (either a firm offer under the UCC or an option contract at common law), the offer remains open even in the face of an outright rejection by the offeree.

Answer 7

True

Question 8

Offers can be _______ or __________.

Answer 8

Unilateral or bilateral

Question 9

What are the requirements of a unilateral offer?

Answer 9

Unilateral Offer- Unilateral: requires performance or is looking for action; Offer makes offer looking for performance (action)

Question 10

If a hairstylist offers to straighten a woman’s hair and tells her to come by the shop the next day with $20. The woman says it’s a good price and comes back to the shop the next day ready to have her hair straightened. If the stylist refuses, has she committed a breach of a unilateral contract? why?

Answer 10

Yes

because The woman conveyed her acceptance by action.

Question 11

An offeror can revoke an offer (take the offer back) before acceptance. When is revocation effective?

What are the two types of revocation

Answer 11

As soon as offeree gets the communication that the offer is revoked!

Direct- “deal’s off”

or Indirect- you see the car you wanted to buy driving down the street

Question 12

Revocation by an Offeror: offeror is free to revoke an outstanding offer, terminating the offeree’s power of acceptance, at any time and for any reason, so long as the revocation?

Answer 12

a. 1) occurs prior to acceptance; and

b. 2) is effectively communicated- direct or indirectly

Question 13

direct or indirect revocation?
1. revocation occurs and terminates the offeree’s power of acceptance when the offeror communicates directly with the offeree and advises the latter that the offer has been revoked.

2. In some cases, the offeree will learn of the offeror’s intention to abandon the deal from a third-party source, and this will also terminate the offeree’s power of acceptance where two conditions are met:
   i) the offeror has taken definite action inconsistent with the intention to enter the proposed contract (such as by selling offered real estate to a third party); and
   ii) the offeree acquires reliable information of the offeror’s inconsistent action (such as learning of the sale from a real estate broker).

Answer 13

1. Direct revocation

2. Indirect revocation

Question 14

T or F REMEMBER: Option Contracts under Common Law and Firm Offers are not revocable in this way!!!

Answer 14

True

Question 15

Option contracts (common law) requires ________ to keep the offer open. What are the required elements?

Answer 15

consideration

Elements required for an option contract: Offer, a subsidiary promise to keep offer open, and consideration to secure the promise to keep the offer open

Question 16

2. Firm Offer Rule (UCC) – Under the UCC, a merchant can make a firm offer (an irrevocable offer) to either buy or sell goods without consideration so long as [§ 2-205]: what three requirements are met?

Answer 16

i) the offer is made by a merchant;
ii) the offer is made in a writing signed by the merchant; and
iii) the offer expressly states by its terms that it will be held open.

Question 17

How does the UCC define a merchant? hint knowledge

Answer 17

a merchant can be UCC defines a merchant in terms of his special knowledge or skill with respect to the practices or goods involved in a transaction. It is important to note that a person may be considered a merchant even if he only has knowledge of the goods, or knowledge of the practices.

Question 18

T or F, a firm offer requires consideration

Answer 18

False, it does not require consideration!

Question 19

Lapse of time- courts hold that an offer made in person or by telephone offer lapses at the end of the conversation UNLESS?

Answer 19

there is lingering language or a clear indication that the offer remains open beyond the conversation.

Question 20

T or F a counteroffer does not terminate the power of acceptance of the original offer

Answer 20

False, it does

Question 21

How can an offer be revived?

Answer 21

Revival: Offer can be revived if offeror offers again for the 2nd time after the 1st offer the offeree rejected it the first time!

Question 22

T or F, inquiry does not terminate the power of acceptance. what are some examples of inquiries?

Answer 22

True

(“could you do better?” “let me think it over (interested still have power to accept); “is that as low as you’ll go?

Question 23

Define acceptance.

Answer 23

an Objective manifestation by the offeree to be bound by the terms of the offer. (Subjective manifestation is still acceptance!)

Question 24

Manner of Acceptance can be in writing, words, or even actions but Manner of acceptance must be ?

UNLESS?

Answer 24

reasonable under the circumstances

UNLESS otherwise indicated by specific language or circumstance. (offeror makes known the specific manner of acceptance required to legally accept. Example: offeror specifies that acceptance must be in writing

Question 25

I offer a man a job painting my shed, the next day I want to revoke the offer but find that he has already started painting the shed before I got the chance to revoke it and I do not do anything to stop him. Is there valid acceptance?

Answer 25

yes, unless acceptance terms specified another means of acceptance

Question 26

Acceptance under the UCC is different from common law under the UCC, what are the requirements for manner of acceptance?

What is the exception?

Answer 26

manner of binding acceptance- Shipping goods, a promise to ship goods, that conform to the offer. BUT non-conforming shipments are also binding IF they are made in good faith! (non-conforming shipments are binding acceptance; but it is a contract breach!)

UNLESS the seller (merchant) actually notifies the buyer that the shipment is offered only as an accommodation to the buyer! The shipment would be a Counteroffer and not constitute acceptance and the buyer would then be free to accept or reject the offer. ( So a counter offer and not a contract breach!)

Question 27

What is the mailbox rule?

Answer 27

The rule that governs contract formation made by mail communications

Question 28

Under the mailbox rule when When is an offer accepted by mail?

Answer 28

As soon as Acceptance is SENT, As long as sent before a revocation is RECEIVED!

Question 29

When will the mailbox rule not apply for mail communications? explain

Answer 29

The mailbox rule will not apply- when the buyer sends a rejection or counteroffer prior to sending an acceptance.
Instead, the first communication to be received by the seller will control. Thus, the acceptance was not effective upon dispatch, but rather, was effective because it was communicated to the seller first, before the rejection was received.

Question 30

Under the mailbox rule when will If rejection to the offer sent first, then acceptance to the offer sent second will?

Answer 30

the first communication RECEIVED by the offeror prevails!! (in other words: the first mail truck to get to there wins! NOT necessarily the first one sent! ) If rejection received first, terminates offer; if acceptance received first, then valid contract, provided there is consideration!

Question 31

Define consideration

Answer 31

the thing bargained for legal detriment or bargained for exchange (what’s in it for the parties?) In other words is there a bargained for exchange required for a valid contract that the court must enforce?

Question 32

What is forbearance to sue?

Answer 32

A type of consideration when one party gives up their right to sue in exchange for money or other benefit

Surrender a validly disputed claim or defense: one where there is a factual or legal uncertainty (Objective uncertainty) as to the merits- or the release of a validly asserted defense is sufficient consideration.

Question 33

Forbearance of an invalid claim or defense: Can be consideration IF ?

Answer 33

the proponent of the claim or defense had a good faith belief in the claim’s validity!

Question 34

If no consideration, is there a substitute for consideration? If so what is it?

Answer 34

Quasi contract remedy (not a valid contract by law, but in equity! Court should enforce the promise, to avoid Injustice! examples: promissory estoppel, detrimental reliance

Question 35

What are quasi contracts? what are their purpose? Name an example

Answer 35

courts will find an implied-in-law contractual obligation where there is an equitable imposition of a would-be contract.

It avoids unjust enrichment, where one party has bestowed a benefit on the other.

example Emergency services are a typical situation where courts will find that a quasi-contract exists.

Question 36

What are four instances that DO NOT constitute consideration? give examples

Answer 36

1. Past acts as or moral consideration -Not Sufficient Consideration! Example: I save the boss’s life. He then offers me a lifetime job because he is greatful but fires me next week! Promise of lifetime job not enforceable because of insufficient consideration!
   2. Pre-existing duty rule (common law) performing a legal duty which is already owed under a contract is NOT consideration!
   3. Modification of contract terms (Common Law) without new consideration is not sufficient to be able to change the original contract terms. (new K terms not valid without new consideration!)
2. Illusory Promise- a promise that is unenforceable due to indefiniteness or lack of mutuality, where only one side is bound to perform. example: an agreement between a seller and buyer which states that the seller agrees to sell all the ice cream he wants to the buyer

Question 37

What are two types of performance?

Answer 37

Unilateral an Bilateral

Question 38

What is required to form unilateral contract?

Answer 38

requires performance or is looking for action; Offer makes offer looking for performance (action).

A unilateral contract is created when the offeror requests acceptance of the offer by the performance of an act rather than by a promise to perform the act.

The offer is accepted only when the offeree performs the requested act.

Question 39

What is required of a bilateral contract?

Answer 39

requires performance from both parties or mutual performance; Offer and offer re exchange mutual promises: looking for a promise.

Question 40

Will subjective impossibility excuse duties of performance of a contract?

Will objective impossibility excuse duties of performance of a contract? Give example

Answer 40

NO, impossibility of performance- subjective impossibility of performance will not excuse duties of performance under a contract.

Yes, Objective impossibility- will excuse duties of performance under a contract.

For example S pestos cannot be legally removed making remodeling of a house impossible even if remodeling is my contractual obligation.

Question 41

explain frustration of purpose of a contract. What is an example?

Answer 41

it means frustration of purpose of the contract
when unexpected events arise making a contract performance impossible to be performed entitles the frustrated party to rescind the contract without paying damages

example: a man contracts to buy a commercial building to rent out and while the sale is pending comma the building is condemned by the city as unsafe. The man can back out of purchase without having to pay damages.

Question 42

Define contract modification.

What is required for modification at common law?

What is required for modification under the UCC?

Answer 42

1. Modification- a subsequent agreement that alters or changes the parties’ duties and obligations under the terms of their original contract.
   a. Modification common law- requires pre-existing duty rule and new consideration required!

b. Modification UCC- requires good faith but no consideration required!

Question 43

What are the Contract Defenses? Hint Acronym. MY LEGS

Answer 43

Marriage-

Year – (1) Contracts that can’t be completed in less than a year must be in writing but if it actually takes longer than a year to complete a project that takes less than a year, it does not need to be in writing can be longer without a written contract as long as the performance can reasonably be completed in a year .

Land- Sale of land : note: Land of sale contracts require: 1 identity of parties 2 identity of subject matter land 3 consideration 4. signature of seller

Exeutor -of another’s estate

Guarantee – guarantee to pay debts of another or standing in another’s place of obligation to pay off the debt. Must be in Writing! Unless: main purpose exception

Sale of goods - $500 or more: must be in writing.

Question 44

What is the main purpose exception? common example?

Answer 44

must not be in writing if the Person making the guarantee to repay the debt and the one who is attempting to collect the debt have a interest or benefit in paying the debt for the other. Other words if the person promising to pay the debt is doing so for his own personal interest then it must not be in writing!

example: partnership debt: Example of the main purpose exception: Randy promises Joe that he will pay the debt that Bill owes if he does not pay it. Is Jose is Randy promise is not in writing, the contract will still be valid if Randy and Bill are partners.

Question 45

Define Mutual Mistake. remedy?

Define Unilateral Mistake. remedy?

Answer 45

a. Mutual Mistake - Both parties are mistaken about a material element that goes to the heart or essence of the bargain in the contract.
Remedy: rescission of contract why? No meeting of the minds

b. Unilateral mistake- contract enforceable against the mistaken party unless non mistaken party knew or should have known the others mistake

remedy contract remedies?

Question 46

What is an implied in law contract? remedy

What are some examples?

Answer 46

A legal substitute for a contract formed to impose equity between two parties. A contract should have been formed, even though in actuality it was not.

A quasi contract Arises when one party bestows a benefit upon the other; used when a contract should have been formed even though it was not! It avoids unjust enrichment, where one party has bestowed a benefit on the other.
Examples: Emergency services are a typical situation where courts will find that a quasi-contract exists. Eg. Doctor attempts to save the life of another

Example: A third frequent quasi-contract situation is where contractual benefits have been conferred via an unenforceable contract, i.e., a would-be buyer of real property who makes im- provements on the land before closing and whose oral contract turns out to be unenforceable under the Statute of Frauds may create an implied-in-law obligation on the seller.

In contract: when a merchant accidently delivers goods to the wrong person, creating an unjust enrichment to the party receiving the goods by mistake.

Question 47

What is an implied in fact contract? remedy

Give an example

Answer 47

An agreement founded upon a meeting of the minds, which, although not embodied in an express contract, is inferred from the conduct of the parties.

. For example sitting down and ordering food in a restaurant. Note: must be an objective manifestation

Question 48

What is an illusory promise? Give an example

Answer 48

A promise that is unenforceable due to indefiniteness or lack of mutuality, where only one side is bound to perform.
An example of this would be an agreement between a seller and buyer which states that the seller “agrees to sell all of the ice cream he wants to” to the buyer.

Question 49

Describe an output contract

Answer 49

agreement in which a producer agrees to sell his or her entire production to the buyer, who in turn agrees to purchase the entire output. The question is how much you got? Note the buyer can buy from other people but must first exhaust the obligations under the output contract and purchase it all before going to others to buy. Buyer is not in breach of contract if seller doesn’t have enough.

Question 50

Describe a requirement contract

Answer 50

in a requirement contract the seller agrees to sell as much as the buyer would require not as much as the seller would produce! The question is how much do you need? Note: seller consult others as well but agrees to give buyer all he needs

Question 51

all contracts are assignable (can assign my rights)

3. All contracts are delegable (I can delegate my contract duties)
   EXCEPT?

Answer 51

Except: for long term requirement contracts and personal service contracts

Question 52

what is satisfaction and accord?

Answer 52

satisfaction and accord is where the parties agree to discharge a contract obligation for an amount other than what was originally agreed upon.

Question 53

what is an accord?

Answer 53

An Accord is an agreement in which one party to an existing contract agrees to different performance than the performance he is entitled to under the first contract.

Question 54

what is a novation?

Answer 54

Novation is the act of replacing a contract with another contractual obligation, requiring the consent of all parties involved.