Contracts Mid-Term

Question 1

Contract

Answer 1

a. 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 in some way recognizes as a duty.

Question 2

Express Consideration

Answer 2

a. Contract formed with express (spoken or written) promise(s)

Question 3

Implied Consideration

Answer 3

“[a] contract implied in fact is one form of an enforceable contract; it is based on a tacit promise, one that is inferred in whole or in part from the parties’ conduct, not solely from their words.”

Question 4

Promise

Answer 4

a. A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made

Question 5

Choice of Law

Answer 5

i. The UCC governs the sale of goods; while the common governs everything else

Question 6

Contract Formation

Answer 6

i. T]he formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.

Question 7

Common Law Consideration

Answer 7

a. Every contract requires a valuable consideration on both sides of the contract.

Question 8

Bargained for Exchange

Answer 8

a. A bargained for exchange consists of a negotiation in which the promise induces the detriment and the detriment induces the promise

Question 9

Legal Value

Answer 9

a. The consideration given must result in either a benefit to the promisor or a detriment to the promisee.

Question 10

Donative Promises

Answer 10

a. Donative promises lack consideration and therefore are unenforceable as contracts.

Question 11

Conditional Gift

Answer 11

a. A promise which by its terms is to be performed prior to the return promise

Question 12

Adequacy of Consideration

Answer 12

a. Mere inadequacy of consideration will not void a contract

Question 13

Illusory Promise

Answer 13

a. An illusory promise cannot serve as consideration. An illusory promise may exist where a promise is subject to a condition which is within the control of the promisor, especially where such condition is related to the contract performance, or when the promisor, at the time of the promise is made, knows that such condition cannot occur

Question 14

Defenses to formation

Answer 14

i. A contract, in whole or in part, may be void or voidable based on unconscionability, illegality, or violation of public policy

Question 15

Mutuality

Answer 15

a. Consideration must exist on both sides of the contract; promises must be mutually obligatory. Both parties must be bound or neither is bound.
b. Exception: Unilateral contracts do not generally bind one of the parties since there is a bargain of a promise for performance.

Question 16

Past Consideration

Answer 16

b. A promise is based on past consideration when the motivation for making the promise is based on performance, which occurred in the past

Question 17

Moral Consideration

Answer 17

c. Moral consideration is the making of a promise where the motivation is based on love, respect, or a desire to do justice

Question 18

Pre-existing Duty Rule

Answer 18

a. Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain

Question 19

Contract Modification

Answer 19

a. Subsequent to the formation of a contract, the parties may, by mutual assent, modify the contract. The modification must be a product of good faith and fair dealing.

Question 20

UCC-Modification of a Contract

Answer 20

a. An agreement modifying a contract within this Article needs no consideration to be binding

Question 21

Promissory Estoppel

Answer 21

i. A promise is made that promisor should have reasonably expected to induce action or forbearance on the part of the promisee or a third party;
ii. The promisee or third party actually took action or refrained from taking action in reliance on the promise; and
iii. Injustice can only be avoided by enforcement of the promise.
iv. The remedy granted for breach may be limited as justice requires

Question 22

Detrimental Reliance

Answer 22

a. The offeree relied to his detriment upon the offer itself.

Question 23

Promissory Restitution

Answer 23

a. A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice

b. A promise is not binding
i. If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or
ii. To the extent that its value is disproportionate to the benefit

Question 24

Restitution

Answer 24

a. A person who has been unjustly enriched at the expense of another is required to make restitution to the other.
c. Restitution is a restoration of what defendant has gained through efforts of plaintiff. Restoration could be the return of the specific thing or a money substitute for the value of the thing or service conveyed.

Question 25

Enrichment

Answer 25

A person is enriched if he has received a benefit (e.g. is given money, land, chattel, a service, has debt paid, avoids an expense, etc.).

Question 26

Restatement of Restitution

Answer 26

i. A person who has supplied things or services to another, although acting without the other’s knowledge or consent, is entitled to restitution therefor from the other if

Question 27

Restatement of Restitution Conditions

Answer 27

1. he acted unofficiously and with intent to charge…, and
2. the things or services were necessary to prevent the other from suffering serious bodily harm or pain, and
3. the person supplying them had no reason to know that the other would not consent…, if mentally competent; and
4. it was impossible for the other to give consent or, because of extreme youth or mental impairment, the other’s consent would have been immaterial.

Question 28

Unjust Enrichment

Answer 28

a. A court may order restitution if:
i. the Plaintiff has conferred a benefit on Defendant;
ii. the Defendant has knowledge of the benefit;
iii. the Defendant has accepted or retained the benefit conferred and
iv. the circumstances are such that it would be inequitable for the Defendant to retain the benefit without paying fair value for it.

Question 29

Officious Intermeddler

Answer 29

a. The Officious Intermeddler Doctrine refers to a person who voluntarily assists and/or benefits another without contractual responsibility or legal duty to do so, but nevertheless wants compensation for his/her actions.

Question 30

Gratuitous Benefit

Answer 30

a. A gift that has already been given without the expectation of compensation may not be withdrawn

Question 31

Quasi-Contract/Contract Implied

Answer 31

a. Not a true contract but an obligation imposed by a court despite the absence of a promise in order to avoid an injustice.

Question 32

Objective Standard

Answer 32

a. A party is bound to a contract by the objective reasonable interpretation of his words and actions in assenting to an agreement and not by his subjective intent.

Question 33

Offer

Answer 33

a. An offer requires a manifestation of present intent to enter a bargain that is stated in certain and definite terms and which is communicated to an identified offeree.

Question 34

Acceptance

Answer 34

The acceptance is a manifestation of assent to the terms of an offer in the manner prescribed or authorized in the offer. The acceptance must be an absolute, unequivocal and unqualified acceptance of each term in the offer.

Question 35

Mirror Image Rule

Answer 35

a. Under the “mirror image” rule, applied in common law transactions, an acceptance must conform to the terms set forth in the offer. No contract is formed if the acceptance contains terms that are different from or additional to those set forth in the offer.

Question 36

Termination of the Power of Acceptance

Answer 36

i. Rejection by the offeree, or
ii. Revocation by the offeror, or
iii. Counter-offer by the offeree, or
iv. Lapse of time, or
v. Death or incapacity of the offeror or offeree

Question 37

Counter-Offer

Answer 37

a. A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing form that proposed by the original offer.
b. An offeree’s power of acceptance is terminated by his making of a counteroffer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree

Question 38

Revocation of the Offer

Answer 38

An offeree rejects an offer when he communicates to the offeror – through words or actions – that he does not intend to accept the offer. A rejection cancels the offer and thereby terminates the offeree’s power of acceptance

Question 39

Lapse of time

Answer 39

a. Offers are open for the time specified by the offeror or, if not specified, then for a reasonable time.
b. A reasonable time is interpreted by all of the facts and circumstances including the subject matter of the offer, price fluctuations, the means by which the offer was made (e.g. face to face, through the mail, etc.) and business practice.

Question 40

Mailbox Rule

Answer 40

a. When sent through the mail, the acceptance is effective on dispatch. Everything else- i.e. the offer, a rejection, a counter-offer or revocation- is effective on receipt,

Question 41

Certainty

Answer 41

a. Even though a party intends to make an offer, the contract cannot be formed unless the terms of the offer are reasonably certain.
b. The terms are reasonably certain if they provide a basis for determining a breach and a remedy.
c. If one or more terms are left open, then that is evidence that a party did not manifest the requisite intent needed to form an offer or an acceptance.

Question 42

UCC Indefinite Terms

Answer 42

a. Even though one or more terms are left open a contract for sales does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

Question 43

UCC Gap Fillers

Answer 43

a. If the contract meets the standard of UCC then the courts will fill in reasonable terms
i. Open price term
ii. Place for delivery
iii. Time provisions
iv. Time for payment
v. Risk of loss
vi. Buyer’s right of inspection

Question 44

Price Quotes

Answer 44

a. Generally price quotes are not offers since alone they usually do not manifest intent to enter into a bargain. Merely quoting a price is commonly understood as inviting an offer rather than as making one. However, where it reasonably appears that the price quote invites acceptance and there is enough detail, then a price quote is an offer

Question 45

Advertisements as Offers

Answer 45

a. Advertisements, catalogs, flyers, and price quotations are usually not offers but are merely invitations to bargain.
b. However, where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract.

Question 46

Legal Detriment

Answer 46

a. Exists where the party:
i. Engages in an act that the party was not previously obligated—whether statutory or contractually – to perform; or
ii. Refrains from exercising a legal right

Question 47

Option Contract

Answer 47

a. Options are a type of contract which holds an offer open for a specified period of time. An option gives the option holder the right but not the obligation to enter into a contract
b. Options contracts, like all contracts, require consideration; otherwise, the promise to hold open the offer is a gratuitous promise

Question 48

Conditional Contracts

Answer 48

a. A conditional promise is one where the promise is limited by a condition. The condition is the occurrence (or non-occurrence) of some event. If the condition occurs, then the promise arises. If the condition does not occur, the promise does not arise

Question 49

Merchant’s Firm Offer-UCC

Answer 49

a. An offer by a merchant to buy or sell goods in a signed writing which by its terms give assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

Question 50

Merchant

Answer 50

a. “Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill

Question 51

Option Contracts-Majority Rule

Answer 51

i. In the context of an option contract nominal consideration is acceptable provided that the terms are fair. Therefore, one will often find courts upholding agreements where only $1 or slightly more in return for an agreement to hold an offer open for a specified period of time.

Question 52

Option Contracts-Minority Rule

Answer 52

i. First, it would enforce a written and signed option agreement with only a “purported consideration” so long as it was on fair terms and executed in a reasonable time. A purported consideration is something recited but not paid. Second, the Restatement provides for promissory estoppel in the context of option agreement though it has limits.

Question 53

Option Contracts-Mailbox Rule

Answer 53

i. Acceptance under an option contract is not effective until receipt.

Question 54

Option Contracts-Majority Rule

Answer 54

i. In the context of an option contract nominal consideration is acceptable provided that the terms are fair. Therefore, one will often find courts upholding agreements where only $1 or slightly more in return for an agreement to hold an offer open for a specified period of time.

Question 55

Option Contracts-Minority Rule

Answer 55

i. First, it would enforce a written and signed option agreement with only a “purported consideration” so long as it was on fair terms and executed in a reasonable time. A purported consideration is something recited but not paid. Second, the Restatement provides for promissory estoppel in the context of option agreement though it has limits.

Question 56

Option Contracts-Mailbox Rule

Answer 56

i. Acceptance under an option contract is not effective until receipt.