Contracts Rule Language

Question 1

Article 2

Answer 1

“Article 2 of the Uniform Commercial Code (UCC) applies to transactions in goods. Goods are things moveable at the time of identification to the contract. A contract under Article 2 may be made in any manner sufficient to show agreement, including conduct by bother parties which recognizes the existence of such contract.”

Question 2

Offer

Answer 2

A person makes an offer when the person communicates to another a statement of willingness to enter into a bargain so that the other understands that his assent tot he bargain is invited and will conclude it.” The terms of an offer need to be reasonably certain.

Question 3

Counteroffer

Answer 3

At common law, a statement is a counteroffer, rather ant an acceptance, when the terms of the initial offer are changed (mirror image rule).

Question 4

Options K

Answer 4

General, an offer may be revoked before acceptance. A promise to hold an offer open requires consideration in order to be binding (unless the UCC firm offer exception applies).

Question 5

Acceptance

Answer 5

Acceptance is a manifestation of assent tot the terms of an offer made in a manner invited by the offer.

Question 6

Rejection

Answer 6

A rejection is manifestation of intent to not accept the offer. It terminates the offer’s power to accept an offer. It is effective when received by the offeror.

Question 7

Consideration

Answer 7

Consideration is a legal detriment or bargained for exchange. A promise to make a gift does not constitute consideration.

Question 8

Pre-Existing Duty Rule

Answer 8

Under common law, promising to perform a legal duty already owed to a promisor is not valid consideration. Exceptions include if the duty is changed (even slightly), unforeseen circumstances, etc.

“It is true that some costs now will allow a contract to be modified without additional consideration of the modification is ‘fair and equitable’ in view of circumstances not anticipated when the contract was made.”

“This usually means that a party encountered difficulties in performing bordering on impracticability.”

Question 9

Gap Fillers

Answer 9

A contract for the sale of goods does NOT fail because one or more terms are missing if the parties intended to make a contract and there is an appropriate remedy for breach.

Gap fillers include course of performance, course of dealing, and trade usage.

Question 10

Performance Requirements (Common law vs. UCC)

Answer 10

Under common law, a party must substantially perform its contractual obligations in order to demand performance (usually payment) from the other party. Courts will look at several factors to determine whether performance was substantial.

The UCC Art. 2 requires perfect tender for one shot deals.

Question 11

Buyer’s Ability to Reject Goods

Answer 11

A buyer can generally reject goods for any reason under the perfect tender rule (There are exceptions to this–eg installment contracts)

Question 12

Buyer’s ability of revocation of acceptance of goods (4 Scenarios)

Answer 12

If a buyer accepts the goods, he can no longer reject them.

BUT, a buyer can revoke his acceptance of the goods when:
1. the nonconformity substantially impairs the value to him;
2. he accepted the goods because he had a reasonable belief the non conformity would be cured (and it wasn’t), or he didnt discover the nonconformity because the nonconformity was difficult to discover, or because of seller’s assurances;
3. he revokes within a reasonable time after he discovers or should’ve discovered the nonconformity; AND
4. he revokes before any substantial change in condition of the goods which is not caused by their own defect.

Question 13

Anticipatory Repudiation

Answer 13

This occurs when there is an unequivocal manifestation by one party to the other that the party cannot or will not perform its obligations under the contract and this statement is made BEFORE the repudiating party’s performance is due.

Question 14

Prospective Inability to Perform

Answer 14

This occurs when a party has reasonable grounds for insecurity that the other party is unable or unwilling to perform. This is merely doubt.

Under the UCC, the party may then, in writing, demand adequate assurance of performance, and until she receives such assurance, may suspend her performance.

Question 15

Retracting a Repudiation

Answer 15

the party who has repudiated can retract his repudiation unless th other party cancelled the contract, materially changed his position in reliance on the repudiation, or indicated that she considered the repudiation to be final.

Question 16

Statute of Frauds (Generally)

Answer 16

“A contract within the SOF satisfies that statute and is enforceable if it is evidenced by a writing signed by the party to be charged, which (1) reasonably identifies the subject matter of the contract, (2) is sufficient to indicate that a contract has ben made, and (3) states with reasonable certainty the essential terms of the contract.”

Question 17

Duress

Answer 17

A contract is voidable when it is established that a party’s manifestation of assent is induced by an improper threat that leaves the party no reasonable alternative

Question 18

Expectation Damages

Answer 18

“The normal measure of damages for breach of contract is expectation damages, which aim to give the non breaching party the benefit of his bargain.”

UCC Rule: “Expectation damages aims to put the aggrieved party in as good a position as if the other party had fully performed.”

Question 19

Punitive Damages

Answer 19

Punitive Damages are generally not recoverable in a breach of contract action unless the conduct constituting the breach is also a tort for which punitive damages can be recovered

Question 20

Restitution (unjust enrichment/quantum merit)

Answer 20

A party may be able to recover restitution for any benefit conferred by way of part performance in excess of the loss that he caused by his own breach.

Question 21

Mitigation

Answer 21

As a general rule, a party cannot recover damages for a loss that the party could have avoided by reasonable efforts.

Question 22

Modification of UCC Contracts (Good Faith definition)

Answer 22

“Under Article 2, contract modifications sought in good faith are binding without consideration.”

“Good faith means there must be a LEGITIMATE COMMERCIAL REASON for the modification.”

Question 23

What is the effect of substantial performance in service contracts?

Answer 23

“In contracts not involving the sale of goods, the condition of complete performance may be excused if the party has rendered substantial performance.”

Question 24

Rule for determining if performance was substantial

Answer 24

“The rules for determining whether performance is substantial are the same as those for determining whether a breach is minor or material: If the breach is minor, performance is substantial; if the breach is material, performance is not substantial.”

Question 25

What will a court consider when determining whether a breach is material?

Answer 25

“To determine whether a breach is material, the court looks at: the amount of benefit received, the adequacy of damages, extent of performance, hardship to the breaching party, and whether the breach was negligent or willful.”

Question 26

Consequential Damages

Answer 26

“Consequential damages consist of losses beyond those covered by the standard measure that a reasonable person would have foreseen would occur as a result of the breach.”

Question 27

Requirement of forseeability?

Answer 27

“Contract damages must be foreseeable to be recoverable.”

“Damages are foreseeable if a reasonable person in the position of the breaching party would have known at the time the contract was made that the damages were likely to occur as a result of the breach.”