contracts & sales

Question 1

what types of contracts are governed by the common law?

Answer 1

contracts for services or real estate

Question 2

under the UCC, even if the terms of a written contract for the sale of goods appear to be unambiguous, what evidence can be presented to explain or supplement the contract?

Answer 2

course of performance, course of dealing, and trade usage

Question 3

how is priority given to evidence presented to explain or supplement inconsistent express contract terms?

Answer 3

if the express contract terms are inconsistent with the course of performance, or trade usage, priority is given to the express terms, followed by course of performance, course of dealing and trade usage

Question 4

define the parol evidence rule

Answer 4

the parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written

Question 5

what are consequential damages?

Answer 5

consequential damages arise out of special circumstances unique to the parties to the contract, rather than arising necessarily from the transaction itself

Question 6

define offer

Answer 6

an offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree

Question 7

how is a bilateral offer accepted?

Answer 7

an offer requiring a promise to accept can be accepted either with a return promise OR by starting performance

Question 8

what requirements must be met to allow an adversely affected party to void a contract based on mutual mistake? (4)

Answer 8

(i) mistake of fact existing at the time the contract was formed;
(ii) the mistake relates to a basic assumption of the contract;
(iii) the mistake has a material impact on the transaction; and
(iv) the adversely affected party did not assume the risk of the mistake

Question 9

if a party has substantially complied or performed with a constructive condition, what can the party recover?

Answer 9

in general, the party can recover the contract price minus any amount that it will cost the other party to obtain the promised full performance

Question 10

if a party does not substantially perform can they recover damages?

Answer 10

a party who has not substantially performed generally cannot recover damages based on the contract, but she may be able to recover through restitution

Question 11

when is the doctrine of anticipatory repudiation applicable, and in what manner must the repudiation be made?

Answer 11

the doctrine of anticipatory repudiation is applicable when a promisor repudiates a promise BEFORE the time for performance is due; the repudiation must be clear and unequivocal, may be by conduct or words, and, if a statement, must be made to the promisee or a third-party beneficiary or assignee of the promise

Question 12

what doctrine comes into play when an unexpected event arises that destroys one party’s purpose in entering into the contract, but performance of the contract is not rendered impossible?

Answer 12

the doctrine of frustration of purpose—the frustrated party is entitled to rescind the contract without paying damages

note: the event that arises must not be the fault of the frustrated party, and its nonoccurrence must have been a basic assumption of the contract

Question 13

under the common law, why was something given in the past not considered adequate consideration for a new contract?

Answer 13

under the common law, past consideration is typically not adequate consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise

note: there is a modern trend toward enforcing such promises under the material benefit rule

Question 14

under the second restatement, can an extrinsic term that would “naturally be omitted” from a writing be introduced?

Answer 14

yes, so long as it does not contradict the writing

Question 15

how is a unilateral offer accepted?

Answer 15

acceptance of an offer for a unilateral contract requires complete performance

Question 16

what happens when performance has begun on a unilateral offer?

Answer 16

once performance has begun, the unilateral offer is irrevocable for a reasonable period of time to allow for complete performance unless there is a manifestation of a contrary intent

Question 17

when is the warranty of fitness for a particular purpose implied?

Answer 17

the warranty of fitness for a particular purpose is implied whenever the seller has reason to know that (i) the buyer has a particular use for the goods, and (ii) the buyer is relying upon the seller’s skill to select the goods

Question 18

how is a warranty of fitness for a particular purpose disclaimed?

Answer 18

the disclaimer must be in writing and must be conspicuous

Question 19

name the types of contracts that fall within the Statute of Frauds (5)

Answer 19

-marriage: a contract made upon the consideration of marriage;
-suretyship: a contract to answer for the debt or duty of another
-one year: a contract that cannot be performed within one year from its making;
-UCC: under the UCC, a contract for the sale of goods for a price of $500 or more; and
-real property contract: a contract for the sale of an interest in real property

acronym M. SOUR (mr. sour)

Question 20

under the UCC, what is required by the “perfect tender rule”?

Answer 20

the perfect tender rule requires perfect goods and perfect delivery; “perfect” means in accordance with the contract provisions or in accordance with the UCC if the contract is silent on tender

Question 21

define the material benefit rule

Answer 21

under the material benefit rule, when a party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though, at common law, such a promise would be unenforceable due to lack of consideration

Question 22

when is a plaintiff entitled to restitutionary recovery?

Answer 22

when a defendant is unjustly enriched by the plaintiff, restitution generally allows the plaintiff to recover on the benefit conferred by the plaintiff upon the defendant

Question 23

how is restitutionary recovery measured?

Answer 23

generally, the benefit is measured by either (i) the reasonable value of the defendant obtaining that benefit from another source, OR (ii) the increase in the defendant’s wealth from having received that benefit

Question 24

what are the three events that would cause the rights of an intended beneficiary to vest?

Answer 24

the rights of an intended beneficiary vest when the beneficiary:
(i) materially changes position in justifiable reliance on the rights created;
(ii) manifests asset to the contract at one party’s request; OR
(iii) files a lawsuit to enforce the contract

Question 25

what are the requirements of a writing for contracts that fall under the Statute of Frauds?

Answer 25

the writing must:
(i) be signed by the party against whom enforcement is sought; and
(ii) contain the essential elements of the deal

Question 26

define fraud in the inducement

Answer 26

fraud in the inducement occurs when a fraudulent misrepresentation is used to induce another to enter into a contract

Question 27

what is fraud in the inducement’s effect on a contract?

Answer 27

contract is VOIDABLE by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement

Question 28

state the common-law mirror-image rule

Answer 28

the common-law mirror-image rule states that the acceptance must mirror the terms of the offer; any change to the terms of the offer, or the addition of another term not found in the offer, acts as a rejection of the original offer and as a new counteroffer

Question 29

at what point can repudiation no longer be retracted?

Answer 29

repudiation may be retracted until such time as the promisee:
(i) acts in reliance on the repudiation;
(ii) signifies acceptance of the repudiation; OR
(iii) commences an action for breach of contract

Question 30

define acceptance

Answer 30

an acceptance is an objective manifestation by the offeree to be bound by the terms of the offer

Question 31

what is the main difference between contract modification under the common law and contract modification under the UCC?

Answer 31

at common law, modifications require consideration; under the UCC, they require only good faith

Question 32

what are the rights of the assignee?

Answer 32

an assignee takes all of the rights of the assignor as the contract stands at the time of the assignment, but she takes subject to any defenses that could be raised against the assignor

Question 33

if a shipment contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?

Answer 33

once the goods are delivered to the carrier

Question 34

define intended beneficiary

Answer 34

one to whom the promisor will pay directly to relieve the promisee from a debt or whom the promisee intends to give the benefit of the promised performance

Question 35

what three factors does a court use to determine if restitutionary recovery is available in a quasi-contract situation?

Answer 35

a court may allow restitutionary recovery if:
(1) the plaintiff has conferred a measurable benefit on the defendant;
(2) the plaintiff acted without gratuitous intent; and
(3) it would be unfair to let the defendant retain the benefit because either (i) the defendant had the opportunity to decline the benefit but knowingly accept it, or (ii) the plaintiff has a reasonable excuse for not giving the defendant such opportunity

Question 36

[UCC Firm Offer Rule] under the UCC, what three requirements must be met for an offer to buy or sell goods to be an irrevocable firm offer?

Answer 36

(i) the offeror is a merchant;
(ii) there is an assurance that the offer is to remain open; and
(iii) the assurance is contained in a signed writing from the offeror

Question 37

if a destination contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?

Answer 37

once the goods are delivered to a particular place (specified in the contract)

Question 38

what is an output contract?

Answer 38

an output contract is a contract under which a seller agrees to sell all that she manufactures of a product to the buyer; there is consideration in these agreements because the promisor suffers a legal detriment

Question 39

what is a void contract?

Answer 39

a void contract results in the entire transaction being regarded as a nullity, as if no contract existed between the parties; the contract is unenforceable

Question 40

what is a voidable contract?

Answer 40

a voidable contract operates as a valid contract unless and until one of the parties takes steps to avoid it

Question 41

define accord

Answer 41

under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s existing duty

Question 42

define satisfaction

Answer 42

a satisfaction is the performance of the accord agreement; it will discharge both the original contract and the accord contract

Question 43

when is the implied warranty of merchantability implied?

Answer 43

the implied warranty of merchantability is implied whenever the seller is a merchant

Question 44

how is an implied warranty of merchantability disclaimed?

Answer 44

the disclaimer can be oral, but must use the term “merchantability” and must be conspicuous if in writing; language that indicates there is no implied warranty is sufficient (e.g., “as is” or “with all faults”)

Question 45

when may a nonbreaching party pursue specific performance as a remedy?

Answer 45

when damages are an inadequate remedy, the nonbreaching party can pursue specific performance

note: legal remedies are often inadequate in contracts for land or other unique goods

Question 46

what is the difference between a gift and valid consideration?

Answer 46

the test to distinguish a gift from valid consideration is whether the offeree could have reasonably believed that the intent of the offeror was to induct the action; if yes, there is consideration and the promise is enforceable

Question 47

define condition precedent

Answer 47

a condition that precedes the obligation to perform

Question 48

under the UCC, what key term(s) must typically be specified for a contract to be formed?

Answer 48

quantity

note: the UCC “fills the gap” if other terms are missing

Question 49

what three conditions must be met fro the defense of impracticability to be available?

Answer 49

(i) an unforeseeable event has occurred;
(ii) nonoccurrence of the event was a basic assumption on which the contract was made; and
(iii) the party seeking discharge is not at fault

Question 50

under the UCC, in what two circumstances does the seller have a right to cure a defective tender?

Answer 50

(i) the time for performance under the contract has not yet elapsed; OR
(ii) the seller had reasonable grounds to believe that the buyer would accept despite the nonconformity

note: the seller must give notice of the intent to cure and make a new tender of conforming goods

Question 51

what is an illusory promise?

Answer 51

an illusory promise is one that essentially pledges nothing because it is vague or because the promisor can choose whether to honor it; such a promise is not legally binding (i.e., void)

Question 52

under the common law, if the breach is material, what remedies can be sought by the nonbreaching party?

Answer 52

the nonbreaching party is able to withhold any promised performance and pursue remedies for breach, including damages

note: if the breach is minor, the nonbreaching party may be able to recover damages, but that party also still must perform under the contract

Question 53

what is the difference between an assignment and a delegation?

Answer 53

an assignment is the transfer of rights under a contract, and a delegation is the transfer of duties and obligations under the contract

Question 54

define fraud in the factum

Answer 54

fraud in the factum (or fraud in the execution) occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction

Question 55

state fraud in the factum’s effect on a contract

Answer 55

no contract is formed, and the apparent contract is VOID

Question 56

when a preexisting duty is at issue, what two options does a promisor have to create valid consideration?

Answer 56

the promisor can:
(1) give something in addition to what is already owed
(2) vary the preexisting duty in some way

Question 57

when is an objective standard used to determine whether a condition is satisfied?

Answer 57

the preferred method is an objective standard based upon whether a reasonable person would be satisfied

Question 58

when is a subjective standard used to determine whether a condition is satisfied?

Answer 58

when the aesthetic taste of a party determines whether the other party’s performance is satisfactory, satisfaction is determined under a subjective standard

Question 59

[Battle of the Forms] under the UCC, when both parties are merchants, an additional term in the acceptance is automatically included in the contract, unless: (name the 3 exceptions)

Answer 59

(i) the term materially alters the original contract;
(ii) the offer expressly limits acceptance to the terms of the offer; or
(iii) the offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received

note: if any one of these three exceptions is met, the term will not become part of the contract, and the offeror’s original terms control

Question 60

under the mailbox rule, when is acceptance effective?

Answer 60

an acceptance that is mailed properly (i.e., correct postage and address) within the allotted response time is effective when sent as opposed to on receipt, unless the offer provides otherwise.

Question 61

who lacks the capacity to make a contract?

Answer 61

(i) minors (under the age of 18);
(ii) people who are mentally ill;
(iii) people who are intoxicated; and
(iv) people whose property is under guardianship by reason of adjudication

Question 62

define incidental beneficiary

Answer 62

one who benefits from a contract even though there is no contractual intent to benefit that person

note: an incidental beneficiary has no rights to enforce the contract

Question 63

what is the basic concept of legal detriment?

Answer 63

there must be something of substance, either an act or a promise, which is given exchange for the promise that is to be enforced

Question 64

define consideration

Answer 64

consideration is evidenced by a bargained-for exchange in legal position between the parties; most courts conclude that consideration exists if there is a detriment to the promisee, irrespective of the benefit to the promisor

Question 65

define the common-law four-corners rule

Answer 65

under the common law, a court was permitted to look only to the writing itself (within the “four corners” of the document) for evidence of intent (regarding whether there is total, partial, or no integration)

Question 66

under the common law, what terms must be covered in order for a contract to be formed?

Answer 66

all essential terms (i.e., the parties, subject matter, price, and quantity)

Question 67

what are four forms of consideration?

Answer 67

consideration can take the form of:
(1) a return promise to do something;
(2) a return promise to refrain from doing something legally permitted;
(3) the actual performance of some act;
(4) refraining from doing some act

Question 68

what is an implied-in-fact contract?

Answer 68

an implied-in-fact contract is a contract that results when a person’s assent to an offer is inferred solely from the person’s conduct; to be contractual bound, the person must not only intend the conduct but also know or have reason to know that the conduct may cause the offeror to believe the offer was accepted

Question 69

what types of contracts are governed by the UCC?

Answer 69

any contract involving the sale of goods

Question 70

what is a requirements contract?

Answer 70

a requirements contract is a contract under which a buyer agrees to buy all that is required of a product from the other party; there is consideration in these agreements because the promisor suffers a legal detriment

Question 71

define condition subsequent

Answer 71

a condition that excuses the duty to perform after a particular event occurs

Question 72

what are the three requirements for a promise to be binding under promissory estoppel?

Answer 72

(i) the promisor should reasonably expect it to induce action or forbearance on the part of the promisee or a third person;
(ii) the promise does induce such action or forbearance; and
(iii) injustice can be avoided only by enforcement of the promise

Question 73

define constructive condition of exchange (CCE)

Answer 73

when a party’s performance can be rendered at the same time as the other party’s performance, each party’s performance is conditioned on the other party’s performance; both parties’ performances are due simultaneously, unless the language or circumstances indicate otherwise

Question 74

what is the formula for expectation damages?

Answer 74

expectation damages = loss in value + other loss - cost avoided - loss avoided

Question 75

when is a revocation of an offer, sent by mail, effective?

Answer 75

upon receipt (example: On day 1, A mails an offer to B. On day 2, A mails a revocation to B. If B receives the offer and accepts before receiving the revocation, a contract is formed.)