Exam 3

Question 1

Statute of Frauds- certain classes of contracts to be enforceable must be:

Answer 1

1. evidenced by a writing
2. signed by the person sought to be bound
   Found in contracts where lying was a problem so now it needs to be written down to be enforceable. Contracts under the statute of frauds are VOIDABLE.

Question 2

Classes of Contracts Required in Statute of Frauds: (Required List)

Answer 2

1. *Contracts evidencing an interest in Real Property (sale or lease of land)
2. *Contracts which by their terms cannot be performed within one year agreement (by terms of contract)
   o Lifelong contract can occur in one year if the person dies
3. *Promises to answer for debts of another (collateral contracts)
4. *Promises of executor of an estate to pay estate claims from personal funds(if someone dies with debt and you have written down you will pay out of pocket to avoid from liquidating estate)
5. *Promises arising from a promise to marry (antenuptual and postnuptual agreements)
6. *U.C.C. Contracts exceeding $500 dollars.

Question 3

Exceptions To Statute Of Frauds: (Be able to apply these)

Answer 3

1. Partial Performance
2. Part Payment – UCC
3. Judicial Admission

Question 4

Parole Evidence Rule-

Answer 4

Based on idea that there was never an oral agreement prior to contract/or the parties’ abandoned original contract when they began negotiating. Parole or external evidence shall not be allowed into evidence to add or modify a contract that is fully integrated or complete on its face. (Do not need to know as a definition)
• Cannot make something ambiguous that which at its face is not ambiguous

Question 5

Construction Rules:

Answer 5

• Contract Construction- Always look at the entire agreement. Law exercises good faith and applies contract to the better party if one is worse.
• Rules of Construction- How do you interpret the language? Ordinary words are to be interpreted based on ordinary meaning.
  • Whole Contract Rule-The provisions of a contract must be construed as a whole so that every party is given effect. Every word is equally important. (Provides context)
  • Strict Construction Against Drafting Party- ambiguity is held against the drafting party because they are the ones in power. (Insurance Rule)

Question 6

Interpreting Contradictory Contracts­ (What part takes precedence over others?)

Answer 6

1. *Handwritten (most like an actual discussion) is over…
2. *Type Written is over …
3. *Pre-Printed

Question 7

3 types of Third Parties:

Answer 7

• *3rd Party Beneficiary- 3 people and none are added. Contracts ends with 3
• *Assignments- Beginning with 2 people, then add 1. Ends with 3
• *Novation-Substation for an old contract with new one. Starts with 2 then adds 1 and subtracts 1. Ends with 2.

Question 8

3 Types of 3rd Party Beneficiaries: (LEARN THESE)

Answer 8

• *Creditor- 3rd party who was going to collect can sue B for breach of contract. Enforceable Rights
• *Donee- (Recipient of gift) Life insurance. Beneficiary can sue. Has claims against Promisor. Enforceable Rights.
• *Incidental- If there was no intent to benefit this 3rd party can’t sue. Not Enforceable

Question 9

Assignments

Answer 9

Transfer of a right, generally rights to receive payment. Courts encourage ability to assign because it promotes commerce

Question 10

Assignment of a Contract include:

Answer 10

1. Assignment of Rights (More common)

2. Delegation of Duties (more limited)

Question 11

Contracts That Aren’t assignable (delegation): Non-Assignable Rights (LIKELY A LIST)

Answer 11

1. *Assignment is prohibited by the contract
2. *Assignment would increase the burden of performance
3. *Where the right to receive personal services (ex: can’t assign marriage)
4. *Credit transactions- (Can’t assign credit to someone else)

Question 12

Assignee is Subject to

Answer 12

The Assignee takes the contract (right) subject to claims, defenses, and set-offs good against the assignor (MUST KNOW)

1. Claims or Cause of Action (a right to payment)
2. Defenses (a reason not to pay)
3. Set Offs (off-set; you owe a refund and so we will deduct that from what we owe you)

If A has a reason not to pay B, they have a reason not to pay C also

Question 13

Assignor’s Warranties-

Answer 13

1. The assigned right is valid
2. Assignor is the owner of the claim or has the right assigned
   (Potato Example in class)
   • Assignor is still liable for the performance

Question 14

Parts of a Contract-

Answer 14

1. *Covenant/Promise- Gives rise to damages when breached.
   o Major-> Material-> Breach
   o Minor-> Nonmaterial-> Set off
2. *Condition- stipulation or prerequisite in a contract. Triggering events; usually judicially disfavored

o *Condition Precedent- Condition that must occur before a party to a contract has an obligation to perform under contract. Contract created once certain event happens. (ex: wild rose=failure of a condition precedent for championship game)
o *Condition Subsequent- (RARE) event whose occurrence or lack thereof terminates a contract. Contract created but if something happens after, it’s over. (ex: If something happens, failed drug test, then you will be fired)
o *Condition Concurrent- Mutual duties of the contract are to take place simultaneously. (right to payment)

Question 15

Two Types of Tenders:

Answer 15

1. *Tender (TIME) of Performance- “If time is of the essence” (time is a material term). This is specified in contact. If not specified then it would be reasonable performance. Depends on facts of given contract.
2. *Tender of Payment- If you owe me money and try to give it to me now and I say no, you still owe me money

Question 16

Law of Perfect Tender

Answer 16

Having to accept anything but exactly what was ordered. Right to get what you asked for.

• *Substantial Performance Doctrine- (Adequacy of Performance) Exception to the rule of perfect tender. Equitable rule that if good faith attempt to perform does not precisely meet the terms of the agreement, the agreement will still be considered complete if the essential purpose accomplished. (If the defects are not INTENTIAL nor MATERIAL)
o *For this to apply the breach has to be Neither(Non): Material or Intentional

Question 17

Discharge-

Answer 17

action releasing you from completion of contract.

• 99% of contracts are discharged by performance

Question 18

DO NOT MEMORIZE AS LIST; Context in true false, know definitions pg. 404)
*8 Ways a Contract Is Discharged By Agreement:

Answer 18

1. By the terms of the Original Contract
2. Mutual Cancellation- both parties agree to cancel and walk away. No repayment.
3. Mutual Recession- both parties agree to cancel and go back to status quo (original standing). Give back item and money. Trade back (ex: cow case)
4. Substitution- agree to new agreement between same contracting parties. Same parties; new agreement.
5. Novation- substitution for an old contract with a new one that either replaces an existing obligation or replaces an original party with a new party. Different parties; same agreement.
6. Accord and Satisfaction- agreement after having differing views on different performance. Change the amount of payment because of unsatisfactory work.
7. Release- 1 party letting the other party off the hook.
8. Waiver- release or relinquishment of a known right or objection or specific part of contract; a provision in a contract.

Question 19

Impossibility- Standard is OBJECTIVE not Subjective:

Answer 19

• *Impossibility-> COMMON LAW- Objective. Based on the fact that the thing cannot be done due to external conditions. Terminates contract
o *Temporary Impossibility- Suspends the duty to perform. Does not terminate contract. Common Law. Weather is in this category.

• *Frustration of Purpose-> COMMON LAW- (Economic Frustration) Because of change in circumstances the purpose of the contract must have no value (frustration must be complete) to the party entitled to receive performance. This discharges a contract. Must completely destroy the purpose of the contract by events outside of your control.
o ex: Guys getting hotel room to watch parade, parade route changes, the room is now useless.

• *Commercial Impracticability-> U.C.C.- Applies to sales. Imposed to deal with the harsh rule that a party must perform its contracts unless it is impossible. However, not all impractabilities are excuses for nonperformance. Does not require same level of frustration. Expanded frustration of purpose. Tangible movable personal property.

Question 20

Curative Tender-

Answer 20

Replace defective; you have a chance to fix it

Question 21

Discharge by Operation of Law- Discharging a contract when (pg. 410 True/False)

Answer 21

1. An alteration or change is made by a party
2. The destruction of written contract with intent to discharge it
3. Bankruptcy
   - • Surrendering all assets when one is unable to pay debts results in discharge for unpaid balance of debt. A federal law that allows debtors to seek and be granted discharge from their debts.
4. Operation of statute of limitations
   - Statute that restricts a time period in which a lawsuit can be brought against someone. The maximum period for judgments of record is 10-20 years. A contract cannot be discharged by unilateral action unless authorized by the act itself or by statute.
5. Contractual limitations. If an event takes place it has effect.
   - • - Typically occurs between major companies; agree to a shorter term for the contractual limitations if a dispute arises.

Question 22

Breach

Answer 22

-failure to act or to perform in the manner called for in a contract. Frees material party from contract.
• If it is a quasi-contract there are equitable remedies (status quo ante to prevent unjust enrichment) instead of damages.
• Law gives rise to damages to give non-breaching party the benefit of the bargain.
1. *Material (Major) Breach- breaks the contract and gives rise to a claim for damages
2. *Non-Material (Minor) Breach- does not break the contract, but does provide a basis for incidental damages and/or offsets
3. *Law- Damages
4. *Equity- Unjust Enrichment (Remedy)

Question 23

Anticipatory Breach-

Answer 23

A party to a contract clearly repudiates his or her obligations under the contract. (Material Breach and Anticipatory breach) Can result in repudiation (undoing of the contract). Refers to time of the contract.

• Repudiation- result of a buyer or seller refusing to perform the contract as stated.
• *Anticipatory Repudiation- Can occur if there is a material breach. Result of the buyer or seller refusing contract made in advance of time of performance.

Question 24

Repudiation is by:

Answer 24

1. Words- “I am not going to do it”
2. *Conduct- If a farmer only has a certain crop and sells it to another party prior to contracting parties date, then contract is impossible to carry out and is reputed. If adequate insurance wasn’t given,

Question 25

Mitigate-

Answer 25

U.C.C. calls it cover. The injured party is required to try and reduce damages if reasonably possible. After a major breach, anticipatory breach, occurs.

Question 26

5 Contract Damages (List)

Answer 26

1. *Compensatory- sum of money that compensates party for the damages incurred as result of breach; Difference between Contract Price & Market Price
   o (ex: Contract price was $10,000 and cover cost was $12,500= Compensatory Damages are $2,500)
2. *Consequential (duty to mitigate)- flow naturally, probably, and foreseeably from the breach; arise from foreseeable consequences.
   o Mitigation of Damages- cover; to seek to lesson damages by obtaining substitute goods.
3. *Nominal- Damages in name only; sum awarded to plaintiff in order to establish legal rights have been violated but are damages in name only. 1 dollar. Used for attorney’s fees.
4. *Punitive- (treble) damages designed to punish breaching party and to discourage certain practices. Excess of compensatory damages imposed on defendant because of the particular wrongdoing.
   o (ex: McDonalds Coffee story)
5. *Liquidated- Pre-agreed amount where actual damages are difficult to determine
   o ex: If building could generate revenue and was not done on time, builder must pay

Question 27

Equitable Remedies-

Answer 27

To return the injured party to their original position before performance began (status quo ante- position you enjoyed before performance began); arise from Quasi contracts when there is a material breach.

1. *Reformation- contract says the wrong thing so you can both rewrite it.
2. *Recession- remedy for mutual mistake of fact. Annul contract. Money back to original standing. (ex: cow case)
3. *Restitution- restore someone to status quo ante. Back to original standing.
4. *Injunction- (injoin) temporary restraining order-> preliminary injunction-> permanent injunction. Order from court to refrain from doing a specified act. See it when an activity lacks utility or usefulness. Action to get you to stop= Abating a nuisance
5. *Specific Performance- Chattel (unique items). This is allowed for unique chattel of money or other compensation wouldn’t be adequate because of unique nature of the chattel. This is also true in terms of land.

Question 28

Types of Property:

Answer 28

• *Real Property- Land or property attached to or imbedded in land. (ex: oil tanks) Fixtures are things added to a building.
• *Personal Property- property that is movable or intangible. Such as possessions or intellectual property.

Question 29

2 Elements to a Gift- (Know as a LIST)

Answer 29

1. *Donative Intent- intent to give the gift; must be present (you must actually have a gift in order to give it)
2. *Delivery
   o Actual- handing the item over
   o Constructive- Symbolic delivery of goods such as a key or papers.

Question 30

2 Types of Gifts: (Know as a LIST)

Answer 30

1. *Gift Inter Vivos- Any transaction that takes place between living person and creates rights prior to the death of any of them; Gift between the living

2.	*Gifts in Causa Mortis-  Gift made in anticipation of death; Gift by donor in the belief that death was immediate and impending that is revoked under certain circumstances. Must be completed by death. 
o	Revoked if:
1.	the donor does not die
2.	the donor revokes prior to death
3.	the donee dies before the donor

Question 31

Lost Property-

Answer 31

Not entitled to a reward or compensation without a contract specifying. Person finding property acquires possession but not title. If it is lost in public place where the person could find it, there is no possession by the finder. (NOT on test as a List)

1. Lost- finder maintains possession of it because the person who lost it would not know where to find it
2. Misplaced- where you would likely return to find it
3. Abandoned- you can take it; usually determined by lack of value
4. Treasure Trove- valuable stuff where the rightful owners of it are long gone

Question 32

Escheat-

Answer 32

The process by which the ownership of unclaimed property is transferred to the state.

Question 33

*4 Types of Joint Tenancy- (Not on test as a list; Will see question on NON-MARITAL TENANCIES)

Answer 33

• *Joint Tenancy with Right of Survivorship (ROS)- Title of property passes on death; On death of 1 tenant, the remaining tenant takes the share of the deceased. After first death, everyone becomes tenants in common (Like a hand grenade; it only works once). If three people receive something due to death, and one dies the other two split it. If another dies his kids split it.
• *Tenants in Common- The interest of the tenant is transferred or inherited thus making the taker a new tenant in common.
• *Tenancy by Entirety- Exists only from husband to wife. Transfer of property completely to one or the other. Right of survivorship cannot be trumped and spouse gets it. (MARITAL TENANCY)
• *Community Property- Property acquired during the time of marriage. Some states provide right of survivorship other provide half to widow and half to heirs on death. (MARITAL TENANCY)

Question 34

*3 Types of Bailments and Burden of Proof:

Answer 34

Burdens of proof where bailed property is damage during the bailment

1. *Sole Benefit of the Bailor- Keeping books at a friend’s house over the summer. Must be liable only for gross negligence for a damage to be collected
2. *Mutual Benefit- Commercial. Requires ordinary negligence.
3. *Benefit of Bailee- Loaning a person your Les Paul guitar. Bailee benefits more. Liable in slight negligence.

Question 35

Bailment-

Answer 35

Relationship that exists when personal property is delivered into the possession of another under an agreement that identical property will be returned in accordance with agreement.
• Has 2 parts:
1. Actual
2. Constructive

Question 36

Ask 2 questions for Bailment:

Answer 36

1. Distinguish from rental
2. Who has burden of proof? (Generally plaintiff)
   o *Based on Contract- Becomes a tort liability claim.
   o Exclusive rental of space is not bailment. Storage spaces are not bailments.
   o Using part of space/sharing space with others is bailment. Liability issues are different.