Final Contracts Prep

Question 1

Section 2 Restatement: Promise

Answer 1

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 2

Section 2 Restatement: Promisor

Answer 2

The person manifesting the intention is the promisor

Question 3

Section 2 Restatement: Promisee

Answer 3

The person to whom the manifestation is addressed is the promisee

Question 4

Section 2 Restatement: Beneficiary

Answer 4

Where performance will benefit a person other than the promisee, that person is the beneficiary

Question 5

Express Promise

Answer 5

When a promise is directly expressed

Question 6

Implied Promise

Answer 6

Promises can be implied by people’s actions/words and they are just as enforceable.

Question 7

Construed Promises (Implied in Law)

Answer 7

Promises the court constructs to prevent unjust enrichment.

Question 8

Purpose of consideration

Answer 8

• to help us decide whether a promise is enforceable
• we need legal tools to help us sort through enforceable and unenforceable promises
• consideration is one of those tools

Question 9

Bargain definition of Consideration

Answer 9

To constitute consideration, a performance or return promise must be bargained for. A performance or return promise is bargained for if it is sought by the promisor in exchange for [their
promise and given by the promisee in exchange for that promise.

Question 10

Benefit/Detriment Definition of Consideration

Answer 10

The promisee’s consideration must result in a benefit to the promisor and/or the promisee’s consideration results in a detriment to the promisee. (this is an older definition). The promisee’s return promise or performance counts as consideration if it is bargained for and results in a benefit to the promisor and/or a detriment to the promisee.

Question 11

Adequacy of consideration

Answer 11

Nothing is consideration that is not regarded as such by both parties (Dougherty v Salt). A promise may also be legally enforceable even though the consideration received by the promisor has no “value”

Question 12

Conditional Promises

Answer 12

A condition is an “if” or “unless” attached to a promise. A conditional promise is a promise to act that does not “ripen” into a duty unless a stated condition occurs.

Question 13

Past Consideration

Answer 13

Promisor hasn’t bargained for it since the consideration was already performed so therefore it doesn’t count.

Question 14

Pre-Existing Duty Rule

Answer 14

exceptions are when the modification is due to circumstances not anticipated and the modification is fair and equitable

Question 15

Section 89 Restatement: Exceptions to the pre-existing duty rule

Answer 15

A promise modifying a duty under contract not fully performed on either side is binding
(a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or
(b) to the extent provided by statute; or
(c) to the extent that justice requires enforcement in view of material change in position in reliance on the promise.

Question 16

Promissory Estoppel Section 90 Restatement

Answer 16

1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Question 17

Promissory Estoppel and Sophisticated Parties

Answer 17

When it comes to whether reliance is reasonable, one can look at whether the promisee was sophisticated or not to see whether it would have been reasonable. A more sophisticated party should know better about certain promises that don’t show a strong obligation.

Question 18

Tasini Standards for restitution/contract in law

Answer 18

The equity doctrine of unjust enrichment rests on the principle that a party should not be allowed to enrich itself at the expense of another. In order to establish a claim for unjust enrichment under NY law, a plaintiff must establish:
1. that the defendant benefitted
2. at the plaintiff’s expense
3. That equity and good conscience require restitution.

Question 19

Tasini Case Explained

Answer 19

In the Tasini case, they failed to establish the claim of unjust enrichment since there had been no expectation of compensation initially. While the defendant did benefit at the plaintiff’s expense, equity and good conscience did not require restitution since defendants had made it clear that they never intended to pay and the plaintiffs’ voluntarily gave consent without expectation that they would be compensated for it.

Question 20

Purpose of Equity and Good Conscience standard for restitution

Answer 20

Equity and good conscience serves the purpose of helping those who entered into an agreement unknowing of their lack of compensation. Opportunity to reject the benefit is another factor they look at when determining equity and good conscience.

Question 21

Quasi contract/constructive contract

Answer 21

A quasi contract is a legal obligation imposed by law to prevent unjust enrichment. This is also called a contract implied in law or a constructive contract.

Question 22

Offer vs Invitation to Bargain

Answer 22

Mere information or an invitation to negotiate does not constitute an offer. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person into understanding that his assent to the bargain is invited and will conclude it.

Question 23

Acceptance vs Counteroffer

Answer 23

The acceptance must be transmitted to the offeror in some overt manner. Intent of acceptance is not enough. An acceptance must be definite and unequivocal. Acceptance may not impose additional conditions on the offer, nor may it add limitations or else it would be a counteroffer.

Question 24

Section 36 Restatement: Methods of Termination of the Power of Acceptance

Answer 24

(1) An offeree’s power of acceptance may be terminated by:
(a) rejection or counter-offer by the offereee, or
(b) lapse in time, or
(c) revocation by the offeror, or
(d) death or incapacity of the offeror or offer
(2) In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.

Question 25

Option Contracts

Answer 25

The agreement to keep an offer open for a given period of time in exchange for consideration is sometimes known as an option contract.

Question 26

Restatement Section 45: Option Contract Created By Part Performance Or Tender

Answer 26

(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
(2) the offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.

Question 27

Bilateral Contract

Answer 27

is one in which each party promises to perform and each owes a duty of performance to the other.

Question 28

Section 71 of Restatement: Requirement of Exchange; Types of Exchange

Answer 28

(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.

Question 29

Section 24 Restatement: Offer Defined

Answer 29

An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

Question 30

Section 50 Restatement: Acceptance of Offer Defined; Acceptance by Performance; Acceptance by promise.

Answer 30

(1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

Question 31

Section 17 Restatement: Requirement of a bargain

Answer 31

(1) Except as stated in subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
(2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under rules stated in sections 82-94.

Question 32

Section 211 Restatement: Standardized Agreements

Answer 32

(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.
(2) Such a writing is interpreted wherever reasonable as treating alike those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.
(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.

Question 33

Rolling Contracts

Answer 33

Refers to situations where final assent to the contract is deferred until after the non drafter has an opportunity to read the terms. That is, no final contract was made at the point of purchase, but the delivery of the standardized terms is an offer. ProCD, Inc v Zeidenberg is a good example of this.
It is not so much that we have a clear offer and acceptance but some contracts form through a sequence of events where at different points things lock in. There needs to at least be notice of additional terms and a reasonable opportunity to accept. As long as those conditions are met, the consumer has accepted the agreement and the additional terms.

Question 34

What makes a contract term unconscionable?

Answer 34

A contract or term of a contract is unconscionable if the contract or term is imposed on the party by unfair means and the term itself is unfair or unduly harsh or one-sided.

Question 35

Preprinted Terms

Answer 35

When a buyer goes to a retail store, selects a product, and take sit to the cashier. Before the buyer pays, the cashier prints out and gives the buyer a piece of paper headed “invoice.” The invoice contains a return policy. When the buyer signs the invoice, the parties have executed a contract that incorporates the store’s standard return provision. The buyer may or may not have read the invoice before signing it, but that does not matter. The buyer had a duty to read it under the objective test of assent, and the buyer is bound by manifested assent, evidenced by the signature on the invoice.

Question 36

Box-top Terms

Answer 36

Where the return policy is set out in bold print on a clearly visible sticker affixed to the box containing the product. Standard terms brought to the attention of the non drafter in this way are called box-top terms and bind a buyer who saw or reasonably should have seen them.

Question 37

Shrinkwrap Terms

Answer 37

There is no invoice and no sticker on the box. Shrinkwrap terms are on a piece of paper that the buyer finds upon opening the box. This is called a shrink-wrap term because it is an allusion to the thin plastic wrap that is commonly used to seal packaged products. Since the term is included in the package or container and has not been seen by the buyer until it is opened, after the transaction in the store has been completed the shrink-wrap terms may not bind the buyer because the seller did not make it known to the buyer until after the contract was made at the store. However, the non drafter could be bound to a shrink-wrap term if a reasonable person would have expected that the contract was subject to standard terms and the standard term in question was of the kind likely to be included in the contract.

Question 38

Clickwrap

Answer 38

standard terms presented on a website that require the non drafter to take affirmative action to acknowledge the acceptance of the standard terms to make a purchase. Since the non drafter cannot complete the transaction without clicking to express assent to the standard terms, provisions presented in this way have come to be called clickwrap terms. Provided that the terms themselves are clearly and coherently written, this is the most reliable way for the website host to ensure that the contract is subject to its terms. It does not matter whether the non-drafter actually read the terms since clicking shows the non-drafter’s clear manifestation of assent.

Question 39

Browsewrap

Answer 39

Browsewrap terms are similar to clickwrap, however, it is different in that the user is able to complete the transaction without having to indicate assent to it by affirmative conduct, such as clicking a button. Courts still regularly bind the non drafter to the terms if the website gave the non drafter reasonable notice of them. The presence of the standard terms must be clearly apparent to make the non drafter accountable for reading them.

Question 40

Hybrid or Sign-In Wrap Terms

Answer 40

A variation of clickwrap and browse wrap terms combines features of both, leading some courts to label this device for procuring assent as a hybrid or sign-in terms. A hybrid term differs from a clickwrap term in that it does not prevent the user from completing the transaction without manifesting acceptance of the terms by clicking on a button or link. Instead, it contains language on the registration or sign-in page that states that the user agrees to the standard terms by registering for or signing into the account.

Question 41

Conditions to meet for 2-207 (battle of the forms)

Answer 41

1) must be the sale of goods
2) there must be a written offer and a written acceptance
3) the terms do not match

Question 42

Battle of the Forms for Non Merchants

Answer 42

Where there is battle of the forms between parties that are not merchants, the terms in the offer control and any additional or different terms in the acceptance are merely suggestions.

Question 43

Battle of the Forms for Merchants

Answer 43

If there is a battle of the forms between merchants then we still have a contract but then we need to ask:
1) is it an additional term?
if it is additional it becomes part of the contract unless the offer had been an iron clad offer (take it or leave it as is) or if the additional term is objected to within 10 days or if it is a material alteration.
2) is it a contradictory or different term?
If it is a contradictory or different term then we knock out the contradicting terms and fill it in with UCC gap fillers.

Question 44

What does Article 2 of the UCC apply to?

Answer 44

The sale of goods. Good are things that can be identified when the contract is formed and can be moved. Examples include: Pens, Boats, Computers, Cars, and Animals.

Question 45

Examples of what does NOT count as a good

Answer 45

Real Estate, Services, and Intangibles (such as intellectual property) are not goods.

Question 46

Who is a merchant?

Answer 46

A person that regularly deals in transactions involving certain types of goods or holds himself out as having special knowledge about those goods. A merchant is also in the business of selling a specific type of product.

Question 47

Restatement 1: Contract Defined

Answer 47

A contract is a promise that the law will enforce.

Question 48

Remedy for breach of promise: Expectation Damages (Hawkins v McGee

Answer 48

Damages is the differences between the value of the goods as the warranty said to be true and the actual value of item at the time of sale, including gains prevented and losses sustained.
The damages rule provides if a promisor breaches a contract by failing to deliver something that was as he warranted it to be, he owes the promisee damages equal to the value of the performance would had it have conformed to the warranty.
Policy: put the plaintiff in as good as a position as he would have been in had the defendant kept his contract.

Question 49

Restatement 79: Adequacy of Consideration; Mutuality of Obligation

Answer 49

If there is bargained-for consideration, there does not need to be a benefit/detriment, equivalence in the values exchanged or a mutuality of obligation. A contract has adequate consideration if it was bargained for by both parties but the cost later turns out to be invaluable (Hardest v Smith lamp patent case).

Question 50

Gift Promise

Answer 50

A note that is the voluntary promise of a gift by one party, has no consideration and is not an enforceable contract. (Dougherty v Salt promissory note to nephew).

Question 51

Conditional Promise

Answer 51

a promise to act that does not “ripen” into a duty until or unless a stated condition occurs. Example: If you walk to the store, I will buy you a coat (conditional gift).
When no other consideration is shown, mutual obligation by the parties to the agreement can furnish sufficient consideration to constitute a binding contact.

Question 52

Implied in Fact v Implied in Law

Answer 52

Implied in fact contract is an actual contract in which the parties intend to enter a contract and this is manifested by conduct rather than an express agreement. (Lady Duff Gordon case)
Implied in Law contracts describe course for unjust enrichment. When the defendant twas enriched at the plaintiff’s expense.

Question 53

Illusory Promise

Answer 53

Example: I promise to give you $1,000 if you will promise to do whatever you want to do.
It is technically bargained for but the promise creates no real obligation.

Question 54

Restatement 73: Performance of Legal Duty

Answer 54

Performance of a legal duty owed to a promisor is not consideration. This is known as the pre-existing duty rule.

Question 55

When is a modification of a contract okay? (pre-existing duty exceptions)

Answer 55

1) change in circumstance was not anticipated
2) contract hasn’t been fully performed
3) modification is fair and equitable

Question 56

Restatement 74: Settlement of Claims

Answer 56

Release of a claim or defense is consideration if the strength of the claim or defense is unclear because of uncertainty as to the facts or the law, or the surrendering party believes that the claim or defense may be determined to be valid. (Vance v Lozano case where there was a promise to repave the driveway to avoid litigation)

Question 57

Elements of Promissory Estoppel:

Answer 57

1) Promise
2) Reasonably expected to induce reliance
3) Reliance
4) Injustice
5) Remedy may be limited as justice requires
If the parties have definitely formed a bargain contract, no promissory estoppel is necessary and a promissory estoppel claim will fail.

Question 58

Examples of Promissory Estoppel

Answer 58

A promissory estoppel claim succeeded in Conrad v Fields when a man promised to pay for law school and she relied on his promise.
Promissory Estoppel also succeeded in Feinberg v Pfeiffer when a woman retired because she was promised pension money.
Promissory estoppel did not succeed in Garwood Packaging v Allen because the statement “come hell or high water” could not be reasonably understood as a promise by businessmen. Superior knowledge can be taken into account.

Question 59

Restitution

Answer 59

The purpose of restitution is to prevent one party from being unjustly enriched at another’s expense.

Question 60

What counts as invalid offers?

Answer 60

• Jokes (unless the person had no reason to know it was a joke)
• Preliminary negotiations (agreements to agree, price quotations, or proposals)
• Advertisements (“coats on sale for $200”

Question 61

Termination of Offers

Answer 61

Offers can be terminated by:
- rejection or counteroffer
- lapse of time (if there is no time limit, it must be left open for a reasonable amount of time)
- death or incapacity
- revocation (must communicate intent to revoke to offeree before acceptance)

Question 62

Common Law Mirror Image Rule

Answer 62

Offer and acceptance have to completely match on all terms. If offeree accepts with additional or different terms, at common law that is a counter-offer

Question 63

How to identify standardized contracts (take it or leave it)

Answer 63

1) the contract terms are drafted by only one of the parties. “Contract maker”
2) the terms are “standardized” in multiple, identical contracts that are presented to consumers, employees, or other groups of people in the market transaction. “Contract Taker”
3) contracts are made on a take it or leave it basis
4) neither party expects the contract takers to read or understand the standardized terms
5) the terms drafted by the contract maker change the default rules of contract law that would otherwise apply to the transaction. Tend to reduce the contract maker’s contractual duties and the contract taker’s rights and remedies.

Question 64

UCC 1-303(e)

Answer 64

provides that express terms and any applicable course of performance, course of dealing, and usage of trade are to be construed whenever reasonable as consistent with one another. If it is not possible there is a hierarchy:
1) Express Terms
2) Course of Performance
3) Course of Dealing
4) Usage of trade