Formation & Defenses (Modules 1-4)

Question 1

Types of Contracts

Answer 1

Express - formed by language, oral or written

Implied - formed by conduct

Quasi-Contracts - not a contract, what happens when an unenforceable contract results in unjust enrichment

Question 2

Bilateral Contracts

Answer 2

Exchange of mutual promises

Can be accepted in any reasonable way, including starting performance

Question 3

Unilateral Contracts

Answer 3

Offeror requests performance from offeree as opposed to a promise

Requires full performance

Occurs when 1) offeror unambiguously indicates that completion of performance is the only matter of acceptance and 2) when there is an offer to the public

Question 4

Void, Voidable, and Unenforceable Contracts

Answer 4

Void - totally without any legal effect from the beginning

Voidable - one or both parties may elect to avoid

Unenforceable - otherwise valid but isn’t enforceable due to some defense

Question 5

Merchants

Answer 5

Merchant is one who regularly deals in good of the kind sold or otherwise holds themselves out as having special knowledge or skill in the area

Question 6

K’s involving both goods and services

Answer 6

apply only the common law or UCC depending on which is the more important part of the transaction

BUT if payment is divided between the two, apply UCC to goods and Comm law to services aspect

Question 7

Mutual Assent

Answer 7

Offer + Acceptance; will be determined on an objective standard (did words/condcut manifest a present intention to enter into an agreement)

Question 8

Elements of Offer

Answer 8

Must create a rxble expectation in the offeree that the offeror is willing to enter into a K

Elements
1) Intent (promise to enter)
2) Essential Terms
3) Communicated to Offeree

Question 9

Intent (1st Element of Offer)

Answer 9

Must contain a promise, undertaking, or commitment to enter into a K (i.e., an intent) and not just an invitiation to bargain which will be determined on an objective standard by these factors:

LSPM
1) Language
2) Surrounding Circumstances (Context)
3) Prior practice/relationship of parties
4) Method of communication

Question 10

Definite and Certain Terms (2nd Element of Offer)

Answer 10

Have enough essential terms been provided so that a K is capable of being enforced

1) Identify offeree
2) Definiteness of subject matter
- for land Ks need to identify the land and the price
- for sale of goods need to identify the quantity
- for employment if no length states will be assumed to be at will
- if no price, then court will supply a reasonable one at time of delivery

Question 11

Communication to Offeree (3rd Element of Offer)

Answer 11

Offeree must actually have knowledge of the offer in order to accept (e.g., returns dog to owner but didn’t know the owner put out reward posters, they don’t get paid)

Question 12

Termination of Offer by Offeree

Answer 12

1) Lapse of time - must accept within a rxble time (usually 1 month but depends on circumstances)

2) Express Rejection
- effective once received by offeror, even if they don’t have knowledge of it

3) Rejection by Counteroffer

4) Conditional Acceptance of New Terms

Question 13

Termination of Offer by Offeror

Answer 13

1) Direct Revocation

2) Indirect Revocation
- occurs when offeree receives correct info, from a reliable source, that the acts of the offeror indicate to a rxble person that they no longer wish to make the offer

Question 14

Limitations on Offeror Power to Revoke

Answer 14

1) Option Contracts w/ Consideration given

2) Merchant Firm Offer (no consideration required if the merchant offeror signs the memo and gives assurance it’ll be held open; valid for 3 months max)

3) Detrimental (Foreseeable) Reliance by Offeree

4) Performance has begun by an offeree in a unilateral contract; preparation to perform does not count but may be detrimental reliance

Question 15

Termination by Operation of Law

Answer 15

1) Death or insanity of either party

2) Destruction of the subject matter

3) Supervening illegality

Question 16

Silence as Acceptance (Bilateral K)

Answer 16

Generally doesn’t work as acceptance but “custom exception” if prior dealings make it so that silence would be reasonable

Question 17

Acceptance of Unilateral K

Answer 17

Once performance is complete (but irrevocable once begin)

Offeree is not required to give notice that they began performance but must notify within a reasonable time after it’s complete

Question 18

Acceptance of UCC K (conforming and nonconforming goods)

Answer 18

Conforming: Promise to ship or by shipment

Nonconforming: shipment is an acceptance by offeree and also a breach by offeror (unless it’s offered only as an accomodation)

Question 19

Battle of the Forms (UCC) (Merchant-Nonmerchant)

Answer 19

No mirror image rule for UCC, inclusion of additional or diff terms is still an acceptance unless expressly state otherwise in offer

Merchant-Nonmerchant: additional or diff terms are prposals to modify and are not a part of the K unless offeror agrees

Question 20

Battle of the Forms (UCC) (Merchant-Merchant)

Answer 20

ADDITIONAL terms will be included if:
1) do not materially materially alter
2) offer does not expressly prohibit additional terms
3) offeror hasn’t already rejected these terms in teh past
Note: offeror can reject additional terms if done so in a rxble time

DIFFERENT terms two approaches:
1) treat the same as additional terms
2) “knockout rule” which states that conflicting terms in the offer and acceptance are knocked out of the K

Question 21

Merchant’s Confirmatory Memo (UCC)

Answer 21

Memo confirming an oral agreement that that contains diff or additional terms also subject to battle of the forms

Will satisfy SOF even though doesn’t meet all the requirements

Question 22

Mailbox Rule

Answer 22

Acceptance effective at moment of dispatch (as long as properly addressed and stamped) unless:

1) offer stipulates acceptance not effective until received
2) it’s an option contract, which is effective only upon receipt
3) Offeree sends rejection then acceptance, in which case it’s whichever arrives first

Question 23

Consideration Elements

Answer 23

1) bargained-for exchange
2) legal value

Question 24

Bargained-for-exchange (Consideration)

Answer 24

Requires that the promise induce the detrmient and the detriment induce the promise

Act of Forbearance (promisee promises not to do something they have a legal right to do) is sufficient if that forbearance benefits the promisor; does not have to be economic

Past or moral consideration does not satisfy

Question 25

Legal Value (Consideration)

Answer 25

Courts do not consider adequacy of consideration, unless it is entirely devoid of value in which case it’s insufficient

Question 26

Preexisting Legal Duty as Consideration

Answer 26

Promising to perform/not perform a preexisting legal duty is not consideration, unless:

a) new or diff consideration is promised

b) the promise is to ratify a voidable obligation (e.g., promise to go thorugh with a K despite other party’s fraud)

c) the duty was owed to a 3P and not the promisor

d) there is an honest dispute as to the duty

e) Unforeseen circumstances; if the modification is fair and equitable in view of the circumstances that weren’t anticipated when the K was made (alaska fisherman sailors case)

Question 27

Modification of Ks

Answer 27

Traditional is that can’t modify without new consideration

Modern view is that can modify without consideration if:

1) the modification is due to unanticipated circumstances and 2) is fair and equitable

Note: UCC K’s can be modified freely without consideration as long as done in good faith

Question 28

Promissory Estoppel/Detrimental Reliance

Answer 28

A promise (K with no consideration) is enforceable if:

1) the promisor should rxbly expect to have induced an action or forbearance

2) the action/forbearance was in fact induced

Remedy is “limited as justice requires” which is usually reliance damages

Question 29

Types of Defenses to Contract

Answer 29

1) Defect in Capacity (i.e., person wasn’t capable of contracting in the first place)

2) Defect in Formation

3) Defense to Enforcement (invalid K because enforcing it would be wrong)

Question 30

Defect in Capacity (Infancy)

Answer 30

K is voidable

Minor can disaffirm a K anytime until they reach age of majority

If disaffirm must return anything they received under the K that remains (hasn’t been squandered/wasted/destroyed)

Can disaffirm a K for “necessaries” (food, shelter, clothing, medical care) but will be liable in restitution for value of benefits received

Question 31

Defect in Capacity (Mental Incapacity)

Answer 31

K is voidable

If mental capacity makes it so incapable of understanding the nature/significane of the K they can disaffirm or affirm when lucid or by an appointed legal rep

Like minors are liable in quasi-contract for necessities

Question 32

Defect in Capacity (Intoxication)

Answer 32

K is voidable

If person is fucked up to the point that they don’t understand nature/signficance of the K, and the other person had reason to know they were fucked up, they can affirm/disaffirm when they’re sober

Like minors are liable in quasi-contract for necessities

Question 33

Defect in Capacity (Duress/Undue Influence)

Answer 33

K is voidable

Duress by Threat
K is voidable

Economic Duress
generally doesn’t make it voidable unless 1) party threatens to commit a wrongful act that would seriously threaten other person’s property/finances and 2) no adequate means available to prevent the threatened loss

Undue Influence Elements
1) undue susceptibility to pressure by one party
2) excessive pressure by the other party

Question 34

Absence of Mutual Assent (Ambiguous K Language) [Defect in Formation]

Answer 34

Really not sure what’s good here

If K includes a term with at least two possible meanings, result depends on parties’ awareness of ambiguity

Neither party aware: no K

Both parties aware: no K

One party aware: binding K based on what the ignorant party rxbly believed to be the meaning of the ambiguos words

Question 35

Absence of Mutual Assent (Mutual Mistake as to Existing Facts) [Defect in Formation]

Answer 35

If both parties were mistaken about an exisiting fact when enterring the deal, if mistake is:

1) about a basic assumption on which the K was made

2) material mistake and

3) the party wanting to void did not assume the risk of the K, then it can be voided; if they did assume the risk it can’t

Question 36

Absence of Mutual Assent (Unilateral Mistake as to Existing Facts) [Defect in Formation]

Answer 36

If only one party was mistken, will not prevent the formation of the K; BUT:

1) if the nonmistaken party knew or had reason to know the other party was mistaken

2) mistake has a material effect on the K

3) mistaken party didn’t bear the risk

then it is voidable by the mistaken party

Question 37

Absence of Mutual Assent (Fraud in the Inducement) [Defect in Formation]

Answer 37

If one party induces the other to enter into teh K by using fradulent misrepresentation (that they knew was false) the K is voidable if the innocent party justifiably relied on the fraud

Question 38

Absence of Mutual Assent (Material Misrepresentation) [Defect in Formation]

Answer 38

Whether or not the misrepresentation was fraudulent, innocent party can void the K if they justifiably relied on teh misrep and the misrep was material

Will be material if:

1) would induce a rxble person to agree, or

2) misrepresenting party knows that for some special reason it is likely to induce this particular person to agree, even if a rxble person wouldn’t

Question 39

Exculpatory Clauses

Answer 39

Can have one exculpating a aparty from negligent acts if the contract is for activities known to be dangerous (ski hill operator can have it)

Exculpatory clause releasing party from liability for intentional acts is unconscionable

Question 40

Statute of Frauds (Agreements Covered)

Answer 40

M - marriage
Y - k’s more than a year
L - land
E - executors
G - goods over $500
S - sureties

Question 41

Oral Modification of SOF Contracts

Answer 41

Written contract can be modified orally, but must be in writing if it falls within the SOF as modified

Common law written K’s can always be modified orally, even if there’s a provision saying otherwise

UCC written K’s:
- Merchant-Merchant –> can have a clause saying no oral modifications
- Merchant-Nonmerchant –> can have same clause but nonmerchant needs to have a separate signature authorizing it

Question 42

Oral Land Contracts (SOF Exception)

Answer 42

Generally unenforcable as sale of land falls within the SOF, but will be enforceable if buyer has done at least 2 of these 3 things:

1) paid for it (all or substantial amount)
2) took possession
3) valuably improved it

Question 43

Oral Service Contracts for 1+ Year (SOF Exception)

Answer 43

Will be enforceable if one party has completely performed

Question 44

Oral Sale of Goods Contracts for $500+ (SOF Exception)

Answer 44

Will be enforceable if:

1) the goods have been specially manufactured or

2) the goods have been either paid for or accepted
- if only partially paid for, enforceable to to the extent of the partial payment

Question 45

When Writing Not Required for SOF Contract

Answer 45

1) specially manufactured goods
2) party admitted in judicial proceeding existence of the K
3) merchant’s confirmatory memo
4) Equitable/promissory estoppel

Question 46

Writing Requirements for SOF Frauds

Answer 46

doesn’t need to be a whole official document, just needs to have the following:

1) rxbly identifies the subject matter
2) indicates a K was made
3) has the essential terms