Formation of Contracts

Question 1

A promise to guarantee debt is supported by consideration if:

Answer 1

1. the guarantor is compensated
2. the loan is conditioned on obtaining a guarantee,
   OR
3. the promise is made before or at the same time as the loan.

Question 2

Modifying existing contracts under the Common Law, traditional vs. modern view

Answer 2

Under the traditional view, K mods. generally must be supported by new consideration- ie, each party must alter its duties in some way.

BUT, under the modern view new consideration is not req. if the mod. is fair and equitable in light of the unexpected circumstances.

Apply the modern view modern view unless specified.

Question 3

Preexisting duty rule for consideration and exceptions

Answer 3

A promise to perform a prexisting duty is generally unenforceable for lack of consideration.

Common law exceptions:

-new/altered consideration
- ratification of voidable duty
honest dispute
-unexpected event
-renewed promis
-3rd party

UCC Expectations:
modification, sought in good faith.

Question 4

When does a promise to surrender a claim or defense constitute consideration for a settlement agreement?

Answer 4

As long as:
1. the claim or defense is valid or subject to a good-faith dispute, or
2. the surrendering party believes that the claim of defense may be valid.

Question 5

What is an offer to form a bilateral contract?

Answer 5

an offer that invites acceptance by return promise

Question 6

How can an offer to form a bilateral contract be accpeted?

Answer 6

Can be expressly accepted with a return promise.

Or impliedly accepted by starting performance.

Notice is not required to effectively accept an offer by starting performance unless the offer so requires.

UNLESS the offeree should know that the offeror has no convenient way of learning withing reas. time the performance has begun, then the oferee must notify the offeror.

(Out of the country for 3 months, must notify of acceptance)

Question 7

When does an offer terminate before acceptance?

Answer 7

1. at the offeror revocation.
2. at the Offerree’s rejection
3. Lapse, time period specified in offer expires/ after reasonable time if no time period specified.
4. By law: either party dies or is adjudicated insane/becomes permanently mentally incapacitated, subject matter of offer is destroyed or becomes illegal.

Question 8

UCC Contracts Quantity term requirements

Answer 8

K’s for the sale of goods must specify a quantity of goods to be sold that is certain or capable of being made certain by reference to objective facts.

The quantity term is sufficiently definite in a requirement K, because the buyers actual req. can be determined objectively.

Question 9

Mutual assent to form a binding K can be manifested by:

Answer 9

written or spoken words (express)
OR
By conduct (implied in-fact).

Question 10

When is an implied-in-fact K created by a party’s conduct or failure to act?

Answer 10

If the party
1. intentionally engages or fails to engage in conduct
AND
2. knows or has reason to know that assent can be inferred from that conduct.

Question 11

An offer that is illusory will become legally binding if:

Answer 11

1. the circumstances change such that the offer imposes obligations on both parties and
2. the offer is accepted after the change in circumstances.

Question 12

When is an offer to form an option K revoked before the option is accepted?

Answer 12

Revocation occurs when
1. the offeror directly communicates the revocation to the offeree, or
2. the offeree obtains reliable information that reasonably indicates the offer was revoked.

Question 13

What is the doctrine of promissory estoppel? (Ie detrimental reliance)

Answer 13

An offer is biding in an option K and therefore irrevocable if:
1. the offeror reas. expected to induce reliance on the offer before acceptance.
2. the offeree reas. relied on the offer,
AND
3. reliance caused the offeree to suffer substantial detriment.