K Law and Sales

Question 1

what is a contract

Answer 1

a promise the law will enforce

Question 2

two laws that apply in K law

Answer 2

UCC article 2 and Common Law

Question 3

UCC Article 2 (UA2)

Answer 3

UCC governs all contracts for the sale of goods

Special rules govern transactions between merchants

Question 4

Common Law (CL)

Answer 4

any contracts not governed by the UCC are governed by the CL

Question 5

4 Parts to a valid K

Answer 5

offer

acceptance

consideration

no defenses to formation or enforcement

Question 6

valid offers

Answer 6

1. manifestation of a present intent to contract demonstrated by a promise, undertaking, or commitment
2. communicated to an identified offeree; and
3. definite and certain terms

Question 7

Termination of Offers

Answer 7

1. lapse of time
2. revocation
3. rejection
4. termination by operation of law

Question 8

Lapse of time

Answer 8

must accept within specified time period or, if none, within reasonable time

Question 9

Revocation

Answer 9

words or conduct of the offeror terminating the offer

Question 10

Revocation is effective

Answer 10

when received by offeree

Question 11

Irrevocable offer

Answer 11

a) Merchant’s firm offer under UCC
b) Option contract—offeree gave consideration to hold open offer
c) Detrimental reliance

Question 12

Rejection

Answer 12

words or conduct of the offeree rejecting the offer

Question 13

Rejection effective

Answer 13

when received by offeror

Question 14

Counteroffer acts as a

Answer 14

rejection

Question 15

Termination by operation of law when:

Answer 15

1) Destruction of subject matter of the contract
2) Supervening illegality of subject matter of contract
3) Death or insanity of either party

Question 16

Unequivocal acceptance

Answer 16

a. Common law—acceptance of each and every term of the offer (mirror image rule)

b. UCC—an acceptance that adds terms to the offer is valid
1) Between merchants, the additional terms become part of the contract unless they materially alter the contract, the offeror objects, or the offer is limited to its terms (“battle of the forms”)

Question 17

Methods of acceptance

Answer 17

a. UCC—reasonable means
b. Unilateral contract—performance
c. Bilateral contract—promise or performance

Question 18

Acceptance effective upon dispatch (mailbox rule)

Answer 18

Limitation—offeror opts out; rejection sent first

Question 19

Consideration

Answer 19

1. Bargained-for exchange (not a gift), and
2. Detriment to promisee or legal benefit to promisor (courts focus on detriment)
   a. Adequacy generally irrelevant
   b. Past consideration generally invalid (preexisting duty rule)
3. Substitutes
   for consideration—promissory estoppel and detrimental reliance

Question 20

Exceptions to past consideration generally be invalid (pre-existing duty rule)

Answer 20

1) Exceptions:
a) Written promise to pay time-barred debt
b) New or different consideration promised
c) Promise ratifying a voidable obligation (e.g., minor ratifying upon reaching age of majority)
d) Compromise of honest dispute
e) Unforeseen circumstances make modification fair and equitable (modern rule) or rise to the level of impracticability (majority view)
f) Good faith modification under Article 2

Question 21

No Defenses to Formation or Enforcement (5)

MIIFS U

mistake

incapacity

illegality

fraud or misrep

sof

unconscionability

Answer 21

mistake

Fraud and misrepresentation (includes concealment and nondisclosure)

Illegality of consideration or subject matter

Incapacity—infancy, mental incapacity, intoxication, duress, and undue influence

Statute of Frauds—certain contracts must be in writing, signed by the party to be charged (“MY LEGS” )

Unconscionability—court may refuse to enforce to avoid unfair terms (e.g., contracts of adhesion)

Question 22

unilateral mistake

Answer 22

contract is voidable if nonmistaken party knew or should have known of mistake

Question 23

Mutual mistake

Answer 23

Mutual mistake—contract is voidable by adversely affected party if:

1) Mistake concerns basic assumption on which contact was made
2) Mistake has material effect; and
3) Party seeking avoidance did not assume risk

c. Ambiguous terms—one party aware of ambiguity = contract; neither party or both parties aware of ambiguity = no contract

Question 24

Statute of Frauds—certain contracts must be in writing, signed by the party to be charged (“MY LEGS” )

Answer 24

a. Marriage—when marriage is consideration for promise (e.g., “If you marry my son, I will buy you a car”)
b. Year—promises that cannot be performed within one year from date of contract
c. Land—promises creating interests in land (e.g., leases, easements, fixtures,
mineral rights, mortgages)
d. Executors and administrators—promises to pay estate debts from own funds
e. Goods—contracts for sale of goods for a price of $500 or more
1) Exceptions—specially manufactured goods, goods accepted or paid for f. Suretyship—promise to answer for debt of another