MBE Contracts

Question 1

When a promisor reserves the right to change his mind in a contract that is otherwise valid,
E.g.,
“[the wholesaler] reserves the right to cancel this order at any time before September 1.”

Is there still a valid contract?

Answer 1

No. Unless the right to change his mind is limited by some objective standard, then consideration may be found and the contract will be upheld.

Otherwise… it’s an ILLUSORY PROMISE–a statement that appears to be promising something but does not actually commit the promisor to anything at all

promisor reserves the right to change his mind, does not bind the promisor and is therefore illusory

Question 2

Are Illusory Promises enforceable?

Answer 2

No; they b/c fail to actually commit/bind the promisor to anything.

Question 3

ANTICIPATORY REPUDIATION

When the date of performance has not passed and the promisee has fully performed, the promisee must

Answer 3

wait until the promisor’s performance is due before filing suit

In this situation, anticipatory breach is inapplicable; the promisee must wait for actual breach before filing suit.

***Typically, this occurs when the promisor’s obligation is the payment of MONEY under COMMON LAW

Question 4

UCC Sale of Goods

If a distributor shipped NON-conforming goods (seven crates instead of eight), but the grocer accepted the shipment, and then told the distributor they’re NCG, what does the distributor have the right to collect from the grocer?

Answer 4

Contract Price for those goods (-) minus damages to Grocer for the Distributors breach

Even though they were NCG and the grocer told the manufacturer, the grocer accepted the shipment,
—> rendering the grocer obligated to pay the CONTRACT PRICE of the ACCEPTED goods – minus any damages caused by the distributor’s breach

Question 5

Under (UCC § 2-206), the effect of a Seller’s acceptance of Buyer’s offer under the two different methods below results in an agreement based on what terms?

PROMISE to ship (When oral promise made OR When written promise sent)

vs

Shipment of goods (When goods shipped)

Answer 5

PROMISE TO SHIP

WHEN all parties are MERCHANTS
– terms of offer
– + terms added by battle-of-forms rule

WHEN ≥1 party is nonmerchant
– terms of offer
– new terms are merely proposed additions

SHIPMENT OF GOODS

Terms of offer (e.g. in the purchase order)

Question 6

Acceptance by shipment is effective immediately and creates a contract with terms identical to those of the offer (e.g. the purchase order).

Once created, the contract cannot be modified unless both parties agree to the modification.

And if either party breaches, the other party can recover

Answer 6

consequential damages (eg, lost profits)

Question 7

The statute of frauds requires that any contract that cannot be performed within one year be in writing.

Is an agreement for LIFETIME employment (i.e. the life of the individual) subject to the statute of frauds?

Answer 7

No… because it could be performed within a year if the employee retires or dies within one year

Question 8

In an employment contract, is the employee’s salary (ie, compensation) is an essential term that could cause the contract to fail for indefiniteness?

Answer 8

Yes.

Question 9

A court can reform (at a party’s request) a written contract that fails to accurately express the parties’ initial intent due to a mistake by both parties when:

Answer 9

1) the parties had a prior agreement (either oral or written)
2) the parties put that prior agreement into writingand
3) the parties’ mistake caused a difference between the prior agreement and the written agreement.

*Even if one party later denies the prior difference afterwards

Question 10

Does Parol Evidence rule bar evidence of a prior/contemporaneous agreement between the parties for evidence of mistake/to reform a contract?

Answer 10

No.

Question 11

An objection or motion to strike is TIMELY only IF

Answer 11

it’s made at the FIRST OPPORTUNITY
(e.g. Objecting when the words come out of the Witness’s mouth, NOT a motion to strike after the witness leaves the stand)

Question 12

When is disclosure required to avoid misrepresentation?

Answer 12

“Poor Moms Fraudulently Misrepresent”

1) PREVIOUS ASSERTION
– Disclosure would prevent previous assertion from being a misrepresentation or fraudulent or material

2) MISTAKE ABOUT BASIC ASSUMPTION
– Disclosure would correct other party’s mistake about basic assumption of contract AND Failure to disclose would constitute lack of good faith & fair dealing

3) FIDUCIARY RELATIONSHIP
– Other party is entitled to know fact because of confidential/fiduciary relationship

4) MISTAKE ABOUT WRITING
– Disclosure would correct other party’s mistake about contents or effect of writing that embodies agreement

Question 13

If a party commits fraudulent misrep, but before the deceived party finds out/avoids the contract, the facts are cured so as to be in accord with the facts that were previously misrepresented, is the contract still voidable?

Answer 13

No. It is no longer voidable; Both parties may still enforce it.

A contract is no longer voidable if, following a misrepresentation but before the deceived party has avoided the contract, the facts are cured so as to be in accord with the facts that were previously misrepresented.

Question 14

A court may modify or refuse to enforce a contract or part of a contract on the ground that it is unconscionable, that is, when it is

Answer 14

– so unfair to one party that no reasonable person in the position of the parties would have agreed to it
– could also be unfair bargaining power

Question 15

Can a party reserve a right to seek remedies as a result of a breach of a land/sale contract once the party accepts conveyance and tenders payment on the closing date?

Answer 15

Yes.
(E.g. farmer question where possession delayed from Jan 15 to Jan 30, he loses rental value of $2,500.00 for the 15 days, but tenders $500k and moves in on Jan 30 as agreed, reserving the right to seek damages)

Question 16

Illegal contracts are generally void as against public policy. But if a contract is illegal solely because a party does not have a required license, then the enforceability of the contract depends on whether the purpose behind the licensing requirement is:

Answer 16

economic (eg, raise revenue) – in which case the contract is enforceableor

regulatory (eg, protect public health or safety) – in which case the contract is unenforceable if the public policy behind the requirement clearly outweighs the interest in enforcing the contract.

Question 17

For UCC Contract Modifications,
an unwritten modification is valid unless

Answer 17

statute of frauds applies

*SUBJECT MATTER and QUANTITY are only terms that when modified will need to be in a writing

Question 18

What types of modifications to a UCC sale of goods contract must be in a writing to satisfy the *SOF? (2 terms)

*Assuming the original UCC contract needed to be in writing

Answer 18

Modification of:

1) Subject Matter
or
2) Quantity

Question 19

Under the covenant of warranty, the grantor of a warranty deed must defend and compensate the grantee for any

Answer 19

LAWFUL claims made against the grantee’s title—eg, when the grantee is DEFEATED in a third party’s quiet title action

*NO reimbursement of expenses/help from Grantor when grantee SUCCEEDS in a suit against grantee’s title

Question 20

Where a contract has both services and goods elements, the predominant purpose test applies.

If the cost of the services exceed those of the materials, the contract is likely to be classified as

Answer 20

a contract for SERVICES

Question 21

True or False:

Consideration can be found when there is a change in a party’s duties, even where that change is financially beneficial to the party.

Answer 21

True.

Generally, a court will not evaluate the adequacy of consideration where the consideration is given as part of a bargained-for exchange

*AS long as modification was not made in BAD FAITH when the costs were miscalculated, subsequent savings are fine

Question 22

When there’s a promise to pay a debt/loan agreement, then the SOL runs, then a new promise to pay back the money/or promise to give some money to satisfy the debt is given (oral or written), is it enforceable?

Answer 22

Yes, as an accord and satisfaction agreement.

– Debt/Loan agreement made
– Statute of Limitations Expires
– New Promise to pay the loan back or part of it in satisfaction

(e.g. Aunt lending Nephew $1k in writing, four years later the SOL expired, Aunt called up nephew for the money, he said idr how much i owe you but i will send you $500 next month, and she sues to enforce the oral promise next month –> ENFORCEABLE)

Question 23

A contract for the transfer of real property must be

Answer 23

IN WRITING

Question 24

Transfer of a deed to the grantee creates a presumption that

Answer 24

the grantor intended to make a present transfer of the property interest.

Question 25

Parol evidence is admissible to show that the grantor lacked intent to transfer a deed,

However, when the grantor transfers the deed to the grantee subject to a condition that does not appear in the deed (e.g., an oral condition), parol evidence is

Answer 25

not admissible and the condition is not enforceable

Question 26

Under the “Material Benefit Rule,”

Answer 26

past consideration CAN be adequate when one person CONFERS a MATERIAL BENEFIT on ANOTHER that was NOT INTENDED to be a gift + the OTHER PERSON then PROMISES TO PAY for this BENEFIT

Question 27

Can a mortgagee (Bank) elect to pursue its rights against the mortgagor’s PERSONAL obligation without first seeking to foreclose on the mortgaged property?

(If the loan says “with recourse”/”personal liability”)?

Answer 27

Yes.

In most states, the mortgagee may elect to pursue its rights against the mortgagor’s personal obligation without first seeking to foreclose on the mortgaged property.

Question 28

Does Emotional distress generally rise to the level of incapacity to contract?

Answer 28

No.

In order to challenge a contract on the grounds of mental incapacity, the party must have been UNABLE to understanding the NATURE and CONSEQUENCES of the transaction… or UNABLE TO ACT in a REASONABLE MANNER w/ regard to the transaction + the other party MUST HAVE REASON TO KNOW of this fact

Question 29

Undue influence is the

Answer 29

unfair persuasion of a party to assent to a contract.

Question 30

Athough expectancy damages normally are awarded in a breach-of-contract action….

Where the nonbreaching party has partially performed a below-market-price contract, the party may recover

Answer 30

RESTITUTIONARY damages are permitted in such cases….
the benefit conferred upon the owner as measured
by the amount the owner would have had to pay to secure the same performance rendered

(Otherwise, the breaching party would profit from its breach)
E.g. new company does a painting job at a discount price to get a good rep in the community, but owner breaches halfway through the job. Their costs are $100k, their expected profits were $10k, the same job by a similar company would have been a $115k contract price, they can recover the $115k instead of the $110k (expectancy damages) b/c the contract was a BELOW-THE-MARKET-PRICE contract and court doesnt want the owner benefiting from its breach

Question 31

Once the court makes a definitive ruling on the admissibility of evidence, if the ruling was made before the trial began (i.e. in a Motion in Limine), does a party need not renew the objection to the admission of the evidence during trial to preserve it for appeal?

Answer 31

No. The court made a definitive ruling on the admissibility of evidence when they decided it before trial, that is enough to preserve it

Question 32

If a lease agreement for 5 years prohibits assignment of contracts without the lessor’s consent, and the lessee leases the space to another person for 1 year, is that a violation of the agreement?

Would an assignment effectively prohibit a lessee from assigning the contract?

Answer 32

No, b/c it’s a sublease, not an assignment, b/c it only subleases part of the lease term, not the full remaining lease term.

No, it just puts him in breach of the agreement… can still assign because it doesn’t say “void”

Question 33

If a lease agreement for 5 years prohibits assignment of contracts without the lessor’s consent, Would an assignment (i.e. the remaining term being leased to someone rather than a temporary time prior to the lease expiration) effectively prohibit a lessee from assigning the contract?

Answer 33

No.

Question 34

A seller can argue the exception to the UCC’s Statute of Frauds for goods specially manufactured for the buyer when

(e.g. baked goods/perishable goods/specific design/fit)

Answer 34

1) the goods are NOT SUITABLE FOR SALE TO OTHER in the seller’s ordinary course of bz

AND

2) the seller has SUBSTANTIALLY BEGUN manufacture or commitments FOR PROCUREMENT

Question 35

When a buyer receives imperfect tender, he may

Answer 35

1) accept the goods in whole,
2) accept them in part, or
3) reject the entire shipment.

Question 36

In UCC contract cases, a seller’s damages are usually limited to

Answer 36

expectancy and incidental damages

Question 37

Under the UCC, the seller generally must STRICTLY PERFORM (Perfect Tender Rule) all obligations under the contract or be in breach.

The doctrine of “material” breach/substantial performance applies only in the context of

Answer 37

1) installment contracts or
2) when the parties so provide in their contract

Question 38

Repudiation may be retracted until such time as the
promisee

Answer 38

(i) acts in reliance on the repudiation, (ii) signifies acceptance of the repudiation, or (iii) commences an action for breach of contract

Question 39

In addition to “MY LEGS” or “M’SOUR”, FL requires the following contracts to be in writing:

Answer 39

In addition to the aforementioned contracts, Florida requires the following contracts to be in writing:

i) Executor contract (a type of suretyship contract)—A promise by an administrator of a will to pay any debt or damages from her own estate;

ii) Newspaper subscriptions—Subscriptions to newspapers, periodicals, other publications;

iii) Health care—A guarantee, warranty, or assurance as to the results of any medical, surgical, or diagnostic procedure performed by a licensed physician, osteopathic physician, chiropractor, podiatrist, or dentist; and

iv) Debt—A contract satisfying a debt or obligation for less than the full amount.

Question 40

The duty to mitigate damages in an employment contract is for

Answer 40

COMPARABLE WORK (i.e. same job, not different jobs/roles)

Question 41

For personal service contract, death or physical incapacity of the person necessary to perform according to the contract will

Answer 41

DISCHARGE the duty to perform

(e.g. engineer has rare allergic reaction to mines, and can’t continue job under 2-year contract in the mines cause it causes him illness)

Question 42

Can a buyer demand assurances after a seller breaches one contract w/ the Buyer but does not indicate any reason that they will breach on the other, separate contract?

Answer 42

Yes.

Even if the buyer has two totally separate accounts/contracts with that seller, the buyer can still be subject to demands for adequate assurance on either account/contract.