MEE Contracts

Question 1

What are the questions to ask yourself in determining if an offer creates a reasonable expectation of willingness to enter into a contract?

Answer 1

(1) Was there an expression of a promise, undertaking, or commitment to enter into a contract?
(2) Were there certainty and definiteness in the essential terms?
(3) Was there communication of the above to the offeree?

Question 2

Is an advertisement an offer?

Answer 2

Usually construed as mere invitations for offers. Although price quotations generally are not offers, they can be if given in response to an inquiry that contains a quantity term.

They can be if extremely definite.

Question 3

What are the four cases in which offers become irrevocable?

Answer 3

(1) Consideration was paid;
(2) It was a merchant’s firm offer (U.C.C.);
(3) Offeree would rely to his detriment;
(4) Unilateral contract performance has begun.

Question 4

How does a counteroffer differ from “mere negotiations”?

Answer 4

A counteroffer acts as a termination, however, mere negotiations do not terminate an outstanding offer. Pay attention to the language.

Question 5

How does acceptance function (CL vs. U.C.C.)?

Answer 5

For common law, the mirror image rule applies. For U.C.C. they can use “battle of the forms” to fill in missing terms and create a contract.

Question 6

What is F.O.B.?

Answer 6

FOB stands for “free on board.” The letters FOB are always followed by a location (for example, a city name), and the risk of loss passes to the buyer at the named location. The seller bears the risk and expense of getting the goods to the named location. These contracts can be either shipment contracts or destination contracts, depending on the location named.

Question 7

What is the mailbox rule? What are the exceptions?

Answer 7

Acceptance is effective as of the moment of proper dispatch. However, the exceptions are…

(1) The offer stipulates that acceptance is not effective until received.
(2) An option contract is involved (an acceptance under an option contract is effective only upon receipt).
(3) The offeree sends a rejection and then sends an acceptance, in which case whichever arrives first is effective.
(4) The offeree sends an acceptance and then a rejection, in which case the acceptance is effective (that is, the mailbox rule applies) unless the rejection arrives first and the offeror detrimentally relies on it.

Question 8

How do modifications work at common law?

Answer 8

Under general contract law, a contract can’t be modified unless the modification is supported by new consideration. The modern view, however, permits modification without consideration if: (1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and (2) it is fair and equitable.

Question 9

How do modifications work in U.C.C.?

Answer 9

Consideration isn’t necessary to modify; all the parties need are good faith promises of new and different terms.

Question 10

What is Promissory Estoppel?

Answer 10

Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing. A promise is enforceable if necessary to prevent injustice if:

a. The promisor should reasonably expect to induce action or forbearance, and
b. Such action or forbearance is in fact induced.

Question 11

What is the Statute of Frauds? Who’s signature is required? What type of contracts does it cover?

Answer 11

Some contracts, by statute, must be evidenced by a writing signed by the party sought to be bound.

Marriage
Year (More than One to Perform)
Land
Executor (Administrator)
Goods of $500 or More
Surety (Debt Guarantee)

Question 12

What is the Parole Evidence Rule? What is outside the scope of the rule?

Answer 12

When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain,
the writing is an “integration.”

(1) Validity Issues
(2) Interpretation Issues
(3) Subsequent Modifications
(4) Reformation

Question 13

What are attacks on validity in PER?
What is reformation in PER?

Answer 13

Validity - The party acknowledges (concedes) that the writing reflects the agreement but asserts, most frequently, that the agreement never came into being because of any of the following: (fraud, duress, mistake, etc.)

Reformation - The party to a written agreement alleges facts (for example, mistake) entitling that party to reformation of the agreement, the parol evidence rule is inapplicable.

Question 14

What is the unconscionability defense to a contract?

Answer 14

Allows a court to modify or refuse to enforce an entire contract or a provision in it to avoid “unfair” terms, usually due to some unfairness in the bargaining process (that is, procedural unconscionability).

Unfair price alone is not a ground for unconscionability.

The test is when the contract was made, look for unequal bargaining power.

Question 15

When is mistake a defense to a contract (Mutual vs. Unilateral)?

Answer 15

(1) Mutual Mistake as to Existing Facts - Mistake as to basic assumption, has a material effect, and party seeking avoidance did not assume the risk.

(2) Unilateral Mistake - Usually not a defense, but if the nonmistaken party knew or had reason to know of the mistake, the contract is VOIDABLE by the mistaken party.

Question 16

What is a condition precedent?

Answer 16

A condition precedent is one that must OCCUR BEFORE an absolute duty of immediate performance arises in the other party.

Question 17

What is a condition subsequent?

Answer 17

A condition subsequent is one that, when it occurs, CUTS OFF an already existing absolute duty of performance.

Question 18

What is the test for discharge by Impracticability?

Answer 18

A party to perform has encountered:
(1) Extreme and unreasonable difficulty and/or expense, and
(2) Its nonoccurrence was a basic assumption of the parties.

Question 19

What is the test for discharge by Frustration of Purpose?

Answer 19

(1) Some supervening act or event leading to the frustration.
(2) At the time of entering into the contract, the parties did not reasonably foresee the act or event occurring.
(3) The purpose of the contract has been completely or almost completely destroyed by this act or event.
(4) The purpose of the contract was realized by both parties at the time of making the contract.

Question 20

What is an express warranty?

Answer 20

Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain.

The key is the buyer relied on it.

Question 21

What is the implied warranty of merchantability?

Answer 21

Implied in every contract for sale by a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable.

“Fit for the ordinary purpose for which such goods are used”.

Question 22

What is Repleviny?

Answer 22

Buyer has made at least part payment of the purchase price of goods that have been identified under a contract and the seller has not delivered the goods, the buyer may replevy the goods from the seller in two circumstances:

(i) The seller becomes insolvent within 10 days after receiving the buyer’s first payment, or
(ii) The goods were purchased for personal, family, or household purposes.

Question 23

What are some of the factors for a court to determine if there is a material breach?

Answer 23

a. The amount of benefit received by the nonbreaching party;
b. The adequacy of compensation for damages to the injured party;
c. The extent of part performance by the breaching party;
d. Hardship to the breaching party;
e. Negligent or willful behavior of the breaching party; AND
f. The likelihood that the breaching party will perform the remainder of the contract.

Question 24

What is substantial performance?

Answer 24

Substantial Performance Arises If Breach Is Minor:

The rules for determining substantiality of performance are the same as those for determining materiality of breach.

Question 25

What is the U.C.C. Perfect Tender Doctrine?

Answer 25

If goods or their delivery fail to conform to the contract in any way, the buyer generally may reject all, accept all, or accept any commercial units and reject the rest.

Question 26

When does a buyer accept under the U.C.C. Perfect Tender Doctrine?

Answer 26

A buyer’s right to reject under the perfect tender doctrine generally is cut off by acceptance. Under Article 2, a buyer accepts when:

(1) After a reasonable opportunity to inspect the goods, they indicate to the seller that the goods conform to requirements or that they will keep the goods even though they fail to conform; OR
(2) They fail to reject within a reasonable time after tender or delivery of the goods or fail to seasonably notify the seller of their rejection; OR
(3) They do any act inconsistent with the seller’s ownership.

Question 27

What are a seller’s rights regarding the reclaiming of goods?

Answer 27

If a seller learns that a buyer has received delivery of goods on credit while insolvent, the seller may reclaim the goods upon demand made within 10 days after the buyer’s receipt of the goods.

Question 28

What are the requirements for a mutual rescission? What about a unilateral rescission?

Answer 28

Mutual - The contract may be discharged by an express agreement between the parties to rescind.

Unilateral - For unilateral rescission to be granted, the party desiring rescission must have adequate legal grounds. Most common among these are mistake, misrepresentation, duress, and failure of consideration.

Question 29

What happens to the risk of loss if goods are destroyed?

Answer 29

If goods that were identified when the contract was made are destroyed
(1) without fault by either party and (2) before the risk of loss passes to the buyer, the contract is avoided (that is, the seller’s performance is excused).

If the goods were not identified until after the contract was made, the seller in this situation would have to prove impracticability to be discharged.

Question 30

What is a seller’s measure for damages?

Answer 30

Standard measure of damages will be based on an “expectation” measure, that is, sufficient damages for them to buy a substitute performance. This is also known as “benefit of the bargain” damages.

Question 31

What is a buyer’s measure for damages in cases of unaccepted or undelivered goods?

Answer 31

If after a reasonable effort to cover, a buyer is unable, they may replevy undelivered goods.

If buyer can cover, they can sue for the difference.

Question 32

What is a buyer’s measure for damages in cases of nonconforming goods?

Answer 32

The buyer is not required to accept accommodation goods and may reject them. If the buyer rejects, the shipper isn’t in breach and may reclaim the accommodation goods, because the tender does not constitute an acceptance of the buyer’s original offer.

Question 33

What are incidental damages?

Answer 33

Costs of storing, shipping, reselling, etc.

Question 34

When is specific performance available as a remedy in contract cases? When is it not?

Answer 34

(1) Available for Land and Rare or Unique Goods;
(2) Covenant Not to Compete

It is not available for breach of a contract to provide services, even if the services are rare or unique.

Question 35

What is the duty to mitigate?

Answer 35

Manufacturing Contracts: Generally, in a contract to manufacture goods, if the person for whom the goods are being manufactured breaches, the manufacturer is under a duty to mitigate by not continuing work after the breach. However, if the facts are such that completion of the manufacturing project will decrease rather than increase damages, the manufacturer has a right to continue.

Construction Contracts:A builder does not owe a duty to avoid the consequences of an owner’s breach by securing other work, for example, but does have a duty to mitigate by not continuing work after the breach. Again, however, if completion will decrease damages, it will be allowed.

Question 36

Are punative damages generally awarded in contract cases?

Answer 36

No.

Question 37

What is restitution?

Answer 37

Restitution is based on preventing unjust enrichment when one has conferred a benefit on another without gratuitous intent. Restitution can provide a remedy not only when a contract exists and has been breached, but also when a contract is unenforceable, and in some cases when no contractual relationship exists at all between the parties.

Question 38

What are the rights of a creditor beneficiary?

Answer 38

A creditor beneficiary can sue the promisee on the existing obligation between them. They may also sue the promisor, but may obtain only one satisfaction.

Question 39

What are the rights of a donee beneficiary?

Answer 39

A donee beneficiary has no right to sue the promisee unless grounds for a detrimental reliance remedy exist.

Question 40

What are the rights of an incidental beneficiary?

Answer 40

Only intended beneficiaries have contractual rights, not incidental beneficiaries. In determining if a beneficiary is intended, consider whether the beneficiary…

(1) is identified in the contract,
(2) receives performance directly from the promisor, or
(3) has some relationship with the promisee to indicate intent to benefit.

Question 41

Can rights be assigned or duties delegated in a contract?

Answer 41

Yes, absent a valid non-assignment clause (if there is one present than it takes precedent), you can assign duties and rights.

Note: You cannot assign duties that are specific to a certain person (hiring Beyonce to do a show, she cannot assign the obligation), but cannot get specific performance (involuntary servitude) so can only sue for monetary damages.