My Contracts Rules

Question 1

UCC or Common Law?

Contracts

Answer 1

When a transaction involves both the sale of goods and the rendering of services, the “predominant purpose” test applies to determine whether the UCC or the common law governs the entire transaction.

Question 2

What does the UCC govern?

Contracts

Answer 2

The UCC governs contracts for the sale of goods, which are tangible, moveable items.

Question 3

What does a contract require?

Contracts

Answer 3

Every contract requires three components: (1) an offer, (2) an acceptance, and (3) consideration.

Question 4

Definition of offer?

Contracts

Answer 4

An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.

MUST express present intent of offeror to be legally bound to contract

Question 5

What constitutes as acceptance?

Contracts

Answer 5

For a bilateral offer, acceptance can either be with a return promise or by starting performance. In contrast, a unilateral offer can only be accepted by completing performance.

Question 6

What is consideration?

Contracts

Answer 6

Consideration is comprised of two elements: (1) a bargained-for exchange between the parties; and (2) legal value, meaning that it must constitute a benefit to the promisor or a detriment to the promisee.

Question 7

What part of UCC falls within Statute of Frads and how is it satisfied?

Contracts

Answer 7

A contract for the sale of goods for a price of $500 or more is within the Statute of Frauds and generally must be (1) evidenced by a writing (2) with a quantity of goods term (3) that is signed by the party against whom enforcement is being sought.

EXCEPTIONS: unique goods; judicial admissions; full performance; Memo

Question 8

EXCEPTIONS to UCC within Statute of Frauds?

Contracts

Answer 8

There are three situations within the Statute of Frauds that are satisfied and therefore enforceable without the writing requirement: (1) specialty manufactured goods; (2) admissions in pleadings or court; (3) full performance - either payment or delivery and acceptance; and (4) with the Merchant Confirmatory Memo.

(1) if made a substantial beginning of the goods manufacturing

Question 9

Requirements for Merchant Confirmatory Memo?

Contracts

Answer 9

The Merchant Confirmatory Memo Rule is an exception, where an oral contract is acceptable with the following requirements:
1. Both parties must be merchants who deals in the kind of goods that are the subject matter of the contract
2. There must be a writing that accurately reflects the agreement between the parties (with a quantity term)
3. The writing must be signed by the party against whom enforcement is sought
* Additionally, the memo can be enforced against the recipient if the recipient received the memo and did not object to the terms within 10 days of receipt.

Question 10

Options for non-conforming goods under UCC?

Contracts

Answer 10

Under the UCC, if the seller tenders nonconforming goods, the buyer has the right to accept or reject all or part of the goods. In order to reject the goods, the buyer must give notice to the seller within a reasonable time and do so before acceptance.
1. After rejection, the buyer is entitled to a return of any payments made on the goods, and has a security interest in the rejected goods, which the buyer must hold for a reasonable time to allow for the seller to reclaim them, for any payments made by the buyer to the seller for the goods.
2. In addition, the buyer is entitled to damages measured by difference between the market price at the time of the breach and the contract price as well as incidental and consequential damages.

The buyer accepts the goods by expressly stating acceptance, using the goods, or failing to reject within a reasonable time.
1. In accepting goods, the buyer does not forego the right to sue the seller for damages resulting from a breach if the buyer timely gives the seller notice.
2. Here the damages would be the difference between value of nonconforming goods and conforming tender (usually cost of replacement or repair), plus consequential and incidental damages

Question 11

Requirements for revocation under UCC?

Contracts

Answer 11

For revocation after acceptance, the buyer may revoke an earlier acceptance of the goods if nonconformity substantially impairs the value of the goods, with the following requirements:
1. the buyer must notify the seller of revocation;
2. revocation must be within a reasonable time; and
3. the buyer must satisfy one of the statutory grounds for not having rejected in the first place: (a) the seller promised to cure the problem but never did; (b) the seller made assurance regarding goods; or (c) the non-conformity is a latent non-conformity.
* However, revocation must occur before any substantial change in the condition of the goods not caused by the defect.
* Buyer is obligated to hold the rejected goods with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them. A failure to do so is wrongful and can prevent the buyer from cancelling the contract unless such exercise is commercially reasonable (if shown by the buyer by a preponderance of evidence).

Question 12

Types of warranties under UCC?

Contracts

Answer 12

1. Express warranty
2. Implied warranty of merchantability
3. Implied warranty of fitness for a particular purpose

Question 13

Requirements for express warranty?

Contracts

Answer 13

Any promise, affirmation, description, or sample made by the seller that is part of the basis of the bargain is an express warranty, unless it is merely the seller’s opinion or puffery.

Question 14

Requirements for implied warranty of merchantability?

Contracts

Answer 14

A warranty of merchantability is implied whenever the seller is a merchant who deals in the kinds of goods involved in the transaction. To be merchantable, goods must be fit for their ordinary purpose.

Question 15

Requirements for implied warranty of fitness?

Contracts

Answer 15

An implied warranty of fitness for a particular purpose occurs when:
1. the buyer has a particular purpose in purchasing the goods;
2. the sellers knows of the buyer’s purpose; and
3. the buyer relies on the seller’s expertise in selecting the goods.

Question 16

Parol Evidence in UCC?

Answer 16

The UCC presumes that a contract is partially integrated. However, that presumption goes away when the writing contains a merger clause—i.e., a clause that declares the written contract to be the complete and final agreement between the parties. The written contract will instead be deemed completely integrated.
* When a contract is partially integrated, extrinsic evidence of additional consistent terms is admissible unless the parties “certainly” would have included the terms in the written contract.
* However, contradictory terms are not admissible.

EXCEPTION: admissible for proof of conditions or defenses

Question 17

Attorney’s fees allowed in damages?

Contracts

Answer 17

Attorney’s fees are generally not recoverable by a successful litigant in a contract action unless the parties have agreed otherwise, there is specific law authorizing the recovery of such fees, or the breach of contract claim is paired with a fraud claim.

The UCC does not authorize the recovery of such fees.

Question 18

Revocation of offer?

Contracts

Answer 18

Offers can be revoked at will by the offeror prior to the acceptance, even if he has promised not to revoke for a certain period, with some exceptions:
* An option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer
* Under the Merchant’s Firm Offer Rule, there are circumstances in which a promise to keep an offer open is enforceable even if no consideration has been paid to keep the offer open, which are: (1) if a merchant; (2) offers to buy or sell goods in a signed writing; and (3) the writing gives assurances that it will be held open. Should all three elements be present, the offer is not revocable for lack of consideration during the time stated, or if no time is stated, for a reasonable time (but in no event may such period exceed three months).
* Partial performance: if offeree must have knowledge of offer when performance begins, then a unilateral offer is irrevocable.

Revocation must be communicated directly or with action/notifcation

Question 19

Disclaimer of warranties under Article 2?

Contracts

Answer 19

Under Art. 2, a seller can disclaim both of these implied warranties.
* Warranty of merchantability can be disclaimed by use of “as is,” “with all faults,” or similar language that makes plain that there is no implied warranty. The disclaimer may be oral, but it must use the term “merchantability” and must be conspicuous if in writing.
* To specifically exclude the implied warranty of fitness for a particular purpose, the disclaimer must be in writing and use conspicuous language.

Question 20

Statute of limitations under UCC?

Contracts

Answer 20

An action for breach of a sales contract or warranty must be commenced within four years after the cause of action accrues. A breach of warranty generally accrues when delivery is made. But, if a warranty expressly extends to future performance, the cause of action will accrue when the breach is or should have been discovered by the aggrieved party.

Question 21

Contracts releasing liability in VA?

Contracts/Torts

Answer 21

• A contract provision that purports to release a defendant from liability for personal injury caused by the defendant’s future negligence is prohibited. These types of contracts are void per public policy and are not enforceable.
• Contract provisions releasing a defendant from liability for property damage caused by the defendant’s future negligence are enforceable.

Question 22

Interpreting terms under the UCC?

Contracts

Answer 22

When interpreting an ambiguous term in a contract, the UCC provides that evidence can supplement a term by the following, in highest to lowest priority: course of performance, course of dealing, and trade usage.

Question 23

Definition of installment contract?

Contract

Answer 23

An installment contract is defined as one in which the goods are to be delivered in multiple shipments, and each shipment is to be separately accepted by the buyer.

Question 24

Perfect tender rule and installment contracts?

Contracts

Answer 24

The UCC requires a seller to make a “perfect tender” of the goods; substantial performance will not suffice except for installment contracts or when the parties agree that it applies. Under an installment contract, if the seller makes a nonconforming tender, the buyer can reject only if the nonconformity (1) substantially impairs the value of that shipment to the buyer and (2) cannot be cured.
* If the seller makes adequate assurances that he can cure the nonconformity, then the buyer must accept the shipment.
* The buyer may cancel the contract only if the nonconformity substantially impairs the value of the entire contract to the buyer.

Question 25

Punitive damages under contract law?

Contracts

Answer 25

Punitive damages are not recoverable in a contract action unless compensatory damages are awarded, and the seller’s conduct constitutes a willful, independent tort.

Question 26

Lack of privity in defective products?

Contracts/Torts

Answer 26

In breach of warranty or negligence claims brought against the manufacturer or seller of goods, lack of privity between plaintiff and defendant is not a defense.
* Even if the plaintiff did not purchase the goods from the defendant, the plaintiff may bring suit if the plaintiff was a person whom the manufacturer or seller might reasonably have expected to use, consume, or be affected by the goods.

Question 27

Damages under UCC after acceptance?

Contracts

Answer 27

• When the buyer accepts goods that violate the warranty of merchantability, and gives the seller notice of the breach, the buyer may recover damages measured as the difference (at the time and place of acceptance) between the value of the goods as accepted and the value they would have had if they had been as warranted, plus any appropriate consequential and incidental damages. Typically, the amount of such damages is the cost to repair or replace the goods.
• For accepting nonconforming tender, the damages would be the difference between value of nonconforming goods and conforming tender (usually cost of replacement or repair), plus consequential and incidental damages.