REG 5

Question 1

Define: express contract, implied contract, and quasi-contract.

Answer 1

• Express contract is a contract formed by words – written or oral.
• Implied contract is an agreement in which the parties’ assent is inferred from their conduct.
• A quasi-contract is not a contract, but rather is a remedy to prevent unjust enrichment.

Question 2

Name the three elements necessary for an enforceable contract.

Answer 2

• An agreement made up of an offer and an acceptance,
• An exchange of consideration (something of legal value), and
• A lack of defenses.

Question 3

To be enforceable, must a contract generally be in writing?

Answer 3

Generally, writing is not required unless the contract is within the Statute of Frauds.

Question 4

Define the term “offer” and state it’s key requirements.

Answer 4

An offer is a statement by the offeror that invites the offeree to form a contract. To be an offer:

• The offer must be seriously intended.
• The terms must be definite and certain.
• It must be communicated.

Question 5

What is the general rule regarding the revocability of an offer by the offeror?

Answer 5

The general rule is that the offeror can revoke anytime before acceptance, even if the offeror promise to keep an offer open. There are exceptions for option contracts, a substantial start on a unilateral contract and merchant’s firm offers.

Question 6

When is revocation of an offer effective?

Answer 6

When received by the offeree.

Question 7

What are the three exceptions on the offeror’s power to revoke?

Answer 7

• Option contract where consideration is paid to keep the offer open
• Merchant’s firm offer under UCC
• Beginning performance of a unilateral contract

Question 8

What is an option?

Answer 8

A distinct contract in which the offeree gives consideration in exchange for the offeror’s promise to keep the offer open.

Question 9

What is the mailbox rule?

Answer 9

An acceptance is effective to create a contract at the time of dispatch if a reasonable means of communication is used.

Question 10

What are the two elements of consideration?

Answer 10

(i) A bargained for exchange (ii) of something of legal value.

Question 11

In common law contracts what is required for modification of an existing contract between two parties?

Answer 11

Under the common law a contract can be modified if both parties agree and give additional or different consideration.

Question 12

Name a circumstance where a promise will be enforced without consideration.

Answer 12

Detrimental reliance/ Promissory estoppel situation

Question 13

Name some of the defenses available in determining whether a promise will be binding as a contract.

Answer 13

• Fraud
• Innocent misrepresentation
• Duress
• Undue influence
• Mutual mistake
• Unilateral mistake
• Illegality
• Minority
• Intoxication
• Insanity
• Unconscionability
• Statute of limitations
• Statute of frauds
• Impossibility
• Impracticability
• Frustration of purpose
• Accord and satisfaction
• Substituted contract
• Novation
• Failure of conditions

Question 14

What are the elements of fraud?

Answer 14

To establish the defense of fraud, the plaintiff must prove 5 elements:

• The defendant made a misrepresentation of a material fact.
• Scienter: The misrepresentation was made with an intent to deceive (scienter) or with a reckless disregard of the truth (constructive fraud).
• The defendant made the misrepresentation with intent to induce reliance.
• The plaintiff justifiably relied on the misrepresentation.
• The plaintiff suffered damages.

Question 15

Under the Statute of Frauds, what types of promises must be evidenced by a writing?

Hint: MYLEGS

Answer 15

• A promise made where marriage is the consideration
• A promise which by its terms cannot be performed within one year
• Contracts involving the sale or long-term lease of real estate (land)
• An executor’s promise to pay an estate debt out of personal funds
• Contracts involving the sale of goods for $500 or more
• A promise to pay the debt of another (suretyship)

Question 16

Does a contract for the sale of land for $200 need to be evidenced by a writing?

Answer 16

Yes. All contracts for the sale of land (regardless of dollar value) must be evidenced by a writing signed by the party to be charged.

Question 17

What is the Parol Evidence Rule?

Answer 17

If the parties have entered into a fully integrated written contract, prior or contemporaneous oral statements and prior written statements cannot be admitted into evidence to vary the written terms of the contract.

Question 18

If a party to a contract commits an act that constitutes an anticipatory repudiation, what are the options of the nonrepudiating party?

Answer 18

• Treat the repudiatation as an immediate breach and sue for damages immediately
• Ignore the repudiation, await the time specified for performance, and sue if the repudiating party does not perform
• Cancel the contract

Question 19

In general, what is the goal of contract remedies?

Answer 19

Contract remedies are intended to put the nonbreaching party in as good a position as he or she would have been had the other party performed as promised.

Question 20

What are liquidated damages and are they enforceable?

Answer 20

A liquidated damage clause is a clause in a contract that specifies what damages will be if there is a breach (e.g., forfeiture of a down payment for breach). A liquidated damage clause is enforceable if the amount is reasonable in relation to the actual harm done and not a penalty.

Question 21

Distinguish between a creditor beneficiary and a donee beneficiary.

Answer 21

A creditor beneficiary is one to whom the promisee owes a debt.

A donee beneficiary is one to whom the promisee wishes to give a gift or create a right.

Question 22

What rights may NOT be assigned?

Answer 22

You cannot assign when the assignment will change the obligor’s risk or when the delegated duty involves a specialized personal service. Offers also cannot be assigned with the exception of option contracts.

Question 23

Under the Sales Article, what are the exceptions to the Statute of Frauds?

Hint: SWAP

Answer 23

• Specially manufactured goods
• Written confirmatory memo between merchants
• Admission in court
• Performance to the extent accepted

Question 24

What is a merchant’s firm offer?

Answer 24

A written and signed offer by a merchant assuring that the offer will be held open for a period of time. Such offers must be kept open for the time stated, or if no time is stated, for a reasonable time, but in any event no longer than three months.

Question 25

Under the sales article, its mirror image rule, the terms of acceptance must match the terms of the offer or no contract is formed.
True or False?

Answer 25

False. The sales article does not follow the common law mirror image rule. If the terms of the acceptance do not match the terms of the offer, the terms of the control, except in a contract between merchants. In a contract between merchants, the terms of acceptance usually control unless the offeror objects or changes are material.

Question 26

Under the UCC, what are the ways to accept an offer to buy goods?

Answer 26

• A promise to ship

- By prompt shipment unless the offer indicates otherwise

Question 27

State the accommodation shipment rule.

Answer 27

Shipment of nonconforming goods will not operate as an acceptance, but rather will operate as a counteroffer, if the seller notifies the buyer that the shipment is intended as an accommodation.

Question 28

How long is the statute of limitations in UCC Sales and when does the statute begin to run?

Answer 28

The time of breach.

The UCC statute of limitations is four years from the time the cause of action accrued (from the date of breach).

Question 29

If a contract does not specify where goods should be delivered, what is the usual place for delivery?

Answer 29

The seller’s place of business or if there is no place of business, the seller’s home.

Question 30

If there is no agreement between the parties, when does risk of loss pass to the buyer:
If the seller is a merchant?
If the seller is not a merchant?

Answer 30

If the seller is a merchant:

• In a noncarrier contract, when the buyer takes physical possession of the goods, or
• In a shipment contract, when the seller turns over the goods to a carrier
• in a destination contract, when the goods reach the destination specified

If the seller is not a merchant:
-Upon tender of goods to buyer

Question 31

Under the UCC, state the rules governing passage of title.

Answer 31

• Title generally can pass as parties agree
• If parties do not agree, title passes upon delivery
• If buyer rejects goods, title revests with seller

Question 32

Under the Sales Article, identify four types of warranties.

Answer 32

• Express warranties
• Warranty of title
• Implied warranty of merchantability
• Implied warranty of fitness for particular purpose

Question 33

How does the warranty of title arise?

May it be disclaimed by a general disclaimer?

Answer 33

The warranty of title arises automatically in every sale of goods. It may be disclaimed specifically (e.g., “I am giving no warranty of title”) or by circumstances (e.g., a judicial sale), but may not be disclaimed through a general disclaimer, such as “as is” or “with all faults.”

Question 34

Who makes the implied warranty of merchantability?

Essentially, what does the warranty guarantee?

Answer 34

Only merchants who regularly sell goods of kind sold and other experts in the goods make the warranty, which is that the goods are fit for the ordinary purpose for which goods are used.

Question 35

Who makes the implied warranty of fitness for a particular purpose?
What does it guarantee?

Answer 35

Any seller (not just merchants) who know that the buyer is relying on the seller to choose suitable goods for a particular purpose makes the warranty. The seller’s guarantee is that the goods are fit for the purpose for which the seller has reason to know the buyer will use them.

Question 36

What must be shown in order to prove a cause of action for strict products liability?

Answer 36

• The seller was in the business of selling goods
• The product was defective when it left the seller’s hands
• The product was unreasonably dangerous
• The defect caused the plaintiff’s injuries or damages
• The product was expected to and did reach the consumer without substantial change in condition

Question 37

If a seller sells goods to a buyer on credit and then learns that the buyer is insolvent, what are the seller’s remedies?

Answer 37

• Withhold goods still in seller’s possession
• Stop goods in transit and demand cash
• Demand return of goods already received – 10-day limitation

Question 38

What are the buyer’s options when goods are tendered which do not conform to the contract?

Answer 38

• Keep the goods and sue for damages
• Reject all of the goods and cancel the contract
• Reject all or some of the goods and sue for damages

Question 39

If a buyer breaches, under what circumstances can a seller cover the full contract price?

Answer 39

When the buyer has the goods, the seller can collect the full contract price plus incidental damages if the goods cannot be resold for any price or if the goods are destroyed after risk of loss has passed to the buyer.