REG Lecture 6

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

Question 4

Define the term “offer” and state its 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 promises to keep an offer open.

Question 6

When is revocation of an offer effective?

Answer 6

When received by the offeree.

Question 7

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

Answer 7

• Option contract in which consideration is paid to keep an 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 an 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

(1) A bargained for exchange (2) 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 in which 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 victim must prove five elements:

• The defrauder 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 defrauder made the misrepresentation with intent to induce reliance.
• The victim justifiably relied on the misrepresentation.
• The victim suffered damages.

Question 15

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

Answer 15

• An agreement made in which marriage is the consideration
• A promise which by its terms cannot be performed within a year
• Agreements 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)
• *M**arriage
• *Y**ear
• *L**and
• *E**xecutor’s promise
• *G**oods $500 or more
• *S**uretyship

Question 16

Does a contract for the sale of land for $200 need to be evidenced by 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 repudiation 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 an obligation.

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?

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 from 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, the terms of the acceptance must match the terms of the offer or no contract is formed (i.e., the mirror image rule).

True or false?

Answer 25

False. The Sales Articles 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 offer control, except in a contract between merchants. In a contract between merchants, the terms of the acceptance usually control unless the offeror objects or the changes are material.

Question 26

Output and requirement contracts do not state an exact quantity of goods. When are such contracts enforceable?

Answer 26

Although the exact quantity is unknown, output and requirement contracts are enforceable if the amounts are reasonable with respect to normally expected amounts.

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 accommodation.

Question 28

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

Answer 28

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

The limitations period begins to run when the breach occurs.

Question 29

If the 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 the 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 good, title revests with seller.

Question 32

Under the Sales Article, identify four types of warranties.

Answer 32

• Express warranty
• Warranty of title
• Implied warranty of merchantability
• Implied warranty of fitness for a 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 the kind sold and other experts in the goods make the warranty, which is that the goods are fit for the ordinary purpose for which the 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 knows that the buyer is relying on the seller to choose goods suitable for a purpose specified by the buyer 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 that 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 the buyer breaches, under what circumstances can a seller recover the full contract price?

Answer 39

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

Question 40

What three attributed must be shown in order to obtain a patent for an invention?

Answer 40

The invention is:

• Novel
• Useful
• Not obvious to someone working in the field

Question 41

What is the basic requirement to obtain a copyright in an original work?

Answer 41

It must be in a tangible medium of expression.