Contract Sales & Leases Flashcards
(398 cards)
1
Q
What governs all contracts unless modified by statutory law?
A
Common law governs all contracts.
2
Q
What is an example of statutory law that can modify common law?
A
The Uniform Commercial Code (UCC).
3
Q
Which types of contracts are generally governed by the common law of contracts?
A
Contracts relating to services, real estate, employment, and insurance.
4
Q
What governs contracts for the sale and lease of goods?
A
The Uniform Commercial Code (UCC).
5
Q
How does the UCC affect general contract law?
A
The UCC modifies general contract law in specific areas.
6
Q
What is a contract?
A
A contract is a promise or a set of promises for which the law provides a remedy for breach or recognizes as a duty.
7
Q
How can a contract be simply defined?
A
A contract is an agreement that can be enforced in court.
8
Q
What is required for a contract to be formed?
A
A contract is formed by two or more parties who agree to perform or refrain from performing some act.
9
Q
When do contract disputes typically arise?
A
Contract disputes generally arise when there is a promise of future performance.
10
Q
What happens if a contractual promise is not fulfilled?
A
The party who made the promise is subject to court sanctions and may have to pay damages or perform the promised act.
11
Q
What are the potential consequences of breaching a contract?
A
Consequences may include paying damages or being required to fulfill the promised act.
12
Q
What is the prime importance in determining whether a contract has been formed?
A
The element of intent is of prime importance.
13
Q
How is intent determined in contract law?
A
Intent is determined by the objective theory of contracts, not by personal or subjective beliefs.
14
Q
What does the objective theory of contracts focus on?
A
It focuses on outward, objective facts rather than a party’s secret, subjective intentions.
15
Q
What are some examples of objective facts used to determine intent?
A
- What the party said when entering into the contract.
- How the party acted or appeared.
- The circumstances surrounding the transaction.
16
Q
What are the four requirements for a valid contract to exist?
A
The four requirements are agreement, consideration, contractual capacity, and legality.
17
Q
What does “agreement” entail in the context of contract formation?
A
An agreement includes an offer made by one party and acceptance of that offer by another party.
18
Q
What is “consideration” in a contract?
A
Consideration refers to promises made by the parties that must be supported by something of value, such as money, received or promised to convince a person to make a deal.
19
Q
What is meant by “contractual capacity”?
A
Contractual capacity means that both parties must possess the legal characteristics that qualify them as competent to enter into a contract.
20
Q
What does “legality” refer to in contract law?
A
Legality means that the purpose of the contract must be legal and not against public policy.
21
Q
What can make a valid contract unenforceable despite meeting the four requirements?
A
Certain defenses to enforceability can invalidate a contract even if the requirements are met.
22
Q
What is meant by “voluntary consent” in contract law?
A
Both parties must voluntarily agree to the contract; if consent is obtained through fraud, undue influence, mistake, or duress, the contract may be unenforceable.
23
Q
What role does “form” play in the enforceability of a contract?
A
The contract must be in the form required by law; some contracts must be in writing to be enforceable.
24
Q
What is a bilateral contract
A
A type of contract that arises when a promise is given in exchange for a promise.
25
What is a unilateral contract
A contract that results when an offer can be accepted only by the offeree’s performance.
26
Formal contracts
A contract that by law requires a specific form, such as being executed under seal, to be valid.
27
Informal contracts
A contract that does not require a specified form or formality in order to be valid.
28
Why are Negotiable instruments considered formal contracts?
the Uniform Commercial Code (UCC) requires a special language to create them
29
express contract
A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.
30
implied contract
A contract formed in whole or in part from the conduct of the parties (as opposed to an express contract).
31
Requirements for Implied Contracts
1. The plaintiff furnished some service or property.
2. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected.
3. The defendant had a chance to reject the services or property and did not.
32
executed contract
A contract that has been completely performed by both parties.
33
executory contract
A contract that has not yet been fully performed.
34
valid contract
A contract that results when the elements necessary for contract formation (agreement, consideration, contractual capacity, and legality) are present.
35
unenforceable contract
A valid contract rendered unenforceable by some statute or law.
36
voidable contract
A contract that may be legally avoided (canceled) at the option of one of the parties.
37
void contract
A contract having no legal force or binding effect.
38
agreement
A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events—an offer by one party to form a contract, and an acceptance of the offer by the person to whom the offer is made.
39
What is an offer in contract law?
A promise or commitment to perform or refrain from performing some specified act in the future.
40
Under the common law, three elements are necessary for an offer to be effective:
The offeror must have a serious intention to become bound by the offer.
The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract.
The offer must be communicated to the offeree.
41
Who are the parties involved in an offer?
The party making the offer is called the offeror, and the party to whom the offer is made is called the offeree.
42
How is "serious intent" determined in contract law?
Serious intent is determined by what a reasonable person in the offeree’s position would conclude from the offeror’s words and actions.
43
Why might an offer made in anger or jest be considered ineffective?
Such offers do not meet the serious-and-objective-intent test, as a reasonable person would not view them as serious.
44
What was the outcome of the case Lucy v. Zehmer regarding the enforceability of a contract made in a casual setting?
The court found that the writing constituted an enforceable contract despite claims of drunkenness and jest, as the intent was serious.
45
What types of statements are not considered offers?
Expressions of opinion, statements of future intent, preliminary negotiations, invitations to bid, advertisements, and auction invitations.
46
What is a "preliminary agreement" in contract law?
A preliminary agreement can constitute a binding contract if all essential terms are agreed upon with no disputed issues remaining.
47
What must an offer include to meet the definiteness of terms requirement?
Identification of the parties, subject matter, consideration, and time of payment, delivery, or performance.
48
What is the communication requirement for an effective offer?
The offer must be communicated to the offeree, as one cannot agree to a bargain without knowing it exists.
49
Can a court supply missing terms in a contract?
Yes, if the parties have clearly manifested their intent to form a contract, but the court will not rewrite a contract if the intent is too vague.
50
What happens when an effective offer is communicated to an offeree?
The offeree gains the power to accept the offer and create a binding contract.
51
What is revocation in the context of an offer?
Revocation is the offeror's act of withdrawing an offer before it is accepted.
52
When does a revocation become effective?
A revocation becomes effective when it is communicated to the offeree or their agent.
53
What is an option contract?
An option contract is an irrevocable offer where the offeror promises to hold an offer open for a specified time in exchange for payment from the offeree.
54
What occurs if the offeree rejects an offer?
The offer is terminated, and any subsequent attempt to accept is considered a new offer.
55
How is a rejection effective?
A rejection is effective only when it is actually received by the offeror or their agent.
56
What is a counteroffer?
A counteroffer is a rejection of the original offer and simultaneously makes a new offer.
57
What does the mirror image rule state?
The mirror image rule requires the offeree's acceptance to match the offeror's offer exactly; any changes or additions terminate the original offer.
58
What are some ways an offer can be terminated by operation of law?
Lapse of time
Destruction of the subject matter
Death or incompetence of either party
Supervening illegality
59
When does an offer terminate due to the lapse of time?
An offer automatically terminates when the specified time period for acceptance has passed or after a reasonable period if no time is specified.
60
What happens if the specific subject matter of the offer is destroyed?
The offer is automatically terminated, and no notice is required.
61
How does death or incompetence affect an offer?
An offer is terminated if either the offeror or offeree dies or becomes legally incapacitated, unless the offer is irrevocable.
62
What is supervening illegality?
Supervening illegality occurs when a law or court decision makes the offer illegal, automatically terminating the offer.
63
What is the significance of the example involving Shane Lee and Sue Kim?
It illustrates how a newly enacted law can automatically terminate an offer that becomes illegal before acceptance.
64
What is acceptance in contract law?
Acceptance is a voluntary act by the offeree that shows agreement to the terms of an offer, which can consist of words or conduct.
65
What are the requirements for an effective acceptance?
The acceptance must be unequivocal, communicated to the offeror, and generally made only by the person to whom the offer is directed.
66
What is the mirror image rule?
The mirror image rule states that the acceptance must exactly match the terms of the original offer; any changes create a counteroffer.
67
How did the case of Lagrange Development illustrate acceptance?
In the case, a modification by Lagrange constituted a counteroffer, which was accepted by Sonja Brown through her performance of the sale.
68
Can silence be considered acceptance?
Generally, silence cannot constitute acceptance, but it can operate as acceptance in situations where there has been prior dealings between the parties.
69
What is the difference between acceptance in unilateral and bilateral contracts?
In unilateral contracts, acceptance is usually evident through performance, while in bilateral contracts, communication of acceptance in the form of a promise is necessary.
70
What is the Mailbox Rule?
The Mailbox Rule states that acceptance becomes effective when the offeree dispatches the acceptance via an authorized mode of communication, not when it is received by the offeror.
71
How does the timing of acceptance work in bilateral contracts?
Acceptance must be timely, meaning it must occur before the offer is terminated.
72
What happens if an acceptance is sent by an unauthorized method?
An acceptance sent by a means not expressly or impliedly authorized is not effective until it is received by the offeror.
73
When can a substitute method of acceptance be effective?
A substitute method of acceptance may be effective if it serves the same purpose as the authorized means, but it is only effective upon receipt by the offeror.
74
In the example of Bennion and Morgan, what is the significance of using a different delivery service?
Morgan's acceptance via UPS instead of FedEx is still effective, but it does not form a contract until Bennion receives the acceptance.
75
What is the second element of a valid contract?
Consideration is the second element of a valid contract.
76
How is consideration defined in contract law?
Consideration is the value given in return for a promise in a bilateral contract or for a performance in a unilateral contract.
77
What role does consideration play in the enforcement of promises?
Consideration is a primary basis for the enforcement of promises under common law.
78
What does consideration serve as in a contract?
Consideration serves as the inducement, price, or motive that causes a party to enter into an agreement.
79
What are the two key components of consideration?
1. Something of legally sufficient value must be given in exchange for the promise.
2. There must be a bargained-for exchange.
80
Will courts typically interfere with contracts based on the amount of consideration paid?
No, as long as consideration is present, courts generally do not interfere with contracts based on the amount of consideration.
81
What does it mean for consideration to be "legally sufficient"?
It means that the consideration must be something of value in the eyes of the law.
82
What are the three forms that legally sufficient consideration can take?
1. A promise to do something one has no prior legal duty to do.
2. The performance of an action that one is not otherwise obligated to undertake.
3. The refraining from an action that one has a legal right to undertake (forbearance).
83
How does consideration typically function in bilateral contracts?
Consideration usually consists of a promise in return for a promise.
84
Can you give an example of consideration in a bilateral contract?
In a sales contract, the seller promises to ship goods, and the buyer promises to pay for those goods; each promise constitutes consideration.
85
What characterizes consideration in unilateral contracts?
In unilateral contracts, consideration involves a promise in return for a performance (an action).
86
Give an example of consideration in a unilateral contract.
If Anita promises to pay her neighbor $800 for painting her garage, the act of painting the garage serves as the consideration for Anita’s obligation to pay.
87
What is the second element of consideration in contract law?
The second element is that consideration must provide the basis for the bargain struck between the contracting parties.
88
What does it mean for consideration to be a "bargained-for exchange"?
It means that the item of value must be given or promised by the promisor in return for the promisee’s promise, performance, or promise of performance.
89
How does a bargained-for exchange distinguish contracts from gifts?
Contracts involve a mutual exchange of value, while gifts do not require any return or exchange of value.
90
What happens when one or both parties think consideration has been exchanged but it has not?
Such agreements may lack enforceable consideration, leading to invalid contracts.
91
What is the "preexisting duty" rule in contract law?
A promise to do what one is already legally obligated to do cannot be considered legally sufficient consideration.
92
Give an example of a preexisting duty.
If Ajax Contractors demands an extra $75,000 to complete a project they are already contracted to finish, this agreement is unenforceable due to the preexisting duty.
93
Under what circumstances can unforeseen difficulties lead to a valid modification of a contract?
If extraordinary difficulties arise that were unforeseen at the time the contract was created, a court may find the modification to be fair and enforceable.
94
What is rescission in contract law?
Rescission is the mutual cancellation of a contract, returning the parties to their original positions.
95
What issues can arise when parties rescind a contract and create a new one?
It can be difficult to determine if the new contract is supported by valid consideration or if there was a preexisting duty under the old contract.
96
Why is past consideration not valid as consideration in a contract?
Promises made in return for actions or events that have already occurred lack the necessary element of a bargained-for exchange.
97
Provide an example of past consideration.
If Iverson promises Blackmon 25% of merchandise profits for using "The Answer" as a logo, this is unenforceable because it is based on past actions.
98
What is required for a noncompete agreement to be valid?
It must have new consideration; simply being employed is not sufficient consideration for a current employee.
99
What makes a promise illusory in contract law?
If the terms express such uncertainty that the promisor is not definitively bound to perform, the promise is illusory and unenforceable.
100
Give an example of an illusory promise.
A promise of a bonus contingent on management's discretion is illusory, as it does not create a binding obligation.
101
What are some common examples of agreements that lack consideration?
1. Preexisting Duty (e.g., a firefighter receiving a reward for a duty).
2. Past Consideration (e.g., a friend promising a gift for a past action).
3. Illusory Promises (e.g., a vague promise of a bonus based on management's opinion).
102
What are common ways to settle legal claims through contracts?
Claims can be settled through accord and satisfaction, a release, or a covenant not to sue.
103
What is an accord and satisfaction?
An accord and satisfaction occurs when a debtor offers to pay, and a creditor accepts, a lesser amount than what was originally claimed to be owed.
104
What is the difference between accord and satisfaction?
The accord is the agreement to accept a lesser amount, while satisfaction is the performance (usually payment) that occurs after the accord is executed.
105
Can accord and satisfaction occur with liquidated debts?
No, if a debt is liquidated (fixed and determined), acceptance of a lesser amount does not satisfy the debt, as the debtor has a preexisting obligation to pay the full amount.
106
What is an unliquidated debt?
An unliquidated debt is one where the amount owed is not settled or determined, allowing acceptance of a lesser sum to operate as satisfaction of the debt.
107
What is a release in contract law?
A release is a contract in which one party forfeits the right to pursue a legal claim against another party, barring any further recovery beyond the terms stated.
108
What are the requirements for a release to be binding?
The agreement must be made in good faith, in writing, and accompanied by consideration.
109
How does a covenant not to sue differ from a release?
A covenant not to sue does not bar further recovery; it simply substitutes a contractual obligation for a legal action based on a valid claim.
110
What was the outcome of Already, LLC v. Nike, Inc.?
The U.S. Supreme Court affirmed that Nike's covenant not to sue prevented it from filing trademark infringement claims against Already, and Already could not assert that Nike's trademark was invalid.
111
What does the term "colorable imitation" refer to in trademark law?
It refers to any trademark that resembles a registered trademark to the extent that it is likely to cause confusion or deceive the public.
112
What is the "voluntary cessation test" in legal terms?
It requires a defendant claiming that its wrongful behavior has ceased to show that it is absolutely clear the behavior cannot reasonably be expected to recur.
113
Why would a party agree to a covenant not to sue?
It provides a way to settle disputes without litigation, allowing both parties to avoid the costs and uncertainties associated with a lawsuit.
114
What types of contracts are similar to covenants not to sue?
Similar contracts include settlement agreements, releases, and waivers, as they all involve relinquishing the right to pursue legal action under certain conditions.
115
What is promissory estoppel?
Promissory estoppel is a legal doctrine that allows a person to obtain recovery based on reliance on a promise, even if the promise is unenforceable due to lack of consideration.
116
Under what circumstances is promissory estoppel applied?
It is applied in situations where a promise is made without consideration, and enforcement is necessary to avoid injustice.
117
What are the elements required for promissory estoppel to be applied?
1. A clear and definite promise must exist.
2. The promisor should expect that the promisee will rely on the promise.
3. The promisee must reasonably rely on the promise by acting or refraining from some act.
4. The promisee’s reliance must be definite and result in substantial detriment.
5. Enforcement of the promise is necessary to avoid injustice.
118
What happens if the elements of promissory estoppel are met?
The promise may be enforced even if it is not supported by consideration, preventing the promisor from using the lack of consideration as a defense.
119
What is the purpose of promissory estoppel?
To provide a remedy and prevent injustice when one party has relied on a promise to their detriment.
120
What does the term "estoppel" mean in the context of promissory estoppel?
"Estoppel" refers to the principle that a person is barred from denying the truth of a matter, particularly regarding a promise that is claimed to exist.
121
How does promissory estoppel function in a legal claim?
In a promissory estoppel claim, the defendant is prevented from denying the existence of a promise they made, even if they later claim they never made such a promise.
122
What is the difference between promissory estoppel and quasi-contract?
In promissory estoppel, a defendant makes a promise that the plaintiff relies upon, while in a quasi-contract, there is no promise, but the defendant receives a benefit from the plaintiff.
123
What are the essential elements of promissory estoppel?
1. The defendant makes a promise knowing the plaintiff will likely rely on it.
2. The plaintiff relies on the promise to their legal detriment.
3. To prevent injustice, the promise must be enforced.
124
What should jurors consider when evaluating a promissory estoppel case?
Jurors should ask why the plaintiff acted or did not act in a certain way unless a promise really existed, using the plaintiff's actions as evidence of the promise's reality.
125
Provide an example of promissory estoppel involving parental responsibility.
If George agrees to take care of Karen's child, Jeb, and is listed as the father on the birth certificate, he may be held liable for child support via promissory estoppel even if he later proves he is not the biological father.
126
Give an example of promissory estoppel in an employment context.
If Harry stays at GoPlex based on a promise from the CEO of a $250,000 payment and later receives nothing, he may successfully claim promissory estoppel for relying on that promise.
127
Who bears the burden of proof in a promissory estoppel claim?
The burden of proof is on the plaintiff to demonstrate that a promise existed and that their actions or inactions were connected to the promise made by the defendant, resulting in legal detriment.
128
What is contractual capacity?
Contractual capacity is the legal ability of parties to enter into a contractual relationship.
129
Why is contractual capacity important for a valid contract?
For a contract to be deemed valid, all parties must possess the legal ability to understand and agree to the terms of the contract.
130
How do courts generally view contractual capacity?
Courts generally presume that parties have contractual capacity unless there is evidence to the contrary.
131
In what situations might contractual capacity be lacking or questionable?
Situations such as when a person is a minor or mentally incompetent can lead to questions regarding their contractual capacity.
132
What is the implication of lacking contractual capacity in a contract?
If a party lacks contractual capacity, the contract may be deemed invalid or unenforceable.
133
What is the age of majority for contractual purposes in almost all states?
The age of majority is typically eighteen years.
134
How can a minor's status be terminated aside from reaching the age of majority?
Minority status can be terminated by marriage or by emancipation, where a parent or guardian relinquishes control over the minor.
135
What is the general rule regarding a minor's ability to enter into contracts?
A minor can enter into any contract that an adult can, except for contracts prohibited by law for minors (e.g., purchasing tobacco or alcohol).
136
What does it mean for a contract entered into by a minor to be "voidable"?
It means that the minor has the option to disaffirm (set aside) the contract at their discretion
137
What is disaffirmance in the context of contracts with minors?
Disaffirmance is the legal avoidance of a contractual obligation, where a minor expresses intent not to be bound by the contract.
138
What was the case involving S.L. and PAK Foods about?
S.L., a sixteen-year-old minor, signed an arbitration agreement but later disaffirmed it after being injured and terminated, leading to a lawsuit for medical expenses.
139
Can an adult who enters into a contract with a minor avoid their contractual duties because the minor can disaffirm?
No, unless the minor exercises the option to disaffirm the contract, the adult party is normally bound by it.
140
What is intoxication?
Intoxication is a condition where a person's normal capacity to act or think is impaired by alcohol or drugs.
141
How can a contract entered into by an intoxicated person be classified?
A contract can be either voidable or valid (and thus enforceable) depending on the level of intoxication.
142
Under what condition can an intoxicated person disaffirm a contract?
If the person was sufficiently intoxicated to lack mental capacity, they may disaffirm the contract while intoxicated and for a reasonable time after becoming sober.
143
When will a contract remain enforceable despite a party's intoxication?
If the intoxicated person understood the legal consequences of the agreement, the contract will be enforceable.
144
What do courts consider when determining the intoxicated person's capacity to enter into a contract?
Courts look at objective indications of the person's condition to assess whether they possessed or lacked the required capacity.
145
Why is it difficult to prove that a person's intoxication impaired their judgment to the point of lacking capacity?
It can be challenging to demonstrate that a person's judgment was so severely impaired that they could not comprehend the legal consequences of the contract, leading courts to rarely permit avoidance due to intoxication.
146
What are the possible classifications of contracts made by mentally incompetent persons?
Contracts can be void, voidable, or valid depending on the circumstances.
147
When is a contract made by a mentally incompetent person considered void?
If a court has previously determined that a person is mentally incompetent, any contract made by that person is void, meaning no contract exists.
148
Who can enter into binding legal obligations on behalf of a mentally incompetent person?
Only a guardian appointed by the court can enter into binding legal obligations on behalf of a mentally incompetent person.
149
What happens if a person was mentally incompetent at the time the contract was formed but has not been previously judged as such?
The contract may be voidable if the person did not know they were entering into the contract or lacked the mental capacity to understand its nature, purpose, and consequences.
150
Describe the case of Annabelle Duffie.
Annabelle, who suffered from mental incompetence, signed a deed to transfer property shortly after inheriting it. Her legal guardian later sued to void the contract due to her lack of mental competence, and the court ordered the property returned to her.
151
Can a contract entered into by a mentally incompetent person be valid?
Yes, it may be valid if the person had the mental capacity at the time the contract was formed, including during lucid intervals when they have sufficient intelligence and judgment.
152
What are lucid intervals in the context of mental competence?
Lucid intervals are temporary periods during which a mentally incompetent person has sufficient intelligence, judgment, and will to understand and enter into contracts.
153
What is the final requirement for a contract to be valid and enforceable?
The contract must be formed for a legal purpose.
154
What happens to a contract that is for an illegal purpose?
It is considered void from the outset and thus unenforceable.
155
Can a contract to commit a tortious act be enforceable?
No, a contract to commit a tortious act, such as fraud, is contrary to public policy and therefore illegal and unenforceable.
156
What types of acts are considered illegal for the purposes of contract formation?
Acts that are prohibited by federal or state statutory law or that involve tortious behavior.
157
What do statutes often specify regarding contracts?
Statutes set forth rules specifying which terms and clauses may be included in contracts and which are prohibited.
158
What is the status of a contract to commit a crime?
Any contract to commit a crime is in violation of a statute and is therefore unenforceable.
159
What happens if the object or performance of a contract becomes illegal after it has been formed?
The contract is considered discharged by law.
160
What is usury?
Usury refers to charging an interest rate above the lawful maximum set by statute for various transactions, including loans.
161
How do most states treat usurious contracts?
Most states limit the interest that can be collected to the lawful maximum, while some allow recovery of the principal amount without interest.
162
What defines gambling in a legal context?
Gambling involves the creation of risk for the purpose of assuming it, specifically through the distribution of property by chance for valuable consideration.
163
How have states' views on gambling contracts changed over time?
While traditionally deemed illegal and void, many states now allow and regulate certain forms of gambling, such as lotteries and charity-sponsored events.
164
What is required for certain professions in terms of licensing?
Members of certain professions must obtain licenses, which may involve extensive schooling, examinations, or proof of good moral character.
165
When is a contract with an unlicensed person generally illegal and unenforceable?
If the licensing statute's purpose is to protect the public from unauthorized practitioners, then the contract is illegal.
166
When might a court enforce a contract with an unlicensed person?
If the statute's purpose is merely to raise government revenues, a court may enforce the contract and impose a fine on the unlicensed individual.
167
What are contracts contrary to public policy?
Contracts that have a negative impact on society and are therefore not enforceable, such as contracts for immoral acts or that prohibit marriage.
168
What is the general stance on contracts in restraint of trade?
They are generally unenforceable because they are contrary to public policy, promoting competition in the economy.
169
What is an exception to the unenforceability of contracts in restraint of trade?
A restraint may be enforceable if it is reasonable and contained in an ancillary clause of a contract, such as in the sale of a business or employment contracts.
170
What is a covenant not to compete?
A clause that restricts a seller from opening a competing business in a specific geographic area after selling a business, often enforceable if reasonable.
171
How do noncompete agreements function in employment contracts?
Employees may agree not to work for competitors for a specified period after termination, enforceable if the duration and geographic restrictions are reasonable.
172
How do laws regarding noncompete agreements vary?
Some states, like California, prohibit them altogether, while others require a benefit to the employee for such agreements to be enforceable.
173
What are unconscionable contracts?
Contracts that are so unfair or oppressive that courts may relieve parties from their obligations, often due to procedural or substantive unconscionability.
174
What are exculpatory clauses?
Clauses that release a party from liability for injury, often viewed unfavorably by courts, especially in rental agreements and employment contexts.
175
Under what conditions are exculpatory clauses enforceable?
They must be reasonable, not violate public policy, and should not shield parties from liability for intentional misconduct.
176
What makes a liability waiver enforceable?
Waivers must be clear, unambiguous, and conspicuous, assuming the patron had a chance to read and accept the terms.
177
What is the legal stance on discriminatory contracts?
Contracts that involve discrimination based on race, gender, or other protected characteristics are contrary to statute and public policy, making them unenforceable.
178
What is the purpose of the writing requirement in contracts?
To ensure that certain types of contracts are in writing or evidenced by a memorandum or electronic record to be enforceable.
179
Does the writing requirement mean a formal written contract is necessary?
No, an exchange of e-mails or informal agreements can suffice, provided they are signed or agreed to by the party against whom enforcement is sought.
180
What is the Statute of Frauds?
A statute that stipulates which types of contracts must be in writing, denying enforceability to those that do not comply with its requirements.
181
What types of contracts are generally required to be in writing?
1. Contracts involving interests in land
2. Contracts that cannot be performed within one year
3. Collateral contracts, such as promises to answer for another's debt
4. Promises made in consideration of marriage
5. Contracts for the sale of goods priced at $500 or more under the UCC
182
What happens if a contract is oral when it is required to be in writing?
The contract is voidable by a party who does not wish to follow through with the agreement.
183
What is a third-party beneficiary in contract law?
A third-party beneficiary is a person intended to benefit from a contract between two other parties.
184
What rights does an intended third-party beneficiary have?
An intended beneficiary has legal rights and can sue the promisor directly for breach of the contract.
185
What is the significance of the 1859 case involving Holly, Lawrence, and Fox?
This case established the right of third-party beneficiaries to sue a promisor directly for breach of contract when the promise was made for their benefit.
186
What distinguishes an intended beneficiary from an incidental beneficiary?
An intended beneficiary is specifically meant to benefit from the contract and has legal rights, while an incidental beneficiary receives an unintentional benefit and cannot enforce the contract.
187
Can an incidental beneficiary sue to enforce the contract?
No, an incidental beneficiary cannot sue because their benefit from the contract is unintentional. Only intended beneficiaries have the right to enforce the contract.
188
What are restraints of trade in contract law?
Restraints of trade are contracts that violate public policy by restricting competition and may be illegal and void, often in violation of federal antitrust laws.
189
What is a covenant not to compete (non-compete)?
A covenant not to compete is a type of contract that restrains trade but may be enforceable if it is ancillary to an enforceable agreement and is reasonable in scope and duration.
190
Why might a non-compete provision be included in the sale of a business?
It protects the buyer from the seller starting a new competitive business, ensuring the goodwill and reputation of the business are maintained.
191
In the example of Raul's landscaping business, why is the one-year non-compete agreement significant?
It allows the buyer, Leonardo, to establish the business under new management without immediate competition from Raul.
192
How does the example of the Apple Inc. employment contract illustrate the complexity of non-compete agreements?
The agreement limits employment with competitors globally for three years due to access to trade secrets, raising questions of enforceability based on reasonableness and fairness.
193
What factors might a court consider when evaluating the enforceability of a non-compete agreement?
The court will balance the employer's interests and market share against the employee's rights and future employment opportunities.
194
What can courts do if confronted with a non-compete agreement that is partially enforceable and partially illegal?
Courts may reform the restraint to create an equitable solution, such as limiting the duration or geographical scope of the non-compete.
195
What is the Statute of Frauds?
A legal principle stating that certain types of contracts must be in writing and signed by the parties to be enforceable.
196
What is the One-Year Rule under the Statute of Frauds?
An oral agreement that cannot be performed within 12 months of creation must be in writing to be enforceable.
197
When does the 12-month period for the One-Year Rule start?
The clock starts ticking the day after the agreement is formed.
198
Does an agreement that could possibly be performed within one year need to be in writing?
No, it does not need to be in writing if it could potentially be performed within 12 months.
199
In the example of Billy and the Bar-B-Q place, why does his agreement not need to be in writing?
Because the agreement could possibly be performed the following weekend, making it enforceable without a written contract.
200
Why must the agreement between Z-band and Main Street Club be in writing?
Because it involves a performance that cannot be completed within 12 months, as they agreed to play for the next 3 years.
201
How does the Statute of Frauds apply to agreements that may take more than a year to perform?
Such agreements must be in writing to be enforceable under the Statute of Frauds.
202
What is a third-party intended beneficiary?
An outsider whom the original parties to a contract intend to benefit, giving them certain legal rights to sue the promisor if the promise is not kept.
203
What must an intended beneficiary show to enforce a contract?
The original contracting parties were aware of her situation and intended to benefit her directly.
204
Does the intended beneficiary's name need to appear in the contract?
No, it is sufficient that she is a member of the class of persons for whose benefit the contract was made.
205
What are the two most common types of intended beneficiaries?
Creditor beneficiaries and donee beneficiaries.
206
What is a creditor beneficiary?
A third party who benefits from a contract when a promisor agrees to pay a debt owed by the promisee to that third party.
207
In the example of Emmett's Appliance and Collateral Creditor, why is Collateral Creditor an intended creditor beneficiary?
Because Bloomfalls Capital agreed to assume Emmett's debts, allowing Collateral Creditor to sue Bloomfalls if they fail to perform.
208
What is a donee beneficiary?
A third party who receives a gift from a contract, having the right to sue the promisor directly if the gift is not conveyed.
209
In the life insurance example, who are the donee beneficiaries?
Hannah's parents, Joseph and Carol, who can sue Integrity Life Insurance if they fail to pay the life insurance proceeds.
210
What is an incidental beneficiary?
A third person who benefits from a contract unintentionally and does not have the right to sue the promisor if the promise is not fulfilled.
211
What does Article 2A of the UCC cover?
Article 2A covers leases of personal property (goods) and subleases of goods.
212
What is a lease in the context of Article 2A?
A lease is a transfer of the right to possess and use goods for a specified period of time in exchange for payment.
213
What types of goods are included under Article 2A?
Personal property such as automobiles and industrial equipment.
214
How does Article 2A relate to Article 2 of the UCC?
Article 2A is similar to Article 2 but applies specifically to leases of goods rather than sales of goods, with variations to reflect differences between the two types of transactions.
215
Does Article 2A apply to leases of real property?
No, Article 2A does not concern itself with leases of real property, such as land or buildings.
216
What does Article 2 of the UCC govern?
Article 2 governs sales contracts, or contracts for the sale of goods.
217
How does Article 2 modify common law contract requirements?
Article 2 modifies certain common law requirements to facilitate commercial transactions but still adheres to common law principles unless modified by the UCC.
218
What happens when there is a conflict between common law and UCC rules?
The UCC controls in case of a conflict; when the UCC is silent, common law applies.
219
What is the definition of a sale according to the UCC?
A sale is defined as the passing of title from the seller to the buyer for a price, which may be paid in cash, goods, or services.
220
What does Article 2 exclude from its coverage?
Article 2 does not deal with real property (real estate), services, or intangible property like stocks and bonds.
221
What is required for goods to be characterized as such under Article 2?
Goods must be tangible and movable, meaning they have physical existence and can be transported.
222
How does Article 2 apply to goods associated with real estate?
Contracts for the sale of minerals, oil, or gas are considered sales of goods if severance is made by the seller.
223
What is the predominant-factor test?
A test used by courts to determine whether a contract is primarily for the sale of goods or services when both are involved.
224
Who is considered a merchant under Article 2?
A merchant is someone who deals in goods of the kind involved in the sales contract or holds themselves out as having specialized knowledge or skill related to the goods.
225
Can a person be a merchant for one type of goods but not another?
Yes, a person can be a merchant for specific goods but not for others, such as a retailer being a merchant for sporting goods but not for used computers.
226
What legal case established that title passes at contract formation under UCC Article 2?
The case involving Blasini, Inc. and Cheran Investments, where the court held that title to business assets passed to Blasini at contract formation, regardless of payment status.
227
What does Article 2 say about mixed contracts involving goods and services?
If a court finds that the primary purpose of a contract is the sale of goods, the UCC applies to the entire contract, including any service components
228
How does the UCC modify common law regarding the formation of sales and lease contracts?
The UCC provides specific modifications to common law contract rules to accommodate sales and lease transactions.
229
What flexibility do parties have in sales and lease contracts under the UCC?
Parties are generally free to establish whatever terms they wish in their contracts.
230
When does the UCC come into play in the formation of contracts?
The UCC applies when parties fail to provide certain terms or wish to change the effect of the UCC’s terms in their contract.
231
What phrases does the UCC use to indicate the flexibility of contract terms?
The UCC frequently uses phrases like “unless the parties otherwise agree” and “absent a contrary agreement by the parties.”
232
When is a binding contract formed in general contract law?
A binding contract is formed when a definite offer is met by an unqualified acceptance.
233
How does the UCC address the timing of contract formation?
The UCC allows for a contract to exist even if the exact moment of its making is undetermined [UCC 2–204(2), 2A–204(2)].
234
What is the UCC's stance on open terms in sales or lease contracts?
A sales or lease contract will not fail for indefiniteness even if some terms are left open, as long as the parties intended to make a contract and there is a reasonably certain basis for the court to grant a remedy [UCC 2–204(3), 2A–204(3)].
235
What happens if too many terms are left open in a contract?
A court may find that the parties did not intend to form a contract if too many terms are left open.
236
In the case of Toll Processing Services, LLC v. Kastalon, what was the issue regarding the storage agreement?
The issue was whether the lack of a specific duration in the storage agreement made it unenforceable.
237
What did the appellate court conclude about the storage agreement in the Toll Processing case?
The court affirmed that there was no mutual understanding on the duration of the agreement, making it unenforceable.
238
What is a requirements contract?
A requirements contract is an agreement where the buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer requires.
239
What is an output contract?
An output contract is an agreement where the seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the seller produces.
240
What limitation does the UCC impose on requirements and output contracts?
The quantity must be the amount that occurs during a normal production period and cannot be unreasonably disproportionate to prior requirements or output [UCC 2–306(1)].
241
What is a firm offer under the UCC?
A firm offer is an offer made by a merchant in a signed writing that assures the offeree the offer will remain open for a specified period or a reasonable period not exceeding three months [UCC 2–205, 2A–205].
242
What are the requirements for a firm offer to be valid?
The offer must be written (or electronically recorded) and signed by the offeror.
243
In the example of Osaka's firm offer, what makes it irrevocable?
The firm offer is irrevocable because it is made in a signed writing and assures the offeree that the offer will remain open until a specified date.
244
How may acceptance of an offer to buy, sell, or lease goods be made under the UCC?
Acceptance may be made in any reasonable manner and by any reasonable means, including a prompt promise to ship or current shipment of goods [UCC 2–206(1)(b)].
245
What are conforming and nonconforming goods?
Conforming goods meet the contract's terms, while nonconforming goods do not.
246
What happens if a seller ships nonconforming goods without notifying the buyer?
The shipment constitutes both acceptance of the offer and a breach of contract, unless the seller notifies the buyer that the shipment is merely an accommodation.
247
In the example where Mendez orders blue watches but receives black watches, what does it mean if Halderson ships black watches as an accommodation?
It means that the shipment is an offer rather than an acceptance, and a contract will be formed only if Mendez accepts the black watches.
248
Under common law, when does acceptance of a unilateral offer occur?
Acceptance occurs through performance, and the offeree need not notify the offeror unless the offeror would not otherwise know of the performance.
249
How does the UCC differ regarding notification of acceptance compared to common law?
The UCC requires that the offeror be notified within a reasonable time that the offeree has accepted the contract by beginning performance [UCC 2–206(2), 2A–206(2)].
250
What is the mirror image rule under common law?
The mirror image rule requires that the terms of the acceptance exactly match those of the offer for a contract to be formed.
251
How does the UCC handle additional terms in an acceptance?
Under the UCC, a contract is formed even if the acceptance includes additional or different terms, depending on whether the parties are merchants or nonmerchants [UCC 2–207(1)].
252
If one or both parties are nonmerchants, how are additional terms treated?
If one (or both) parties is a nonmerchant, the contract is formed according to the terms of the original offer, excluding any additional terms [UCC 2–207(2)].
253
What happens when both parties are merchants and additional terms are included in the acceptance?
The additional terms become part of the contract unless the original offer limits acceptance to its terms, the new terms materially alter the contract, or the offeror objects within a reasonable time [UCC 2–207(2)].
254
What is a counteroffer in the context of acceptance?
A response that includes additional or different terms and is conditioned on the offeror’s assent to those terms is considered a counteroffer, not an acceptance [UCC 2–207(1)].
255
How does UCC Section 2–207(3) address conflicting terms in the parties' writings?
It states that conduct recognizing the existence of a contract is sufficient to establish a sales contract, allowing courts to strike conflicting terms and incorporate supplementary terms as needed.
256
What is the common law rule regarding consideration in contracts?
A contract requires consideration to be enforceable.
257
How does the UCC differ from common law regarding contract modifications?
The UCC does not require a contract modification for the sale or lease of goods to be supported by new consideration [UCC 2–209(1), 2A–208(1)].
258
What must any contract modification under the UCC be made in?
Any modification must be made in good faith [UCC 1–304].
259
When must a modification of a sales or lease contract be in writing to be enforceable?
If the contract specifies that changes must be in a signed writing, only those changes agreed to in writing are enforceable.
260
What is required when a consumer signs a form that prohibits oral modifications in a contract?
The consumer must sign a separate acknowledgment of the clause for it to be enforceable [UCC 2–209(2), 2A–208(2)].
261
What happens when a modification makes a sales contract fall under Article 2’s writing requirement?
Such modifications typically require a written form to be enforceable.
262
Under the UCC, what is true about offers?
Not all terms need to be included for a contract to be formed, and the price does not have to be specified [UCC 2–204].
263
What is the general requirement regarding the quantity of goods in an offer?
The contract must normally specify the quantity of goods involved.
264
What makes an offer by a merchant irrevocable without consideration?
An offer in a signed writing with assurances that it will not be withdrawn is irrevocable for up to three months [UCC 2–205].
265
How can acceptance be made under the UCC?
Acceptance can be made by any reasonable means of communication and is effective when dispatched.
266
What constitutes acceptance by performance in the UCC?
Acceptance can be made by a promise to ship, the shipment of conforming goods, or prompt shipment of nonconforming goods unless accompanied by a notice of accommodation.
267
What must happen if acceptance is made by performance?
The offeror must be notified within a reasonable time; otherwise, the offer can be treated as lapsed.
268
What creates a contract even if the acceptance terms differ from the offer?
A definite expression of acceptance creates a contract unless it is expressly conditioned on the offeror's consent to the additional or different terms.
269
Is consideration required for a modification of a contract for the sale or lease of goods under the UCC?
No, a modification does not require consideration as long as it is made in good faith.
270
What does the UCC's Statute of Frauds require for sales contracts priced at $500 or more?
Sales contracts must be in writing to be enforceable [UCC 2–201(1)].
271
What is the writing requirement for lease contracts under the UCC?
Lease contracts requiring total payments of $1,000 or more must be in writing to be enforceable [UCC 2A–201(1)].
272
What constitutes a sufficient writing under the UCC's Statute of Frauds?
The writing must indicate the parties intended to form a contract and must be signed by the party against whom enforcement is sought.
273
Can a typed name qualify as a signature on an electronic record?
Yes, a typed name can qualify as a signature on an electronic record.
274
What is the limitation of enforceability regarding quantity in writing under the UCC?
The contract will not be enforceable beyond the quantity of goods shown in the writing; other terms can be proved by oral testimony.
275
What must a writing for a lease include under the UCC?
The writing must reasonably identify and describe the goods leased and the lease term.
276
What special rule applies to merchants regarding the Statute of Frauds?
Merchants can satisfy the Statute of Frauds if one merchant sends a signed written confirmation of an oral agreement within a reasonable time [UCC 2–201(2)].
277
What happens if a merchant receives a signed confirmation but does not object to it within ten days?
The writing is sufficient against the receiving merchant, even if they have not signed it.
278
In the example of Alfonso and Goldstein, why can't Alfonso raise the Statute of Frauds as a defense?
Because he did not object in writing to the contents of the confirmation sent by Goldstein within ten days of receipt.
279
What are the three exceptions to the writing requirements under the UCC's Statute of Frauds?
1. Specially manufactured goods
2. Admissions in court proceedings
3. Partial performance
280
When is an oral contract for specially manufactured goods enforceable?
If the goods are specifically manufactured for a buyer, not suitable for resale, and manufacturing has substantially started.
281
How is an oral contract enforceable if the party admits it?
If the party against whom enforcement is sought admits in pleadings, testimony, or other court proceedings that a sales or lease contract was made.
282
Under what condition will an oral contract be enforceable based on partial performance?
If payment has been made and accepted, or goods have been received and accepted, the contract will be enforced at least to the extent that performance took place.
283
What is a key requirement for contract terms under general contract law?
The contract must contain all material terms.
284
How does sales law differ regarding contract terms?
Open terms are acceptable if the parties intended to form a contract, but the quantity term must normally be specified, and the contract is not enforceable beyond that quantity.
285
What rule applies to acceptance in general contract law?
The mirror image rule applies; if additional terms are added, a counteroffer is created.
286
How does acceptance work under sales law?
The mirror image rule does not apply; additional terms will not negate acceptance unless the acceptance is expressly conditional on assent to those terms.
287
What is required for contract modifications under contract law?
Modification requires consideration.
288
How does sales law treat contract modifications?
Modification does not require consideration.
289
What makes an option contract irrevocable under contract law?
An option contract is irrevocable if supported by consideration.
290
How are merchants' firm offers treated under sales law?
Merchants' firm offers are irrevocable without consideration.
291
What does the Statute of Frauds require in general contract law?
All material terms must be included in the writing.
292
What are the writing requirements for sales law under the Statute of Frauds?
Writing is required only for sales of goods priced at $500 or more, and the contract is not enforceable beyond the quantity specified.
293
How can merchants satisfy the Statute of Frauds requirement?
Merchants can satisfy the requirement by a written confirmation evidencing their agreement.
294
What are the exceptions to the writing requirement in sales law?
Exceptions exist for specially manufactured goods, admissions, and partial performance.
295
What is an unconscionable contract?
An unconscionable contract is one that is so unfair and one-sided that it would be unreasonable to enforce it.
296
What can a court do if it deems a contract unconscionable under the UCC?
The court can refuse to enforce the contract, enforce the remainder of the contract without the unconscionable part, or limit the application of the unconscionable term to avoid an unconscionable result [UCC 2–302, 2A–108].
297
What was the case Jones v. Star Credit Corp. about?
The case involved the Joneses purchasing a freezer for $900, with total costs raising it to $1,234.80, while the freezer had a maximum retail value of $300.
298
Why did the Joneses choose to sue in state court rather than federal court?
There was no federal question or constitutional issue at stake, making state court the appropriate venue.
299
What does Section 2–302 of the UCC authorize a court to do regarding contracts?
It authorizes the court to find a contract or clause unconscionable and allows the court to refuse enforcement, excise the clause, or limit its application.
300
What factors did the court consider in determining unconscionability in Jones v. Star Credit Corp.?
The court considered the mathematical disparity between the retail value and sale price, the excessive credit charges, and the limited financial resources of the buyer.
301
What was the court's decision in the Jones v. Star Credit Corp. case?
The court held that the contract was not enforceable and reformed the contract so that no further payments were required.
302
How does the knowledge of a seller regarding a buyer's limited resources relate to unconscionability?
The seller's knowledge of the buyer's limited resources can support a finding of unconscionability, indicating that an advantage was taken during the transaction.
303
What impact does the case Jones v. Star Credit Corp. have on today's law?
It illustrates how courts assess unconscionability by focusing on excessive pricing and unequal bargaining power, often leading to successful claims under UCC 2–302.
304
What did title represent before the UCC was created?
Title represented the right of ownership and controlled the issues of rights and remedies in sales contracts.
305
What was a common issue with determining title before the UCC?
It was often difficult to ascertain when title passed from the seller to the buyer and how a court would decide who held title at the time of a loss.
306
How has the UCC addressed the issues surrounding title in sales contracts?
The UCC has separated the question of title from the rights and obligations of buyers, sellers, and third parties as much as possible.
307
Does the UCC still consider title relevant in some situations?
Yes, the UCC has special rules for determining when title passes, although these rules do not apply to leased goods.
308
What concepts has the UCC largely replaced the concept of title with?
The UCC has replaced the concept of title with identification, risk of loss, and insurable interest.
309
What must happen before any interest in goods can pass from the seller or lessor to the buyer or lessee?
The goods must be in existence and identified to the contract [UCC 2–105(2)].
310
When does identification take place in a sales or lease contract?
Identification takes place when specific goods are designated as the subject matter of the contract.
311
Why is identification significant in a sales or lease contract?
Identification gives the buyer or lessee the right to insure the goods and the right to recover from third parties who damage the goods.
312
What happens if the parties do not specify when identification will take place in their contract?
The UCC provisions determine when identification takes place [UCC 2–501(1), 2A–217].
313
When does identification occur for existing goods?
Identification occurs at the time the contract is made if the goods are specific and determined to be in existence.
314
In the example of Litco Company contracting to lease five cars, when does identification occur?
Identification occurs at the time of contracting because the cars are identified by their vehicle identification numbers (VINs).
315
What are future goods?
Future goods are any goods that are not in existence at the time of contracting.
316
When does identification take place for unborn animals?
Identification takes place when the animals are conceived if they are to be born within twelve months after contracting.
317
When is identification made for crops?
Identification occurs when the crops are planted if they are to be harvested within twelve months or the next harvest season.
318
How is identification made for any other future goods?
Identification occurs when the seller or lessor ships, marks, or designates the goods as those referred to in the contract.
319
When are goods that are part of a larger mass identified?
Goods are identified when they are marked, shipped, or designated by the seller or lessor as the particular goods to pass under the contract.
320
What are fungible goods?
Fungible goods are goods that are alike naturally, by agreement, or by trade usage, such as specific grades of grain or oil.
321
How does ownership of fungible goods work?
Owners of fungible goods typically hold title as tenants in common, allowing a seller to pass title and risk of loss to a buyer without physically separating the goods.
322
In the example of Alvarez, Braudel, and Carpenter, how does Alvarez pass title to Treyton?
Alvarez can pass title and risk of loss to Treyton without physically separating the 5,000 bushels of grain because the goods are fungible.
323
What provisions apply to the passage of title once goods exist and are identified?
The provisions of UCC 2–401 apply to the passage of title.
324
Can buyers and sellers agree on when title will pass?
Yes, they can reach an explicit agreement on when title will pass.
325
Without an explicit agreement, when does title pass to the buyer?
Title passes to the buyer at the time and place the seller performs by delivering the goods [UCC 2–401(2)].
326
In which situation does title pass at the time of physical delivery?
When a person buys cattle at a livestock auction, title passes upon physical delivery of the cattle unless otherwise agreed.
327
What is a shipment contract?
A shipment contract requires the seller to deliver goods into the hands of a carrier, with title passing at the time and place of shipment [UCC 2–401(2)(a)].
328
What is a destination contract?
A destination contract requires the seller to deliver goods to a specific destination, with title passing when the goods are tendered at that destination [UCC 2–401(2)(b)].
329
How does title pass when no movement of the goods is required?
Title passes when a document of title is delivered to the buyer; if no document is required, title passes at the time and place the sales contract is made.
330
What happens to title when a title document is required?
Title passes to the buyer when and where the document is delivered, even if the goods never move.
331
When does title not pass if no document of title is required?
Title does not pass until the goods are identified to the contract; if goods have not been identified, title remains with the seller.
332
In the case of Timothy Allen and Indy Route 66 Cycles, why did the court rule in favor of the government?
The court ruled that title passed to Allen when Indy delivered the motorcycle, despite Indy retaining a “Certificate of Origin.”
333
What was the outcome of the case involving Alaska Air Group and Horizon Air regarding the E175 jets?
The court ruled that title did not pass until the aircraft were identified, as the purchase contract did not specify individual planes, allowing the sale to SkyWest without affecting Horizon's agreement.
334
What is the primary question regarding risk of loss in a sale or lease transaction?
The question is who bears the financial loss if the goods are damaged, destroyed, or lost in transit.
335
Does risk of loss necessarily pass with title under the UCC?
No, risk of loss does not necessarily pass with title; it is generally determined by the contract between the parties.
336
How can the contract specify when the risk of loss passes?
The contract may state expressly when the risk of loss passes, or a court may interpret existing terms to determine this.
337
What does the term "F.O.B." indicate in a contract?
F.O.B. (free on board) indicates that the selling price includes transportation costs to a specific location, with the seller bearing the risk of loss to that location [UCC 2–319(1)].
338
When does risk of loss pass in a shipment contract?
In a shipment contract, risk of loss passes to the buyer when the goods are delivered to the carrier [UCC 2–509(1)(a), 2A–219(2)(a)].
339
In the case of Pitman's sale of grapefruit, when does risk pass to the buyer?
Risk passes to the buyer when the grapefruit are properly placed in the possession of the carrier in Houston.
340
When does risk of loss pass in a destination contract?
Risk of loss passes to the buyer when the goods are tendered to the buyer at the specified destination [UCC 2–509(1)(b), 2A–219(2)(b)].
341
What is the presumption regarding ambiguous contracts?
Courts will generally presume an ambiguous contract is a shipment contract unless clear and explicit language indicates otherwise.
342
What happens when the seller keeps the goods for pickup?
If the seller is not a merchant, risk of loss passes to the buyer on tender of delivery. If the seller is a merchant, risk passes when the buyer takes physical possession [UCC 2–509(3)].
343
How does risk of loss pass when goods are held by a bailee?
Risk of loss passes when the buyer receives a negotiable document of title, the bailee acknowledges the buyer’s right to possess the goods, or the buyer receives a nonnegotiable document and has had a reasonable time to present it [UCC 2–503(4)(b), 2–509(2)].
344
What occurs when a sales or lease contract is breached?
The party in breach generally bears the risk of loss, depending on which party breaches the contract.
345
If the seller breaches and the goods are nonconforming, when does risk pass to the buyer?
Risk does not pass to the buyer until the defects are cured or the buyer accepts the goods despite their defects.
346
What are the limitations on risk of loss when the buyer breaches?
1. The seller must have identified the contract goods.
2. The buyer bears risk for only a commercially reasonable time after the seller learns of the breach.
3. The buyer is liable only to the extent of any deficiency in the seller’s insurance coverage.
347
What is required for parties to obtain insurance coverage on goods in sales and lease contracts?
Parties must have a sufficient interest in the insured item to obtain a valid policy.
348
Which laws determine the sufficiency of insurable interest?
Insurance laws determine sufficiency, while the UCC provides helpful rules regarding insurable interests in goods.
349
When does a buyer or lessee have an insurable interest in identified goods?
A buyer or lessee has an insurable interest the moment the contract goods are identified by the seller or lessor [UCC 2–501(1), 2A–218(1)].
350
Can a buyer or lessee obtain insurance coverage for goods before the risk of loss has passed?
Yes, they can obtain insurance coverage even before the risk of loss has passed.
351
When does a seller have an insurable interest in goods?
A seller has an insurable interest in goods as long as he or she retains title to the goods [UCC 2–501(2)].
352
Does a seller retain an insurable interest after title passes to the buyer?
Yes, if the seller has a security interest in the goods, they still have an insurable interest after title has passed.
353
Can both the buyer and seller have an insurable interest in the same goods at the same time?
Yes, both can have an insurable interest in identical goods simultaneously.
354
What must a buyer or seller do to recover from an insurance company?
They must sustain an actual loss to have the right to recover.
355
What happens to the insurable interest of a lessor in leased goods?
The lessor retains an insurable interest in leased goods unless the lessee exercises an option to buy [UCC 2A–218(3)].
356
What occurs to the risk of loss when a lessee exercises an option to buy?
The risk of loss passes to the lessee when they exercise the option to buy.
357
What is the UCC Battle of the Forms?
It refers to the situation when the terms of acceptance differ from the terms of the offer in contracts for the sale of goods.
358
What is the Mirror-Image rule?
The Mirror-Image rule states that an acceptance must exactly match the terms of the offer; any change or addition constitutes a counter-offer.
359
What happens under the Mirror-Image rule if a service contract changes terms during acceptance?
No contract is formed if the acceptance changes the terms of the offer, such as increasing the price.
360
How does the UCC differ from the Restatement regarding contract acceptance?
Under the UCC, a contract is formed if there is intent to agree, and additional terms are merely suggestions unless acceptance is conditioned on those terms.
361
In the UCC, what occurs if a buyer accepts an offer but adds a request for delivery?
A contract is formed because the request for delivery is considered a suggestion, not a condition of acceptance.
362
What happens if the acceptance is conditioned upon additional terms under the UCC?
If acceptance is conditioned upon additional terms becoming part of the contract, then no contract is formed.
363
Who is considered a merchant under the UCC?
A merchant is someone who deals in goods of the kind involved in the sales contract or has specific skill or knowledge regarding the goods or services.
364
What happens to additional terms in contracts between merchants under the UCC?
Additional terms become part of the contract unless they materially alter the original contract, the original offer limits acceptance, or the offeror rejects the additional terms in a timely manner.
365
Give an example of a situation that falls under the Restatement rather than the UCC.
If Amy asks Bennet to paint her house for $500, and Bennet responds with a price of $750, this is an example of a service contract falling under the Restatement.
366
What are the conditions under which additional terms do not become part of a contract between merchants?
Additional terms do not become part of the contract if they materially alter the agreement, if the original offer limits acceptance to its terms, or if the offeror rejects the additional terms.
367
What does the passage of title refer to in contracts for the sale of goods?
It refers to the transfer of ownership of the goods from one party to another.
368
How can parties determine when title to the goods passes?
The parties can specify the timing of the title transfer in the contract.
369
What is the default rule for the passage of title in sales contracts?
Title transfers from Seller to Buyer upon delivery of the goods.
370
Why is the transfer of title significant in a sales contract?
It is the point at which one party becomes responsible for any loss or damage to the goods.
371
What is a "no-ship" contract?
A contract where the goods do not need to be physically moved; the buyer must pick up the goods.
372
When does title generally pass in a no-ship contract?
Title passes when the contract identifying the goods is formed, and the goods are prepared for pickup.
373
In a shipping contract, when does title pass?
Title passes when the goods are delivered or dropped off with a carrier.
374
Provide an example of a shipping contract scenario.
If Tom uses UPS to send antiques to Harry, title transfers when Tom gives the box of antiques to the UPS delivery person.
375
In a destination contract, when does title pass?
Title passes when the seller delivers the goods to a specific destination and the buyer accepts those goods.
376
Give an example of a destination contract scenario
If Tom drives the box of antiques to Harry and Harry inspects and accepts the goods, title passes to Harry at that point.
377
What are the core obligations of a buyer and seller in a contract to sell goods?
The seller must transfer and deliver conforming goods, while the buyer must accept and pay for those goods according to the contract.
378
What does delivering conforming goods mean?
It means the seller makes the identified goods available to the buyer according to the contractual standards.
379
What is required for a seller's delivery of goods?
The seller must provide notification reasonably necessary for the buyer to take delivery, including reasonable notice at an agreed-upon location.
380
What is referred to as a "Tender of Performance"?
The seller's action of making the goods available to the buyer, which triggers the buyer's duty to accept and pay for the goods.
381
Does the buyer have the right to inspect the goods before payment?
Yes, unless otherwise agreed, the buyer has the right to inspect the goods before making payment.
382
What is a condition precedent to the buyer's obligation to accept the goods?
The goods must pass inspection.
383
How can a buyer accept the goods after inspection?
By signaling acceptance, failing to reject within a reasonable time, or acting inconsistently with the seller's ownership.
384
When must the buyer make payment for the goods?
Payment must be made at the time and place the goods are received or according to the agreed credit terms.
385
What signifies that the contract has been completely performed?
The buyer's acceptance of the goods and subsequent payment completes the performance of the contract.
386
The primary source for contract law is
A) Social Values
B) Common Law
C) Expectations
D) personal interests
Common law
Common law is the source for much of US law, Contract law is based on common law as well. Contract law can be modified or replaced by statutory law such as the Universal Commercial Code, or by administrative agency regulations.
387
Juan offers to pay Sari to deliver certain documents within thirty minutes. Sari can accept the offer only by completing the task within the deadline. If she does, Juan and Sari will have
a bilateral contract.
a unilateral contract.
a void contract.
an unenforceable contract.
unilateral contract
In this case, Sari can only accept the offer if she completes the task within the thirty-minute deadline. A unilateral contract is a promise for an act, formed not when promises are exchanged but when the act is performed.
388
Marketing Inc. offers to create a campaign to increase N’Ice Cream Inc.’s online business. N’Ice agrees to pay for the service. These parties have
an express contract.
an implied contract.
no contract.
a formal contract.
an express contract
In an express contract the terms of the agreement are fully and explicitly stated in words, oral or written. The agreement between Marketing and N’Ice is simply stated. Marketing will create a campaign, N’Ice will pay for the work.
389
Macy offers to sell his fitness watch for $50 to Nona. Nona promises to pay Macy the price. Later, they exchange the watch for the funds. A contract was created when
Nona paid for the watch.
Macy offered to sell the watch.
Macy delivered the watch.
Nona promised to pay for the watch.
Nona promised to pay for the watch
In this case Macy and Nona have entered into a bilateral contract, goods exchanged for payment. If Macy had insisted that Nona pay in cash within an hour, and Nona agreed, a unilateral contract would have existed.
390
Grinders Mill agrees to sell to Harvest Company a certain quantity of refined grains. Some of the other terms in the deal are left open. In the case of a dispute, a court will generally presume
nothing.
whatever favors the non-breaching party.
whatever is reasonable.
whatever favors the plaintiff.
whatever is reasonable
In this case the parties agreed to terms of sale that were mutually beneficial – Harvest got the grain, Grinders got paid. Both parties agreed to leave some of the terms until later. The court will weigh the evidence in the case and the terms of the contract and render a decision based on what is reasonable.
391
Bon, an agent for City Motors Inc., e-mails Dale on May 1 that the dealer will sell to her a 2018 Ford pick-up truck for $25,000 between May 1 and July 1. Bon’s offer to Dale is
irrevocable until Dale responds.
revocable at any time.
irrevocable for the stated period.
revocable on the payment of consideration to Dale.
irrevocable for the stated period
This case is an illustration of a firm offer made to Dale by Bon for a specified period. The email constitutes a written and signed firm offer and Bon would be in breach of contract if he sells the truck to another party during the specified period.
392
Bean Processor Inc. agrees to ship a certain quantity of coffee beans to Coffee Café LLC. Bean sends to Coffee an e-mail indicating that the parties intended to form a contract. Against Bean, as a contract, the e-mail will be sufficient
if it is signed by Bean.
under no circumstances.
if Coffee responds with an acknowledgment of the deal.
if it is signed by Coffee.
if it is signed by Bean
This case is an illustration of a firm offer made to Coffee Café by Bean. The electronic signature in an email is sufficient to meet the requirement that the offer be both written and signed.
393
Dona offers to sell her used sofa, chair, coffee table, end table, and lamp to Etta for $700. Etta responds that she will pay that price if Dona’s TV set is included. Neither party is a merchant. Their contract is formed according to
under no circumstances.
whatever is reasonable.
the new terms of the acceptance.
the terms of the original offer.
the terms of the original offer
In the law of contracts, the mirror image rule, also referred to as an unequivocal and absolute acceptance requirement, states that an offer must be accepted exactly with no modifications. The offeror is the master of their own offer. An attempt to accept the offer on different terms instead creates a counteroffer, and this constitutes a rejection of the original offer. Therefore, they proceed according to the terms of the original offer.
394
Seacoast Transport Company pays Trucks & Trailers Inc. a stated price for the use of seven tractor-trailer rigs for a year. Under the UCC, this is
a sublease.
a sale.
a contract for services.
a lease.
a lease
Leases of personal property (goods such as automobiles and industrial equipment) have become increasingly common. In this context, a lease is a transfer of the right to possess and use goods for a period of time in exchange for payment. The key words in the question are “for the use” and “for a year”. Use of a product over a period of time is indicative of a lease.
395
Mining Corporation purchases the business assets of Open Pit Inc., including its equipment and supplies, for an agreed-to price, payable in installments. Under the UCC, this transaction is
a sale.
a sublease.
a lease.
a contract for services.
a sale
The UCC defines a sale as “the passing of title [evidence of ownership rights] from the seller to the buyer for a price” [UCC 2–106(1)]. The price may be payable in cash or in other goods or services. In the example given in the question, Mining Corporation is purchasing the business assets of Open Pit including its equipment and supplies. If the transaction were concerned with land or intangible assets, the UCC would not apply.
396
Embers Corporation orders 12 fire extinguishers from Firefighting Inc., which delivers the equipment. This is most likely
a sale of goods.
a contract for services.
a lease of goods.
a gift.
a sale of goods
The UCC defines a sale as “the passing of title [evidence of ownership rights] from the seller to the buyer for a price” [UCC 2–106(1)]. The price may be payable in cash or in other goods or services. In the example given in the question, Embers ordered 12 extinguishers from Firefighting and the goods were delivered. We can assume this transaction is a sale. If the transaction is concerned with land or intangible assets, the UCC would not apply.
397
Jo owns a condominium that she leases to Kia. Jo employs Maria to manage the condominium. Jo gives her daughter Liu $450 on her sixteenth birthday. Jo sells her car to her neighbor Steve for $1,500. Article 2 of the UCC covers
the sale to Steve.
The employment of Maria.
the gift to Liu.
the lease to Kia
the sale to Steve
The UCC defines a sale as “the passing of title [evidence of ownership rights] from the seller to the buyer for a price” [UCC 2–106(1)]. The price may be payable in cash or in other goods or services. In the example given in the question, Jo is leasing to Kia. Real Estate is not covered by the UCC but by the Civil Code of many states. Jo employs Maria to manage the building. Employment law stems in part from general contract law such as terms and conditions of employment. The UCC does not cover gifts, so the gift to Jo’s daughter Liu would not be covered.
398
