Contracts

Question 1

When a transaction involves both the sale of goods and the rendering of services, the:

Answer 1

predominant purpose test applies to determine whether the common law of contracts or Article 2 of the UCC applies to the entire transaction

Question 2

The parol evidence rule:

Answer 2

prevents the introduction of prior extrinsic evidence that contradicts the terms of the written contract

Question 3

If a writing is a total integration:

Answer 3

The parties cannot introduce extrinsic evidence of prior or contemporaneous understandings or negotiations

Question 4

Four Corners Rule

Answer 4

Common law rule that permitted courts to look only at the writing itself for evidence of intent

Question 5

Common law modification of existing contract:

Answer 5

must be supported by consideration

Question 6

Article 2 of the UCC governs Ks for:

Answer 6

The sale of goods. Goods are things moveable at the time of identification to the contract

• A contract under Article 2 may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract

Question 7

Common law governs Ks for:

Answer 7

Services and real estate

Question 8

Implied warranty of fitness for a particular purpose:

Answer 8

(1) seller is an expert,
(2) seller makes representations about a product,
(3) buyer relies on seller’s expertise, and
(4) seller is aware of buyer’s reliance

Disclaimer: MUST BE CONSPICUOUS

Question 9

Perfect Tender Rule (UCC)

Answer 9

Goods tendered by seller must perfectly conform wit the contractual specifications

When there is no perfect tender buyer can accept the goods, reject all goods, or accept some of the goods

Once goods are accepted they may not be returned unless defect was not immediately discoverable by purchaser

Question 10

What damages are appropriate in a contract for the sale of goods where there is a breach by the seller?

Answer 10

Buyer is entitled to EXPECTATION damages or the COST TO COVER

Question 11

Under the CL, if a party unequivocally informs the other party that he will not perform:

Answer 11

This amounts to an anticipatory repudiation and is treated as a breach

Non breaching party can: sue for damages immediately or wait until time for performance to be due to sue under the K

Question 12

When a party breaches, the goal of contract law:

Answer 12

Is to place the nonbreaching party in the position they would have been in had the contract been performed (expectation damages). Expectation damages include consequential damages.

Nonbreaching party also has a duty to mitigate damages in order to reduce total liability

Question 13

Consequential damages

Answer 13

Damages that were reasonably foreseeable at the time of performance

Lost profits: Need to prove them with a reasonable degree of certainty

Question 14

When the nonbreaching party fails to mitigate damages:

Answer 14

The court can award damages in the amount that the loss would have been had the nonbreaching party properly mitigated

Proper inquiry is whether reasonable efforts to mitigate were made

Question 15

An option contract is:

Answer 15

a promise to keep an offer open for a specific period of time in exchange for consideration (something that induces a party to uphold the agreement)

Question 16

Merchant’s firm offer exception to consideration requirement for option K

Answer 16

When a merchant promises to hold an offer open for a reasonable period of time in a memo and signs it, that offer will be held open w/o consideration

Merchant: someone who normally deals in the type of goods being sold

Question 17

A contract is enforceable when:

Answer 17

There is mutual assent between parties based on an offer and an acceptance

Question 18

An offeror may revoke his offer at any time:

Answer 18

so long as the offeree receives notice of the revocation

Valid notice: direct communication from offeror OR indirectly by learning from reliable 3rd party of offeror’s inconsistent acts

Offer is revoked if offeree receives direct or indirect notice of revocation

Question 19

Offer

Answer 19

Objective manifestation of a willingness by offeror to enter into an agreement that creates a power of acceptance in offeree

Question 20

Counteroffer

Answer 20

Rejection of offer and creation of new offer

Question 21

Acceptance

Answer 21

Objective manifestation by the offeree to be bound by the terms of the offer

• Effective upon dispatch (normally)

Question 22

Rejection

Answer 22

Manifestation of assent not to accept the offer

Question 23

Consideration

Answer 23

Legal detriment or bargained for exchange

• Past consideration is generally no consideration unless the jurisdiction has adopted the material benefit rule

Question 24

Pre-existing duty rule

Answer 24

Promising to perform a legal duty already owed to a promisor is not valid consideration

*EXCEPTIONS: duty is changed, unforeseen circumstances

Question 25

Contract Modification

Answer 25

CL: Consideration is required

UCC: Only good faith is required

Question 26

Promissory Estoppel

Answer 26

A promise is binding if:

(1) Promisor should reasonably expect it to induce action on the party of the promisee or a third person,
(2) Promise does induce such action, and
(3) Injustice is only avoided by enforcement of the promise

Question 27

Substantial Performance (CL)

Answer 27

Party must substantially perform its contractual obligations in order to demand performance from the other party

Question 28

Divisible Contract

Answer 28

A party that performs one or more parts of the K may collect payment for those parts even if he does not substantially complete performance of his duties

Question 29

Revocation of Acceptance

Answer 29

Buyer can do this when:

(1) nonconformity substantially impairs the value to him;
(2) he accepted the goods because he had reasonable belief that the nonconformity would be cured or because the nonconformity was difficult to discover,
(3) he revokes within a reasonable time after he discovers or should have discovered the nonconformity, and
(4) he revokes before any substantial change in the condition of the goods which is not caused by their own defect

Question 30

Anticipatory Repudiation (CL)

Answer 30

Promisor repudiates clearly and unequivocally before time of performance is due

Nonbreaching party can:

(1) treat repudiation as breach,
(2) ignore and demand performance, or
(3) wait until date of performance and then sue for breach

Question 31

Anticipatory Repudiation (UCC)

Answer 31

Unequivocal refusal of buyer/seller to perform or when reasonable grounds for insecurity arise and the other party fails to provide adequate assurances within reasonable time not to exceed 30 days

Question 32

Retraction of Repudiation

Answer 32

Permitted if other party has not canceled the K or materially changed position

Question 33

What contracts are subject to the statute of frauds?

Answer 33

Consideration of marriage, suretyship, cannot be performed within one year, sale of goods over $500, real property

Question 34

Duress

Answer 34

A contract is voidable when it is established that a party’s manifestation of assent was induced by an improper threat that leaves the party no reasonable alternative

Question 35

Expectation Damages

Answer 35

The normal measure of damages for breach of contract are expectation damages, which are intended to put the nonbreaching party in the same position as if the K had been performed

• Must be foreseeable and calculated with reasonable certainty

Question 36

Punitive Damages

Answer 36

Generally not recoverable in breach of K action

Question 37

Restitution

Answer 37

Party may be able to recover restitution for any benefit conferred by way of part performance in excess of the loss that he caused by his own breach

Question 38

Mitigation

Answer 38

Generally, a party cannot recover damages for a loss that the party could have avoided through reasonable efforts