Contracts

Question 1

Contract

Answer 1

(1) Offer

(2) Acceptance

(3) Consideration

Question 2

Offer

Answer 2

(1) Intent to enter into a K +

(2) Specific Terms of K.

Question 3

Advertisements

Answer 3

generally, not an offer; they are an invitation to offer (except: when it limits who can accept)

Question 4

Terminating an Offer

Answer 4

(1) Death; (2) Lapse of Time; (3) Rejection; (4) Counteroffer; (5) Revocation

Lapse of Time – if there is no time period stated, a reasonable amount of time has passed

Direct Revocation – Offeror can revoke before offeree accepts

Indirect Revocation – Offeree learns that Offeror made a deal w another party & offer is now revoked as a result

Question 5

Irrevocable Offers

Answer 5

When elements not met–>defaults to revocable offer. (1) Option K; (2) UCC Firm Offer; (3) Unilateral K

Question 6

Option K

Answer 6

Irrevocable Offer. Promise to keep the offer open for a period of time + additional consideration (e.g., open for 2 weeks for $50)

Question 7

Acceptance

Answer 7

(1) Mirror Image Rule; (2) Silence; (3) Performance; (4) Mailbox Rule

Question 8

Mirror Image Rule

Answer 8

Acceptance has to mirror terms of the offer (e.g., accept in writing must accept in writing)

EXCEPTION: UCC Sale of Goods – offeree can accept anyway even if different terms. As long as basic material terms = same.
*Except – (1) material changes in terms (price, goods, etc.); (2) offeror rejects within reasonable amount of time; (3) offer limited acceptance

Question 9

Silence

Answer 9

Acceptance. Offeree gives offeror the impression that silence will be considered an acceptance

Question 10

Mailbox Rule

Answer 10

Acceptance is effective once sent (except: letter #1: rejection sent, letter #2: acceptance sent first letter to arrive)

Question 11

UCC Firm Offer

Answer 11

Irrevocable Offer. sale of goods. Promise to keep offer open for a period of time, no consideration required but needs to be in writing signed by the merchant. Lasts for time stated or max 3 mo.

Question 12

Unilateral K

Answer 12

Irrevocable Offer. Irrevocable once performance starts. a promise for an act (e.g., promise to pay $500 if you paint house)
-Bilateral K – promise for a promise (e.g., promise to paint your house if you promise to pay me $500)
-Payment in Unilateral K – don’t have to pay full amount until complete performance

Question 13

Consideration

Answer 13

Bargained-for exchange. Each party is giving up something, regardless of value.

Question 14

Peppercorn Consideration

Answer 14

Courts will not invalidate consideration regardless of how little value (e.g., $1.50)

Except:

(1) Illusory Promise: looks like a promise but not actually giving anything up/still retaining control (e.g., I’ll call you when I decide). Modern trend is that an illusory promise–> enforceable consideration;

(2) Promise to Give Gift: invalid; but giving gift–> valid & enforceable;

(3) Past or Moral Consideration: offering to give $$ after good deed invalid

Question 15

Promise to Pay Debt After Statute of Limitations/Bankruptcy

Answer 15

valid consideration & enforceable

Question 16

Forbearance to Sue

Answer 16

if promise not to sue even tho could –> valid consideration & enforceable

Question 17

Promissory Estoppel

Answer 17

A promise by a party that makes other party reasonably rely in detriment valid & enforceable

Question 18

Accord & Satisfaction

Answer 18

Hypo #1: Debt is undisputed ($100). Partial payment ($50), but check says “paid in full”–> must pay remainder ($50)

Hypo #2: Debt is disputed ($100). Negotiate & settle ($75), check says “paid in full”–> do not have to pay remainder ($25)

Hypo #3: Debt is disputed ($100). Doubt re debt amount/whether debt owed but paid partial amount ($50) –>do not have to pay remainder ($50)

Question 19

Risk of Loss

Answer 19

No Carrier – Seller bringing goods to Buyer directly. Seller is a merchant RoL on seller until buyer takes possession of goods. Seller is not a merchant RoL is on seller until makes available for buyer to pick up

Carrier is Involved – Delivery intermediary (UPS, boat, plane).
-Shipment K (“FOB Seller”): Default. RoL is on seller until gives to carrier. Once given it to carrier, RoL shifts to buyer.
-Destination K (“FOB x”): RoL is on seller until goods get to actual location.

Question 19

Requirements K

Answer 19

I promise to deliver all the quantity of x I have. Something happened. As long as acted in good faith valid.

Question 20

Modification of Material Term of K

Answer 20

Oral or written (except: UCC: can have a clause prohibiting oral modification = valid)

Common Law – need new consideration v. UCC Sale of Goods – need good faith, no consideration needed

Mutual Modification – bc of unforeseen circumstance, mutually can modify terms as long as change is fair and reasonable

Question 21

Conditions

Answer 21

I will do X if you do Y. A condition/event in the K that must happen–>requires you perform/not perform.

Condition Precedent – Condition/event must happen before performance;

Condition Concurrent - Condition/event must happen at the time of performance;

Condition Subsequent – Condition/event must happen after the K

Required Performance – Generally, if event doesn’t occur don’t have to perform.
-Except: Must perform regardless of condition occurring– (1) Waiver of condition: “do it anyway/forget about it/dw about it;”

(2) Bad Faith;

(3) Avoiding forfeiture: if a party would suffer a great loss/forfeiture

Question 22

Time in a K

Answer 22

Time is not of the essence in a K unless it is stated. If it is stated, then it becomes a condition in a K.

Question 23

Good Faith

Answer 23

Generally implied in every K

Question 24

Nonconforming Goods

Answer 24

Seller delivers goods that are not what buyer originally ordered. Buyer may (1) reject, (2) accept, or (3) reject in part and accept in part. If reject, must reject in reasonable amount of time. If accept, buyer will pay amount of the goods in the OG k.

Hypo #1: Seller sends nonconforming goods but has reasonable grounds to think buyer would accept nonconforming goods Seller can fix nonconforming delivery if (1) can fix within reasonable amount of time (2) gives notice

Hypo #2: Seller sends nonconforming goods prior to delivery date  Seller can fix nonconforming delivery if (1) can deliver by due date (2) gives notice

Installment K – Delivering goods in installments (100 #2 pencils/week for 10 weeks).
-If one of the installments is nonconforming (#1 pencil box) does not mean total breach of K if it affects only that installment. If S cannot fix it–>B can reject it. If S can fix it B cannot reject it & must give seller chance to fix
-If one nonconforming installment materially impairs value of whole K total breach
-Accommodation: only sending you this as an accommodation. B can accept or reject.

Question 25

Impracticability

Answer 25

Unforeseen circumstances which now makes performance of K too difficult/expensive  can be discharged of performance

Foreseeable – any fluctuation of price is foreseeable. Must be extreme.

Question 26

Impossibility

Answer 26

Objectively no one could perform (UCC- Goods are destroyed; Performance is now illegal; Physically can’t do it)

Temporary Impossibility – cannot raise defense of impossibility (e.g., blizzard and roads closed for 48 hours)

Parties Prepared for Event – no defense for contingency that parties prepared for bc then foreseeable (e.g., snow tires on truck)

Question 27

Frustration of Purpose

Answer 27

Core reason for entering K no longer exists–> can be discharged of performance (e.g., bar prep course, don’t take bar)

Question 28

Anticipatory Repudiation

Answer 28

Hypo #1: Before performance, one party unequivocally refuses to perform Total breach = can sue right away or wait or start looking for other options (cancel K). If repudiating party comes back and offers to perform, other party can accept or reject.
 Repudiating party can retract repudiation UNLESS OP has (1) sued RP, (2) accepted repudiation, and/or (3) relied on repudiation and has started looking for another buyer

Hypo #2: Before performance, party1 informs OP that unsure if can perform (e.g., give money to buy house)  OP can demand assurances from party1. If Party 1 provides assurance within reasonable amount of time  OP must wait for Party 1 to perform. If Party 1 doesn’t respond within reasonable amount of time OP can find someone else/can cancel K.
 UCC Sale of Goods K demand for assurances must be in writing and reasonable amount of time = 30 days

Question 29

Defenses to K Enforceability

Answer 29

(1) Minor

(2) Insane

(3) Duress

(4) Undue Influence

(5) Unconscionability

(6) Illegal

(7) Mistake

(8) Misrepresentation

(9) Non-Compete Clauses

(10) SOF

Question 30

Minor

Answer 30

voidable at minor’s option. K can be ratified at age of majority. #s agreed upon after majority>#s agreed upon when minor

Question 31

Insane

Answer 31

K is void

Question 32

Duress

Answer 32

Threat

Question 33

Undue Influence

Answer 33

Uneven bargaining position + special relationship

Question 34

Unconscionability

Answer 34

Result of K will be unconscionable

Question 35

Illegal

Answer 35

Not enforceable, void

Question 35

Mistake

Answer 35

Unilateral – one party is mistaken about a term in the K. Generally, not be a defense unless (1) the other party knew about the mistake (take advantage of me) OR (2) clerical error

Mutual – mistake by both parties to a material term in K. Defense accepted bc no meeting of minds. Remedy = Recission.

Question 35

Misrepresentation

Answer 35

Intentional Misrepresentation – (1) said something knew or should have known was false; (2) intent to get detrimental reliance.

Negligent Misrepresentation – (1) said something false/omitted (2) special relationship (e.g., fiduciary duty) (3) detrimental reliance

Question 35

Legal Remedies

Answer 35

$

Question 35

Expectation Damages

Answer 35

Default; Granted if foreseeable with reasonable certainty. Puts person back in position before breach, had K been performed. (Market/K Price + Costs – Benefit [aka any $ you saved/received])

Question 36

Reliance Damages

Answer 36

Put person in position prior to the K. Paid $ in reliance on K. Granted generally when can’t get expectation D bc too uncertain/speculative (either or)

Question 37

Restitution

Answer 37

Get back value given to you. K is partially performed. Recover market value of the services. At the option of the non-breaching party in replacement of expectation damages (either or)

Question 38

Consequential

Answer 38

Foreseeable costs bc of breach

Question 39

Incidental

Answer 39

Out of pocket expenses

Question 40

Liquidated Damages

Answer 40

Determined at time K made. Clause in K that decides what damages will be if breach. Enforceable if reasonable (~10% or less of value of K) and does not act like a penalty.

Question 41

Quantum Meruit

Answer 41

Breaching party recover reasonable value of services done – any damages they commit during service

Question 41

UCC Seller’s Damages

Answer 41

(1) goods have been delivered & accepted = K price;

(2) some/none delivered and not resold (K price-Market price);

(3) some/none delivered and some resold (K price – Resale Price) + incidental damages

Question 41

Loss Profits

Answer 41

Seller is the lost volume seller, i.e., sell as many as possible. Expected Profit + Costs – Payment for Resale

Question 42

UCC Buyer’s Damages

Answer 42

(1) B purchased replacement goods (K Price - $ for New Goods);

(2) B has not purchased replacement goods (K Price – Market Value @ time B learns of S’s breach) + incidental/consequential damages – any expenses saved

Question 43

Equitable

Answer 43

Granted when remedy at law ($) won’t help.

(1) Specific Performance (item in K is unique/land);

(2) Injunction (prevent irreparable harm, e.g., employment K/trade secret);

(3) Recission (rescind bc no meeting of the mind via mistake, misrepresentation, duress, or lack of capacity)

Question 44

Parol Evidence

Answer 44

One/both parties trying to add more terms to an existing K parties already agreed to. Terms that parties are trying to add were talked about prior to or at the time of K. Is parole evidence admissible?

Complete or Final Integration – PE not admissible. Generally, K has a merger clause (“this is a final agreement b/w the parties”).
 Except – Parole evidence is allowed to clear up an ambiguous term in fact

Partial Integration – PE admissible. Anything that explains/supplements OG terms of K (consistent add. terms; e.g., how/where/when going to complete K) but nothing that contradicts/materially alters OG terms (e.g., price, type of car; Compare car accessories).

Fraud, Duress, Condition Precedent, Course of Dealing – parole evidence is admissible
 Condition Precedent – an event must occur before the parties are obligated to perform
 Course of Dealing – Sale of goods; customs of the trade. How we buy/sell

Question 45

Third-Party Beneficiary Rights

Answer 45

(1) 2 people have a valid K (2) 3rd party will be benefiting from K.

Intended Third-Party Beneficiary – may have rights against contracting parties. K parties intended to benefit 3rd party = intentional
 Naming Beneficiary – Generally will name individuals specifically in K but also can generally indicate who is to benefit
 Rights Vest – Can only sue when rights vest. K parties can change minds unless rights vested. Rights vest (1) When either K party tells 3rd party & 3rd party accepts OR (2) 3rd party learns about K and begins to rely.

Incidental Third-Party Beneficiary – no rights against contracting parties. incidentally benefiting from K = not intentional

Question 46

Assignment

Answer 46

Transfer of rights

Present intent to transfer (must transfer now. Can’t transfer in future, e.g., transfer 6 mo./1 year from now)
 Breach – Can sue 3rd party and OG K party for breach (no/bad performance) unless OG K parties executed a novation
 Anti-Assignment – clause prohibiting assignments but still assign anywaysAssignment is still valid but owes damages for breach unless void (clause says assignments are prohibited and void so assignment is void).

Question 47

Assignment & Delegation

Answer 47

Valid. 2 people have an agreement. One party transfers obligation/performance to 3rd party.

Question 47

Delegation

Answer 47

Transfer of duties (except: personal service Ks; Ks requiring personal skills, discretion, expertise; delegation would materially alter terms of K)

Anti-Delegation – clause prohibiting delegation (“no delegation of duty”) => Enforceable

Other times you cannot delegate:

(1) Materially alter risk of performance/obligation of OP –makes OP worried that won’t get what bargained for (assigning to co. on verge of bankruptcy/lack of expertise) or bc assigning party has unique service/expertise so want them to do it specifically (can’t even give to another specialized person)=> cannot assign to 3rd party

(2) Cannot Change Terms – Party assigned K cannot change/add terms, only receives rights/obligations

(3) Assignment of Right to Money – you owe me $100 but pay it to X. Must give notice to pay X.

Question 47

Non-Compete Clauses

Answer 47

Conditions of where you can work after quit. Enforceable if reasonable under circumstances

Question 47

Statute of Frauds

Answer 47

MYLEGS.

(1) Marriage;

(2) Year: Ks that cannot be performed w/in a year [except: employment for life & no performance date listed];

(3) Land: includes leases [except: part performance];

(4) Executor of Estate;

(5) Guarantor/surety [except: purpose for guaranteeing debt is to benefit me];

(6) Sale of Goods over $500 [except: part performance of delivery/payment, Merchant’s Written Confirmation = confirm quantity via memo + signed by sender + no objection in writing w/in 10 days of receipt]

Legal Writing – Parties, subject matter, basic material terms, signed (or initialed/symbol everyone knows) by party to be charged.