Contracts Flashcards
1
Q
What is required for valid consideration?
A
(1) a bargained-for exchange between the parties; and
(2) legal value - that which is bargained for must be considered of legal value
i.e. it must constitute a benefit for the promisor or a detriment to the promisee
e.g. promise to pay and a promise to sell
‘I will attempt to get the money together’ = NOT a promise
No need for equivalency of exchange
2
Q
When is consideration not valid?
A
Past consideration
Moral consideration
Illusory promise
Token consideration (devoid of value)
Sham cosnideration (insignificant sum)
Gross inadequacy of exchange that so shocks the conscience
3
Q
What is a manifestation of assent?
A
It is an acceptance.
4
Q
Is a manifestation of assent/acceptance sufficient to conclude an enforceable contract? Evebn if the parties intend to memorialize their agreement in a contract/writing that isn’t prepared yet?
A
Yes, parties’ agreement on essential terms constitutes the manifestation of mutual asset sufficient to create an enforceable contract.
5
Q
What is the Parol Evidence Rule?
A
The PE rule bars parties to a written contract from presenting PRIOR ‘extrinsic’ evidence (written or oral) or contemporaneous oral expressions of terms in a contract that would contradict, modify or vary the terms of a written agreement, when that written agreement is considered complete and finalized.
IF the evidence is subsequent - such as modifications of a contract - that is VALID! PE = only PRIOR evidence.
6
Q
How does Article 2 apply the PE rule?
A
Art 2 generally follows the same rules as common law. A party can’t contradict a written contract but may add CONSISTENT ADDITIONAL TERMS, unless:
1) there is a merger clause, or
2) the courts frind from all the circumstances that the writing was intended as a complete and exclusive statement of the terms of the agreement.
Art 2 also provides that a written contract’s terms may be explained or supplements by evidence of:
- course of performance;
- course of dealing; and
- usage of trade
REGARDLESS of whether or not the writing appears to be ambiguous.
7
Q
When assessing whether the PE rule applies, what is the first thing to ascertain? Why? Define this!
A
Whether the contract is partially or completely integrated.
Why? If only partially integrated, the parol evidence rule does not apply (extrinsic evidence is admissible ONLY for proving consistent, admissible terms - the writing CANNOT be contradicted but CAN be supplemented).
Completely integrated contract = intended to be the complete and exclusive expression of all terms in the agreement (writing CANNOT be contradicted OR supplemented).
Partially integrated = anything less than completely integrated, e.g. contains only some, not all, of the terms in the agreement.
8
Q
What are the exceptions to the PE rule? i.e. when can it be used for an integrated contract?
A
- aid in interpreting an existing term
- show that a writing is/is not an integration
- establish that an integration is complete or partial
- establish subsequent agreements or modifications
- show that the contract terms were the product of illegality, fraud, duress or mistake
- show that a written agreement is contingent on a condition precedent
9
Q
What is a completely integrated agreement
A
It is an unambiguous written agreement that leaves no doubt that the parties intended it to be the final contract, and expresses the parties’ full and exclusive agreement on a matter.
10
Q
What is the Four Corners Rule?
A
If a written agreement, on its face, appears complete, no outside evidence may be used to challenge it. If there is evidence that exists outside of the four corners of the agreement, it is inadmissible if they contradict the terms of the written contract.
11
Q
Who dictates how an offer may be accepted?
A
The offeror - the offeror is the master of his offer, which means he may prescribe the method by which it may be accepted.
12
Q
What is an executory accord? What does it require to be valid?
A
When parties agree to allow for one of the parties who has a duty to perform to promise a different, substitute performance from what they originally promised, which would discharge their existing duty.
It requires an affirmative, mutual agreement between the parties to allow one to give a different performance in substitution for an existing duty.
13
Q
When a creditor offers to discharge an existing debt for less than the amount owed if the debtor pays sooner, is this supported by consideration?
A
YES! The creditor benefits from a faster return payment, although he sacrifices some % of the debt owed, and the debtor discharges his debt for less, although it is due sooner than originally agreed.
14
Q
What is the certainty rule for damages?
A
A plaintiff must prove that the losses suffered were not just speculative but were certain.
15
Q
When can consistent additional terms be added to a Sale of Goods even when there is a completely integrated agreement?
A
Fully integrated contracts can be explained or supplemented by evidence of ‘consistent additional terms’ which can be based on: PDT
1.course of performance (way parties have conducted themselves in performing the particular contract at hand)
2. course of dealing (pattern of performance between the parties to the contract with respect to past contracts)
3. trade usage (any practice regularly observed in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question - must be reconciled with the express terms of the contract, i.e. it explains terms of contract).
This evidence can be added regardless of whether/not the writing appears to be ambiguous.
16
Q
What is the approach to the parol evidence rule under the UCC (sale of goods)?
A
Contract terms that are intended by the parties to be the final expression of their agreement can’t be contradicted by evidence of any previous agreement or contemporaneous oral agreement but may be explained/supplemented by evidence of ‘consistent additional terms’.
17
Q
What is required for modification of a common law contract?
A
Mutual assent and consideration.
18
Q
Under the UCC, what is sufficient to show agreement between parties?
A
Appropriate conduct between the parties may be sufficient to show agreement to a contract for sale of goods - e.g. even if an exchange of correspondence between the parties makes the exact moment of contract formation indeterminate, the proposal of identical terms demonstrates a condition was met and that the parties’ conduct manifested agreement.
19
Q
Do UCC contracts fall under the ‘mirror image’ rule?
A
No, this is a common law rule that requires the acceptance to match the offer.
UCC relaxes this rule to allow contracts to be formed even where the acceptance differs from the offer.
20
Q
What is a crossing offer? Is it valid under common law?
A
When identical offers are sent by 2 parties to one another.
The offeree must know of the offer in order to accept it, and
this is true whether the offer is for a bilateral or unilateral
contract. Thus, if A sends B an offer and B sends A an offer
unaware of A’s offer (such as a crossing offer situation), no
contract is formed, even if the offers contain the same terms.
21
Q
Is a crossing offer valid under the UCC?
A
No, although under the UCC unclear communications can create a manifestation of agreement, a cross-offer functions as a rejection followed by a counter-offer.
22
Q
What is adequate assurances?
A
A party to a contract with reasonable grounds to worry that the other party might not perform can request adequate assurances of performance.
Party can suspend performance pending receipt of that assurance.
23
Q
What happens when a party fails to provide an adequate assurance? What happens when they do provide them?
A
A failure to provide adequate assurance within a reasonable time (not to exceed 30 days) can be treated as a repudiation which may give rise to a right to terminate the contract.
Once adequate assurances are provided, the other party is bound to perform under the contract.
24
Q
Can a merchant’s firm offer stay open for longer than 3 months?
A
If a merchant-offeror states that an offer will stay open for a period beyond the UCC’s 3-month limit on irrevocability, they will be bound only for 3 months.
Remember that the 3-month limitation applies only to offers not supported by consideration. Watch for an offer
that looks like a merchant’s firm offer but includes some consideration. This is an option contract, and the offer can
be held open for as long as the parties specify.
25
What is a Merchant's Firm Offer? Under the UCC
An offer can become irrevocable if:
1. made by a merchant
2. in signed writing
3. and gives explicit assurances that the offer will be held open
A firm offer will only last for the period of time stated in the offer. If no time period is stated, the offer will stay open for a maximum of three months.
Offer becomes irrevocable EVEN if no consideration given by the offeree.
If consideration is given = option contract and stays irrevocable as long as agreed.
26
What happens if a UCC Firm oFFer contains a time period? What is the time limit?
If a UCC Firm Offer states a time period for how long the offer will remain open, that time period governs how long the offer remains irrevocable.
BUT a firm offer cannot be made irrevocable for more than 3 months, even if contracted to remain open for longer. SO if no consideration is given for offer to remain open, after 3 months, the offer can be revoked at any time by the offeror BUT the offeree can accept whenever if not revoked by offeror.
27
In a UCC firm offer, can the offeree accept after 3 months are up and no consideration has been given for the offer to stay open?
Yes! After 3 months the offer has become revocable which just means that the offeror can revoke it (as opposed to before when he couldn't and it had to stay open). But if the offeror doesn't actually revoke the offer, the offeree is still free to accept it whenever they wish. It is an open, un-revoked, offer.
IF the offeree gave additional consideration after the 90 days/3months is up, the offer could remain irrevocable.
28
If both parties are merchants, can a firm offer under the UCC be made orally?
NO! A firm offer must be made in a signed writing that assures that the offer will be held open.
29
What is the general rule on revocation? What are the exceptions?
An ordinary offer is revocable at the will of the offeror.
Exceptions:
1. Standard option contract (common law)
2. Firm offer under the UCC
3. Temporary irrevocability as a result of the offeree's part performance or detrimental reliance.
30
When is specific performance of a contractual obligation granted?
When an award of monetary damages is inadequate - i.e. where damages would not be a just or reasonable substitute for performance of the promise, or where the calculation of adequate damages would be impracticable.
SO, SP = granted when:
(a) there is a valid contract
(b) there is an inadequamte remedy at law
(c) the enforcement of the perfromance is feasible; and
(d) no defenses apply.
31
When is a legal remedy for damages normally inadequate?
The damages are unique, difficult to calculate, impossible to collect, or the breaching party is insolvent.
32
Which kind of assignments are irrevocable and revocable?
Assignments for value = (1) done for consideration or (2) taken as security for or payment of a preexisting debt. They CANNOT be revoked.
Gratuitous assignment = assignment not for value (e.g. gift) IS revocable - the assignor retains the power to revoke the assignment unless and until the assignee obtains performance from the obligor.
33
What happens when a performance is subject to an express condition? When does it become due?
A performance that is subject to an express condition cannot become due unless the condition occurs or its non-occurence is excused.
34
What happens if a contract is contingent upon an express condition that the buyer do something but the buyer doesn't even attempt to carry out the thing?
The duty of good faith is implied in every contract, imposes an obligation on the buyer to make reasonable efforts to carry out what he needed to do under the condition.
Normally the non-occurence of an express condition to a contract would excuse the buyer from having to perform. But here the buyer did not act in good faith by attempting to do what he needed to do in order for the contract to be valid. SO the seller can sue the buyer for breach.
35
How are damages to an injured buyer in a contract for the sale of real estate, usually measured? (when SP not available and why might it not be available?)
Expectancy damages: the difference between the contract price and the market value of the property at the time that the buyer learned of the breach, plus any incidental or consequential damages.
Typically a breach of contract for real estate would entitle the buyer to soecific performance because land is considered unique. BUT note, specific performance is NOT available when the land in question has been sold to someone else.
36
How are expectancy damages calculated?
(a) the loss in value to the non-breaching party, plus
(b) any other loss, including incidental or consequential loss, caused by the breach, less
(c) any cost or other loss that the non-breaching party has avoided by not having to perform.
37
Can a promise be supported by consideration?
Yes, if two things are true:
1. The promisee is giving up something of value or circumscribes his liberty in some way to suffer a legal detriment; and
2. the promisor makes his promise as part of a bargained-for exchange for the promisee's legal detriment.
Legal detriment = important where not clear that one party has really given up anything in the bargain
Bargain element = dispositive in situations that do not involve business dealings, e.g. a promise to make a gift.
38
Do courts consider the adequacy of consideration?
No, courts do not consider the adequacy of consideration as long as the consideration was bargained-for, 'even a peppercorn will suffice' for consideration.
What matters for finding consideration is the existence of an exchange, even if the values exchanged are unequal.
39
What happens to a contract that violates a state/regulatory statute?
It may be declared unenforceable on the grounds of public policy - i.e. if enforcing it is against public policy. BUT if declaring said contract unenforceable would be contrary to the public policy of protecting the policy owner and the policy owner is within the class of persons that the policy is intended to protect, the court will not declare the contract unenforceable.
40
Is specific performances used for personal service contracts?
Specific performance is generally awarded for breach of contract where monetary damages would be inadequate or impracticable.
BUT a court will not issue an affirmative injunction compelling a person to specifically perform a personal service contract (although a court might issue a negative injunction in certain circumstances.
41
When does a court impute a quasi-contract?
To avoid unjust enrichment - i.e. one party receiving a benefit without paying for it. The remedy will be for the party that has benefited to pay the value of the benefit conferred to the conferring party.
42
What happens when a buyer sends non-conforming goods but includes a note stating that they are an accommodation? What is the general rule here?
UCC - an order/other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt shipment of conforming OR non-conforming goods, OR a prompt promise to ship.
IF the seller seasonably notifies the buyer that the shipment of non-conforming goods is being offered only as an accommodation to the buyer, the shipment of those non-conforming goods will NOT result in a breach - it is a counter-offer (to sell the goods shipped as they are) which the buyer can then choose to accept/reject.
If buyer accepts accommodation - contract of goods is formed.
If buyer rejects - contract is prevented from coming into existence at all, and the buyer may not sue the seller for breach.
43
What happens when a Seller sends non-conforming goods?
UCC - an order/other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt shipment of conforming OR non-conforming goods, OR a prompt promise to ship.
By sending non-confirming goods, a seller is accepting the offer and breaching the contract at the same time. The buyer can then either accept the non-conforming goods or reject them. If the buyer rejects the non-conforming goods, he can then sue for breach.
44
When does a revocation terminate an offeree's power of acceptance?
IF it is communicated to the offereree BEFORE they accept.
45
What is the mailbox rule?
The mailbox rule renders a properly mailed acceptance effective upon dispatch, not the receipt. So this means that when a letter is deposited in the mail, the acceptance is effective, and the offer can no longer be revoked.
46
What happens if an offer is ambiguous about if they invite acceptance through a return promise or through performance? (commonly occurs where the offer is a request that the goods be shipped)
UCC - an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt shipment of conforming OR non-conforming goods, OR a prompt promise to ship.
47
What are the 2 exceptions to a contract only conferring rights and duties imposed on the parties to the contract, not anyone else?
1. where the original contract confers rights and duties on a 'third party beneficiary'; and
2. when a party seeks to transfer rights and duties under a contract to a third party, usually in the form of an assignment of rights or delegation of duties
48
What is an incidental third party benediticary
Those who may benefit from the contract but that is not the primary purpose of the contract - i.e. an incidental beneficiary
49
What factors are looked at to determine whether a beneficiary is 'intended'?
Whether:
1. The beneficiary could have reasonably relied on the fact that a purpose of the contract was to confer a right to him
2. Performance is supposed to run directly from a contracting party to the third party, rather than from the promisor to the promisee and only indirectly benefitting the third party again;
3. If part of the overall objective of the parties to the contract was to benefit the third party.
50
Is a lifetime contract covered by the Statute of Frauds (under the performance not within one year from date of contract category)?
No! It is capable of performance within a year - a person can die at any time.
51
What are essential terms in a contract?
No definitive list - depends on the agreement, its context and the subsequent conduct of the parties. There must be enough in the writing to enable the court to enforce the contract.
Examples of essential terms include: identity of the parties,
description of the subject matter, and the terms necessary
to make the contract definite. See other cards for specific contracts (land, sale of goods, employment).
52
What is actually required by the SoF?
Not a formal written contract. The writing can be a receipt, a letter, a check with details in the memo line, a written offer that was accepted orally.
Statute requires only one or more writings that:
1. reasonably identify the subject matter of the contract
2. indicate that the contract has been made between the parties, and
3. state with reasonable certainty the essential terms
53
What essential terms must be included in a land sale contract?
Writings evidencing land
sale contracts must contain a description of the land and
the price.
54
What essential terms must be included in an employment contract?
Writings for employment contracts must state the length
of employment and salary for the services or work perfromed.
55
What essential terms must be included in a UCC sale of goods contract?
Writings evidencing sales of goods contracts (UCC) must
indicate that a contract has been made and specify the
quantity term
56
What happens if an essential term is missing from a contract?
As essential term must be agreed upon before the contract can be deemed enforceable. A contract is not enforceable if one or more of the essential terms are left open.
57
Explain the defense of illegality
If either the consideration or the subject matter of a contract is illegal, this will serve as a defense to enforcement.
Illegal consideration or subject matter renders a contract void and unenforceable. In a close case, a court may sever an illegal clause from the contract rather than striking down the entire contract.
58
Explain how the effect of illegality depends on timing?
Subject matter/consideration was illegal at the time of the offer - there was no valid offer.
If it became illegal AFTER the offer but before acceptance, the supervening illegality operates to REVOKE the offer.
IF it becomes illegal AFTER a valid contract was formed, the supervening illegality operates to discharge the contract because performance has become impossible.
59
What about if a contract is illegal solely because a party does not have a required license?
Depends on the reason for the license:
Revenue Raising - license merely to to raise revenue - contract IS enforceable
Protection of the Public - license required to ensure licensee meets minimum requirements to protect public welfare (e.g. license to practice medicine), contract is VOID. SO even if the unlicensed party performs under contract, they cannot collect damages.
60
What happens when the consideration and the subject matter of a contract is not illegal but the contract has an illegal purpose? (e.g. contract to rent a plane where the renter's purpose is to smuggle drugs)
Contract is VOIDABLE by party who:
1. did not know of the purpose
2. knew but did not facilitate the purpose AND the purpose does NOT involve 'serious moral turpitude'.
61
What is a divisible contract?
Contract is considered 'divisible' if:
1. the contract divides each party's performance into at least 2 parts
2. each party had the same number of parts that they are obligated to perform; and
3. each party's performance on each part is agreed to be the equivalent of a corresponding part for the other party.
- analysis relies on fairness - courts focus on preventing hardship and forfeiture.
UCC - discourages treatment of contracts for sale of goods as being divisible so = INSTALLMENT contract.
62
What is a UCC installment contract?
UCC - discourages treatment of contracts for sale of goods as being divisible so = INSTALLMENT contract.
Installment contract = one that provides for the delivery of goods in separate lots to be separately accepted.
Unless the parties have agreed to permit delivery in installments, all goods subject to a contract for sale must be tendered in a single delivery.
63
What happens if installment deliveries have NOT been agreed upon but the seller delivers only a partial shipment?
The entire contract has been breached and he may not recover on it for that installment, even though the price of that installment could be calculated by pro-rating the contract price.
BUT remember - when goods are accepted = different.
64
What happens when a UCC installment contract is non-conforming?
The buyer must accept that installment if the seller gives adequate assurance of the defect's cure, unless the non-conformity substantially impairs the value of the installment contract and cannot be cured.
65
Does the UCC's perfect tender rule apply to installment contracts?
No!
PTR entitles a buyer to reject a tender of delivery that fails in any respect to conform to the contract.
66
When a contract is discharged by unforeseen impracticability and it partially performed, what can the performer recover?
They are entitled to restitution for the value of the part of the contract they performed prior to the discharge.
The party has a right to recover in quasi-contract at the contract rate or for the reasonable value of his performance if that is a more convenient mode of valuation.
67
What is the effect of impracticability?
The contract is discharged and each party is excused from duties arising under it that are yet to be fulfilled. Either party my due for rescission and receive restitution of any goods delivered, payments made etc.
68
What is the effect of partial impossibility?
If performance to be rendered under a contract becomes only partially impossible, the duty may be discharged only to that extent.
The remainder of the performance may be required according to the contractual terms, even if remaining performance involves added expense/difficulty.
69
There is no substantial performance under Art 2 UCC, there is the perfect tender rule (if goods fail to conform to the contract in any way, buyer may reject all/accept all/accept any unit and reject the rest). BUT when can it be interpreted that the buyer has accepted the goods? And what happens when they do accept?
Right to reject is cut off my acceptance.
A buyer accepts when:
a) after a reasonable opportunity to inspect the goods, she indicates to seller that they conform or that she will keep them even if they fail to conform;
b) she fails to reject w/in a reasonable time after tender or delivery; or
c) she does any act inconsistent with the seller's ownership.
70
What happens when a seller sends non-conforming goods under UCC? What happens when buyer accepts/rejects?
The shipment itself is an acceptance of the offer and a breach of the contract. The buyer may respond by: accepting the non-conforming in whole, rejecting the whole, rejecting in part.
IF buyer decides to reject non-conforming goods, he can then sue for breach.
IF buyer accepts the non-conforming goods, the seller may bring an action to recover the contract price of the goods. BUT seller's reward = reduced by any reasonable losses that resulted from the seller's breach.
71
A debtor is late on payment of debt to a creditor, the creditor tells the debtor that he won't sue him if he pays by a certain, later date. There is an oral agreement. Is this valid? What happens if the creditor goes ahead and sues the debtor before the agreed upon date?
Consideration is required for a settlement to be enforceable. Under the pre-existing duty rule, the creditor's promise to forbear from suing to collect was not supported by consideration from the debtor, because the amount due was already liquidated and the debtor promised to do NOTHING MORE than what he was already obligated to do. The creditor's promise was not supported by consideration from the debtor - it allowed for payment of an undisputed amount after the time for payment of the debt had passed.
72
What happens if a debtor owes a creditor money but the creditor agrees to reduce the amount owed if the debtor pays early? Is there sufficient consideration to support this promise?
Yes, the creditor us agreeing to accept less than the full amount if the debtor pays before the due date - the creditor is giving up some of their money in exchange for the debtor's promise to pay. SO there is sufficient consideration to support the promise.
Consideration must be given to enforce a promise to allow a debtor to delay payment on an undisputed debt.
73
What is the difference between assignment and delegation?
Assignment = RIGHTS - transfer of rights and duties to another person. NOT obligations.
Delegation = DUTIES -
transfer of authority and responsibility for fulfilling a contractual duty to another party. NOT contractual rights, ONLY obligations.
74
When there is a clause in a contract prohibiting assignment of the contract, how will it be construed?
A clause prohibiting assignment of 'the contract' will be construed as barring only delegation of the assignor's duties.
75
When there is a clause prohibiting assignment of 'contractual rights', how is it construed?
It generally does not bar assignment but merely gives the obligor the right to sue for damages.
76
What does it mean when the contract provides that attempts to assign will be void?
It means the parties can bar assignment. Also if the assignee has notice of the non-assignment clause, an assignment will be ineffective.
77
What is the modern view re bilateral contracts and acceptance
Modern view = most contracts are bilateral.
Unless clearly indicated otherwise by language/circumstances, all offers are 'indifferent' offers - they may be accepted by promising or beginning performance.
78
What are the 2 circumstances in which a contract is deemed unilateral?
(unilateral = a contract that can be formed only by full performance) ONLY occurs:
1. where the offeror clearly indicates that completion of performance is the only manner of acceptance (offeror = master of the offer)
2. where there is an offer to the public (e.g. a reward offer) which clearly contemplates acceptance by performance rather than a promise.
79
What is a mutual mistake?
Contract based on a mistake made by both parties. 3 requirements before adversely-affected party may avoid the contract:
1. mistake must concern a basic assumption on which the contract was made (i.e. will one party get an unexpected, unbargained for gain and the other will suffer an unexpected loss);
2. the mistake must have a material effect on the agreed exchange of performances (i.e. the imbalance is so severe that party cannot fairly be required to carry it out); and
3. the party seeking avoidance did not assume the risk of mistake (e.g. one party in a batter position to know risks than other - contractor vs homeowner/party knew their assumption was doubtful - consciously aware of their ignorance) - must TRULY be a MISTAKE, not uncertainty.
80
When is impracticability in issue?
When the non-occurence of the event was a basic assumption of the parties in making the contract and neither party expressly or impliedly assumed the risk of the event occuring.
81
What happens to parties' duties under a contract is impracticability (impossibility)/frustration happen?
Both parties' contractual duties are discharged
82
What is the test for impracticability? Is it the same for Art 2?
The party who was supposed to perform has encountered:
1.extreme and unreasonable difficulty and/or expense
2. its non-occurence was a basic assumption of the parties when they entered into the contract
Art 2 generally follows these rules - if the sale of goods has become impossible or commercially impracticable the seller will be discharged to the extent of impossibility/impracticability. Generally - seller assumes risk of possibility that unforeseen events may occur.
83
When can a contract be rescinded on grounds of supervening impracticability?
Where a party's performance is made impracticable without his fault due to the occurrence of an event, the non-occurrence of which was the basic assumption on which the contract was made.
E.g. destruction of a specific thing necessary for the performance of a duty OR the necessity to comply with a governmental order.
84
Generally, all contractual duties may be delegated by the party to perform the obligation (delegator) to a third person (delegate). What is the effect on liability of the parties after a delegation?
When performance of a duty = delegated, the delegator remains liable for the delegate's performance of that duty.
85
What is novation and how is it validly executed?
Novation substitutes a NEW party for the original party to the contract - it completely releases the original party (unlike delegation).
The obligee must expressly agree to accept the delegate's performance in lieu of the delegator's and release the delegator from liability. Consent to the delegation is NOT enough to insulate the delegator from liability. I.e. novation must be executed - would require consent to the delegation AND release of the old party from liability under the original contract.
86
When does a modification to a contract NOT require additional consideration? (common law contract for services)
If the modification is because of unforeseen circumstances that have arisen AND the modification is both fair and equitable.
87
What is the UCC standard for contract modifications?
Good faith - no requirement for new consideration.
88
When an offer has been made and the offerree requests more information regarding the offer, is this a counteroffer?
NO! This is merely an inquiry. If the offeror clarifies/provides the information, then the offeree responds accepting the offer, a valid offer has been formed.
89
When can an offeree's power of acceptance terminate due to lapse of time?
When an offeree fails to accept the offer within the time stated in the offer or within a reasonable time.
90
What is the doctrine of prevention?
When there is a conditional contract (i.e. a party has a duty of performance that is subject to a condition, e.g. an award if a crook is convicted of a crime), a party must refrain from conduct that prevents or hinders the occurrence of a condition (i.e. by wrongful prevention - the other party would not have reasonably contemplated or assumed the risk of this type of conduct).
E.g. the authorities hinder the award to the civilian by negotiating a deal with the crook and dropping charges against him.
Doctrine of prevention will excuse the failure of a condition that has been hindered.
91
What is given greater weight, evidence of express terms or evidence of trade usage?
Evidence of express terms.
92
Which is given more weight, evidence of course of dealing or evidence of trade usage?
Evidence of course of dealing.
93
What is unconscionability? When is a determination made?
The refusal of a court to enforce a provision, a modification, or an entire contract to avoid unfairness. A determination of unconscionablity is made based on circumstances at the time the contract was formed.
94
What is substantive unconscionability?
It is based on price alone. A price may be considered excessive if it is set at approx. 2 or 3 times the market price of similar goods.
determination = is the set price so far off from the market price that it is unconscionable?
95
What is procedural unconscionability?
Exists when there is some form of unequal bargaining power between the parties.
Found when a party was induced into agreeing to the contract without any meaningful choice, i.e. there was no possibility of true 'bargaining', indicating a lack of assent.
e.g. knowledge by stronger party that weaker party in unable to receive substantial benefits from the contract or is unable to protect his interests by reason of physical/mental infirmities, ignorance, illiteracy or inability to understand the language of the agreement.
96
What are 'good faith' and 'bad faith'
Good faith = honesty and remaining committed to the agreed common purpose as well as consistent with the other party's justifiable expectations.
Bad faith = conduct that does not adhere to reasonable community standards around fairness and decency, e.g. abuse of power or interference with the other party's ability to perform.
97
What happens if a court finds a contract unconscionable at the time it was made?
It may refuse to enforce the entire contract or to enforce only the remainder of the contract without the unconscionable term.
98
In the case of a unilateral contract, is the offeree required to give the offeror notice that he has begun the requested performace?
No, generally not required. BUT offeree is required to notify the offeror within a reasonable time after performance has been completed.
99
What is adequate assurances under the UCC?
Where reasonable grounds for insecurity arise with respect to the other party's performance, a party may make a written demand for adequate assurance of due performance. Failure to provide such assurance within a reasonable time may be treated as repudiation of the contract.
100
When is a request for adequate assurances justified?
In order to be justified, the insecurity (i.e. the source of the need for AA) must relate either to the INABILITY or UNWILLINGNESS of the other party to perform.
E.g. a mere shift in market price does not call into question someone's willingness or ability to perform a contract.
101
What amounts to a repudiation of a contract after a request for adequate assurances?
The communication must be an unequivocal statement of a party's inability or unwillingness to perform.
102
What is an illusory promise? Is it sufficient consideration for a contract?
An illusory promise is a statement that appears to be promising something but does not actually commit the promisor to anything at all. E.g. when a promisor reserves the right to change his mind/cancel an order - does not bind the promisor and so is illusory.
BUT if promisor's right to change his mind = limited by some objective standard, consideration is likely to be found and the contract upheld.
It is NOT sufficient consideration to support a return promise.
103
What method of damages is appropriate for a breach of warranty claim?
104
What does a valid assignment need to look like?
Hypo: is this a valid assignment: ' Any money I receive from the homeowner will be paid immediately to the lender, regardless of any demands from other creditors'?
To be an assignment, the writing has to show the assignor's intent to transfer his rights under the contract COMPLETELY and IMMEDIATELY, extinguishing the assignor's rights under the contract.
There needs to be sufficiently clear intent. A writing is usually not required but the right being assigned must be adequately described. You do not need to use the word 'assign' - any accepted words of transfer will suffice.
105
In order for there to be an intended 3PB, what language are you looking for?
The parties need to intend for the third person to have 3PB status. There has to be EVIDENCE to support such intention such as contract language e.g. that indicates that performance of the homeowner's payment is to run directly to the lender.
106
Is consideration required for an assignment?
No, a gratuitous assignment is effective - consideration is not required. These kinds of assignment are generally revocabe.
BUT note, assignement for value cannot be revoked.
An assignment is for value if it is: (1) done for consideration,or (2) taken as security for or payment of a preexisting
debt. Assignments for value cannot be revoked.
107
When does a voidable promise or contract exist?
When a party to the contract has the power to disaffirm the agreement for some specific legal reason, such as the existence of fraud, duress or infancy
108
What duties in a contract would make it non delegble?
1. Substantial interest in having the original promisor perform
2. Contract involves special judgement or particular skill
3. special trust or rship % the parties
4. Contractual restriction on delegation
109
What kind of clause would signal that duties under a contract are not delegable without the other party to the contract's consent?
An exculpatory clause - commonly gounf in contracts for hazardous activities - release a contracting party from liability for their own negligent acts.
This is an example of when someone has a SUBSTANTIAL interest in having the original promisor perform/a substantial interest in who is performing the work. The new person could end up causing more damage than the other would have if he had been the one to perform - will mean the other party faces greater liability for damage than they expected when hiring the expert.
110
Does a contract have to specifically state that duties are delegable?
NO! Generally all contractual duties may be delegated by the performing party unless an exception applies. The contract need not explicitly specify that delegation is permissible for a party to be allowed to delegate their duties.
111
When a contract right is delegated, who is liable for the duty?
The delegator remains liable for the performance of the duties under the contract. Consent to the delegation is NOT enough to insulate the delegator from liability - would have to novate the contract (all parties agree to accept delegate's performance in lieu of the delegator and release the delegator from liability).
112
What is the difference between circumstances giving rise to a right to demand assurances and those constituting anticipatory repudiation.
Be sure that you understand the difference between circumstances giving rise to a right to demand assurances and those constituting anticipatory
repudiation.
The right to demand assurances arises
when there are reasonable grounds for insecurity—something makes a party nervous that the other will not perform.
Anticipatory repudiation requires much more than nervousness; there must be a clear indication that the other party is
unwilling or unable to perform. Thus, for example, “I’m not going to perform” is an anticipatory repudiation, but “I’m not
sure if I can perform” most likely is only a reason to demand assurances.
113
Where a buyer has more than one contract with a seller and the seller breaches one of them due to a refusal by their supplier to extend additional credit and so he can no longer perform. What might the buyer do in response re the other contracts he has with the Seller?
Request adequate assurances!
Where a party's conduct is a ambiguous indication that the party may NOT perform --> The other party in this situation may suspend but not cancel performance. He can also demand assurances from the other party that they will perform. If the latter fails to provide the assurances, this failure will be considered a repudiations, entitling the other party to cancel the contract.
Until the buyer receives such assurance, it may suspend performance if commercially reasonable.
An example arises when a buyer falls behind in his account with a seller - even if the buyer has two totally separate accounts with that seller - the buyer can still be subject to demands for adequate assurance on either account.
114
What is repudiation of a contract?
When looking at the performance of a contract, you are looking to see if performance has been excused or discharged.
A condition to a contract (i.e. a party does not have a duty to perform unless a condition has been fulfilled) can be excused in a number of ways.
Anticipatory repudiation occurs if a promisor, prior to the time set for performance of his promise, indicates that he will not perform when the time comes. It stems from the words or conduct of the promisor UNEQUIVOCALLT indicating that he cannot/will not perform when the time comes. Mere expressions of doubt or fear will not suffice (can seek adequate assurances).
115
When a party has anticipatorily repudiated a contract, what does the nonrepudiating contract do?
4 options:
1. treat AR as total repudiation and sue immediately
2. suspend his own performance and wait to sue until performance date
3. treat the AS as an offer to rescind and treat the contract as discharged; or
4. ignore the repudiation and urge the promisor to perform
(NB by urging the promisor to perform,, the nonrepudiating party is NOT waiving the repudiation - she can still sue for breach and is excused from performing unless the promisor retracts the repudiation. She should also SUSPEND her performance - if she continues to perform in spite of the repudiation, she my be precluded from claiming damages for any loss that could have been avoided).
116
Can a party retract their repudiation? When can't they?
A repudiating party may at any time before his next performance is due, withdraw this repudiation UNLESS other party has canceled/sued for breach/materially changed their position in reliance on the repudiation/otherwise indicated that she considers the repudiation final.
SO an attempted retraction is ineffective if it is communicated too late (see above).
Withdrawal of the repudiation may be in any manner that clearly indicates intention to perform BUT must include any assurances justifiably demanded.
117
When there is a COMMON LAW contract and the parties agree to modify it for no consideration - e.g. providing another service to someone for free, will that modification be permitted?
Pre-existing duty rule - 'bargain' element of consideration. If a party promises to do what he is legally obligated to or he forbears or promises to forbear from doing something that he is not legally entitled to do, he has NOT incurred the kind of legal detriment necessary to constitute consideration.
SO pre-e duty rule means that if parties to an existing contract agree to modify the contract for the sole benefit of one of them, the modification will usually be unenforceable at common law for lack of consideration.
118
When there is a UCC contract and the parties agree to modify it for no consideration - e.g. offering to throw in another thing in a sale of goods contract for no consideration, will that modification be valid?
UCC explicitly removes consideration requirement for modifications of existing contracts. Instead of consideration, UCC requires every contract for the sale of goods to impose an obligation of good faith and reserves the court's right to refuse to enforce any contract it finds unconscionable.
So a unilateral modification of a contract that is accepted before the offer lapses, is valid, EVEN if no additional consideration.
119
HYPO: is an agreement where a debtor permits a debtee to pay them a sum owed at a later date at the same rate of interest they have been paying, for a promise that the debtor doesn't sue for money in the meantime, valid as to consideration?
Yes! A promise to perform a pre-existing legal duty is NOT sufficient consideration to support a return promise. And a promise to do the same thing for a new promise is not sufficient consideration. BUT here the extension in time means there is consideration for a new promise (e.g. to not sue during the remaining time).
There will be a payment of interest over additional months (i.e. the debtor will make more money - they will get the original amount along with more interest than originally agreed) and so this IS adequate consideration.
120
HYPO: if you enter into a loan agreement with a bank and then your financial condition significantly worsens, are you obliged to let the bank know?
The bank then sues you for misrep, is this valid even though you were telling the truth (i.e. not misrepresenting) at the time you made the original loan application?
YES you do have to let the bank know. Non-disclosure is the equivalent of a fraudulent assertion (i.e. a misrepresentation), if the maker:
(i) knows the disclosure is necessary to prevent a previous assertion from being fraudulent;
(ii) knows the disclosure would correct a mistake of the other party as to a basic assumption on which the party was making the contract and non-dislcosure amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing;
(iii) knows that the disclosure would correct a mistake as to the contents or effect of a writing; or
(iv) is in a rship of trust and confidence with the other party.
If the non-disclosure is fraudulent, the contract will be VOIDABLE (as this is a defense to FORMATION).
SO a failure to disclose that your financial situation has significantly worsened is material as it would likely negatively impact you ability to repay a bank's loan. SO because your original loan application represented your finances differently, you need to notify the bank to correct their basic assumption that your finances have not worsened.
121
UCC has no mirror image rule (common law). So contracts are allowed to be formed even when the acceptance differes from the offer, and then parties can determine what the terms of the contract are.
What happens to additional terms when the contract is between two mwechanrs? What is the exception to this general rule?
What if the contract is with a buyer who is not a merchant?
122
Describe offer and acceptance between a seller and buyer under UCC
There is no mirror-image rule under the UCC (i.e. the requirement that the acceptance matches the offer).
UCC - the acceptance can differ from the offer and the the parties can determine what the terms of that contract are.
If both parties to the contract are NOT merchant, additional or different terms are considered to be mere proposals that do NOT become part of the contract unless the offeror expressly agrees. BUT the acceptance is STILL valid, they will just not be obligated to carry out the additional terms.
If the other party then EXPRESSLY REJECTS the proposed additional term, it does not form part of the contract. SO if the party responds saying they won't do it, this is an express repudiation of the contract.
IF both parties are merchants, additional terms are included in the contract unless they materially alter the terms of the contract (they change a party's risk or the remedies available); the offer expressly limits acceptance to the terms of the offer or the offeror already objected to the particular terms of objects within a reasonable time after notice of them is received.
123
how does the offer and acceptance of a UCC contract differ when it is between two merchants?
IF between merchants - additional terms proposed in the acceptance will become part of the contract if the other party remains silent. (UNLESS it materially alters the contract or the other party objects to the addition of the term).
SO re acceptance - a written acceptance of a contract for sale will generally operate as an acceptance even if it states additional or different terms. If they materially alter the contract - the offeror will need to expressly agree to them and if the other party rejects them, they will not become part of the contract and operate as a repudiation of the existing K.
124
What does anticipatory repudiation require?
1. An overt communication of an intention not the perform a contractual obligation; or
2. An action that renders performance impossible or shows a party's determination not to perform.
125
HYPO: where there is a contract for a car with payment due on X day and the buyer emails the seller to say he may not make the payment by X day and having read the email, the seller sells the car to someone else, what is the seller guilty of?
The Seller is guilty of anticipatorily repudiating the contract by selling the car to someone else. SO the seller could NOT succeed in a claim against the buyer for breach of contract.
Anticipatory repudiation can be treated as an IMMEDIATE breach of contract.
The buyer will be entitled to damages: the difference between the market price at the time the buyer learned of the breach and the contract price.
126
What damages is the buyer entitled to when the seller anticipatorily repudiates a contract?
The buyer will be entitled to damages: the difference between the market price at the time the buyer learned of the breach and the contract price.
127
Accord and satisfaction is way of discharging performance under a contract. What does it require?
An accord is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that
they are supposed to receive from the other party, some other, different future performance.
The accord, taken alone, won’t discharge the prior contract; it merely suspends the right to enforce it in accordance with the terms of the accord contract.
Satisfaction is the performance of the accord agreement. Its effect is to discharge not only the original contract but also the accord contract as well.
Generally an accord needs CONSIDERATION - even if it is of lesser value than the originally bargained- for consideration in the prior contract. It will be sufficient if the new consideration is of a different type or if the claim is to be paid to a third party. ALSO debtor's offer to make a partial payment on an existing debt will suffice for accord and satisfaction if there is some 'bona fide dispute' as to the underlying claim or there is otherwise some alteration, even if slight, in the debtor's consideration.
128
A lawyer charges a client under an estimated amount and the client good faith disputes the amount and tenders a check for the amount that they believed the amount to be. The lawyer misreads the check, cashes it and then realizes and tries to sue the client for the outstanding $. What is this an example of?
The check exception under accord and satisfaction.
129
What is the checks exception to accord and satisfaction?
If a monetary claim is uncertain or is subject to BONA FIDE DISPUTE, an accord and satisfaction may be accomplished by a GOOD FAITH tender and acceptance of a check when that check (or an accompanying document) conspicuously states that the check is tendered in full (i.e. 'payment in full') satisfaction of the debt.
Cashing the check without protest amounts to an acceptance of the offer of an accord ans satisfaction of the debt.
130
What is the effect of a breach of an accord before satisfaction?
(i) breach is by debtor
(ii) breach is by creditor
If debtor breaches an accord - creditor may sue either on the original undischarged contract OR for breach of the accord agreement.
If the creditor breaches the accord agreement by suing on the ORIGINAL contract, debtor has 2 courses of action available:
(1) raise the accord agreement as an equitable defense and ask that the contract action be dismissed; or
(2) wait until they are damaged (creditor is successful in their action on the original contract) and then bring an action at law for damages for breach of the accord contract.
131
When does accord and satisfaction most likely/often arise?
When payment or performance is overdue, or there is a dispute as to the performance due and the parties are looking for a resolution to discharge the contract.
132
When is a contract divisible?
IF 3 elements are satisfied:
(i) the contract divides each party's performance into at least 2 parts;
(ii) each party has the same number of parts that they are obligated to perform; and
(iii) each party's performance on each part is agreed to be the equivalent of a corresponding part for the other party.
Analysis relies on fairness - courts focus o0n preventing hardship and forfeiture. If a contract explicitly states that is it indivisible, the court is NOT permitted to find it divisible.
133
Where there is a divisible contract (e.g. a builder is contracted to develop 3 buildings, he develops one and demands payment and refuses to build the other 3), will the other party be obliged to pay him for what he has done?
YES because this is a divisible contract. When one party performs a single unit under a divisible contract, he is entitled to recover the amount that was agreed upon or the equivalent even if he does not perform the other units or before the entire contract is performed.
IF the partially performing party then does not perform the remaining duties under the contract, he will be subject to liability and the withholding of counter-performance for those units.
SO a divisible contract entitles a party to recover the amount due for a completed unit under that contract, even before completion of the entire contract. BUT party is still able to recover damages if the builder fails to complete the other two structures - any recoverable damages caused by the builder's failure to complete the contract.
134
What effect does substantial performance have on a contract? What does it apply to?
It means that the condition of complete performance may be excused if the party has rendered substantial performance.
NOTE - courts generally only apply this doctrine IF constructive (implied) conditions are involved. They will NOT apply it where there is express condition for fear that it would defeat the express intent of the parties.
NB only arises if breach is MINOR
IF the breach is material then the performance has NOT been substanital
If the breach is minor then perforamce HAS been susbtantial
Does not apply if breach is 'wilful'.
135
How does substantial performance by one party affect damages sought by the other party?
The party who has substantially performed IS able to enforce the contract BUT the other party will be able to mitigate by deducting damages suffered due to the first party's incomplete performance.
136
How does the doctrine of substantial performance apply to a divisible contract?
In a divisible contract, recovery IS available for substantial performance of a DIVISIBLE part EVEN though there has been a MATERIAL breach of the entire contract.
137
when there is a breaching party attempting to collect on a partially performed contract, what should you consider?
(1) substantial performance
(2) divisibility
(3) restitution
138
Modfication of contracts - what is the old and new rule under common law?
Under general contract law, a contract can’t be modified unless the modification is supported by new consideration.
The modern view, however, permits modification without consideration if: (1) the modification is due to circumstances
that were unanticipated by the parties when the contract was made and (2) it is fair and equitable.
139
What is the UCC rule re modification of contracts?
Under the UCC, consideration
isn’t necessary to modify; all the parties need are good faith promises of new and different terms.
140
Is an oral modification of a contract valid?
SO remember that many contracts need to be in WRITING, thanks to the SoF (this includes signed writings over $500) and so if a contract must be in signed writing, modifications will have to be in writing too.
BUT if the parties attempt to orally modify a contract that requires a written modification, it is technically INEFFECTIVE as a modification but can operate as a WAIVER. A waiver will be found whenever the other party has changed position in reliance on the oral modification.
Consideration is NOT needed for a valid waiver.
However, a party who makes a waiver affecting an executory (not yet performed) portion of the contract may retract the waiver if they notify the other party that
strict performance of the waived terms is required. The waiver may not be retracted if the other party detrimentally relied on it.
141
When two parties to a UCC contract agree to modify the contract as to, for example a delivery date, and the contract is for goods over $500 and so subject to the SoFs, will the modification need to be in writing?
Yes but if done orally, it will act as a WAIVER of the condition (i.e. the delivery date).
142
When two parties orally agree on a deal and then reduce it to writing but the writing incorrectly reflects the oral agreement they made, what may the parties seek?
Reformation - a re-writing so that the document correctly reflects the oral agreement they made originally.
BUT - reformation is NOT a remedy for an underlying disagreement about the deal itself (that results in a document reflecting only the understanding of one party) - that is a mutual mistake scenario and the court will often find that no contract exists at all due to mutual mistake preventing assent.
SO reformation is ONLY an appropriate remedy when the writing incorrectly summarizes the parties' shared understanding, not when they fundamentally disagree on terms of the deal to begin with.
E.g. a clerical error has been made in reducing the agreement to writing - party may bring an action for reformation - will allow writing to be corrected or include an omitted provision. I.e. there was a mistake made when it was reduced to writing.
143
When is reformation an appropriate remedy?
144
What happens when two parties orally make a contract, they put it in writing and then disagree about what is put in writing - i.e. they have a disagreement about the deal itself.
This will be mutual mistake and the court will find that no contract exists at all as mutual mistake prevents assent.
145
When can an advance payment or deposit be returned?
If the buyer has paid part of the purchase price in advance and then breaches the contract, they can usually recover some of the payments. Unless the seller can prove greater damages, they may keep advance
payments totaling 20% of the purchase price or $500, whichever is less. The balance must be returned to the buyer.
BUT if there is a valid liquidated damages clause, the seller need refund only the excess of the buyer’s payments over the amount of liquidated damages.
146
What are liquidated damages? When are they reasonable? What 2 requirements need to be met?
This is when parties stipulate in a contract what damages are to be paid in the event of breach.
They must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach.
It will be enforceable if:
(1) damages for contractual breach were difficult to estimate or ascertain at the time the contract was formed; and
(2) the amount agreed upon was a reasonable forecast of compensatory damages in the event of breach
So court should compare the anticipated damages at the time the K was formed against the liquidated damages number itself. IF it is unreasonable - the liquidated damages amount will be found to be a penalty and won't be enforced.
147
What is a lost volume seller?
Someone who has a large volume of supply will typically be able to re-sell an item to another customer promptly and at the same price. However, as a result of the breach, the seller loses a sale (i.e. only sells one item instead of the two items he would have sold had the original contract been performed).
SO when a buyer breaches a contract with a lost volume seller, the seller will be entitled to damages in the amount of that lost sale.
148
When there's a lost volume seller and the buyer has already paid a deposit towards the item, will he get the deposit back?
he would be entitled to the deposit, minus the lost profits.
149
When a buyer breaches a contract for sale of goods, what is the seller entitled to?
Seller may recover the difference between the contract price and the re-sale price or lost profits.
When a buyer repudiates before the goods are shipped, the seller will typically re-sell them to a 3P). If the re-sale is 'made in good faith and in a commercially reasonable manner', the seller may recover the difference between the resale price and the contract price together with any incidental damages but less expenses saved in consequence of the buyer's breach (consequential ds).
150
How does the UCC apply the parol evidence rule?
UCC: imposes an obligation of good faith in the performance and enforcement of every contract.
Contract terms which are intended by the parties to be the final expression of their agreement can't be contradicted by evidence of any previous agreement or contemporaneous oral agreement but may be explained or supplemented by evidence of 'consistent additional terms'.
'consistent additional terms' can be based on:
(i) course of performance - way parties have conducted themselves in performing the particular contract at hand;
(ii) course of dealing - pattern of performance % the parties tot the contract w/respect to past contracts; and
(iii) trade usage - any practice regularly observed in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question.
SO these can inform the interpretation of a contract and will be admitted in court even if there is a complete contract UNLESS they cant be reasonably reconciled with express terms of the contract.
151
When are constructive conditions used?
They are imposed by courts as a matter of law, to ensure fairness.
Principal use = in bilateral contracts - each party makes one or more promises to each other, and each party's substantial performance of his promise is generally a constructive condition to the performance of any subsequent duties by the other party.
152
What is the most important constructive (implied) condition?
The duty of each party to render performance is conditioned on the other party either rendering his performance or making a tender of his performance.
153
What is the difference between an express and a constructive condition?
Constructive condition is NOT agreed on by the parties, even by implication but is imposed by courts as matter of law, in order to ensure fairness.
Strict compliance with express conditions is ordinarily required BUT constructive only require substantial compliance to be satisfied.
154
what is IMPLICIT in a requirements contract for the purchase and sale of a good?
The buyer's obligation to purchase all of its requirements for the goods exclusively from the seller for the duration of the contract.
155
HYPO: in a requirements contract, where company X agrees to buy its total requirements from company Y for one year, what is implied?
The buyer's obligation to purchase all of its requirements for the good exclusively from the seller for the duration of the contract.
IF company X decided to go to someone else (other than company Y), they have materially breached the contract and would justify a repudiation f it.
156
Can an option contract, that is contingent upon consideration being received, e.g. 'this offer will become effective as an option only if and when the $100 consideration is in fact paid', still function as an option contact when the consideration required hasn't been paid?
An option contract can only be formed if the offeree gives the offeror consideration in return for the offer, otherwise option is revocable.
BUT even if the consideration is NOT provided the offer CAN be accepted by the offeree unless the offer lapses or the offeree receives notice of revocation by the offeror.
SO even without consideration, the offer may still be accepted unless the offer lapses or the offeror receives notice of the revocation.
For example, if you had been interested in buying a house and the owner said he'd keep the price open to you for 30 days if you pay $100 and that the option is contingent upon you paying the $100, even if you didn't pay it, you would still have until the offer lapses to accept the owner's offer UNLESS it can be shown that you received notice that the owner revoked the offer. For example, if the owner tells you that he is selling the house to someone else because he hasn't heard from you, he has revoked the offer - it demonstrates the owner's inability to enter into the contract and you can no longer accept.
157
How does an option contract transform a unilateral contract into a bilateral one?
It provides some guarantee to any party providing an agreement to the contract that their actions will receive compensation.
158
what is the differences between intended and incidental third party beneficiaries?
159
Battle of the forms UCC - how does it differ from the counteroffer situation in Common law Ks - compare them
The UCC battle of the forms
