Contracts

Question 1

Describe & example unilateral contract / bilateral contract?

Answer 1

Bilateral contract—arises from a promise that requests acceptance by an
return promise of the promisee: I give you 100 if you promise to paint my carpet.
Unilateral contract: acceptance by action: 100 if you take the action of painting my carpet.

Question 2

Rules Common Law vs UCC on acceptance on slightly different terms?

Answer 2

common law = acceptance has to be mirror image to make a deal, UCC = 2, 207 In some cases, a purported acceptance that does not match the terms of the offer exactly can
still count as a legal acceptance. But, do not assume that all terms in the purported acceptance will govern the contract.

Question 3

2, 207 (1) what are the requirements for the UCC to count as acceptance?

Answer 3

-definite and timely expression of acceptance
-even though it
states terms additional to or different
-unless acceptance is
expressly made conditional upon assent to the additional or different terms

Question 4

2, 207 (2) UCC: requirements for new terms to be part of contract?

Answer 4

1) Both parties are merchants;
2) The new term does not materially alter the deal;
3) The initial offer did not expressly limit acceptance to its terms; and
4) The offeror does not object/abject within a reasonable time to the new term.

Question 5

Varia: (1) what is the knock out rule, (2) what governs if parties fail to make a contract but still act as though there is an agreement (207(3)), (3) what happens if parties have a contract (usually by verbal agreement) and one party sends a
confirming memo with additional terms?

Answer 5

1. Arises when the acceptance has a different term from the initial offer (as opposed to just an
   additional term): “Knock out” both of the different terms; neither term will govern and the general
   gap-filling provisions of the UCC will apply. (Minority—When the different term does not govern under § 2-207(2), the initial offer
   controls the terms.)
2. Under UCC § 2-207(3), only the terms that parties did agree on become part of the contract, with all other terms supplied by the UCC default
   rules.
3. If you see this fact pattern (early agreement + written
   confirmation with new terms), work through the same steps as above for § 2-
   207(2). But recognize that the new terms will very rarely come in.

Question 6

Is there bargained for consideration?

Answer 6

Exam Tip 3: The bar examiners like to test situations in which bargained-for
consideration is missing. Ask the following questions:
1. Who is making the promise that needs to be supported by
law? (That person is the promisor; the other party is the promisee.)
2. Is there a
benefit to the promisor or a detriment
to the promisee? (You just need one, not both.)
3. Was this bargained for? (In other words, did the
parties think that they were making a deal when they exchanged promises?)

(Not doing something that you are legally entitled to do is a legal detriment.)

Question 7

Rules regarding Consideration - general - both Common & UCC

Answer 7

1. Adequacy of consideration (nominal consideration) (one dollar not enough, must be subjective enough value)
2. Illusory promise is not enough “if I feel like it” “when the economy gets better”
3. Satisfaction contracts are not illusory; they are real contracts with
   consideration “as much as I need”
4. Output and requirements contracts are not illusory promises “as much as I produce”
5. Past consideration is not consideration.
6. Promising not to sue is consideration, if there is a good faith believe the claim is real & no uncertain law surrounding it.

Question 8

Modification of contract, Common Law?

Answer 8

Follows the preexisting duty rule—a promise to do something that you are already legally
obligated to do is not consideration.

Exceptions:
1) A change in performance
2) A third party promising to pay; or
3) Unforeseen difficulties that would excuse performance.

Promising partial payment for release from a debt obligation—ask whether the debt is
currently due and undisputed. If so, the modification is not binding!

Question 9

UCC rule on modification of a contract?

Answer 9

Ask whether the modification is made in good faith. If so, it is
binding even without new consideration.

Question 10

Promissory Estoppel /reliance? A theory next to Consideration, if there is no consideration, reliance can be there.

Answer 10

Three key elements for a claim under reliance:
1) A promise is made that would be reasonably expected
to induce reliance;
2) The promisee does indeed take detrimental action in reliance on the promise; and
3) injustice can only be avoided by enforcement of the promise.

Note 13: Charities do not need to prove detrimental reliance (the second
element) when pursuing a reliance theory to collect on a charitable-gift
promise.
Note 14: Remember that reliance was discussed earlier with respect to
irrevocable offers (a type of caterpillar “power shield”).

Question 11

Quasi-Contract
* Sometimes called a “contract implied-in-law.”, Arises when you would have made a contract if you could have, but you could not, or when one
party conferred a benefit on another party, and it would be fair to pay for that benefit, elements?

Answer 11

1) The plaintiff confers a benefit
on the defendant;
2) The plaintiff reasonably expected to get paid; and
3) It would be unfair to let the defendant keep the benefit without
paying.
* Look for an opportunity to decline or a good reason why there was no opportunity
to decline.
Note 15: When you see a situation that does not satisfy the normal
requirements for a contract but still strikes you as unfair, ask whether quasi-
contract might apply.

Question 12

Moral Obligation Plus Subsequent Promise (the “Half Theory”). Normally, this would be past consideration and thus not binding.

Also, the seal? makes it legally binding?

Answer 12

Only in a few jurisdictions, so only if exam says “jurisdiction subscribes to this rule”. Can mean that if someone saves you from sharks, you have to pay back the note ride, even though no bargained consideration.

Seal. No, dead letter law today.

Question 13

Defenses to Contract Formation—The “D” in “All Contracts Don’t Stink.”?

Answer 13

1) Misunderstanding
2) Incapacity
3) Mistake
4) Fraud/Misrepresentation/Nondisclosure
5) Duress
6) Illegality
7) Unconscionability

Question 14

Misunderstanding
o Arises when each party attaches a different meaning to the same words
o For this defense, you must show that?

Answer 14

1) The parties use a material term that is open to two
or more reasonable interpretations (the objective test cannot apply);
2) Each side attaches a different meaning to the term; and
3) Neither party knows, or should know, of the confusion.

Question 15

Incapacity
o Who lacks the capacity to make a contract?

Answer 15

1) Minors (under the age of 18)
2) People who are mentally ill—two standards:
* The person cannot understand the nature and consequences of his actions; or
* The person cannot act in a reasonable manner
in relation to the transaction (if the other side knows or has reason to know this).
3) Very intoxicated persons (if the other side knows or has reason to know this)

Question 16

What happens if you make a contract with a person who lacks capacity?

Answer 16

 The contract is voidable—the incapacitated party can
disaffirm.
 Contract for necessities—the party without capacity must still pay
fair value (not necessarily the contract price)
* Necessity— something you really need to live (e.g., food, clothing, or shelter)

A party without capacity can ratify the deal by keeping the benefits of the contract after
capacity is obtained.

Question 17

Mistake
o A mistake is a belief that is not in accord with a present fact.
Which categories and elements?

Answer 17

a. Mutual mistake (affecting both parties)
 Allows the adversely affected party to rescind if:
a) There is a mistake of fact, existing at the time that the deal is made;
b) The mistake relates to a basic assumption of the contract and has a
material impact on the deal; and
c) The impacted party did not bear the risk of
mistake.
(both mistake stone for diamond)

b.Unilateral mistake (one party)
 Allows the adversely affected party to rescind if:
a) She can prove all of the elements of mutual mistake; and
b) Either:
i) The mistake would make the contract unconscionable; or
ii) The other side knew of, had reason to know of, or caused the mistake.
(one party tries to get a deal that seems to good to be true)

Question 18

Misrepresentation—a statement at the time of contracting that is untrue.
 Can be intentional (fraudulent) or accidental
o To assert this defense, the party must show?

Answer 18

1) A misrepresentation of a present fact (not opinion, like “great car”);
2) That is material (not cigarette lighter in car) OR fraudulent (intentional); and
3) That is made under circumstances in which it is justifiable to rely on the
misrepresentation.

Question 19

Fraud in the Execution?
Nondisclosure?

Answer 19

—you trick someone into signing something that they do not even
know is a contract

—the other party does not learn the truth about something, but now you just
remain quiet
 Normally, you do not need to tell the other side about all material facts related to the
deal.
Except: A special (fiduciary) relationship or active concealment

Question 20

Duress?
Undue influence?

Answer 20

o An improper threat that deprives a party from making a meaningful choice to contract (gun to the head)
o economic duress—arises when one party makes threats to
induce another party to contract (or modify a contract)

—arises when a party puts very intense sales pressure on another party,
who often seems weak-minded or susceptible to high-pressure sales tactics.

Question 21

Illegality?
Contracts against public policy?

Answer 21

Editorial Note 5: Because they do not impact the requirement that contracting
parties have a “meeting of the minds,” the defenses of illegality, contracts
against public policy, and unconscionability are enforcement defenses, not
formation defenses. This means that they do not prevent the formation of
a contract, but will impact its enforceability.
o Illegal contracts are unenforceable.
But, a contract entered in furtherance of an illegal act (that is
not itself illegal) will still be enforced. (taxi ride to robbery)
Typically, the law will just leave the parties where they stand. There is a modern trend
toward allowing less-guilty parties to recover restitution (i.e., get their money back).

—are not enforced
 These are contracting situations that are not formally illegal but present some other
policy concern (e.g., a broad exculpatory agreement). (social norms)

Question 22

Unconscionability?

Answer 22

o This is the ultimate contract defense. Everything seems fine, but a court simply looks at the
deal and says, “No, this shocks my conscience. It’s unconscionable.”
o Two varieties of unconscionability:
1) procedural unconscionability—a defect in the bargaining
process itself, usually:
* A hidden term (surprise); or
* An absence of meaningful choice (no other contracting option).
2) substantive unconscionability—a rip-off in some
term of the contract
o Some jurisdictions require both varieties to be present before a deal is stuck down; others
may act if only one variety is present.

Question 23

Statute of fraud, 2 questions?

Answer 23

1) Does the Statute of Frauds apply to this transaction? Are we in SOF world?
2) If so, has the Statute of Frauds been satisfied?
* Contracts in SOF world require a higher and special form of proof—typically a writing signed by
the defendant or some performance on the purported deal.

Question 24

Is the Contract in the Statute of Frauds World?

Answer 24

• Recall that the Statute of Frauds applies to only a few types of contracts:
  1) Marriage—a contract made in consideration of marriage (like a prenup)
  2) Suretyship—a contract promising to guarantee the debt of another
  3) One year—a contract that by its terms cannot be performed within
  one year from its making
  4) UCC—applies to goods contracts for a price of a contract is 500 dollars or more (Mickey verbally contracts with Pabst to buy exactly $500 in beer.
  Are we in Statute of Frauds world? yes, under the UCC part of the SOF.)
  5) Real property—a contract for the sale of an interest in real property
  Note 17: Remember Mr. SOUR (or M. SOUR) the mascot of Lemonhead candy.

The main-purpose exception—if the main purpose in agreeing to pay the debt of another is for
the surety’s own economic advantage, then we are NOT in SOF world.

• !The one-year rule is interpreted very narrowly; the question is whether there is
  NO possible way for the contract to be
  performed within one year. VB:
  I contract on April 1 to hire a 1L student as my RA for three
  months during the summer after her 2L year of law school. Are we in Statute of
  Frauds world? Yes. The length of the employment is only three months, but it
  won’t even start until after one year from now.
  Luke Skywalker hires me to teach him contract law for the rest of
  his life. Are we in Statute of Frauds world? NO. It is possible that
  Skywalker could die within one year.
• All contracts involving real property are not automatically in SOF world; only those transferring
  an interest in the property.
• Leases of less than one year are usually not in SOF world.

vb
Skywalker hires Chewbacca to build a house on an acre that
Skywalker owns on Endor. Is this contract in Statute of Frauds world?
NO. It involves land but does not transfer an interest in land.

Question 25

Has the Statute of Frauds been Satisfied? 1. Service Contracts that Cannot be Performed within One Year?

Answer 25

Two main ways to satisfy the SOF—by **performance or writing**. The exact requirements differ between our parallel universes. Full performance of a services contract by either side satisfies the Statute of Frauds. Part performance of a services contract does not satisfy the Statute of Frauds.

Question 26

What kind of writing is needed to satisfy the Statute of Frauds, if we are in this realm?

Answer 26

A Writing Signed by the Party Against Whom the Contract is Asserted o Do you need both signatures on the writing? no, only who against enforced. o Does the writing have to be a formal contract? no, but: o It must cover the fundamental facts: 1) Show that a contract has been made; 2) Identify the parties; and 3) Contain the essential elements of the deal. For real estate: 3. Real Estate - Common Law o A signed writing will satisfy the Statute of Frauds. o *Part performance *of a real estate contract can satisfy the Statute of Frauds if any *two *of the following three elements are met: 1) Possession; 2) Payment; 3) Improvements to the land.

Question 27

How are goods contracts satisfied in Statute of Frauds?

Answer 27

****Goods (UCC) **a**. Signed writing  A signed writing will satisfy the SOF, but the requirements differ a little: * There is no need to mention the price; * The writing must mention the quantity of goods sold.  The contract is only enforceable under the SOF for the quantity mentioned in the writing. Example 114: **b.** Part performance  Part performance satisfies the SOF, but only for the quantity delivered and accepted. **c.** Custom-made (or specially manufactured) goods  These are exempted from the Statute of Frauds.  The maker can satisfy the SOF as soon as it makes a substantial beginning toward the manufacturing of the goods. d. A judicial admission  Includes a statement in a pleading or during testimony, etc.  This satisfies the Statute of Frauds under the UCC. e. Confirming memo  The failure to object to a confirming memo within 10 days will satisfy the Statute of Frauds—but only if both parties are merchants.

Question 28

Miscellaneous Statute of Frauds Problems -Do you need a signed writing to authorize an agent to form a contract that is in Statute of Frauds world? -Modification Suppose you have a deal that is in SOF world, and the requirements are met. Now the parties want to modify that deal. Must the modification also satisfy the Statute of Frauds requirements?

Answer 28

-yes, equal dignity rule -Ask whether the deal, with the alleged modification, would be in Statute of Frauds world. * If so, the Statute of Frauds requirements must be met for the modification; * If not, there is no Statute of Frauds requirement, even though the initial deal was in Statute of Frauds world.

Question 29

A. Second Main Question: Has the contract been performed?

Answer 29

Four big topics within this question: 1) Parol-evidence rule 2) Warranties 3) Conditions 4) Excuse of performance obligations (impracticability, frustration of purpose, etc.) Note 18: Remember “Pizza With Crawling Escargot”

Question 30

The Parol Evidence Rule (PER)—The “P” in “Pizza With Crawling Escargot.”

Answer 30

First, determine what the agreement entails. o If the parties have reduced their contract to a comprehensive writing, then earlier statements or writings related to this agreement are not part of the deal under the PER. o Does the PER apply to later written or verbal statements about the deal? no, that’s a modification. o Does the PER apply to earlier written documents? yes. written and verbal. Gateway Question: Have the parties created an integrated writing? o complete integration—the contract expresses all terms of the agreement. o partial integration—there is a final writing, but some terms are not included. * How do you distinguish an agreement that is not integrated from one that is completely or partially integrated? o Look for a merger clause (evidence of complete integration). "this is a complete understanding..." o Courts may also ask whether, under the circumstances, an extrinsic term of the agreement would “naturally be omitted” from the writing.  If so, it may not violate the parol-evidence rule and can be introduced as evidence if it does not contradict the writing. Example 122: Same facts as Example 120, except Hugh argues that Disney verbally offered him, prior to signing, a sequel part for $5 million. Can he introduce this evidence? o The UCC universe is more forgiving.  Presumes that a writing is, at most, only a partial integration—unless the parties would have certainly included a disputed term in the writing - allowing more evidence to come in Situations in which the PER does not apply to bar earlier evidence include: 1) Will not bar evidence relevant to a defense against contract formation (duress, mistake, fraud, etc.) 2) Even if a writing is completely integrated, a party can introduce evidence of a second separate deal. 3) Even if a writing is completely integrated, a party might be able to introduce evidence of a prior communication that is designed to interpret an ambiguous term in the final agreement. Same facts as Example 120, except the parties disagree over what “movie” means in the contract. Disney believes that Hugh will make “Mrs. Doubtfire 2.” Hugh claims that they had verbally agreed that he would make “Driving Miss Daisy 2.” Can Hugh introduce this evidence? yes, as long as the term “movie” is sufficiently ambiguous.

Question 31

* Some people confuse the parol evidence rule with the Statute of Frauds.

Answer 31

o If the question does not have a signed writing, think statute of frauds . o If the question does have a signed writing, along with an earlier discussion of the deal, think parole evidence rule .

Question 32

A. Warranties—The “W” in “Pizza With Crawling Escargot” * A warranty is a promise about a term of the contract that explicitly shifts risk to the party making the promise. * You can also disclaim all warranties. Types?

Answer 32

1. *Express* Warranty o A promise that affirms or describes the goods and is part of the basis of the bargain is an express warranty unless it is merely the seller’s opinion. o The use of a sample or model creates an express warranty that the goods sold will be like the sample. 2. *Implied *Warranty of *Merchantability* o This warranty is triggered only when the seller is a merchant dealing in the goods at issue. o Warrants that the goods are fit for ordinary commercial purposes .o Can a merchant disclaim this warranty? yes, if it is very clearly done.  Look for VERY CONSPICUOUS language; and  Look for the term “merchantability.” Editorial Note 8: Unless the circumstances indicate otherwise, the warranty can be disclaimed by use of “as is,” “with all faults,” or similar language that makes plain that there is no implied warranty. The disclaimer may be oral, but it must use the term “merchantability” and must be conspicuous if in writing. 3. *Implied* Warranty of* Fitness for a Particular Purpose* o Triggered when a buyer *relies on a seller’s expertise to select a *special type of good that will be used for a special purpose o Warrants that the goods will satisfy this special purpose Example 129: Same facts as Example 127, except you can’t decide between three different types of hubcap polish. You ask the clerk which one is right for your aluminum-alloy hubcaps, and he picks up a can and says, “THIS is the brand you want.” When you spray it on your hubcaps, they turn an ugly yellow color. AutoZone has breached an implied warranty of o Can a nonmerchant extend this warranty by implication? *!yes*, as long as the buyer relies on any seller’s expertise. o Can this warranty be disclaimed? yes, conspicuous language.  Must be CONSPICUOUS  Disclaimer must be in writing.

Question 33

B. Conditions—The “C” in “Pizza With Crawling Escargot” * Another way to shift risk by stating that one party’s contractual obligation will only kick in if some future event takes place * Conditions can be express or implied. * The most important implied condition is the “constructive condition of exchange.” STRICT!

Answer 33

1.** Express **Conditions o Express conditions are created by language in the contract.  Look for magic words like “only if,” “provided that,” “on the condition that,” “only in the event that,” etc. o Express conditions must be *strictly satisfied*, unless the condition is somehow excused. **a. Satisfaction conditions**  How are these conditions met? It depends on the nature of the performance. Preferred approach—use an *objective* standard of satisfaction. o If most reasonable people would be satisfied, then the condition is met. * Contracts involving *aesthetic taste*—such as art or tutoring services—use a *subjective *standard. o The party can still breach if they claim *dissatisfaction in bad faith*. **b. Waiver**  The party receiving the protection of the condition may waive the condition by *words or conduct*.  A condition will also be waived if the other party wrongfully interferes with or hinders the occurrence of the condition. * This will be judged by a *good-faith standard*.

Question 34

IMPLIED CONDITIONS?

Answer 34

A. **The Constructive Condition *(vs express condition) of Exchange (CCE)** One party’s performance is conditioned on the other side’s performance. B. **Common-Law Universe** * The doctrine of substantial performance states that a party will satisfy the CCE if there is not a material breach - exception to strictness. * Substantial performance only works to satisfy the CCE if the failure is not willfull. -If payment must be made (because there is only a minor problem) can the nonbreaching party recover damages for the deficiency? yes: o Typically measured as the cost to complete the performance o Sometimes limited to the diminution in market value * Can a breaching party who fails to satisfy the CCE due to a material breach get paid anything? o not on yhr contract, but —maybe quasi-contract * Can a breaching party who fails to satisfy an express condition get paid in quasi-contract? o Usually not, express conditions must be strictly satisfied. * **Divisibility**—If a contract is clearly divisible, then it will be broken into mini-contracts for the purposes of determining if there has been substantial performance. Tip of: something is divisable.

Question 35

**C. UCC Universe: Performance**

Answer 35

**C. UCC Universe: Performance** * The UCC requires perfect tender. Exam Tip 5: Do not discuss **substantial performance or material breach** if the contract involves **goods.** o Exceptions—contract explicitly changes the default rule; installment contracts * Perfect tender has two main obligations: 1) Perfect ___goods_____________________________ 2) Perfect ____delivery____________________________ Note 19: Rejection of the goods is not the same as rejection of an offer. 1. Revocation of Acceptance o The buyer may revoke an acceptance of the goods if the goods seem OK when delivered but a defect is discovered within a reasonable time. Example: Under the facts in Example 141, Fireball delivers all 500 pints of the whiskey, and Mickey stores the bottles in her cellar. A month later, she opens a bottle to find that it is cola (not whiskey). She can revoke her acceptance and send the bottles back. 2. Seller’s Right to Cure o If the seller fails to tender perfect goods and time is left on the contract or the seller had reasonable grounds to believe that the buyer would accept a replacement, then the buyer must give the seller a chance to cure. 3. Delivery o The default method of delivery under the UCC is one delivery of the goods. o The UCC allows for installment contracts (agreement for delivery in separate lots).  The buyer can reject a specific delivery that is not perfect only when there is substantial impairment in the installment that cannot be cured. 4. Method of Tender/Delivery a. Tender at Seller’s place of business  If the goods are to be tendered at the seller’s place of business, then the seller just needs to give the goods to the buyer. b. _____________________________________ contract [F.O.B. Seller’s place of business]  If the contract is a shipment contract, then the seller must take three actions to satisfy perfect delivery: a) Get the goods to a ____________________________________________________; b) Make arrangements for ___________________________; and c) _______________________ the buyer. c. ________________________________________ contract [F.O.B. Buyer’s place of business]  If the contract is a destination contract, then the seller must get the goods to the buyer’s business and notify the buyer. Risk of Loss Problem o Arises when there is a goods contract followed by damage or destruction of the goods before the buyer receives them. Who will bear the loss, the seller or the buyer? 1) Check whether the parties have already dealt with the risk problem in the contract. If so, their agreement will control. 2) If not, ask whether either party has breached (typically another part of the contract). * If so, the breaching party bears the risk of loss. * Is this true even if the breach is totally unrelated to the delivery damage? _______. 3) If there is no breach, and the goods are being shipped, then ask what type of delivery contract it was: * If it was a shipment contract, then the risk of loss during delivery rests with the _____________________. * If it was a destination contract, then the risk of loss during delivery rests with the _____________________. 4) In all other cases, ask whether the seller is a merchant. * If so, the risk of loss stays with the seller until the buyer _______________________ the goods. * If not, the risk of loss moves to the buyer when the seller ______________________ the goods.

Question 36

Offer?

Answer 36

An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.

Question 37

unilateral offer accepted?

Answer 37

Acceptance of an offer for a unilateral contract requires complete performance. Note: Once performance has begun, the unilateral offer is irrevocable for a reasonable period of time to allow for complete performance unless there is a manifestation of a contrary intent.

Question 38

Contracts covered by UCC?

Answer 38

Goods

Question 39

Define acceptance.

Answer 39

a manifestation of a willingness to enter into the agreement by the offeree

Question 40

Under the common law, what terms must be covered in order for a contract to be formed?

Answer 40

All essential terms (i.e., the parties, subject matter, price, and quantity)

Question 41

Legal detriment?

Answer 41

There must be something of substance, either an act or a promise, which is given in exchange for the promise that is to be enforced.

Question 42

How is a bilateral offer accepted?

Answer 42

An offer requiring a promise to accept can be accepted either with a return promise or by starting performance.

Question 43

4 forms of consideration?

Answer 43

Consideration can take the form of: 1. A return promise to do something 2. A return promise to refrain from doing something legally permitted 3. The actual performance of some act 4. Refraining from doing some act

Question 44

Common law & past consideration?

Answer 44

Under the common law, past consideration is typically not adequate consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise. Note: there is a modern trend toward enforcing such promises under the material benefit rule.

Question 45

3 conditions impractibility?

Answer 45

(i) An unforeseeable event has occurred; (ii) Nonoccurrence of the event was a basic assumption on which the contract was made; and (iii) The party seeking discharge is not at fault.

Question 46

What types of contracts are governed by the common law?

Answer 46

Contracts for services or real estate

Question 47

Under the UCC, what key term(s) must typically be specified for a contract to be formed?

Answer 47

Quantity Note: The UCC ""fills the gap"" if other terms are missing.

Question 48

Under the mailbox rule, when is acceptance effective?

Answer 48

An acceptance that is mailed properly (i.e., correct postage and address) within the allotted response time is effective when sent as opposed to on receipt, unless the offer provides otherwise.

Question 49

Who lacks the capacity to make a contract?

Answer 49

(i) Minors (under the age of 18); (ii) People who are mentally ill; (iii) People who are intoxicated; and (iv) People whose property is under guardianship by reason of adjudication.

Question 50

Define accord and satisfaction.

Answer 50

Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party's existing duty. A "satisfaction" is the performance of the accord agreement; it will discharge both the original contract and the accord contract.