Contracts

Question 1

Valid Contract

Answer 1

A valid contract requires (1) an offer, (2) acceptance, (3) consideration, and (4) no defenses to formation.

Under the UCC the essential term for enforceability is the quantity of goods. Other terms may be gap-filled, and consideration is satisfied by a bargained-for exchange.

Question 2

Perfect Tender Rule (UCC)

Answer 2

A buyer may reject goods that fail to conform exactly to the contract.

Question 3

Expectation Damages

Answer 3

Expectation Damages, aim to place the non-breaching party in the position they would have been in had the contract been fully performed. This is typically calculated as:
(Market price - Contract price) × Quantity of goods.

Question 4

Consequential Damages

Answer 4

Consequential damages are damages that arise as a result of the breach but are not part of the direct transaction. They are recoverable if they were foreseeable at the time of contracting and caused by the breach.

Question 5

Mistake

Answer 5

A mutual mistake makes a contract is voidable if both parties were mistaken about a material fact that affects the bargain. A unilateral mistake makes a contract is voidable only if one party was mistaken and the other party knew or should have known of the mistake.

Question 6

What is Specific Performance?

Answer 6

An equitable remedy requiring a D to perform their contractual obligation when (1) there is a valid contract, (2) the terms are sufficiently definite, (3) monetary damages are inadequate, and (4) there are no valid defenses.

Question 7

What is a material breach?

Answer 7

A material breach occurs when a party’s failure to perform substantially undermines the contract’s purpose, depriving the non-breaching party of the benefit of the bargain. A material breach excuses the non-breaching party from further performance and allows them to sue for damages.

Question 8

When is a contract fully Integrated?

Answer 8

A contract is ‘fully integrated’ if it represents the final and complete agreement of the parties.

Question 9

What are Equitable Defenses?

Answer 9

Equitable defenses include: Unclean hands, Laches, Impossibility.

Question 10

When is contract reformation available?

Answer 10

To modify a written contract to reflect the parties’ true intent when (1) there is fraud or mutual/unilateral mistake, and (2) the modified terms are consistent with the parties’ agreement.

Question 11

UCC vs Common Law

Answer 11

Contracts for the sale of goods are governed by UCC Article 2, while contracts for services and real estate are governed by common law.

Question 12

Predominant Purpose Test

Answer 12

If a contract includes both goods and services, the governing law is based on the contract’s primary purpose—UCC applies if goods predominate; common law applies if services predominate.

Question 13

Merchant

Answer 13

A merchant is a person who regularly deals in goods of the kind or otherwise holds themselves out as having special knowledge or skill related to the goods or practices involved in the transaction.

Question 14

Firm Offer Rule (§ 2-205)

Answer 14

A merchant’s signed, written offer to buy or sell goods is irrevocable for up to three months without consideration.

Question 15

Battle of the Forms (§ 2-207)

Answer 15

Additional terms in an acceptance automatically become part of the contract unless: (1) The offer expressly limits acceptance to its terms, (2) The terms materially alter the contract, or (3) The offeror objects within a reasonable time.

Question 16

Merchant’s Confirmatory Memo (§ 2-201(2))

Answer 16

A written confirmation of an oral contract sent by one merchant binds both parties unless the recipient objects within 10 days.

Question 17

Implied Warranty of Merchantability (§ 2-314)

Answer 17

A merchant selling goods automatically warrants that the goods are fit for their ordinary purpose.

Question 18

What is a merchant’s Duty of Good Faith (§ 2-103)?

Answer 18

Merchants must act in good faith and fair dealing, which includes honesty in fact and observance of reasonable commercial standards.

Question 19

Offer

Answer 19

An offer is a manifestation of willingness to enter into a bargain that creates a power of acceptance in the offeree.

Question 20

Acceptance

Answer 20

Acceptance is a clear and unequivocal assent to the terms of an offer that must be communicated to the offeror.

Question 21

Mailbox Rule

Answer 21

Acceptance is effective upon dispatch, while revocations and rejections are effective upon receipt. If an acceptance and rejection are both sent, the first to be received is effective.

Question 22

Mirror Image Rule (Common Law)

Answer 22

Under common law, an acceptance must exactly match the offer; otherwise, it is a counteroffer.

Question 23

Consideration

Answer 23

Consideration requires a bargained-for exchange that results in a legal detriment to the promisee or a benefit to the promisor.

Question 24

Time is of the Essence

Answer 24

If a contract explicitly states that time is of the essence, timely performance is a material term, and failure to perform on time constitutes a material breach excusing the non-breaching party from performance.

Question 25

When is a promise enforceable under Promissory Estoppel?

Answer 25

A promise is enforceable without consideration if the promisor reasonably expects reliance, the promisee reasonably relies to their detriment, and enforcement is necessary to prevent injustice.

Question 26

What are defenses to formation? [MMUUDSLIP]

Answer 26

Defenses to formation include, misrepresentation, mistake, unconscionability, undue influence, duress, Statute of Frauds, lack of capacity, illegality, or public policy

Question 27

Misrepresentation

Answer 27

A contract is voidable if a party justifiably relied on a material misstatement of fact by the other party.

Question 28

Can an unconscionable term be enforceable?

Answer 28

No, a contract or term is unenforceable if it is so one-sided that it shocks the conscience. Courts analyze procedural unconscionability (unequal bargaining power, hidden terms, or lack of meaningful choice) and substantive unconscionability (oppressive or grossly unfair terms). A court may refuse to enforce the contract, remove the unconscionable term, or modify the contract to make it fair.

Question 29

Undue Influence (contracts)

Answer 29

A contract is voidable if one party **improperly influences** another to enter into an agreement, **overcoming their free will.** This often arises in fiduciary or dependent relationships, where one party **exploits a position of power to induce assent.** The victim may rescind the contract.

Question 30

Duress (contracts)

Answer 30

A contract is voidable if one party was induced to enter the contract by an improper threat that left them with no reasonable alternative. Physical duress makes a contract voidable if signed under actual physical force. Economic duress makes a contract voidable if a party wrongfully threatens financial harm and the other party has no reasonable choice but to agree.

Question 31

Statute of Frauds [MY LEGS]

Answer 31

Contracts for marriage, contracts not performable in one year, contracts for the transfer of land, executor contracts, contracts for goods over $500, and suretyship contracts must be in a writing signed by the party to be charged to be enforceable.

Question 32

Lack of Capacity

Answer 32

A contract is voidable if one party lacked legal capacity to contract at the time of formation.

Question 33

Illegality

Answer 33

A contract is void if it requires illegal conduct or violates a criminal statute, regulatory rule, or licensing requirement.

Question 34

Parole Evidence Rule

Answer 34

If a written contract is fully integrated, prior or contemporaneous oral agreements that contradict the writing are inadmissible.

Question 35

Exceptions to the Parol Evidence Rule [RAISED]

Answer 35

Exceptions to the parole evidence rule include: 1) grant or deny a Remedy, (2) clarify Ambiguous terms, (3) establish whether the agreement is Integrated, (4) establish a Subsequent modification to a contract, (5) determine whether a valid contract Exists, or (6) support a Defense to enforceability.

Question 36

What is required for a valid contract Modification?

Answer 36

Common Law: A modification must be supported by new consideration to be enforceable. UCC: A modification does not require consideration if made in good faith.

Question 37

Oral Contract

Answer 37

A valid oral contract requires offer, acceptance, consideration, mutual assent, definiteness, legality, and capacity. A contract need not be in writing unless required by the Statute of Frauds.

Question 38

Statute of Frauds Exceptions PMAS (Like PMS)

Answer 38

A contract that does not satisfy the Statute of Frauds may still be enforced under: (1) Part performance, (2) Merchant’s confirmatory memo, (3) Admission in court, or (4) Specially manufactured goods.

Question 39

Right to Cure (UCC)

Answer 39

A seller may fix non-conforming goods if they give proper notice and cure within the contract time.

Question 40

What is a minor breach and does it excuse performance?

Answer 40

A minor breach occurs when a party’s failure to perform does not substantially impair the contract’s purpose. A minor breach does not excuse the non-breaching party’s obligation but may entitle them to damages.

Question 41

Can Partial Performance satisfy the Statute of Frauds if there was no written contract?

Answer 41

Partial performance may satisfy the Statute of Frauds if the acts unequivocally indicate that a contract exists, such as payment, possession, or improvements in a land contract or delivery and acceptance in a goods contract.

Question 42

What is a minor breach?

Answer 42

A minor breach occurs when a party’s failure to perform does not substantially impair the contract’s purpose.

Question 43

What is an anticipatory repudiation?

Answer 43

When a party unequivocally refuses to perform, the non-breaching party may: (1) Treat the contract as breached and sue immediately, (2) Suspend performance and wait for the performance time, or (3) Demand reasonable assurances.

Question 44

Reasonable Assurances

Answer 44

A party with reasonable doubts about performance may demand assurances in writing. If not provided within 30 days, it is treated as repudiation.

Question 45

Time is of the Essence

Answer 45

If explicitly stated, timely performance is a material term, and failure to perform on time is a material breach.

Question 46

What are excuses for non-performance?

Answer 46

A breaching party’s performance is excused if circumstances change such that performance is: (1) impossible (e.g., death, incapacity, destruction, or prevention), (2) impracticable (e.g., extreme or unreasonably difficult), (3) frustrated in purpose (e.g., performance becomes virtually worthless), or (4) if a condition precedent fails to occur.

Question 47

Incidental Damages

Answer 47

These cover expenses incurred in responding to the breach (e.g., cost of obtaining substitute goods).

Question 48

Duty to Mitigate

Answer 48

The non-breaching party must take reasonable steps to limit their damages.

Question 49

Cover (UCC)

Answer 49

A buyer may purchase substitute goods and recover the price difference from the breaching seller.

Question 50

Lost-Volume Seller

Answer 50

If a seller could have made multiple sales simultaneously, they can recover lost profits rather than just contract price.

Question 51

Express Warranty

Answer 51

An express warranty arises from affirmations, descriptions, or models that form part of the bargain.

Question 52

Implied Warranty of Fitness for a Particular Purpose

Answer 52

A seller warrants that goods are fit for a specific buyer’s purpose if the buyer relies on the seller’s expertise.

Question 53

Disclaimer of Warranty

Answer 53

To be effective, a disclaimer of merchantability must be conspicuous and specifically use the word “merchantability”.

Question 54

FOB Terms

Answer 54

FOB terms determine who bears the risk of loss. (1) FOB Seller: Risk of loss passes when goods are shipped. (2) FOB Buyer: Risk of loss passes when goods are received.

Question 55

Gap Filler

Answer 55

If missing, the UCC provides reasonable price, time for performance, and delivery at seller’s place of business.

Question 56

What is the rule for rejecting nonconforming goods under an installment contract?

Answer 56

a buyer may reject a nonconforming installment if the nonconformity substantially impairs the value of that installment and cannot be cured.

Question 57

Does the perfect tender rule apply to installment contracts?

Answer 57

the perfect tender rule does not apply to installment contracts. Instead, a buyer may reject an installment only if the nonconformity substantially impairs the value of that installment.

Question 58

Can a buyer reject an entire installment contract if one installment is nonconforming?

Answer 58

No, unless the nonconformity substantially impairs the value of the whole contract. A buyer can reject the entire contract only if a single nonconforming installment substantially impairs the value of the entire contract.