Contracts

Question 1

Applicable Law

Answer 1

Article 2 of the Uniform Commercial Code (UCC) governs contracts for the sale of goods. Goods are defined as movable things. For all other contracts, Common Law dictates, unless it is a mixed contract, where the predominant purpose of the contract will determine the appropriate law.

Question 2

Formation

Answer 2

Contract formation requires: 1) an offer; 2) an acceptance; 3) consideration; and 4) there must be no appropriate defenses to formation.

Question 3

Offer

Answer 3

An offer is a manifestation of intent to contract with clear and certain terms that is communicated to an identified offeree.

Question 4

Merchant’s Firm Offer

Answer 4

An offer is not revocable if it is made by a merchant, in a signed writing, that gives assurances that it will be held open for a period that is stated in the writing (if no time is stated, reasonable time no more than 3 months)

Question 5

Acceptance

Answer 5

Acceptance requires a manifestation of asset to the terms of the offer.

Question 6

Bilateral Contracts

Answer 6

The start of performance manifests acceptance, where the contract may not be revoked.

Question 7

Unilateral Contracts

Answer 7

A Unilateral Contract is one where a party states a requirement without an identified offferee. The start of performance renders a unilateral ocntract irrevocable, where acceptance exists only when performance is complete. If beginning performance, an offeree must inform the offeror of completion within a reasonable time of completion of performance.

Question 8

Retraction of Unilateral Offer

Answer 8

A unilateral offer may be retracted either by lapse of a reasonable time or earlier by revocation.

Question 9

Revocation

Answer 9

A revocation is the retraction of an offer by the offeror and is only valid if communicated to the offeree before acceptance.

Question 10

Counter-Offer

Answer 10

A counter offer is a response made by the offeree to the offeror that contains the same subject matter as the original offer but differes in terms. It operates as a rejection of the original offer as well as a new offer.

Question 11

Consideration

Answer 11

Consideration is a bargained-for exchange of something of legal value. Consideration can also include enjoining someone from doing something they are legally allowed to do. Courts generally don’t question adequacy of the consideration - “a mere pepercorn” may suffice. A promise to refrain is consideration.

Question 12

Illusory Contract

Answer 12

An illusory contract is an attempt to contract, however it is not legally binding. (Ex: “I will buy …. If I decide to” is illusory because it doesn’t offer an actual detriment) If contract says a party can cancel before a certain date, it is illuroy until that date, but binding after the date.

Question 13

Implied in Fact Contract

Answer 13

A contract based on a tacit promise, inferred when conduct creates a contract, a benefit was receive that could have been refused, and it would be fair to presume payment was expected. (like at a restaurant where you are expected to pay and the food will be delivered)

Question 14

Requirement Contract

Answer 14

A contract where a purchaser will fill their entire requirement for a particular good from the contracted seller.

Question 15

Output Contract

Answer 15

A contract where the seller of goods contracts with a buyer to sell them all the goods produced by a seller.

Question 16

Option Contract

Answer 16

An offer is not revocable if the offeree gives consideration for a promise by the offeror to refrain from revoking an offer for either a stated period of time, or reasonable time if no time is specified. Option contracts are an exception to the mailbox rule, and are accepted upon receipt, not mailing.

Question 17

Mutual Mistake

Answer 17

A contract is voidable when both parties are mistaken as to the basic assumption on the contract which is material to the contract and the party claiming mistake is not obligated to bear the risk of such mistake

Question 18

Misrepresentation

Answer 18

Defendant makes misrepresentation of material fact for the purpose of inucing the plaintiff to rely on the misrepresentation to their detriment. Nominal damages are not available.

Question 19

Unilateral Mistake

Answer 19

A mistakeby one party that is unknown to the other party, concerning a basic assumption that is material to the contract. A unilateral mistake may be a defense to formation if one party knew or had reason to believe that theo ther party was mistaken.

Question 20

Conditions

Answer 20

A condition makes performance obligatory only when the condition occurs. Concurrent conditions occur simultaneously, but each functions as a condition preceent to the other.

Question 21

Satisfaction Conditions

Answer 21

Can be viewed subjectively, but in good faith. Even if objectively satisfactory by reasonable persons, the client decides his own subjective satisfaction.

Question 22

Breach

Answer 22

A contract breach occurs when a party fails to perform when 1) conditions precedent are satisfied; 2) time to perform arrives; and 3) performance is not discharged.

Question 23

Minor or Material Breach

Answer 23

If a party does not receive the substantial benefit of their bargain, the breach is material and they are no longer obligate to continue performance under the terms of the contract. The non-breaching party will have an immediate right to all remedies available.
A breach of contract is minor if a party gains the substantial benefit of the bargain despite defective performance. A minor breach does not relieve the aggrieved party of performance under the contract; it merely gives them a right to damages for the minor breach.

Question 24

Time is of the Essence

Answer 24

Contract performance is required within a reasonable time as specified in the contract. However, if the contract contains a “time is of the essence” clause, failure to perform by that date results in a material breach of contract. Without this provision, even if there’s a date in the contract, a meterial breach doesn’t happen until a reasonable amount of time has passed beyond that date.

Question 25

Statute of Frauds

Answer 25

Specific types of contracts that are not vali dunless they are in writing: 1) Marriage 2) Land sale or lease for over a year in length 3) Executor guarantees to pay 4) Contracts for goods > $500 5) Suretyships Writings must be signed by party charged, reasonably identify the subject matter, indicate there is a contract and state the essential terms.

Question 26

Statute of Frauds Exceptions

Answer 26

Even if the contract is not in writing, contracts that are fully performed, if there is juicial acknowledgement of the agreement, or where there has been a foreseeable, detrimenal reliance on the contract will still be enforced. Also, the promise will not fall under the SoF when the purpose of making the guarantee was to benefit the person making the promise.

Question 27

UCC SoF Exceptions

Answer 27

A contract will be enforced despite not being in writing when a party has received a Merchant's confirmatory memorandum and the receiving party does not object in a reasonable time, if the goods in question have been received and paid for, or if the goods in question were custom made.

Question 28

Modifications

Answer 28

Under common law, contract modifications require consideration. Exceptions exist, including when there are changed circumstances and the contract is not fully performed. Under the UCC, consideration is not required fr contract modifications in good faith.

Question 29

Duress

Answer 29

Duress is a wrongful pressure exerted upon ap erson in order to coerce that person into a contract that he or she ordinarily wouldn't enter.

Question 30

Impracticability

Answer 30

The defense of impracticability is available when some unanticipated event renders performance unreasonably difficult to perform under the contract.

Question 31

Unconscionability

Answer 31

A contract may be void where the provisions are so one-sided that they are unconscionable at the time of formation. Applies where one party has unequal bargaining power.

Question 32

Frustration of Purpose

Answer 32

A defense to contract enforcement that relieves the buyer from performance when an unforeseen event destroys the buyer's purpose for creating the contract. In order for the buyer to be excused, the seller must have known the buyer's purpose ar the time of formation.

Question 33

Impossibility

Answer 33

Impossibility discharges performance if it would be objectively impossible to perform due to unforeseen circumstances.

Question 34

Difference between FoP and Impossibility

Answer 34

FoP is the "why" the contract was created. Impossibility involves the duties that are listed in the contract. If the underlying "why", which is known by the other party, becomes frustrated because of unknown things, it's FoP. If some unforeseen situation makes it so someone can't peform their duties, then it's impossibility.

Question 35

Parol Evidence Rule

Answer 35

Evidence of a prior or contemporaneous agreement may not be introduce if it contradicts a later integrate writing. Exceptions: 1) proof of condition; 2) clerical error; 3) employing a defense of formation; 4) to interpret vague terms; or 5) supplement a contract that is only partially integrated.

Question 36

UCC Perfect Tender Rule

Answer 36

A seller must deliver goods that perfectly conform to the contract. If they don't perfectly conform, a buyer may reject all or a portion of the goods. The seller may cure if the performance due date hasn't arrived. Also, when dealing with installment contracts, if one of the installments doesn't conform to the contract, that installment must substantially jeoparize the value of the entire contract.

Question 37

Non-Conforming Goods Sale

Answer 37

Upon receiving non-conforming goods, the buyer may sell the goods in a public or private sale, but must notify the seller beforehand.

Question 38

Mirror Image Rule

Answer 38

Under common law, an acceptance must mirror the offer.

Question 39

Merchant

Answer 39

A merchant is someone who regularly deals in goods of the kind sold in the contract, or who holds themselves out as a merchant.

Question 40

Rejection of Goods

Answer 40

A buyer is required to provide timely notice to the seller that the goods that were received are rejected.

Question 41

Battle of the Forms

Answer 41

UCC Article 2 allows acceptance of an offer with different specifics, including clauses, amonts, etc. For these changes to be effective, and not considered a rejection and counter-offer, both parties must be merchants. Also, new terms may not materially change the contract, and there may not be a clause in the offer prohibiting the changes or additions. If a UCC Article 2 changed contract is returned, the receiving party must object to any changes within a reasonable time, else the modified contract is valid.

Question 42

Promissory Estoppel

Answer 42

A plaintiff can pursue non-contractual damages when 1) they reasonably and foreseeably relied on a promise; 2) to their detriment; 3) the promisor should have reasonably expected such an anction; and 4) failure to rule for the plaintiff would result in an injustice.

Question 43

Adequate Assurances

Answer 43

A party to a contract with legitimate concerns they will not receive their contracted performance may request adqeuate assurances. An adequate assurance is some for of evidence or confirmation that the contract will be fulfilled. If the other party does not provide these assurances within a reasonable time, the requesting party may treat that as an anticipatory repudiation.

Question 44

Anticipatory Repudiation

Answer 44

Occurs when a party unambiguously communicates they will not perform before performance is due. The aggreived party may treat the anticipatory repudiation as a breach and sue immediately, suspend performance and wait to sue when performance is due, treat the repudiation as an offer to rescind/contract as discharged, or ignore the repudiation and urge performance.

Question 45

Anticipatory Repudiation Retraction

Answer 45

A repudiation can be retracted unless the aggrieved party has actively cancelled the contract, materially changed position, or accepted the repudiation as a final decision not to perform.

Question 46

Compensatory Damages

Answer 46

These damages are required to compensate a plantiff for their contractual damages (includes Expectation and Consequential damages). In order to get compensatory damages, they had to be foreseable, causal, certain and unavoidable, and may not be awarded should there have been a failure to mitigate damages.

Question 47

Expectation Damages

Answer 47

These damages include all expected profits or costs that would have been realized if the contract was fully performed by the breaching party. These damages place the non-breaching party in the position they would have been in if there was no breach.

Question 48

Consequential Damages

Answer 48

These are damages that stem indirectly from the breach, but they are foreseeable and certain.

Question 49

Reliance Damages

Answer 49

If a plaintiff's expectation damages are too speculative to measure, they may elect to recover based on their reasonable reliance on the contract. Reliance damages award the plaintiff the cost of performance and are designed to place the plaintiff in the position they would have been if the contract was never formed

Question 50

Liquidated Damages

Answer 50

These are damages specified within the writing of the contract. Liquidated damages require that the damage be difficult to estimate and will not be enforced if the damages are unreasonable or if used as a penalty for non-performance.

Question 51

Incidental Damages

Answer 51

These are damages that are smaller, reasonable costs that stem directly from the breach. (Ex. Ad costs for new hire if your K employee walks out)

Question 52

Assignment of Rights

Answer 52

A transfer of rights. This is a situation where an obligor contracts with an assignor. The assignor then assigns their rights to the obligor's performacne to the assignee. Generally, all contractual rights may be assigned other than ones that would substantially change the obligor's duty or risk, assign furture rights to arise from furuter contracts, or are prohibited by law.

Question 53

Gratuitous Promise

Answer 53

If consideration is provided for past services, the promise is invalid.

Question 54

Delegation of Duties

Answer 54

A delegation is a transfer of duties. It generally consists of a situation where the obligor/delegator promises to perform for the obligee but then delegates their duty to the delegatee. Generally, all duties may be delegated except those that involve personal judgement and skill, or the delegation would alter the rights of the obligee.

Question 55

Enforcement of Expired Debt

Answer 55

An exception to the pre-existing duty rule - No consideration is require to contract to receive pre-existing defaulted debt.

Question 56

Quasi-contract

Answer 56

When there is a failed contract, the defendant is required to make restitution to the plaintiff. Requirements: 1) Plaintiff confers a non-gratuitous benefit to the defendant; 2) the defendant knows the plaintiff's expectation because they knew of the benefit and did not decline; and 3) the defendant would be unjustly enriched if they retain the benefit.

Question 57

Illegal contract

Answer 57

A statute to raise revenue will not prevent contract enforcement if the contractor has not obtained a statutorily require license. Usually happens when client refuses to pay unlicensed contractor and claims the contract was illegal, therefore unenforceable.

Question 58

Novation

Answer 58

When all parties to a contract agree to release one of the parties and replace them with a third party.