Contracts

Question 1

Wendy wholesaler sold to roberta retailer. A dispute has arisen between the parties and Roberta is trying to prove that Wendy is a “merchant” as opposed to a casual party. The least important factor in determining whether Wendy is a “merchant” under UCC Art. 2 is that she:

a) is a wholesaler rather than a retailer
b) deals in the goods sold to Roberta
c) holds herself out as an expert in the goods sold to Roberta
d) Sells under 10 units a year to Roberta

Answer 1

a) this is the least important factor - either a wholesaler or a retailer could be classified as a merchant or as a casual seller depending on if she regularly dealt in the goods. (note that the amount of goods sold a year - e.g. only 10 units) would be relevant to determine whether they regularly deal in the goods for purposes of being a merchant

Question 2

Where a client accepts the services of an attorney without an agreement concerning the amount of the fee, there is:

a) an implied-in-fact contract
b) an implied in-law contract
c) an express contract
d) no contract

Answer 2

a) the contract for the payment of fees would be implied by the fact that the client accepts the services of the attorney.

Question 3

Sarah Student was a third year law student staying in the library when her book was taken when she left on a bathroom break. She ran into the student lounge and announced “I will pay $20 to anyone who identifies the dirty bum who took my book!” Donna saw the theft take the book but did not believe Sarah would actually pay her the $20. So Donna went up to Sarah and said, “I know the identity of the thief and promise to tell you, but I want the $20 in advance.” The effect of Donna’s statement is to:

a) create a unilateral contract
b) create a bilateral contract
c) create no contract
d) create a contract which is defeasible unless Donna makes the required disclosure within a reasonable period of time

Answer 3

c). The offeror was bargaining for a unilateral contract, but Donna is making a rejection and counter-offer with her words

Question 4

Jack and Jill began to negotiate for the transfer of a business. Their negotiations continued for some time. Jack is asserting that Jill made a promise containing an offer which he accepted with a return promise. Jill asserts that the agreement was not what she intended. In determining whether a contract has been created, the courts will look primarily at:

a) the fairness to the parties
b) the objective intent of the parties
c) the subjective intent of the parties
d) the subjective intent of the offeror

Answer 4

b). The courts will look at the objective intent of the parties

Question 5

Which of the following offers for the sale of widgets is not enforceable if the seller changes her mind prior to acceptance?

a) a merchant tells buyer in writing she will sell the widgets for $35,000 and that the offer will be irrevocable for ten days
b) a merchant writes buyer offering to sell the widgets for $35,000
c) a merchant telegraphs buyer offering to sell the widgets for $35,000 and promises to hold the offer open for ten days
d) A merchant writes buyer offering to sell the widgets for $35,000 and stating that the offers ill be irrevocable for ten days if buyer will pay $1.00. Buyer pays

Answer 5

b) A merchant seller’s mere offer to sell without any promise that the offer is to be held open is revocable at the will of the seller.

Question 6

How does the “firm offer rule” function (e.g. what is required for it to apply)?

Answer 6

A firm offer is signed in writing by a merchant and provides explicit assurances that the offer will be held open. The merchant has to sign even if the other party provides the form.

Question 7

A merchant’s irrevocable written offer (firm offer) under article 2 of the UCC to sell goods:

a) must be separately signed by the offeror if the offeree supplies a form contract containing the offer
b) is always valid for three months
c) is nonassignable
d) cannot exceed a three month duration even if consideration is given

Answer 7

a) the offeror still has to sign the form even if the other party provides it. The firm offer can be valid for a stated period less than three months. The exchange of consideration would convert it into an option contract.

Question 8

Base electric co has entered into an agreement to buy its actual requirements of copper wiring for six months from the Seymour Metal Wire Company. Seymour Metal has agreed to sell all the copper wiring Base will require for six months. The agreement between the two companies is:

a) unenforceable because it is too indefinite as to quantity
b) unenforceable because it lacks mutuality of obligation
c) unenforceable because of lack of consideration
d) valid an enforceable

Answer 8

D) requirement contracts are valid and enforceable without specifying quantity a along as there is a reasonable basis for giving an appropriate remedy. A reasonable quantity would be imposed.

Question 9

Which of the following will be legally binding despite a lack of consideration?

a) an employer’s promise to make a cash payment to a deceased employee’s family in recognition of the employee’s many years of service
b) a promise to donate money to a charity on which the charity relied in incurring large expenditures
c) a modification of a signed contract to purchase a parcel of land
d) a merchant’s oral promise to keep an offer open for 60 days.

Answer 9

b). The doctrine of promissory estoppel applies to eliminate the necessity that the donor of a charitable pledge receive consideration to support the promise. The law implies the necessary consideration.

Question 10

In which of the following situations would an oral agreement without any consideration be binding under UCC Art. 2?

a) A renunciation of a claim or right arising out of an alleged breach
b) a merchant’s firm offer to sell or buy goods which gives assurance that the offer will be held open
c) an agreement comprising a large requirements contract
d) an agreement that modifies an existing sales contract

Answer 10

d). The UCC says that a modifications made in good faith to a sale of goods contract require no consideration!

Question 11

Duval Manufacturing Industries, Inc. orally engaged Harris as one of its district sales managers for an 18-month period commencing April 1. Harris commenced work on that date and performed his duties in a highly competent manner for several months. On October 1, the company gave Harris a notice of termination as of November 1, citing a downturn in the market for its products. Harris sues seeking either specific performance or damages for breach of contract. Duval pleads the Statute of Frauds and/or a justified dismissal due to the economic situation. What is the probable outcome of the lawsuit?

a) Harris will prevail because he has partially performed under the terms of the contract
b) Harris will lose because his termination was justified by unforeseeable economic factor beyond Duval’s control
c) Harris will lose because such a contract must be in writing and signed by a proper agent of Duval
d) Harris will prevail because the Statue of Frauds does not apply to contracts such as his

Answer 11

c). The SOF requires that contracts for over one year be in writing to be enforceable!

Question 12

Doral, Inc. wished to obtain an adequate supply of lumber for its factory extension, which was to be constructed in the spring. It contacted Ace Lumber Co. and obtained a 75-day written option (firm offer) to buy its estimated needs for the building. Doral supplied a form contract which included the option. The price of lumber has since risen drastically and Ace wishes to avoid its obligation. Which of the following is Ace’s (seller’s) best defense against Doral’s assertion that Ace is legally bound by the option contract?

a) Such an option is invalid if its duration is for more than two months
b) The option is not supported by any consideration on Doral’s part
c) Doral is not a merchant
d) the promise of irrevocability was contained in a form supplied by Doral and was not separately signed by Ace.

Answer 12

d) The seller merchant has to sign the form in order for the firm offer to be in place - note that because Ace is a merchant (the relevant merchant party), no consideration is needed for the firm offer rule to apply. But SOF compliance is still needed including the seller’s signature.

Question 13

A and B both sign a memo stating that A agrees to sell - and B agrees to buy - a tract of land. The K specified that the transaction should be closed and conveyance made and accepted by “tender of general warranty deed conveying a good and marketable title” on a date specified. The memo signed by the parties contains all of the elements deemed essential and necessary to satisfy the SOF applicable to the transaction, except there was an omission of the agreed-upon price in the memo.

A has refused to perform and in an action by B for specific performance, A relies upon the SOF as a defense. If B offers evidence, in addition to the written memo, that the parties discussed and agreed upon a purchase price of $35,000 B should:

a) succeed, because the law implies that the parties contracted for the reasonable market value of the land, although the price to be paid may not necessarily be that orally agreed upon
b) fail, because the evidence does not show that the price agreed upon is in fact the reasonable market value of the land
c) succeed, because A is estopped from denying that such agreed price is a fair and equitable one, which will be implied by law as a term of the written memorandum
d) fail, because the price agreed upon is an essential element of the contract and must be in writing

Answer 13

d) a contract for the sale/purchase of land falls under common law and so the price and a sufficient description of the property must be in writing!

Question 14

What does it mean to be in SOF compliance?

Answer 14

Has to be in writing and signed by the parties to be bound. It must also identify the parties, describe land (if land is at issue), and usually recite a price term. Emails and other designations can create a “signature” and comply.

Question 15

To what types of contracts does the SOF apply?

Answer 15

MYLEGS: Marriage, Year+, Land, Executor - in specific situations, Goods over $500, Sureties

Question 16

Sarah Sailor owned 2 sailboard a 32-footer and a 37-footer. Bill Buyer has seen the 37-footer and doesn’t know there is another one. Sarah offered in writing to sell “my sailboat” to Bill for $15,000. Bill accepted and paid $15,000 cash.

The next day, Sarah delivers the 32-footer and Bill rejects it because it is not the boat he thought he was buying. Sarah refuses to give him his $ back and insists he take the boat. Bill’s best argument for relief is:

a) express fraud by Sarah
b) a latent ambiguity was known by Sarah but not Bill
c) there was a mutual mistake
d) Bill’s subjective intent should control, requiring reformation of the contract subject

Answer 16

B. If one party is aware of a latent ambiguity and does not inform the other party, the K is usually enforced against the aware party.

Question 17

Which of the following factors result(s) in a UCC Article 2 express warranty with respect to a sale of goods?

a) The seller’s description of the goods as a part of the basis of the bargain
b) the seller selects goods knowing the buyer’s intended use
c) both A and B
d) neither A nor B

Answer 17

a). all affirmations of fact that become a part of the basis of a bargain are express warranties… including a seller’s description of the goods. B is incorrect because fitness for a particular purse is generally an implied warranty!

Question 18

The UCC Art. 2 implies a warranty of merchantability to protect buyers of goods. To b subject to this warranty, the goods need not be:

a) fit for all the purposes for which the buyer intends to use the goods
b) adequately packaged and labeled
c) sold by a merchant
d) in conformity with any promises or affirmations of fact made on the container of label

Answer 18

a) the UCC only requires that the goods be fit for their ordinary purpose!

Question 19

The UCC Art. 2 provides for a warranty of title and against infringement. The primary purpose of this warranty is to protect the buyer of goods from infringement upon the rights of third parties. This warranty:

a) only applies if the sale is between merchants
b) must be expressly stated in the contract or the SOF will prevent its enforceability
c) Does not apply to the seller if the buyer furnishes specifications which result in an infringement
d) cannot be disclaimed

Answer 19

C. If the buyer’s specifications are what create an infringement upon the rights of third parties, the seller is not liable to the buyer. *the implied warranty of title applies even to casual sellers, need not be in writing. The warranty means GUT: Good title, free from Undisclosed security interests, and Transfer rights exist with the seller. Also means that it doesn’t infringe on any 3rd parties’ patents/copyrights.

Question 20

Kent construction Co. is hired to build dwellings for Magnum, Inc. To save money, Kent construction deliberately used cheaper panels than that required by the plan (plan required 2 x 6 and they used 2 x 4). Magnum discovered this variance and so is withholding payment. Final payment would have been $25,000 and damages are estimated to be $15,000. In a lawsuit for the last payment, Kent Const. Co will:

a) prevail on the contract less damages of $15K because it substantially performed
b) prevail because the damages were not substantial in relation to the overall contract price
c) lose because the law unqualifiedly requires literal performance of such contracts
d) lose all rights under the K because it intentionally breached

Answer 20

d). Even though this is a common law and not a UCC contract - meaning the “perfect tender rule” doesn’t apply, a breaching party cannot recover in quantum meruit for an intentional/deliberate breach such as this.

Question 21

A vineyard had existing contracts both with H Winery (for 200 tons o’ grapes due Jan 15) and with S Winery (for 100 tons o’ grapes due Feb 15). There was a field fire in the vineyard and all but 30 tons of grape were destroyed.

The vineyard owner then contacted H and S Wineries and offered to replace with a different type of grapes at a reduced price. He also offered to give H 20 tons of the original grape and S 10 tons of the original grape. H winery demanded all 30 tons because they purchased first. The vineyard owner gave H winery the 20 tons of grapes and so H winery bought the other 180 tons from someone else at a price $24,000 higher than the price he had with the original vineyard. If H Winery brings suit, the vineyard’s worst defense is:

a) the cause of the shortage was beyond his control
b) his pro-rata allocation between H and S was reasonable
c) he should not be held liable because he offered a substitute grape at no extra price
d) neither he nor H foresaw that a fire would occur in the grape fields

Answer 21

C is the worst defense. It assumes that the vineyard assumes liability but in actuality, the UCC considers failure of a presupposed condition (such as the existence of the grapes) is not even a breach. All of the other options are valid defenses.

Question 22

Pacific Gas Co was a retailer of natural gas for homeowners and businesses. In 2003, Pacific signed a 5-year requirements contract with Mega Gas Producers, a company which piped natural gas from the plains of Canada. In early 2005, Mega informed Pacific that, due to a significant price increase it was experiencing from the drillers, it could no longer afford to supply gas to Pacific unless they paid a surcharge of 20%. There were other suppliers that then offered to sell gas to Pacific. Pacific responded to Mega’s repudiation by filing a lawsuit against Mega seeking an order of specific performance. Concerning the order of specific performance, the court will likely decide for:

a) Pacific unless they are able to cover their requirement from another source
b) Mega because the gas was available on the open market and therefore the goods are not unique
c) Mega unless replacement was not commercially feasible for Pacific
d) Pacific if the supply cut-off satisfied the “other proper circumstances” test for specific performance

Answer 22

D. The UCC says that “specific performance may be decreed where the goods are unique or in other proper circumstances.”

Question 23

Under the UCC, does specific performance require the goods be unique and thus unable to be found on the market?

Answer 23

Not exactly. The uniqueness of the goods is one way to mandate specific performance. But specific performance may also be mandated in “other proper circumstances.” (whatever that means)

Question 24

D promised P that he would install sprinklers at her home. D overbooked himself and so doesn’t install the sprinklers at P’s house. P finds out that D was planning to install sprinklers at N’s house. Can P get:

a) specific performance
b) punitive damages
c) an injunction preventing D from working on N’s house

Answer 24

C. You can get an injunction/restraining order in a personal services contract to prevent the defendant from working for anyone other than you! And specific performance in personal services? Erm, slavery? Punitive damages are pretty rare w/out egregious circumstances

Question 25

When can an illegal contract still be enforced?

Answer 25

If the law was meant to protect people like the plaintiff (e.g. unauthorized practice of law statute meant to protect people swindled by fake lawyers. The fake lawyer cannot then argue illegality as a grounds for not being bound by the K).

Question 26

A common law duty is delegable even though the: a) contract provides that the duty is nondelegable b) duty delegated is the payment of money and the delegates is less creditworthy than the delegator c) Delegation will result in a material variance in performance by the delegate d) duty to be performed involves the personal skill of the delegator

Answer 26

B) the obligee is still owed payment even by a less creditworthy debtor. The others all prohibit delegation (particular skill of the original contracting party, material variance, or specific language saying its nondelegable)

Question 27

Megabank U.S. has historically made a year-to-year loan to Fred and Sally who operate a convenience store. A competitor store opening up has caused F & S to lose business and make loan repayments late. Megabank has requested that the borrowers obtain a guarantee if they'd like to renew the loan again. As a favor, Sally's father orally promised Fred and Sally to be jointly-liable and pay 1/3 of the loan if they defaulted again. If Megabank sues Sally's father on his guarantee, the strongest legal defense that the father can assert is: a) the promise was oral and is thus invalidated by the SOF b) there was no consideration to support the father's promise c) the requirements of promissory estoppel are not met d) the bank did not first pursue Fred and Sally

Answer 27

B. Consideration is necessary to render the promise enforceable. Note that the SOF has an exception for sureties meant to benefit oneself - arguable Sally's dad gets gain knowing his daughter is financially okay... just makes B the "best" argument.

Question 28

Linda Landlord owned a small rental house that was in need of repairs. She entered into an oral contract with Robert Rental to sell him the house for $59,000 cash. Robert relied upon this representation and borrowed the purchase money from his parents. Robert paid the $59,000 to Linda, moved into the house, began to make improvements, and paid the property taxes. Linda developed seller's remorse 6 months later, refunded the money, and demanded Robert leave. If Robert sues Linda for specific performance of the house transfer. Linda's best defense is: a) The SOF requires a writing signed by the seller b) whatever improvements Robert made was not substantial c) She returned the $59,000 to Robert d) The house was a rental unit and Robert was just a tenant

Answer 28

B). In order for specific performance to be triggered, the improvement made by the land possessor must be substantial enough to clearly show that the claiming party is more than a mere tenant. (SOF has an exception for oral conveyances where the land possessor makes a substantial payment, moves in, and begins to make substantial improvements... in other words, this hinges on whether improvements were substantial!)

Question 29

``` Mary Manufacturer and Tony Trucker entered into a written contract on Jan 1 in which Mary agreed to build 100 trucks for Tony over the next 10 months. The price was to be $100K per truck and the manufacturing schedule dictated that 10 trucks/month were to be completed. The K state in part, "it is expressly agreed that Tony will be under no payment obligation unless 10 trucks are completed no later than June 30th." 5 tucks meeting the K specifications were completed and tendered to Tony on June 30th. The remaining 5 trucks were tendered September 1. The above contract is: a) entire b) divisible c) neither divisible nor entire d) partially divisible and partly entire ```

Answer 29

D. The UCC rule is that goods must be delivered in one lot unless the terms or circumstances indicate to the contrary. In this case, the K was for 100 trucks in ten lots of ten. Thus the K is partially divisible and partially entire.

Question 30

Client hired Lawyer to prepare an estate plan, will, and trust for his family. The agreement specified that Lawyer would not be liable if she failed to exercise due care or complete the engagement. After Lawyer began to draft the documents, she and Client got into a dispute about the operations of the trust and the identity and powers of the trustee. Lawyer decided to assign the engagement to another lawyer, and without informing Client gave the rest of the assignment to Newbie. Newbie eventually completed the will but it was late and he charged a higher fee than Client expected to pay. In addition, the IRS audited the plan and disallowed it. If Client brings suit against Newbie: a) Client will prevail on a third party beneficiary theory b) Client will prevail only if he has privity of contract with Newbie c) Newbie will prevail over Client because he is sheltered under the clause relieving Lawyer of liability d) Newbie will prevail over Client because Client did not pay him

Answer 30

A. Client was a 3rd party beneficiary of the delegation between Lawyer and Newbie. This means he can bring suit for professional malpractice. Even without privity, 3rd party beneficiary status provides standing to sue.

Question 31

In the event of a buyer's breach, what is the seller's remedy?

Answer 31

the contract price minus any deposit given by the buyer. However, the UCC authorizes sellers to keep the lesser of 20% or $500 of a buyer's deposit but the contract price may be the bigger remedy.

Question 32

In order to prevail on the theory of implied warranty for a particular purpose, what must the buyer show that the seller knew?

Answer 32

The seller has to have known of the buyer's particular purpose and his/her reliance on the seller's expertise that the good will work for that particular purpose. This applies to merchants and non-merchant sellers

Question 33

Contractor agreed to build a custom garden for Homeowner for a flat fee: $5,000. Contractor began work on the project, but Homeowner wanted an "active" role in the project and kept changing the plans. Contractor became more and more discouraged and told Homeowner to make a final decision and leave her and her workers alone. Homeowner refused, Contractor became so emotionally distraught that she could not complete the work and left. She had no substantially performed yet but according to an appraiser, her work was worth $4,000. H had paid C $2,500 already and then hired another contractor of finish the garden for $2,000 more. If H sues C for breach of contract, the likely outcome is that H will: a) prevail because C breached the contract when she walked off the job b) not prevail because his involvement was the cause of the incapacity of the personal service contractor c) not prevail because he breached an implied condition of cooperation d) prevail because the total job cost him more than the $5,000 contractual amount

Answer 33

c).the breach was caused in large part by H - normally there would be a "cost to complete" remedy but not this time!

Question 34

In deciding a controversy involving the question of who has the risk of loss in goods, the court will look primarily to: a) the intent of the parties manifested in the contract b) the shipping terms used by the parties c) whether title has passed d) the insurance coverage of the parties

Answer 34

a) the parties' intent controls in UCC Art. 2 questions.

Question 35

A wholesaler wants to provide his retailer with inventory on credit but has learned that the retailer is in financial trouble. One of his salesmen reported that the retailer may have lien creditors and judgment creditors who could levy on the inventory. Under the circumstances, the wholesaler might be best advised to: a) ship the goods on a "sale or return" basis b) make sure the retailer signs an agreement that he will not give the inventory to 3rd parties until he has paid for the goods c) ship the goods on a "Sale on approval" basis d) files a financing statement w/in 20 days of the retailer receiving the goods

Answer 35

c. "Sale on approval" retains title and risk of loss in the seller so the buyer's creditors can not levy on the inventory.

Question 36

If a seller asks a buyer for assurances that the buyer will be able to pay on time, and the buyer doesn't write back in a month, what happens?

Answer 36

The seller may assume anticipatory repudiation, but if the buyer pays in cash the seller cannot refuse. Goods in transit may be stopped.

Question 37

Under UCC Art. 2, which of the following statements is correct concerning a contract involving a merchant seller and a non-merchant buyer? a) Whether the UCC sales article 2 is applicable does not depend on the price of the goods involved b) only the seller is obligated to perform the contract in good faith c) the contract will either be a sale or return, or sale on approval contract d) the contract may not involve the sale of personal property with a price of more than $500

Answer 37

a. All personal property, regardless of price, is covered under the UCC Art. 2. (all parties must perform in good faith, $500 or more triggers the SOF but the UCC still applies)

Question 38

Seller repudiates a contract to buyer, essentially saying, "I'm not going to deliver your widgets." Buyer waits a while and eventually "covers" by getting substitute widgets a while later. How (And based on the market price at what time) are the buyer's damages measured?

Answer 38

The buyer's damage can generally be measured by the difference between contract price and market cover price at the tie the buyer knew of the breach. (in other words, assume the buyer *could* cover their damages as soon as they know of the breach and calculate from there).

Question 39

Under the UCC, how much of a buyer's deposit can a seller retain?

Answer 39

The smaller of 20% of the contract price or $500.

Question 40

In a sale of goods contract, can the buyer easily get an injunction to prevent seller from selling to someone else?

Answer 40

No. This is different from a personal services contract. Here the buyer can typically "cover" his/her damages on the market.

Question 41

Charlie Supplier operated a hardware store and also a small contracting operation. He entered into a contract with Henry Homeowner to build a garage and with Betty Buyer to sell her enough lumber so she could build a second garden shed identical to the one she built last year. Charlie's form specified prices of $5,000 and $800 for the two contracts, respectively. Henry's purchase order specified $4,000 and betty's purchase order specified $600. All the parties would like the contract to be enforced at their price. The industry average price for the garden shed lumber was $650. Betty Buyer had paid $625 for the same lumber from Charlie last year. Charlie completed Henry's garage and delivered the lumber for the garden shed to Betty. Both buyers were satisfied with the quality but still disagree with Charlie on the prices they have to pay. What price would a court likely assign to the two contracts? a) Henry: $5,000 Betty $625 b) Henry: $5,000 Betty $800 c) Henry: $4000 Betty $600 d) Henry: $4,000 Betty $650

Answer 41

A). Henry's contract is for services, but Betty's is for the sale of goods - UCC. Henry's common law contract makes the offeror the "master of the bargain" and so Henry's offer sticks. Betty's UCC contract is subject to "gap-filling" rules because of the conflict. The UCC gap filling has 3 steps in order of priority: (1) prior course of dealings in this contract, (2) prior course of dealings of these parties, (3) usage of trade. The $625 is the prior course of dealings between these parties and is the best answer.

Question 42

Seller and Buyer entered into a $1,000 contract for the sale of a large color TV. The agreement called for shipment terms of "ex-ship" and stated that "assignment of this contract is prohibited unless both parties consent in writing." Seller also asked Buyer if she knew a good shipper and she reported a local common carrier, Speedy Shipping, had done a good job for her in the past. Without informing Seller, Buyer then gratuitously assigned "all my rights and obligations under the contract" to Assignee. the TV was loaded onto a vessel owned by Speedy and Seller paid $100 for shipment charges. The Speedy vessel was then destroyed in an explosion during an unexpected massive traffic accident, through no fault of Speedy. Delivery to Buyer of the TV was thus not made. If Buyer brings a breach of contract suit against Seller, the court should hold for: a) Seller because Buyer designated the vessel to transport the goods b) Seller, because the TV had been delivered to Speedy in good working order c) Buyer, because the carrier is deemed to be the agent of the seller if the shipment terms are "ex-ship" d) Buyer because the goods were not delivered to her!

Answer 42

d). Shipment terms "ex-ship" require the seller to deliver the goods to the buyer at a named port and pay for unloading. Risk of loss THEN transfers to the buyer. Seller retained the risk of loss in this situation because the TV did not make the destination port.

Question 43

Can a merchant revoke an offer made under the firm offer rule?

Answer 43

Nope! If there is a firm offer in writing by a merchant giving assurances that an offer will be kept open, it cannot be effectively revoked. If the "firm offer" imposes no time period, a reasonable one will be construed by the court.

Question 44

Ace Co entered into a contract with Jennifer to manufacture and deliver 1,000 computers in 20 days. Jennifer paid $25,000 and immediately added the computers to her insurance policy. Ace began production the next week. However, two weeks later a fire destroyed the warehouse in which the computers were stored. Jennifer: a) must sue Ace to recover the $25,000 b) lacked an insurable interest in the computers, as she did not have possession c) had an insurable interest in the computers on the day she signed the sales contract and paid $25,000 d) cannot prohibit the insurance company from pursuing Ace after it pays the loss through subrogation

Answer 44

d). The insurance company has rights against Ace because it steps into the shoes of the insured. Jennifer's right against Ace would then be available to the company. Note that Jennifer's insurable interest arose when the goods were designated as hers.

Question 45

Does the UCC Perfect tender rule apply to installment shipments?

Answer 45

No. The buyer is not entitled to the same "perfect tender" but can reject goods that are a "substantial impairment" of the contract.

Question 46

Does a party need a reason to make a request for assurances?

Answer 46

A request for assurances need only be responded to if the request was based on reasonable grounds for insecurity with respect to the other party’s performance. If such grounds exist and the requesting party receives no such assurances, then the K can be considered anticipatory repudiated. BUT a groundless request for assurances requires no such response.

Question 47

What is the difference between acceptance method under the mailbox rule in a common law v UCC contract?

Answer 47

Under the common law, the offeree must use the same or faster method of communicating acceptance as the offer was conveyed (e.g. letter to e-mail, letter to letter). Under the UCC, acceptance method need only be "reasonable."

Question 48

How long is a subcontractor's bid to a general contractor irrevocable?

Answer 48

A subcontractor's bid to a general is irrevocable until the general contractor is awarded the prime contract.

Question 49

What is the maximum length of time an offer can be kept open under the UCC firm offer rule?

Answer 49

3 months - and only the seller has to be a merchant for the F.O.R. to apply.

Question 50

Who has to sign an offer for it to qualify for the UCC "firm offer" rule?

Answer 50

The merchant who gives assurances of the offer must sign - even if the offer is stated in a form provided by the other party. Note that both parties need not be merchants, only the offeror need be!

Question 51

Regardless of the shipping terms (FOB, etc.), if a party breaches the contract, do they bear the risk of loss?

Answer 51

Sure as fuck do!

Question 52

A buyer makes a unilateral offer to a seller asking them to ship 300 widgets by a set date. When the seller ships non-conforming goods, does that constitute acceptance of the buyer's offer?

Answer 52

The shipment IS acceptance of the offer, creating a contract. However, typically the shipment of nonconforming goods is a breach for violation of the perfect tender rule (unless the seller has the opportunity to cure like in an installment sale context), or if the seller makes it clear that the shipment is a mere accommodation (then it is NOT acceptance).

Question 53

When a buyer takes a partially non-conforming shipment and finds that some of the goods are non-conforming after acceptance, can they accept only part of the shipment (the good part)?

Answer 53

Sure! If the buyer goes on to use a portion of the shipment, she will be deemed to have legally accepted the portion that she uses. The buyer has a right to inspect goods before payment or acceptance. If the buyer discovers a hidden defect later on, they can revoke within a "reasonable period of time" (before the goods have substantially changed condition) by notifying the seller.

Question 54

What are the two types of "implied contracts" and how do they work?

Answer 54

i. Implied in fact: circumstantial implication shows mutual intention (e.g. patient accepts doctor’s services) ii. Implied in law: benefit conferred + prevent unjust enrichment … recover in quantum meruit

Question 55

What is the difference between a bilateral and unilateral contract?

Answer 55

A bilateral contract is accepted by the exchange of promises ("I promise to pay you $1,000 if you promise to write my will") and is mutually binding. A unilateral contract the offeree may accept by performance - but need not accept.

Question 56

If a contract is ambiguous as to its method of valid acceptance (promise or performance), what is the general rule?

Answer 56

If it is unclear whether a bilateral or unilateral contract is being proposed, it is likely going to be interpreted as a unilateral contract. However, once the offeree accepts by beginning performance, she is bound to complete it.

Question 57

What is an executory contract?

Answer 57

Where full performance of contract duties has not yet been rendered.

Question 58

What is a wholly executory contract?

Answer 58

No performance at all has been rendered yet - only promises have been given.

Question 59

What does it mean for a contract to be partially executed?

Answer 59

Some performance has begun by at least one party.

Question 60

What does it mean for a contract to the fully executed?

Answer 60

Both parties have completely performed their contract duties and no obligations remain.

Question 61

What are the key qualities of a valid offer?

Answer 61

a. Unambiguous b. Certain c. Definite on all material terms (if missing terms, gap-filling okay if UCC) d. Intent to be bound rather than a mere invitation to deal? e. Not yet revoked or terminated? f. No misunderstanding (there is a "meeting of the minds")

Question 62

From what lens will the court assess whether or not an offer is certain, definite, etc.?

Answer 62

The court will use an objective test: how would a reasonable offeree interpret the offeror's words?

Question 63

Under the common law, how would missing terms in a contract offer be handled?

Answer 63

The common law does not have gap-filling provisions. So, a valid K cannot be missing essential terms such as parties, subject matter, price, quantity, and time of performance. Land K requires description of property.

Question 64

Under the UCC, how would missing terms in the contract/offer be handled?

Answer 64

The UCC has gap-filling provisions: default terms will be entered in, including if price gone, a reasonable market price. The order of priority for the source for gap-filling: i. Course of performance in existing K ii. Prior performance b/t the parties iii. Usage of trade

Question 65

How do the UCC gap-filling provisions (CPU) intersect with the parole evidence rule?

Answer 65

These gap-filling provisions require an exception to the parole evidence rule b/c may require evidence of extrinsic circumstances outside the 4-corners of the K (course of performance, prior dealings b/t parties, usage of trade).

Question 66

What are the basics to the "firm offer rule" - how could it apply?

Answer 66

i. Merchant offeror ii. Signed by the offeror (even if the firm offer is a form supplied by the other party) iii. No longer than 3 months 1. Stated period of time can be less 2. If no time given, “Reasonable” amount of time imposed 3. If expressly gives 4 months, can be revoked after 3rd iv. No consideration required v. Explicit assurances that will be kept open vi. Even if offeree rejects, the offer is not revoked w/in the time period (can accept subsequent to a rejection and it’s still legit!)

Question 67

How does promissory estoppel work?

Answer 67

i. Was a Promise made? ii. Would P’or Reasonably Expect (i.e., be foreseeable) that promise would induce action or forbearance by P’ee? iii. Did promise Actually Induce such action or forbearance on part of P’ee (to her Detriment)? iv. Does Justice require enforcement of the promise?

Question 68

Under what circumstances is an offer effectively revoked/terminated?

Answer 68

i. Revocation 1. At-will by offeror prior to acceptance 2. Revocation = effective when received 3. If offeree learns that offeror sold to someone else, or acts in a manner inconsistent w/keeping the offer open, may consider offer terminated 4. Unless option contract (see below) ii. Rejection/counteroffer by offeree iii. Death/incapacity of offeror iv. Lapse of time 1. After reasonable time period v. Subject matter becomes illegal vi. Subject matter destroyed

Question 69

Is the power to accept a valid offer assignable by the offeree?

Answer 69

Nope. Acceptance has to be made by the offeree.

Question 70

When might silence constitute acceptance of a contract offer?

Answer 70

1. Parties expressly say silence will = acceptance 2. Past course of dealings indicates silence = acceptance 3. Custom of trade or industry indicates that silence = acceptance 4. (remember, implied in-fact contracts where you accept someone’s services, too)

Question 71

If the method of acceptance (exchange of promise or performance) is ambiguous in a UCC context, how may the offeree accept?

Answer 71

Under the UCC, the offeree can accept by EITHER (and if accepts by promise, then it creates a bi-lateral contract). To avoid this, the offeror needs to explicitly state that the promise to ship goods will NOT constitute acceptance.

Question 72

What term cannot be filled via gap-filling in a UCC contract (E.g. which term is essential)?

Answer 72

UCC contract MUST state the quantity ordered (unless output/requirement contract)

Question 73

How does the UCC handle the "mirror image rule?"

Answer 73

ii. Consistent minor additional terms okay iii. Non-merchants: 1. These additional terms are mere proposals – offeror must expressly approve iv. B/w merchants: 1. Minor add. terms become part of the contract unless the offer expressly precludes new terms OR if: a. The terms materially alter the bargain b. The other party objects w/in reasonable period

Question 74

When does a valid revocation of an offer take effect?

Answer 74

On the date received.

Question 75

Can an offer preclude applicability of the mailbox rule?

Answer 75

Yes - the offeror could indicate that acceptance is only valid when received in which case the MBR would not apply.

Question 76

Assuming the common law mailbox rule applies, how does it operate?

Answer 76

3. Under the MBR, acceptance is effective when dispatched a. So long as offeree uses same method or faster as the offeror did i. If slower method used, then acceptance valid when received b. Bound even if the acceptance is lost in the mail or offeror sent an un-received revocation c. BUT mis-addressed or absent postage, then doesn’t apply! 4. If offeree tries to accept after a rejection, it depends on what gets there first (if rejection gets there first, offer is terminated)

Question 77

How does the UCC treat the mailbox rule?

Answer 77

More liberal version – acceptance need only be by reasonable manner/reasonable medium (including slower)

Question 78

What is an aleatory contract?

Answer 78

An aleatory contract is a contract in which the performance of one or both parties is contingent upon the occurrence of a particular event. The most common type of aleatory contract is an insurance policy.

Question 79

Under the UCC, do modifications of a contract require independent consideration?

Answer 79

Not if they are made in good faith.

Question 80

What is the pre-existing legal duty rule?

Answer 80

When a party merely performs an act that she is already legally obligated to do, she cannot demand additional compensation for it because there’s no VC (common law).

Question 81

What is a third-party beneficiary and how is one validly created?

Answer 81

3rd-party beneficiaries are non-contracting parties who still receive enforceable rights under the contract IF: 1. At time of K formation, intent to bestow rights onto this person 2. This specific person was “in contemplation” when the K was formed 3. The enforcement rights haven't been modified/rescinded prior to vesting 4. 3rd party beneficiary can sue promisor directly

Question 82

What does it mean for a third party beneficiary's enforcement right under a contract to be "vested?"

Answer 82

The beneficiary shows assent to the assignment or has knowledge of their status as 3rd P bene - some sort of affirmative action acknowledging their status: examples – commencing a lawsuit, reasonable reliance measures

Question 83

What is a creditor beneficiary?

Answer 83

Creditor beneficiary = a type of 3rd party beneficiary where the contract specifies that a creditor of the party receiving payment will actually get the $ 1. E.g. Attorney-client contract where client pays off a bank debt 2. Bank = creditor beneficiary, may sue either attorney or client

Question 84

What is a donee beneficiary?

Answer 84

A donee beneficiary receives contract assignment right gratuitously. Can only sue the promisor, no consideration between donee beneficiary and promisee. And the donor can revoke prior to performance because no VC.

Question 85

What does it mean to be a contract assignee?

Answer 85

i. Someone who receives a pre-existing contract RIGHT (to receive payment or sue) ii. Occurs after contract formation (that’s how different from third party beneficiary) iii. Typically extinguishes the assignor’s ability to enforce K rights

Question 86

Are oral assignments of contract rights/duties enforceable?

Answer 86

Yup! Unless land, UCC $500+, wage assignments, land (then writing required)

Question 87

When are contract assignment rights irrevocable?

Answer 87

Irrevocable if in writing or with VC, but non-written gratuitous assignments are revocable at will.

Question 88

Does assignment of a contract right require VC?

Answer 88

No, but gratuitous, non-written assignments are revocable at will by the assignor.

Question 89

Can the delegation of duties be prohibited by the terms of the contract?

Answer 89

Yes - under either the common law or the UCC

Question 90

When is the delegation of a contract duty non-delegable?

Answer 90

1. Personal skill of the original party is involved (non-delegable unless w/consent) 2. Material risk or burden is imposed by the delegation

Question 91

To whom is a delegate (one who accepted a delegated contract duty) liable?

Answer 91

Delgatee who accepts delegation is liable to the original customer (who is an intended 3rd party beneficiary of the delegator/delegatee contract). They ALSO remains liable to the original obligee (unless there is a novation or release)

Question 92

If multiple assignees are given rights under the contract, who gets priority on payment?

Answer 92

1. Common law: first in time | 2. UCC: First to “perfect” (see Secured transactions UCC-9)

Question 93

What kind of contracts can be avoided by parties under 18 - and how?

Answer 93

i. Under 18 – can disaffirm contracts unless for necessities 1. Necessities = food, shelter, clothing, medical care, insurance ii. Upon reaching 18, infant gets to decide: avoid or ratify 1. Ratification is implied by bringing suit to enforce 2. If decides to avoid/rescind, then has to return the remainder of the luxury items iii. If kiddo over 18 misrepresents age, can recover against him/her for fraud, restitution, quasi-contract

Question 94

Are parents usually liable for their minor children's contracts?

Answer 94

No!

Question 95

How does insanity as grounds for invalidation of a contract work?

Answer 95

1. Judicial determination required that party could not understand the contract due to insanity, senility, etc. 2. Burden of persuasion is on the party claiming insanity

Question 96

How does intoxication as a grounds for invalidating a contract work?

Answer 96

1. So intoxicated/impaired by medicine or drugs that could not understand legal consequences of act a. The mere fact that he/she would not have entered into the K without intoxication/meds is not enough b. Typically if aware of intoxication (usually the case when self-induced) not gonna cut it

Question 97

What are the typical reasons that a contract might be unenforceable for being against public policy?

Answer 97

i. Restriction on trade ii. Employment non-compete agreements w/o separate VC 1. Non-competes must be limited by subject, area, and time iii. Contracts that create tortious interference with a third party iv. Exculpatory clauses relieving self of liability

Question 98

How specifically does the statute of frauds apply to contracts of a certain length of time?

Answer 98

1. 365 days – not required 2. 366 – required 3. Indefinite term (“for life”) – not required (grim!)

Question 99

When does the SOF apply to the sale of goods and what are the exceptions to its application in that context?

Answer 99

Goods for $500 or more in US dollars. Exceptions: a. Part performance i. E.g. seller delivers part of the order, buyer inspects and accepts. b. Admission by the defendant that K was made c. Merchant-to-merchant – any symbol to signify a writing is okay (written memorandum if not objected to) d. Specially manufactured goods

Question 100

When/how does the SOF apply to land contracts and what is the exception to its requirement?

Answer 100

1. Including express easements! 2. Full description of the land also required 3. Exception: a. Land possessor makes payment, moves in, performs substantial improvements

Question 101

What are the exceptions to the SOF requirement for sureties?

Answer 101

1. Exception – pre-existing creditor | 2. OR guarantor undertaking oral promise for his own economic advantage (sometimes comes up with parents)

Question 102

When does a unilateral mistake make a contract voidable?

Answer 102

Typically the contract is still enforceable unless the other (non-mistaken) party had knowledge of the mistake/failed to correct OR aided in the mistake

Question 103

How are mutual mistakes treated in a contract scenario?

Answer 103

1. Both parties are mistaken about a significant basic assumption/fact material to the contract 2. Has to be legally relevant – minor mutual mistake usually doesn’t matter a. E.g. mutual mistake of value not typically grounds to rescind b. Mutual mistake of fact usually IS grounds to avoid the contract

Question 104

How would you assess whether or not a contract is unconscionable?

Answer 104

i. Consider: relative bargaining power (process) ii. Outcome incredibly skewed (substance) iii. “Shocks the conscience” iv. Often in standard form adhesion contracts

Question 105

What is fraud in the inducement?

Answer 105

1. (May) make contract voidable. Requires: a. False statement of material fact b. Intent to deceive c. Reliance d. Damages

Question 106

What is fraud in the execution?

Answer 106

Voids a contract - innocence party signs something that is LATER turned into a contract!

Question 107

What is fraudulent concealment?

Answer 107

1. Ommission/nondisclosure of material fact/defect | a. If significant damages result may be grounds for rescission!

Question 108

How does the parole evidence rule operate?

Answer 108

The parole evidence rule bars admission of extrinsic evidence inconsistent with the written terms of an integrated contract agreement. i. Integrated contract? 1. Usually contains language like “total agreement” or “complete agreement” 2. Then look only to the “4 corners of the document” 3. Extrinsic terms contrary to the contract are excluded from evidence ii. Partially integrated contract? 1. Not a complete agreement between the parties a. Consistent verbal terms/understandings can be introduced

Question 109

What are the exceptions to the parole evidence rule's bar on the admission of extrinsic evidence?

Answer 109

DUCAS: 1. Defect in formation 2. UCC trade/dealings (CPU gap-filling rules) if needed to clarify intent 3. Condition precedent 4. Ambiguity in need of interpretation 5. Subsequent modifications

Question 110

In interpreting a contract, how will the courts consider handwritten terms over typed terms?

Answer 110

Handwritten is presumed to prevail because it tends to show parties' most recent agreement.

Question 111

If there is a conflict in the amount in a contract and there are both spelled words (eight) and numbered (8), which prevails?

Answer 111

Written words are presumed to control.

Question 112

What are the SEVEN "Must-ask, do tell" questions of contract law?

Answer 112

1. Does the UCC or common law control? 2. Is there a valid offer? 3. Is there a valid acceptance? 4. Is the agreement an enforceable contract? 5. Are there any defenses to enforcement? 6. Has the performance obligation matured? 7. If there is a breach, what is the appropriate remedy?

Question 113

What does it mean for something to be shipped COD?

Answer 113

(UCC only) COD means “collect on delivery” – buyer may have to pay before inspecting. All goods must be tendered in a single delivery and payment is then due.

Question 114

What is the DEFAULT UCC rule for shipment and payment of goods?

Answer 114

In general, unless otherwise agreed, payment is due at time/place of delivery of conforming goods. If seller demands cash, should give the buyer reasonable amount of time to get it (normally payment by check is coolio).

Question 115

What does the buyer owe the seller if she accepts non-conforming goods?

Answer 115

If buyer accepts non-conforming goods, has to pay contract rate for them (UCC)

Question 116

Under the UCC, what is the default rule for the place of shipment if not otherwise agreed?

Answer 116

Place of delivery is seller’s place of business as default

Question 117

What does FOB mean?

Answer 117

FOB “free on board” – seller bears the expense of putting the goods in possession of the carrier and loading them

Question 118

What are the two types of FOB terms?

Answer 118

a. FOB place of destination – seller bears risk of loss until the goods are tendered to buyer at designated destination b. FOB place of shipment – buyer pays freight. Seller bears risk of loss until loaded to carrier, but once in the carrier’s hands, risk of loss transfer to buyer (default)

Question 119

What does CIF mean?

Answer 119

CIF “Cost, insurance, and freight” – seller’s price includes the cost, insurance, and freight to buyer’s destination… seller delivers to the carrier and pays all the costs. Once delivered to carrier, risk shifts to buyer – who can seek remedy against carrier or insurer.

Question 120

What does ex-ship mean?

Answer 120

Ex-ship: seller must deliver the goods free of carrier liens to the port of destination AND pay for vessel unloading. Then risk of loss passes to buyer.

Question 121

What does "no arrival/no sale" mean?

Answer 121

“No arrival/no sale” – excuses the seller from liability of non-delivery results solely from hazards of transportation

Question 122

What would create an express warranty under the UCC?

Answer 122

1. Any seller affirmations that: a. Become part of the bargain b. On which the buyer relies

Question 123

How does the UCC implied warranty of merchantability work?

Answer 123

1. Merchantability – goods sold by a merchant must be of a commercially-acceptable quality 2. Must be of fair/average quality and suitable for ordinary purpose. 3. Container, packaging must also meet this standard 4. BUT if the buyer inspects and doesn’t discover/refuses to inspect the goods, defects that would have been detected are not covered. 5. Seller can disclaim with certain words (“as is” or “with all faults” – need not be written but if it is, must be conspicuous)

Question 124

How does the UCC implied warranty of fitness for a particular purpose work?

Answer 124

a. If buyer relies on seller’s advice/expertise/selection b. Seller must know of buyer’s particular purpose c. No writing required d. Seller can exclude with a written, conspicuous disclaimer

Question 125

How does the UCC warranty of title and against infringement work?

Answer 125

a. Seller guarantees GUT: i. Good title ii. Undisclosed security interests not present iii. Transfer rights are legit b. And merchant sellers cannot infringe on the copyrights patents of others c. Can only be excluded with detailed disclosure language (would not be favored to allow an exclusion for this one)

Question 126

What are the 5 C's that enable a seller to property limit liability through a disclaimer or exclusion?

Answer 126

Exclusionary contract language must be: 1. Clear 2. Conspicuous 3. Conscionable 4. Consistent 5. Consumer purchaser

Question 127

What is the Magnuson-Moss Act?

Answer 127

Requires that specific warranties made by a seller may require designations as "Full or limited" and that assignees may also enforce warranties.

Question 128

How would a contract establish a "condition precedent" and what would that mean in terms of performance obligation?

Answer 128

i. Condition precedent signified by words such as “if,” “provided,” “on the condition that.” ii. E.g. I’ll sell you this land if you arrange financing iii. Could involve someone “Signing off” – e.g. I’ll begin building when an architect certifies that these plans are satisfactory 1. Objective standard: would a reasonable architect reject? 2. Subjective: involves my personal taste! iv. Slight time lag is okay unless K specifies “time is of the essence” v. One party may not prevent a condition precedent from happening 1. BUT condition precedent could be expressly excused or impliedly waived

Question 129

How does the UCC treat the failure of a presupposed condition?

Answer 129

1. Not a breach if non-occurrence of supervening condition (e.g. the existence of our warehouse) was assumed in the K 2. Buyer then has the option to agree to what’s available based on what remains, or terminate the agreement

Question 130

What are the key reasons that a party's performance obligation will have NOT matured (in other words, that nonperformance would be justified)?

Answer 130

Failure of a condition precedent, impossibility, impracticability (extreme), contract becomes illegal, lack of cooperation/hindrance by the other party, or frustration of purpose (subject matter destroyed)

Question 131

What are some of the key defenses to contract enforcement?

Answer 131

Duress, fraud, illegality, incapacity, undue influence, mistake, pre-existing legal duty (can make the additional duty unenforceable), void against public policy.

Question 132

What does COD mean?

Answer 132

"Cash on delivery"

Question 133

What is an accord?

Answer 133

ii. Accord – a new agreement reached by the parties (substitute agreement) 1. Consideration = giving up the rights to sue on the original contract 2. BUT if the accord is breached, dual remedies: a. Sue on the original obligation (as long as statute of limitation hasn’t run) b. Sue on the accord agreement

Question 134

What is a novation?

Answer 134

iii. Novation – similar to an assignment 1. New contract where new party substituted for old one 2. Includes an express release of the original obligor (thus the distinction between assignment)

Question 135

What is contract cancellation?

Answer 135

Mutual agreement to rescind the contract – terminates all rights and discharges both parties

Question 136

What is a contract waiver?

Answer 136

Where one party excuses a required condition of the contract (if both do, more like a cancellation or accord). There is not consideration for the waiver so it is revocable.

Question 137

How do liquidated damages work as a remedy?

Answer 137

i. Stipulated provision in the K ii. Must bear a reasonable relationship to the actual damages iii. If used, should be the only remedy iv. If considered so large to constitute a penalty - void v. If used, may justify recovery of interest award (because the amount is easily ascertainable)

Question 138

What are a seller's UCC remedies if buyer refuses to accept conforming goods or breaches (e.g. is insolvent, fails to provide assurances w/in 30 days)?

Answer 138

i. Seller’s remedies (e.g. buyer refuses to accept conforming tender) 1. Can stop goods in transit 2. Demand COD for future shipments 3. Cancel and sue for damages 4. Commercially reasonable resale costs 5. Incidental damages incurred while mitigating losses 6. Can reclaim goods from insolvent buyer ii. Right to cure (if seller provides non-conforming goods) before contract date

Question 139

What are the buyer's UCC remedies?

Answer 139

1. Entitled to the “perfect tender rule” a. But must make an effective rejection to avoid acceptance! b. Has a right to inspect goods before payment/acceptance c. Even if pays COD, can still reject non-conforming goods and get $ back 2. Plus remedies of CICS: a. Cover damages (difference b/w cover and contract price) i. If unable to cover, remedy is difference between contract price and FMV @ the time buyer learned of seller’s breach b. Incidental damages (mitigation costs flowing from the breach) c. Consequential damages – must be foreseeable to seller d. Specific performance if CIT i. Cover is impossible (goods can’t be found elsewhere on the market) ii. Identified w/particularity in the contract iii. Transfer to a BFP has not occurred

Question 140

What makes for a valid offer?

Answer 140

Definite, certain on material terms, reasonable person would interpret an intent to be bound, that has not yet been revoked/terminated, no misunderstanding. This can include a "firm offer" or an option contract.

Question 141

What makes for a valid acceptance?

Answer 141

Has to be accepted by the original offeree (non-assignable) who has actual knowledge of the offer, mirror image (only if common law), received before revocation/termination of offer (mailbox rule). If a bilateral contract, exchange of promises = acceptance. If unilateral - performance = acceptance. Silence is only acceptance if particular reason to believe it will operate as such.

Question 142

What are the typical grounds for enforcement of a binding contract?

Answer 142

Bargain + VC (classic), benefit conferred + subsequent promise to pay (restatement 86), promissory estoppel ("reliance"), implied contracts (one party accepts the services of another).

Question 143

What does it mean for a contract to be entire/indivisible?

Answer 143

Type of contract where obligations of the contracting parties are interdependent, and no party can demand performance from the other(s) unless it performs its own part or is ready and willing to do it. Construction contracts, for example, are usually indivisible: if the contract calls for the client to pay certain sums at certain stages of the contract, then the contractor may stop the work at any stage if not paid accordingly. Most lump sum payment contract are regarded indivisible. Also called an entire contract.

Question 144

Offeree mails a valid acceptance to a valid mailed offer on April 2nd. Offeree e-mails a rejection of the offer on April 3rd. Is there a contract (assume common law)?

Answer 144

Yes. The offer is accepted upon dispatch. However, if the offeree FIRST rejected and subsequently accepted, then it would matter when the two pieces of communication were received by the offeror.

Question 145

What constitutes a mutual mistake?

Answer 145

A mutual mistake is where (a) neither party at fault, (b) neither party aware, (c) on a basic assumption on which the contract is made, and (d) not of a type for which either party would be expected to bear the risk of mistake). Then the contract is voidable by the adversely affected party.

Question 146

Under the UCC parole evidence rule, is evidence of the past course of dealings admissible?

Answer 146

Yes. Course-of-dealing evidence is admissible to explain or supplement a final written agreement EVEN if the parties intended the written agreement to be final/conclusive.

Question 147

Under the UCC parole evidence rule, what effect does a clause have that indicates it it a completely integrated agreement?

Answer 147

Even a contract deemed "completely integrated" can still be subject to evidence that explains the course of dealings. The parole evidence rule would bar contradictory evidence but not explanatory information.

Question 148

What is the difference between a pre-existing legal duty (modification attempt) and a valid modification (unforeseen circumstances)? How about an accord?

Answer 148

i. Pre-existing legal duty: a new promise is given for the same act the party has already promised to perform ii. Would require additional consideration iii. When a party merely performs an act that she is already legally obligated to do, she cannot demand additional compensation for it because there’s no VC iv. BUT: Unforeseen Circumstances/ Additional Obligations Exception 1. Where a subsequent agreement imposes an additional obligation or burden not previously assumed, the agreement – supported by VC – is valid and binding (Brian Construction) 2. Modification is binding IF it’s fair and equitable in view of circumstances not anticipated 3. UCC: a. An agreement modifying a K needs no VC to be binding b. Just needs to be in good faith! ii. Accord – a new agreement reached by the parties (substitute agreement) 1. Consideration = giving up the rights to sue on the original contract 2. BUT if the accord is breached, dual remedies: a. Sue on the original obligation (as long as statute of limitation hasn’t run) b. Sue on the accord agreement

Question 149

What is the difference between a novation and an assignment?

Answer 149

A novation requires the original debtor/party to AGREE to the substitution of the new party.