Contracts

Question 1

Elements for Frustration

Answer 1

Purpose of K has become basically valueless by virtue of some Unforseen Supervening Event not the fault of the party seeking discharge.

1. There is some supervening act or event leading to the frustration;
2. At the time of entering into the contract, the parties did NOT reasonably foresee the act or event occurring;
3. The purpose of the contract has been completely or almost completely destroyed by this act or event; and
4. The purpose of the contract was realized by both parties at the time of making the contract.

Question 2

Test for Impracticability

Answer 2

(i) Extreme and unreasonable difficulty and/or expense; and
(ii) Its nonoccurrence was a basic assumption of the parties.

Mere change in the degree of difficulty or expense due to such causes as increased costs, unless well beyond the normal range, is NOT impracticability, bc these are the types of risks that a K is intended to cover.

Question 3

Accord

Answer 3

New Agmt in which one party to an existing K agrees to accept, in lieu of performance, some other, DIFFERENT performance/obligation. (usually arises under a dispute);
-SUSPENDS performance of orig agmt until -Accord is/isn’t performed. Breach of accord? can recover on either orig K or accord.

Question 4

Satisfaction

Answer 4

Performance of the accord agreement. Its effect is to discharge not only the original contract but also the accord contract as well.

Question 5

Novation

Answer 5

occurs when a new contract substitutes a NEW PARTY to receive benefits and assume K duties, agreed to by both parties. The original contract will be discharged by the novation.

Question 6

Discharge

Answer 6

may occur in several ways other than by actual performance, including by novation, accord and satisfaction.

Question 7

Prospective failure to perform (NOT repudiation)

Answer 7

involves conduct or words that merely raise doubts that the party will perform. judged on a Reasonable person standard.

may be retracted, provided the other party has not yet changed position in reliance on the repudiation or prospective failure. The effect of a prospective failure is to allow the innocent party to suspend performance until she receives adequate assurances. She may treat this situation as a breach only if the assurances are not given. If a defaulting party regains his ability or willingness to perform, he must communicate that to the other party.

Question 8

Anticipatory Repudiation and Effect

Answer 8

occurs when promisor, prior to time set for performance, unquestionably indicates that she will not perform. Repudiation MUST be unequivocal! need NOT be in writing

nonrepudiating party has four alternatives:

(i) Treat the anticipatory repudiation as a total repudiation and sue immediately;
(ii) Suspend his own performance and wait to sue until the performance date;
(iii) Treat the repudiation as an offer to rescind and treat the contract as discharged; or
(iv) Ignore the repudiation and urge the promisor to perform (but note that by urging the promisor to perform, the nonrepudiating party is not waiving the repudiation—she can still sue for breach and is excused from performing unless the promisor retracts the repudiation).

Note: U.C.C. section 2-610 provides substantially identical alternatives to a nonrepudiating party when there is an anticipatory repudiation in the case of the sale of goods.

*applies only to bilateral contracts with executory (unperformed) duties on both sides.

Question 9

Constructive Condition

Answer 9

a condition read into the K by the Court

Question 10

Offer

Answer 10

1) Manifestation of present intent to be bound demonstrated by expression of commitment, promise or undertaking, 2) communicated to identifiable offeree in 3) definite & certain terms.
1. intent (promise/undertaking of commitment)
2. communicated to identifiable offeree
3. certainty/definite in terms (UCC quantity, Land price, time, matter, parties)
(if material term to be added in the future, the terms are too vague) price of goods missing? reas price at delivery

creates a reasonable expectation in offerree that offeror is willing to enter into K on basis of offered terms.

Question 11

merchant

Answer 11

regularly deals in this type of good; or holds itself out as having special knowledge in this type of good

Question 12

intended TPB

Answer 12

intended and named in K (vs incidental)

Question 13

TPB rights vest when:

Answer 13

TPB
1. manifests assent to K
2. sues to enforce K
or 3. aware of K and materially changes position in justifiable reliance
*Parties can modify K only PRIOR to TP vesting
D can raise any defense against TPB that could’ve been raised against orig K party.

Question 14

Creditor TPB

Answer 14

TP was creditor of Promisee

Question 15

! UCC 2-207 battle forms

Answer 15

Additional Term in acceptance?

NOT 2 Merchants:
Valid K, (UNLESS acceptance was Expressly made Conditional on assent to the additional terms) BUT, K does NOT include Additional terms (mere proposals) unless Offeror expressly agrees to them
–knocked out

2 Merchants:
Acceptance creates Valid K and ADDITIONAL term becomes PART of K UNLESS
1. offer expressly limited to acceptance to its terms
2. rejection of term w/in reas time
3. additional term Materially changes offer (substantially affects economic risks or benefits or changes usual remedy for breach; Maj. arbitration clause is material) - -
DIFFERENT TERM - KNOCKED OUT

Even if party added the material term in his OWN form, he is bound by UCC rule;

Question 16

Goods

Answer 16

all tangible movable items

Question 17

Merchant Confirmatory Memo

Answer 17

In K betw 2 Merchants, if one party sends the other a written confirmation of the understanding within a reasonable amount of time, it binds sender immediately and will bind recipient if he has reason to know of contents and doesn’t REJECT w/in 10 days
(exception to SoF)

Question 18

Lapse of Offer

Answer 18

Lapse by Timing - Offer may be terminated by offeree’s failure to accept within time specified in offer. If no deadline, then within reasonable time.

Lapse by Operation of Law - Offer will terminate if not accepted before death of either party, insanity, destruction of proposed subject matter, or supervening illegality

Question 19

Acceptance

Answer 19

Unequivocal assent to terms of offer made by one with power of acceptance, in manner prescribed or authorized by offer; manifestation of assent to an offer

Question 20

CONSEQUENTIAL Damages only avail to….

Answer 20

buyer

Question 21

Unilateral Contract:

Answer 21

offeror requests performance rather than a promise (once act is completed contract is formed and Payment due);

Only full performance with intent to accept is acceptance;

• unless an offer specifically provides that it may be accepted by performance only, will be construed as an offer to enter into a bilateral contract,
• ONCE performance has begun the offer cannot be revoked as to that performer. (Sort of like option)

Question 22

Bilateral Contract:

Answer 22

Exchange of mutual promises;

-Can be accepted by either promise to perform, or beginning of performance

Question 23

contract

Answer 23

mutual assent between parties regarding a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law, in some way, recognizes as a duty.

Question 24

Mirror Image Rule

Answer 24

(CL ONLY) states that acceptance of an offer must be unequivocal acceptance to each and every term of offer. Any different or additional terms in the acceptance make the response a rejection and counteroffer. (be wary of mere inquiry that is NOT rejection)

Question 25

Parol Evidence Rule (4 corners Rule)

Answer 25

where parties to a K intend to express their agmt in a final (integrated) writing, other expressions made PRIOR to or CONTEMPORANEOUSLY with the writing are not admissible to VARY, contradict, of modify the terms of the writing. **Admissible for other purposes though (to supplement terms not mentioned, clear up Confusion in K) if not clear complete and exclusive integration of all terms.. Statements made AFTER K allowed EXCEPTIONS: will NOT bar extrinsic evidence of Formation issues (Fraud, illegality, undue influence, duress, mistake, condition PREcedent, lack of consideration, trade usage/industry practice, course of dealing betw parties) CL - parol evidence can be received to aid a fact-finder in interpreting a document only if the writing appears to be ambiguous on its face. UCC - written contract’s terms may be explained or supplemented by course of dealing, usage of trade, or course of performance evidence, WHETHER OR NOT the writing appears to be ambiguous.

Question 26

Reliance damages

Answer 26

put the plaintiff in the position she would have been in had the contract never been formed. If the plaintiff’s expectation damages will be too speculative to measure, the plaintiff may elect to recover reliance damages instead.

Question 27

Mailbox Rule

Answer 27

Acceptance by mail or similar means creates contract at Moment of DISPATCH/mailing; Rule does not apply to Options; does not apply when K lays out dates/times specifically; assumes stamp and proper address Exceptions: Rejection and acceptance 1. Sends Rejection then Acceptance, whichever arrives 1st binds 2. Sends Acceptance then Rejection, acceptance effective unless rejection arrives 1st and offeror detrimentally relies on it

Question 28

Promissory Estoppel / Detrimental Reliance

Answer 28

doctrine used by courts to avoid unjust outcome where there is NO legal K; a promise that promisor 1. should reasonably expect to induce action or forbearance on part of promisee, and 2. which does induce action/forbearance/reliance, 3. becomes binding if injustice can be avoided only by enforcement of promise; (award expectation OR reliance damages)

Question 29

auction is with reserve

Answer 29

the auctioneer may withdraw the goods at any time until he announces completion of the sale.

Question 30

auction without reserve

Answer 30

once the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.

Question 31

Modification - Requires New Consideration?

Answer 31

CL- requires new consideration and agreement to modify a contract, U.C.C. Article 2 allows modification w/o new consideration if sought in good faith

Question 32

Ratification

Answer 32

A promise to perform a voidable obligation

Question 33

Mutuality

Answer 33

requires that consideration exists on both sides of the contract.

Question 34

Integration

Answer 34

When the parties to a contract express their agreement in a writing with the intent that the writing embody the final expression of their bargain

Question 35

Implied in Fact K

Answer 35

Formed by CONDUCT ie manifestations of assent other than oral or written language (ex. silence/action) objective

Question 36

Quasi Contract; Implied in Law K

Answer 36

Not contracts at all; contructed by courts to avoid unjust enrichment by permitting P to bring action in RESTITUTION to recover Unjust Enrichment (amount of benefit wrongfully conferred on other)

Question 37

Consideration

Answer 37

bargained for exchange of legal value (not Gift); Bargained-for exchange requires that the promise induce the detriment and the detriment induce the promise; Courts will enforce a promise as a contract only if it is supported by 1. Consideration or a 2. Substitute for consideration (promissory estoppel, detrimental reliance, or g/f modification UCC)

Question 38

Past Consideration

Answer 38

Promise in exchange for something you have already done is NOT effective as consideration

Question 39

Lifetime Services Exception

Answer 39

exception to SoF where contract is for lifetime services, because person may die within a year.

Question 40

Express K

Answer 40

formed by language, oral or written

Question 41

mutual mistake

Answer 41

if both parties are mistaken about existing facts (not future happenings), contract voidable by adversely affected party if: 1. concerns basic assumption on which K is made 2. Mistake has material effect on agreed upon exchange and 3. party seeking avoidance did not assume risk

Question 42

Lack of Capacity

Answer 42

Contract voidable if party’s mental capacity so deficient that he is incapable of understanding nature of agreement.

Question 43

! Firm Offer Rule

Answer 43

UCC – Offer by MERCHANT in SIGNED writing, which by its terms gives assurance it will be held OPEN, is NOT revocable for lack of consideration/$ during time stated (Merchant option) -If NO time is stated, must be held open for REASONABLE time not to exceed 90 days max. -IF stated time is longer than 90 days, offer is valid only for 90 day period max. UNLESS consideration or detrimental reliance makes it option contract keeping K open for longer

Question 44

no perfect tender? Buyer can

Answer 44

1. accept goods and pay K price 2. timely reject goods and sue for damages 3. accept and reject in part IF Seller gives notice of Accommodation with non-conforming tender, it is Counter offer that Buyer can accept/reject ALL (not part), but CAN'T sue for any damages

Question 45

illusory

Answer 45

consideration is not present on both sides of K; conditional promises are NOT illusory unless condition is entirely w/in promisor's control (hot dog win ex.)

Question 46

Contracts Essay Approach

Answer 46

1. Applicable Law 2. Formation 3. Defenses to Formation 4. Terms 5. Third Parties 6. Performance 7. Remedies

Question 47

Main Purpose Exception to Surety

Answer 47

Exception to Sof – surety • Use if main purpose of Guarantor in promising to answer for debt of another, was to benefit HIMSELF (not other) than does NOT need to be in writing! not really surety

Question 48

Unilateral Mistake

Answer 48

will NOT prevent Contract formation, UNLESS non mistaken party knows or has reason to know of mistake by other party

Question 49

F.O.B. Buyers place of Biz, risk of loss on?

Answer 49

Free on board, SELLER bears risk until delivery to buyer at place listed

Question 50

F.O.B. Seller's place of biz, risk of loss on?

Answer 50

BUYER bears risk once goods handed over from Seller to Common Carrier

Question 51

F.O.B. Point of Destination

Answer 51

Seller bears risk until gets to Point of Destination, then shifts to buyer

Question 52

All Ks assignable/delegable Except

Answer 52

1. unique service Ks 2. Long term Requirement Ks 3. would substantially alter the obligor's risks

Question 53

Consideration is Required for Assignment, T or F?

Answer 53

False! not required. Gratuitous ok

Question 54

material breach

Answer 54

promisee does not receive the substantial benefit of the bargain as a result of the breach, and the non breaching party can cancel contract and sue for damages

Question 55

Assignments must be in writing, T or F?

Answer 55

False. need not be in writing

Question 56

minor breach

Answer 56

promisee gains substantial benefit of her bargain despite obligor's defective performance; non breaching party CANNOT cancel K, but can sue for damages

Question 57

Too injured/sick for unique personal services K?

Answer 57

excused for that time; NOT liable for damages unless K provides otherwise. (impossibility)

Question 58

liquidated Damages ok if

Answer 58

1. damages difficult to ascertain at time of entering agmt and 2. amount is reasonable forecast of compensatory damages

Question 59

condition precedent

Answer 59

act or event (other than lapse of time) that must occur before party under duty to perform

Question 60

Lost Profits - standard remedy | non breaching seller under UCC

Answer 60

remedy = K price minus resale price

Question 61

Lost Profits - VOLUME seller | non breaching seller under UCC

Answer 61

remedy = lost profits on that sale (remember to subtract any deposit they already paid)

Question 62

impossibility

Answer 62

occurrence of an unanticipated or extraordinary event may make contractual duties impossible to perform; must be OBJECTIVE, NOT subjective (so if party took more lucrative K it is not objectively impossible)

Question 63

compensatory damages

Answer 63

put non breaching party back in place she would have been if promise had been performed; measure of damages based on expectancy of getting benefit of bargain (expectation damages, or if too speculative reliance damages, and Consequential damages (only for buyer))

Question 64

consequential Damages

Answer 64

non breaching party may be liable for any losses resulting from breach that any reasonable person would have forseeen would occur from breach at time of entering K; (show forseeability, causation, and certainty) in sales K only avail to Buyer

Question 65

Incidental damages

Answer 65

expenses reasonably incurred by buyer in inspection, receipt, transport, care, custody of rejected goods, and other expenses incidental to breach; seller's shipping, returning and resale

Question 66

Damages and Certainty

Answer 66

damages must not be speculative, but must be certain in their nature; Also must be unavoidable and caused by breach (plus duty to mitigate)

Question 67

Excuse of condition by substantial performance

Answer 67

condition of complete performance may be excused if the party has rendered subtl performance and breach is minor. Usually applies to constructive conditions only (not express bc conflicts w/ intent of parties); To find SP, use same factors as material/minor breach

Question 68

Factors for Material or Minor Breach

Answer 68

- amt of BENEFIT received by non breaching party - adequacy of compensation for damages - EXTENT of part performance by breaching party - hardship to breaching party - negligent or willful acts by breaching party - likelihood breaching party will perform remainder (must show willing/able to perform) - Late performance is genly not material if done in reasonable time

Question 69

Failure of a condition

Answer 69

discharges liability of the promisor whose obligations on the conditional promise never mature; ie nonfulfillment of condition normally excuses a duty to perform

Question 70

Excuse of Condition by Hindrance/failure to cooperate

Answer 70

Party having a duty subject to condition, prevents condition from occurring, thus excusing performance by other party if action is wrongful

Question 71

Specific Performance

Answer 71

only proper when legal remedy is inadequate (ie only 1 person can do it, or Good is UNIQUE irreplaceable Issues: feasibility of enforcement by court, against public policy Subject to Equitable Defenses: ex. unclean hands

Question 72

Revocation

Answer 72

Retraction of the offer by the offeror. revocation (and rejection) effective upon receipt. Can be DIRECTly communicated to offeree OR Indirect: if offeree receives 1. correct info 2. from reliable source 3. of acts of offeror indicating to reasonable person that offeror no longer wishes to make offer Unilateral K becomes irrevocable once performance has begun

Question 73

Requirements Contract

Answer 73

promisor binds itself to buy from the supplier all that it requires, and the supplier binds itself to sell to the promisor that same amount; Valid quantity under UCC for all actual requirements/output; assumption parties will act in g/f and no demand for quantity unreasonably disproportionate to stated estimate or prior dealings NEEDS consideration on BOTH sides or it is illusory.

Question 74

Installment Contract

Answer 74

1 contract for the exchange of goods, but goods are to be delivered in separate lots; defect in 1 delivery can be total breach only if defect substantially impairs value or entire Contract.

Question 75

UCC Gap Filler

Answer 75

if no time is stated for delivery in the K, delivery is due w/in a reasonable time

Question 76

Insolvency

Answer 76

UCC - Seller may stop delivery of goods when he learns, BUT seller MUST deliver goods to insolvent buyer if buyers tenders CASH for payment,

Question 77

Option

Answer 77

distinct contract in which offeree gives consideration for a promise by offeror not to revoke an outstanding offer. CANNOT be terminated before the time stated, EVEN by express rejection by offeree (UNLESS detrimental reliance on rejection) or DEATH of offeror!! MUST STAY OPEN.