Contracts Law

Question 1

SALE

Answer 1

A contract in which title to goods passes from seller to buyer for a price.

Question 2

GOODS TRANSACTION

Answer 2

a good is anything that is movable at the time they are identified as items to be sold under the contract. Article 2 of the UCC applies to most every transaction in goods

Question 3

NONGOODS TRANSACTION

Answer 3

If a sale involves an exchange of service or is a mix of both goods and services a court will determine which aspect is dominant and apply the law governing that aspect to the whole contract. Contracts for nongoods are controlled by the common law.

Question 4

GOOD FAITH & FAIR DEALING

Answer 4

Every contract under the UCC imposes an obligation of good faith in its performance na enforcement (UCC §1-304). “Good Faith” is honesty in fact and the observance of reasonable commercial standards. The Common Law also imposes a duty of good faith and fair dealing on each party to a contract with respect to performance and enforcement.

Breach of the duty of good faith and fair dealing is a question of fact, but usually involves exercising discretion in a way that deprives the other party of the fruits of the contract.

Question 5

BILATERAL CONTRACT

Answer 5

A traditional bilateral contract is one consisting of an exchange of mutual promises, in which both parties are promisors and promisees

Question 6

UNILATERAL CONTRACT

Answer 6

A traditional unilateral contract is one in which the offeror requests performance rather than a performance. Offeror-Promisor promises to pay upon completion of the requested act done by promisee.

Question 7

CREATION OF A CONTRACT

Answer 7

1. Mutual Assent (Offer & Acceptance)
2. Consideration or some substitute
3. Are there any Defenses to the Creation of a K?

Question 8

OFFER

Answer 8

Offeror must communicate to the offered in such a way to create a reasonable expectation in the offer that the offeror is willing to enter into a contract on the basis of the offered terms. In deciding whether a communication creates a reasonable expectation, consider the following questions:

1. Was there an expression of a promise , undertaking, or commitment to enter into a K?
2. Was there certainty and definiteness?
3. Were these communicated to the offeree?

Question 9

Promise, Undertaking, Commitment

Answer 9

To find a promise, undertaking, or commitment has been communicated, there must be finding of intent on the part of the offeror to enter into a K, e.g. “I offer”, “I promise”, Quoting a price, “I am asking for…”, “I would consider selling for…”,

Question 10

Communication

Answer 10

The broader the communication media the Moree likely the court finds a communication to be a solicitation of an offer, e.g. advertisements are generally considered invitations for offers.

Question 11

Statute of Frauds Subjects (MYLEGS)

Answer 11

Marriage, Land, Year-long performance or more, Executor Promise, Goods greater than $500, Surety

Question 12

Defenses to a Meeting of Minds (MUDII)

Answer 12

Mistake
Unconscionability
Duress/Fraud – overcome another party’s will by force or misrepresentation
Illegality
Incapacity (Minor, Mental illness, Intoxication)

Question 13

Compensatory Damages - Expectation Damages

Answer 13

Generally, compensatory damages will be measured by the standard known as expectation damages. In other woads standard calculates the benefit of the bargain, and the goal is to place the non-breaching party in the position he would have been in but for the breaching party’s non performance.

Question 14

What is a Merchant under Art.II UCC?

Answer 14

UCC defines a merchant as someone who regularly deals in goods of the kind sold or who otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved.

Question 15

Explain the Mailbox Rule

Answer 15

Acceptance by mail or similar communication means creates a contract at the moment of dispatch, provided that the mail is properly addressed and stamped, unless:

(i) the offer stipulates that acceptance is not effective until received; or
(ii) where an option contract is involved, acceptance under an option contract is effective only upon receipt

An acceptance transmitted by unauthorized means or improperly transmitted by authorized means may still be effective

Question 16

Acceptance (CL)

Answer 16

Acceptance must be:

i. communicated
ii. in a reasonable manner
iii. Absolute and unequivocal

Question 17

Shipment of NonConforming Goods (UCC)

Answer 17

Shipment of nonconforming goods is acceptance creating a bilateral contract as well as a breach of the contract unless seller seasonably notifies buyer that a ship of nonconforming goods is offered only as an accommodation. Buyer is not required to accept accommodation, and may reject. If he does, shipper is not in breach and may reclaim accommodation goods, because her tender does not constitute an acceptance of the buyer’s original offer.

Question 18

Consideration

Answer 18

To have a legally enforceable contract there must be a bargained for change in legal position between the sprites, i.e. a valuable consideration of some kind. Three elements:

1. Bargained for exchange between parties
2. a. Must be of Legal Value, or
3. b. it must constitute a benefit to the promiser or a detriment to the promisee.

Question 19

Suretyship Promises

Answer 19

A suretyship contract involves a promise to pay the debt of another.IT is not enforceable unless it is supported by consideration.

Question 20

Promissory Estoppel (CL)

Answer 20

It is an equitable remedy. Consideration is not necessary if the facts indicate that a promisor should be estopped from not performing on a contract. A promise is enforceable if necessary to prevent injustice if:

1. promisor should reasonably expect to induce action or forbearance and
2. such action or forbearance is in fact induced.

Question 21

What is Anticipatory Repudiation, and what elements are required?

Answer 21

Occurs if a promisor prior to the time set for performance of his promise indicates that he will not perform when the time comes to execute the contract. If the following conditions are met, anticipatory repudiation will serve to excuse conditions

1. Bilateral Contact Requirement - AR applies only if there is a bilateral contract with executory (unperformed duties on both side). Nonrepudiator must wait until the time originally set for performance by the repudiating party,. until such time, nonrepudiator can change his mind and perform the contract
2. AR must stem from the words or conduct of the promisor unequivocal indication that he will not perform when the time comes

Question 22

What are Potential Response to Anticipatory Repudiation ?

Answer 22

Four options available to the nonrepudiating party

1. Treat AR as total repudiation and sue immediately
2. Suspend performance and wait to sue on performance date
3. Treat Repudiation as an offer to rescind and treat the K as discharged
4. Ignore the repudiation and urge promisor to perform. There is no waiver by doing this and nonrepudiator can still sue for breach.

Question 23

Warranty of Title

Answer 23

Any seller of goods warrants that the title transferred is good that the transfer is rightful and that there are no liens or encumbrances against the title of which the buyer is unaware at the time of contracting. This warranty arises automatically

Question 24

Warranty Against Infringement

Answer 24

merchant seller automatically warrants that the goods delivered are free of any patient, trademark, copyright or similar claims. Buyer who furnishes specifications for the good to seller must hold seller harmless against any such claim.

Question 25

Implied Warranty of Merchantability

Answer 25

Implied in every K for sale by a merchant who deals in goods of the kind sold, there is a warranty that the goods are merchantable.

Question 26

Elements of Warranty of the Merchantability

Answer 26

(1) pass without objection in the trade under the K description
(2) be of fair average quality
(3) be fit for the ordinary purposes for which such goods are used
(4) Be of even kind, quality, and quantity within each unit and among all units involved
(5) Be adequately contained packaged, labeled
(6) Conform to any promises or affirmations of fact made on the label

Question 27

Implied Warranty of Fitness For Particular Purpose

Answer 27

This warranty will be implied when:

(i) any seller (merchant or not)
(ii) has reason to know the particular purpose for which goods are to be used, and
(iii) buyer is relying on the seller’s skill and judgment

Question 28

UCC §2-315. Comment on “Particular Purpose”

Answer 28

“Particular Purpose” differs from ordinary purpose for which goods are used in that it envisages a specific use by buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used are those envisaged in the concept of merchantability

Question 29

Express Waiver

Answer 29

Any affirmation or of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model creates an express warranty if the description, sample model I start of the basis of the bargain

Question 30

Implied Warranties

Answer 30

The implied warranties of merchantability and fitness for a particular purpose can bee disclaimed by either specific disclaimers or general methods of disclaimer

Question 31

Disclaimer of Warranty of Merchantability

Answer 31

Warranty of Merchantability can be specifically disclaimed or modified only by mentioning merchantability - and the disclaimer must be CONSPICUOUS if in writing

Question 32

Disclaimer of Warranty for Fitness for Particular Purpose

Answer 32

It may be disclaimed only by CONSPICUOUS WRITING

Question 33

CONSPICUOUS

Answer 33

contractual language so written displayed or presented that a reasonable person against whom it is to operate ought to have noticed it. Language is considered conspicuous if:

(i) If its in larger type than surrounding text
(ii) It is in a contrasting type font color
(iii) It is set off from the text by marks that call attention to it

Question 34

Modification of Contracts Without Consideration (Common Law Modern View)

Answer 34

Generally, a contract may not be modified without consideration. The modern view however permits modification without consideration if :

(i) modification is due to circumstance that were unanticipated by the parties when the K was made
(ii) it is fair and equitable

Question 35

Modification (UCC)

Answer 35

Under UCC 2-209, even if the K is not within the Statute of Frauds, if it explicitly provides that it may not be modified or rescinded except in writing signed by the parties.

Question 36

Mutual Mistake

Answer 36

Generally a mistaken assumption shared by both parties. When Both parties entering in to a K are mistaken about existing facts relating to the K, the contract may be voidable by the adversely affected party if:

1. mistake concerns a basic assumption on which the contract was made
2. mistake has a material effect not he agreed-upon exchange
3. party seeking avoidance did not assume the risk of the mistake (not a defense if party bore the risk)

Question 37

Unilateral Mistake

Answer 37

If only one parties is mistake about facts relating to the agreement, the mistake will not prevent formation of K. HOWEVER, if non-mistaken party knew or had reason to know of the mistake, the contract is voidable by the mistaken party. The mistake must have a MATERIAL EFFECT upon the agreement.

Question 38

Effect of Infant’s Capacity

Answer 38

Infants (People under legal age of consent) lack capacity to enter into a contract binding on themselves. However, contractual promises of an adult made to an infant are binding on the adult. Contracts between infants and adults are voidable by the infant but binding on the adult.

Question 39

Intoxication Defense

Answer 39

Intoxication is a defense only if the intoxicated party is so intoxicated as to not understand the nature and significance of the agreement, and the K may be voidable if the other party had reason to know.

Question 40

Illegality Defenses

Answer 40

Most  Common  Type: 
Restraint of trade, 
Gambling 
Usurious Contracts 
Obstructing administration of justice
Inducing breach of public fiduciary duties  
Relating to Torts or Crimes