Contracts Tested Rules

Question 1

Mistake

What is a mistake?

Answer 1

a belief that is not in accord with a present fact

Question 2

Mistake

How is a mutual mistake proven? What is the remedy?

Answer 2

Allows the adversely affected party to rescind if:
1. There is a mistake of fact, existing at the time that the deal is made;
2. the mistake relates to a basic assumption of the K and has a material impact on the deal
3. the impacted party did not bear the risk of mistake

Reformation is also available

Question 3

Mistake

How is unilateral mistake proven? what remedy?

Answer 3

Adversely affected party can rescind if:
1. She can prove all the elements of mutual mistake; and
2. either (1) the mistake would make the contract unconscionable; or (2) the other side knew of, had reason to know of, or caused the mistake

One should note that the second element essentially makes it a fraud or nondisclosure argument. A unilateral mistake alone will not be enough to invalidate a K

Question 4

What is unconsionability? How is it proven?

Answer 4

Two varities:
1. Procedural: a defect in the bargaining process itself. Usually a hidden term (suprise; shock the conscience), or an absence of meaningful choice (no other option)
2. Substantive: a rip-off. egregiously one-sided.

Question 5

suretyship

What is the correct characterization of a guarantor’s obligation to the obligee?

Answer 5

It is primary, meaning the payment is guaranteed, not the collection. Therefore, the obligee may sue the guarantor without having exhausted or started collection efforts agains the obligor.

Question 6

suretyship

If the guarantor is obligated to pay the obligee, what right do they have against the obligor?

Answer 6

At common law, the guarantor has a claim against the obligor for reimbursement, also known as indemnification.

Question 7

Suretyship, Assumption, SoF

What does the SoF say about suretyship?

Answer 7

The suretyship provision of the Statute of Frauds provides that no action concerning an agreement shall be brought against any person upon a promise to answer for the debt, default, or misdoings of another, unless that agreement is in writing and signed by the party to be charged or his agent.

Question 8

Suretyship, Assumption, SoF

What does the SoF apply to?

Answer 8

1. Marriage- a contract made in consideration of marriage (like a prenup)
2. Suretyship–a contract promising to answer for the debt of another
3. One year–a K that by its terms cannot be performed within one year from its making (no possible way it can be performed in a year).
4. UCC–goods Ks for a price of $500 or more
5. Real property–a K for the sale of an interest in real property

M. SOUR

Question 9

Suretyship, Assumption, SoF

What is the main-purpose exception?

Answer 9

If the main purpose in agreeming to pay the debt of another is for the surety’s own economic advantage, then we are not in SOF world.

Question 10

Suretyship, Assumption, SoF

What does an assumption clause do and provide and how does it relate to SOF?

Answer 10

It provides that the grantee who assumes the debt, promises to pay the mortgagee the debt the grantee owes to the grantor. This is not a suretyship and thus the SOF does not apply.

Jones (grantor)
AA (grantee) assumes payment
Bank (mortgagee)

2021 J No. 6

Question 11

SOF

Two main ways to satisfy SOF?

Answer 11

1. Full performace (either party)
2. signed writing

Exact requirements differ by universe

Question 12

SOF

Satisfy Service Ks that cannot be performed within one year?

Answer 12

Full performance of a services contract by either side. Part performance is insufficient. or signed writing.

Question 13

SOF

Elements of signed writing to satisfy SOF?

Answer 13

A writing signed by the party against whom the Contract is asserted.

Question 14

SOF

Satisfy real estate K?

Answer 14

• A signed writing
• Part performance that involves two of the three:
  1. Possession
  2. Payment
  3. Improvements to the land

Question 15

SOF

SOF for UCC Goods 500 and over? (5)

Answer 15

1. A signed writing. But of course no need to mention price. Must mention quantity. Only enforceable for the quantity mentioned
2. Part performance satisfies the SOF but only for the quantity delivered and accepted.
3. Custom made (or specifically manufactured) goods are exempted from the SOF. The maker can satisfy SOF as soon as it makes a substantial beginning toward manufacturing of the goods.
4. A judical admission. Includes a statement in a pleading or during testimony.
5. The failure to object to a confirming memo within 10 days will satisfy the SOF BUT only if both parties are merchants