K Formation

Question 1

Implied-in-Fact Contract

Answer 1

Created by parties’ CONDUCT

Question 2

Restitution

Answer 2

• Quasi contract
• Protects against unjust enrichment whenever K law would yield an unfair result
• Receives reasonable value of the benefit conferred, NOT the K price

Question 3

Bilateral K

Answer 3

Offer can be accepted any reasonable way

Question 4

Unilateral K

Answer 4

Offer can be accepted ONLY by performing

• Reward/contest/prize
• Offer stipulates acceptance is only by performance

Question 5

Requirements K

Answer 5

Permissible under Article 2 despite uncertain quantity

-Look for sudden increases/assignments/etc. that are way out of line with prior requests

Question 6

Open Price Term

Answer 6

Does not preclude enforeability

-Court will read in a “reasonable” price EXCEPT in K’s for real property

Question 7

Types of Irrevocable Offers

Answer 7

(1) Options
(2) Firm Offers (Article 2)
(3) Foreseeable Reliance Before Acceptance
(4) Starting Performance in a Unilateral K

Question 8

General Rule of Revocation

Answer 8

Offer can be terminated by the offeror at any time before acceptance

Question 9

Option

Answer 9

A promise to keep an offer open that is paid for

-IN NY: Signed written promise not to revoke is enforceable even without payment

Question 10

Firm Offer

Answer 10

• Article 2
• In SOG, if a MERCHANT promises in a SIGNED WRITING to keep an offer open, that offer is irrevocable
• 3 month time limit

Question 11

Foreseeable Reliance Before Acceptance

Answer 11

• Rarely succeeds
• i.e. where subcontractor submitting bids to a contractor knows the bid will be relied upon for the contractor to compute his own bid

Question 12

Starting Performance in a Unilateral K

Answer 12

Must be more than mere preparation (i.e. buying paint to paint a house)
-IN NY: offer for a unilateral K can be revoked up until performance has been COMPLETED

Question 13

ARTICLE 2 - ACCEPTANCE VARYING OFFER

Answer 13

• Acceptance does NOT have to mirror offer
• Offeree’s adding or changing a term DOES NOT prevent acceptance, but the offeree’s term is included ONLY IF:
  
  • (1) Both parties are MERCHANTS and
  • (2) There is no MATERIAL CHANGE (e.g. would cause hardship or surprise to the offeror), and
    - (3) No objection is made within a reasonable time

Question 14

STARTING PERFORMANCE IN A BILATERAL K

Answer 14

• Starting performance IS acceptance

- Carries with it an implied promise to finish the job

Question 15

STARTING PERFORMANCE IN A UNILATERAL K

Answer 15

• Starting performance is NOT acceptance
• COMPLETING performance is acceptance
• Offeree can walk away once performance has commenced in a unilateral K, but offeror CANNOT revoke

NY –> offeror can revoke until performance is completed

Question 16

IMPROPER PERFORMANCE UNDER THE COMMON LAW

Answer 16

Simultaneous acceptance AND breach

Question 17

IMPROPER PERFORMANCE UNDER ARTICLE 2 UCC

Answer 17

Simultaneous acceptance and breach UNLESS seller is sending non-conforming goods as an accommodation to the buyer and SAYS so specifically

Question 18

ARTICLE 2 - ACCEPTANCE VARYING OFFER

Answer 18

• Acceptance does NOT have to mirror offer
• Offeree’s adding or changing a term DOES NOT prevent acceptance, but the offeree’s term is included ONLY IF:
  
  • (1) Both parties are MERCHANTS and
  • (2) There is no MATERIAL CHANGE (e.g. would cause hardship or surprise to the offeror), and
    - (3) No objection is made within a reasonable time

Question 19

STARTING PERFORMANCE IN A BILATERAL K

Answer 19

• Starting performance IS acceptance

- Carries with it an implied promise to finish the job

Question 20

LACK OF CAPACITY

Answer 20

= a defense against formation
-Incapacitated D’s may disaffirm the K (voidable)
-UNLESS the incapacitated D retains the benefit after regaining capacity
-EXCEPTION
Incapacitated D’s are still liable for NECESSARIES, for a reasonable value (not the K price)

Question 21

IMPROPER PERFORMANCE UNDER THE COMMON LAW

Answer 21

Simultaneous acceptance AND breach

Question 22

IMPROPER PERFORMANCE UNDER ARTICLE 2 UCC

Answer 22

Simultaneous acceptance and breach UNLESS seller is sending non-conforming goods as an accommodation to the buyer and SAYS so specifically

Question 23

WHEN IS ACCEPTANCE OF AN IRREVOCABLE OFFER EFFECTIVE?

Answer 23

Only effective when RECEIVED

-Exception to the mailbox rule

Question 24

3 EXCEPTIONS TO THE MAILBOX RULE

Answer 24

(1) Offer states otherwise
(2) Irrevocable offers
(3) Rejection sent first

Question 25

LACK OF CAPACITY

Answer 25

= a defense against formation -Incapacitated D's may disaffirm the K (voidable) -

Question 26

ECONOMIC DURESS

Answer 26

3 Requirements (1) Threat to make an existing K (2) Buyer only agreed to a 2nd deal to get the 1st deal done AND (3) There is no reasonable alternative

Question 27

COERCION

Answer 27

Arises where a party's free will is overcome by an unlawful use of force or threats of imminent use of force

Question 28

MISREPRESENTATION/NON-DISCLOSURE OF A MATERIAL FACT

Answer 28

Honest misrepresentations and non-disclosures are FATAL FLAWS in the agreement process, as long as they concern a material fact

Question 29

AMBIGUITY/MISUNDERSTANDING

Answer 29

If the parties are on different wavelengths, there is no K because of the ambiguity Ex/ Peerless ship case EXCEPTION: -If one party knows or has reason to know that there is ambiguity, then the innocent party's meaning will prevail and there will be a K on those terms

Question 30

MUTUAL MISTAKE

Answer 30

If both parties are mistaken about a material (i.e. essential to the K) fact, the parties are excused from performance -Does not include mistakes as to value - not deemed amterial

Question 31

UNILATERAL MISTAKE

Answer 31

One party’s mistake does NOT excuse performance unless the other party knew or had reason to know about it

Question 32

PAST CONSIDERATION

Answer 32

MBE: Past consideration is not consideration at all NY: Past consideration IS consideration if it is expressly stated in a signed writing, and can be proven

Question 33

MODIFICATION - COMMON LAW

Answer 33

- New consideration is required to modify a K - Performing an existing duty is insufficient (Pre-Existing Duty Rule) - Pre-existing duty rule is not available to third parties as a defense * **NY Distinction - Don’t need new consideration for a modification as long as it is in a signed writing

Question 34

MODIFICATION - UCC ARTICLE 2

Answer 34

New consideration is NOT required to modify a K, but must show good faith

Question 35

TIME BARRED DEBT

Answer 35

A written promise to pay a debt, collection of which is barred by the SOL, is enforceable EVEN WITHOUT CONSIDERATION -Signed writing serves as substitute for consideration (both MBE & NYS)

Question 36

PROMISSORY ESTOPPEL

Answer 36

Foreseeable reliance may make a promise enforceable even without consideration -Fallback position

Question 37

PUBLIC POLICY ISSUES

Answer 37

(1) Covenants not to compete | (2) Exculpatory clauses

Question 38

COVENANT NOT TO COMPETE

Answer 38

Courts will invalidate or narrow covenants not to compete that operate as a restraint of trade - Scope of covenant (duration and geography) - Need for covenant (uniqueness of service)

Question 39

EXCULPATORY CLAUSE

Answer 39

Exculpatory clauses can be used to eliminate liability for ORDINARY negligence, but NOT for gross negligence or intentional torts

Question 40

UNCONSCIONABILITY

Answer 40

SUBSTANTIVE: terms of the agreement are unfair (i.e. indentured servitude) PROCEDURAL: the agreement process was unfair (i.e. small print, gross imbalance in bargaining power)

Question 41

8 DEFENSES AGAINST FORMATION

Answer 41

(1) Incapacity (2) Economic Duress (3) Misrepresentation/Non-disclosure (4) Ambiguity (5) Mutual Mistake (6) Lack of Consideration (7) Public Policy (8) Unconscionability

Question 42

PARTIAL PAYMENT OF A DEBT AS CONSIDERATION

Answer 42

If the debt is due and undisputed, no consideration for creditor's promise to forgive the debt - the money owed is not disputed and it is owed right now IN NY: Don't need consideration if promise to forgive is in a SIGNED WRITING