MBE - Contracts With GA Distinctions Flashcards

Question

In a contract for the sale of goods, what terms of agreement control when an offeree provides the offeror with a **definite and seasonal expression of acceptance**, the acceptance is **not expressly made conditional on assent to the additional or different terms**, and **BOTH parties are merchants**? | Battle of the Forms Acceptance With Varying Terms

Answer 1

**Additional terms are INCLUDED** in a contract for a sale of goods when: * (1) both parties are merchants; * (2) there is a definite and seasonable expression of acceptance given (or a written confirmation sent within a reasonable time); * (3) the acceptance is not expressly made conditional on assent to the additional or different terms IF: * (a) the **offer does not expressly limit acceptance to the offer’s terms**, * (b) the **additional terms do not materially affect the contract**, *AND* * (c) **notification of objection to them has not already been given**. ## Footnote Material Effect: Terms materially affect a contract when they would result in **surprise, hardship, or change a party’s risk profile**. **Same Rule in GA**

Answer 2

If an offeree provides a definite and seasonable expression of acceptance BUT **makes their acceptance expressly conditional on the offeror’s assent to additional or different terms**, the offeree has made a COUNTEROFFER; * a contract can still be formed by the offeror’s express acceptance to the new terms OR by conduct that indicates the existence of a contract between the parties. **Terms the Forms Don’t Agree On**: Under the **knockout rule**, the contract will consist of the terms both parties’ forms agree, and varying terms are knocked out and filled by UCC gap fillers. ## Footnote **Same Rule in GA**

Answer 3

When the offeree *does not* give a **definite and seasonable expression of acceptance**, a contract can still be created if the conduct of the parties indicates the existence of a contract. **Under the knockout rule**, the contract consists of **only what the parties' agree upon** and varying terms will be knocked out and filled by UCC Gap Fillers.

Answer 4

An offer is effective when **received**. Revocation or Rejection/Counteroffer: effective when **received**.

Answer 5

Under the **Mailbox Rule**, an acceptance is effective when **sent**. (Dispatch) Except, acceptance of an **option contract** is effective upon *receipt*.

Answer 6

If an offeree sends **both** an acceptance and a rejection: * **If Acceptance is sent *before* Rejection**: The contract is formed on dispatch; however, if the offeror **relies** on a rejection that is received before the acceptance, then the offeree *may be estopped from contract enforcement* * **If Rejection is sent *before* Acceptance**: Whichever the offeror *receives first controls*.

Answer 7

An **implied-in-fact** contract is created by conduct if: * (1) the **conduct is intentional**; *AND* * (2) each party **has reason to know the other party will interpret the conduct as an agreement**.

Answer 8

**Implied-in-law/quasi** contract: In the absence of a contractual relationship between parties, the court can create a **quasi or "implied-in-law" contract** when: * (1) the **plaintiff has conferred a measurable benefit** on the defendant; * (2) the **plaintiff acted without gratuitous intent**; *AND* * (3) it would be **unfair to let the defendant retain the benefit** without compensating the plaintiff. ## Footnote **Example**: In an emergency, a doctor rushes to aid a woman in a car accident. The woman was too delirious to respond to the doctor or consent to the doctor pulling glass shards out of the woman's skin. The doctor later send a bill to the woman.

Answer 9

Consideration is a **bargained for exchange** of any act or forbearance that **induces a detriment to the promisee** and a **benefit of the promisor**. ## Footnote **GA Distinction**: GA law follows the **minority rule for consideration**, only requiring that there be a **benefit *OR* detriment**, but not both. **GA Distinction - Good vs. Valuable Consideration**: Under GA law, **Good Consideration** is founded on a natural duty and affect, or on a strong moral obligation. **Valuable Consideration** is founded on money or something that can be converted into money. Although marriage cannot be converted into money, it is considered *valuable* consideration. **GA Distinction - Contracts Under Seal**: In GA, **contracts under seal** raise a rebuttable presumption of consideration. However, **any nominal consideration** will suffice to defeat a defense of failure of consideration.

Answer 10

A promise for the following *generally* fails for lack of consideration: * **Preexisting Legal Duty (CL)**: A promise to perform a preexisting legal duty is not sufficient consideration because the promisor is already bound to perform (there are exceptions); * **Past Consideration/Moral Obligation**: A promise made in return of something given in the past or out of moral obligation is not sufficient consideration; * **Illusory Promise**: Illusory Promises are invalud and occur when one party has no actual obligation to perform; * **Promise of a Gift**: A promise of a gift is not sufficient consideration; * **Sham/Nominal/Token Consideration** are not sufficient consideration. ## Footnote A Preexisting Legal Duty will not fail adequate consideration when: (1) there is an **addition or change** in performance, (2) there are **severe unforeseen circumstances** *and* the contract is not fully performed by either party; OR (3) the duty/promise was owed to a **third-party**, not the promisor. *See* flashcard on Consideration Alternatives.

Answer 11

Under the **material benefit rule**: a promise made in recognition of a *benefit* previously received is **binding to the extent necessary to prevent injustice**. However, a promise in recognition of a material benefit is NOT binding when: * (1) the benefit was **conferred as a gift**; OR * (2) the **value of the promise is disproportionate to the benefit conferred**.

Answer 12

**Promissory Estoppel** is an exception to the requirement of consideration for a contract to be enforceable. Promissory estoppel applies when: * (1) a **promisee reasonably relied on a promise**, * (2) the **promisee shifted their position to their detriment**, *AND* * (3) **enforcing the promise is necessary to prevent inherent injustice**. ## Footnote **GA Distinction - Promissory Estoppel - Charitable Institutions**: In GA, a **charitable institution** does **not have to prove *reliance*** on a promise to recover under promissory estoppel.

Answer 13

A promise to **pay a non-legally enforceable past debt** is binding without new consideration if it is **IN WRITING**.

Answer 14

Modification of a contract governed by the CL requires: (1) **mutual assent** AND (2) **new consideration** (unless an exception applies). **Preexisting Legal Duty Exceptions**: Past performance or a preexisting legal duty is NOT adequate consideration, except when: * **Addition or Change** in peformance; * **Unforeseen Circumstances**: a fair and equitable modification due to severe unanticipated circumstances *AND* the contract *isn't fully performed* by either party; OR * **Third-Party Promise**: Where the duty was owed to a third-party, not the promisor.

Answer 15

Under the UCC, **No consideration** is required to modify a contract; BUT, the modification must be **made in good faith**. Modifications under the UCC require a writing if: * (a) if falls within the statute of frauds, OR * (b) the original contract states that modifications must be in writing.

Answer 16

If a party does not have capacity to enter into a contract, the contract is **voidable** by the *person who lacked capacity*. ## Footnote Incapacity can include: Minor Contract, Mental Incompetence, and Intoxication.

Answer 17

A contract is **voidable** by a party that **lacks mental capacity**. A party lacks mental capacuty when: * (1) they **cannot understand the contract's nature and consequences or act in a reasonable manner**; *AND* * (2) the **other party has reason to know of this fact**. If a party is **adjudicated mentally incompetent**, a purported contract is **VOID**. A contract made by a **mentally incompetent party** during a **lucid interval** is enforceable. ## Footnote **GA Law**: In GA, if an individual **has not been adjudicated mentally incompetent**, the contract is **voidable**, *unless* it was made **during a lucid interval**.

Answer 18

**Intoxication**: A contract is **voidable** by the party who entered into an agreement intoxicated **only if** the **other party has reason to know of the intoxication**. ## Footnote **GA Law**: A contract entered into while intoxicated is **voidable**, but it **may be ratified** either **expressly** or through **conduct inconsistent with rescission**.

Answer 19

A contract between a **minor and an adult** is **voidable by the minor** before reaching the age of majority *or* within a reasonable time after. * A minor that disaffirms a contract is entitled to recover *all consideration* and in return must *return all consideration that remains in the minor's possession*. **Necessities** Exception: Contracts entered into by minors for **necessities** are enforceable, but the **minor must only pay the fair value** of the necessities. | Necessities include: food, shelter, clothing, medical care, etc. ## Footnote **GA Distinctions - Necessities**: In GA, a contract for necessities is **binding on a minor**, *BUT* the person supplying the necessities must show that: (1) the **parent or guardian failed to supply** the sufficient necessities; *or* (2) the **minor was emancipated**. **GA Distinctions - Statutory Exceptions/Additional Binding Contracts on Minors**: * (1) If a **minor is engaged in any trade or business**, the minor is bound for *all contracts in connection with that trade or business*; * (2) **Marriage contracts** and settlements made by minors **who are of lawful age to marry** are binding; * (3) Any **indebtedness for a loan from a trust fund for educational purposes** to any educational institution is *binding on a minor*.

Answer 20

A contract is **deemed ratified** and **enforceable** once a party that entered into the contract as a minor: * (1) reaches the **age of majority**; *and* * (2) **retains the benefit or consideration** of the contract. ## Footnote **Same Rule in GA**

Answer 21

**Duress**: Under the duress rule, a contract is **voidable by the victim** if * (1) a party makes an **improper threat**; * (2) that **induces the other party to enter into the contract**; and * (3) the induced party has **no reasonable alternative**. NOTE: *An improper threat can be: threat of criminal prosecution, a civil action pursued in bad faith, a crime, a tort, etc*. **Physical Duress**: A contract is **void** if a party **physically compels another party** by duress to enter into an agreement. **Non-Physical/Economic Duress**: A contract is **voidable** if a party **takes advantage of the economic circumstances** of another party through an **improper threat** to enter into an agreement. | Economic: A mere threat to breach a K (without more) is insufficient. ## Footnote **GA Distinction**: In GA, A party to a contract who is a victim of duress, whether by **imprisonment, threats, or other acts** can **void** the contract. **GA Distinction - Overcoming the Mind**: In GA, the duress must be such that it overcomes the mind and will of a person who is of **ordinary firmness**.

Answer 22

**Physical Duress**: A contract is **void** if a party **physically compels another party** by duress to enter into an agreement. **Non-Physical/Economic Duress**: A contract is **voidable** if a party **takes advantage of the economic circumstances** of another party through an **improper threat** to enter into an agreement. | Economic: A mere threat to breach a K (without more) is insufficient.

Answer 23

**Undue Influence**: A contract is **voidable** by a victim induced by undue influence to enter into a contract when a party uses **Unfair Persuasion** on a party that is: * (1) under their **domination** OR * (2) in a **sufficiently close relationship** with them to *justify believing they will act in their interest or welfare*. ## Footnote Examples usually include manipulation of the victim, such as a trustee encouraging a beneficiary to enter into a contract OR a family-member-caretaker refusing to provide essentials to the ill family member to persuade them into entering into a contract.

Answer 24

A mistake is a **belief not in accord with a present fact**.

Answer 25

**Mutual Mistake**: A contract is *voidable* by the adversely affected party under **mutual mistake** if at the time of contract formation: * (1) both parties **made a mistake** about a **basic assumption of fact**; * (2) that has a **material impact** on the contract; and * (3) the party asserting the mistake did **not bear the risk of the mistake**. **Bears the Risk**: A party *bears the risk* when: * (1) risk is allocated to him by agreement; * (2) risk is allocated to him by the court; OR * (3) he is aware at the time of contract formation that **he has limited knowledge of the facts but treats the limited knowledge as sufficient**. | A mistake as to price or *value* is NOT considered material (opinion) ## Footnote **GA Law - Mutual Mistake**: In GA, a contract **cannot be enforced** if it was executed on the basis of a mutual mistake of law or fact.

Answer 26

**Unilateral Mistake**: A unilateral mistake is *generally not a valid defense*. However, a contract IS **voidable** under **unilateral mistake** if at the time of contract formation: * (1) **one party made a mistake** about a basic assumption of fact; * (2) that has a **material impact** on the contract; * (3) the party asserting the mistake did **not bear the risk of the mistake** *AND*: * (a) the **mistake's effect makes the contract *unconscionable***, OR * (b) the **other party has reason to know** of the mistake. **Bears the risk**: A party *bears the risk* when: * (1) risk is allocated to him by agreement; * (2) risk is allocated to him by the court; OR * (3) he is aware at the time of contract formation that **he has limited knowledge of the facts but treats the limited knowledge as sufficient**. ## Footnote **GA Law - Unilateral Mistake**: In GA, a unilateral mistake that **results from the defendant's own negligence** *does not justify* the defendant's **failure to perform**.

Answer 27

**Misunderstanding**: A contract is NOT formed when: * (1) a contract term is **material and ambiguous**; * (2) the parties have **different subjective meanings** of the contract terms; *AND* * (3) **neither party knows or should know** of the ambiguity. **What Terms Form the Contract**: * **If *one* party is aware** of the meaning understood by the other party, a contract is formed *according to the understanding of the **unaware party*** * **If both parties have the same incorrect subjective meaning** a contract is formed *according to that meaning*.

Answer 28

**Misrepresentation**: A misrepresentation is an *untrue assertion of fact* made by words or conduct. When this occurs, a contract is **voidable by the adversely affected party if**: * (1) the misrepresentation was **fraudulent** OR **material**; * (2) the misrepresentation **induced assent** to the contract; *AND* * (3) the **adversely affected party justifiably relied** on the misrepresentation. **Fraudulent Misrepresentation**: A party knowingly or recklessly made a false representation of material fact with intent to induce the other party. **Material Misrepresentation**: Is a representation that would have affected whether the party would have entered into the contract. ## Footnote **GA Distinctions**: In GA, Fraudulent Misrepresentation is called **Actual Fraud**; and Non-fraudulent/Material Misrepresentation is called **Constructive Fraud**.

Answer 29

**Fraudulent Misrepresentation**: A contract is *voidable* under **fraudulent misrepresentation** by the **adversely affected party** IF: * (1) a party **knowingly or recklessly** made a false representation of material fact with intent to induce another party; * (2) the misrepresentation did **induce assent** to the contract; *AND* * (3) the **adversely affected party justifiably relied** on the misrepresentation. | NOTE active concealment IS a statement. Visit nondisclosure card. ## Footnote **GA Distinction - Actual Fraud**: In GA, Actual Fraud exists if misrepresentation of a **material fact** is (1) made **willfully to deceive or recklessly without knowledge** and (2) **acted on by the opposite party**. **GA Distinction - Procedural Req. to Recover** for Actual Fraud: In GA, to recover on a claim of fraud, the party must, **upon the discovery of the fraud**, promptly **restore or offer to restore to the other** whatever he received from the contract.

Answer 30

**Fraud in the Execution**: A contract is **void** when the fraudulent misrepresentation **prevents a party from knowing the character of the transaction**. ## Footnote Ex: Tricking a party into signing a document that they do not know is a contract.

Answer 31

**Nondisclosure:** Generally, there is *no duty to disclose all facts*. However, the **uninformed party may seek rescission of a contract** IF: * (1) a party **actively conceals** the nondisclosed facts; * (2) the other party **is entitled to know the facts because of a confidential or fiduciary relationship**; OR * (3) to **correct an earlier mistake of the uninformed party**/**correct a past statement from being misleading** *and* the nondisclosure would breach good faith and fair dealing. NOTE: **Concealment**: Concealment is an affirmative act **intended to prevent the discovery of facts** and is deemed a misrepresentation. ## Footnote Note that if there is concealment, disclosure and required, and the fraudulent misrepresentation rule is implicated.

Answer 32

**Concealment**: Concealment is an affirmative act **intended to prevent the discovery of facts** and is deemed misrepresentation. A contract is *voidable* under **fraudulent misrepresentation** by the **adversely affected party** IF: * (1) a party **knowingly or recklessly** made a false representation of material fact with intent to induce another party; * (2) the misrepresentation did **induce assent** to the contract; *AND* * (3) the **adversely affected party justifiably relied** on the misrepresentation. | Concealment IS a false representation *knowingly* made. ## Footnote **GA Distinction - Concealment & Direct Inquiry**: In GA, Concealment **amounts to fraud** when a **direct inquiry is made** *and* the **truth is evaded**.

Answer 33

**Illegality**: * A contract that includes **illegal subject matter**/requires **illegal conduct** is **VOID**. * A contract with an **illegal purpose** is **voidable** by the **party who did not know od the illegal purpose**. This party can recover damages if the OTHER party acted *with knowledge* of the illegality. * If a contract becomes **illegal AFTER it is formed**, the duty to perform under the contract is **discharged**.

Answer 34

Courts will NOT enforce contracts that are contrary to Public Policy. **Restrive Covenants**: A restrictive covenant IS enforceable if it is **reasonable**: in * (1) **time**; * (2) **geographic area**, *AND* * (3) **scope of activity limited**

Answer 35

**Unconsionability**: A court may *modify or refuse to enforce a contract or term* when the contract or term **shocks the conscience of the court**. Unconsionability requires on a *sliding scale* BOTH: * (1) **Procedural Unconscionability** (meaning a gross inequality in the parties' bargaining positions); *AND* * (2) **Substantive Unconscionability** (meaning the contract terms are obviously unfair and one-sided in favor of the superior party). ## Footnote **GA Law**: A contract term is **unconscionable** IF **no reasonable person** in the position of the party would agree to it.

Answer 36

**Statute of Frauds**: Contracts subject to the Statute of Frauds are **not valud unless** they are in **writing**, which must: * (1) be **signed by the party to be charged**; * (2) **reasonably identify the subject matter**; * (3) **indicate that a contract was made by the *parties***; *AND* * (4) state the **essential terms** ## Footnote Remember: The essential terms for CL are subject matter, parties, price, and quantity. Under the UCC, the subject matter and parties should be stated, and there MUST be the **QUANTITY**.

Answer 37

Contracts subject to the Statute of Frauds include: * ***M*arriage**: A contract including a promise in consideration of marriage is subject to the SOF writing req. * ***S*uretyship**: A contract including a promise to pay the debt of another is subject to the SOF writing req. * ***O*ne Year**: A contract that **cannot be fully performed within 1 year from its making (impossible)** is subject to the SOF writing req. * ***U*CC**: Contracts for the sale of goods of **$500 or more** are subject to the SOF writing req. (need not state price, but *must* state quantity) * ***R*eal Property**: Contracts for the sale of land *or* creating an *interest in land* (e.g., lease for over 1 year) are subject to the SOF writing req. | Think "M.SOUR"; Exceptions will be in a different flashcard. ## Footnote **GA Distinction – Additional Ks subject to SOF**: * Payment from **Executor Estate**: In GA, a promise by an **executor, administrator, guardian, or trustee to pay damages out of his own estate** is subject to the statute of frauds. * **Revive a Debt**: In GA, a promise to **revive a debt barred by a statute of limitations** is subject to the statute of frauds. * **Lend Money**: In GA, *any* commitment to **lend money** is subject to the statute of frauds.

Answer 38

**Merchant's Confirmatory Memorandum**: If **both parties are merchants**, the SOF writing requirement is satisfied IF in a reasonable time: * a merchant's confirmatory memo signed only by the *party enforcing it* * is received by the other party *AND* * the recipient **did not object within 10 days**. **Goods Accepted *or* Paid For**: If goods are accepted or paid for, the statute of frauds is satisfied as to *those* goods, but not the whole contract. **Custom Made Goods**: If the seller of goods * (1) made a **substantial start** on custom made goods *AND* * (2) the **goods are not suitable for sale in the ordinary course of the seller's business**, the statute of frauds is satisfied. **Judicial Admission**: If the party **to be charged** makes an **admission or acknowledgment during a judicial proceeding**, the statute of frauds is satisfied.

Answer 39

**Full Performance**: ...of a contract that cannot be completed within one year satisfies the statute of frauds. **Partial Performance of Land Contracts**:... satisfies the statute of frauds IF **two** of the following occur: a party * (1) made **payment for the land**; * (2) **took possession** of the land; * (3) **made valuable improvements** to the land. **Judicial Admission**: If the party to be charged **admits** to the contract in **judicial pleadings** or during a judicial proceeding, the SOF is satisfied. **Estoppel**: The party to be charged can be *estopped from denying the existence of the K* if the unjured party reasonably relied on the other party's promuse to her detriment in some jurix.

Answer 40

The **Parol Evidence Rule**.

Answer 41

The **Statute of Frauds**.

Answer 42

**Parol Evidence Rule**: When there is a **written agreement** *and* **prior or contemporaneous written or oral statements** about the agreement, the parol evidence rule makes those prior or contemporaneous statements **inadmissible** to **contradict the unambiguous terms of a completely or partially integrated writing**. However, evidence of a prior or contemporaneous statement that supplements (adds to), but does not contradict the writing is only barred if the writing is **completely integrated** ## Footnote There are situations where the Parol Evidence will not bar prior or contemporaneous statements.

Answer 43

No. The parol evidence rule **does not** bar oral or written statements about subsequent agreements.

Answer 44

**Partial Integration**: When a writing is **partially integrated**, the writing **does not** contain a complete statement of all the terms. If the writing is partially integrated, **evidence of prior or contemporaneous statements is ALLOWED if it does *not contradict*** the writing. Note: The UCC **presumes that writings are most likely only a partial integration**. If not agreed upon, the court will fill in default contract terms. ## Footnote **GA Law - Unwritten Portions**: Under GA law, proof of unwritten portions of a contract that are **consistent with the written portions of the contract** are admissible IF the writing *does not purport to contain all stipulations of the contract*.

Answer 45

**Complete Integration**: When a writing is **completely integrated**, the writing contains a **complete and exclusive statement** of the terms, and any *prior or contemporaneous* statements are **discharged**. Applying the parol evidence rule, evidence of prior or contemporaneous oral or written statements about the agreement is INADMISSIBLE when the writiting is completely integrated. ## Footnote **Merger Clause**: The presence of a **merger clause** is evidence that the writing is completely integrated on its face. NOTE: Situations where even though a writing is completely integrated, evidence will still be admitted.

Answer 46

1. Correct a clerical error or typo; 2. Establish a defense against formation; 3. Interpret Vague or ambiguous terms (but courts will use plain meaning rule); 4. To Supplement a partially integrated writing; 5. Show an extrinsic term that would would **naturally be omitted** from the writing that does not contradict the contract; 6. Prior or contemporaneous statements referencing a separate deal/ subsequent contract modifications 7. Condition precedent to effectiveness 8. Establish Ground for granting or denying remedy (reformation, rescission).

Answer 47

* **Price**: If the *price* is missing, the court will app;y a **reasonable price at the time of delivery** * **Time for Payment**: If the time for payment is missing, the court will apply that **payment is due at the time and place the buyer is to receive the goods** * **Time for Shipment**: If the time for shipment/delivery is missing, the court will apply **within a reasonable time and at a reasonable hour** * **Place for Delivery**: If the place for delivery is missing, the court will apply the **seller's place of business**. If seller has no place of business, deliver will be to **seller's residence**. If the identified goods are **known by the parties to be at some other place**, that is the place of delivery. ## Footnote Note: Contract terms may be established by the course of trade performance, course of dealong, and/or trade usage.

Answer 48

A **warranty** is a promise about a term of the contract that **explicity shifts risk to the party making the promise**. There are *express* and *implied* warranties.

Answer 49

An express warranty is created when: * (1) the **seller makes an affirmation** of fact, promise, description, or provides a sample; * (2) **relating to the goods**, * (3) that **becomes part of the basis of the bargain**. If the seller makes an express warranty, the **seller is liable for the breach** of the express warranty, and it **cannot be disclaimed *by the seller***. | An "opinion" *does not* create an express warranty. ## Footnote Note: No intent is necessary to create an express warranty, nor does the seller need to use the words "warrant" or "guarantee."

Answer 50

The **warranty of title**: is an implied warranty that warrants that title: * (1) shall be good and rightful; *AND* * (2) is free from any security interests, liens, or encumbrances. Warranty of Title may be disclaimed by specific language or circumstances.

Answer 51

1. The **Implied Warranty of Merchantability** (goods sold by a merchant) 2. The **Implied Warranty of Fitness for a Particular Purpose** The implied warranties (of Merchantability and Fitness for Particular Purpose) **can be disclaimed by the seller**: * (1) in a **conspicuous writing**; * (2) with "**as is** language; * (3) by **waiver by the buyer if defects can be discovered by a reasonable inspection**; OR * (4) by course of dealing, course of performance, or trade usage.

Answer 52

The **Implied Warranty of Merchantability** warrants that all goods **sold by a merchant** are **fit for their ordinary purpose**, and if not—the merchant seller will be liable for breach. | One-off sales by a *merchant* do not carry the warranty. ## Footnote Remember: A **merchant** is a person who deals in goods of the kind or holds themselves out as having knowledge or skill peculiar to the goods or practices involved in the transaction. (Under UCC, can be a businessman).

Answer 53

The **Implied Warranty of Fitness for a Particular Purpose** applies when: * (1) the **seller knows or has reason to know of the buyer's particular purpose** for which the goods are required; *AND* * (2) the **buyer relies on the seller's skill or judgment to select** or furnish suitable goods. ## Footnote NOTE: a nonmerchant can extend by implication this warranty as long as the buyer relies on *any* seller's expertise.

Answer 54

Yes. A **nonmerchant** can extend by implication the Implied Warranty of Fitness for a Particular Purpose as **long as the buyer relies on *any* seller's expertise**.

Answer 55

A condition makes performance *contingent* upon the **occurrence or completion of a future event**. ## Footnote There are Express conditions (e.g., satisfaction) and Implied Conditions (e.g., constructive condition of exchange)

Answer 56

An **express condition** is created by language in the contract (e.g., "provided that," "only if"), and must be **strictly satisfied *unless* the condition is waived**. An express conditon *can be waived IF*: * (1) the party **receiving the protection of the express condition** does so by **words or conduct**; * (2) the protected party **wrongfully interferes or hinders the occurrence of the condition** *or* **fails to make a good faith effort to satisfy the condition**.

Answer 57

**Objective standard of Satisfaction**: If most reasonable people would be satisfied, then the condition is satisfied. **Subjective standard of Satisfaction**: If the contract involves *aesthetic taste*; the condition is satisfied if the person is subjectively satisfied, * BUT the party can still breach if they claim dissatisfaction in *bad faith*.

Answer 58

The **constructive condition of exchange** states that one party's **performance is conditioned upon** the other side's performance. ## Footnote Note that the CCE is satisfied with substantial performance in an agreement governed by the Common Law.

Answer 59

Under the CL, the doctrine of **substantial performance** states that a party will satisfy the Constructive Condition of Exchange unless there is a **material breach**, or **the failure is willful**. ## Footnote Note that if a party has **substantially performed**, the other party **cannot withhold payment**, but can recover for the breach.

Answer 60

CL: A **material breach** occurs when a party **does not** render **substantial performance**. A material breach ezcuses the nonbreaching party's performance. *To determine if a breach is MATERIAL*, courts look to: * (1) the **extent of performance**; * (2) the **adequacy of compensation for loss to the nonbreaching party**; * (3) **hardship**; * (4) the **likelihood the breaching party will cure**; *AND* * (5) whether the **breach was intentional**

Answer 61

A **minor breach** does not excuse the nonbreaching party's performance, but the nonbreaching party may bring a **separate action for damages**.

Answer 62

If a contract is **divisible**, then it will be *broken into mini contracts* to determine if there has been substantial performance.

Answer 63

A party's failure to perform by a specified time is typically NOT a material breach *unless*: * (1) it **significantly deprives the other party of the benefit** of the contract; OR * (2) if the contract had a **Time is Of the Essence Clause**, mandating complete performance by a specific date. ## Footnote A "Time if of the Essence" Clause can be indicated by using "Time is of the Essence" or similar langage in the contract.

Answer 64

Under the **perfect tender rule**, performance of a sale of goods contract requires **perfect tender**. If there is *any* nonconformity, there is a breach and the buyer may reject **all or a portion** of the goods. | The perfect tender rule *does not* apply to installment contracts. ## Footnote NOTE: Substantial performance does not apply to a sale of goods contract generally. However, there CAN be material breach in an installment contract.

Answer 65

A seller has a **right to cure** the breach of a sale of goods contract when: * (1) the **time for performance has not yet expired**; OR * (2) if the seller had **reasonable grounds to believe that substitute goods would be accepted** ## Footnote Example with respect to (2): When the same type of nonconforming goods had been accepted in the past.

Answer 66

* (1) **Cancel the Contract** only IF an installment is so defective that it **susbstantially impairs the value of the entire contract** and cannot be cured; OR * (2) **Reject an Installment** only IF the nonconformity **substantially impairs the installment** and the time to cure has passed.

Answer 67

revocation of acceptance is allowed.

Answer 68

The buyer accepts the goods when: * (1) after a reasonable opportunity to inspect, the buyer **signifies to the seller that goods are conforming** or **that it will retain them despite a nonconformity**; * (2) the buyer **fails to reject the goods** after a reasonable time to inspect them; *OR* * (3) the buyer does **any act inconsistent with the seller's ownership of the goods**.

Answer 69

A buyer may revoke acceptance of goods **within a reasonable time** after the buyer **discovers or should have discovered a nonconformity** ONLY IF: * (1) the nonconformity **substantially impairs** the value of the goods; AND * (2) either: (a) the defect was **latent or difficult to discover**; (b) acceptance was **reasonably induced by the seller's assurances**, or (c) the buyer **had a reasonable assumption that the defect would be cured**

Answer 70

The buyer's revocation of acceptance of goods is **not effective until**: the buyer **notifies the seller**, and it must occur **before there is any substantial change in the goods** not caused by their own defects.

Answer 71

The UCC treats this as an acceptance **and** a breach. However, when the seller seasonably notifies the buyer that the wrong goods are being shipped **as an accomodation**, no acceptance occurs and the **seller made a counteroffer**.

Answer 72

To properly reject goods, the buyer must: * (1) **notify the seller of the rejection within a reasonable time**; * (2) **notify the seller of the particular defect**; and * (3) **hold the goods for a reasonable amount of time** so the seller can get them back.

Answer 73

Yes. If the goods are rightfully rejected and the buyer **has paid *some or all* of the purchase price**, then she will have a **security interest** in the rejected goods.

Answer 74

If the seller **fails to give reasonable instructions** to the buyer for the rejected goods, the buyer can either: * (1) **store the goods** on the seller's account; * (2) **ship the goods back** themselves; or * (3) **resell the goods** for the seller. | t

Answer 75

If a buyer **wrongfully disposes** of the rejected goods, the **seller may sue** the buyer for **conversion** to recover the **fair market value** of the converted property *at the time of the conversion*.

Answer 76

Every contract contains an **implied obligation** of good faith and fair dealing to act honestly and fairly. UCC requires: * (1) honesty in fact; *AND* * (2) observance of **reasonable commercial standards** of fair dealing. ## Footnote It is applicable in all contracts, but the UCC includes observing commercial standards.

Answer 77

If the goods are to be tendered at the seller's place of business, the seller just needs to **give the goods to the buyer**.

Answer 78

A **F.O.B. Seller's Place of Business** contract is a **shipment contract**. If a contract is a **shipment contract**, then the seller must: * (1) get the goods to a common carrier; * (2) make arrangements for the delivery; and * (3) notify the buyer

Answer 79

A **F.O.B. Buyer's Place of Business** contract is a **Destination contract**. If a contract is a **destination contract**, then the seller must: * (1) get the goods to the Buyer's place of bsuiness, and * (2) notify the buyer.

Answer 80

First, **if agreed upon in the contract**, * the contract terms govern whether the buyer or seller bears the *risk of loss* Second, **If the risk of loss is not contractually agreed upon**, *AND* **there is a breach of some part of the contract** * the breaching party bears the *risk of loss* Third, **if the risk of loss is not contractually agreed upon** *AND* **NO party breached** the contract, * the *risk of loss* in a **Shipment Contract** (seller delivers to carrier) passes to the **Buyer when** the goods are **delivered to the carrier**. * the *risk of loss* in a **Destination Contract** (seller delivers to buyer) remains with the seller and passes **to buyer when** the goods are **delivered to the Buyer**.

Answer 81

A Shipment Contract is **presumed** if the contract **does not specify**, and the shipment is by an independent carrier. ## Footnote Note: Remember, if it does specify, a Shipment contract will be indicated by "F.O.B. Seller's Place of Business/Location"

Answer 82

If the seller is a **merchant**, the risk of loss passes to the **Buyer** upon receipt of the goods. If the seller is **not a merchant**, the risk of loss passes to the **buyer** upon tender of delivery.

Answer 83

* Impossibility * Impracticability * Frustration of Purpose

Answer 84

The **Impossibility Excuse** discharges performance IF after contract formation: * (1) a **supervening event occurs outside of the party seeking relief's control**; * (2) that makes the contract **objectively impossible**; and * (3) the **nonoccurrence of the event was a basic assumption of the contract** UNLESS, a party bears the risk under the contract or circumstances. Examples: * The **death or incapacity** of a person that is **necessary to effectuate the contract** can render it impossible. * The **unanticipated destruction** of the subject matter of the contract can render it impossible; * The **supervening illegality** such as a subsequent and unanticipated law or regulation can render the contract impossible. ## Footnote Remember: A party **bears the risk** under a contract when: (1) it is allocated to him by the contract; (2) it is allocated to him by the court; or (3) he is aware at the time of formation that he has limited knowledge of the facts and treats the limited knowledge as sufficient.

Answer 85

The **Impracticability Excuse** discharges performance IF after contract formation: * (1) a **supervening event occurs ouside of the party seeking relief's control**; * (2) that makes the contract **extremely and unreasonably difficult or expensive**; and * (3) the **nonoccurrence of the event was a basic assumption** of the contract UNLESS the party bears the risk under the contract or circumstances. *Remember; a party bears the risk under the contract when: (1) it is allocated to him by the contract; (2) it is allocated to him by the court; or (3) he is aware at the time of formation that he has limited knowledge of the facts and he treats the limited knowledge as sufficient. ## Footnote **GA Distinction - Impracticability**: In GA, generally a party cannot excuse himself ffrom a contract by pleading that performance is impracticable **in the absence of a statutory provision** or a **provision in the contract for such a contingency**.

Answer 86

The **Frustration of Purpose** excuse discharges performance IF after contract formation: * (1) a supervening event occurs outside of the party seeking relief's control; * (2) that **substantially frustrates** the contract's principal purpose; and * (3) the **nonoccurrence of the event was a basic assumption of the contract** UNLESS the party bears the risk under the contract or circumstances. ## Footnote Remember: A party **bears the risk** under a contract when: (1) it is allocated to him by the contract; (2) it is allocated to him by the court; or (3) he is aware at the time of formation that he has limited knowledge of the facts and treats the limited knowledge as sufficient.

Answer 87

* **Mutual Rescission** (or cancellation) * **Accord (new act) and Satisfaction (excusal)** * **Novation**

Answer 88

**Mutual Rescission** (or cancellation) by **mutual agreement**: * Both parties can **mutually agree** to **cancel the agreement by rescission** as long as there is **some performance remaining from *each* side**. Otherwise, there is no consideration for this modification.

Answer 89

**Accord**: The parties to an earlier contract can contract to relieve a party of their performance under the earlier contract in exchange for the **completion of a new act, or "accord."** **Satisfaction**: Satisfaction is the excusal of performance required under the initial contract upon *satisfaction* of the **accord (new act)**. * If a party **fails to satisfy the accord**, the other party may sue under either the: (1) original contract; OR (2) the accord terms.

Answer 90

If a party **fails to satisfy the accord**, the other party may sue under either the: (1) original contract; OR (2) the accord terms.

Answer 91

A **Novation** occurs when: * (1) All parties (including the substitute party) agree to discharge an *original party* to the contract; AND * (2) substitute a new third party in the original party's place. Under a novation, the **substitute party assumes all duties required of the original party**, and the original party's duties are discharged/excused, meaning they cannot be sued for breach. ## Footnote Contrast novation from a *delegation*; where only one party decided to allocate his duties to a third party. In that case, the delegating party would not be released from liability.

Answer 92

A party **anticipatorily repudiates** the contract when that party: * (1) **clearly and unequivocally** * (2) communicates that they are **unable or unwilling to perform** under a contract; * (3) **before performance is due**. ## Footnote Note: A party can *retract its repudiation* and restore the contract **unless**: the nonbreaching party has (1) commenced a lawsuit; or (2) materially changed its position in reliance on the repudiation.

Answer 93

If an anticipatory repudiation occurs, the nonbreaching party *may*: * (1) **treat the contract as repudiated and sue immediately** for damages (but cannot sue early IF party has completed performance and is only waiting on payment); OR * (2) **ignore the repudiation, demand performance, and sue after performance is due**

Answer 94

A party can **retract is repudiation** and restore the contract **unless** the nonbreaching party has: * (1) commenced a lawsuit; OR * (2) materially changed its position in reliance on the repudiation.

Answer 95

**Insecurity**: If a party has **reasonable grounds** for being insecure about another party's ability or willingness to perform, then the **insecure party may** makw a **written request** for **adequate assurance of performance**. * Then insecure party, after making this request, **may suspend performance until adequate assurances are received**.

Answer 96

When a party has failed to respond to the insecure party's **proper demand** for adequate assurances of performance **within a reasonable time**, the **insecure party may treat this failure as a repudiation of the contract**. ## Footnote Remember, when a contract is anticipatorily repudiated, the nonbreaching party may: (1) **sue immediately for damages** (but cannot sue early IF you have completed performance and are only waiting on payment); OR (2)** ignore the repudiation**, demand performance and sue after performance is due.

Answer 97

**Expectation Damages** * Compensatory/General Damages; * Consequential Damages * Incidental Damages **Reliance Damages** **Restitution**

Answer 98

**Expectation Damages**: Expectation damages are meant to put the nonbreaching party in the **same economic position** that they **would have been in had the contract been performed as promised**.

Answer 99

To recover **expectation damages**, the damages must be: * (1) caused by the breaching party; * (2) foreseeable; * (3) **reasonably certain** (not speculative); *AND* * (4) unavoidable because **reasonable steps were taken to mitigate the damages**. ## Footnote Note: An award of damages MUST account for and deduct for any costs the injured party avoided because of the breach.

Answer 100

Expectation Damages = **Compensatory/General Damages** (direct loss) + **Consequential Damages** (indirect loss arising from plaintiff's special/foreseeable circumstances) + **Incidental Damages** (indirect costs in an effort to mitigate losses) — **Costs or Loss Avoided** (by not having to perform). ## Footnote Remember: Consequential damages are not recoverable unless they were:(1) reasonably certain; (2) reasonably foreseeable; and (3) arise from the plaintiff's special circumstances that the breaching party had reason to know of at the time of contracting.

Answer 101

**Consequential Damages** are **not recoverable** *unless* they were: * (1) reasonably certain; * (2) reasonably foreseeable; and * (3) arise from the the **plaintiff's special circumstances that the breaching party has reason to know of at the time of contracting**. Consequential damages may be *limited* or excluded by agreement **unless it is unconscionable**. ## Footnote **GA Law**: In GA, consequential damages are not recoverable unless they can be traced **solely to the breach**; *or* are **capable of exact computation**.

Answer 102

Incidental Damages are the **reasonable costs or expenses incurred to mitigate** or avoid additional loss from the breach/ ## Footnote (e.g., cost to return, store, inspect, transport, care for nonconforming goods)

Answer 103

**Mitigation**: A nonbreaching party must mitigate losses by taking **reasonable steps to avoid additional loss** after a breach. If a party fails to do so, the court will reduce the total damage award by the amount that could have been avoided. * When NOT required: Affirmative steps to mitigate are NOT required when they would involve **undue risk, burden, or humiliation**. ## Footnote **GA Distinction - Mitigation**: In GA, the general rule is an injured party must mitigate damages as far as is practicable by the use of ordinary care and diligence, but this DOES NOT APPLY to a **Landlord when a tenant breaches a lease**. When a tenant breaches, the landlord may leave the premises vacant and hold the tenant liable for rent accrued...unless: * (1) the **landlord accepts the tenant's surrender** OR * (2) the tenant **successfully terminates the lease**. * Then, the landlord must make reasonable efforts to re-lease the premises and mitigate.

Answer 104

**Waste Doctrine**: When the award for expectation damages or the cost of completion of a contract is wasteful such that it would **grossly overcompensate the nonbreaching party**, a court may award damages for **diminution in value**, the difference in value of the property/land. The waste doctrine applies when: * (1) a contractor performs in **good faith**, but defects exist; AND * (2) Remedying the defects would entail economic waste (the cost of completion greatly exceeds the value of the completed work) ## Footnote Ex: When the nonbreaching party wants to demolish the whole building because of defects made in good faith and wants the contractor to pay for the demolition and the cost to rebuild; this would be WASTE.

Answer 105

* Reliance Damages * Restitution * Liquidated Damages (if applicable) * Specific Performance (if applicable)

Answer 106

**Reliance Damages** are meant to **reimburse the nonbreaching party for losses caused by reliance on the contract**, putting them in the position they would have been in if the contract never existed. Reliance damages are **available** when * (1) the plaintiff acted in reliance on the other party's agreement to perform under a contract *AND* * (2) the plaintiff's reliance was foreseeable. ## Footnote **GA Distinction - Reliance**: In GA, there can be no justificable reliance on a promise that is unenforceable at the time it is made.

Answer 107

**Restitution Damages** are meant to prevent unjust enrichment; the plaintiff's damage award is equal to the **economic benefit that they conferred on the defendant**. A pary CANNOT recover both expectation damages and restitution.

Answer 108

Generally, **litigation expenses and interest** are *not* allowed as damages in GA. However, litigation expenses *can* be awarded when the defendant: * (1) has **acted in bad faith** * (2) has **been stubbornly litigious**; OR * (3) has **caused the plaintiff unnecessary trouble and expense**.

Answer 109

A **liquidated damages** clause will be enforced IF: (1) the damages amount is difficult to estimate at the time the contract is formed; *AND* (2) the **amount is reasonable** to the actual damages suffered. If a liquidated damage clause is valid, * then only that amount will be awarded. If a liquidated damage clause is invalid, * then actual damages are available. A court will not award liquidated damages as a penalty. ## Footnote **GA Distinction - Liquidated Damages**: In GA, both parties are bound by the agreement to accept liquidated damages, and therefore the **nonbreaching party cannot elect to take actual damages if he has already agreed to liquidated damages**.

Answer 110

The court can award **Specific Perdormance** of a contract IF money damages are inadequate to compensate an injured party. Specific Performance is NOT awarded for **personal service contracts**, but injunctive relief may be awarded. * CL: Specific performance is presumptively available for real estate contracts * UCC: Specific performance is available **only for unique or custom made goods** ## Footnote **GA Distinction - Specific Performance**: In GA, to recover in the form of specific performance on a K for the sale of land, the purchaser must show that he paid or tendered the **purchase money price** according to the contract.

Answer 111

Rescission treats the original contract as **cancelled** and is available when there is a problem with contract formation. *A contract will not be rescinded IF*: * (1) there is a valid equitable defense; OR * (2) the plaintiff sued for damages under the contract in a **prior action** (party *can* sue for damages & rescisision at the *same time*) ## Footnote **GA Distincton - Rescission for Fraud**: In GA, to rescind a contract on the basis of fraud, the **defrauded party** must promptly, upon **discovery of the fraud**, **restore or offer to restore whatever the received** under the contract. **GA Distinction - Pre-Contract Position Recovery in Fraud**: In GA, A party may only rescind a contract on the basis of fraud when both parties can be restored to their pre-contract position.

Answer 112

Reformation allows a contract to be **changed to conform** to the parties' original intent. **Reformation is an available remedy** when: * (1) a valid contract exists, but there was a **misrepresentation**; OR * (2) **mutual istake of a material fact** (or a unilateral mistake IF the nonmistaken party had reason to know of the mistake). ## Footnote Reformation is NOT allowed if there is a valid equitable defense (e.g., unclean hands/laches).

Answer 113

When a buyer breaches, a **seller may recover by**: * Withhold delivery of the goods * Cancel the contract * Stop delivery of the goods by carrier (if buyer is insolvent and goods are in possession of the carrier/bailee) * Replevy identified goods from an insolvent buyer (see reclamation rule) AND Receive one of the general damages: * Cover Damages * Market Damages * Lost Volume Seller + * Incidental Damages ## Footnote Think: Buyer breach can include (1) the buyer wrongfully rejecting goods or revoking acceptance; (2) buyer anticipatorily repudiating; (3) buyer failing to pay...

Answer 114

When a buyer breaches and the seller **resale the goods in good faith for a lower price than the contract price**, the seller can recover the **difference between the resale price and the contract price** as cover damages. ## Footnote A nonbreaching seller is also entitled to **incidental damages**, which are the commercially reasonable costs as a result of the breach.

Answer 115

When a buyer breaches and the seller did *not* resell the goods, the measure of damages for nonacceptance or repudiation is: (1) **the difference between the market price at the time and place for tender** *AND* **the unpaid contract price**, with any incidental damages less expenses saved.

Answer 116

When a buyer breaches by refusing to purchase the goods, a **volume seller** (seller who regularly sells the contracted for item) is entitled to recover: * the profit it **would have made on the sale to the contract buyer**, EVEN though the seller mitigated damages by selling the item at a contract price to another buyer. ## Footnote A nonbreaching seller is also entitled to **incidental damages**, which are the commercially reasonable costs as a result of the breach.

Answer 117

A buyer who **never received the goods**, **rightfully rejected the goods**, **or justifiably revoked acceptance** MAY: * (1) cancel the contract * (2) recover any amount paid; * (3) recover **incidental and consequential damages**; AND/OR * (4) recover either: **Cover Damages** or **Market Damages** ## Footnote Think: A seller can breach by: (1) not delivering the goods; (2) delivering nonconforming goods and buyer rejecting them; (3) seller repudiating; (4) delibering nonconforming goods and buyer accepting imperfect tender

Answer 118

When the **buyer has accepted noncomforming goods** and has given notice to the seller of the nonconformity, the buyer may recover **warranty damages**: * the difference between the value of the nonconforming goods and the value they were warranted as.

Answer 119

Generally, Generally, a **party who is not in privity of contract to another party cannot assert a claim for a breach** of contract. However, an intended third-party beneficiary has the same rights as those in privity and can sue for breach of contract.

Answer 120

Only an **Intended Beneficiary** has enforcement rights because the contracting parties **intended for performance under the contract to benefit the identified third party** | Note: the third party need not be identified *by Name* ## Footnote **GA Law - Intended Beneficiary**: In GA, for a third party beneficisry to have standing to enforce a contract, it must **clearly appear** that **both parties** intended that the **third party should be the beneficiary of the contract**.

Answer 121

An incidental third-party beneficiary is **someone who just happens to benefit** from the contract but has NO legal rights.

Answer 122

A third-party may enforce rights under a contract ONLY IF the rights have vested. Vesting occurs when the third party: * (1) **manifested assent to the contract** at the request of a contracting party; * (2) the **third party detrimentally relied** on the contract; OR * (3) the **third-party sues to enforce** the contract. Once vested, the **contract cannot be changed or modified without consent** of the third-party.

Answer 123

**Creditor beneficiary**: A creditor beneficiary arises when the promisee strikes a deal with the promisor in order to repay some earlier debt to a third party. **Donee Beneficiary**: A donee beneficiary arises when there is no preexisting obligation, but the promisee clearly intends to confer a gift of enforcement on a third party.

Answer 124

A party's rights and benefits may be transferred (assigned) to a third party IF: (1) the assignor **manifests his intent to transfer**; AND (2) **Assignee assents to the assignment** ## Footnote Note that someones the Bar Exam refers to Assignment but means both assignment and delegation.

Answer 125

If a contract **prohibits** assignments, * the assignment is **valid**, but the assignor has **breached the contract** and is liable for damages. * Note that a contract that prohibits assignment will be construed to: (1) allow the assignment of rights; and (2) **bar delegation of duties**. If a contract **invalidates** assignments, * the assignment is **void** and the third party assignee cannot recover because there was no power to assign. ## Footnote **GA Distinction - Assignment**: In GA, *unless* the contract is for **personal services or requires particular skills or qualifications**, once a party performs its obligations under the contract, that **party's right to enforce the contract may be assigned without the other party's consent**, when if the contract contains a no assignment clause.

Answer 126

**Gratuitous Assignment** * If the rights under a contract are assigned **without consideration**, the assignment is generally revocable and the *last assignment controls* However, a gratuitous assignment cannot be revoked if: * (1) the **obligor has already performed** * (2) assignee **reasonably and forseeably relies on the assignment to their detriment**; OR * (3) a **document evidence the assigned right or wrtitten assigned signed by the assignor** was delivered to the assignee.

Answer 127

**If a Gratuitous Assignment**: * the **last assignee prevails** UNLESS earlier assignment is irrevocable (obigor performance, deterimental reliance, or document/writing evidencing the assignment delivered to assignee) **If Rights were assigned For Consideration**: then the first assignment for consideration prevalis UNLESS the later assignee: * (1) has no notice; and * (2) is the first to obtain either: (a) payment; (b) a judgment; or (c) a new contract from the obligor by novation

Answer 128

All contract **duties** are delegable to a third party UNLESS: * (1) the contract **prohibits delegation or assignment**; * (2) delegation is **prohibited by law or public policy**; * (3) the contraxt is a **personal service contract that calls for exercise of personal skill/disctetion**; OR * (4) delegation **materially alters the expectation** of the obligee. The delegating party remains liable for nonperformance UNLESS a novation occurs. ## Footnote NOTE: Remember that a novation is different b/c BOTH parties substitute the obligee in a novation. Also note that bar exam may use assignment and mean assignment and delegation.

Answer 129

A delegatee is not liable for breach unless she receives **consideration** from the delegating party.

Answer 130

Under the UCC, an auctioneer has discretion to either: **reopen the bidding**; or **declare the auction final**?

Answer 131

A seller has an insurable interest as long as she has **title or a security interest** in the goods.

Answer 132

A **buyer** has an insurable interest when the goods are **specifically idenfitied**.

Answer 133

The buyer must still pay for the goods. ## Footnote Remember, risk of loss on buyer if buyer breached *or* if the contract is a Shipment Contract "F.O.B. Seller's Place of Business" and the goods are damaged in transit.

Answer 134

If the ROL for damages goods is on the seller and there has been a total destruction of the goods, * the **contract is avoided and neither party must perform or pay**. ## Footnote Remember, risk of loss on seller if seller breached *or* if the contract is a Destination Contract "F.O.B. Buyer's Place of Business" and the goods are damaged before reaching the Buyer.

Answer 135

If the ROL for damages goods is on the seller and the goods have been damaged but not totally destroyed, * the contract is avoided **unless the buyer wishes to take the damages goods at a reduced price**. * If so, buyer has no claim against the seller. ## Footnote Remember, ROL on seller if seller breached *or* if the contract is a Destination Contract "F.O.B. Buyer's Place of Business" and the goods are damaged before reaching the Buyer.

Answer 136

* The **seller can sue** IF she retains **title or has a security interest**. * The **buyer can sue** IF the goods are **specifically identified**. The **statute of limitations** is normally **4 years**, but it can be modified down by the contract, but NOT less than 1 year.

Answer 137

A buyer who **unlawfully obtains** title possesses a **voidable tite**.

Answer 138

Yes. A person with voidable title can transfer good title to a good faith purchaser for value. This is true even when: * the seller was deceived by the buyer's identity; * the buyer's check bounced; and * delivery was procured through fraud.

Answer 139

No. Title cannot be obtained by theft. Even a good-faith purchase by a subsequent buyer **cannot normally cut off the rights of the true owner if there has been theft**, EXCEPT WHEN: * the **buyer has made improvements **to the goods; OR * the **true owner indicates**, by words or conduct, that **the thief had good title**.

Answer 140

An unpaid seller can assert the **right of reclamation** for goods sold on credit when: * (1) the **buyer was insolvent when it received the goods**, * (2) the **seller makes a demand within 10 days of buyer's receipt** of the goods (or within a reasonable time if the buyer misrepresented his solvency to the seller in writing within 3 months before delivery); and * (3) the **buyer still has the goods** (buyer didn't sale to a good faith purchaser for value).

Answer 141

In GA, buyer has a right to replevin for goods identified in the K if: * (1) after reasonable effort, **the buyer cannot cover or the circumstances show the effort will be unavailing**; OR * (2) the **goods have been shipped under reservation and satisfaction of the security interest has been made** or tendered.

Answer 142

A contract that **violates the law** is often unenforceable on public policy grounds. However, there is an exception to this rule when the contract **violates** a law **designed to propect** the **party seeking to enforce the contract**. In that case, the contract is **enforceable** so as to avoid frustrating the public policy behind the statute.

Answer 143

* **Definite Duration**: An employment contract for a definite duration can be terminated only **for cause** or by **mutual agreement**. * **Indefinite Duration**: An employment contract for an *indefinite duration* is construed as an at-will employment and can be terminated by either party at any time and for any reason. (unless the termination violates public policy i.e., firing in retaliation of discrimination suit) * **Permanent Duration**: An employment contract for a *permanent duration* is construed as an at-will employment and can be terminated by either party at any time for any reason. (unless the termination violates public policy)

Answer 144

Jurisdictions are split as to whether parties' *option to terminate* the contract w/in a year removes it from the statute. Minority Rule: * the option to terminate removes the contract from the statute, because the duration of the agreement is uncertain. **Majority Rule**: * the option to termibate **does *not* remove the contract from the statute of frauds**, because the agreement may not be fully perfomed before its termination.

Answer 145

An **output contract** is a contract for sale of as many goods as seller *produces* during a specific period. ## Footnote Note: Exact Quanity doesn't need to be specified here because a method of determining the quantity is identified.

Answer 146

A **requirements contract** is a contract for sale of as many goods as buyer *requires* during a specified period. ## Footnote Note: Exact Quanity doesn't need to be specified here because a method of determining the quantity is identified.

Answer 147

A contract for **exclusive dealing** carries with it an **implied obligation** by the seller to use its **best efforts to supply the goods** and the buyer to **promote their sale** (even if they do not need it or want it).

Answer 148

When a debt is disputed in good faith and the debtor offers to settle the debt by giving the creditor a **check with a conspicuous notation** stating that it constitutes **payment in full**, the creditor can then: * **Cash the check**, in which case the creditor impliedly agrees to an accord and satisfaction, and the **debt is discharged** *OR* * **Reject the check**, in which case the **debt is not discharged**.

Answer 149

The following factors are relevant to make this determination: * **Susceptibility** of the assenting party (e.g., elderly, in poor health) * **Unfairness of the resulting bargain** (e.g., sale of business for less than half its market value) * **Unavailability of Independent Advice** (e.g., attorney unavailable to discuss sale).