REG - Contracts

Question 1

2 sets of contract rules
What is covered under common law?
Under UCC - Uniform commercial code?

Answer 1

Apply to contracts other than contracts for the sale of goods. Examples include real estate, insurance, employment and professional services.
UCC - involving sale of goods - tangible personal property

Question 2

What is the difference between an option in common law and a firm offer in UCC?

Answer 2

?

Question 3

What is the difference between revocation and rejection?

Answer 3

Revocation by offeror - effective when received by offeree. Offeror can revoke offer anytime prior to acceptance except in an option contract - an option supported by consideration
Once offer is accepted, any attempted revocation is not valid.
Rejection by offeree - can counteroffer which terminates offer. Note inquiry means offer still valid.

Question 4

What is consideration and how is it valid?

Answer 4

It must be bargained for to be valid.

Question 5

What are possible remedies for breach of contract?

Answer 5

Monetary damages
Specific performance
Liquidated damages
Anticipatory repudiation

Question 6

What are the essential elements of a contract?

Answer 6

Offer
Acceptance
Consideration
Legal Capacity
Legality
Reality of consent
Statute of frauds

Question 7

What the the difference types of contracts

Answer 7

Express - terms specifically orally or in writing
Implied - terms not stated, some/all inferred
Executed - terms fully performed
Executory - terms have not been fully performed
Unilateral - no legal obligation/contract unless action is taken
Bilateral - legal obligation for both parties
Voidable - enforceable unless party with rights pulls out
Void - not enforceable by either party

Question 8

What are the requirements of a valid offer?

Answer 8

Intent - would a reasonable person think offer was made? Note intent/invitation to negotiate is not offer.
Definite/certain - specific terms
Communicated - to offeree by offeror/agent

Question 9

What are formation defenses?

Answer 9

Actions that invalidate what otherwise would be mutual assent. Duress, fraud (misrepresentation+intent to mislead/scienter + reasonable reliance by injured + result in injury), mistake, and undue influence.
Mutual/bilateral mistake makes voidable, unilateral mistake not.

Question 10

What is promissory estoppel? What elements are required?

Answer 10

An implied contract at law, where a court rules that a contract exists even though an element of a contract is missing. Could be used when promissee relied on promise and reliance has caused injury.
Promissory estoppel acts as a substitute for consideration and renders the promise enforceable. The elements needed for it include 1) detrimental reliance on a promise 2) reliance on promise is reasonable and foreseeable 3) damages results if the promise is not enforced

Question 11

What can automatically terminate an offer by operation of law?

Answer 11

If any of the following occur:
death/incapacity of either party - if acceptance occurs before death, the contract is valid
the subject matter of offer is destroyed
the proposed contract becomes illegal

Question 12

What happens in the case of late acceptance?

Answer 12

It is seen as a counteroffer, not acceptance.

Question 13

What is consideration and how does consideration work in contracts and modifications?

Answer 13

Consideration is an act, promise, or forbearance which is offered by one party and accepted by another as inducement to enter into an agreement. A party must bind himself to do something he is not legally obligated to do. AND consideration must be bargained for. Past consideration is not sufficient to serve as consideration for a new contract because it is not bargained for.
A contract must have consideration on both parties. If a contract is modified, both must give new consideration under common law rules.
LEGAL + BARGAINED FOR

Question 14

What is the difference between common law and UCC for changes to contract terms? Which is enforcable?

Answer 14

Common law - changes to an existing contract needs new consideration by both parties to be legally binding.

UCC - enforceable. A contract for the sale of goods may be modified orally or in writing without new consideration if change is made in good faith.

Question 15

What is the parol evidence rule?

Answer 15

The parol evidence rule prohibits the presentation of evidence of any prior or contemporaneous oral or written statements for the purpose of changing a written agreement intended by the payor to be the final and complete expression of the contract. However, it does not bar from evidence any oral or written agreements entered into by the parties subsequent to the written contract.

Question 16

What is the statute of limitations time period for a breach in contract?

Answer 16

The statute of limitations requires the plaintiff to file a lawsuit within a specified period of time after the cause of action/breach.

Question 17

What are the rules/exceptions of common law duty delegation?

Answer 17

It cannot be delegated for any of the below
- contract provision prohibits delegation
- if assignment would materially change the risk or burden of obligor
- involves personal services, trust or confidence (need consent of obligee)
Note - can delegate pmt of money as it does not impact performance to obligee
Otherwise it can be generally assignable.

Question 18

What is the difference between duress and unconscionable contracts?

Answer 18

Duress occurs when there are improper threats or acts which deprive party of free will and causes them to agree.
Unconscionable contract is an oppressive contract wherein one party takes unfair advantage of the other, usu because of absence of choice or poor education.

Question 19

What happens if there is a contract and less than the total is delivered due to infrequent means?

Answer 19

As the circumstances could be foreseen by the parties, even though it may have been in good faith, as the contract is valid, the party is liable for the total.

Question 20

How is acceptance under common law vs UCC?

Answer 20

Under common law - acceptance must be unequivocal and unqualified, in the precise terms in which the offer specified.
UCC alters this as far as the sale of goods is concerned. An offer to buy goods for prompt shipment is construed to invite acceptance, either by a prompt promise to ship or prompt shipment. Note that price terms and shipping terms can be omitted. Assume then reasonable price and at seller’s place of business.

Question 21

Oral agreement: If agreed to sell for less than FMV, and deposit given, but sold to another at FMV, can party sue for specific performance?

Answer 21

No because it was not in writing.
In order to conform with Statute of Frauds, and therefore be enforceable, any contract for the sale of an interest in real property (regardless of price) must be in writing and signed by the party to be charged.
Note there is a $500 provision that applies to goods, not services.

Question 22

Under common law, the terms of the offer must be..

Answer 22

certain or definite

Question 23

Difference between reformation, rescission, and restitution

Answer 23

Reformation is a remedy used to correct a mutual or unilateral mistake. Allows contract to be rewritten so that it is in agreement with the original intentions of the contract. Applies to written contracts containing ambiguities.
Rescission would cancel the contract and return both parties to their precontract positions.
Restitution would compensate for injury or loss or try to restore to original state. Involves both parties to a contract returning whatever they have received under the agreement.

Question 24

Difference between misrepresentation, actual and constructive fraud?

Answer 24

Misrepresentation may involve an innocent misstatement made in good faith (no scienter or intent to mislead). To rescind, must prove misrepresentation was material fact, reliance on fact, and injury as result.
Actual fraud requires scienter or intent to mislead.
Constructive fraud requires reckless disregard for the truth.

Question 25

Difference between compensatory damages and specific performance?

Answer 25

Specific performance - as remedy if money damages will not be adequate to compensate the nonbreaching party - esp if rare and cannot be readily purchased in market.
Monetary if not.

Question 26

What are the statute of frauds requirements?

Answer 26

• Contracts that cannot be performed within one year must be in writing (date since contract formed)
  $500 provision applied to goods, not services

Question 27

What is the doctrine of substantial performance?

Answer 27

If it can be shown that the defect in the performance was only minor in nature, that a good faith effort was made to conform completely with the terms of the agreement, and that the price is decreased by the value of the defect, the contractual obligation will be discharged.
The value of the defect will be deducted from the price

Question 28

Difference between regulatory licensing statute and revenue seeking statute?

Answer 28

Violation of a regulatory licensing statute makes the contract unenforceable by both parties. The main function of this is to protect public against unskilled/dishonest persons.
The purpose of revenue seeking is to gain revenue for the govt unit issuing the license. A contract that violates this is enforceable.

Question 29

What are the types of damages and when are they awarded?

Answer 29

Punitive - generally not allowed in common law

Liquidated damages - agreed to in a contract to set the amount of damages in the event of breach of contract

Question 30

What is a quasi contract

Answer 30

An implied in law rather than express agreement which results when one of the parties has been unjustly enriched at the expense of the other. The law creates such a contract when there is no binding agreement present to keep the unjust enrichment from occurring.

Question 31

What is novation? Who is liable

Answer 31

Novation - an agreement between 3 parties whereby a previous agreement is discharged by the creation of a new agreement. This substitutes one contracting party for another. This discharges the old party of all liability.

Question 32

What are personal defenses and what can be used against all holders of negotiable instruments, under UCC?

Answer 32

Personal defenses include breach of warranty, fraud in the inducement, and lack of consideration.
All defence - minority of the maker - assertable against any party

Question 33

What happens when A’s outstanding AR from B is given to C, and then B pays A. Who does C get $ from?

Answer 33

C goes to A as B did not know of assignment and removed their liability from A.

Question 34

Who does a donee beneficiary have legal rights against in case of breach?

Answer 34

Donee beneficiary is an intended beneficiary who can bring an action against the promisor, not the promisee (the one making a gift). Promisee can also sue promisor on breach.