Rules - Themis

Question 1

What is the common law mirror image rule?

Answer 1

The common-law mirror-image rule states that the acceptance must mirror the terms of the offer. Any change to the terms of the offer, or the addition of another term not found in the offer, acts as a rejection of the original offer and as a new counteroffer.

Question 2

What is the difference between a void and voidable contract?

Answer 2

A void contract results in the entire transaction being regarded as a nullity, as if no contract existed between the parties; the contract is unenforceable.

A voidable contract operates as a valid contract unless and until one of the parties takes steps to avoid it.

Question 3

If a destination contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?

Answer 3

Once the goods are delivered to a particular place (specified in the contract)

Question 4

What are the rights of the assignee?

Answer 4

An assignee takes all of the rights of the assignor as the contract stands at the time of the assignment, but she takes subject to any defenses that could be raised against the assignor.

Question 5

What is the difference between assignment and delegation?

Answer 5

An assignment is the transfer of rights under a contract, and a delegation is the transfer of duties and obligations under the contract.

Question 6

When may a nonbreaching party pursue specific performance as a remedy?

Answer 6

When damages are an inadequate remedy, the nonbreaching party can pursue specific performance.

Note: Legal remedies are often inadequate in contracts for land or other unique goods.

Question 7

What are consequential damages?

Answer 7

Consequential damages arise out of special circumstances unique to the parties to the contract, rather than arising necessarily from the transaction itself.

Question 8

Define accord and satisfaction.

Answer 8

Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s existing duty.

A “satisfaction” is the performance of the accord agreement; it will discharge both the original contract and the accord contract.

Question 9

What three factors does a court use to determine if restitutionary recovery is available in a quasi-contract situation?

Answer 9

A court may allow restitutionary recovery if:

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 because either (i) the defendant had the opportunity to decline the benefit but knowingly accepted it, or (ii) the plaintiff had a reasonable excuse for not giving the defendant such opportunity.

Question 10

What are four forms of consideration?

Answer 10

Consideration can take the form of:

1. A return promise to do something
2. A return promise to refrain from doing something legally permitted
3. The actual performance of some act
4. Refraining from doing some act

Question 11

What is the remedy of conversion?

Answer 11

The fair market value of the item at the time of the conversion

Question 12

When are objective and subjective standards each used to determine whether a condition is satisfied?

Answer 12

The preferred method is an objective standard based upon whether a reasonable person would be satisfied. However, when the aesthetic taste of a party determines whether the other party’s performance is satisfactory, satisfaction is determined under a subjective standard.

Question 13

If a shipment contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the buyer to seller?

Answer 13

Once the goods are delivered to the carrier

Question 14

Define the common law four corners rule

Answer 14

Under the common law, a court was permitted to look only to the writing itself (within the “four corners” of the document) for evidence of intent (regarding whether there is total, partial, or no integration).

Question 15

What is a requirements contract?

Answer 15

A requirements contract is a contract under which a buyer agrees to buy all that is required of a product from the other party. There is consideration in these agreements because the promisor suffers a legal detriment.

Question 16

Define offer

Answer 16

An objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree

Question 17

Name the types of contracts that fall within the statute of frauds

Answer 17

Marriage - a contract made upon the consideration of marriage;

Suretyship - a contract to answer for the debt or duty of another;

One year - a contract that cannot be performed within one year from its making;

UCC - under the UCC, a contract for the sale of goods for a price of $500 or more; and

Real Property contract - a contract for the sale of an interest in real property.

(Acronym: Mr. SOUR)

Question 18

Define condition precedent

Answer 18

A condition that precedes the obligation to perform

Question 19

When is the implied warranty of merchantability implied, and how is it disclaimed?

Answer 19

The implied warranty of merchantability is implied whenever the seller is a merchant.

The disclaimer can be oral, but must use the term “merchantability” and must be conspicuous if in writing. Language that indicates there is no implied warranty is sufficient (e.g., “as is” or “with all faults”).

Question 20

What are the three requirements for a promise to be binding under promissory estoppel?

Answer 20

(i) The promisor should reasonably expect it to induce action or forbearance on the part of the promisee or a third person;
(ii) The promise does induce such action or forbearance; and
(iii) Injustice can be avoided only by enforcement of the promise.

Question 21

When is the doctrine of anticipatory repudiation applicable, and in what manner must the repudiation be made?

Answer 21

The doctrine of anticipatory repudiation is applicable when a promisor repudiates a promise BEFORE the time for performance is due. The repudiation must be clear and unequivocal and may be by conduct or words.

Question 22

What are the three events that would cause the rights of an intended beneficiary to vest?

Answer 22

The rights of an intended beneficiary vest when the beneficiary:

i) Materially changes position in justifiable reliance on the rights created;
ii) Manifests assent to the contract at one party’s request; or
iii) Files a lawsuit to enforce the contract.

Question 23

When is a revocation of an offer, sent by mail, effective?

Answer 23

Upon receipt. (Example: On day 1, A mails an offer to B. On day 2, A mails a revocation to B. If B receives the offer and accepts before receiving the revocation, a contract is formed.)

Question 24

When is plaintiff entitled to restitutionary recovery, and how is it measured?

Answer 24

When a defendant is unjustly enriched by the plaintiff, restitution generally allows the plaintiff to recover on the benefit conferred by the plaintiff upon the defendant. Generally, the benefit is measured by either (i) the reasonable value of the defendant obtaining that benefit from another source, or (ii) the increase in the defendant’s wealth from having received that benefit.

Question 25

Define the parol evidence rule.

Answer 25

The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written.

Question 26

What types of contracts are governed by common law?

Answer 26

Contracts for services or real estate

Question 27

What is the formula for expectation damages?

Answer 27

Expectation Damages = loss in value + other loss - cost avoided - loss avoided

Question 28

What is an implied in fact contract?

Answer 28

An implied-in-fact contract is a contract that results when a person’s assent to an offer is inferred solely from the person’s conduct. To be contractual bound, the person must not only intend the conduct but also know or have reason to know that the conduct may cause the offeror to believe the offer was accepted.

Question 29

Who lacks the capacity to make a contract?

Answer 29

(i) Minors (under the age of 18); (ii) People who are mentally ill; (iii) People who are intoxicated; and (iv) People whose property is under guardianship by reason of adjudication.

Question 30

Define constructive condition of exchange

Answer 30

When a party's performance can be rendered at the same time as the other party's performance, each party's performance is conditioned on the other party's performance; both parties' performances are due simultaneously, unless the language or circumstances indicate otherwise.

Question 31

Define acceptance

Answer 31

An objective manifestation by the offeree to be bound by the terms of the offer

Question 32

What three conditions must be met for the defense of impractibility to be available?

Answer 32

(i) An unforeseeable event has occurred; (ii) Nonoccurrence of the event was a basic assumption on which the contract was made; and (iii) The party seeking discharge is not at fault.

Question 33

Define incidental beneficiary

Answer 33

One who benefits from a contract even though there is no contractual intent to benefit that person Note: An incidental beneficiary has no rights to enforce the contract.

Question 34

Define fraud in the inducement and state its effect on a contract

Answer 34

Fraud in the inducement occurs when a fraudulent misrepresentation is used to induce another to enter into a contract. Effect: Contract is VOIDABLE by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement.

Question 35

What is the difference between a gift and valid consideration?

Answer 35

The test to distinguish a gift from valid consideration is whether the offeree could have reasonably believed that the intent of the offeror was to induce the action. If yes, there is consideration and the promise is enforceable.

Question 36

Under the common law, if a breach is material, what remedies can be sought by the nonbreaching party?

Answer 36

The nonbreaching party is able to withhold any promised performance and pursue remedies for breach, including damages. Note: If the breach is minor, the nonbreaching party may be able to recover damages, but that party also still must perform under the contract.

Question 37

Define fraud in the factum and state its effect on a contract

Answer 37

Fraud in the factum (or fraud in the execution) occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction. Effect: No contract is formed, and the apparent contract is VOID.

Question 38

(Battle of the forms) Under the UCC, when both parties are merchants, an additional term in the acceptance is automatically included in the contract, unless (name three exceptions):

Answer 38

(i) The term materially alters the original contract; (ii) The offer expressly limits acceptance to the terms of the offer; or (iii) The offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received. Note: If any one of these three exceptions is met, the term will not become part of the contract, and the offeror's original terms control.

Question 39

What is an illusory promise?

Answer 39

An illusory promise is one that essentially pledges nothing because it is vague or because the promisor can choose whether to honor it. Such a promise is not legally binding (i.e., void).

Question 40

Under the UCC, what is required by the perfect tender rule?

Answer 40

The perfect tender rule requires perfect goods and perfect delivery. "Perfect" means in accordance with the contract provisions or in accordance with the UCC if the contract is silent on tender.

Question 41

Under the mailbox rule, when is an acceptance effective?

Answer 41

An acceptance that is mailed properly (i.e., correct postage and address) within the allotted response time is effective when sent as opposed to on receipt, unless the offer provides otherwise.

Question 42

Define intended beneficiary?

Answer 42

One to whom the promisor will pay directly to relieve the promisee from a debt or whom the promisee intends to give the benefit of the promised performance

Question 43

If a party has substantially complied or performed with a constructive condition, what can the party recover?

Answer 43

In general, the party can recover the contract price minus any amount that it will cost the other party to obtain the promised full performance. Note: A party who has not substantially performed generally cannot recover damages based on the contract, but she may be able to recover through restitution.

Question 44

What is the basic concept of legal detriment?

Answer 44

There must be something of substance, either an act or a promise, which is given in exchange for the promise that is to be enforced.

Question 45

What requirements must be met to allow an adversely affected party to void a contract based on mutual mistake?

Answer 45

(i) Mistake of fact existing at the time the contract was formed; (ii) The mistake relates to a basic assumption of the contract; (iii) The mistake has a material impact on the transaction; and (iv) The adversely affected party did not assume the risk of the mistake.

Question 46

Define the material benefit rule

Answer 46

Under the material benefit rule, when a party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though, at common law, such a promise would be unenforceable due to lack of consideration.

Question 47

At what point can repudiation no longer be retracted?

Answer 47

Repudiation may be retracted until such time as the promisee (i) acts in reliance on the repudiation, (ii) signifies acceptance of the repudiation, or (iii) commences an action for breach of contract.

Question 48

Under the common law, why was something given in the past not considered adequate consideration for a new contract?

Answer 48

Under the common law, past consideration is typically not adequate consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise. Note: there is a modern trend toward enforcing such promises under the material benefit rule.

Question 49

When is the warranty of fitness for a particular purpose implied, and how is it disclaimed?

Answer 49

The warranty of fitness for a particular purpose is implied whenever the seller has reason to know that (i) the buyer has a particular use for the goods, and (ii) the buyer is relying upon the seller's skill to select the goods. A disclaimer must be in writing and be conspicuous.

Question 50

How is a unilateral offer accepted?

Answer 50

Acceptance of an offer for a unilateral contract requires complete performance. Note: Once performance has begun, the unilateral offer is irrevocable for a reasonable period of time to allow for complete performance unless there is a manifestation of a contrary intent.

Question 51

What is an output contract?

Answer 51

An output contract is a contract under which a seller agrees to sell all that she manufactures of a product to the buyer. There is consideration in these agreements because the promisor suffers a legal detriment.

Question 52

Under the UCC, even if the terms of a written contract for the sale of goods appear to be unambiguous, what evidence can be presented to explain or supplement the contract?

Answer 52

Course of performance, course of dealing, and trade usage. Note: If the express contract terms are inconsistent with the course of performance, or trade usage, priority is given to the express terms, followed by course of performance, course of dealing and trade usage.

Question 53

Condition subsequent

Answer 53

Condition that excuses the duty to perform after a particular event occurs

Question 54

What doctrine comes into play when an unexpected event arises that destroys one party's purpose in entering into the contract, but performance of the contract is not rendered impossible?

Answer 54

The doctrine of frustration of purpose. The frustrated party is entitled to rescind the contract without paying damages. Note: The event that arises must not be the fault of the frustrated party, and its nonoccurrence must have been a basic assumption of the contract.

Question 55

Under the second restatement, can an extrinsic term that would naturally be omitted from a writing be introduced?

Answer 55

Yes, so long as it does not contradict the writing.

Question 56

How is a bilateral offer accepted?

Answer 56

An offer requiring a promise to accept can be accepted either with a return promise or by starting performance.

Question 57

Under the UCC, in what two circumstances does the seller have a right to cure a defective tender?

Answer 57

(i) The time for performance under the contract has not yet elapsed; or (ii) The seller had reasonable grounds to believe that the buyer would accept despite the nonconformity. Note: The seller must give notice of the intent to cure and make a new tender of conforming goods.

Question 58

Define the parol evidence rule

Answer 58

The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written.

Question 59

UCC firm offer requirements

Answer 59

(i) The offeror is a merchant; (ii) There is an assurance that the offer is to remain open; and (iii) The assurance is contained in a signed writing from the offeror.

Question 60

When a preexisting duty is at issue, what two options does a promisor have to create valid consideration?

Answer 60

The promisor can: 1. Give something in addition to what is already owed 2. Vary the preexisting duty in some way