Contracts Flashcards

Question

What is the Mailbox Rule?

Answer 1

Acceptance is effective when sent. Mailbox summary: Offer: effective upon receipt Acceptance: effective on dispatch Effective on receipt in an option contract Rejection: effective upon receipt Revocation: Effective on receipt (MAJORITY) Effective on dispatch (MINORITY) Rejection followed by acceptance Rejection is effective if rejection arrives first the late arriving acceptance is treated as a counter offer (R2D 40) acceptance effective if acceptance arrives first. Acceptance followed by rejection Acceptance is effective ULESS Rejection gets there first, and the offeror has detrimentally relied on the rejection ## Footnote Exceptions exist, such as for option contracts, where acceptance is effective upon receipt.

Answer 2

A bargained-for exchange of legal value. ## Footnote Each party must incur a legal detriment or confer a benefit for a contract to be enforceable.

Answer 3

Applies where a promise induces reasonable and foreseeable reliance and injustice can be avoided only by enforcement. ## Footnote This legal principle can enforce a promise even in the absence of a contract.

Answer 4

Under UCC § 2-205, as adopted in California, a merchant’s firm offer is an offer by a merchant to buy or sell goods in a signed writing that gives assurance that the offer will be held open. Such an offer is irrevocable without consideration for the time stated in the offer, or, if no time is stated, for a reasonable time, but in no event may the period of irrevocability exceed three months. If the assurance is contained in a form supplied by the offeree, the offeror must separately sign the assurance clause for it to be effective. Merchant + signed writing + assurance = irrevocable (max 3 months). ## Footnote THE UCC IS SUPPLIMENTED BY CL If no elements of MFO then options contract under UCC may apply If non- merchant holds contract open with consideration, no firm offer- but can be irrevocable under UCC rules.

Answer 5

A contract or term is unconscionable if it is so one-sided, oppressive, or unfair that it shocks the conscience of the court, making enforcement inequitable. Courts may: *Refuse to enforce the contract, *Sever the unconscionable clause, or *Limit the application of the clause to avoid injustice. Procedural Unconscionability (how the contract was formed) *Focus: Fairness of the bargaining process *Examples: Hidden or fine-print terms Deceptive or high-pressure tactics Lack of meaningful choice (adhesion contracts) Substantive Unconscionability (content of the contract) *Focus: Fairness of the terms themselves *Examples: *Extreme one-sidedness (e.g., waiving all liability for seller) *Grossly disproportionate obligations or penalties Note: Courts often require a combination of procedural and substantive unconscionability to invalidate a contract, but in some jurisdictions, extreme substantive unconscionability alone may suffice. Timing: Unconscionability is assessed at the time of contract formation, not after performance or breach. Consequential disclaimers: Disclaimers of consequential damages may be unenforceable if unconscionable, e.g., when buyer had no meaningful choice and waiver is one-sided. Adhesion contracts: Standard-form contracts offered on a take-it-or-leave-it basis are more closely scrutinized for unconscionability. ## Footnote This doctrine protects parties from unfair contract terms.

Answer 6

Certain contracts are unenforceable unless memorialized in a writing signed by the party to be charged that reasonably identifies the subject matter, indicates a contract exists, and states the essential terms unless an exception applies. (Comes after formation stage. Defense to enforceability. Must be specially pleaded by the defendant) Effect of SOF: When an oral contract, within the scope of the Statute of Frauds, cannot be evidenced by a sufficient writing, the oral agreement is unenforceable, UNLESS (exceptions): * sufficient written memorandum OR * ## Footnote This legal requirement helps prevent fraud and misunderstandings.

Answer 7

a WRITING SIGNED BY THE PARTY to be charged that reasonably IDENTIFIES the SUBJECT matter, indicates a CONTRACT exists, and STATES the essential TERMS. double check if applicable to written memo or merc firm offer or some other law Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received.

Answer 8

Some writing sufficient to indicate that a contract for sale has been made between the parties and Signed by the party against whom enforcement is sought or by his authorizing agent or broker. A writing is not insufficient because it omits or incorrectly stats a term agreed upon, but the contract is not enforceable under this paragraph beyond the quantity of the goods shown in such writing.

Answer 9

The signature to a memorandum may be any symbol made or adopted with an intention actual or apparent, to authenticate the writing as that of the signer. UCC 1-201(37) Signed includes using any symbol executed or adopted with the present intention to adopt or accept a writing Letter head Business card Company logo or trademark “x” Nickname if a law requires a signature, an electronic signature satisfies the law. Parties must intend to conduct the transaction electronically. Intention may be determined by context and surrounding circumstances, including the parties conduct.

Answer 10

Marriage: A contract made in consideration of marriage is within the Statute of Frauds and must be in writing to be enforceable. Key Exceptions / Nuances: Applies only to promises inducing marriage (e.g., prenuptial agreements). Does NOT apply to mutual promises to marry. Applies to property and financial promises, not emotional promises. Partial performance does NOT remove the contract from the SOF (marriage itself is not enough)

Answer 11

A contract is within the Statute of Frauds if, by its terms, it cannot possibly be performed within one year from the date of formation. If possible, no SoF.

Answer 12

Contracts to answer for the debt of obligation of another. Must be made by the surety to the creditor. Suretyship falls outside scope of Statute of Frauds if the main purpose/interests benefits the surety themselves. The Statute of Frauds suretyship clause does not apply when the primary obligation is between the promisor and the creditor, even though the promise is to benefit a third party. The Surety’s Promise Must Be Collateral. Distinguish from a novation (substitute party) Main Purpose Exception or leading objective exception: if the main purpose or leading object of the surety is to secure a financial benefit for the surety rather that a direct financial benefit for the debtor, the surety’s promise to pay the debtor’s obligation is outside the Statute of Frauds. Alternate Promises: As long as one of the promises does not fall within the statute of frauds the entire contract is deemed to be outside the statute of frauds

Answer 13

A promise by an executor or administrator to pay estate debts out of their own funds is within the Statute of Frauds and must be in writing. Key Exceptions / Nuances: Does not apply if payment is from estate assets. If executor receives a personal benefit, courts may enforce under equitable principles. Rarely tested but easy points if spotted.

Answer 14

Includes leases longer than one year, easements, mortgages, and profits. Does NOT apply to service contracts merely related to land. Part Performance Exception: Oral land contracts may be enforced if the buyer: Takes possession, and Makes valuable improvements or pays part/all of the purchase price. Remedies limited to specific performance, not damages.

Answer 15

Contracts for the Sale of GOODS for the Price of $500 or More Two performance exceptions for the Sale of Goods * FIRST – the goods are to be specially manufactured for the buyer, and * The goods cannot be sold to others in the ordinary course of the seller’s business, AND the seller has substantially begun making the goods or making commitments to get the goods. * SECOND- goods for which payment has been made and accepted, or * Goods have been received and accepted * Both parties must act in order for this exception to apply.

Answer 16

IS A CONTRACT WITHIN THE SCOPE OF THE STATUE? STEP 1 is the contract within the scope of the statute? YES STEP 2 Is there a sufficient writing? Is there sufficient content? Is it signed by the party in question? YES Satisfies Statute of Frauds and is enforceable NO Contract is enforceable If not signed, or not content or writing Contract is NOT enforceable STEP 3 Is there an exception?

Answer 17

A contract is voidable if both parties were mistaken about a basic assumption that materially affected the agreement. ## Footnote This principle allows for rescission of contracts under certain conditions.

Answer 18

A counteroffer is both a rejection of the original offer and a new offer. conditional acceptances are counteroffers. ## Footnote This alters the terms of the original offer and requires acceptance to form a contract.

Answer 19

Improper threat or unfair persuasion that induces a party's assent. ## Footnote Contracts formed under duress are voidable.

Answer 20

* Compliance with requirements * Part performance * Specially manufactured goods * Merchant's confirmatory memo * Admissions in court * Suretyship (Main Purpose Rule) ## Footnote These exceptions allow certain contracts to be enforceable even if they typically fall under the Statute of Frauds.

Answer 21

* Payment * Possession * Improvements ## Footnote At least two of these three elements must be present for part performance to take effect.

Answer 22

The parole evidence rule bars evidence of prior or contemporaneous agreements to contradict or add to the terms of an unambiguous completely integrated written agreement. ## Footnote The Parol Evidence Rule bars evidence of prior or contemporaneous agreements that contradict a final integrated written contract.

Answer 23

* Complete integration: Intended as the complete and exclusive expression of all terms * Partial integration: Allows consistent additional terms to be admitted ## Footnote The level of integration affects what evidence can be introduced in court.

Answer 24

It indicates that the writing is the complete and exclusive statement of all rights and obligations ## Footnote In jurisdictions following Williston's view, a merger clause is presumed to express the intent of the parties for complete integration.

Answer 25

The effect of the Integrated Agreement under PER discharges Prior Agreements within its scope. RD2 213. A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them. (look for consistency, avoid bar everything) ## Footnote A binding, completely integrated agreement supersedes any prior agreements.

Answer 26

UCC Gap Fillers * Express terms * Course of performance * Course of dealing * Usage of trade ## Footnote This hierarchy determines how additional terms are interpreted under the UCC. Gap fillers are default terms the UCC supplies when a sales contract is silent on an issue. 👉 Under UCC Article 2, a contract does not fail for indefiniteness just because it’s missing terms—as long as the parties intended to contract and there is a reasonably certain basis for a remedy. The Big Rule (Anchor This) “The UCC will fill in missing terms such as price, time, delivery, payment, and warranties, but it will not supply a missing quantity term (except for output or requirements contracts).”

Answer 27

An event that must occur before a duty to perform arises ## Footnote If the condition does not occur, the duty to perform never matures.

Answer 28

* Covenant: A promise to do or refrain from doing something * Condition: An event that must occur for a duty to perform to arise Covenants promise, conditions perform. ## Footnote Breach of a covenant leads to damages, while failure of a condition excuses performance.

Answer 29

Rule: A condition is an event, not certain to occur, that must occur before performance becomes due (condition precedent), or that terminates an existing duty (condition subsequent). Effect: No duty to perform No breach No damages for nonperformance Possible restitution only Trigger Words in Facts: “If,” “provided that,” “on the condition that,” “subject to” “Approval,” “financing,” “inspection,” “permit” “Because the condition did not occur, the duty to perform never arose.”

Answer 30

Rule: A breach occurs when a party fails to perform a duty that has already arisen under the contract. Effect: Liability for damages Other party’s performance may be excused if material Trigger Words in Facts: “Shall,” “must,” “agrees to” Missed deadlines after duty attached Defective or late performance “Because the duty had already arisen, the failure to perform constitutes a breach.”

Answer 31

A party may not rely on the failure of a condition if that party wrongfully prevented or hindered the condition from occurring. ➡️ Condition is excused ➡️ Duty becomes absolute Elements to Analyze Condition existed Condition failed Other party caused or contributed to the failure Conduct was wrongful or unjustified Wrongful = Bad faith Lack of cooperation Active interference Common Bar Examples Seller prevents inspection → buyer excused from inspection condition Employer blocks licensing → can’t rely on lack of license Lender refuses to process financing → financing condition excused Essay Phrase (Gold): “Under the prevention doctrine, a party may not benefit from its own wrongful conduct.”

Answer 32

Rule (Restatement) A court may excuse the non-occurrence of a condition to avoid disproportionate forfeiture, unless the condition was a material part of the agreed exchange. What Is “Forfeiture”? Loss of compensation already earned Not just losing expected profits Think: “worked for nothing.” Elements to Hit on Exam Condition failed Strict enforcement would cause forfeiture Forfeiture is disproportionate Condition was not central to the bargain Where This Commonly Appears Construction contracts Insurance notice provisions Employment bonus conditions Timing technicalities Limit (Very Important) Cannot be used if: Condition defines the core risk Condition was explicitly bargained for Essay Phrase: “Courts are reluctant to excuse conditions that go to the heart of the bargain.”

Answer 33

Occurs when a party unequivocally indicates by words or conduct that they will not perform before performance is due The non-breaching party may: Treat the contract as breached immediately and sue for damages, or Wait until performance is due to see if the repudiating party performs. Nuances: Substantial performance requirement: Minor deviations do not constitute anticipatory repudiation. Retraction allowed: The repudiating party may retract the repudiation before the non-breaching party materially changes position, unless the non-breaching party has already acted in reliance or indicated acceptance of the repudiation. UCC exception: For contracts for the sale of goods, repudiation may occur if a merchant clearly indicates unwillingness to perform. ## Footnote This allows the non-breaching party to treat the contract as breached.

Answer 34

* Treat as an immediate breach * Wait for performance * Demand adequate assurances ## Footnote Each option has different implications for the non-breaching party's rights.

Answer 35

A party may demand written assurances when reasonable grounds for insecurity exist ## Footnote Failure to provide assurances within a reasonable time constitutes repudiation.

Answer 36

* Compensatory damages * Consequential damages * Incidental damages * Reliance damages * Liquidated damages * Punitive damages * Nominal damages ## Footnote Each type of damage serves a different purpose in compensating the non-breaching party.

Answer 37

Specific performance is an equitable remedy available when legal damages are inadequate, the contract terms are definite, and performance is feasible. Courts grant specific performance when: Legal damages are inadequate, and The contract terms are definite and certain, and Performance is feasible for the court to supervise, and The plaintiff has clean hands | no available when K req ongoing supervision or k for personal services ## Footnote Specific performance is often used for unique goods incl land, art, antiques, herilooms

Answer 38

ROL determines who bears the loss after the contract is formed but before performance is complete. Risk of loss depends on whether the seller is a merchant and whether delivery is by shipment or destination contract. ## Footnote Risk of loss shifts based on the terms of the contract and the status of the seller.

Answer 39

It only matters after: *A valid contract exists *Goods are identified *Delivery has not yet been completed

Answer 40

An intended third-party beneficiary may enforce the contract once rights vest ## Footnote Rights vest upon assent, reliance, or suit.

Answer 41

* Assignment of rights: Generally assignable unless prohibited * Delegation of duties: Duties may be delegated unless personal in nature or prohibited ## Footnote The delegator remains liable even after delegating duties.

Answer 42

A court may grant specific performance even if the remedy is not mutual, as long as the plaintiff’s performance can be assured. ca follows modern rule, mutuality of remedy is not req. focus is on adequeacy of damages, feasibility and equity

Answer 43

Damages must be proven with reasonable certainty ## Footnote This ensures that claims for damages are not speculative.

Answer 44

Mitigate damages ## Footnote This means taking reasonable steps to reduce the impact of the breach.

Answer 45

(Cover price − K price) + incidentals + consequentials ## Footnote This allows the buyer to purchase substitute goods and recover the difference.

Answer 46

(Market price − K price) + incidentals + consequentials ## Footnote This calculates the damages based on market price at the time of breach.

Answer 47

(K price − resale price) + incidentals ## Footnote This allows the seller to resell goods and recover damages.

Answer 48

Recover lost profit ## Footnote This applies when a seller could have made multiple sales.

Answer 49

Non-breaching party must take reasonable steps to reduce damages ## Footnote This principle prevents parties from claiming excessive damages.

Answer 50

Damages must have been foreseeable at the time of contracting ## Footnote This limits recovery to damages that were predictable.

Answer 51

Bars equitable relief ## Footnote This principle prevents a party from seeking relief if they acted unethically.

Answer 52

* Termination and cancellation * Rescission * Novation * Accord and satisfaction ## Footnote These are various ways a contract can be legally ended.

Answer 53

**A party’s contractual duty is discharged when: performance becomes impracticable without that party’s fault due to the occurrence of an unforeseen event, the nonoccurrence of which was a basic assumption of the contract.** | Contract discharged ## Footnote This occurs when performance becomes impossible due to unforeseen circumstances.

Answer 54

Voluntary relinquishment of a known right ## Footnote This can affect the enforceability of a contract.

Answer 55

* Formation of Contracts * Defenses to Enforceability * Contract Content and Meaning * Performance, Breach, and Discharge * Remedies * Third-Party Rights ## Footnote This outlines the key areas of focus for the Multistate Bar Exam.

Answer 56

Common Law (services, real estate) or UCC Article 2 (goods) ## Footnote This distinction is crucial for applying the correct legal principles.

Answer 57

Must have definite terms ## Footnote An offer must be clear enough to create a binding agreement.

Answer 58

Something of value exchanged between parties ## Footnote This is essential for a contract to be enforceable.

Answer 59

Limits the use of outside evidence to interpret a written contract ## Footnote This rule helps maintain the integrity of written agreements.

Answer 60

Did a party fail to perform? ## Footnote This is a key factor in determining remedies.

Answer 61

For unique goods ## Footnote This remedy compels a party to fulfill their contractual obligations.

Answer 62

Several writings may be merged together to satisfy the writing requirement All of the merged writings must be referable to the contract in dispute. UCC sufficient writing requirements.

Answer 63

Common law: modification of a contract resembles the creation of a contract and generally requires the same elements as the formation of a contract Offer Acceptance Consideration Statute of Frauds and MODIFICATION The requirements of the Statute of Frauds must be satisfied if the contract as modified is within its provisions. Must satisfy the Sof. Modifications priced above $500 = Writing

Answer 64

An express warranty is created when the seller makes an affirmation of fact, promise, description, or sample/model that becomes part of the basis of the bargain and relates to the goods. Elements: *Affirmation of fact or promise *Description of the goods, or sample/model *The statement becomes part of the basis of the bargain *Goods fail to conform ⚠️ Mere puffery or opinions do not create an express warrant "best on the market" or "will last forever" not verifiable promise so puffery samples create express warranty goods but conform exactly

Answer 65

An implied warranty of merchantability arises automatically when: *The seller is a merchant, and *The goods are of the kind sold. Merchantable goods must: *Pass without objection in the trade *Be fit for the ordinary purpose *Be of fair, average quality *Be adequately packaged and labeled *Conform to any promises on the label

Answer 66

An implied warranty of fitness for a particular purpose arises when: *The seller knows the buyer’s particular purpose, and *The buyer relies on the seller’s skill or judgment to select suitable goods. !!The seller need not be a merchant. "AS IS" disclaimes all implied warranties. express warranties survive.

Answer 67

The seller warrants that: *Title conveyed is good, and *Goods are delivered free from liens or encumbrances unknown to the buyer.

Answer 68

Express Warranties *Cannot be disclaimed if the disclaimer directly contradicts the warranty. Implied Warranty of Merchantability *Must mention “merchantability” *If in writing, must be conspicuous Implied Warranty of Fitness *Must be in writing and conspicuous “As Is” or “With All Faults” *Disclaims all implied warranties Buyer Inspection *No implied warranty for defects a reasonable inspection would reveal

Answer 69

If a warranty is breached, the buyer may recover: Difference in value between goods as warranted and as delivered Incidental and consequential damages May also revoke acceptance if the breach is substantial

Answer 70

An assignee steps into the shoes of the assignor and takes only those rights the assignor had at the time of the assignment, subject to all defenses and modifications. Even a good-faith assignee without notice is still bound by prior modifications. An assignee acquires no greater rights than the assignor had at the time of the assignment and takes the contract subject to all prior modifications, waivers, and defenses. Assignees are bound by existing contract terms, modified or not. notice not required Only the creditor could reinstate the original terms — and only if it was a waiver, not a modification

Answer 71

temporary excuse of performance unless parties aggree to make permenant then modification.

Answer 72

Employment contracts of indefinite duration (including “permanent” employment) are presumed to be at-will, unless the parties clearly agree otherwise. An at-will employment relationship may be terminated by either party at any time, for any reason, or no reason, without liability. Language like “permanent job” does not, by itself, overcome the at-will presumption. At-will employment contracts generally do not support anticipatory repudiation damages, because either party could terminate at any time. If the employment is at-will, future wages are not recoverable, because continued employment was not guaranteed. Many courts are reluctant to apply promissory estoppel to at-will employment, especially where the employee has not yet begun work. SOF: Employment contracts of indefinite duration are outside the Statute of Frauds because they could be performed within one year.

Answer 73

If a debt is barred by the statute of limitations, the original claim is unenforceable. However, certain actions by the debtor can revive enforceability, including: *Acknowledgment of the debt: The debtor admits the existence of the debt. *New promise to pay without new consideration: A clear, unequivocal promise to pay the debt can restart the statute of limitations or create a new obligation. common-law rule: a promise to pay a barred antecedent debt is enforceable without new consideration if it is in writing and clearly expresses the intention to revive the debt.

Answer 74

A new promise to pay a debt that is otherwise unenforceable generally requires consideration to be binding. Consideration can be satisfied if the promisee agrees to do something they were not already legally required to do, such as: Forgiving part of the debt, or Accepting less than the full amount in exchange for a new promise.

Answer 75

Partial payment of a barred debt can operate as: *A new enforceable promise for the amount paid. *Accord and satisfaction: A debtor offers to pay part of the debt, and the creditor accepts it as full satisfaction; if the creditor accepts, it can make the agreement enforceable.

Answer 76

A debt barred by the statute of limitations is unenforceable in court. However, there’s an exception: the debtor can revive the debt by making a new promise to pay. Nuance: The promise must be voluntary. The promise can be for all or part of the original debt. This rule is recognized at common law and in most jurisdictions. for debts barred by the statute of limitations, new consideration is not required for a promise to pay to be enforceable. *This differs from other contract modifications or promises to pay existing debts. *For an unbarred debt, a promise to pay the same debt usually needs new consideration (like paying early, paying a different form, or forgiving part of the debt). *For a barred debt, the new promise alone (especially if written) is enough. *Many jurisdictions require that a promise to revive a barred debt be in writing. *The debtor can promise to pay less than the full amount of the original debt. That partial promise is enforceable for the amount promised, even if the rest of the debt remains barred. The enforceable amount is limited to the amount of the new promise, not the entire original debt.

Answer 77

General rule: A debtor must pay the creditor directly unless the creditor agrees otherwise. Payment by a third party (like a buyer) is usually not effective unless the creditor has explicitly authorized that arrangement. In contract law, novation (substituting a new party in the obligation) requires consent from all parties—the debtor, the creditor, and the third party. Nuance: Even if the dealer asked the buyer to pay the bank, the bank has discretion to refuse payment from a third party. Authorization by phone can be binding, but it must be clear and unequivocal. Ambiguity may favor the bank’s claim.

Answer 78

Contract modification requires mutual agreement between the parties to the original contract. *Revocation of modification is possible if the other party has not relied substantially on the modified arrangement or if the modification was conditional. Nuance: Courts often look at whether the debtor relied on the modified payment schedule. If the debtor acted on the installment plan, some jurisdictions might require the creditor to honor it. Consent to a particular arrangement is usually strictly construed. The creditor may consent to installment payments from the debtor only, and may not automatically extend consent to payment by a third party, unless explicitly agreed.

Answer 79

Once a debt is due, a creditor has a right to demand immediate payment, unless a valid modification or waiver exists. Telephone agreements can modify payment terms, but the scope of the agreement matters—did it cover payment by a third party, or just the debtor directly? Courts often examine whether the creditor’s actions were consistent with the modification. Nuances: Who can pay? Only those explicitly authorized by the creditor. Method of modification: Oral modifications are valid but must be clear and intended to alter the original contract. Creditor’s rights: Creditor can often insist on original payment terms if the modification does not clearly extend to third-party payments. Reliance matters: If the debtor relied on the modification, courts may limit the creditor’s ability to demand immediate full payment, but only if the modification was broad enough.

Answer 80

Rule: Disclaimer of implied warranties must be conspicuous and use language like “as is” or “with all faults.” Disclaimer of consequential damages: Under UCC 2-719: Parties can limit or exclude consequential damages unless unconscionable. May not be enforceable if it fails to include damages that were foreseeable or arises after the contract is formed. Nuances: Timing of disclaimer: A disclaimer in a post-delivery acknowledgment may not modify the contract, especially if the contract was already formed by shipment and acceptance. Consequential vs. direct damages: Direct damages: Cost to repair/replace defective goods. Consequential damages: Lost profits, business interruption, or other indirect losses. Knowledge requirement: A disclaimer may be ineffective if the seller knew the buyer would suffer consequential losses from defects. BUYERS REMEDIES Rule: When goods fail to conform: Rejection or revocation of acceptance (if nonconformity substantially impairs value and was not discovered on inspection). Damages: May include: Direct damages: Cost to repair/replace defective goods. Consequential damages: Losses resulting from use of defective goods (UCC 2-715). Nuances: Mitigation: Buyer must take reasonable steps to reduce damages (e.g., recall). Notice requirement: Buyer must notify seller within a reasonable time after discovering defect. Integration with disclaimer: Disclaimers attempting to eliminate consequential damages may be subject to unconscionability or timing issues.

Answer 81

General Rule: An adhesion contract is a standard-form contract offered by a party with stronger bargaining power to a weaker party on a “take-it-or-leave-it” basis. Such contracts are not automatically unenforceable, but courts may closely scrutinize them for unconscionability or unfair terms. Nuances Formation and Consent: *The weaker party does not have meaningful opportunity to negotiate terms. *Lack of negotiation does not automatically void the contract, but may support a claim of procedural unconscionability. Enforceability: *Courts will enforce reasonable terms in adhesion contracts. *Unreasonably one-sided or oppressive terms may be struck down as substantively unconscionable. Typical Characteristics: *Fine print or boilerplate language *Non-negotiable *Terms that limit liability or shift all risk to the weaker party *Often used in insurance contracts, leases, consumer transactions, and online agreements Relationship with Unconscionability: *Adhesion contracts often trigger procedural unconscionability analysis, especially when combined with oppressive terms. Courts generally require both procedural and substantive unconscionability, though extreme substantive unconscionability alone may sometimes invalidate the contract. Remedies / Court Action: Court may: *Sever unconscionable clauses, *Limit enforcement, or *Refuse enforcement of the entire contract if the unfairness is extreme. Bar Exam Tip: *Always ask: **Was the contract presented on a take-it-or-leave-it basis? **Were there terms that were hidden, confusing, or oppressive? **Would enforcing the term shock the conscience?

Answer 82

Sequence of conduct between parties in prior transactions establishes a common basis of understanding. Rule (UCC §1-303(b)): A course of dealing is the sequence of conduct between the parties in prior transactions that establishes a common understanding for interpreting their agreements. Prior conduct can explain, supplement, or qualify express terms in a new contract. Nuances: *Specific to the parties: Unlike trade usage, this is party-specific. *Consistency: Requires repeated prior dealings that create reasonable expectations. *Overrides trade usage: Where course of dealing and trade usage conflict, the parties’ course of dealing generally prevails. Reliance matters: Can create implied contractual rights or waivers if one party has consistently accepted certain performance or behavior.

Answer 83

Rule (UCC §1-303(c)): A trade usage is a practice or method of dealing that is regularly observed and followed in a trade or industry. Trade usage can supplement or interpret the terms of a contract for the sale of goods. Practices regularly observed in the industry can supplement or interpret contract terms. Nuances: *Scope: Applies to the industry or trade in general, not just between the parties. *Consistency required: Must be regularly observed and reasonably known in the industry. *Limitations: If the parties’ course of dealing or course of performance conflicts with trade usage, the specific conduct of the parties prevails. Bar tip: Trade usage often shows customary terms, e.g., typical discounts, delivery practices, or inspection periods.

Answer 84

Conduct under the current contract may also show waiver or understanding. Rule (UCC §2-208): A course of performance is the conduct under the current agreement between the parties that shows how they interpret or apply the contract terms. *It can supplement or explain contract terms when the contract involves repeated occasions for performance. Nuances: *Requires repeated performance: Must involve more than a single instance to establish a pattern. *Binding effect: Can demonstrate waiver or modification of contractual terms by mutual assent through conduct. Overrides trade usage or course of dealing? Only if the course of performance is inconsistent with prior understandings, and the parties accept it without objection.

Answer 85

Order of precedence: 1: Course of Performance (current contract) 2: Course of Dealing (past contracts between same parties) 3: Trade Usage (general industry practice) Always check for: Consistency with the contract terms Prior acceptance or objection Reasonable expectations created by conduct

Answer 86

A party to a contract may delegate performance of contractual duties to a third person unless (i) the contract prohibits delegation, (ii) the duties are personal in nature or require special skill, judgment, or discretion, or (iii) delegation would materially change the obligee’s expectations or risk. A contract term prohibiting “assignment” does not automatically prohibit delegation, unless performance by a particular party is essential. Delegation does not relieve the delegating party of liability for performance unless the obligee agrees to a novation. Nuances: The delegatee may also become liable if they expressly or impliedly assume the duty. The obligee can sue: The delegator, and The delegatee (if assumed)

Answer 87

Duties under a personal service contract are not delegable. Personal services are involved Based on personal skill, taste, reputation, or trust The contract expressly forbids delegation Delegation would materially alter: The obligee’s expected performance, or The risk of nonperformance Examples commonly tested: Artists, professionals, tutors, lawyers, doctors Output/requirements contracts tied to a specific part Courts enforce express anti-delegation clauses. Language like “this contract may not be assigned or delegated” clearly bars delegation. Silence on delegation → delegation usually permitted, subject to the exceptions.

Answer 88

Gratuitious vs. K delgation Whether the delegatee is paid or unpaid does not control validity. The key question is whether the obligee’s interest is materially affected. Common Law Delegation generally allowed unless personal or restricted. UCC (Sale of Goods) Rule: Delegation is permitted unless it would materially impair the other party’s expectation of performance. Nuances: If reasonable grounds for insecurity arise, the obligee may: Demand adequate assurances Suspend performance pending assurance Delegation = transfer of duties Assignment = transfer of rights Delegation to an Incapable Party Rule: Delegation to someone incapable or unlikely to perform is still a breach if performance ultimately fails. Nuance: Delegation itself is not a breach — nonperformance is.

Answer 89

Validates a proir unauthorized act. must ratify the entire transaction or none of it. Ratification requires knowledge of material facts, not minor details.Ratification relates back to the time of the original act, treating it as authorized from the beginning. Only a person who: Existed at the time of the contract, and Had capacity to contract Corporations can ratify pre-incorporation contracts after formation.

Answer 90

To affirm a contract is to knowingly approve or adopt it, either expressly or by conduct, with intent to be bound.

Answer 91

False statement of material fact Made to induce assent Justifiably relied upon Innocent misrepresentation = voidable Fraud = voidable + damages

Answer 92

Improper threat No reasonable alternative Contract is voidable by the victim of duress

Answer 93

Unfair persuasion Relationship of trust or dominance Classic: caregiver, attorney, spiritual advisor

Answer 94

Minors Mentally incapacitated persons Intoxicated persons (if unable to understand) Minor can disaffirm before or within a reasonable time after majority K voidable by minor

Answer 95

Both parties mistaken about a basic assumption Material effect on the exchange Contract may be rescinded

Answer 96

1. contract must identify beneficiary 2. promise or performance must go directly to them 3. intent to benefit third party Rights vest when the beneficiary: Manifests assent, Brings suit, OR Materially changes position in reliance. After vesting: The original parties cannot modify or rescind without consent.

Answer 97

A third-party beneficiary contract exists when: The contracting parties intend to confer a benefit on a third party. That third party may enforce the contract if their rights have vested. An intended third-party beneficiary may enforce the contract once rights vest. Incidental beneficiaries have no enforcement rights.

Answer 98

promise satisfies a debt owed to third party can enforce contract rights before parties can recind or modify, needs creditor beneficiary consent | rights arise from the contract

Answer 99

promise is a gift to a third party can enforce K rights before parties can rescind or modify, need donee beneficiary consent | rights arise from the contract

Answer 100

Assignment is the transfer of contractual rights from assignor to assignee. Only rights (benefits) are transferred. no consideration req Most contractual rights are assignable unless: The contract prohibits assignment, Assignment materially changes obligor’s duty, Assignment increases burden or risk, The right involves personal services, The right is already fully performed. | Rights arise after contract formation by transfer.

Answer 101

Delegation is the transfer of contractual duties from delegator to delegatee. Only duties (burdens) are transferred. Contract prohibits delegation, The duty involves personal skill or special trust, Delegation would materially change performance. No consent needed unless contract requires it. Delegation does NOT relieve the original party of liability. Delegator remains liable unless there is a novation.

Answer 102

A novation is a new agreement that replaces one party with another and releases the original obligor. Requires: Previous valid contract, Agreement of all parties, Extinguishment of old duty, New valid contract. After novation: Original obligor is discharged. Without novation: Original obligor remains secondarily liable.

Answer 103

UCC 2-205 Requirements: Merchant Signed writing Assures offer held open Irrevocable for: Time stated OR Reasonable time (max 3 months) No consideration required.

Contracts Flashcards

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