Contracts

Question 1

Contract

Answer 1

A contract is a bargained for exchange between two people

Question 2

UCC

Answer 2

Goods = (movable tangible property)
Merchants = regularly deal in goods of that kind

Question 3

Contract Formation

Answer 3

Offer
Acceptance
Consideration

Question 4

Offer

Answer 4

• Intent to enter into contract
• definite terms (quantity, parties, UCC =price)
• communicated to the offeree

Question 5

Irrevocable offers

Answer 5

1. UCC firm offer rule
2. Option Contract
3. Detrimental Reliance

Question 6

UCC firm offer

Answer 6

• merchant
• signed writing
• 3 months max to keep offer open

Question 7

Option Contract

Answer 7

Common law contracts that an offer will be held open . Consideration is required and offer will be irrevocable during the stated option period

When a general contractor submits a bid on a construction project and secures a bid from a subcontractor for a part of the work, the subcontractor is binded to the contract and there is now a option contract

Question 8

Detrimental Reliance

Answer 8

Offer will be irrevocable if offeree has detrimentally relied on the offer or performed in part

Unilateral contract = once performance has begun the offer is temporarily irrevocable

Bilateral Contract = detrimental reliance

Question 9

Acceptance

Answer 9

-must be within a reasonable time
-mirror image rule (acceptance must be the precise image of the offer otherwise its a rejection and a counteroffer)
-UCC added term
*if not a marchant, proposal only
*if both merchants; then the term is added
except if material or objection within a
reasonable time

Question 10

Acceptance Terminated

Answer 10

• rejection
• counteroffer
• revocation
• lapse of time
• death or incapacity

Question 11

Consideration

Answer 11

A bargained for exchange of legal detriment or benefit. Can be a promise to do something or not to do something

A promise to not sue is sufficient consideration even if the claim turns out to be invalid, so long as the person promising not to sue has a good faith belief its valid

Question 12

Inadequate Consideration

Answer 12

1. gifts
2. past consideration
3. pre-exisiting duty rule

Question 13

Defenses to Formation

Answer 13

1. SOF
2. Misrepresentation
3. Unconscionability (unfair)
4. Mistake (mutual mistake)
5. Capacity
6. Duress

Question 14

Contract Terms

Answer 14

1. Conditions
2. Parol Evidence
3. Modification
4. 3rd Party Beneficiaries
5. Assignment
6. Delegation
7. Novation

Question 15

Conditions

Answer 15

Must occur before performance is due

Question 16

Parol Evidence

Answer 16

Limits what evidence made before the signed written contract is considered part of the agreement.

Partial integration = not allowed to contradict terms but can be used

Final Integration = all statements made before agreement cannot be admitted a evidence except

a. fraud
b. mistake
c. illegality
d. duress
e. partial integration
f. conditions precedent
h. ambiguous terms
i. usage of trade

Parol evidence is admissible to attack a contract on the grounds of fraud

Even if a agreement is completely integrated the contract can still be reformed for mutual mistake. Parol evidence does not apply if a party to a valid agreement alleges facts that entitle him to reformation of the agreement

Question 17

Modification/Reformation

Answer 17

Common Law = need mutual assent and consideration

UCC= need only good faith

SOF = if modification falls within SOF, it must be in writing

If there is a difference between the original agreement and the writing, the writing can be reformed to reflect the intent of the parties. A plaintiff who wants to obtain reformation of a contract must show that the agreement does not correctly reflect the contract because of a mistake.

Question 18

3rd Party Beneficiaries

Answer 18

A person who is suppose to benefit from the contract but who is not already a party to the contract

Intended (can sue) = rights vest (1) accept promise (2) files suit to enforce (3) materially changes position in reliance

Incidental (cant sue) = incidentally benefits from the contract but not the intent of the promisor

Question 19

Assignment

Answer 19

A party to a contract transfers her rights under the contract to a 3rd party

• no consideration is required
• a gift is allowed
• assignee stands in the shoes

Question 20

Delegation

Answer 20

When a party to an existing contract appoints a 3rd person the duties owed under the contract

• transfers duties
• delegator remains liable
• cant delegate if special skill

Question 21

Novation

Answer 21

Obligee (person recieving performance) agrees to accept performance from a new person. A novation terminates the liability of the delegator. Need assent by all parties

Question 22

Breach

Answer 22

1. Material v. Minor
2. UCC perfect Tender Rule
3. Anticipatory Repudiation
4. Request for Assurances
5. Warranties
6. Accord & Satisfaction

Question 23

Material v. Minor

Answer 23

Material = party doesn’t get substantial benefit of bargain. Not substantial performance on the contract

Minor = Non-breaching party gets the substantial benefit of the bargain despite the other party’s defective performance. A minor breach does not relive the nonbreaching party of her duty to perform under the contract, but will be entitled to remedial damages for the breach.

Question 24

UCC Perfect Tender Rule

Answer 24

• can reject of accept
• sellers have the right to cure any time before performance is due or had a reasonable belief that it would be acceptable

Question 25

Anticipatory Repudiation

Answer 25

- unequivocal statement - wont perform before perfomance date - non repudiating party can: i. sue immediately ii. suspend performance iii. treat as rescinded iv. urge performance

Question 26

Request for Assurances

Answer 26

- reasonable grounds for insecurity - in writing can demand adequate assurance of performance - they must respond

Question 27

Warranties

Answer 27

1. Express 2. Implies Warranty of merchantability (goods fit for ordinary purpose of the goods) 3. Fitness for a particular purpose 4. implied good faith & fair dealing (in every contract)

Question 28

Accord & Satisfaction

Answer 28

- agree to substitute performance - accept the substitute in discharge of existing duty - doesn't discharge original k until performance is met - performance discharges both k - need new consideration - if lesser value, consideration has to be a different type

Question 29

Performance Excused (Defenses)

Answer 29

1. Misrepresentation/Fruad/Duress 2. Condition Precedent not met 3 .Impossibility 4. Impractiability 5. Frustration of Purpose 6. Mututality 7. Unconscionability 8. Lack of Capacity 9. Illegality

Question 30

Remedies

Answer 30

1. Expection Damges 2. Consequential Damages 3. Reliance Damages 4. Liquidated Damages 5. Nominal Damages 6. Quasi Contract 7. Replevin 8. Ejectment 9. Reformation 10. Rescission 11. Specific Performance

Question 31

Expectation Damages

Answer 31

Put the non-breaching party in the position as if the if the contract was performed

Question 32

Consequential Damages

Answer 32

- Foreseeable consequences - unique to the plaintiff - compensate for damages that are foreseeable consequences of nonperformance (lost profits)

Question 33

Reliance Damages

Answer 33

As if K was never made

Question 34

Liquidated Damages

Answer 34

Difficult to calculate and must be reasonable

Question 35

Quasi contract

Answer 35

D derived a benefit and it is unfair to allow D to keep it

Question 36

Specific Performance

Answer 36

1. Valid Contract 2. Legal remedies inadequate 3. Mutuality (both bound) 4. Feasible to enforce 5. No defenses (laches or unclean hands)

Question 37

Damages for Non-delivery or Repudiation of Contract

Answer 37

The difference between the market price at the time the non-breaching party learned of the breach and the contract price together with incidental and consequential damages. The date of the contract isnt the date to determine damages

Question 38

Accomodation

Answer 38

By sending a prompt shipment of non conforming goods, a seller is accepting the offer and breaching the contract at the same time. The buyer can then accept them or reject them. If the buyer rejects the non-conforming good, the buyer can then sue for breach. BUT if its an accomodation, the shipment of non-conforming goods will not result in a breach of contract. The buyer can choose to accept the accommodation which will be considered a counteroffer and a new contract is formed. If the buyer rejects the accommodation, a contract does not exist and the buyer can sue for breach

Question 39

Pre-existing duty Rule

Answer 39

Absent unanticipated circumstances, a modification solely for the benefit of one of the parties is generally enforceable in contracts not governed by the UCC EX: Contractor asks $1500 more because he would lose money from a clerical error. Paying the additional $1500 would benefit the contractor only