Contracts Basics

Question 1

Define Contract

Answer 1

An agreement between two or more parties as to something in the future that has legal effect

Question 2

Governing Sources of Contract Law

Answer 2

1. Judicial Opinions (usually state court)
2. Statutory Law (primarily UCC as adopted by state legislatures)
3. Restatements
4. Legal Commentary such as treatises and review articles
5. International Contract Law like the Convention on the International Sale of Goods (CISG)

Question 3

Governing Agreement for the Sale of Goods

Answer 3

UCC

Question 4

Governing authority if countries have all ratified agreement

Answer 4

CISG

Question 5

Elements of a Contract

Answer 5

A meeting of the minds (mutual assent) has to occur for a proper K

1. Offer
2. Acceptance
3. Consideration

Question 6

Define Offer

Answer 6

A proposal that includes an intent to be bound. Use the objective reasonable person test.

May be revoked prior to acceptance. Exceptions: promissory estoppel, statutes prohibiting revocation, firm offers UCC, option contracts

Question 7

Define Acceptance

Answer 7

A communicated intent to be bound to the offeror. Use the objective reasonable person test.

Must mirror offer or it is rejection-counteroffer. May not accept after learned offer revoked.

Mailbox rule, acceptance when dispatched.

Question 8

Define Consideration

Answer 8

The parties have considered the agreement and received what they sought.

1. A bargained-for exchange
2. A benefit/detriment test

Exceptions:

• Mere inadequacy (must be gross inadequacy that shocks the conscience)
• Illusory Promise
• Nominal consideration - pretext is not consideration
• Past consideration
• Moral duty
• Gifts (even conditional gifts)

Question 9

Assignment Rules

Answer 9

General rule - Ks are freely alienable . . . May assign. In a full assignment, assignee gets all rights and assignor no longer has rights. Assignment may not materially increase burden or risk of obligor. Assignment may be limited for public policy, material adverse effect on obligor, by K or by federal/state statute.

Issues:

• Assignor - the one who sells the K right
• Assignee - the buyer of the K right
• Obligor - the one who has original duty under K
• Obligee - the one to whom duty to perform is owed
• Delegate - one who agrees to perform obligor’ s duty

Question 10

Delegation Rule

Answer 10

Deals with K duties . . . Duty to perform part of the K may be delegated to another if the duty is not personal in nature (particular artist, attorney, doctor services) without consent of obligee. If delegate fails to perform, obligor still has duty to perform.