Contracts

Infancy doctrine

- a doctrine that allows minor to disaffirm (cancel) most contracts that they have entered into with adults. Public policy reason: kids should be protected from unscrupulous behavior of adults. -Contract is voidable by minor but not by adult. -Minor must disaffirm entire contract. -Minor can disaffirm anytime during minority and for a reasonable period after majority.

Reformation

- an equitable doctrine that permits the court to rewrite a contract to express the parties' true intentions. Example: clerical error dispute.

Common Law

- based on legal principles in earlier case law (precedent) instead of statutory law -governs all contracts except when modified by statutory law, such as the UCC. (services, real estate, employment, and insurance) - reasonable person standard -good faith implied

Commercial Impracticability

--nonperformance that is excused if an extreme or unexpected development (not the fault of the party) makes it impractical for the promisor to perform. The party must not have assumed the risk. --Force Majeure Clauses - agree in contract that certain events excuse nonperformance of the contract; -floods -earthquakes -tornadoes -labor strikes -acts of war -terrorism

Anticipatory Breach (Anticipatory Repudiation)

-A breach that occurs when one contracting party informs the other that he or she will not perform his or her contractual duties when due. -Non-breaching party's duties are discharged immediately -Right to sue immediately -Until the non-breaching party treats the repudiation as a breach (sues or finds a substitute) or the actual time for performance has passed, the repudiating party can retract his anticipatory repudiation by proper notice and restore the parties to their original obligations

Exculpatory Clauses

-A contractual provision that relieves one (or both) parties to the contract from tort liability for ordinary negligence. -Cannot be used if willful conduct, intentional torts, fraud, recklessness, or gross negligence -Courts do not favor them unless parties are of equal bargaining power. -If against public interest or result from superior bargaining power, then void against public policy (doctors and hospitals example)

Necessaries for life

-A minor must pay the reasonable value of food, clothing, shelter, medical care, and other items considered necessary to the maintenance of life. -Look at minor's age, lifestyle and status in life (married or unmarried)

Misrepresentation of a past or existing material fact

-A misrepresentation occurs when an assertion is made that is not in accord with the facts. Misrepresentation can occur by conduct/concealment. -A statement of opinion is not usually enough unless it is an expert's opinion; puffery is not fraud. -Misrepresentations of the law are not enough unless made by an expert such as a lawyer. All are presumed to know the law. -voidable by the innocent party

MUTUAL MISTAKE

-A mistake made by both parties concerning a past or existing material fact that is important to the subject matter of the contract. -Material fact is one that is important to the subject matter of the contract. -Either party may rescind if there is a mutual mistake of a material fact. -An ambiguity in a contract may be a mutual mistake - word or term in a contract is susceptible to more than one logical interpretation.

Incidental Beneficiary

-A party who is unintentionally benefited by other people's contract -No legal rights to enforce contract

Accord and Satisfaction

-Accord is when parties agree to accept something different in satisfaction of the original contract. It does not discharge the original contract - it only suspends it. -The performance of the accord is called satisfaction. Satisfaction of the accord discharges the original contract and the accord. -If accord is not satisfied then may enforce either the accord or the original contract.

Promissory Estoppel (or detrimental reliance)

-An equitable doctrine that prevents the withdrawal of a promise by a promisor if it will adversely affect a promisee who has adjusted his or her position in justifiable reliance. - Not a breach of contract because it is lacking one of the elements such as agreement or consideration. However, in order to be equitable, the court will enforce the arrangement as if it was a valid contract.

Insane but not adjudged insane

-Contracts are voidable only by insane person -must be able to return consideration -Liable in quasi-contract to pay the reasonable value for necessaries.

Adjudged Insane

-Court appoints guardian -Contracts signed are void - no contract exists; cannot be ratified.

UNDUE INFLUENCE

-Equitable doctrine that permits rescission of contract if there has been undue influence. -Occurs when one person takes advantage of another person's mental, emotional, or physical weakness and unduly persuades that person to enter into a contract. -Voidable by innocent party Elements: 1. A fiduciary or confidential relationship must have existed between the parties 2. The dominant party must have unduly used his or her influence to persuade the servient party to enter into the contract.

Quasi Contract (Implied in LAW)

-Equitable doctrine that provides that the court may award monetary damages to a plaintiff for providing work or services to a defendant even though no actual contract existed between the parties -intended to prevent unjust enrichment and unjust detriment -damages based on reasonable value of services -accidentally paint the wrong house but do not stop the painters, must pay for the painting

Bargained-for Exchange

-Exchange that parties engage in that leads to an enforceable contract. In other words, the basis for the bargain -Gratuitous promises or gift promises are unenforceable because they lack consideration. (However, a completed gift promise cannot be rescinded for lack of consideration)

Contracts Contrary to Statutes

-Gambling statutes -Usury laws -Licensing Statutes

Justifiable reliance by the innocent party

-If an innocent party knew the misrepresentation was false or should have known (through inspection, for instance), then there was no justifiable reliance. -voidable by the innocent party

LEGALITY

-Illegal contracts are void -contract to perform an illegal act -Can't sue for performance - if executed, courts will leave you where they find you. -If contract contains an illegal term that does not taint the whole contract, the court may enforce legal portion only.

Mentally Incompetent Persons

-Mental illness, brain damage, mental retardation, senility -Law protects them because they may not understand the consequences of their actions in entering into a contract

DURESS

-Occurs where one party threatens to do some wrongful act (improper threat) unless the other party enters into a contract. Assent is not voluntary; contract not enforceable against innocent party. -Voidable by innocent party. (VOID if physical harm threatened)

Substantial Performance: Minor Breach

-Performance by a contracting party that deviates only slightly from complete performance. Non-breaching party may: -Convince the breaching party to elevate his or her performance to complete performance -Deduct the cost to repair the deviation -Sue the breaching party to recover the cost to repair the defect if the breaching party has already been paid

Enforceable Contracts Without Consideration

-Promises to perform prior unenforceable obligations such as those barred by statute of limitations -Promises to pay debt discharged in bankruptcy -Voidable promises that you later agree to perform when of age/sane.

Ratification

-The act of a minor after the minor has reached the age of majority by which he or she accepts a contract entered into when he or she was a minor. Contract can be expressly or impliedly ratified. -Must be disaffirmed by age majority or reasonable time thereafter.

Unconscionable contracts

-Unconscionability is a doctrine under which courts may deny enforcement of unfair or oppressive contracts -Equitable remedy used when stronger parties take advantage of weaker parties

Intoxicated Person

-Voidable by intoxicated person (point of incompetence) -Had to be incapable of understanding or comprehending the nature of the transaction. -Must be able to return all consideration received. -Quasi-contract for necessities

Illusionary Promises

-a contract into which parties enter, but one or both of the parties can choose not to perform their contractual obligations. Thus, the contract lacks consideration -Sell my car if I have time or after my fourth kid

Acceptance upon dispatch rule and the mailbox rule

-as soon as it sends -acceptance effective upon dispatch -even if lost in transmission -avoid this by stating effective only upon receipt

Void Contract

-contract that has no legal effect -a nullity

Unenforceable Contract

-contract where the essential elements to create a valid contract are met but there is some legal defense to the enforcement of the contract -statute of limitations -statute of fraud - have to be in writing

Liquidated Damages

-damages that are specified in the contract rather than determined by the court. They are damages that parties contract for in advance. -To be lawful, the actual damages must be difficult or impracticable to determine and the liquidated amount must be reasonable, not punitive

Executed Contract

-fully preformed on both sides -completed contract

UCC (Uniform Commercial Code)

-governs commercial transactions -sale of goods (tangible property) -helps create uniformity between sales between states -All states adopted UCC except Louisiana

Executory

-has not been fully preformed on both sides -given car but has not paid

Definite Offer

-identification of the parties -identification of the subject matter -quantity (UCC exception) -Consideration to be paid (common law must have price) -time of performance

Implied in FACT Contract

-implied from the conduct of the parties -hair cut, buy a coke, dinner at a restaurant Elements: -the plaintiff provided property or services to the defendant -the plaintiff expected to be paid by the defendant for the property or services and did not provide the property or services graciously -the defendant was given an opportunity to reject the property or services provided by the plaintiff but failed to do so

Intent to deceive (scienter)

-intentional misrepresentation - person consciously decides to induce another person to rely and act on the misrepresentation. -Gross negligence satisfies this element -Constructive fraud - misrepresentation made with willful and reckless disregard for the truth. -voidable by the innocent party

Minors

-lack full contractual capacity because of age -age of majority in most states is 18; unless emancipated

Impossibility of Performance

-nonperformance that is excused if the contract becomes impossible to perform. -Must be objective impossibility not subjective. In other words, it must be "it can't be done" rather than "I cannot do it' -If performance is partially impossible, discharge is partial. -Death or incapacity of the promisor prior to the performance of a personal service contract. -Destruction of subject matter of a contract prior to performance.

Advertisements

-not usually offers by invitations to make an offer -some advertisements can be offers if they contain definite terms -"the first 5 shoppers get a free gift with purchase"

Option Contract

-offeree pays offeror for right to accept or reject over a specified period of time -prevents offeror from revoking offer

Voidable Contract

-one or more parties have the option to avoid their contractual agreement -if avoided, both parties are released from obligations and can recover consideration -if ratified, parties must perform fully

Express Contract

-oral or written -terms explicitly stated -lease

Complete performance/strict performance

-performance is rendered exactly as required by the contract - executed -Tender of performance discharges a party's contractual obligations. -Tender is an unconditional and absolute offer by a contracting party to perform his or her obligations under the contract.

Bilateral Contract

-promise for a promise -no act is required - the exchange of promises creates an enforceable contract -both parties promise

Unilateral Contract

-promise for an act -no contract until the offeree performs the requested act -I will pay you $20 dollars if you complete the marathon

Legally Sufficient Value

-the promisee suffers a legal detriment or -the promisor receives a legal benefit -Written contracts are presumed to be supported by consideration

Minor's duty of restoration

-usually a minor is obligated only to return the goods or property he or she has received from the adult in the condition they are in at the time of disaffirmance. (Note: a growing number of states are requiring the minor to restore the adult party to the position he held before the contract was made by paying for damage, ordinary wear and tear, and depreciation) -Exception: in most states a minor has to pay damages if destruction of adult's property is from minor's intentional or gross negligent conduct. Some states (not the majority) don't allow disaffirmance if minor misrepresented age

Auctions

-with reverse are not offers but invitations to make an offer -the bid is an offer -the seller doesn't have to accept the bid -without reserve, the highest bid must be accepted

Elements of Promissory Estoppel

1) the promisor made a promise (2) the promisor should have reasonably expected to induce the promisee to rely on the promise (3) the promisee actually relied on the promise and engaged in an action or forbearance of a right of definite and substantial nature (4) injustice/damages would be caused if the promise were not enforced.

Contracts required to be in writing:

1. Contracts involving interests in real property (land, buildings, trees, soil, minerals, timber, fixtures). Example: If Susan contracts orally to sell land to Betty but later decides not to sell, under most circumstances Betty cannot enforce the contract. -Mortgages -Leases- usually if less than a year, then it doesn't have to be in writing -Life estates-person has interest in the land for the person's lifetime and that interest will be transferred to another party on that person's death. -Easements - a given or required right to use another person's land without owning or leasing it. - Express or implied. Express easements must be in writing to be enforceable; implied ones need not be written. -Agents' Contracts (some states)- equitable dignity rule. A rule that says that agents' contracts to sell real estate must be in writing 2. One-year rule - an executory contract that cannot be performed by its own terms within one year from the day after the contract is formed must be in writing. 3. Collateral Promises -Collateral contract or guaranty contract occurs when one person agrees to answer for the debts or duties of another person. -At least three parties and two contracts -Original contract/primary is between the debtor and the creditor; doesn't have to be in writing unless another provision requires it. -Second contract, guaranty contract, is between the person (the guarantor) who agrees to pay the debt if the primary debtor does not and the original creditor. This agreement has to be in writing. Liability only arises if primary debtor does not pay. -Exception: Main purpose rule. If promise is for the benefit of the surety/guarantor, not the debtor, then it doesn't have to be in writing. 4. Contracts for the sale of goods for $500 or more. 5. Agreements of an executor or an administrator to pay debt of decedent must be in writing. 6. Promises made in consideration of marriage.

Exceptions to the writing requirement

1. Promissory estoppel -allows enforcement of oral contracts that should have been in writing if: -Promise induced action or forbearance of action by another -Reliance on oral promise was foreseeable -Injustice can be avoided only by enforcing the oral promise 2. Partial Performance - An oral contract for the sale of land may be enforced when the contract has been partially performed (more than a deposit) 3. Admissions - K enforceable to the extent admitted in court. 4. Merchant written confirmation exception. See UCC (Sales).

Exceptions to Unilateral Mistake that would be enforceable

1. The other party knows or should have known that a mistake has been made. 2. Mistake occurs because of a clerical or mathematical error that is not the result of gross negligence 3. The mistake was due to fraud, duress, or undue influence. 4. The mistake is so serious that enforcing the contract would be unconscionable. (take-it-or-leave it adhesion contracts - unequal bargaining power.)

Valid Contract

1. agreement/mutual assent - offer and acceptance 2. consideration - bargained for exchange and legal value 3. contactual capacity 4. lawful object or legal

Termination by operation of law

1. lapse of time 2. death or incompetence of the offeror or offeree 3. destruction of the subject matter 4. supervening illegality

Termination by action of parties

1. offeror may revoke an offer any time prior to acceptance by the offeree 2. offeree rejects it 3. any attempt to accept by the offeree after rejection is a counteroffer

Requirements of an offer

1. the offer must objectively intend to be bound by the offer 2. the terms of the offer must be definite or reasonably certain 3. the offer must be communicated to the offeree

Intended Beneficiaries

A third party who is not in privity of contract but who has rights under the contract and can enforce the contract against the obligor.

On October 1, Arthur mailed to Madison an offer to sell a tract of land located in Summerville for $13,000. Acceptance was to be no later than October 10. Madison posted his acceptance on the 6th of October. The acceptance arrived on October 7. On October 4, Arthur sold the tract in question to Larson and mailed to Madison a notice of the sale. That letter arrived on October 6 just after Madison had dispatched his letter of acceptance. Which of the following is correct? A. There was a valid acceptance of Arthur's offer on the day Madison posted his acceptance. B. Arthur's offer was effectively revoked by the sale of land to Larson on October 4. C. Arthur could not revoke the offer to sell the land until after Oct. 10 D. Madison's acceptance was not valid since he was deemed to have notice of revocation prior to the acceptance.

A. There was a valid acceptance of Arthur's offer on the day Madison posted his acceptance.

On July 1, Silk sent Blue a letter to sell Blue a building for $80,000. In the letter, Silk stated that it would give Blue 30 days to accept the offer. On July 15, Blue sent Silk a letter that included the following statement: "The price for your building seems too high. Would you consider taking $74,000?" This letter was received by Silk on July 16. On July 19, Tint made an offer to purchase the building for $82,000. Upon learning of Tint's offer, Blue, on July 27, sent Silk a signed letter agreeing to purchase the building for $80,000. This letter was received by Silk on July 29. However, Silk now refuses to sell Blue the building. If Blue commences an action against Silk for breach of contract, Blue will: A. Win, because Blue effectively accepted Silk's offer on July 27. B. Win, because Blue effectively accepted Silk's offer on July 29. C. Win, because Silk was obligated to keep the offer open for the 30-day period. D. Lose, because Blue sent the July 15 letter.

A. Win, because Blue effectively accepted Silk's offer on July 27.

Mail box rule exception

Acceptance following a prior rejection. If an offeree sends a rejection and then changes his mind and sends an acceptance, then whichever one the offeror receives first is valid. If the acceptance is received first, then there is a contract. If the rejection is received first, then the acceptance is not valid.

CAPACITY TO CONTRACT

An individual must have the legal capacity to enter into a contract. The following lack full capacity to contract: minors, insane persons, and intoxicated persons

Stable Corp. offered in a signed writing to sell Mix an office building for $350,000. The offer, which was sent by Stable on April 1, indicated that it would be open until July 9. On July 5, Mix mailed a letter rejecting Stable's offer. On July 6, Mix sent a telegram to Stable accepting the original offer. The letter of rejection was received by Stable on July 8 and the telegram of acceptance was received by Stable on July 7. Which of the following is correct? A. Mix's telegram resulted in the formation of a valid K on July 6. B. Mix's telegram resulted in the formation of a valid K on July 7. C. Mix's letter of July 5 terminated Stable's offer when mailed. D. Stable was not entitled to withdraw its offer until July 9. E. Stable's offer on April 1 is a firm offer under the UCC.

B. Mix's telegram resulted in the formation of a valid K on July 7.

Contracts Contrary to Public Policy

Contracts are contrary to public policy if they have a negative impact on society or interfere with the public's safety and welfare

Delegations

Delegation normally does not relieve the delegator of the obligation to perform if the delegatee fails to. Duties that cannot be delegated: -Duties which are personal in nature. -Duties to provide professional services. -Duties to manufacture a distinct class of high-quality goods. -If contract prohibits delegation. -If performance by delegatee would vary materially from that of the delegator.

Statute of Limitations

Duties are not discharged but enforcement is not possible by the courts.

Elements of Unconscionable Contracts

Elements: 1. The parties possessed severely unequal bargaining power 2. The dominant party unreasonably used its unequal bargaining power to obtain oppressive or manifestly unfair contract terms. 3. The adhering party had no reasonable alternative. -Just because unfair, doesn't mean unconscionable -Court can refuse to enforce contract; enforce unconscionable portion.

Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold them to Sharon and disaffirmed the contract. What result? a. Fay is still liable since she had to disaffirm before her 18th birthday. b. Fay is still liable because selling the skis amounted to a ratification. c. Fay is still liable because she used the skis. d. Fay is not liable because skis are not necessaries.

Fay is still liable because selling the skis amounted to a ratification.

INNOCENT MISREPRESENTATION

If misrepresentation is innocent, then contract can be rescinded but no consequential or punitive damages.

NEGLIGENT MISREPRESENTATION

If misrepresentation is negligent (no due care), contract can be rescinded and reliance and consequential damages are available.

Mitigation of Damages

If there is a breach, the law places a duty on the innocent nonbreaching party to take reasonable efforts to mitigate (avoid and reduce) the resulting damages.

Covenants not to compete

Lawful if ancillary to legitimate sale of business or employment contract if reasonable in three respects: 1. the line of business protected 2. geographical area protected 3. the duration of the restriction.

Inferior Performance: Material Breach

Occurs when a party fails to perform express or implied contractual obligations that impair or destroy the essence of the contract Non-breaching party may: • Rescind (cancel) the contract and seek restitution • Sue to recover damages.

UNILATERAL MISTAKES

Occurs when only one party is mistaken about a material fact(not value) regarding the subject matter of the contract.

Quick Corporation has $270,000 of outstanding accounts receivable. On March 10, 1988, Quick assigned a $30,000 account receivable due from Pine, one of Quick's customers, to Taft Bank for value. On March 30, Pine paid Quick the $30,000. On April 5, Taft notified Pine of the March 10 assignment from Quick to Taft. Taft is entitled to collect $30,000 from a. either Quick or Pine. b. neither Quick nor Pine. c. Pine only. d. Quick only.

Quick only

CONSIDERATION

Something of legal value given in exchange for a promise. The inducement to enter into a contract. A bargained for exchange of things of value by the parties.

GENUINENESS OF ASSENT

There are certain situations where a contract may not be enforced even if all of the required elements of a legal contract are met. Certain defenses may be raised against enforcement: • A party's assent must be genuine or real. This may be missing because the parties entered into the contract based on: • Mistake • Fraudulent Misrepresentation • Duress • Undue Influence

Firm offer

UCC - merchant and in writing

Conditions

a conditional promise (or qualified promise); the promisor's duty to perform (or not perform) arises only if the condition does (or does not) occur. It becomes a covenant if the condition is met. i. Contractual language: if, on condition that, provided that, when, after, as soon as, and the like indicates a condition. ii. Conditions can be express or implied.

Release

a contract in which one party forfeits the right to pursue a legal claim against the other party. It bars further recovery beyond the terms of the release.

Contracts in Restraint of Trade

a contract that unreasonably restrains trade - economic policy favors competition.

Immoral Contracts

a contract whose objective is the commission of an act that is considered immoral by society

Injunction

a court order that prohibits a person from doing a certain act. Requesting party must show that he will suffer irreparable injury unless the injunction is issued. (Example, temporary restraining orders)

Past Consideration

a prior act or performance will not support new contract. You need new consideration

Preexisting Duty

a promise lacks consideration if a person promises to perform an act or do something he or she is already under obligation to do

Illegal Consideration

a promise to refrain from doing an illegal act. Such a promise will not support a contract. - Ks based on this are void

Compensatory damages (actual or general damages)

a remedy intended to compensate a non-breaching party for the loss of the bargain. They place the non-breaching party in the same position as if the contract had been fully performed by restoring the benefits of the bargain

Consequential Damages (special damages

a remedy intended to compensate a non-breaching party for the loss of the bargain. They place the non-breaching party in the same position as if the contract had been fully performed by restoring the benefits of the bargain.

Specific performance

a remedy that orders the breaching party to perform the acts promised in the contract; usually awarded in cases where the subject matter is unique, such as contracts involving land, heirlooms, paintings, stamps, rare coins, etc. -Not used for personal services because courts would find it difficult or impracticable to supervise or monitor performance of the contract

Creditor beneficiary

a third party who benefits from a contract in which the promisor promises the promisee to pay a debt that the promisee owes to the third party.

1. There is an existing contract calling for Seller to deliver 1,000 widgets to Buyer. Buyer says to Seller, "I would like to buy 100 additional units at the same price." Seller responds, "We promise to sell you the 100 extra units if we decide not to sell them to other customers." What is true regarding only the sale of the extra 100 units? a. There is no consideration due to an illusory promise. b. There is no consideration due to a preexisting duty. c. There is no consideration due to a past consideration. d. There is consideration due to promissory estoppel. e. There is consideration due to a legal detriment on both sides.

a. There is no consideration due to an illusory promise.

Union Bank lent $200,000 to Wagner. Union required Wagner to obtain a life insurance policy naming Union as beneficiary. While the loan was outstanding, Wagner stopped paying the premiums on the policy. Union paid the premiums, adding the amounts paid to Wagner's loan. Wagner died and the insurance company refused to pay the policy proceeds to Union. Union may a. recover the policy proceeds because it is a creditor beneficiary. b. recover the policy proceeds because it is a donee beneficiary. c. not recover the policy proceeds because it is not in privity of contract with the insurance company. d. not recover the policy proceeds because it is only an incidental beneficiary.

a. recover the policy proceeds because it is a creditor beneficiary.

Jose entered into an oral contract to provide lawn care and snow removal services to Coretta. They created this contract on January 1, 2004. Under the terms of the contract the work was to be performed from September 1, 2004, until March 1, 2005. On January 15, 2004 what is the status of this contract? a. this contract is unenforceable because it violates the one-year rule of the Statute of Frauds b. this contract is enforceable because it satisfies the one-year rule of the Statute of Frauds d. this contract is unenforceable because it was not signed by both Jose and Coretta d. this contract is enforceable because it is a contract for services

a. this contract is unenforceable because it violates the one-year rule of the Statute of Frauds

Contract

an agreement that is enforceable by a court of law or equity. A promise or set of promises for the breach of which the law gives remedy or the performance of which the law in some way recognizes duty

Quasi-contract (implied-in-law)

an equitable doctrine that permits the recovery of compensation even though no enforceable contract exists between the parties (b/c of lack of consideration or statute of frauds, etc..) -prevents unjust enrichment -recover reasonable value of the services or materials provided

Covenants

an unconditional promise to perform. Nonperformance of a covenant is a breach of contract and the other party has the right to sue.

Kristin offers to sell land to Ian for $5,000. Ian says that $5,000 is too much but he will pay $4,000. Kristin says that she will not sell for $4,000. Two days later, Ian says that Kristin's original offer to sell for $5,000 is acceptable. Kristen says she no longer wishes to sell to Ian because he is a jerk. Which of the following is true about this situation? a. There is a valid contract between Kristin and Ian for the sale of the land for $5,000. b. Ian's counteroffer of $4,000 terminated Kristin's original offer, and she does not have to sell. c. If Kristen does not sell to Ian for $5,000, then she cannot sell the land to anyone else for $5,000 or less. d. The land can no longer be sold for $4,000 or less. e. Kristen loses unless she can establish that Ian cannot come up with $5,000 within 10 days.

b. Ian's counteroffer of $4,000 terminated Kristin's original offer, and she does not have to sell.

A and B have a written contract whereby A agrees to sell B a plot of land for $100,000. Later, without terminating the first contract, the parties modify the deal so that A sells B the same plot of land for $125,000. The second agreement: a. Is a contract because no new consideration is needed for a contract modification under the UCC. b. Is not a contract because there is no consideration. c. Is not a contract because A's promise is illusory. d. Is not a contract because written contracts for the sale of land cannot be modified.b. Is not a contract because there is no consideration

b. Is not a contract because there is no consideration

Frank had a bicycle that he advertised for sale, honestly believing it to be a 1999 model when in fact it was a 1996 model. There were significant improvements in the frame material, not readily apparent, made between 1996 and 1999 to this model bicycle. The buyer believed Frank's statements that it was a 1999 model, and was excited to be getting a model incorporating the improvements. The buyer could avoid the contract on the basis of: a. Fraud. b. Mutual mistake. c. Unilateral mistake. d. Either A or B. e. A, B or C.

b. Mutual mistake.

. Sally owns a very expensive fur coat which Mary would like to buy. During the course of conversation, Mary asks how much Sally would take for the coat. Sally replies, "I am not sure I want to sell the coat, but I think it is worth about $3,000." Mary says, "That is a little more than I wanted to spend." Several days later, Mary calls Sally on the telephone and says, "I'll bring over the $3,000 today." Sally refuses to sell the coat, and Mary sues. What is the likely outcome? a. Mary wins because a valid contract was created. b. Sally wins because there was never any offer for Mary to accept. c. Sally wins because when Mary said $3,000 was too much to pay, Mary rejected the offer. d. Sally wins because Mary did not accept the offer in a reasonable manner. e. Mary wins only if she can show she subjectively thought Mary was serious.

b. Sally wins because there was never any offer for Mary to accept.

In violation of a state licensing statute, Jones purports to be an attorney. After making that allegation, he contracts to perform legal service for Smith. Smith then pays Jones a $500 retainer. Later, after discovering that Jones is not licensed and therefore cannot get the job done, Smith sues Jones for the $500. What is the most likely result, and why? a. Smith definitely wins, because here we have a revenue-raising statute. b. Smith probably wins, because parties for whose protection a regulatory statute has been enacted often can recover amounts paid under a contract declared illegal by the statute. c. Smith definitely loses, because here we have a regulatory statute. d. Smith probably loses, because the law obligates one to check the licensure of a professional with whom one deals.

b. Smith probably wins, because parties for whose protection a regulatory statute has been enacted often can recover amounts paid under a contract declared illegal by the statute.

Ward is attempting to introduce oral evidence in an action relating to a written contract between Ward and Weaver. Weaver has pleaded the parole evidence rule. Ward will be prohibited from introducing parole evidence if it relates to a. a modification made several days after the contract was executed. b. a change in the meaning of an unambiguous provision in the contract. c. fraud in the inducement. d. an obvious error in drafting.

b. a change in the meaning of an unambiguous provision in the contract.

Nagel and Fields entered into a contract in which Nagel was obligated to deliver certain goods to Fields by September 10. On September 3, Nagel told Fields that Nagel had no intention of delivering the goods required by the contract. Prior to September 10, Fields may successfully sue Nagel under the doctrine of: a. promissory estoppel. b. anticipatory repudiation. c. accord and satisfaction d. substantial performance.

b. anticipatory repudiation.

Carlos tells Sally he will sell her his car for $5,000. Sally agrees. The exchange is to take place in ten days. The contract between Carlos and Sally is now: a. unilateral, executory, and valid b. bilateral, executed, and voidable c. bilateral, executory, and express d. bilateral, executory, and implied

bilateral, executory, and express

. King sent Foster, a real estate developer, a signed offer to sell a specified parcel of land to Foster for $200,000. King, an engineer, had inherited the land. On the same day that King's letter was received, Foster telephoned King and accepted the offer. Which of the following statements is correct under the Statute of Frauds? a. No contract was formed because Foster did not sign the offer. b. No contract was formed because King is not a merchant and, therefore, King's letter is not binding on Foster. c. A contract was formed, although it would be enforceable only against King. d. A contract was formed and would be enforceable against both King and Foster because Foster is a merchant.

c. A contract was formed, although it would be enforceable only against King.

. X sells a house to Y for $300,000. Before selling the house, X forgets to tell Y about a leaky faucet in a little-used sink in the basement (which would cost about $10 to fix). Y inspected the house, but just didn't notice the faucet. Later, Y wants to rescind the deal on the basis of fraud or misrepresentation because of the leaky faucet. Which of the following is the best reason why Y cannot rescind? a. Because Y didn't make an express misstatement regarding the faucet, but merely said nothing. b. Because Y's failure to notice the leaky faucet means that he did not justifiably rely on X's "misstatement." c. Because X's failure to disclose the condition of the faucet is not material. d. Because X didn't do anything to actively hide the leaky faucet.

c. Because X's failure to disclose the condition of the faucet is not material.

Which of the following best illustrates duress? a. Bob was to deliver goods worth $500 to Pam on October 1, but failed to do so. Pam tells Bob that unless he pays her $600, which it cost her to obtain goods from another supplier, she will sue him in court. b. Diana, a real estate agent, brings her car in for repair at Eric's Auto Repair. After examining the car, Eric gives Diana a $500 estimate for the work to be done. Diana needs her car to do her job, so she reluctantly agrees to the repairs. c. Len has contracted to sell goods to Mel. Knowing that Mel needs the goods to be delivered on a specific date, Len threatens to withhold delivery on that date unless Mel agrees to pay a higher price. d. Bill persuades his elderly mother to withdraw her life savings from the bank and make an interest-free loan to him.

c. Len has contracted to sell goods to Mel. Knowing that Mel needs the goods to be delivered on a specific date, Len threatens to withhold delivery on that date unless Mel agrees to pay a higher price.

. On November 1, Yost sent a telegram to Zen offering to sell a rare vase. The offer required that Zen's acceptance telegram be sent on or before 5:00 PM on November 2. On November 2 at 3:00 PM, Zen sent an acceptance by overnight mail. It did not reach Yost until November 5. Yost refused to complete the sale to Zen. Is there an enforceable contract? a. Yes, because the acceptance was made within the time specified. b. Yes, because the acceptance was effective when sent. c. No, because Zen did not accept by telegram. d. No, because the offer required receipt of the acceptance within the time specified.

c. No, because Zen did not accept by telegram.

Otto inherited an old safe from his uncle. Otto did not have the combination to the safe and had no idea of its contents, if any. He sold the safe to his friend Marcel "as is" for $35. When Marcel opened the safe, he found $25,000 in cash. Now Otto wants to rescind the contract, claiming that the doctrine of mistake gives him that right. a. Otto is correct, because there is mutual mistake here as neither party knew of the money inside the safe. b. Otto is correct, because it would be unfair to him to allow Marcel to keep the money. c. Otto is not correct, because both parties knew that they did not know about the contents of the safe. d. Otto is not correct, because the remedy of rescission is available only when there is a unilateral mistake; here both parties were mistaken.

c. Otto is not correct, because both parties knew that they did not know about the contents of the safe.

Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy. a. This contract is valid. b. This contract is voidable. c. This contract is void. d. This contract is unenforceable.

c. This contract is void.

Big Bank is a major creditor of Bonwill Department Store. After a major loss in profits due to poor holiday sales, Big Bank decides to help keep Bonwill from bankruptcy by orally promising Mary Tudor, a supplier to Bonwills, that it will guarantee Bonwill's payment for goods that Mary sells to Bonwill. Most likely, Big Bank's oral agreement: a. is unenforceable under the statute of frauds. b. is unenforceable because it is a collateral contract. c. is enforceable under the "main purpose" or "leading object" exception to the statute. d. is enforceable because a collateral contract is not covered under the statute of frauds.

c. is enforceable under the "main purpose" or "leading object" exception to the statute.

Graham contracted with the city of Harris to train and employ high school dropouts residing in Harris. Graham breached the contract. Long, a resident of Harris and a high school dropout, sued Graham for damages. Under the circumstances, Long will a. win, because Long is a third-party beneficiary entitled to enforce the contract. b. win, because the intent of the contract was to confer a benefit on all high school dropouts residing in Harris. c. lose, because Long is merely an incidental beneficiary of the contract. d. lose, because Harris did not assign its contract rights to Long.

c. lose, because Long is merely an incidental beneficiary of the contract.

Unilateral contracts where performance has already begun

can not revoke

Donee beneficiary

contract made for the purpose of giving a gift to third party, the donee beneficiary.

Able hired Carr to restore Able's antique car for $800. The terms of their oral agreement provided that Carr was to complete the work within 18 months. Actually, the work could be completed within one year. The agreement is: a. Unenforceable because it covers services with a value in excess of $500. b. Unenforceable because it covers a time period in excess of one year. c. Enforceable because personal service contracts are exempt from the statute of frauds. d. Enforceable because the work could be completed within one year.

d. Enforceable because the work could be completed within one year.

. Paul is hired by Soprano as a security guard. At the time of hiring, Paul signs an agreement that relieves Soprano from workers' compensation liability. This agreement is most likely: a. Enforceable because Paul and Soprano have equal bargaining power. b. Enforceable because it does not include intentional torts. c. Enforced so long as the terms of the agreement are conspicuously disclosed and clearly known d. Unenforceable as a violation of public policy.

d. Unenforceable as a violation of public policy.

Punitive Damages

damages that are awarded to punish the defendant, to deter the defendant from similar conduct in the future and to set an example to others. -Not recoverable for simple breach of contract -Recoverable for fraud, intentional conduct

Mutual mistakes of value are enforceable

exists if both parties know the object of the contract but are mistaken as to its value. K is enforceable by either party because identity of subject matter is not at issue.

Incidental Damages

expenses directly caused by breach such as those to obtain performance from another source. (storage, shipping, lawyer fees, etc)

Consequential Damages (special damages)

foreseeable damages that arise from circumstances outside the contract. To be liable, the breaching party must know or have reason to know that the breach will cause special damages to the other party.

Three types of conditions

i. Conditions precedent - a condition that requires the occurrence of an event before a party is obligated to perform a duty under a contract. The event triggers the duty of performance or the contract. If there is no event, then there is no duty to perform. ii. Conditions subsequent - a condition, if it occurs, that automatically excuses the performance of an existing contractual duty. iii. Condition concurrent - contract requires simultaneous performance by the both parties to the contract.

Competent party's duty of restitution

if a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor back into status quo

Significant Performance

if the offeree has significantly begun performance , most courts will not allow the offer to be terminated

Mirror image rule

in order for there to be a contract, the offeree must accept the terms exactly as stated by the offer

Rescission

is an action to undo the contract. It is available if there has been a material breach of contract, fraud, duress, undue influence, or mistake. It is not available if there has been substantial performance.

Restitution

is returning the goods or property received from the other party in order to rescind a contract. If goods not available, then give cash equivalent. Restore parties to position they occupied prior to the contract

Supervening illegality

makes performance of the contract illegal

Mere inquires

not rejections, Would you consider 400 for the car?

Fraud in the execution (fraud in the inception)

occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing. VOID

Fraud by concealment

occurs when one party takes specific action to conceal a material fact from another party. Voidable

Fraud in the Inducement

occurs when the party know what he or she is signing, but has been fraudulently induced to enter into the contract Voidable

Obligee

owed the right under the contract

Obligor

owes duty of performance

Composition with creditors

participating creditors agree to extend time for payment or take less money in satisfaction of debt. Original debt is not discharged until new obligations are performed

Mutual Rescission

parties enter into a second agreement to expressly terminate the first agreement. Unilateral rescission of the contract by without consent of the other party is not effective - it is a breach

Discharge by Agreement

parties mutually decide to discharge their contractual duties

Delegator

party making the delegation.

Delegatee

party to whom duty has been delegated

Offeror

party who makes an offer to enter into a contract

Offeree

party whom the offer is made, offeror makes an offer to promise to do or refrain from doing something, if accepted by the offeree, then the contract is created

Moral Obligations

promises made out of a sense of moral obligation or honor - moral consideration is not legal consideration.

Discharge by Operation of Law

sometimes nonperformance of a contractual duty is excused by law

Statutory Irrevocability

statute/law prevents irrevocability

Novation

substitutes a third party for one of the original contracting parties. The new substituted party is obligated to perform the contract and the original party is released from liability. All three parties must agree.

Assignor

the obligee who transfers the rights

Assignee

the party to whom the right has been transferred

Nominal Damages

trifling amount - just to establish that the defendant acted wrongly but the non-breaching party didn't really suffer any monetary loss.

When are offers effective?

when received by the offeree or agent

When is a rejection effective?

when recieved by the offeror either directly or indirectly

Assignments

• Assignee's rights are subject to the defenses that the obligor has against the assignor. • Some assignments must be in writing: wages, interests in land, sale of goods for $500 or more. • Generally, all rights can be assigned. There are exceptions: • Statute prohibits assignment. (For example, you cannot assign worker's compensation benefits). • When a contracts is personal in nature. • When an assignment will significantly change the risk or duties of the obligor. • When a contract prohibits assignment. A contract cannot prohibit the right to receive money, the right to assign negotiable instruments, or the right to receive damages for breach of contract or payment of an account for the sale of goods. • Assignee should notify obligor of the assignment. If no notice is given, then the obligor can discharge his obligation by performances to the assignor. However, once notice is given, then only performance to the assignee can discharge the obligor's obligations.

Parole Evidence Rule (oral evidence)

• Excludes inconsistent prior and contemporaneous oral and written agreements not incorporated into an integrated contract. • Does not apply to: • Clerical or typographical errors • Lack of contractual capacity • Defense of fraud, misrepresentation, duress, undue influence, mistake, illegality, lack of consideration. • Condition precedent • Subsequent mutual recession or modification • To explain ambiguous terms, not contradict • Existence of separate contract • Contract that is partly written and partly oral.

Rules of Construction

• Interpreted as a whole • Generally, more weight is given to specific clauses, over general • Written or typed over printed form provisions • Words over numbers • Words are giving plain meaning • Course of performance (current contract) • Course of dealing (prior dealings between same parties) • Usage of trade (custom or practice) • Courts can supply a term to save an agreement.