Bar Prep MBE 1000-1121

The difference between the contract price and the market price, plus incidental and consequential damages, and the difference between the contract price and the cost of replacement goods, plus incidental and consequential damages, are both

"benefit of the bargain" measures, which are appropriate when the seller does not deliver or the buyer rejects the goods. They are not the appropriate measures when the buyer has accepted the goods.

The doctrine of____ generally does not apply to contracts for the sale of goods due to the U.C.C. _____.

"substantial performance"; "perfect tender rule."

In every assignment for value, the assignor impliedly warrants that:

(i) He has the right to make the assignment; (ii) The right exists and is not subject to limitations or defenses other than those stated or apparent at the time of the assignment; and (iii) He will do nothing to defeat or impair the assigned right.

A novation occurs when a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract. A novation will serve to discharge the old contract. The elements for a valid novation are:

(i) a previous valid contract;(ii) an agreement among all parties, including the new party (or parties) to the new contract; (iii) the immediate extinguishment of contractual duties as between the original contracting parties; and (iv) a valid and enforceable new contract.

A novation will serve to discharge the old contract. The elements for a valid novation are:

(i) a previous valid contract;(ii) an agreement among all parties, including the new party (or parties) to the new contract; (iii) the immediate extinguishment of contractual duties as between the original contracting parties; and (iv) a valid and enforceable new contract.

An assignment is for value if it is:

(i) done for consideration or (ii) taken as security for or a payment of a preexisting debt.

If a buyer accepts nonconforming goods, the buyer may recovery warranty damages for the breach of the seller's warranties. The basic measure of damages for breach of warranty is:

1. The difference between the value of the goods as delivered and the value they would have had if they had been according to the contract, plus 2. Incidental damages, plus 3. Consequential damages.

The elements necessary to establish frustration are:

1. There is some supervening act or event leading to the frustration; 2. At the time of entering into the contract, the parties did not reasonably foresee the act or event occurring; 3. The purpose of the contract has been completely or almost completely destroyed by this act or event; and 4. The purpose of the contract was realized by both parties at the time of making the contract.

The issue is whether the primary purpose of the promisee was to get the benefit for himself or to confer a right on another directly. If the purpose was to confer a right on another directly, that person is an intended third-party beneficiary The court looks at the following factors in resolving the question of intention:

1. Whether the third party is expressly designated in the contract; 2. Whether performance is to be made directly to the third party; 3. Whether the third party has any rights under the contract; and 4. Whether the third party stands in such a relationship to the promisee that one could infer that the promisee wished to make an agreement for the third party's benefit.

As a general rule, if the promisor fails to perform under a contract, a third-party beneficiary whose rights have vested may sue the promisee if the third-party beneficiary is _____________.

A Creditor Beneficiary but a donee beneficiary may not

When an owner of goods entrusts those goods to a merchant who deals in goods of that kind, the merchant has the power to transfer all of the owner's rights in the goods to __________.

A buyer in the ordinary course of business

What is a "constructive" or "implied" condition?

A condition that is implied by a court even though it is not explicitly stated in the contract. Common examples of constructive conditions are the conditions of cooperation and notice.

The performance of one contractual promise is usually a condition precedent to the duty of immediate performance of the return promise. Less than complete performance is a breach of contract. A court will apply the doctrine of "substantial performance" to excuse the condition of complete performance in the case of:

A constructive condition and a minor breach

For cases falling under Article 2, the parties' course of dealing may sometimes be used to explain a contract.

A course of dealing is a sequence of conduct concerning previous transactions between the parties to a particular transaction that may be regarded as establishing a common basis of their understanding.

A and B enter into a contract. A delegates her duties under the contract to a third party, C. Which of the following is correct?

A is the Delegator; B is the Obligee; C is the Delegate

Which of the following will not revoke a gratuitous assignment?

A subsequent delegation of duties by the assignor

When a condition is not satisfied or a duty of performance is broken, and the beneficiary of the condition or duty nevertheless chooses to continue under the contract, a court will hold this to be __________.

An Election Waiver

Which of the following best describes the elements required for an effective assignment?

An adequate description of the right being assigned and present words of assignment

condition precedent to effectiveness

An agreement that a contract will not become binding until a certain condition has occurred.

When a party indicates that she is "waiving" a condition before it is to happen, and the person addressed detrimentally relies on the waiver, a court will hold this to be __________.

An estoppel waiver

A warranty will be implied in a contract for the sale of goods whenever __________ has reason to know the particular purpose for which the goods are to be used and that the ___________ is relying on the seller's skill and judgment to select suitable goods; and the buyer in fact relies on the seller's skill and judgment.

Any seller; buyer

Despite the parol evidence rule, a party to a fully integrated written contract can always offer evidence __________.

Attacking the agreement's validity at the time of formation

If the offeror is a merchant and the offeree is a nonmerchant, additional terms in an acceptance ______.

Become part of the contract if the offeror expressly agrees

A and B enter into a contract under which A will service B's car for $500. If, despite a clause prohibiting assignment of "the contract" by the parties, A assigns the contract to C, what is the result

C has the right to the $500, but A has the obligation to service B's car

B owes A $100. A assigns his right to payment of the $100 to C and notifies B. B pays the $100 to A. If C sues B for the $100

C will prevail if she gave value to A for the assignment because assignments for value are irrevocable

_____ attempt to put the nonbreaching party where she would have been had the promise been performed, so far as money can do this. Expectation, consequential, incidental, and reliance damages are all forms of compensatory damages. Consequential damages consist of foreseeable losses resulting from the nonbreaching party's particular circumstances. Note that in contracts for the sale of goods, only a buyer may recover consequential damages.

Compensatory damages

____ are those that are capable of occurring together, and that the parties are bound to perform at the same time.

Conditions concurrent

_____ are damages resulting from the breach that any reasonable person would have foreseen would occur from a breach at the time of entry into the contract.

Consequential damages

_____s are damages above and beyond general damages that flow from a breach as a result of the plaintiff's special circumstances. They are recoverable only if the breaching party knew of the special circumstances and the losses from the breach were foreseeable.

Consequential damages

Which of the following statements is correct regarding damages for a breach of a contract for the sale of goods?

Either a nonbreaching buyer or a nonbreaching seller may recover incidental damages, but only a buyer may recover consequential damage

Which of the following is outside the scope of the parol evidence rule?

Evidence showing the "true consideration" paid

Benefit of the Bargain Damages are

Expectation Damages

_____ are the standard measure of compensatory damages. Expectation damages are based on an "expectation" measure or what is sufficient for the nonbreaching party to buy a substitute performance. This type of damages is also known as "benefit of the bargain" damages.

Expectation damages

An contract is used only when goods are delivered by boat.

F.A.S. (free alongside). In an F.A.S. contract, the risk of loss passes to the buyer when the goods are delivered to the dock.

An _______contract always specifies a location after F.O.B.

F.O.B. (free on board). The risk of loss passes upon delivery to the specified location.

______occurs when the purpose of the contract has become valueless by virtue of a supervening event.

Frustration . Frustration of purpose is generally used as a defense by the party whose duty it is to pay money, rather than the party that is to perform services.

Examples of things that serve to discharge the duty to perform

Good faith tender of performance; a supervening illegality; the occurrence of a condition subsequent

An intended beneficiary must be __________.

Identifiable at the time performance is due

In the case of breach of an employment contract, which of the following statements is true

If the employee is the breaching party, the employer is entitled to recover the cost of replacing the employe

If the seller is a merchant, the risk of loss passes to the buyer when the buyer takes physical possession of the goods.

If the seller is NOT a merchant, the risk of loss passes to the buyer when the seller upon tender of delivery

_____ include those expenses reasonably incurred by the buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller's breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer's breach.

Incidental damages

The equitable defense of __________ arises when a party delays in bringing an equitable action and the delay prejudices the defendant

Laches

What are consequential damages

Losses resulting from the nonbreaching party's particular circumstances that are a foreseeable result of breach

At common law, which of the following would legally excuse a condition?

Material breach, waiver, or substantial performance

If an accord agreement is breached by the creditor by bringing suit against the debtor under the original contract, the debtor:

May raise the accord agreement as an equitable defense and ask that the contract action be dismissed; or wait until she is damaged and bring an action at law for breach of the accord contract

To recover full damages when an employer breaches an employment contract, the employee

Must make a reasonable effort to find a new position of the same kind in the same locale

Under U.C.C. Article 2, when a contract provides for payment C.O.D., the buyer:

Must pay for the goods on delivery, without inspecting the goods

The Restatement of Contracts allows a party to an agreement to introduce evidence of additional terms not included in a written integration of the agreement if the new terms do not conflict with the written integration and the terms concern a subject that similarly situated parties would not ordinarily be expected to include in a written instrument. These terms are known as:

Naturally Omitted Terms

An assignor properly assigns his rights under a contract to an assignee. The obligor of the contract is subsequently incapable of performing under the contract due to insolvency. Will the assignor be held liable to the assignee?

No, an assignor is not liable to the assignee if the obligor is incapable of performing

When the parties to a contract have expressed their agreement in a completely integrated writing, a court will apply the __________ to determine whether any other expressions, made prior to or contemporaneous with the writing, are admissible to vary the terms of the writing.

Parol Evidence Rule

In contract law, which of the following best summarizes the distinction between the terms "promise" and "condition"?

Promise: Binds a party to perform under a contract. Condition: Creates or extinguishes a duty to perform under the contract

Reliance damages ______________.

Put the plaintiff in the position she would have been in had the contract never been formed

Under the U.C.C., what is required to cure a defective delivery in a single delivery contract?

Reasonable notice of the intention to cure and a new tender of delivery of conforming goods within the time for performance

Under Article 2, how does a buyer's right to replevy differ from a buyer's right to specific performance?

Replevin will lie only for identified goods, while specific performance may be decreed even though the goods have not previously been identified

____is a nonmonetary remedy found in Article 2 of the U.C.C. If a buyer has made at least part payment of the purchase price of goods that have been identified under a contract and the seller has not delivered the goods, the buyer may replevy (or recover) the goods from the seller if the seller becomes insolvent within 10 days after receiving the buyer's first payment or the goods were purchased for personal, family, or household purposes. In either case, the buyer must tender any unpaid portion of the purchase price to the seller.

Replevy

The value of the benefit conferred is the measure of recovery for ___________.

Restitution. Restitution is based on preventing unjust enrichment when one has conferred a benefit on another without gratuitous intent. The value of the benefit conferred is usually measured by the benefit received by the defendant, but it may also be measured by the reasonable value of the work performed by the plaintiff.

Which of the following alternatives is not an appropriate response by a nonrepudiating party to an anticipatory repudiation?

Suspend his own performance and demand assurances from the other party

Assignments for value cannot be revoked. An assignment is for value even if it is:

Taken as payment for preexisting debt

Which of the following is a true statement regarding a minor breach of contract under the common law?

The aggrieved party will gain the substantial benefit of her bargain, but is still entitled to a remedy for the minor breach.

If the employee is the breaching party, the employer is entitled to recover the cost of replacing the employee (i.e., the wages the employer must pay to a replacement employee minus the breaching employee's wages).

The breaching employee may offset money owed for work done to date.

After a reasonable time, a buyer may resell rejected goods only if

The buyer holds the proceeds for the seller's account. If a buyer resells rejected goods, he is entitled to any commission ordinarily paid in the trade or, if none, a reasonable commission not exceeding 10%.

Which of the following statements is most accurate regarding the measure of damages for breach of a contract for the sale of goods?

The buyer's damages are measured as of the time he learns of the breach, while the seller's damages are measured as of the time for delivery.

If a written contract expressly provides that it may be modified only by a writing, ___________.

The common law rule is that the parties can orally modify the contract

An adequate description of the right being assigned and present words of assignment

The defenses the obligor had against the assignor but not to setoffs arising after notice of the assignment

When a buyer, pursuant to a sale of goods contract, accepts nonconforming goods, the buyer's measure of damages is:

The difference between the value of the goods as delivered and the value they would have had if they had been as according to contract, plus incidental and consequential damages

When a delegate assumes the duty to perform, the most important consequence is:

The oblige can compel performance or bring suit against the delegate for nonperformance

Under an Article 2 shipment contract,

The seller must put the goods into the hands of a reasonable carrier and make a reasonable contract for their transportation to the buyer; obtain and promptly tender any documents required by the contract or usage of trade or otherwise necessary to enable the buyer to take possession; and promptly notify the buyer of the shipment.

Under Article 2, in a noncarrier case, in the absence of an agreement otherwise, the place of delivery is generally__________.

The seller's place of business

In a noncarrier case, in which it appears that the parties did not intend that the goods be moved by carrier, in the absence of an agreement otherwise,

The tender must be at a reasonable hour. The seller must give the buyer notice reasonably necessary to enable her to take possession of the goods, and the seller must put and hold conforming goods at the buyer's disposition for a time sufficient for the buyer to take possession.

What does it mean if a term is "collateral" to a written agreement?

The term is related to the subject matter of the agreement but not part of the primary promise

In the event of a breach in a sale of goods contract, the buyer's damages are measured as of ____________, while the seller's damages are measured as of _____________.

The time he learns of the breach; the time for delivery

If the employer breaches the contract, the standard measure of the employee's damages is the full contract price, regardless of when the breach occurs—before performance, after part performance, or after full performance.

Therefore, if the employer breaches the contract before work has begun, the employee is entitled to the full contract price, not merely nominal damages.

The best test for determining whether someone is an intended third-party beneficiary is to ask:

To whom is performance to be given according to the language of the contract

If the quantity term is not specified, there is no contract; the quantity term will not be supplied by a gap-filler.

Under Article 2

When should the nonbreaching party treat an otherwise minor breach as a material breach?

When the breach is coupled with an anticipatory repudiation

Unless the contract provides otherwise, in a destination contract, payment is due __________.

When the goods reach the destination

Unless a contrary intention appears elsewhere, if a party to a contract assigns "all my rights under the contract" to a third party, that assignment __________.

Will be construed to include an assumption of all duties as well

Under the U.C.C., in a single delivery contract, if a seller delivers nonconforming goods to the buyer under the mistaken, but reasonable, belief that the goods would be acceptable to the buyer, and the buyer rejects the goods, the best characterization of the time the seller has to cure is:

Within a reasonable time beyond the time originally provided for performance

Under the doctrine of substantial performance, can one party recover damages for the other party's incomplete performance?

Yes, that party will be able to deduct any damages suffered due to the incomplete performance

Under the U.C.C., a good faith purchaser for value can be _________ or ____________.

a buyer without knowledge of any fraud; a person without knowledge of any fraud who takes a security interest in the goods

A condition that cuts off an already existing absolute duty of performance is also known as __________.

a condition subsequent

If an assignor takes payment or performance directly from the obligor, __________.

a gratuitious assignment is revoked, but an assignment for value is not revoked

Generally speaking, if a contract does not address the importance of timeliness of performance in its terms, a failure by the promisor to perform at the time stated in the contract will result in __________.

a minor breach of contract

A mutual agreement between two parties to a contract that each will give up her respective rights to performance from the other is known as:

a mutual rescission

When a party having the benefit of an ancillary condition under a contract indicates by words or conduct (and without receiving any additional consideration) that she will not insist on that condition being met, this is called __________.

a waiver

An ___is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that she is supposed to receive from the other party to the existing contract, some other, different performance.

accord

When a party assigns "the contract" to a third party, it results in __________.

an assignment of rights and a delegation of duties to the third party

The buyer has a security interest in rejected goods in her possession for

any part of the price already paid and for expenses reasonably incurred in connection with handling them after rejection.

Under Article 2, expenses of inspection must be borne by the ____but may be recovered from the ____if the goods do not conform and are rejected.

buyer; seller

In a single delivery contract, when a buyer rejects goods due to defects, the seller may cure within the time originally provided for performance in the contract:

by giving reasonable notice to the buyer and making a new tender of conforming goods, which the buyer must then accept

Under a _____, a party is not obliged to perform until the happening of a certain event.

condition subsequent. This type of condition limits or modifies a duty under an existing or formed contract. A contingency clause might be included in such an existing contract.

If the owner breaches the contract during construction, the builder is entitled to

contract price, plus interest, because the builder has incurred all the costs of construction

In a_____ the contract requires the seller to deliver the goods at a particular destination, and the risk of loss passes to the buyer when the goods are tendered to the buyer at the destination.

destination contract,

An is a transfer of rights under a contract. The effect of an assignment is to establish privity of contract between the obligor and the assignee, while

extinguishing privity between the obligor and assignor. The assignee then replaces the assignor as the real party in interest, and she alone is entitled to performance under the contract

A ___is not consideration and thus is not value for purposes of assignment. Assignments given as a gift are

gift; gratuitous and are subject to the revocability rules for gratuitous assignments

The assignor warrants

he will do nothing in the future to defeat the assigned right; i.e., he will not wrongfully exercise his power to revoke; at the assigned right is not subject to any valid defenses of the obligor against the assignor; the assignor has the right to assign the right; i.e., that he has made no prior assignment of the same right.

The death or physical incapacity of a person necessary to effectuate the contract serves to discharge the contract by ____. Personal service contracts are discharged in this manner only if the services involved are unique.

impossibility

The general rule is that when the assignor makes two assignments of the same right, if the first assignment is ____________, the ____________ assignee has priority.

irrevocable; first

For a valid assignment, the assignor must

manifest an intent to transfer his rights under the contract completely and immediately to the assignee

Any third-party beneficiary must___, ____, or _____ to vest his rights.

manifest assent, bring suit, or materially change his position

If a seller gives no instructions within a reasonable time after notification of rejection, the buyer

may reship the goods to the seller, store them for the seller's account, or resell them for the seller's account. A buyer may not destroy rejected goods.

An anticipatory repudiation __________.

must be unequivocal. An anticipatory repudiation must be a positive statement that the repudiating party will not perform when performance is due. It cannot be based on expressions of doubt or fear, although those statements could establish a prospective inability to perform.

Both a creditor and donee beneficiary can sue the

promisor for failure to perform

If a plaintiff's expectation damages will be too speculative to measure, the plaintiff may elect to recover __________ instead, to put the plaintiff in the position she would have been in had the contract never been formed.

reliance damages

Death of the assignor, the assignor taking performance directly from the obligor, and the bankruptcy of the assignor all

revoke a gratuitous assignment.

If the subject matter of a goods or land contract has already been sold to another who purchased for value and in good faith, the right to specific performance is cut off. This is known as the equitable defense of

sale to a bona fide purchaser.

An accord will not be supported by consideration that __________.

serves as a partial payment on an undisputed debt

In a______ the seller is authorized or required to ship the goods by common carrier but is not required to deliver the goods to a particular destination. The risk of loss passes to the buyer when the goods are delivered to the carrier. Thus, here the risk of loss passes when the goods are delivered to the trucking company.

shipment contract,

A completely integrated writing may not be contradicted or supplemented. A partially integrated writing cannot be contradicted, but may be

supplemented by proving up consistent additional terms.

By contrast, if a contract provides that it cannot be modified except by a signed writing, the U.C.C. will give

that provision effect, even when the contract is between nonmerchants. If the contract is between a merchant and a nonmerchant, the provision requiring written modification must be signed separately by the nonmerchant.

If the buyer rejects or revokes acceptance of nonconforming goods (which has the effect of a rejection), the buyer is entitled to

the difference between the contract price and either the market price or the cost of buying replacement goods, plus incidental and

When, pursuant to a contract for a sale of goods, a buyer accepts nonconforming goods, he may not recover __________.

the difference between the contract price and the market price

In the case of breach by the seller in a sale of goods contract, if the buyer accepts nonconforming goods, the appropriate measure of damages is

the difference in value of the goods as delivered and the value they would have had if they had been according to contract, plus incidental and consequential damage

The seller has no right to cure beyond the original contract time, unless the seller reasonably believed that

the nonconforming goods would be acceptable with or without a money allowance. Only then does the seller, upon a reasonable notification to the buyer, have a further reasonable time beyond the original contract time within which to make a conforming tender.

If the owner breaches the contract during construction, the builder is entitled to

the profits he would have derived from the contract plus any costs he has incurred to date, or the contract price minus the cost of completion.

In a construction contract, if the property owner breaches the contract before construction has started, the builder is entitled to

the profits he would have derived from the contract.

As a general rule, if the promisor fails to perform under a contract, a donee third-party beneficiary whose rights have vested can sue:

the promisor

there are situations where an assignment must be in writing, including:

wage assignments; assignments of an interest in land; assignments of choses in action worth more than $5,000; and assignments intended as security interests under Article 9 of the U.C.C. Note that even in situations in which a writing is not required, the existence of a writing may affect revocability.

Under a _____, a merchant seller regularly dealing in goods of the kind sold warrants that the goods are delivered free of any patent, trademark, copyright, or similar claims.

warranty against infringement

The measure of recovery for ___ is the difference between the value of the goods as delivered and the value they would have had if they had been according to contract. Warranty damages arise when a buyer accepts nonconforming goods.

warranty damages

when both parties are merchants, additional terms in an acceptance may become part of the contract. However, even when both parties are merchants,

when an offer expressly limits acceptance to its terms or the additional terms materially alter the original terms of the offer, the additional terms do not become part of a contract.