Contracts Multiple Choice Questions

Implied Warranty of Merchantability (2-314);

"merchant" regularly deals in goods involved, or holds out as having particular knowledge (2-104(1)) pass without objection in trade/fit for ordinary purposes 2-316(2) Disclaimer must mention merchantability; if in writing, conspicuous

Frustration of principal purpose.

("Agreements must be observed", or "a deal's a deal") Event has caused extreme reduction in value of other party's performance so as to render it nearly worthless to disadvantaged party Res 2d 265 [Disadvantaged party's] performance of contract excused because principal purpose of contract of [disadvantaged party] frustrated because: Supervening event Non-occurrence is basic assumption No fault of [disadvantaged] party No assumption of risk [by disadvantaged party]

Warranties More generally

(1) A warranty is a guarantee of quality of a product or service for specified period of time. Whether or not there has been a breach of an express or implied warranty is a question of fact. (2) An express warranty is an affirmation of fact or promise or any description of goods which becomes basis of bargain. An opinion is not an express warranty. (3) An implied warranty of merchantability means a product passes without objection in the trade and is fit for ordinary purposes. Plaintiff must establish standard of merchantability. Must have merchant! (4) An implied warranty of fitness for a particular purpose requires that seller knew of buyer's particular purpose.

When may an offer be revoked? (exceptions)

(1) Option contract with consideration (2) Restatement 45 - for unilateral contracts, tenders or begins performance (3) Restatement 87(1)-signed offer; minority of courts follow (4) Restatement 87(2)- reasonable reliance and injustice (5) UCC 2-205 - Merchant's firm offer

Promissory Restitution (rest. 86)

(1) benefit conferred (2) party who benefit was conferred upon make a promise to pay for that benefit (3) justice and fairness Promise after material benefit received promise for previous benefit binding to extent necessary to prevent injustice. Must not be gratuitous; cannot be disproportionate.

Promissory Estoppel Elements

(1) clear and definite Promise (2) Reliance that is reasonable, detrimental, and foreseeable, and (3) Enforcement necessary to avoid injustice

Mistake

(1)A contractual "mistake" is a belief not in accord with facts at time of contract formation. (equitable doctrine remedies: rescission, restitution, reformation

1)Financial difficulty, even insolvency, is not anticipatory repudiation. 2)Insolvency is grounds for requesting adequate assurances.

(1)A party may request adequate assurances. If none given, this is constructive anticipatory repudiation. ●

Excuse: Mutual Mistake

(1)Court's remedy of rescission is discretionary where mutual mistaken belief relates to a basic assumption of contract and parties' performance materially affected. [Res 2d 152] Here, equity did not justify rescission because buyer assumed risk.

Parole Evidence Rule (Classical Approach Supplementation/4 corners)

(1)During a trial, parol (extrinsic oral or written) contemporaneous evidence may not be used to contradict or supplement a written agreement which is complete on its face (classical approach). (2)Parol evidence (oral or written) may always be used to explain an integrated agreement. (3)Parol evidence (oral or written) of a collateral agreement may be admitted as an exception to the parol evidence rule. A collateral agreement relates to a distinct subject. A warranty is not a collateral agreement. (4) Parol evidence (oral or written) may be allowed to prove fraud, or a mistake necessitating reformation of the written agreement. can be called four corners.

Express Condition

(1)Express conditions are decided by the parties themselves. Courts decide implied/constructive conditions. (2)Express conditions must be strictly enforced, unless excused by waiver, breach or forfeiture. (3)A waiver is an intentional relinquishment of a right. (4)Forfeiture is loss of compensation after substantial reliance. (5)Preview: "Substantial performance" does not apply to express conditions, only constructive conditions.

Parole Evidence Rule Modern Approach (interpretation)

(1)Under the modern contextual approach, the court need not find ambiguity first before admitting extrinsic evidence. A court may consider all extrinsic evidence to determine the extent of integration, meaning of contract, and party intent. Then the court excludes evidence that would vary or contradict a final written agreement. If contract language is "reasonably susceptible" to a particular contract interpretation, the parol evidence proving that interpretation is admissible. (2)Under the classical approach, during a trial, parol (extrinsic oral or written) contemporaneous evidence may not be used to contradict or supplement a written agreement which is complete on its face. The court must interpret a contract according to its "plain meaning". A contract must be "ambiguous" before extrinsic evidence is used to interpret its meaning.

14) *Devon tells Sam that he will pay him a commission if Sam sells his house for him. Sam immediately advertises the house, prepares it for showing, and shows it to several potential buyers. Devon then tells Sam that he no longer wants his help in selling the house. If Sam brings an action against Devon what is the likely result? (A)Under the Restatement (2d), Sam will prevail and if he sells Devon's house, he is entitled to a commission. (B) Under the Restatement (2d), Devon will prevail because Sam has not sold his house. (C) Devon has breached no agreement with Sam because of inadequacy of consideration. (D)There was no binding agreement because there was no mutuality of obligation.

(A)Under the Restatement (2d), Sam will prevail and if he sells Devon's house, he is entitled to a commission.

12) Uncle Felix promises nephew Nathan that if Nathan graduates from college, Uncle Felix will pay Nathan $10,000 for a trip to Europe. Nathan graduates from college. Is Uncle Felix's promise enforceable? (A)Yes, there is consideration for Uncle Felix's promise. (B) No, Uncle Felix's promise was gratuitous. (C) No, Uncle Felix's promise was illusory. (D)Yes, Uncle Felix has a moral obligation to keep his promise.

(A)Yes, there is consideration for Uncle Felix's promise.

11) *Sara promises to sell her computer to Taylor, if Taylor promises to pay Sara $750. Taylor accepts. Do they have a legally enforceable contract? (A)Yes, there is mutual assent and consideration. (B) Yes, there is a promise and detrimental reliance. (C) No, there is no mutual assent no consideration. (D)No, there is a promise, but no detrimental reliance

(A)Yes, there is mutual assent and consideration.

15) Esther is a boat dealer. On Sept. 1, 2021 Esther writes Frank in a signed note that Esther is willing to sell Frank a specified boat for $25,000, but Frank must accept this offer by Sept. 15, 2021. On Sept. 10, 2021 Esther sells the same boat to Gary instead and tells Frank that she sold the boat to Gary, adding, "You snooze. You lose." On Sept. 11, 2021 Frank accepts Esther's offer. Do Esther and Frank have a binding contract for the sale of Esther's boat? (A)No, Esther has revoked her offer by selling the boat to Gary and telling Frank. (B) Yes, Frank has accepted Esther's offer in time. (C) Yes, Frank has a reasonable time to accept the offer. (D)No, there was no consideration for Esther to keep her offer open until Sept. 15, 2021.

(B) Yes, Frank has accepted Esther's offer in time.

3) *Which of the following is an offer? (A) An internet ad states, "Shoes for Sale". (B) Al texts Bea, "Are you interested in buying my car?" (C) Al texts Bea, "I offer to sell you my laptop for $500. This offer is open until tomorrow." (D) All of the above.

(C) Al texts Bea, "I offer to sell you my laptop for $500. This offer is open until tomorrow."

4) Which of the following is a definition of consideration? (A) Benefit to the promisor and detriment to the promisee. (B) Detriment to the promisor and benefit to the promisee. (C)Benefit to the promisor or detriment to the promisee. (D)Acceptance effective upon dispatch.

(C)Benefit to the promisor or detriment to the promisee.

Good Faith and Fair Dealing (checklist)

(a) Fulfills reasonable expectations of parties; parol evidence admissible (b) UCC 1-201(20): honesty in fact (subjective test) and reasonable commercial standards (objective test) (c) UCC 2-104(1) "merchant"-deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to practices or goods in transaction (d) Restatement (Second) 205: duty of good faith and fair dealing (e) CISG 7(1): good faith in international trade (f) Bad faith violates community standards of decency, fairness, or reasonableness (g) Question of fact

In the hospital, right before her gallbladder operation, Felicia is told to sign a medical consent form for her operation. She asks if there are any risks. The staff is silent. Felicia signs, and afterwards she develops an infection, which was a common risk of the operation. Which of the following is true? (a)Her consent is voidable because there was a duty to disclose/misrepresentation/fraud in the inducement. (b)Her consent is void because this is fraud in the execution/fraud in factum. (c)Felicia assumed the risk.

(a)Her consent is voidable because there was a duty to disclose/misrepresentation/fraud in the inducement.

In the hospital, right before her gallbladder operation, Felicia is told to sign a medical consent form for her operation. She is told that Dr. Amazing will perform the surgery. Actually Dr. Awful will perform the surgery. If unknowingly Felicia signs, which is true? (a)Her consent is voidable because this is fraud in the inducement. (b)Her consent is void because this is fraud in the execution/fraud in factum. (c)She has a duty to read.

(a)Her consent is voidable because this is fraud in the inducement.

Sheila, a used car dealer, offers to sell a Ramry to Foster for $1000. She tells him in a signed writing he has until Sept. 15 to decide. On Sept. 14 Sheila tells Foster she has changed her mind. Foster tells her he accepts her offer. (a)They have a binding contract. (b)They do not have a binding contract. (c)I don't know.

(a)They have a binding contract.

In the hospital, right before her gallbladder operation, Felicia is told to sign a medical consent form for her operation. Actually she is given a consent form to use her medical information and tissue for research. If unknowingly Felicia signs, which is true? (a)Her consent is voidable because this is fraud in the inducement. (b)Her consent is void because this is fraud in the execution/fraud in factum. (c)She has a duty to read.

(b)Her consent is void because this is fraud in the execution/fraud in factum.

Procedural Unconscionability

-Coercion -Lack of meaningful choice •Disparity in bargaining power •Terms are hidden or not reasonably intelligible •High pressure sales tactics, no reasonable alternatives

Substantive Unconscionability

-Fairness of exchange -Trade practice unless whole industry corrupt

when court implies a term

1) Court must interpret the contract. 2) Does contract cover situation at hand? Court might find implied-in-fact term. 3) If not, court supplies term. This is implied-in-law. 4) Court considers actual expectations. 5) Court also considers justice and fundamental fairness.

Implied Terms in UCC - Reasonable Notice of Termination

1) This distributorship agreement was a sale of goods. 2) The UCC applies and requires reasonable notice of termination. [UCC 2-309] What is reasonable is a question of fact. 3) A distributor should be given a reasonable period of time to recoup his investment or to find substitute arrangements.

UCC Modification extras

1)A UCC contract modification is invalid if it was entered into under duress. The UCC supplements and does not displace the common law of duress and coercion. 1)The party who agrees to the modification under duress must protest the modification.

Contract Avoidance (Mental Incapacity)

1)A contract is voidable by a person who, due to mental illness or defect, lacked the capacity to contract at the time of entering into the agreement. 2)Under the traditional cognitive test, proof was required that the person was unable to understand the nature and quality of the transaction. 3)Under the modern affective/volitional test, proof was required that the person was unable to act in a reasonable manner, and the other party had reason to know of his/her condition. 4)Some courts require medical evidence or expert testimony.

Fraud in the Execution

1)A contract with assent obtained by misrepresentation (fraud in the execution/fraud in factum) as to the character or essential terms of the contract is void.

Implied terms

1)A court may find an implied-in-fact or implied-in-law term when interpreting a contract, e.g., an implied promise to use reasonable efforts or best efforts. 2)Thankfully, all contracts also contain an implied obligation of good faith and fair dealing. This means not to frustrate the parties' reasonable expectations and the purpose of the contract. Plaintiff Wood had implied promise to use reasonable efforts to bring profits and revenues into existence; therefore Wood's promise not illusory and defendant Lady Duff-Gordon bound to her promise to give him exclusive right to place her indorsements. (Wood v. Lucy)

Restitution (mentally incompetent)

1)A mentally incompetent person may be liable for services conferred even though the person did not consent to such services.

Kep points on minors

1)A minor/infant's contract is voidable rather than void. 2)A minor may disaffirm a contract while a minor and up until a reasonable time after reaching majority. 3)If a contract is avoided, a minor may sue for return of consideration given; minor must also return tangible benefits received. 4)Some courts will reduce minor's recovery in a cash sale for use and depreciation; i.e., minor must make restitution to major. 5)Minor always liable for reasonable value of necessaries, e.g. food, clothing, shelter (restitution). 6)Some courts will not void contract if minor has misrepresented age or willfully destroyed property. Most courts hold that minor may disaffirm but may be liable in tort for fraud.

Mistake General Principles (summary)

1)A mistake is a belief not in accord with the facts at the time of contract formation. 2)A contract may be avoided for bilateral mistake if it was a basic assumption, with a material effect on performance, and there was no assumption of risk. 3)An unilateral mistake avoidance also requires substantial hardship or other party knew or had reason to know of mistake.

mortgages

1)A mortgage contract is not substantively unconscionable merely because the loan amount was more than the value of borrower's house. The borrower benefits from the loan and the bank has suffered a detriment due to an undercollateralized loan. 2)Inducement by unconscionable conduct is a separate independent ground for an unconscionable contract. The standard is higher than for procedural unconscionability, e.g., affirmative misrepresentations, active deceit or concealment of a material fact.

past consideration (misc)

1)A promise based on a past benefit is without consideration. Even though promisor may have a moral obligation to keep his promise, there is no legal obligation. 2)Exceptions: promises based on debts barred by the statute of limitations, promises to pay for debts incurred while a minor, and discharged bankruptcy debt.

Restitution (contractors)

1)A subcontractor may recover in restitution from an owner when the owner has not paid the general contractor for the work performed and the subcontractor has exhausted its remedies against the general contractor. 2)If owner has paid general contractor for subcontractor's work, owner has not been unjustly enriched by unpaid subcontractor's work. Subcontractor must also exhaust remedies against general contractor.

Unconscionability

1)An unconscionable contract is unenforceable. A court may refuse to enforce a particular term or the whole contract. 2)Unconscionability is an absence of meaningful choice (procedural unconscionability) (quasi-fraud; quasi-duress) along with unreasonably favorable terms to one party (substantive unconscionability).

Sheila offers to give Bart $500 if he finishes the Chicago marathon. On the day of the marathon, 3/4 through the race, Sheila tells Bart that she revokes her offer. Bart finishes the race. You advise Bart: 1)Sheila may revoke her offer at any time before acceptance. 2)Because this is an offer for a bilateral contract, Sheila may not revoke her offer once Bart has begun performance. 3)Because this is an offer for an unilateral contract, Sheila may not revoke her offer once Bart has begun performance, but she is not bound until Bart finishes the race.

1)Because this is an offer for an unilateral contract, Sheila may not revoke her offer once Bart has begun performance, but she is not bound to her promise until Bart finishes the race.

Public Policy

1)Contracts against public policy are unenforceable. They are sometimes illegal. 2)Sources of public policy are legislation and judicial precedent. 3)Two main areas of judicial rulings are agreements in restraint of trade or interfering with family relations. 1)To strike down a contract on public policy grounds, the public general welfare must outweigh the societal interest of freedom of contract.

Undue Influence

1)Doctrine of contract avoidance which protects vulnerable parties in unfair bargaining situations. Excessive pressure in overcoming the will of a vulnerable person. 2)Vulnerability, undue susceptibility of one party: e.g., physical condition, emotional anguish, senility, etc. 3)Unfair persuasion and domination by the other party. The other party may be in a special relationship to the dominated party, e.g., fiduciary relationship, trustee/beneficiary, lawyer/client, etc. 4)Examples of unfair persuasion are unusual time or place, insistence on urgency, multiple persuaders, absence of third party advisors, etc.

Statute of Frauds (signatures and etc.)

1)Every agreement within the Statute of Frauds is void unless some note or memorandum is in writing, and subscribed by the party to be charged, i.e., defendant, and the note or memorandum contains essential terms. 2)The Statute of Frauds does not require one signed writing, but may be satisfied by piecing together different signed and unsigned documents. Parol (oral) evidence may be used to connect the different documents and to indicate acquiescence or assent to the unsigned documents. 1)A check may satisfy the statute of frauds if it is signed by the party to be charged (promissory/defendant).

Contract Misrepresentation

1)In order to bring a contract action for misrepresentation, a party must prove either fraudulent or a material misrepresentation and reasonable reliance. The remedy is rescission and restitution. Opinions are actionable if there is a trust relationship; expert opinion; or other susceptibility to misrepresentation.

Tort Misrepresentation

1)In order to bring a tort action for misrepresentation, a party must prove defendant knowingly made false and material representations; plaintiff reasonably relied on these representations and plaintiff suffered damages. Opinions are actionable if there is a trust relationship; expert opinion; or other susceptibility to misrepresentation.

Contract Avoidance: Nondisclosure

1)Nondisclosure of a fact known to one party may be equivalent to the assertion that the fact does not exist. 2)Seller has duty to disclose to the buyer facts in a residential dwelling, which materially affect the value of the property. 3)A matter is material if it is one to which a reasonable person would attach importance in determining his choice of action in the transaction in question. 4)Failure to disclose a known material fact may justify rescission of a contract. 1)Sellers have duty to disclose material facts affecting the value of property which are not readily observable and known to the buyer. 2)A material fact is likely to induce a reasonable person to manifest his assent.

Implied Terms - Good Faith & Fair Dealing

1)Parol evidence may be admitted to explain the parties' intentions. It cannot be used to bar evidence concerning the implied covenant of good faith and fair dealing, which is contained in all contracts. 2)The central premise of the implied covenant of good faith and fair dealing is not to frustrate the parties' reasonable expectations and the purpose of the contract. 3)The implied covenant of good faith and fair dealing may (a) add terms that were not expressly made in the contract; (b) address bad faith conduct by defendant even in the absence of violation of an express term; and (c) examine a defendant's discretion expressly granted by the contract. 4)Bad faith or ill motive may be present when a party acts arbitrarily, unreasonably, or capriciously, with the objective of preventing the other party from receiving its reasonably expected fruits under the contract.

Parol Evidence Rule (Misc)

1)Parol evidence may be used to explain an agreement. However, some courts first require ambiguity on the face of the document. 2)Parol evidence may also be used to show an oral condition precedent, the invalidity of an agreement (illegality, fraud, duress, undue influence, incapacity, mistake), a collateral agreement, or right to an "equitable" remedy. (i.e., no agreement or writing invalid). 3)Oral or written evidence after the writing is not barred by the parol evidence rule. 4)Parol evidence may also be used to show fraud.

Rescission

1)Rescission is unwinding a contract, and restoring the parties to their original positions.

Restrictive Covenants (non-compete)

1)Restrictive covenants must be reasonable, balancing the interests of employers, the hardship to former employees, and the interests of the public. Courts may "blue pencil" a covenant before enforcing it.

contract avoidance (minors)

1)Traditional rule: a minor may disaffirm a contract up until a reasonable time after reaching majority, receive restitution from the major and only return what minor has. This protects minors from improvident contracts with crafty adults. 2)Modern rule and minority of jurisdictions (Dodson): minor's recovery of funds from major may be offset by use, depreciation, and negligence. This is when there has been no overreaching and undue influence by major, the contract is fair and reasonable to minor, and the minor has paid cash.

Unconscionability (misc.)

1)UCC 2-302; Restatement (2d) 208; no definition (mot important provision). 2)Some courts require both procedural and substantive unconscionability Question of fact, but judge (not jury) decides unconscionability, at time contract was entered into

Demand for Adequate Assurances

1)UCC 2-609 authorizes a party with reasonable grounds for insecurity to demand adequate assurance of due performance from the other party, and if commercially reasonable to suspend performance until such assurance has been received. If no assurances are received within a reasonable time, the demanding party may treat this an anticipatory repudiation by the other party. 2)What are reasonable grounds for insecurity is a question of fact depending on words, actions, course of dealing or performance, the nature of the sales contract, and the industry. They may include a buyer falling behind in payments. 3)The request for adequate assurances may be in writing. 4)The adequate assurances requested must be commercially reasonable. Repeated demands for adequate assurances may be made if reasonable.

Abraham is a thug. He kidnaps Sarah and threatens her life unless she signs a contract to sell her house to him. In captivity, with no way to escape, and her life endangered, Sarah signs the contract. The contract between Sarah and Abraham is: 1)Void because of physical duress. 2)Voidable because of economic duress. 3)Enforceable.

1)Void because of physical duress.

Shrinkwrap contract

1)When a merchant delivers a product with additional terms, and expressly provides that consumer has right to accept terms or return product, a consumer may be bound by those terms. 2)Contract formation occurs when consumer accepts full terms after receiving a reasonable opportunity to reject them (after delivery of product). This is the "layered contracting" theory. 1)purchaser orders product; product arrives wrapped in plastic with contract terms. Purchaser has opportunity to reject terms by returning product. Called "rolling contracts", "layered contracts" or "money now, terms later" contracts. Shrinkwrap contracts must give clear notice of right of rejection.

physical duress (rest 174)

1)When a party enters into a contract under physical duress (threat of physical harm,) the contract is void. Restatement (2d) 174.

Contract Nondisclosure (cont.) Rest. 161

1)a party must prove that disclosure is necessary to prevent misrepresentation of a previous assertion, or is failure to act in good faith and fair dealing, or trust or confidential relationship exists. The remedy is rescission and restitution. Restatement (2d) 161.

unjust enrichment

1)an equitable principle that one cannot receive benefits without making compensation for them. One should pay a reasonable charge.

What can be used to interpret

1)interpreting a contract, a court may look to the written contract, previous correspondence and negotiations, trade usage, government regulations, reasonableness, and subsequent conduct of the parties.

contract implied in law

1)is a legal fiction to prevent unjust enrichment. Elements: plaintiff has conferred benefit; defendant accepts benefit; inequitable to retain benefit without paying fair value. 1)is an obligation without regard to assent (i.e., quasi-contract is not a contract).

Unilateral Mistake

1. A contract will be rescinded where: a) Unilateral mistake concerned basic assumption of contract b) Unilateral mistake has material effect on agreed exchange of performances c) Mistaken party did not assume risk of mistake d) Enforcing the unilateral mistake is unconscionable. requires substantial hardship or other party knew or had reason to know of mistake.

Three types of breach

1. Substantial performance/nonmaterial, partial breach 2. Material/partial breach Res (2d) 241 3. Total breach Res (2d) 241 + 242

Sheila and Bart enter into negotiations for Bart to buy Sheila's real estate business. They draft a letter of intent with essential terms. They state that do not intend to be bound by the letter of intent and that Sheila may decide to sell the business to someone else. Sheila negotiates in good faith with Bart. However, Sheila sells her business to Lester. 1)Sheila has breached her contract with Bart because their letter of intent had essential terms. 2)Sheila has not breached a binding contract with Bart.

2)Sheila has not breached a binding contract with Bart.

Abraham is a businessman. He refuses to pay $10,000 that he owes to Sarah. Because of this, Sarah is on the verge of bankruptcy. Abraham threatens not to pay Sarah unless she signs a settlement agreement that she will accept $800 instead. Without any alternatives, Sarah signs the settlement agreement. The settlement agreement between Sarah and Abraham is: 1)Void because of physical duress. 2)Voidable because of economic duress. 3)Enforceable.

2)Voidable because of economic duress.

Sarah is Abraham's elderly aunt. Sarah is recovering from major surgery and her health is fragile. One midnight, Abraham, accompanied by his seven siblings, visits Sarah in the hospital to convince her to sell her property to them. They tell her that she cannot consult others. They do not leave until she agrees to sell them her property. After succumbing to their overpersuasion, Sarah signs an agreement at 3am. The agreement between Sarah and Abraham and his siblings is: 1)Void because of undue influence. 2)Voidable because of undue influence. 3)Enforceable.

2)Voidable because of undue influence.

Lara wants to buy Roma's car. Roma tells Lara that the car only has 50,000 miles on it and has never been in an accident. Actually, the car has 75,000 miles on it and has been in two accidents and Roma knows this. Lara reasonably relies on Roma's statements. After Lara buys Roma's car, she tries to resell it and discovers the truth. What may Lara do? 1)Sue Roma in tort for damages. 2)Sue Roma in contract law for rescission and restitution. 3)1) and 2). 4)Nothing. Caveat emptor! [Buyer beware]

3)1) and 2).

Which of the following is the purpose of the PER? 1)It requires people to put agreements in writing. 2)It discourages people from putting agreements in writing. 3)It effectuates the intent of parties to have a final written agreement by excluding evidence in court of prior negotiations.

3)It effectuates the intent of parties to have a final written agreement by excluding evidence in court of prior negotiations.

Grandma Lee promises her granddaughter Emma that if Emma graduates from college, that Grandma Lee will give her a house. Emma graduates from college. Is Grandma's promise enforceable? 1)No, there was no consideration for Grandma Lee's promise because Emma received a benefit from going to college. 2)No, there was no consideration for Grandma Lee's promise because Grandma Lee received no benefit. 3)Yes, there was consideration because there was a legal detriment to Emma. 4)Yes, there was consideration for Grandma Lee's promise because there was a negotiation.

3)Yes, there was consideration because there was a legal detriment to Emma.

Parol Evidence Rule (UCC Trade Usage, Course of Dealing, Course of Performance)

4) Agreement under the UCC means the bargain of the parties to act as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance.These should be consistent with express terms of contract Trade usage is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. [UCC 1-303(c).] 2) Course of performance is the action of the parties in carrying out the contract at issue. 3) Course of dealing consists of relations between the parties prior to signing that contract.

Which of the following is true about the PER? 1)It is the same as the Statute of Frauds. 2)It applies to all written agreements. 3)It applies only to oral evidence. 4)It affirms the primacy of subsequent written agreement over prior negotiations and agreements.

4)It affirms the primacy of subsequent written agreement over prior negotiations and agreements.

Which of the following is a sale of goods, and thus is governed by the UCC Article 2? A contract for 1)Employment 2)Sale of house. 3)Sale of trademark. 4)Sale of tiger.

4)Sale of tiger.

adhesion contract

A "standard-form" contract, such as that between a large retailer and a consumer, in which the stronger party dictates the terms.

Bailment

A bailment is a delivery of personal property. A bailee assumes a duty of care.

Constructive Condition

A constructive condition is a default rule, in the absence of party agreement. (1)Constructive conditions are judicial devices to help determine the consequences of breach.

Express Contract

A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.

Mutual Mistake Elements repeated rest 152

A contract may be avoided for bilateral mistake: •Basic assumption •Material effect on agreed exchange of performances •Party wanting avoidance does not bear risk

Promissory estoppel definition

A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies; such a promise is binding if injustice can only be avoided by enforcing the promise.

integrated contract

A fully integrated written agreement is intended by the parties to be a final and exclusive record of their agreement.

party bears the risk of loss by:

A party bears risk of loss by a)Agreement b)Treats limited knowledge as sufficient, c)Allocation of court

*Gina orders boots on-line from www.yourboots.com On their website there is a link to terms and conditions. One of the terms states that all disputes will be submitted to arbitration in California. The arbitration clause is in bold and conspicuous print. When Gina places her order, she must first click "Agree" to the terms and conditions after scrolling through them, including the arbitration clause in bold and conspicuous print. Is the term about arbitration enforceable? (A)Yes, this is a clickwrap agreement and it is likely courts will enforce the arbitration clause because Gina had actual and constructive notice of the arbitration clause. (B) No, this is a browsewrap agreement; courts will consider whether or not Gina had actual or constructive notice of the site's terms and conditions before the term is enforceable. (C) No, this is a shrinkwrap agreement and the courts will not enforce this term. (D)No, terms and conditions on websites are not enforceable

A)Yes, this is a clickwrap agreement and it is likely courts will enforce the arbitration clause because Gina had actual and constructive notice of the arbitration clause.

UCC: Mutual Assent Through Conduct

An agreement may be made even though the moment of making is undetermined. UCC 2-204 (2) The parties' conduct may indicate an agreement. UCC 2-204(1)

Offer

An offer gives the offeree power to accept and form a contract without further assent by the offeror.

Promissory Estoppel Pre acceptance reliance 2 rules:

Baird Rule (classic) Drennan Rule (modern)

Clickwrap

Before purchase, buyer scrolls through terms and clicks "I agree".

Bilateral v. Unilateral (distinguish)

Bilateral--->2 promises, offeror makes an offer, offeree accepts the offer, exchange promises for future perfomance Unilateral--->offeror makes offer asking for performance. Acceptance is done through performance.

1) *What is the definition of a contract? (A) An agreement among two or more parties about future performance. (B) Legally enforceable promises. (C) Both of the above. (D) None of the above.

C) Both

2) Which of the following are sources of contract law? (A) Court cases. (B) State statutes. (C)Both of the above. (D)None of the above.

C)Both

Material/partial breach Res (2d) 241

Can sue for actual damages Can wait to perform promise (suspend performance) until there is cure of breach (reasonable time) (1)A party may suspend performance when there has been a material partial breach.

Substantial performance/nonmaterial, partial breach

Can sue for actual damages, but must still perform promise (1)"Substantial performance" does not apply to express conditions, only constructive conditions. Substantial performance is performance without a "material breach". Factors for substantial performance: purpose of provision, reason for nonperformance, cost of remedy, adequacy of damages

Consideration

Classical rule: Benefit to promisor or detriment to promisee Restatement: Bargained for exchange/mutual inducement. Detriment: waiver/relinquishment of legal right; act or forbearance, or promise to act/forbear

Objective Theory

Contract's meaning is what reasonable person familiar with circumstances would think, not the subjective meaning of either party.

Principles of Interpretation (intro card)

Contractual ambiguity should be resolved against the party who drafted the agreement (contra preferentum). This is usually applied in cases with uneven bargaining power.

Role of Ambiguity

Courts may require ambiguity first before applying principles of interpretation. Otherwise, they will use the plain meaning of the contract.

Statute of Frauds (attack approach)

Defense against enforcement of a contract Requires certain, not all, contracts to be in writing Writing must be signed by "party to be charged", i.e., defendant Signature is any symbol made with intent to authenticate document (1)Is contract "within" statute? (i.e., covered by statute) (2)If so, is statute "satisfied"? (i.e., requirements met by sufficient memorandum with material terms) (3)If statute not satisfied, is there applicable exception? (e.g., part performance or reliance?)

Impossibility or Impracticability

Disadvantaged party's performance of contract excused because performance is now "impossible" or "impracticable". Extreme change in nature of performance for disadvantaged party. Performance so vitally different as to alter essential nature. Res 2d 261 Supervening event Non-occurrence is basic assumption No fault of [disadvantaged] party No assumption of risk [by disadvantaged party] Traditional categories: a) death or incapacity, b) destruction of subject matter, c) government regulation or order

Total breach Res (2d) 241 + 242

Does not have to perform promise, can sue for future damages too (2) Total breach is material nonperformance that has not been cured for a reasonable period of time. Further delay will unduly prejudice nonbreaching party. (3) Where there has been a total breach, a party may terminate the contract and sue for past and future damages.

UCC Modification 2-209

Does not require new consideration for a modification, but parties must deal in good faith. The Statute of Frauds is applicable for a modification for a sale of goods $500 or more. Performance and reliance are defenses to the Statute of Frauds or a no oral modification (NOM) clause. (1)Under the UCC, if there is a "no oral modification clause", a modification is still valid if payment has been received and accepted.

Exceptions to Statute of Frauds

Even though contract is within Statute of Frauds, and no writing satisfies Statute, contract still enforceable because of... 1)Part Performance - possession of land and substantial improvements 2)Promissory Estoppel (R (2d) 139) - nonavailability of other remedies; definite and substantial, reasonable, foreseeable reliance 3)UCC 2-201 -sale of goods $500 or more a) Merchants' Confirmatory Memo b) Specially manufactured goods, court testimony, payment accepted

UCC 2-207 (battle of the forms)

Exception to mirror image rule: in certain circum., contract is formed eeven though acceptance adds/chagnes offer (1): Was acceptance made expressely conditional? If so, then acceptance is really counteroffer (2) If in 1 included difff/extra terms, what to do w/terms (3) no contract exists technically, but parties act if one exists. Then PARTIES BOUND BY CONTRACTUAL ACTIONS (4) If both parties are merchants, addnl terms added to contract unless excluded or material (5) If not merchants, addnl terms are proposals that must be agreeed to (6)1)Acceptance is a counteroffer only if the acceptance is expressly made conditional on acceptance to additional terms. https://www.youtube.com/watch?v=b6-PRwhU7cg&ab_channel=MarkDeAngelis

Pre existing duty rule exceptions

Exceptions: •Unforeseen circumstances and fair and equitable (R 2d 89 (a)) (impracticability not needed) •Reliance (R 2d 89 c) •Mutual rescission and new contract

Hierarchy of Evidence weight

Hierarchy of Preference - weighing evidence - more weight to top of list 1) Separately negotiated or added express terms 2) Specific express terms 3) General express terms 4) Course of Performance 5) Course of dealing 6) Trade Usage •Course of performance - what has happened between parties during this contract •Course of dealing - includes previous dealings between parties in previous contracts •Trade Usage - includes industry practices

Subjective Theory (19th century)

If parties had different meanings, no contract formed.

Doctrine of Reasonable Expectations

Majority rule for insurance contracts Customers are not bound to unknown terms which are beyond the range of reasonable expectations.

Statute of Frauds (scope)

Marriage (pre-nups are consideration) Year by express terms cannot be performed within one year from date of contract Land (transfers of real estate) Executor's promise to pay estate's debts out of own assets Goods--->$500 or more Ucc 2-201 Surety-->guarantor of debt

Baird Rule

Mere use by a general contractor of a subcontractor's bid is not acceptance, forming a bilateral contract.

Mailbox Rule

Offer valid upon receipt. Acceptance is valid upon mailing. It does not apply if the offeror says it needs to be received.

When may an offer be revoked? (general rule)

Offeror make revoke at any time prior to acceptance

Drennan Rule

Reasonable reliance resulting in foreseeable prejudicial change in position may imply an enforceable promise not to revoke an offer for a bilateral contract. The majority of courts hold that general contractors may rely on bids submitted by subcontractors. This is preacceptance reliance.

Duty to Read (Ray v. Eurice)

Rule: Absent fraud, duress or mutual mistake, one having capacity to understand a written document who reads and signs it, or without having read it, signs it, is bound by his signature in law.

Promissory Estoppel fun facts

S90 was introduced in the 1930s. estoppel--->stopped from claiming no consideration. most influential rule. places responsibility on promisors, especially helpful in family situations and charitable situations.

Merchant's Confirmatory Memo

Seller and buyer must be merchants. First merchant sends confirmatory memo. If second merchant doesn't object within 10 days, second merchant is bound to contract, even though second merchant never signed anything. (cross reference battle of forms.

Browsewrap

Sellers puts terms on website and states all use of website subject to terms.

Predominant Purpose Test

The "predominant purpose" test is used to determine if Article 2 applies. A contract primarily for services, with an incidental sale of goods, is not covered by Article 2.

Revocation of Unilateral Contracts

Traditionally, an offer for an unilateral contract could be revoked anytime before full performance by offeree. At least two approaches today: a) Some courts hold that an offer for an unilateral contract cannot be revoked if an offeree has substantially performed. b) Under Restatement 2nd (45), an option contract is created upon the offeree tendering or beginning performance. This means an offeror cannot revoke an offer for a unilateral contract if the offeree has tendered or begun performance.

Restitution (marriage)

Unmarried cohabitants may raise claims based upon unjust enrichment following the termination of their relationships where one of the parties attempts to retain an unreasonable amount of the property acquired through the efforts of both. There may also be an express or implied contract between unmarried cohabitants.

Bad Faith (examples)

Violation of spirit of contract Deprivation of fruit of contract Lack of diligence Abuse of power Interference with other party's performance

Economic Duress

When a party enters into a contract because of an improper threat that leaves no reasonable alternative (e.g., economic duress), the contract is voidable. 4)Improper threats: crime or tort, threat of criminal prosecution, bad faith threat of civil process, etc. 5)Lack of reasonable alternatives: no other sources of goods, services, funds, etc.

Parole Evidence Rule

When parties to a contract have agreed to put their agreement in a writing, neither party may contradict or supplement the written agreement with extrinsic evidence (written or oral) of prior agreements or negotiations.

Quasi Contract (stipulations)

Where a person performs services for another, the law implies a promise to pay for those services. However, the person offering services can not officiously (no bullshit) confer a benefit on another person. Officiousness is unjustified interference. A person rendering necessaries or professional services to a mentally incompetent person may recover compensation even if the mentally incompetent person does not consent to them

Modified Objective Theory

Where one party knows or has reason to know what the other party means, the court will enforce the contract in accordance with the innocent party's meaning.

material benefits (restatement 86)

Where promisee cares for, improves, and preserves the property of promisor, includes saving life, preventing serious bodily harm

UCC 2-205 Firm Offers

a merchant's firm offer is irrevocable if in a signed writing for the time stated, but for no longer than 3 months if not.

Common Law Pre-Existing Duty Rule

a modification will not be enforced without valid consideration for the modification. (This guards against coercive behavior).

Retracting Repudiation

a party may retract repudiation before the injured party gives notice or materially relies on the repudiation.

Kelsey promises to give United Way $100,000. Kelsey changes her mind. Has Kelsey made a legally binding promise to United Way? a)No, there is no consideration. b)Yes, there is consideration. c)Yes because United Way has detrimentally relied on her promise. d)Yes, to avoid injustice.

a)No, there is no consideration.

Kelsey promises to give her brother Sam a Rolex watch on his birthday. Sam is excited! Kelsey changes her mind. Has Kelsey made a legally binding promise to Sam? a)No, there is no consideration. b)Yes, there is consideration. c)Yes, because Sam has detrimentally relied on her promise. d)Yes, to avoid injustice.

a)No, there is no consideration.

Agreements to Agree

agreements to agree are not binding contracts. a letter of intent is binding if parties intend it to be an agreement (agreement to agree) for a future contract must contain essential terms and must be sufficiently definite.(walker v, keith)

Advertisements as Offers

an advertisement is usually not an offer but an invitation for an offer. Ads may be offers for unilateral contracts where they invite performance of a specific act without further communication and leave nothing for negotiation. (RJR)

Patent/intrinsic ambiguity

apparent from words of contract.

1)Sara has an oral agreement to sell Eric her house for $200,000. They have nothing in writing. Eric does not move into the house nor make improvements. Eric does not detrimentally rely on Sara's promise. Is there an enforceable contract against Sara? a)Yes, Eric has accepted Sara's offer and there is consideration. b)No, because there is no writing to satisfy the Statute of Frauds. c)Yes, there are definite terms. d)No, this is a sale of goods.

b)No, because there is no writing to satisfy the Statute of Frauds.

Landowner and prospective buyer have option contract to purchase land. Prospective buyer does not pay consideration for option contract. May landowner withdraw offer? a)Yes, an offer to sell land is always freely revocable before acceptance. b)Yes, if there was no consideration for the option contract and prospective buyer has not reasonably relied on offer. c)No, if landowner has reasonably relied on offer. d)No, if prospective buyer has requested an irrevocable offer.

b)Yes, if there was no consideration for the option contract and prospective buyer has not reasonably relied on offer.

UCC 2-207

battle of the forms (watch the song)

Implied Warranty of Fitness for a Particular Purpose (2-315)

buyer relies on seller's skill or judgment in selecting goods for buyer (seller does not have to be merchant); seller knows of reliance; does not have to be defective (seller deception) 2-316(3) Disclaimer must be in conspicuous writing

Owner contracts with general contractor to build house. General contractor contracts with subcontractor. Subcontractor performs work for general contractor. Owner pays general contractor. General contractor does not pay subcontractor. May subcontractor recover from Owner? a)Yes, because Owner and subcontractor contracted with each other. b)Yes, Owner is unjustly enriched. c)No, Owner is not unjustly enriched. d)No, subcontractor was officious.

c)No, Owner is not unjustly enriched.

Subcontractor submits estimate for windows for building home to general contractor. General contractor submits bid with estimate to landowner. Landowner accepts general contractor's bid. In a jurisdiction applying the majority rule, may subcontractor withdraw estimate? a)Yes, an offer by a subcontractor is always freely revocable before acceptance by the general contractor. b)Yes, as long as there was no option contract between the general contractor and subcontractor. c)No, if general contractor has reasonably relied on estimate. d) No, if subcontractor has reasonably relied on estimate.

c)No, if general contractor has reasonably relied on estimate.

Kelsey promises to give her brother Sam a house on his birthday in her town. Sam moves to Kelsey's town and finds a new job there. Kelsey changes her mind. Has Kelsey made a legally binding promise to Sam? a)No, there is no consideration. b)Yes, there is consideration. c)Yes, because Sam has detrimentally relied on her promise and to avoid injustice.

c)Yes, because Sam has detrimentally relied on her promise and to avoid injustice.

Promissory Estoppel (Rest. 90) uses:

can be used as substitute for consideration, the basis of an irrevocable offer, and as a measure for damages.

UCC Contracts Formation General Priciples

contracts for the sale of goods. 1)The "predominant purpose" test is used to determine if Article 2 applies. A contract primarily for services, with an incidental sale of goods, is not covered by Article 2.

1)Sara has an oral agreement to hire Eric for two years for $30,000 a year to work in Hawaii. They have nothing in writing. Eric gives up another job and moves to Hawaii to work for Sara. Then Sara tells him there is no job after three months. Is there an enforceable contract against Sara? a)No, because there is no writing to satisfy the Statute of Frauds. b)Yes, there are definite terms. c)No, this is a sale of goods. d)Yes, even though there is not a writing to satisfy the Statute of Frauds, there has been detrimental reliance by Eric.

d)Yes, even though there is not a writing to satisfy the Statute of Frauds, there has been detrimental reliance by Eric.

1)Sara has an oral agreement to sell Eric her house for $200,000. They have nothing in writing. Eric moves into the house and makes substantial improvements. Is there an enforceable contract against Sara? a)No, because there is no writing to satisfy the Statute of Frauds. b)Yes, there are definite terms. c)No, this is a sale of goods. d)Yes, even though there is not a writing to satisfy the Statute of Frauds, there has been partial performance by Eric.

d)Yes, even though there is not a writing to satisfy the Statute of Frauds, there has been partial performance by Eric.

repudiation

definite manifestation of intent not to perform a contract from one contract party to the other. It is a total breach (1)Anticipatory repudiation is advance refusal to perform. 1)Anticipatory repudiation may be manifested in words or conduct. (1)A suggestion for modification of the contract is not a repudiation (type of total breach of contract).

Where consideration for a contract is illusory, the contract will be invalidated for gross inadequacy of consideration.

dohrmann v. swaney....so gross as to shock the conscience

*UCC Article 2 applies to employment contracts. False. Promissory estoppel is found in Restatement 2d Section 90. True. 9) A letter of intent is binding if the parties intend it to be true. True.

false

Consideration is required for all enforceable promises.(T/F)

false

moral obligation is not consideration

grautuitous arrangements are not considerationgratuitous

Excuses for non performance

impossibility, impracticability and frustration of principal purpose Exception to general rule: Pacta sunt servanda (a deal's a deal).

merger clause

is a clause in a written contract which declares that contract to be the complete and final agreement between the parties

contract implied in fact

is based on a promise inferred from the parties conduct

Restitution (intro card)

liability for benefit recieved: 1) Plaintiff has conferred benefit on defendant 2) Defendant accepts benefit 3) Unjust for defendant to retain benefit without paying for it

Surrogacy Agreements

may be contrary to public policy if they do not allow custody decisions to be made until after birth or involve payments beyond expenses.

1)Under common law, a conditional acceptance is a counteroffer. 2)A counteroffer may be accepted by performance.

mirror image rule and last shot

Donative Promise

no consideration.

Latent (extrinsic) ambiguity

not apparent from words, but visible in light of surrounding circumstances. Therefore, may offer extrinsic evidence of disinterested witnesses, trade usage, etc. to show latent ambiguity.

Objective Reasonableness Standard

parties conduct for mutual assent is judged using an objective reasonable test. parties can not avoid contracts because they are not profitable,

No Oral Modification Clause

private statute of frauds clause

Illusory Promise

promise that in fact does not impose any obligation on the promisor. An unrestricted right to revoke an offer and terminate a contract, is not a offer.

Illusory Promise (how their dealt with)

promise that in fact does not impose any obligation on the promisor. however, courts sometimes find promise not illusory by inferring promise to act in good faith, or finding offer for unilateral contract.

Charitable Subscriptions

promise to give something to a charity for a charitable purpose. reliance can be a substitute for consideration under these contracts.

UCC Express Warranties

quality or nature of goods; "basis of bargain"; description, sample, model (opinion/puffery is not warranty) 2-316(1)) Disclaimer inoperative if "inconsistent" with express warranty.

Promisor (in rest. 90)

should reasonably expect their promise to induce detrimental reliance by the promisee. a promise may be implied by conduct.

Statute of Frauds

statutory requirement that certain types of contracts to be in writing

Revocation of an offer

the revocation must be communicated to the offeree. Notice of acceptance of another offer is notice of revocation of the offer(normile)

Past consideration is no consideration but....

there is promissory restitution---->Promise after material benefit received Material benefit includes saving life, preventing serious bodily harm Restatement (2d) 86: promise for previous benefit binding to extent necessary to prevent injustice. Must not be gratuitous; cannot be disproportionate. traditionally, promises for past benefits were not enforceable unless they were for obligations no longer due because of the statute of limitations, for a minor, or debts discharged in bankruptcy.

Unilateral Contract

these are contracts that are accepted by performance (Brooklyn bridge)

Qualified or conditional acceptance (common law)

this is a counteroffer in common law. changing terms creates a counter offer thus revoking the counteroffer.

A letter of intent is binding if the parties intend it to be true

true

Illusory promises are unenforceable.

true

Promissory estoppel is found in Restatement 2d Section 90.

true

UCC Article 2 applies to consumers. (T/F)

true

Constructive Conditions

when is it time to walk away. we meet in office at 6 how long do I need to stay before I can just go home.

when are terms reasonably certain(definite)?

when they provide a basis for breach and remedy

Factors to Consider for determining intent

whether agreement is usually put into formal writing, number of details, amount of money involved, whether formal writing contemplated, etc Where letter of intent is ambiguous, parties may present evidence of intent (see parole evidence rule maybe even move this card).

If a contract violates a statute (rest 181)

•contracts in violation of regulatory purpose are unenforceable •contracts in violation of revenue-raising statutes may still be enforceable