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73 Cards in this Set

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In the Alden vs Presley case, was Presley's promise to pay the mortgage enforceable?
No - his promise was a gratuitous “gift” promise that was not supported by consideration. As such, it was unenforceable against Presley's estate.
Explain what type of contract has been created during each event:

A) Elizabeth signs a contract to purchase a new BMW from Ace Motors. She has not yet paid for the car, and Ace Motors has not yet delivered it.

B) Elizabeth pays for her car but Ace Motors has still not delivered the car.

C) Ace Motors delivers the car to Elizabeth.


A model act that contains uniform rules that govern commercial transactions:
Uniform Commercial Code
Third persons do not usually have the power to do what?
Accept an offer
What is true about online auctions for many businesses?
Business sales through online auctions now exceed non-business sales.
Bob offers to sell Carol his computer but conditions that Carol accept his offer by May 1. When can Bob revoke his offer?
Anytime before Carol accepts the offer.
Linda is adjudged insane by a court and a guardian is appointed. Linda later buys a new car. Does she have a contract?
No - any contract made under a person that has been adjudged insane is VOID.
What was the court’s issue and holding in the Flood v. Fidelity & Guaranty Life Insurance Co. case?
ISSUE: Was the life insurance policy that named Mrs. Flood as her husband’s beneficiary an illegal contract that is void?

HOLDING: The life insurance policy that Ellen Flood had taken out on the life of her husband was void based on public policy. There was evidence proving Mrs. Flood's scheme to defraud both the insurer, Fidelity, and the insured, Mr. Flood.
The person who transfers the right of possession and use of goods under a lease:
In what 2 ways can an offeror revoke his offer?
The revocation may be:

1) Communicated to the offeree either by the offeror or a third party (i.e. “I hereby withdraw my offer”).

2) Made by the offeror’s express statement or by an act that is inconsistent w/ the offer (i.e. selling the goods to another party).
You promise to buy Jill's car for $2,000, and she promises to sell it to you for that amount. The exchange of car for cash is to occur in five days. Today, this is an example of a contract that is:
bilateral, executory
Jack rented a condo for a week in Ohio to attend the Olympics. Lodging was scarce, so the rental was at twice the normal rate. However, the Olympics were canceled. Jack wants to be excused from his contract to rent the condo, but the owner refuses. How can Jack avoid paying for the original condo rental?
Jack can claim that there was frustration of purpose.
What established the formation, performace, and default of leases in goods?
Article 2A of the UCC–Leases
Digital Electronics, Inc., makes an offer to the owners of National Computer Corporation to buy the entire company. Who has the power to revoke this offer?
Digital Electronics, the offeror, only.
How might an offeror avoid the problem of lost acceptances?
By expressly altering the mailbox rule. The offeror can do this by stating in the offer that acceptance is effective only upon ACTUAL RECEIPT of the acceptance.
A contract that is held to be against public policy is treated as what?
An illegal contract
Smith Roofing Company agrees to roof a house for $50,000. One week after Smith finishes the roof, over 20% of the shingles fall off due to improper installation. The homeowner promises Smith an additional $10,000 to reinstall the shingles. However, the homeowner later refuses to pay Smith more than $50,000 for the work. What would result?
Smith is not entitled to any more than $50,000 for its work because there was a preexisting duty.
John agrees to sell his sports equipment store to Kay and, as part of the sale, promises not to open a similar store in the United States for twenty years. Is John's promise is enforceable?
No- because it is unreasonable in terms of geographic area and time.
Jane promises to pay her secretary $1,000 in consideration of the services the secretary provided over the years. Jane later breaks her promise. Was there a breach of contract?
No – Jane is not liable because the secretary’s consideration is in the past.
The person who acquires the right to possession and use of goods under a lease:
What was the court’s issue and holding in the Ryno v. Tyra case?
ISSUE: Was there an illegal contract? If so, who owns the car?

HOLDING: Tyra, the customer at the car dealership who won the coin toss, owns the car. The court found that there was an illegal contract and left the parties where it found them--that is, with Tyra in possession of the car.
Al sent Baker a letter containing an offer. The letter was sent on day 1, and was received on day 3. On day 4 Baker mailed an acceptance to this offer, which was received by Al on day 6. On day 5 Al changed his mind and hand-delivered a revocation to Baker that same day. Is there a contract?
Yes, there is still a contract Al’s revocation is not effective because it was received after a contract was formed
Hugo calls Irma on the telephone and offers to buy Irma's textbooks from the previous semester for $55. Irma agrees. Is there a contract?
Yes - an EXPRESS CONTRACT (oral)
The UCC defines "goods" as:
tangible personal property
Hans bought a sports car when he was 15. Two weeks after he turned 18, he sold the car to his neighbor. Is there still a contract?
Hans has indicated his intent to be bound to the contract by selling the car and can no longer disaffirm.
Harold makes an oral agreement to purchase Tina's boat for $700. Under the Uniform Commercial Code, is there a contract?
No - the oral agreement is unenforceable because of the Statute of Frauds.
Tim contracts to perform a violin solo for Bob. Tim later assigns the contract to his friend Sarah. Can he do this?
No – Tim cannot assign his duty to play because the contract was one in which Tim's personal skill as a musician was an essential part of the agreement.
Bill sends a letter to Wendy offering to sell her seven tons of steel. Wendy reads Bill’s offer and sends him an acceptance letter. When is Wendy's acceptance effective?
When she dispatches it.
A three-party transaction consisting of the lessor, the lessee, and the supplier or vendor:
Finance lease
Harry is hired as an accountant by a large Dallas-based accounting firm. The firm's drafts an employment contract which states: "Employee agrees that he will not engage in the practice of accounting in Dallas for one year after termination with this firm." Harry signs the contract, works for 6 months, and then resigns and opens his own firm in Dallas. What will result?
Harry’s former employer will sue him for breach of contract, and will win, b/c this non-compete clause is reasonable in period of time and geographical area.
Can all convenience stores within Bossier City agree to have the price of gasoline not exceed a certain price?
No – this is illegal because it would be a contract in restraint of trade.
____ ____ may be inferred from what is customary in similar transactions or prior dealings between parties.
Implied authorization
According to the Statute of Frauds, contracts that are not in writing but should be are:
In old chancery courts, equity was used when decisions were based on what?
Fairness and moral rights.
List 5 ways an offer may be terminated by actions of the parties.
1. Revocation of the offer by the offeror
2. Rejection of the offer by the offeree
3. Counteroffer by the offeree
4. Promissory estoppel
5. Option contracts
Most states have statutes which state that contracts made by intoxicated persons are ____.
Article 2 of the UCC applies to:
All sales of goods
A contract in which the seller agrees to sell all of its production to a single buyer:
output contract
A transfer of the right to the possession and use of the named goods for a set term in return for certain consideration:
What might the court do if there is a term missing in a contract?
The court can reasonably fill in an IMPLIED term.
Foreseeable damages arising from circumstances outside the contract:
Consequential damages
What are the 5 types of promises that lack consideration?
1) Illegal consideration
2) Illusory promises
3) Moral obligation
4) Preexisting duty
5) Past consideration
A contract in which a buyer agrees to purchase all of the requirements for an item from one seller:
Requirements contract
A contract that can't be performed by its terms within a year must be in writing.
What are 4 types of formal contracts?
1. Contracts under seal
2. Recognizances
3. Negotiable instruments
4. Letters of credit
Under modern law of contracts, a contract is considered supported by legal value if:
The promisee suffers a legal detriment or legal benefit.
In what 2 ways can an offer be terminated?
1) Action of parties
2) Operation of law
The passing of title from a seller to a buyer:
Suppose you are in a contract w/ your neighbor to buy his house. However, your neighbor's home is flooded while he is away. Is the contract still enforceable?
Yes - even though destruction of the subject matter terminates an OFFER, it DOES NOT terminate an offer that has already been accepted (in a contract).
Suppose the Dallas Cowboys contract w/ a tailor to make uniforms. The tailor completes the uniforms, but the coach thinks the color is wrong and refuses to pay the tailor. Is the contract still enforceable?
Yes - the contract is still supported by legal value b/c the tailor suffered a LEGAL DETRIMENT. The contract had sufficient consideration.
What are the 4 illegal contracts contrary to statutes?
1) Licensing Statutes
2) Usury Laws
3) Gambling Statutes
4) Sabbath Laws
Fred hires a lawyer to draft his will. He directs the lawyer to leave all of his property to his best friend, Shari. Fred later dies & the lawyer is negligent in drafting the will & causes it to be invalid; Fred's relatives receive all his inheritance. Can Sheri sue?
Yes - Sheri can sue the lawyer for damages b/c she was the INTENDED BENEFICIARY of Fred's will.
What was the court’s issue and holding in the Wells Fargo Credit Corp. v. Martin case?
ISSUE: Does Wells Fargo's unilateral mistake (clerical error $15,000 instead of $115,000) constitute grounds for setting aside the judicial sale?

HOLDING: Wells Fargo's unilateral mistake did not entitle it to relief from the judicial sale.

WHY? The amount of the sale was grossly too little. This slip-up occurred due to an avoidable, unilateral mistake by an agent of Wells Fargo. Mr. Martin's bid was accepted when the clerk announced "sold."
To be actionable as fraud, a material misrepresentation of fact must be:
It must be of a past or existing material fact. This means that the misrepresentation must have been a significant factor in persuading the innocent party to enter the contract (does not have to be the sole factor).
LSU contracts w/ a contractor to build a new facility w/ space for 1,000 students. However, the completed building can support the weight of only 500 students b/c the contractor used shoddy materials. The defect cannot be repaired w/out rebuilding the entire structure. What has occurred & what can the LSU can do?
LSU may either:

1) Rescind the contract & require removal of the building. They are then discharged of any obligations under the contract & can hire another contractor to rebuild the building.
2) Accept the building & subtract damages caused by the defect from the contract price.
An anticipatory breach is a ___ breach of contract.
The Restatement (Second) of Contracts version of promissory estoppel provides that if parties enter into an oral contract that should be in writing under the statute of frauds, the oral promise is enforceable against the promisor if what 3 conditions are met?
1) The promise induces action or forbearance of action by another.
2) The reliance on the oral promise was foreseeable.
3) Injustice can be avoided only by enforcing the oral promise.
What was the court’s issue and holding in the Parker v. Arthur Murray, Inc. case?
ISSUE: Does the doctrine of impossibility excuse Parker's performance of the personal service contracts?

HOLDING: There was evidence which proved that the plaintiff was incapable of continuing his lessons, & the doctrine of impossibility of performance excused Parker's performance of this personal service contract.
Leder Laboratories enters a written contract to employ a manager for 3 years at a salary of $6,000/month. Before work starts, the manager is told he is no longer needed. Assume that the manager later finds another job, but it pays only $5,000/month. Is there anything he can do?
This is a material breach of contract. The manager may recover $1,000 per month for 36 months ($36,000) from Leder Laboratories as COMPENSATORY DAMAGES. These damages place the manager in the same situation as if the contract w/ Leder had been performed.
Covenants not to complete that are ancillary to a legitimate sale of a business or employment contract are lawful if they are reasonable in what 3 aspects?
1) line of business protected
2) geographical area protected (LA – no less than 45 miles)
3) duration of time (LA – 5 yrs.)
Travis and Holly enter into an oral contract where Holly agrees to sell her motor home to Travis for $35,000. She sends him a signed letter w/ the terms of their agreement. Who is the contract enforceable against?
The contract can only be enforced against HOLLY b/c she signed a written memorandum (the letter) containing the terms of the contract. The contract cannot be enforced against Travis since he can raise the statute of frauds as a defense.
If a court finds that a contract or contract party has run into unforeseeable difficulties that make his/her performance more expensive, and the other party has promised to clause is unconscionable, it may:
1) refuse to enforce the contract
2) refuse to enforce the clause but enforce the remainder of the contract
3) limit the applicability of any unconscionable clause to avoid any unconscionable result
What was the court’s issue and holding in the Wilson v. Western National Life Insurance Co. case?
ISSUE: Was there a concealment of a material fact that justified Western's rescission of the life insurance policy?

HOLDING: There was concealment by the Wilsons that warranted rescission of the life insurance policy by Western.

WHY? The Wilson’s insurance application would not have been accepted had Mr. Wilson disclosed on the application his past overdose, Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance.
Allen Co., a wholesaler, enters a contract to purchase 1,000 men’s suits for $150 each from the Fabric Co., a manufacturer. Prior to contracting, the Allen Co. tells the manufacturer that the suits will be resold to retailers for $225. Fabric Co. breaches the contract by failing to manufacture the suits. Allen Co. cannot get the suits manufactured in time to meet his contract. What can the wholesaler do?
He can recover $75,000 of lost profits on the resale contracts (1,000 suits x $75 profit) in CONSEQUENTIAL DAMAGES from the manufacturer b/c the manufacturer knew of this special damage to Allen Co. if it breached the contract.
What happens to the non-breaching party when there is an anticipatory breach of contract?
1) The non-breaching party’s obligations under the contract are discharged immediately.
2) The non-breaching party can sue the repudiating party when the breach occurs; there is no need to wait until performance is due.
Suppose an art dealer contracts to purchase native art from Africa. However, Africa enacts a law forbidding native art from being exported from the country before the contract is performed. Can the art dealer still receive the native art?
No – because of a SUPERVENING ILLEGALITY, this contract is discharged by impossibility.
Mike offers Joan a job upon her graduation from college. If Joan graduates, the condition has been met. If Mike refuses to hire Joan at that time, she can sue him for breach of contract. If Joan does not graduate, Mike is not obligated to hire her. This is an example of:
A condition precedent
What are the 3 ways to discharge a contract by agreement?
1) mutual rescission
2) accord and satisfaction
3) novation
Don contracts w/ BL Co. to have BL build an office for $5 million. The plans call for three-ply windows. BL constructs it as planned except it installs two-ply windows & it will cost $30,000 to install the correct ones. What has occurred & what can Don do?
1) If BL Co. agrees to replace the windows, its performance is elevated to complete performance, & Don must pay the entire contract price.
2) If Don hires someone else to do the windows, he may deduct this cost of repair from the contract price & pay the difference to BL.
What was the court’s issue and holding in the Sutton v. Warner case?
ISSUE: Does the equitable doctrine of part performance take this oral contract for the sale of real property out of the Statute of Frauds?

HOLDING: The doctrine of part performance did apply & the Statute of Frauds did not prevent the enforcement of the oral contract to sell real estate.

WHY? The doctrine of part performance by the purchaser is an exception to the Statute of Frauds when applied to contracts for the sale of real property.
In most cases, the mistaken party for a ___ ___ will not be permitted to rescind the contract.
Unilateral mistake
A utility company enters a contract to buy uranium from a supplier at a fixed price of $1 million per year for 5 years. Suppose a new uranium cartel is formed worldwide & the supplier must now pay $3 million for uranium to supply the utility w/ each year’s supply. Is the contract still enforceable against the supplier?
Because of COMMERCIAL IMPRACTICABILITY, the supplier can most likely rescind its contract w/ the utility based company. However, it is not impossible for the supplier to supply the uranium.
What happens to the promisor when the doctrine of promissory estoppel applies?
The promisor is estopped (prevented) from raising the statute of frauds as a defense to the enforcement of the oral contract