Contracts Nc Bar Exam

Front 1

What do you need to ask yourself to see if there is a contract?

Back 1

1. was there mutual assent

2. was there consideration

3. are there any defenses

Front 2

What is needed for mutual assent?

Back 2

1. meeting of the minds

2. offer--objective manifestation of the intent to enter into an agreement

(i) must be intent into enter not a mere invitation.

(ii) language more specific likely to be an offer.

Front 3

When are advertisements considered an offer?

Back 3

when an advertisement when there are certain and definite "first come, first served"

Front 4

What is the rule for auctions without reserve?

Back 4

No offer seller may withdraw the goods

Front 5

What is the rule for reserve auction?

Back 5

1. offer is made by a potential bidder

2. acceptance

3. with reserve seller the right to withdraw the goods if bid is not high enough before the hammer falls

Front 6

What does certainty and definiteness of terms mean?

Back 6

the more definite the terms the more reasonable the receiver's exepctation that the sender has expressed an intention to contract

Front 7

What is needed for the terms to be definite and certain?

Back 7

1. identity of the offeree and the subject matter

2. price

3. time of payment

4. quantity

5. nature of the work to be performed.

Front 8

How is an offer terminated?

Back 8

1. direct communication

2. revocation by indirect communication

(i) correct information

(ii) from a reliable source

(iii) acts of the oferor that would indicate to a reasonable person that the offeror no longer wishes to make the offer

Front 9

What are the exceptions of an offeror revoking an offer?

Back 9

1. Option contract where the offeree gives consideration

Front 10

What is a firm offer?

Back 10

General Rule an offer by a merchant, signed by the merchant gives assurances that the offer will be held open for a reasonable time.

Note: if not time stated, it cannot exceed 90 days

Front 11

What is detrimental reliance?

Back 11

where the offeror could reasonably expect that offeree would rely to her detriment on the offer, it it will be irrevocable as an option contract for a reasonable length of time

Front 12

What is the general rule for general contractor and subcontractor?

Back 12

once the subcontractor submits the bid, he becomes bound when the general contractor uses the bid in his proposal. General contractor's reliance must be reasonable.

Front 13

When can a unilateral contract be revoked?

Back 13

unilateral contract can be revoked at any time prior to acceptance.

Note: once the offeree begins perfomrance the offer is irrevocable and must stay open for a reasonable amount of time.

Front 14

What is the NC rule for revocation of a unilateral contract?

Back 14

The North Carolina rule permitting the offeror to revoke the offer after performance begins but allowing the offeree to recover his reliance interest

Front 15

What is the traditional rule for unilateral contracts?

Back 15

the traditional unilateral contract was one in which the offeror requested performance rather than a promise

Front 16

How does an offeree reject an offer?

Back 16

1. Express rejection

2. counteroffer-offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms.

Note: Mere inquiry is not a counter offfer.

Front 17

What is revival of an offer?

Back 17

if the offer is rejected, the offeror may restate the same offer and create a new power of acceptance

Front 18

What is the rule for rejecting an option contract?

Back 18

rejection or a counteroffer to an option contract does not terminate the original offer. Offeree can come back later and accept if the time period hasn't lapsed.

Front 19

What is a lapse of an offer?

Back 19

if the offeror doesn't accept within the specified or within a reasonable time the offer lapse

Front 20

What is termination by operation of law?

Back 20

1. Death or insanity of either party termiantes the contract

2. termination by destruction of subject matter

3. termination by supervening legal prohibition of proposed contract

Front 21

What is the mailbox rule?

Back 21

acceptance by mail is effective upon dispatched provided its properly address and stamped unless

there is a rejection that is sent first and the rejection is recieved first

Note: not applicable if the offer stipulates that accpetance is not effective until received or an option contract is involved.

Front 22

What is the exception to the mailbox rule?

Back 22

If rejection is sent and then an accpetance is sent, whichever is reaches the offeror first prevails

Front 23

What is a grumbling acceptance?

Back 23

an acceptance that is effective as long as its not a dissent

Front 24

What are the exceptions to the rule that one cannot accept a contract by silence

Back 24

1. express waiver in offer--offer may expressly waive any communication of acceptance

2. act as acceptance--offer may specify that an act be done,once the act is done a contract is formed

3. Silence as acceptance-if the offeree silently takes offered benefits, the courts will often find acceptance (look at prior dealings and trade practices)

Front 25

What is a unitlateral contract?

Back 25

a promise exchanged for performance

Front 26

What is a bilateral contract?

Back 26

a promise in exchange for a promise

Front 27

What is the rule for reward?

Back 27

offeree must have knowledge

Front 28

What are the elements of consideration?

Back 28

1. there must be bargained for exchange between the parties and that which is bargained for must be considered for legal value

2. must constitute a benefit to the promisor and the detriment to the promise

Note: bargained-for-exchange the promise must induce the detriment and the detriment must induce the promise

Note: act or forebearance by promisee must be of benefit to promisor-the test is whether the act or forbearance by the promisee would be of any benefit to the promisor

Note: if the promisor's motive was no more than to state a condition of a promise to make a gift, there is no consideration

Note:

Front 29

What is the rule for past or moral consideraton?

Back 29

General Rule-not sufficient consideration something already given or performed before promise was made, will not satisfy the bargain requirement

Front 30

What are the exceptions to past or moral consideration?

Back 30

1. debt barred by a technical defense-past obligations that would be enforceable but for a defense statute of limitations are enforceable if its in writing or has been partially performed

Note: promise to pay for past requested act-if acts have been previously performed by the promisee at the promisor's request, a new promise will be enforceable

Front 31

What is the pre-existing duty rule?

Back 31

The rule holds that a promise to perform an act that the party is already obligated to perform is not consideration for a return promise

Front 32

What is legal value for consideration?

Back 32

adequacy of consideration--a pepercorn could be sufficient.

Front 33

What is legal benefit and legal detriment?

Back 33

must be a detriment to the promisee

Front 34

What is legal detriment to the promisee?

Back 34

occurs when the promisee does something he is under no legal obligation to do or refrains from doing something that he has a legal right to do

Front 35

What is the legal benefit to promisor?

Back 35

the forebearance or performance of an act by the promisee which the promisor was not legally entitled to expect ro demand but which confes a benefit on the promisee

Front 36

What are the exceptions to the pre-existing duty rule?

Back 36

1. new or different consideration is promised

2. promise is to ratify a voidable obligation

3. pre-existing duty is owed to a 3rd person rather than to the promisor

4. there are unforeseen circumstances sufficient to discharge a party

Front 37

Is forebearing to sue, adequate consdieration?

Back 37

forbearance to sue-if the claim is valid, the forbearance to sue is consideration. if the claim is invalid, if the claimant reasonably and in good faith believes its valid, its consideration

Front 38

what is the consideration for output contract?

Back 38

promisor suffers a legal detriment by parting with the right to buy or sell the goods from another source

Note: unreasonable disproportionate quanties, any stated estimates, in the absence of any stated estimate, what's normal in prior output/requirments contracts

Front 39

What is the rule for suretyship?

Back 39

Must be supported by consideration. If the surety is paid consideration is met.

Exception: obtaining surety is condition precedent--when surety is obtained and promises to pay the contract is binding if the creditor performs in reliance on the Surety's promise

Front 40

What is the Main Purpose Doctrine?

Back 40

if the surety's main purpose is for his benefit, no consideration will be found

Front 41

What are the elements of promissory estoppel?

Back 41

1. the promisor should reasonably expect to induce action or forbearance

2. Person to whom promise was made reasonably relies on it to his detriment

3. injustice can be avoided only by enforcing the promise and

4. remedy may be limited as justice requires

Note: NC doesn't recognize promissory estoppel

Front 42

In NC what is the rule for contracts under seal?

Back 42

seal raises a presumption of consideration that must be rebutted by clear and convincing evidence.

Front 43

What is the rule for mutual mistake?

Back 43

contract may voidable by the adversely affected party if:

1. the mistake concerns a basic assumption on which the contract was made

2. the mistake has a material adverse effect on the agreed-upon exchange and

3. the adversely affected party did not bear the risk of the mistake.

Front 44

What is the rule for unilateral mistake?

Back 44

where only one party is mistaken in will not prevent formation of k, if the nonmistaken party knew or had reason to know of the mistake, he will not be permitted to accept

Front 45

What is the rule for mistake in transmission?

Back 45

the message as transmited is operative unless the other party knew or should have known of the mistake.

Front 46

What is the general rule for minors entering into contracts?

Back 46

ks entered into by minors are voidable

Note: NC minor can still void a k even if there is misrepresentation of age.

Front 47

What is the exception to the defense of infancy?

Back 47

cannot avoid contracts for necessities

Front 48

What is the sef-off rule in NC for contracts with minors?

Back 48

NC law allows a set-off from what the seller gives to the minor.

Hypo:c. Property in minor’s possession must be returned to other party

1.If minor disaffirms K for sale of Camry. Minor gives me back car and I give him back $10,000. If car has been in a wreck and been totaled and is now worth $50, then gen. rule is that minor gives me the car and I give back the $10k

2.NC – Set off Rule – NC law reaches the same result but allows me to set-off from what I return to the minor. So minor gets $9,950 and keeps the $50 car for a total of $10,000

3.NC Rule for minors who are artists, creators of intellectual property, athletes, or performing extras

Front 49

What is the rule for mental incapacity as a defense for formation of a contract?

Back 49

one whose mental capacity is so deficient that he is incapable of understanding the nature and significance of a k may disaffirm when lucid or his legal representative.

Front 50

What is the rule for duress as defense to formation of a contract?

Back 50

ks induced by duress and coercion are voidable and may be rescinded as long as not affirmed

Front 51

What is the statute of frauds?

Back 51

certain agreements must be in writing

Front 52

What is covered under the statute of frauds?

Back 52

M.Y. L.E.G.S

Marriage

contracts performed later than a year

interest in lands

executor promises personally to pay estate debts

Sale of Goods over $500.00

Sureytship

Front 53

What is the exception for the statute of frauds and the interest of land?

Back 53

part performance doctrine

1. payment of all or part of the purchase price

2. purchaser in possession of the land

3. purchaser made improvements on the land

Note: NC doesn't recognize part performance

Front 54

What is the rule for covenants not to compete?

Back 54

must be reasonable restraints on employee: look at time of restriction, territory and type of employment

Front 55

In NC, what is the rule for covenants not to compete?

Back 55

In an agreement restricting a person's right to compete, made either ancillary to a contract for the sale of a business or a contract of employment, is valid if it is in writing, based on a valuable consideration, reasonable as to time and territory, fair to the parties, and not against public policy

Note:Moreover, employers frequently attempt to prevent such competition without giving anything in return for the employee's promise not to compete. However, if the employment relationship is already established without a covenant not to compete and the employer thereafter requests the employee agree to such a restriction, the employer must furnish new consideration in order for the restriction to be valid

Front 56

What is the test for the intended beneficiary versus incidental beneficiary for third party beneficiary?

Back 56

Did the parties intend to give a benefit to a 3rd party

Front 57

What are the factors determining intent for third party?

Back 57

1. 3rd party expressly designated in the contract

2. is performance to be made directly to 3rd party

3. Does the 3rd party have any Rights under the k

4. Does the 3rd party have such a relationship with the promisee that one could infer that the promisee wished to make an agreement for the benefit of a 3rd party

Front 58

When do the Rights vests under a 3rd party beneficiary?

Back 58

a beneficiary can enforce a contract only after his rights have vested. Their rights vests when the beneficiary.

Front 59

What are the rights of promisee and the 3rd party?

Back 59

Promisor's defenses

(i) any defense that he would have againt the promisee

(ii) any defense the promisee would have against 3rd party if the promise to pay absolute.

Front 60

What is the rule for a Third Party beneficiary versus Promisee?

Back 60

a 3rd party creditor may sue promisee.

Front 61

What are the promisor's defenses under the 3rd party?

Back 61

Any defense that he would have against the promisee (lack of assent no consideration)

Note: any defense the promisee would have against the 3rd party if the promise to pay was absolute

Front 62

What is the rule for 3rd party in regards to promisee versus promisor?

Back 62

a promisee may sue the promisor both at law and in equity for specific performance if the promisor is nto performing for the 3rd person

Front 63

What is an assignment?

Back 63

a transfer of a right under a contract is called an assignment

Note: need not be inwriting

Front 64

What is the general rule for third party beneficiary?

Back 64

It is well-settled in North Carolina that where a contract between two parties is intended for the benefit of a third party, the latter may maintain an action in contract for its breach . In determining whether one is an intended beneficiary, court should consider: (1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right of performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance

Front 65

what assignments need to be in writing?

Back 65

1. wage assignments

2. assignments ininterest of land

3. choses in action worth more than 5k

4. assignments intended as security interests

Front 66

What is the difference between revocable or irrevocable assignments?

Back 66

assignment for consideration

assignment not for consideration--generally revocable

Front 67

What are the exceptions of irrevocable assignments?

Back 67

1. obligor has already performed

2. a token (tangible claim) of assigned rights have been delivered to the assignee

3. if the assignment is in writing

4. estoppel-when assignor should reasonably foresee tha the assignee will rely on assignemnt

Front 68

What are the methods of revocation for an assignment?

Back 68

1. death of assignor

2. bankruptcy

3. notice of revocation

4. assignor takes performance directly from the obligor

5. subsequent assignment of the same right by the assignor to another

Front 69

What are the rights of an assignee versus an obligor?

Back 69

assignee may enforce her rights against the obligor

Front 70

What are the defenses of the obligor?

Back 70

any defense he had against assignor

Front 71

What happens to the modification of contract between the assignor and obligor, after it has been assigned?

Back 71

1. no effect on rights of assignee

2. UCC modification of an assigned right to payment that hasn't been fully earned is effective against assignee if made in good faith

Front 72

What is a typical asignment situation?

Back 72

X(obligor) contracts with Y (the assignor). Y assigns his right to X's performance to Z (the assignee)

Front 73

What rights may be assigned?

Back 73

Generally, all contractual rights may be assigned

Front 74

What are the exceptions of the rights that can be assigned?

Back 74

1. an assignment that would substantially change the obligor's duty of risk (personal service ks where the service is unique, requirements and output ks where the assignee will substantially vary quantity)

2. an assignment of future rights to arise from future ks (not future rights in already existing contracts) and

3. an assignment prohibited by law

2.

Front 75

What is the outcome for assignee vs assignor?

Back 75

the assignee can sue the assignor for wrongfully exercising the power to revoke in an irrevocable assignment situatiojn.

Note: an action by the assignee against the assignor may also lie where the obligor successfully aserts a defense against the assignor in an action brought by the assignee against the obligor to enforce the obligation.

Front 76

What are the problems if there have been successive assignments of the same rights?

Back 76

Revocable assignments-where the 1st assignment is revocable, a subsequent assignment will serve to revoke the fist

Irrevocable assignments

(a) first assignee has priority

Front 77

What are the exceptions under successive assignments for irrevocable assignments?

Back 77

1. if subsequent assignee gets the 1st judgment against the obligor she will prevail

2. if the 2nd assigneee gets 1st payment

3. if 2nd gets 1st delivery of a token chose

4. if 2nd gets novations

5. Estoppel 2nd assignee can proceed against 1st assignee on estoppel.

Front 78

What are the excpetions to a delegation of duty?

Back 78

1. duties involving personal judgment and skill

2. delegation that would change the obligee's expectancy

3. a special trust was reposed in the delegator by the other party to the contract and

4. a contractual restriction on delegation

Front 79

What are the rights and liabilities under delegation?

Back 79

1. obligee -must accept performance from the delegate that may be delgated

2. delegator remains liable

3. delgatee obligee cannot compel delgatee to perform, unless assumption-where the delegatee promises perform because of consideration.

Front 80

What is the parol evidence rule?

Back 80

where the parties to a k express their agreement in writing with the intent that it is the full and final expression of their bargain (integration) any written or oral expressions made prior to or contemporaneous with the writing are inadmissible to vary the terms of the writing.

Front 81

What is the analysis for parol evidence?

Back 81

1. is the writing integrated?

2. If yes, no parol evidence

3. if no, the oral and extrinsic evidence is permissible

Front 82

What is the parol evidence rule in NC?

Back 82

inconsistent with a written contract ... or which tends to substitute a new or different contract ... is incompetent ... where the writing totally integrates all the terms of a contract or supersedes all other agreements relating to the transaction ... [but] where it is shown that the writing is not a full integration ... the terms not included in the writing may then be shown by parol

Front 83

What is a condition precedent?

Back 83

must occur before an absolute duty of immediate performance arises in the other party.

Front 84

What is a condition current?

Back 84

those capable of occurring together and that the parties are bound perform at the same time

Front 85

What is a condition subsequent?

Back 85

the occurrence of which cuts off an already existing absolute duty of performance

Front 86

What is an accord?

Back 86

an accord is an agreement in which one party to a contract agrees to accept performance different from that originally promised.

Note: consideration less than that of the original contract will be sufficient if it is of a different type or is to be paid to a 3rd party

Front 87

What is the effect of an accord?

Back 87

1. effect does not discharge a contractual duty. It merely suspends the other party's right to enforce it

2. Partial payment of original debt-payment of a smaller amount than is due is valid consideration if its made in good faith and there is a bona fide dispute as to the claim. This is often accomplished by tendering a check conspicously marked 'payment in full'

Front 88

What is satisfaction?

Back 88

the performance of the accord. It discharges effect of the accord

Front 89

What is the rule in NC for accord and satisfaction of a disputed debt?

Back 89

Consistent with the pre-existing duty rule is the widely accepted proposition that payment of a lesser amount is consideration for a discharge of the whole debt only when the debt is disputed or unliquidated. Under those circumstances a valid compromise exists. Where the debt is liquidated and undisputed, payment of a lesser sum given in satisfaction of the whole debt is not consideration sufficient to support an accord and satisfaction unless the debtor also gives some new or additional consideration.

Front 90

What is the rule for a undisputed debt?

Back 90

Often a debtor who owes an undisputed, liquidated debt promises to pay all or part of his debt if his creditor promises to do something in return. Such an agreement lacks consideration under the pre-existing duty rule and the debtor cannot enforce the creditor's promise

Front 91

What is material breach?

Back 91

if the obligee does not receive the substantial benefit of the bargain as a result of the failure to perform or defective performance. The non-breaching may do the following:

1. may treat the k as an end and

2. will have an immediate right to all remedies for the breach of the entire k, including damages

Front 92

What are compensatory damages?

Back 92

to put the nonbreaching party where she would have been had the promise been performed

Front 93

What are expectation damages?

Back 93

sufficient damages for so the non breaching party can buy a substitute performance

Front 94

What are consequential damages?

Back 94

in additon to standard measures of damages imposed on the breaching party, he will be held liable for any further losses resulting from the breach that any reasonable person would have foreseen at the time of entry of the k

Front 95

What are the damages for a breach of k for the sale of land

Back 95

difference between k price and the fair market value of the land

Front 96

What are the damages for construction contract when the owner breaches.

Back 96

before construction started--builder is entitled to the profit he would have derived from the k

breach during construction builder is entitled to the full k price plus interest

Front 97

What are the damages for construction contract when the contractor breaches.

Back 97

before construction started--owner gets cost of completion plus reasonable compensation for any delay

during construction--cost of completion plus reasonable compensation for any delay

Front 98

What is the rule for mitigation of damages in employment ks?

Back 98

in employee k where the employer breaches, the employee has a duty to use reasonable care in finding another job of the same type

Front 99

What is the rule for mitigation damages for sale of goods?

Back 99

Buyer is in breach--if seller doesn't resell goods, his damages would be limited to the difference betwen the k price and the market value at the time of the time of set performance

Seller in breach-if buyer doesn't cover, she is limited to the difference between the k price and the market value and cannot recover and consequential damages that could have been avoided

Manufacturing ks--if the person for whom the goods are being manufactured breaches, the manufacturer is under a duty to mitigate by not continuing work after the breach, unless not continuing would increase the loss

Construction ks--builder no duty to avoid the consequencees of an owner's breach but does have a duty not to continue working unelss not continuing will increase the loss

Front 100

When is specific performance available

Back 100

land ks and rare unique goods

note: not available for service ks

Front 101

What are the defenses for service under specific performance?

Back 101

laches--the party delayed bringing an equitable action which prejudices the defendant

unclean hands

sale to a bona fide purchaser

Front 102

Under 2-207, when do additonal terms of acceptance become part of the agreement?

Back 102

Additional terms contained in an expression of acceptance or wirtten confirmation become part of a k between merchants unless:

1. an expression of acceptance was made conditonal on assent to the additional terms

2. the offer explicitly limited acceptance to its terms

3. the additional terms materialy alter contract or

4. notification or objection to the additional terms is given within a reasonable time after notice is received

Front 103

What is the UCC excpetion to the pre-existing duty?

Back 103

k involves the sale of goods, modifications of it in a manner which benefits only one of the parties is enforceable without consideration, if the modification was obtained in good faith.

Front 104

What is an illusory agreement?

Back 104

1. has assumed no obligation to the other, or

2. can unilaterally avoid his obligations to the other

Front 105

What is the rule for specially manufactured goods under the UCC (statute of frauds)

Back 105

oral k is enforceable for specially manufactured goods, not suitable for sale to others in the ordinary course of the seller's business.

Front 106

What is the perfect tender rule?

Back 106

the seller's performance must ordinarily strictly conform to the agreement, or the buyer may reject the items seller is in material breach of the k if his tender is not perfect

Front 107

When are consequential damages recoverable?

Back 107

consequential damages are only recoverable when the breaching party had knowledge or reason to know that the nature of the consequential damages actually suffered

Front 108

What are the rules for cross mailing?

Back 108

mailbox rule applies--accetance mailed before revocation notice = k

mailbox rule applies acceptance before rejection = k

mailbox rule does not apply first to receive notice wins

rejection followed by acceptance 1st to arrive controls

Front 109

Under common law, what are the rules for unilateral contract?

Back 109

offer can be revoked anytime before the acceptance

modern-offer irrevocable once offeree begins performance

Front 110

Under the UCC what are the rules for buyer receiving goods?

Back 110

if seller notifies byer of non-conforming goods and claims goods are merely an accomodation, buyer does not have to accept but if he does-seller is not the breach

2. offeree elects to begin performance as a mode of accpetance, the offeree must notify seller within a reasonable time or offeror can treat offer as lapsed before acceptance.

Front 111

Under UCC what is revocation of an offer?

Back 111

Expressed in writing within reasonable time

GR-once acceptance of goods--cannot reject goods

Front 112

Under UCC, what are the exceptions to revocation?

Back 112

Exception--if buyer discovers non-conformity within reasonable time and

(1) non-conformity substantially impairs the value of the goods

(2) non-conformity was difficult to discover (latent defect)

Front 113

What is a firm offer?

Back 113

signed promise given by a merchant (buyer or seller) to keep offer open but can be no longer than 3 months

Front 114

Under common law, what is anticipatory repudiation?

Back 114

if there is a definite and unyielding renunciation of any intention to perform, he commits a present material breach of k

1. immediately sue for material breach of repudiated k or

2. affirm k and wait for date of performance

Front 115

Under the UCC, what is repudiation?

Back 115

a repudiating party may retract repudiation anytime before performance would be due unless:

1. other party changed their positioning detrimenta reliance or

2. the other party accepted repudiation as final

Note: can only wait to sue for commercially reasonable time--if not, can only recover for what could not have been mitigated.

1. given written demand for adequate assurances

2. suspend his own performance until reply is given

3. if no response within 30 days-treat as repudiation.

Front 116

Under the UCC, what can be assigned?

Back 116

assignment that would materially alter k duties of non-consenting party is not effective

can assign output/requirement k as long as there is no unreasonable fluctuation of sending goods

no assignment clause = no delegation of duties unless expressly stated.

Front 117

What is F.O.B?

Back 117

destination where the buyer buyer is located

Front 118

What is the rule for liuidated damages as a penalty in NC?

Back 118

It is the general rule that the amount stipulated in a contract as liquidated damages for a breach thereof, if regarded by the court as liquidated damages and not as a penalty, may be recovered in the event of a breach even though no actual damages are suffered