Contracts

Front 1

What does it mean when the call of the questions asks you to answer using the "modern trend" or "modern law?"

Back 1

It means to abandon the common law. Don't chose what you think is right.

Front 2

Under the "modern trend" of K law, does it matter whether a preexisting duty is owed to the promisee or a 3rd party?

Back 2

YES

Under the modern trend of K law, the preexisting duty rule is only triggered when the duty is owed to the promisee, NOT a 3rd party.

This is contrary to the CL.

Front 3

If a $1000 debt is barred by the SOL, but the debtor later promises, in writing, to pay $600, what is the debtor's liability?

Back 3

$600.

"Moral consideration" is sufficient to uphold this agreement.

The new agreement MUST be in writing AND signed.

Front 4

When can silence be acceptance?

Back 4

Who had prior dealings OR trade practices known to both parties create a commercially reasonable expectation by the offeror that silence represents acceptance.

If this is the case, the offeree is under a duty to notify the offeror that it does not accept.

NOTE:
The offeror cannot make silence acceptance.

Front 5

Is a K to be a shipper or distributor of goods governed by the UCC?

Back 5

NO.

This is not the same as a manufacturer.

This is not a goods K.

Front 6

What is the difference between these clauses in a K:

(1) K may be canceled upon reasonable written notice at any time.

(2) K may be canceled after two months upon reasonable written notice at any time.

Back 6

(1) Illusory (no K)

(2) Valid K

Front 7

If a contractor relies on a bid by a subcontractor without informing the subcontractor of his reliance, what relationship is formed?

Back 7

If the elements of promissory estoppel (promise, reliance, injustice) are satisfied, the offer is binding as an option K between the general and sub.

The sub will be held to the K.

Front 8

If a contractor relies on a bid by a subcontractor without informing the subcontractor of his reliance, but ultimately does not use the sub's services, what relationship is formed?

Back 8

The general contractor has elected NOT to exercise his option (promissory estoppel) and is NOT obligated to use the sub's services.

Front 9

When does a 3rd party beneficiary's rights vest?

Back 9

(1) Knows and assent;
(2) Knows and rely; OR
(3) Knows and Sue on it.

NOTE:
The parties may by agreement determine the issue of whether or when a 3rd party's rights vest.

HOWEVER:
If the 3rd relies on the contract to its detriment, rights may not be vested per the k, but it may still entitle the beneficiary to the benefit.

Front 10

What defenses can be asserted against a 3rd party beneficiary?

Back 10

Any defenses that can be raised against the opposing contracting party.

-Visa Versa

Front 11

(1) What rights exist after Assignment?

(2) What duties exist after Delegation?

Back 11

(1) When the rights are assigned, the assigning party can receive NO further benefit from those rights

(2) When the duties are delegated, the delegating party remains secondarily liable.

Front 12

What is required for a modification under:

(1) UCC

(2) CL

Back 12

(1) UCC
Good faith

(2) CL
New consideration

Front 13

If a shipment of nonconforming goods is accompanied by a letter of accommodation, what is the relationship between the parties?

Back 13

The letter of accommodation is a counter offer.
-There is NO breach
-There is not K

Front 14

If a shipment of nonconforming goods is NOT accompanied by a letter of accommodation, what is the relationship between the parties?

Back 14

-There is a K
-There is a BREACH

Front 15

How does the UCC deal with the proposal of additional terms by the offeree within his "acceptance?"

Back 15

It is a valid acceptance.

The issue is whether the additional terms are part of the agreement.

2-207

The proposal of additional terms by the offeree in a definite and timely acceptance does not constitute a rejection and counteroffer. Rather, the acceptance is effective unless it is expressly made conditional on assent to the additional terms. If both parties to the sale of goods contract are merchants, the additional terms will become part of the contract
unless:

(i) they materially alter the contract,
(ii) the offer expressly limits acceptance to the terms of the offer, or
(iii) the offeror has already objected to the particular terms, or he objects within a reasonable time after notice of them is received.

Front 16

Typically an acceptance is valid upon sending (mailbox rule) regardless of whether a rejection is subsequently sent, even if the rejection is received before the acceptance.

What will change this outcome?

Back 16

Reliance.

If the offeror relies on the rejection (that was sent subsequent to the acceptance), then the offer has been rejected, notwithstanding the mailbox rule.

Front 17

Is an agreement to use your "best efforts" to do something valid consideration?

Back 17

YES.

-This typically arises when dealing with exclusive distributor problems.

Front 18

When will a court likely consider a catalog to be an offer?

Back 18

(1) When it is sent in response to an inquiry about prices about a specific item

AND

(2) It includes terms of delivery and sale

Front 19

Is an agreement enforceable if a unilateral mistake is discovered after execution and the parties agree to reform the K to correct the mistake WITHOUT new consideration?

Back 19

YES

General Rule:
A K will not be avoided by a unilateral mistake.

Except:
When the non-mistaken party knew or should have known about the other party's mistake.

If this mistake is discovered after execution and the parties agree to reform the K to correct the mistake then the modification does not require new consideration.

Front 20

If one party's "satisfaction" of performance is a condition precedent to their own duty to pay, and that party is not satisfied in good faith, is their duty to perform excused?

Back 20

YES.

So long as it is in good faith.

Front 21

What is the difference between:

(1) Quasi K

(2) Promissory Estoppel

Back 21

(1) Quasi K
K implied in law
Restitutionary remedy (∆ benefited)

(2) Promissory Estoppel
Consideration substitute
Benefit needed to be conferred on ∆

Front 22

Subcontractor submits bid for $75k. General calls sub and tells sub "we won't be able to do it with your present bid, however, if you can shave off $5k, I'm sure the numbers will be there for us to get that project." Sub refuses to lower bid.

What is the contractual status of the parties?

Back 22

No K

General's call = a rejection and counter offer which sub rejected.

Front 23

When is a gratuitous assignment NOT revocable?

Back 23

General Rule:
(1) Assignment requires consideration
(2) A gratuitous assignment is generally freely revocable

Exception:
A gratuitous assignment is NOT freely revocable if:
(1) performance: the obligor has already performed; or
(2) reliance: the assignee has already relied on the performance to his detriment

Front 24

When is a revocation effective?

Back 24

Upon receipt, regardless of whether there is knowledge of the revocation.

Front 25

What are a non-breaching party's options under the UCC?

Back 25

Under the UCC, if a K is breached, the non-breaching party cannot unilaterally decided to pay ONLY a portion of the price. The non-breaching party may:

(1) reject the goods and cancel or "cover"
OR
(2) accept the goods and sue for damages

-The non-breaching party cannot create their remedy

Front 26

Under the UCC was is the effect of additional terms contained within an acceptance?

Back 26

(1) If acceptance is NOT conditioned upon acceptance of purposed terms there is a K

(2) If both parties ARE merchants, the new terms will be integrated into the K UNLESS:

(a) they materially alter

(b) the offeror objects to the changes within a reasonable amount of time

(c) the offer expressly limits acceptance to the terms of the offer

(3) If one of the parties is NOT a merchant than there is ONLY an acceptance of the offeror's terms

Front 27

FACTS:
Offeror makes an offer
Offeree responds, "offer is being considered, but would you consider less?"
Offeror responds "NO"
Offeree responds, "I accept your original terms."

What is the status of the parties?

Back 27

There is a K on the offeror's terms.

Although the general rule is counter offer is a rejection of the original offer and a new offer, a mere inquiry about terms or matters is not a counteroffer.

The test is for whether a response is a counteroffer or a mere inquire is:
Whether a reasonable person would believe that the offer was being rejected.

-This was not a counter offer.

Front 28

Can there be an anticipatory repudiation after the non-breaching party has fully performed?

Back 28

NO.

This is nothing more than a breach. Anticipatory repudiation cannot occur after complete performance-only prior to performance or during performance.

Front 29

What are the 4 ways to determine which party to a contract bears the risk of loss?

Back 29

(1) AGREEMENT
-K states

(2) BREACHING PARTY
-Any breach

(3) COMMON CARRIER (delivery obligation)
(a) choose a common carrier;
(b) make reasonable delivery arrangements;
AND
(c) notification

(4) TENDER
(a) Merchant Seller: upon receipt of buyer
(b) Non-Merchant Seller: upon tender (instructions how to receive)

Front 30

Does payment in advance impair your right to inspect or assert contractual remedies if the goods do not conform?

Back 30

NO.

Front 31

What is the effect of cashing a check, which is less than the contracted price, that states "payment in full?"

Back 31

This is an ACCORD and SATISFACTION and the party who sent the check is not obligated to pay to the old contract price.

Front 32

Is a contract to build a house within the SOF?

Back 32

NO.

"Land" transaction do not include the construction of buildings.

Front 33

Is an agreement to rescind an agreement binding if one of the parties is unaware that the other party's acceptance of that agreement has been mailed?

Back 33

NO.

If the opposing party does not know of an outstanding acceptance (mailbox rule), there can be no meeting of the minds, which is required for a valid recision.

Front 34

(1) Who bears the risk of loss while in transit if the contract is FOB seller?
(2) Who pays for shipping if the contract is FOB seller?

Back 34

(1) Buyer
(2) Buyer

Front 35

When has the obligor breached his duties to pay the assignee by making payment to the assignor?

Back 35

When the obligor has NOTICE of the assignment and the assignee.

Without notice, the assignee cannot sue the obligor for the his payment to the assignor.

Front 36

Under the UCC, what are the buyer's options after receiving non-conforming goods?

Back 36

(1) Reject all
(2) Accept all
(3) Accept some and Reject the rest.

If any units are rejected, the buyer must notify the seller within a reasonable amount of time after rejection.

If the buyer does not notify, the buyer cannot rely on the defect to claim breach if the seller could have cured.

Front 37

What is needed to satisfy the "material term" requirement under the:

(1) CL SOF
(2) UCC SOF

Back 37

(1) CL SOF
Price
Description

(2) UCC SOF
Only quantity (unless requirements or output k)

Front 38

When is a price quote an offer?

Back 38

When it is sent in response to a specific inquiry.

(1) Request for an offer:
"Please quote your best price on 800 troy ounce of platinum bars for immediate delivery at my bank."

(2) Offer:
"My best price is $475 per ounce."

Front 39

What is the difference between:

(1) Conditional acceptance
(2) Condition

Back 39

(1) Conditional acceptance
"I will buy IF I can obtain a mortgage"
-This is language in response to an offer
-Language kills offer; there is no K

(2) Condition
"B agrees to buy S's house IF B can obtain a mortgage"
-Language contained within the K
-There is a K, but if the condition is not met both parties are released from their obligations

Front 40

How can a condition be excused?

Back 40

(1) Waiver
-Stmt by benefited party AFTER condition has not been satisfied

(2) Estoppel
-Stmt by benefited party BEFORE condition has not been satisfied-

(3) Prevention
-Conduct by benefited party that inhibits satisfaction of condition

(4) Avoidance of forfeiture
-Court discretion if injustice to non-benefited party would result

Front 41

Elements of anticipatory repudiation?

Back 41

(1) Unambiguous statement OR conduct;
(2) Indicating repudiating party will not perform;
AND
(3) Made prior to the time performance is due;

Front 42

What is the procedure for requesting "adequate assurances?"

Back 42

(1) Reasonable grounds for insecurities
(2) Written demand for adequate assurance
(3) Suspend performance IF commercially reasonable until assurances are given

Front 43

What are the 4 types of agreements that excuse performance of a prior K?

Back 43

(1) Rescission
(2) Accord and Satisfaction
(3) Modification
(4) Novation

Front 44

What is the difference between:

(1) Rescission
(2) Accord and Satisfaction
(3) Modification
(4) Novation

Back 44

(1) Rescission
-Cancellation while performance is still remaining from each party
-There must be mutual assent

(2) Accord and Satisfaction
-Substitute performance
-"Paid in full" + Deposit
-Contains if...then language
-Can sue for non-performance of either agreement

(3) Modification
-Substitute agreement
-Old agreement is destroyed
-Contains NO if...then language
-Can sue ONLY for non-performance of the modified agreement

(4) Novation
-Substitute person
-Excused party is NOT liable under the K (both parties agreed to substitute)

Front 45

What happens if an accord is not performed?

Back 45

The aggrieved party can elect to sue under either the accord or the original obligation.

-This is unlike a modification, where ONLY the modified agreement is enforceable

Front 46

3rd party beneficiary Vocabulary?

Back 46

(1) 3rd party beneficiary
-Not a party to the k

(2) Promisor
-Person who will provide the benefit to the 3rd party beneficiary

(3) Promisee
-Person who negotiated the promise for the benefit of the 3rd party beneficiary

(4) Intended/Incidental
-Intended beneficiaries may have rights
-Incidental beneficiaries never have rights

(5) Creditor/Donee
-Creditor beneficiary less common; may sue promisee (preexisting duty to pay)
-Donee beneficiary more common; may NOT sue promisee

Front 47

Assignment Vocabulary?

Back 47

(1) Assignor
-Party to the K that transfers rights

(2) Assignee
-Not a party to the contract that receives rights

(3) Obligor
-Other party to the contract

Front 48

What is the effect of an assignment against the following contractual provisions:

(1) "rights hereunder are not assignable"
(2) "all assignments of rights under this contract are void"

Back 48

(1) "not assignable"
Assignment will be valid BUT assignor is liable for breach.

(2) "are void"
Assignment is invalid.
Assignee may sue Assignor for breach of implied warranty of the right to assign.

Front 49

What are the implied warranties of assignor in an assignment FOR VALUE?

Back 49

Assignor warrants:

(1) he has the right to assign
(2) assignee's assignment is not subject to any defenses
(3) he will not impair the value of the assignment

Front 50

Gratuitous v. For Value
Assignments

Back 50

(1) Gratuitous
(a) Freely revocable
(b) If multiple assignees: last in time
-unless reliance, delivery, or indicia of ownership


(2) For Value
(a) NOT freely revocable
(b) If multiple assignees: first in time
-unless Good Faith Assignee who 1st receives:
i. payment;
ii. judgment;
iii. novation; OR
iv. indicia of ownership

Front 51

Is it harder to prevent assignments or delegations?

Back 51

Assignments.

Court will uphold weak anti-delegation clauses.

Front 52

What can prevent the delegation of duties?

Back 52

(1) "No assignment" clause
(2) "No delegation" clause
(3) Special skills required
(4) Special reputation required

Front 53

When will the common law prevent an assignment?

Back 53

When the assignment "substantially changes the duties of the obligor."

-The payment of money is NEVER a substantial change.

Front 54

For purposes of determining a material breach, what is the difference between:

(1) Painting 3 apartments when you agreed to paint 10 for $10,000

(2) Painting 3 apartments when you agreed to paint 10 for $1,000 each

Back 54

(1) Material Breach
-when there are multiple tasks to be performed and the payment is in lump sum, the breach is material if the majority of the tasks are not performed.

(2) Complete Performance of 3
-Divisible K: when there are multiple tasks to be performed and the payment is on a pro rate basis, the breach is not material as to the tasks performed.

Front 55

When does a buyer accept non-conforming goods?

Back 55

(1) Indicates he will keep the goods after a reasonable inspection.
(2) Fails to reject or notify of rejection within a reasonable amount of time.
(3) Performs an act inconsistent with the seller's ownership.

Front 56

If a party negligently omits a clause from a K and later seeks have that clause to integrated into that K via the parol evidence rule, does that party's negligence have any bearing on their ability to do so?

Back 56

NO.

Negligence on the part of either party is of no consequence.

Front 57

When is a liquidated damages provisions valid?

Back 57

(1) Damages were difficult to forecast at time contract was made;
AND
(2) Provision is a reasonable forecast.

Front 58

If a delegatee breaches and the non-delegating party sues the delegatee, may the delagatee claim, as a defense, that the duties were non-delegable in the first place?

Back 58

YES.

Look to see if the duties required special knowledge, skill, or reputation.

Front 59

What does "assent" mean for purposes of the vesting of a 3rd party beneficiary's rights?

Back 59

It means that the 3rd party manifested assent to the promise in a manner invited or requested by the parties.

Example:
A and B enter into a K and agree that A is to pay T because B owes T money.
If B tells T and T agrees that B's debt can be reduced in this manner, T has assented.
NOTE: T can sue A or B to recover the funds if not paid.

Front 60

Does an intended 3rd party beneficiary's rights "vest" once he learns of the contract?

Back 60

NO.

This is not enough to be considered "assent."

Front 61

Will a liquidated damages provision entitled, "penalty" be upheld?

Back 61

YES

So long as damages are:

(1) difficult to ascertain at the time of formation of the K

AND

(2) The amount is a reasonable forecast of compensatory damages after breach

Front 62

After anticipatory repudiation, what options does the aggrieved party have?

Back 62

(1) Sue immediately
(2) Wait for time for performance encourage performance
(3) Treat this as an offer to rescind and treat the K as discharged

Front 63

What is an Accord and Satisfaction?

Back 63

(1) Accord
Agreement supported by consideration, to accept come other performance in lieu of the performance required under the existing k

(2) Satisfaction
Performance of the accord agreement

(*) The must be a bona fide dispute as to the claim
-e.g., debt owed; performance due

Front 64

If buyer and seller enter into a contract, is the contract enforceable even though buyer knows that the property to be sold is jointly owned by seller and co-owner?

Back 64

NO

Sellers promise to sell the property is an enforceable K, whereby buyer implicitly agreed to obtain co-owner's consent.

If co-owner objects, seller cannot sell, and buyer can recover damages from seller for breach. Specific performance, however, will probably not be available.

Front 65

Does the parol evidence rule apply to actions for reformation?

Back 65

NO

Front 66

(1) Reformation

v.

(2) Rescission

Back 66

(1) Reformation
-Used when there was a meeting of the minds but k does not reflect it
-Parol evidence does not apply

(2) Rescission
-Used when there was NOT a meeting of the minds due to fraud, misrepresentation, etc.
-Party seeking to rescind does not have to wait to be sued
-[don't think parol evidence applies]

Front 67

A 1st contracts with B to sell 10 tons of grapes. A then contracts with C to sell 20 tons of grapes. If the season is unexpectedly poor and A only has 15 tons to sell, how must he divide the grapes.

Back 67

Pro Rata, i.e., 5 tons to B and 10 tons to C.

However, B and C do NOT have to accept this modification BUT may NOT recover damages.

Front 68

When does death of the offeror NOT revoke his offer?

Back 68

If the offer is for a valid unilateral K that has become irrevocable due to part performance of the offeree.

Front 69

How do you calculate damages for a lost volume seller?

Back 69

K Price - Cost to Seller = Lost Profits

DO NOT account for a subsequent sale of the subject matter. There is NO mitigation defense.

Front 70

Statute of Frauds: Elements

Back 70

(1) Id of ∆

(2) Id subject matter

(3) Terms and conditions

(4) Recital of consideration

(5) Signature of ∆

Front 71

What is governed by the SOF?

Back 71

MY LEGS

(1) Marriage
(2) Year or more

(3) Land sale
(4) Executor
(5) Guarantee
(6) Sale of goods ≥$500

Front 72

What is the "main purpose" exception to the SOF?

Back 72

Guarantee clause benefits the guarantor

(1) Applies to guarantee clauses
-G of MY LEGS

(2) If guarantor's main purpose of guaranteeing the debt is to benefit himself, the K is not within the SOF.

Ex:
S Store sells P paint to use in painting C’s house. S alleges C promised to pay for the paint if P did not pay. C’s alleged promise is NOT within the SOF

Front 73

If S sends nonconforming goods to B and B accepts some, what is the price that B has to pay?

Back 73

The K price for the conforming goods.

Regardless of whether the the new goods are much more expensive.

Additionally, π may sue for damages due to the nonconformity.

Front 74

Parol Evidence is generally admissible for what?

Back 74

For any allegations that there was an error in FORMATION.

Front 75

How can acceptance of an offer be given?

Back 75

Unless otherwise unambiguously indicated by the offer, in ANY manner and by ANY medium that is REASONABLE under the circumstance.

Unambiguous:
"Acceptance ONLY by return mail"

NOT:
"Acceptance by return mail"