Exam Three Study Guide

Chapter 7

Is a promise by itself legally enforceable?

No

What two elements are needed to prove that a contract existed?

Offer and acceptance

What is the definition of a merchant under the UCC?

Someone who deals in the kind of goods contracted for or otherwise holds himself out as having a special skill or knowledge related to the goods involved

What types of contracts does the UCC apply to?

Sales contracts for goods as well as leases

What are the three requirements of an implied contract?

  1. Party A provides party B a good or service
  2. Party B had the opportunity to reject
  3. Party B knew, or should have known A wanted to contract

Executory v. Executed Contracts

Executory – one party still owes performance

Unilateral v. Bilateral Contracts

U: an offer that can be accepted by complete performance only

B: accepted by a return promise

When can an offer in a unilateral situation be revoked?

BEFORE party begins return performance or prepares for performance

Void v. Voidable Contracts v. Unenforceable

Void – no contract at all (illegal)

Voidable – one party has the option of nullifying

Unenforceable – contain all the elements, but are unenforceable (sale of land in writing)

What are the requirements for a valid offer?

  1. Must be communicated to offeree
  2. Must have serious objective intent
  3. Must contain definite enough terms

What statements are not really offers?

  • Expression of opinion
  • Expression of intent

How are advertisements unique?

A nonoffer until it limits the number of people that can accept or the quantity

Who is the offeror in an auction? What does it mean to be sold “with reserve”? Without reserve?

The one bidding; with reserve: withdraw before gavel bangs; without: withdraw before bidding starts

When do offers terminate?

  • After a reasonable amount of time
  • Rejection
  • Operation of law – illegal subject matter
  • Destruction of Subject Matter
  • Counteroffer
  • Is an inquiry a counteroffer?

No

What is the mirror image rule? UCC 2-207

May not add terms while accepting a contract; abolished mirror image rule

What is an options contract and why is it unique?UCC § 2-205 firm offers

Contract under which the offeror promises to keep the offer open until a specified date

Can become firm offer if: 1. Made by a merchant 2. Signed writing 3. Writing clearly states the offer is to remain open

What constitutes acceptance?

  • Bilateral Contract? Mutual Assent
  • Unilateral Contract? Party provides complete performance
  • Mailbox Rule – acceptance is valid upon dispatch of mail
  • Cyber Based Acceptances – know click-on agreement and shrink-wrap agreement
  • Can silence constitute acceptance? Generally not under common law

What terms are essential to have in a contract?

  1. Identified parties
  2. Subject Matter
  3. Time for Performance
  4. Price

*Lack of one of these does not automatically make a contract void* - sometimes courts will fill in missing terms

What is an outputs contract?The buyer agrees to purchase all of the output a seller produces

What is a requirements contract?Seller agrees to give buyer all the product they will need

Duty to Act in Good Faith: parties to a contract must act in good faith with fair dealing (don’t be deceiving)

Chapter 8 Consideration

What constitutes consideration and why consideration is needed? Something of legal value

Promises? No

Refraining from action? Possibly, if it provides legal value

Courts do not generally concern themselves with adequacy of consideration. What is the exception to this rule?

“But a peppercorn”

What agreements lack or may lack consideration?

  1. Conditional gift unless it’s something of value (first to walk to the front of the room)
  2. Past Consideration
  3. Preexisting duty – something already owed
  4. Illusory Promise– looks like consideration, but it isn’t!

What is an exception to the preexisting duty rule? Doctrine of unforeseen circumstances; can modify contract from its original terms (as long as unforeseeable)

UCC 2-209: an agreement to modify a contract governed by the UCC (sale of goods) can do so without additional consideration

Promissory estoppel: NO CONSIDERATION

  1. Person makes promise
  2. Justifiably relies on that promise
  3. Suffers a detriment
  4. Justice is served by the enforcement of that promise

Additional Agreements that Constitute Consideration:

  1. Mutual Rescission – both parties agree to go back to pre-contracting positions
  2. Novation – ditch the old contract for a new one
  3. Accord and Satisfaction – original duty is dismissed when new duty is performed; old duties had to be disputed
  4. Release –type of novation where new duties are replacing the old ones

Chapter 8 Capacity

Why does it matter if a party to a contract is a minor?They don’t have contractual capacity

Is a contract entered into by a minor voidable? Yes, in most cases

What is the significance of a contract for necessities in the context of a minor?Can still cancel the contract, but they will stay liable for the value they received; why do they do this? Incentive for adults to contract with minors for things necessary to their existence

Do minors have to make restitution?No, as long as they give the item back or they had already consumed it (don’t have to pay them back)

What if a minor lies about their age? Is the contract still voidable?Most states they can still cancel the contract, but they may have to pay restitution depending on the state

What is ratification?Minor chooses not to cancel the contract

What happens if a party to a contract was intoxicated at the time of formation?Can cancel if they were unable to comprehend the consequences at the time of formation

What if they understood the consequences? Not voidable

Mental Incompetence of a party to a contract

When is the contract void?Determined mentally incompetent by the court earlier

Voidable? Same as intoxication

Fully Enforceable?If they are lucid – can understand consequences

Chapter 8 Legality

What happened in cases of illegal subject matter? Void and contract can be deemed illegal

Mistake of fact?Restitution or reformation

Additional subject matter that is legal?Restitution or reformation

Only one party is doing something illegal? Voidable at option of other party

Contracts in the restraint of trade must be:

  1. Reasonable in length
  2. Reasonable in geography
  3. Reasonable in scope

What is an unconscionable contract?Shock the conscience of the court

What is an adhesion contract?One party has an extreme amount of bargaining power

What is procedural unconscionability?The process is unfair

What is substantive unconscionability?The terms are unfair

What is an exculpatory clause? Relieving the duties of a party if an injury occurs as a result of the contract; court looks to see if it was a necessity or for fun (10K run, suffer heat stroke – for fun)

Chapter 9 Statute of Frauds

What contracts must be in writing to be enforceable for a contract to exist?

  1. Sale of land
  2. Promises on the consideration of marriage
  3. Contracts that will take longer than a year to complete
  4. Promises to pay the debt of another

What about guarantors that receive an economic benefit?

If they receive an economic benefit, the contract is not valid

  1. Contracts for the sale of goods more than $500

What exceptions exist to the Statute of Frauds?

  • UCC 2-201 – defendant doesn’t need to sign the contract if it is between two merchants and they received written notification and didn’t object for ten days
  • Partial performance
  • Promissory estoppel

What is the parole evidence rule?Nothing discussed before forming the contract can be used as a defense

What are the exceptions to the parole evidence rule?

If the contract doesn’t represent their entire agreement

Additional written agreements after the formation of the original agreement can be used

Subsequent modification – agreement t change contract; written or oral

Doesn’t prevent previous negotiations if they clarify ambiguous terms (course of performance, course of dealing, usage of trade)

Chapter 9 Assent and Defenses

What is the legal significance of a mutual mistake?

First, know it must be material

No relief for mistake of how much something is worth

If it is a mutual material mistake, the court will hold that no contract exists

What is the legal significance of a unilateral mistake?

Generally do not provide relief when one party is mistaken

Exception: other party knew or should have known about the mistake

Clerical errors – may be bankrupt by such an error, so they might provide relief

Do courts generally consider mistakes of:

Value?Too many cases would be heard, so do not consider bad deals

Law?No, you should know the law

What are the legal elements needed to prove fraud/misrepresentation?

  1. Misrepresentation
  2. Material Fact
  3. Other party justifiably relies
  4. Suffers Damages

How about negligent misrepresentation?Not entirely sure the statement is true – are held liable

What is the effect of innocent misrepresentation?Honestly believed your untrue statement – if not a material fact, cannot use as a defense

What is duress? Three Types

  1. threat of physical harm or imprisonment
  2. threat of wrongfully taking another’s property
  3. threat of economic hardship
  4. engaged in wrongful behavior
  5. caused the economic hardship
  6. had no other alternatives

What is undue influence? Unfairly influenced to make a decision they otherwise would not have (physical and economic)

Chapter 7:

  1. Carlill v. Carbolic Smoke Ball Co.
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Lucy v. Zehmer
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Roto-Lith Ltd. V. F.P. Bartlett & Co.
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Shelton v. Oscar Mayer Foods Corp.
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings

Chapter 8:

  1. Hamer v. Sidway
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Shields v. Gross
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. First State Bank of Sinai vs. Hyland
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Tunkl v. Regents of University of California
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings

Chapter 9:

  1. Wright v. Wright
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Aydin Corp v. U.S.
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Kase v. French and French
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings

Chapter 10:

  1. Jacobs & Young v. Kent
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Hawkins v. McGee
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings
  1. Bain v. Gillispie
  2. Facts of the Case
  1. Relevance to Class
  1. Court Findings

Exam 3 Quizlet: