Contracts

What is the formula for a contract?

Contract = Mutual Assent + Consideration - Defenses

What are the two elements of mutual assent?

Offer + Acceptance

What is the buzzword for the definition of an offer?

1. “Outward manifestation of intent to enter into a contract”

2. Intent AND specific terms

Is an advertisement an offer?

No, it is not

If an advertisement isn’t an offer, what is it?

It is an invitation to deal

What are five ways an offer can be terminated?

1. Death

2. Lapse of time

3. Rejection

4. Counteroffer

5. Revocation

What is the difference between direct and indirect revocation of an offer?

Direct - Offeror retracts their offer

Indirect - Offeree learns that offeror make a deal with someone else

Are offers revocable? General rule

Yes, they are revocable

What is an option contract? Is it revocable?

Option Contract - Promise to keep an offer open, requires consideration.

It is not revocable

What is a UCC firm offer? Is it revocable?

1. Sale of Goods

2. Conducted by merchants

3. Signed in writing by a merchant.

It is not revocable, as it will stay open for the guaranteed time.

What is the max time limit on a UCC firm offer?

3 months

What is the difference between a unilateral and bilateral contract?

1. Unilateral - Promise for an act

   1. Ex. I’ll give you $100 if you find my dog

2. Bilateral - Promise for a promise

   1. Ex. I’ll give you $100 if you agree to paint my house

When does an offer become irrevocable for a unilateral contract?

When the other party begins performance

What is the common law mirror image rule?

The acceptance must mirror the offer

Can silence be considered acceptance?

Sometimes. If prior dealings or parties’ relationship make it reasonable to treat silence as acceptance.

What is the common law mailbox rule?

Acceptance is effective when Sent

If a rejection is mailed, then an acceptance is sent, which one prevails?

The first to arrive

If the response to the offer contains a change to the contract, will it be allowed as acceptance?

If it is a material change, it is not acceptance.

What is the definition of consideration?

A bargained-for exchange

Can consideration be insufficient based on the amount given?

No, $.01 can be enough to buy a house.

What is an illusory promise?

The party making the offer retains control.

Examples of Illusory Promises:

• 🚫 “I’ll buy your car if I feel like it.”
  (Too vague — promisor isn't actually committing.)

• 🚫 “I promise to hire you if I decide to open a store.”
  (Performance is entirely at promisor’s discretion.)

Is the promise to give a gift valid consideration?

No, it is not.

Is a gift that has already been given valid consideration?

Generally not

Is past consideration valid?

No

Is moral consideration valid?

No

Is a promise to pay someone’s debt valid consideration?

Yes

Is a promise not to sue valid consideration?

Yes

Briefly explain promissory estoppel as a substitution for consideration.

Promissory estoppel is a substitute for consideration when:

1. A promise is made,

2. The promisee reasonably relies on it,

3. The reliance is detrimental, and

4. Injustice can only be avoided by enforcing the promise.

Keywords - Detrimental Reliance!

Will a partial payment negate the remaining amount owed?

No, it will not

If someone disputes a debt, but pays part of in good faith, is the rest of the debt wiped out?

It depends. If the debt is disputed and the partial payment is made in good faith as full satisfaction, then yes, the rest of the debt may be discharged under the doctrine of accord and satisfaction.

If a party cannot pay the debt and both parties make a new deal, is the new or old amount enforceable?

If both parties voluntarily agree to a new deal (called an accord), and the debtor follows through (called satisfaction), then the new amount is enforceable, and the old debt is discharged.

But if the debtor fails to pay the new amount, the creditor can usually choose to enforce either the original or new agreement.

Is a contract with a minor void or voidable?

Voidable at the option of the minor

Is a contract with someone with a mental illness void or voidable?

Void

Is a contract that becomes illegal enforceable?

No, it is not

Can a contract be unconscionable? What does this mean?

No, it cannot. It means that the result itself is unfair

What is the difference between a unilateral and mutual mistake?

Unilateral - One party makes a mistake
Mutual - Both parties are mistaken about a material term

Is a unilateral mistake a defense? Exceptions?

Generally not, unless:

1. Other party knew of the mistake

2. Clerical Error

What happens to the contract if there is a material mutual mistake?

Rescission - It is canceled because there was no true meeting of the minds

What is the difference between intentional and negligent misrepresentation (contract defense)?

1. Intentional Misrepresentation

   1. Knew/should have known of falsity with intent to induce reliance

2. Negligent Misrepresentation

   1. Causes the innocent party to detrimentally rely

Are non-compete clauses valid defense to a contract?

They can be if - reasonable under the circumstances

What is the statute of frauds? What types of contract are subject to this? Acronym?

1. Certain contracts must be in writing

2. MYLEGS

   1. Marriage

   2. Contract cannot be performed in one YEAR

   3. Land

   4. Executor

   5. Guarantor

   6. Sale of goods of $500 or more

What is the part performance exception to the statute of frauds?

Writing is not necessary if there is a showing of 2 out of 3:

1. Some payment

2. Possession of land

3. Valuable improvements

What is the guarantor/surety exception to the statute of frauds?

A promise to pay someone else’s debt must be in writing to be enforceable.

Exception: If the guarantor's promise mainly benefits themselves, it does not need to be in writing — this is called the "main purpose" rule.

Will partial performance be a valid exception to the statute of frauds for the sale of goods of $500+?

Yes, it will

What is the merchant confirmation exception to the statute of frauds?

No writing required if:

1. Confirmation signed by the sender

2. Includes quantity

3. No written objection within 10 days

What is the parol evidence rule in contract formation?

If there’s a final written contract, you can’t use earlier or oral statements to change or add to its terms.

Does the parol evidence apply to post-formation modifications?

No, modifications after a formalized written contract are not subject to the parol evidence rule.

Can verbal statements be added to clear up ambiguity? Is this allowed under the parol evidence rule?

Yes, that is fine.

Is verbal evidence that explains or supplements the original contract admissible?

Yes

Is verbal evidence that contradicts or materially alters the contract admissible?

No, it is not.

Give a few general exceptions where outside verbal evidence is allowed.

Exceptions: You can use outside evidence to show things like:

• Fraud or mistake

• Ambiguity

• A separate side agreement

• That the contract was never final

In a non-carrier case, if the seller is a merchant, when does the risk of loss transfer to the buyer?

When the buyer takes possession

In a non-carrier case, if the seller is a non-merchant, when does the risk of loss transfer to the buyer?

When the goods are tendered to the buyer

In a shipment contract, when does risk of loss shift from buyer to seller?

When they are delivered to a carrier

In a destination contract, when does the risk of loss shift from buyer to seller?

When they are delivered to that destination

What is a requirements contract?

A buyer agrees to buy all the widgets and generally acts in good faith.

What types of terms would be considered in the modification of a contract?

Material terms

Under common law, is consideration needed for a modification? What about the UCC?

1. Common Law: New consideration is needed

   1. UCC: No new consideration, good faith needed

Can modification be oral, written, or both?

Can be oral or written

What is a condition precedent?

1. Event happens prior to the performance of the contract

What is a condition concurrent?

Event occurs at the time of performance of the contract

What is a condition subsequent?

Event occurs after the contract was formed

What three rights does a buyer have if they receive non-confirming goods?

1. Reject

2. Accept

3. Reject/Accept in part

Does a seller have a right to cure non-conforming goods that are sent?

Yes, if:

1. Seller had reasonable grounds to believe goods would be accepted

2. By notice to buyer + new tender of goods within the original timeline for performance

What are the buyer’s rights under a non-conforming installment contract?

Under a non-conforming installment contract, the buyer’s rights depend on how bad the breach is:

1. Single bad installment – Buyer can reject that installment if it substantially impairs its value.

2. Whole contract breach – Buyer can cancel the entire contract only if the nonconformity substantially impairs the value of the whole contract.

In short:

• Minor issues = reject that shipment.

• Major ongoing issues = cancel the whole deal.

What is the doctrine of impracticability? Can it discharge a contract?

1. Unforeseen events that make performance too difficult/expensive

2. Yes, sometimes. A mere supplier price change is insufficient

What is the doctrine of impossibility? Can it discharge a contract?

No one is able to perform anymore (Ex.- Goods are destroyed, performance becomes illegal)
Yes, if it is permanent and not foreseeable

Would a snow storm count as an impossibility?

Generally, not.

What is the frustration of purpose related to contracts? Can it discharge a contract?

1. The core reason for contract is no longer present 

   1. Ex. You enter into a contract with a BAR tutor. 

      1. Next, you decided not to take the BAR exam 

What is the doctrine of anticipatory repudiation?

Before the contract performance is required, one party unequivocally refuses to perform

What is the doctrine of demand assurances?

When a party has a reasonable doubt that the other party may not perform, they can ask the party to assurance that they will perform.

Does a UCC demand assurance have to be in writing?

Yes, it does

Generally, can a party retract their statement of repudiation? Exceptions (3)?

1. Party can retract unless: 

   1. The other party has sued

   2. The other party has accepted the repudiation

   3. The other party has relied on the repudiation 

What is the difference between an intended and incidental third party beneficiary?

Intended - Original parties intended to benefit a third party
Incidental - A third party accidentally receives benefits from the contract

For an intended and incidental beneficiary, MAY, MUST or NEVER the party have rights?

Incidental - Never has rights
Intended - May have rights

When do the rights of an intended third party beneficiary vest?

When:

1. Third party is informed of rights and accepts, OR

2. Third party learns of rights and relies

If the third party rights have vested, is there a difference in the rights and defenses compared to the original party?

Generally not, they would have the same rights/defenses.

Generally, are assignments and delegations valid?

Yes

What is the difference between an assignment and a delegation?

Assignment = transferring rights under a contract to someone else.
Delegation = transferring duties (obligations) to someone else.

Example:

• Assignment: “I give you my right to get paid.”

• Delegation: “You do the work instead of me.”

If the assignee or delegatee does not perform, can the other party sue the assignor/delegator AND the assignee/delegatee?

Yes, unless there is a novation

What is a novation?

A release of the original party from the contract

Generally, if there is an anti-assignment clause, is the assignment valid? Exceptions

Yes, but there are a few exceptions.

1. Not valid if it would materially alter risk of performance

a. Ex. Seller transfers to a company that is about to go out of business

1. Unique or personal service contract cannot be transferred 

   b. Ex. Service provider transfers to someone that doesn’t have the material needed to be successful 

What is the legal remedy to contract breaches?

Money damages

What are expectation damages?

Put plaintiff in position if contract had been performed

What are reliance damages?

They put the plaintiff in position he would have been in prior to the contract.

What is restitution? How is it measured?

Getting back any value you already gave.
Contract was partially performed.
Measured by the market value of the services.

What are consequential damages?

Foreseeable costs because of a breach

If a buyer breaches and the goods are delivered/accepted, what can the seller recover?

The original contract price

If a buyer breaches and the goods were not delivered/accepted, what can the seller recover?

Contract price - market price

If a buyer breaches and the goods were resold, what can the seller recover?

Contract price - resale price

If a seller can sell as many widgets as possible, can they recover lost profits?

Yes.
[Expected profit + Costs] - Payment for resale

If a seller breaches and the buyer purchased replacement goods, what can they recover?

Contract price - cost of new goods

If a seller breaches and the buyer didn’t purchase replacement goods, what can they recover?

Contract price - market price at the time of breach

When is an equitable remedy available. forbreach?

When remedy at law (damages) is inadequate

What will a court force specific performance for breach?

For unique items. (Special land)

When will a court issue an injunction for breach?

To “prevent irreparable harm” (Employment contracts, trade secrets, etc.)

What is rescission?

No meeting of the minds - mistake, duress, misrepresentation, etc.