"Love Story"
Formation & Mutual Assent
Formation & Mutual Assent
Which theory looks at the conduct of the parties from the perspective of a hypothetical "reasonable person" rather than attempting to examine their actual, subjective intentions?
Objective Theory of Contracts
Which test involves the promisor making a promise to induce a return promise or performance and the promisee making a return promise or performance to secure the initial promise?
Bargain for Exchange Test
What is an express condition and how does it differ from a promise?
Express condition: An EVENT (not certain to occur) that must occur before a performance duty arises. Promise: A COMMITMENT to do/not do something. Differences: (1) If condition doesn't occur (and isn't excused), obligor's duty never becomes due—NO BREACH (duty was conditional). (2) If promise not performed, it's a BREACH—breaching party liable for damages.
What is the basic rule of statute of frauds?
What happens to a contract if one or more of the parties has a right to put an end to the contract simply by manifesting an election to do so?
(hint: different from contract becoming not a contract at all)
voidable
They are mere solicitations for offers.
An ad can become an offer when it: (1) contains specific, definite terms (esp. quantity), (2) limits the number of potential acceptors (e.g., 1st come 1st served), and (3) leaves nothing open for negotiation.
an offer which offeror should reasonably expect to induce action or forbearance on part of offeree before acceptance and that does induce such forbearance is binding as an option contract to avoid injustice (typically in contractor/subcontractor contexts)
Drennan Rule
What is "substantial performance" and what legal effect does it have?
Substantial performance: Party performed in all material respects despite minor deficiencies.
Legal effect: (1) Satisfies constructive condition, (2) Other party's duty NOT discharged (must still perform), (3) Constitutes only PARTIAL (immaterial) breach, (4) Breaching party entitled to contract price minus damages for deficiencies (setoff).
what are the two exceptions to statute of frauds?
premised on equitable estoppel
premised on promissory estoppel
List four defenses relative to defective bargaining processes?
duress, undue influence, misrepresentation, unconscionability
A rich uncle said to his niece, "I understand that you have been accepted by a number of law schools and can't decide which one to choose. I would like to make that decision easier for you, so I will pay your tuition wherever you go." The niece was ecstatic and said, "Thank you, uncle. I accept your offer and I will make you proud." When the niece presented the uncle with the first tuition bill, the uncle refused to pay. Is the uncle legally obligated to pay the tuition?
(a) yes, bc he made an offer and the niece accepted it.
(b) yes, bc the niece relied on his offer.
(c) no, bc he made a promise that is not legally enforceable.
(d) no, bc his promise was not in writing
Yes, because the niece relied on his offer.
What is promissory estoppel and what are its five elements?
Enforces promises without consideration when: (1) promisor made a promise, (2) promisor should reasonably foresee promise would induce reliance, (3) promise DID induce actual reliance, (4) reliance was detrimental, (5) injustice can only be avoided by enforcement.
Distinguish between partial breach, material breach, and total breach. What rights does each give to the non-breaching party?
Partial breach: Substantial performance achieved but with deficiencies. Rights: (1) Non-breaching party MUST continue performing, (2) Can recover damages for deficiencies (setoff from amount owed).
Material breach: No substantial performance; significant failure. Rights: (1) Non-breaching party may SUSPEND performance (wait to see if cure), (2) NOT automatically discharged—must determine if/when becomes total.
Total breach: Material breach that becomes uncured under § 242 factors or where material breach so severe no reasonable expectation of cure. Rights: (1) Performance obligation DISCHARGED, (2) Can cancel contract, (3) Pursue all expectation damages (including consequential and future damages). Key: Material breach alone ≠ automatic right to cancel; must become total
On June 1, a farmer orally agreed to sell 500 bushels of corn to a grain distributor for $4,000, with delivery scheduled for September 1. On June 3, the distributor sent an email to the farmer on the distributor's company letterhead stating: "This confirms our agreement for your sale of 500 bushels of corn to us, delivery September 1. We look forward to doing business with you." The farmer received the email on June 3 and read it but did not respond. On August 15, the farmer notified the distributor that he would not deliver the corn because he had received a better offer from another buyer. Both the farmer and distributor are merchants who regularly deal in grain.
Can the distributor enforce the contract against the farmer?
A) Yes, because the distributor's email satisfies the statute of frauds under the merchant's confirmation exception, and the farmer failed to object within 10 days.
B) No, because the email was not signed by the farmer, who is the party against whom enforcement is sought.
C) Yes, because the distributor's email provides a sufficient writing under UCC § 2-201(1), and the farmer's failure to respond constitutes acceptance.
D) No, because the farmer never signed any writing, and the merchant's confirmation exception does not apply to sales between merchants of agricultural products.
A) Yes, because the distributor's email satisfies the statute of frauds under the merchant's confirmation exception, and the farmer failed to object within 10 days.**
This tests the merchant's confirmation exception under UCC § 2-201(2). When both parties are MERCHANTS, one merchant can send a written confirmation "sufficient against the sender" that binds BOTH parties IF: (1) sent within reasonable time after oral agreement, (2) recipient has reason to know its contents, and (3) recipient fails to object IN WRITING within 10 days.
Here, all elements are satisfied: Both parties are merchants (regularly deal in grain). The distributor's June 3 email was timely (2 days after agreement), contained sufficient terms (quantity = 500 bushels, subject matter = corn, price = implied), was signed/sent by distributor (letterhead), and the farmer received it and had reason to know contents but never objected. The 10-day window passed without objection, so the statute of frauds is satisfied as to BOTH parties.
Option B would be correct under § 2-201(1) but fails to account for the § 2-201(2) exception. Option C misstates the law—silence doesn't equal acceptance of the underlying contract (that happened orally on June 1), but failure to object removes statute of frauds defense. Option D is wrong—no agricultural products exception to § 2-201(2).
This is the classic merchant's confirmation scenario from the quiz materials and tests understanding of this critical UCC exception.
This comes into play when the parties have a written agreement but one of the parties claims it does not state all of the terms to which the parties agreed
parol evidence rule
Explain how the UCC's approach to open terms differs from the common law requirement that material terms be "reasonably certain."
Also, which essential term can NEVER be left open under the UCC?
UCC allows contracts even with open terms (including price) as long as parties intended to contract and there's a reasonably certain basis for remedy. UCC provides gap fillers for price, place of delivery, time for shipment, etc. Common law requires greater certainty in material terms.
Under UCC, QUANTITY can never be left open (no gap fillers).
A rancher was driving by a neighbor's ranch when she saw some men loading cattle into a truck. She called the county sheriff, who arrested the men for cattle rustling. Later, when the men were convicted, a representative of the Sheep and Cattleman's Assoc., a private group, called both the sheriff and the rancher and told them that they were eligible for the Assoc.'s reward for actions or information leading to the arrest and conviction of cattle rustlers. "Reward?" the rancher responed, "I didn't know there was a reward."
As a matter of contract law, is the Assoc. obligated to pay the reward?
(a) to sheriff only
(b) to rancher only
(c) to both sheriff and rancher
(d) neither sheriff nor rancher
(d) neither sheriff nor rancher
- A reward is an offer to be accepted by performance. The rancher gave the offeror the requested performance, but bc she did not know abt the reward, her performance was not induced by the offer. Therefore, it was not bargained-for.
- We can presume that as part of his contract with the county, the sheriff had an obligation to apprehend criminals. Therefore, not induced by offer to render the performance ("pre-existing duty rule")
A man agreed in writing to sell his car to a woman for $10,000. On the agreed date for performance, the man tendered the car but the woman did not tender the $10,000, telling the man she would pay him later. Is the man justified in not giving her the car?
(A) No, because he had promised to tender the car on that date.
(B) No, because there is no express condition making his performance a condition of her performance.
(C) Yes, because performance by each party is an implied condition of performance by the other party.
(D) Yes, because her material breach discharges the man's duty.
Answer (C) is the best answer. The woman clearly committed a breach when she did not do what she promised to do. The issue is: What is the consequence of that breach? Does the man still have to perform? Prior to Lord Mansfield's historic decision in Kingston v. Preston, 99 Eng. Rep. 437 (K.B. 1773), English courts found that unconditional promises had to be performed even if the other party had not performed. That case set things right, and found that simultaneous performances were implied conditions of each other, or “constructive conditions of exchange.” Therefore, while it would have been the correct answer before 1773, today Answer (A) is incorrect. Under the modern view, even if the parties do not expressly state in the contract that the simultaneous performances are conditional, it is implied that they are. See Restatement §238; U.C.C. §§2-507, 2-511. Therefore, Answer (B) is incorrect. Even though the woman's breach was material, the man's contractual duties were not necessarily discharged. According to Restatement § 242 cmt. a: “Ordinarily there is some period of time between suspension and discharge, and during this period a party may cure his failure.” Here, the woman said she would pay later. While her failure to tender the money on delivery clearly establishes the man's right to suspend his performance, his duties are probably not discharged. If she pays within a reasonable period of time, and offers damages for the delay, then she has cured the breach. Therefore, Answer (D) is incorrect.
A grain buyer passed through North Dakota, stopping at various farms and making oral agreements to buy grain. When he returned to his office, he sent a signed letter to one farmer that stated, “This is to confirm that you agreed to sell us 100,000 bushels of winter wheat at $3 per bushel.” Even though it was properly addressed, the letter never reached the farmer. When it came time to harvest the wheat, the market price was $3.50 per bushel, and the farmer refused to sell his wheat to the grain buyer. If the buyer were to seek to enforce the contract, what would be the farmer's best defense?
(A) There is no writing signed by the farmer that evidences the contract.
(B) The farmer is not a merchant.
(C) The terms of the confirmation letter are too indefinite.
(D) The buyer sent the confirmation letter to the correct address, but it never got there.
Answer (D) is the best answer. This contract is within the Article 2 statute of frauds. Wheat is a good according to § 1-205(1) and the price is more than $500. There is, however, no writing signed by the farmer—the party “against whom enforcement is sought.” So we look for an exception and we find one that may be applicable in § 2-201(2), which provides: (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. Under this section, a contract can be enforceable against a party even though that party did not sign a writing that evidences the contract. Therefore, Answer (A) is incorrect. The section only applies “between merchants.” This means, according to § 2-104(3), that “[b]oth parties are chargeable with the knowledge or skill of merchants.” The grain buyer is undoubtedly a merchant. Is the farmer? Some cases come to the aid of farmers in this situation and hold that even though a farmer regularly buys and sells a commodity, the farmer is not necessarily a merchant for that purpose. See David B. Harrison, Farmers as “Merchants” Within Provisions of UCC Articles 2, Dealing With Sales, 95 A.L.R.3d 484 (1979). This makes no sense to me. Nevertheless, even if there is some authority that would give the farmer this defense, Answer (B) is incorrect because you are instructed to choose the best answer, so you want to choose the one about which there is the least doubt. The section makes the writing effective even if it is not signed by the party against whom enforcement is sought as long as it is “sufficient against the sender.” In this case, we would ask if the confirmation is sufficient against the buyer. The confirmation is a writing signed by the buyer, but does it “indicate that a contract for sale has been made between the parties”? I think it does, because it describes the goods and has a quantity and price. Any other terms, such as delivery date, can be filled in by testimony as to the agreement or by the default rules. Therefore, since the writing is sufficiently definite and can be made even more definite, Answer (C) is incorrect. The section only applies if the confirmation “is received and the party receiving it has reason to know its contents.” The definition of “receives” is found in § 1-202(e), which provides that “a person ‘receives’ a notice or notification when: (1) it comes to that person's attention” or was delivered to their place of business. Neither of these conditions was satisfied here. Note that if the section had provided that it is sufficient if the sender “notifies” the other party, then the buyer would probably prevail because a person can be notified even if they never receive the notice. The definition of “notifies” in § 1-202(d) states: A person “notifies” or “gives” a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course, whether or not the other person actually comes to know of it. Under that section, you notify a person if you send the letter to his address even if it does not reach him.
A student bought a new computer for a computer store for $2,000. The specifications stated that the computer had a terabyte of memory. After he used it for a while, the student discovered that it had only 1/2 of a terabyte of memory. The store sells the same model of computer with 1/2 of terabyte memory for $1,800. A computer repair shop will install another 1/2 terabyte of memory for $240. What is the Code remedy for the breach of warranty?
(a) seller must repair or replace the computer so that it conforms to what was promised.
(b) The seller must pay the student $200.
(c) The seller must pay the student $240.
(d) The seller must pay the student the difference in value between the goods as promised and the goods as delivered, which could be either $240 or $200 depending on the measure used.
Answer (D) is the best answer. The student has a claim for breach of an express warranty. We are accustomed to manufacturers and sellers promising to “repair or replace” defective parts for a certain period of time. Such a “remedial promise” is a limited remedy under § 2-719(1)(a), for it limits the remedy for breach of warranty found in § 2-714(2). Since no such limited remedy was part of these facts, Answer (A) is incorrect. The remedy for breach of warranty set forth in § 2-714(2) is “the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted.” The $200 difference in the price between the seller's computer like the one accepted ($1,800) and the seller's computer as promised ($2,000) is one measure of the difference in value. But in fact, many courts use the cost of repair or replacement as a handy objective measure of the difference in value. Therefore, Answer (B) and Answer (C) are incorrect because they are insufficient.
Distinguish between preliminary negotiations and an offer. What factors suggest parties are still negotiating rather than making an offer?
Preliminary negotiations explore terms without creating power of acceptance; an offer is a definite proposal inviting acceptance.
Factors showing negotiation: (1) lack of essential terms, (2) invitation for further discussion, (3) language suggesting need for additional agreement (e.g., form letters, "let's discuss").
Restatement § 26: not an offer "if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent."
What makes a promise "illusory," and how does this relate to mutuality of obligation? Give an example from either requirements contracts or employment contexts.
Illusory promise: Appears to be a promise but doesn't actually bind the promisor to do anything (e.g., "I'll buy if I want to"). Fails as consideration because there's no real detriment—promisor retains complete discretion. Mutuality issue: If one party isn't bound, arguably neither is. Requirements contracts avoid being illusory because: (1) buyer must buy exclusively from seller (forbearance), (2) good faith limits discretion.
What is anticipatory repudiation, what must it consist of under Restatement § 250, and what four options does the aggrieved party have under the UCC?
Anticipatory repudiation: Pre-performance announcement of unwillingness/inability to perform a material part of contract.
Must be: (1) UNEQUIVOCAL statement/conduct showing won't perform, AND (2) Would constitute MATERIAL/TOTAL breach if it occurred at performance time. UCC § 2-610 options: (1) Await performance for commercially reasonable time, (2) Resort to any breach remedy immediately (don't have to wait for performance date), (3) Suspend own performance, (4) Identify goods to contract/salvage unfinished goods (§ 2-704).
list the 5 classes of contracts subject to a the Statute of Frauds: (100 points per correct answer)
(a) a contract of an executor or administrator to answer for a duty of his decedent (the executor-administrator provision);
(b) a contract to answer for the duty of another (the suretyship provision);
third parties typically involved
If main purpose that surety is entering contract for own economic benefit, it does not trigger statute of frauds
(c) a contract made upon consideration of marriage (the marriage provision);
Common examples = prenups
(d) a contract for the sale of an interest in land (the land contract provision);
(e) a contract that is not to be performed within one year from the making thereof (the one-year provision).
How do the writing requirements differ between common law Statute of Frauds and UCC § 2-201?
Common law: Writing must contain ALL essential terms and be signed by party to be charged.
UCC § 2-201(1): Only requires (1) writing evidencing contract for sale, (2) signed by party to be charged, (3) specifying QUANTITY (other terms can be omitted).