Contracts

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bebocm
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Contracts
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2010-05-24 15:38:46
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Key concepts in Contracts for the Ohio Bar
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  1. How do you determine whether the common law or UCC applies if a contract is for both a sale of goods and for services?
    Look at the predominant purpose of the contract. If the predominant purpose is for services with goods incidental, then the common law applies. If the predominant purpose if for goods with services incidental then the UCC applies.

    This is all-or-nothing: either UCC or common law
  2. How do you determine whether a contract has been formed?
    • Ask the following questions:
    • 1. Is there a valid offer by the offeror?
    • 2. Was there acceptance by the offeree? and
    • 3. Was the contract supported by consideration?
  3. Define an offer.
    An offer is an objective manifestation by an offeror to enter into an agreement, thereby creating the power of acceptance in the offeree.
  4. What standard determines whether or not an offer has been made?
    An objective standard measured by the perspective of a reasonable person
  5. Does an offer have to be in writing?
    No
  6. Under Common Law, what terms must a contract include?
    • A contract must include all essential terms, including:
    • 1. Parties
    • 2. Subject matter
    • 3. Quantity
    • 4. Price
  7. Under the UCC, what key terms must be included in a contract?
    • 1. Quantity
    • 2. Subject matter

    There is no need for price b/c the UCC can act as a gap filler and determine that independently
  8. An advertisement is usually not an offer except in two main instances:
    • 1. The advertisement is in the nature of a reward
    • 2. The advertisement is sufficiently specific
  9. Definition of Acceptance
    Acceptance is an objective manifestation of a desire to be bound by an offeror
  10. Modes of Acceptance
    Under both the Common Law and the UCC, acceptance can take place in any reasonable manner. However, the offeror can dictate the mode of acceptance.
  11. Language of an acceptance under Common Law
    An acceptance must be the mirror image of the offer. Any additional terms constitute a rejection of the initial contract and a counter-offer for a new contract.
  12. Additional terms under the UCC and Non-Merchants
    Under the UCC, additional terms don't constitute a counter-offer. A battle of the forms dictates who's terms govern.

    If parties are non-merchants, additional or differing terms are treated as proposals for additional contract terms unless made conditional on the offeror's consent.
  13. Additional terms and the UCC and Merchants
    • If parties are merchants, the contract exists under the terms of acceptance unless:
    • 1. the new or different terms materially alter the agreement
    • 2. the offer limits the terms; or
    • 3. the offeror rejects the new terms
  14. What happens when a contract between merchants conflicts?
    • 2 things depending on jurisdiction:
    • 1. the competing clauses knock eachother out= the Knock Out Rule
    • 2. the last form sent governs = The Last Shot rule
    • a. Exceptions to the Last Shot Rule: the offeror objects, the offer expressly limits terms, or the terms of the acceptance materially alter the agreement
  15. In a unilateral contract, when an offeree has reason to know that offeror has no adequate means of learning of the performance, the offeror's duty is discharged unless what 3 elements are met?
    • 1. The offeree exercised reasonable diligence in notifying the offeror
    • 2. The offeror leanrs of the performance in a reasonable time; and
    • 3. The offer indicates that notificaiton isn't needed
  16. When does acceptance of an offer of a bilateral contract occur under the Mailbox Rule?
    Upon dispatch
  17. Under the Mailbox Rule, when do offers, revocations of offers, and rejections of an offer of a bilateral contract occur?
    Upon receipt

    • receipt - rejection
    • acceptance-answer
  18. Lebron mails a letter accepting an offer from the New York Knicks, but then get a better offer from the Cleveland Cavs. He then sends a second letter rejecting the Knick's offer. Has the contract been accepted or rejected?
    Accepted because there is no longer an offer to reject

    Exception: If the Knicks get the rejection first and rely on it, then there is no contract!
  19. Lebron mails a rejection to the New York Knicks first but then changes his mind and mails an acceptance to the Knicks. What happens in this situation?
    The Mailbox Rule is abandoned and the first letter to make it to its destination governs
  20. Can an offer generally provide that silence is a form of acceptance?
    • No, unless:
    • 1. The offeree has reason to believe that silence indicates acceptance and the offeree wants to accept
    • 2. When previous dealings show that silence indicates an acceptance
  21. Describe the manners in which an offeror can terminate an offer.
    • 1. Death or insanity
    • 2. Revocation
    • 3. Lapse of time
  22. A _____________________ offer terminates when the offeree learns of the death/insanity of the offeror.
    Unaccepted
  23. When can an offeror revoke an offer?
    An offeror can revoke an offer any time prior to acceptance.
  24. What happens if an offeror attempts to revoke an offer after the offeree accepted it?
    The attempt to revoke is invalid.
  25. Contracts that cannot be revoked by the offeror are describe as:
    Option contract
  26. What are the three categories of option contracts?
    • 1. Those under the Common Law
    • 2. Those under the UCC, and
    • 3. Those applying to unilateral contracts
  27. When is an option contract created under Common Law?
    An option contract is created when an offeree has paid consideration.
  28. What does the Firm Offer Rule under the UCC state concerning option contracts?
    • A promise to keep an offer open is enforceable even without consideration if it is:
    • 1. made by a merchant,
    • 2. made in writing,
    • 3. lasts no more than 3 months, and
    • 4. deals with the sale of goods
  29. Once performance has begun in a unilateral contract, what are the consequences?
    An option contract is created and the offeror must give the offeree a reasonable amount of time to finish performance.

    However, even if an offeree starts performance under a unilateral contract, he is under no obligation to finish performance.
  30. Describe the two ways in which lapse of time applies.
    • 1. If the offer states a time in which the offer lapses, then that time governs
    • 2. If an offer says nothing about time in relation to termination, then it will be terminated in a reasonable amount of time
  31. In what two ways can an offeree terminate a contract?
    • 1. Rejection
    • 2. Counter-offer
  32. What happens when you reject an offer?
    When an offer is rejected it dies and cannot be accepted.
  33. When does a counter-offer become effective?
    A counter-offer becomes effective upon receipt.
  34. What effect does a counter-offer have on an existing offer?
    A counter-offer kills an existing offer and replaces it with a new offer.
  35. Does a counter-offer terminate an option contract?
    Not by itself.
  36. In what two ways can outside events terminate an offer?
    • 1. Destruction of subject matter whle the offer is open
    • 2. Intervening illegality-a legal offer terminates if made illegal before acceptance
  37. Define consideration.
    Consideration requires a bargain where each party encures some legal detriment, such as a promise to do something you are not already legally obligated to do.
  38. How is the adequacy of consideration judged?
    Consideration doesn't have to have the same value as the good/service at issue. Courts will only look into the value of consideration if it appears that it is nominal/sham consideration.
  39. What is sham consideration?
    Sham consideration attempts to turn a donative promise into a promise supported by consideration.
  40. Do you need additional consideration when you modify a contract?
    You do under Common Law, but not under the UCC
  41. When can promissory estoppel turn a donut promise into a contract?
    • Promissory estoppel applies when the following 3 conditions are met:
    • 1. It is foreseeable that reliance will occur
    • 2. Reliance does actually occur, and
    • 3. Injustice will occur if the promise is not enforced
  42. In what three circumstances does promissory estoppel usually apply?
    • 1. Gratuitous promises made to family members
    • 2. Gratuitous promises made to charity
    • 3. Gratuitous promises made to a bailor
  43. Under promissory estoppel, can a sub-contractor revoke a sub-bid?
    No.

    Ex. Guzman is a general contractor and is preparing a bid on a building project. He invites sub-contractors to bid on the various project components. You submit a bid for the electrical work. Based on these bids, Guzman creates his general bid and submits it. Guzman wins the bid. When he turns to inform the sub-contractors, before he gets a chance to accept your bid, you revoke. Promissory estoppel makes this revocation invalid, and the sub-contractor will have to perform or be in breach.
  44. If a general contractor wins a contract, is he required to accept a sub-contractor's bid?
    No. There's a basic assumption that you may not get the bid, so the sub-contractor likely doesn't rely on getting the bid accepted.
  45. Under what two special instances is neither consideration nor reliance required?
    • Contributions to charity do not require reliance.
    • Promises to pay a debt barred by a statute of limitations do not require consideraiton.
  46. Even when the requirements of offer, acceptance, and consideration have been met, a contract may be either _____________ or ______________ due to a defect in the information.
    • Void
    • Voidable
  47. Define void contracts.
    A void contract is treated as though it was never made. It is a nullity.
  48. Define voidable contracts.
    A voidable contract is one where one or more parties is able to void it. A voidable contract is at least enforceable on some level, unlike a void contract.
  49. Name the five Mrs. of Excuse.
    • 1. Mistake
    • 2. Misunderstanding
    • 3. Minrepresentation
    • 4. Undue influence
    • 5. Duress
  50. Define excuse.
    An excuse addresses the situation in which some defect in the formation of a contract is sufficiently serious as to render the contract void or voidable.
  51. Define mistake.
    Under mistake, one or both of the parties has a belief that isn't in accord with the facts (e.g. A party believes he is contracting about one item when in fact he is contracting for another). Mistakes can either be unilateral or bilateral.
  52. When will a unilateral mistake be excused?
    • 1. When the party seeking to void the contract does not bare the risk of mistake, and either
    • 2. the effect of enforcement would be unconscionable OR the other party knew about or caused the mistake
    • *enforcement is unconscionable if the mistake is significant
  53. In cases of mistake, do general contractors usually bare the risk of mistake?
    Courts say no.
  54. What happens to a contract when a mutual mistake occurs as to an essential element of the contract?

    MUTUAL MISTAKE TEST: to determine if this defense is available to you
    The contract is voidable if the mistake by both parties materially effects the bargain, and a party cannot void the contract if they bare the risk of mistake.
  55. What happens if a mutual mistake can be cured by reformation of the contract?
    If mutual mistake can be cured by reformation, then neither party can avoid the contract.
  56. Define misunderstanding.
    A misunderstading occures when the two parties don't have a shared understanding of what they've done.

    Ex. Peerless case, where two different ships were contemplated by contracting parties. If there is no meeting of the minds, then it is possible that no contract will exist.
  57. Does misrepresentation require intent on the part of the speaker?
    No, innocent mistatements are still misrepresentations. Intent isn't important unless you're trying to prove fraudulent misrepresentation.
  58. When can misrepresentation make a contract voidable?
    • 1. When a material misrepresentation exists
    • 2. When a party was induced by misrepresentation, and
    • 3. When the party was justified in relying on the misrepresentation
  59. When will a misrepresentation become fraud?
    • 1. When it was made knowingly
    • 2. When it was made without confidence in the assertion
    • 3. When the person making the assertion makes it with no basis
  60. To void for misrepresentation, the misrepresentation must be ____________. To void for fraud, materiality is ______________.
    Material, not required
  61. Nondisclosure is tantamount to assertion of a fact if one of four conditions is satisfied.
    • 1. Disclosure is necessary to prevent a previous disclosure from being a misrepresentation of fraud.
    • 2. Disclosure would correct an assumption and failure to disclose would constitute lack of good faith.
    • 3. Disclosure would correct a mistake as to the content or affect of a writing.
    • 4. There exists a confidential or fiduciary relationship.
  62. Define duress.
    Duress occurs when a wrongful act or threat deprives a party of a meaningful choice.
  63. To qualify as duress, threats must:
    • 1. Be improper
    • 2. Induce assent
    • 3. Be sufficiently grave as to justify the victim's assertion
  64. What are the defenses to formation of a contract?
    • 1. Capacity (infants, mentally ill, intoxication)
    • 2. Illegality
    • 3. Unconscionability
    • 4. Violation of public policy
  65. When an infant enters into a contract, who may make the contract voidable?
    Only the infant can inforce the contract.
  66. A contract entered into by a mentally ill person is voidable only when:
    The person had been adjudicated mentally ill by a court and is under guardianship

    *If someone is not adjudicated mentally incompetent, only the mentally ill can avoid the contract
  67. What must occur in order for intoxication to be a defense?
    • 1. The intoxicated person was unable to understand the nature of the transaction and
    • 2. The other party had reason to know of the party's intoxication
  68. Illegality can be used as a defense when either of these two things is illegal.
    Either the performance or consideration of a contract
  69. When is a contract unconscionable?
    • When it is so unfair that a reasonable person in the party's situation would not enter into the contract.
    • *Examples of unconscionable contracts include contracts of adhesion and boiler plate terms
    • * Unconscionability is an issue of law decided by the court
  70. What is the difference between an implied in fact contract and an implied in law contract?
    An implied in fact contract is formed by action instead of the traditionally offer, acceptance, and consideration but is nonetheless still a contract. All contract law applies to implied in fact contracts. Implied in law contracts are actually quasi contracts.
  71. What elements must exist in order for a quasi contract to exist?
    • 1. One party confers a benefit
    • 2. With reasonable expectation of compensation
    • 3. The defendant knowingly accepted the benefit, and
    • 4. The defendant would be unjustly enriched in absence of compensation
  72. A gardener arrives to install a sprinkler in your neighbor's yard. He accidentally starts work on your yard instead. You see him working and know what is going on. You say nothing. At the end of the day, once the sprinkler is installed, you refuse to pay since there was no offer or acceptance. Was there a contract? Might you be liable to the garner in quasi contract?
    • There is no contract because there was no offer or acceptance.
    • You would be liable because you accepted a benefit and failure of compensation would result in unjust enrichment.
  73. How can an express warranty be established?
    • Express warranties can be established through express statement or example, by promise, by description, or by sample.
    • *Opinions and puffery are not express warranties
  74. When does an implied warranty for merchantability apply?
    It applies when a merchant sells a good. The good must be fit for its ordinary purpose and the warranty attests to the good at the time of sale.
  75. How may an implied warranty be disclaimed?
    It may be disclaimed by using conspicuous languagethat makes it clear that there is no such warranty. If using an oral disclaimer, you must use the term "merchantability", and selling something "as is" requires the use of conspicuous language.
  76. Examination of the goods and the Implied Warranty
    If a buyer has examined the goods or has refused to do so, then there is no implied warranty with respect to defects that would have been discovered upon examination.
  77. What is an implied warranty of fitness for a particular purpose?
    • This warranty applies when:
    • 1. the buyer has a particular purpose for the goods
    • 2. the seller has to know of that use
    • 3. and the buyer has to rely on the seller's expertise in selecting the good
  78. What type of seller does an implied warranty of fitness for a particular purpose apply to?
    These warranties apply to all sellers, not just merchants.
  79. Define discharge.
    Discharge is concerned with the circumstances that will allow a promisor to be relieved of performing a duty.
  80. Define impracticability.
    Impracticability means that some event that is not provided for in the contract makes performance impractical or difficult. Impracticability could mean that performance can only be done at excessive cost or that performance is impossible.
  81. When can impracticability be used as a defense for non-performance under the UCC?
    • 1. Goods identified in the contract are destroyed
    • 2. Performance has become illegal, or
    • 3. Performance has become impractical

    • ADDITIONALLY...
    • a. the event cannot be foreseeable
    • b. the non-occurence of the event was a basic assumption of the contract
    • c. the event was not the fault of the person using this defense
  82. How does bearing the risk of loss effect the defense of impracticability?
    Parties can specify in a contract that one or the other will bear the risk of loss. In that case, the party bearing the risk will not be able to use the excuse of impracticability.
  83. What are the requirements of impracticability under the UCC?
    • 1. A contingency must occur
    • 2. The contingency must make performance impractical
    • 3. The non-occurence of the contingency was a basic assumption of the contract
  84. When is a defense of impracticability normally valid under Common Law?
    • 1. Performance becomes illegal
    • 2. Specific subject matter of the contract is destroyed
    • 3. The performing party in a personal service contract dies or is incapacitated
    • 4. Performance becomes impracticable.

    • ADDITIONALLY (like the UCC)...
    • a. The event must occur
    • b. The non-occurence of the event must be a basic assumption of the contract
    • c. The even has made performance impracticable

    Note, though, that under both the UCC and Common Law, if the contract addresses how to deal with a contingency then that language governs.
  85. Define frustration.
    A party's duty to render performance is discharged if, after the contract is made, the principle purpose is substantially frustrated by an event the non-occurence of which was a basic assumption of the contract. The event must not be the fault of the party using this defense and the rule does not apply if the contract dictates how to deal with the occurence.
  86. Define recission.
    Recission occurs when a party is excluded from performing a contract. Recission can occur through mutual consent of the parties.
  87. What acts as consideration in a recission?
    The release of rights (such as the right to file a suit) acts as consideration
  88. When can you rescind a contract in which a third party beneficiary is involved?
    You can only rescind a contract dealing with a third party beneficiary before his rights have vested.
  89. Explain how release works.
    Under release, a party's duty to perform can be discharged by the other party. This requires a writing from the discharger that inludes an intent to discharge. Under Common Law, you must have consideration. However, the UCC does not require consideration.
  90. How do you show that one is an intended beneficiary to a contract?
    • You must show:
    • 1. recognition of the beneficiary is appropriate (he was meant to be a beneficiary) and either
    • 2. performance will satisfy an obligation of promise to pay money to the beneficiary OR a promise intends to give the benefit to the beneficiary.

    *Intended beneficiaries CAN inforce contracts.
  91. What happens in a third party beneficiary contract once the third party's rights have vested?
    Once this happens, attempts by the parties to modify or rescind the contract must receive approval from the third party beneficiary.
  92. How do rights vest in a third party beneficiary?
    • The rights of the beneficiary vest if any of the following occur:
    • 1. The beneficiary assents to the contract
    • 2. The beneficiary detrimentally relied on the contract
    • 3. The beneficiary files suit to enforce the contract
  93. What is the difference between assignment and delegation?
    Assignment refers to a transfer of rights, while delegation refers to a transfer of duties.

    Note: Generally, assignment is allowable and can be done unilaterally.
  94. When is assignment NOT possible?
    • 1. When it materially alters the obligor's duties
    • 2. When the assignment materially impairs the obligor's ability to obtain performance
    • 3. When the assignment materially varies the risk of the other party
    • 4. When assignemt is prohibited by contract

    *Consideration makes assignment irrevocable
  95. When is delegation NOT possible?
    • 1. When the party has a substantial interest in having the delegating individual perform, and
    • 2. When it is prohibited by the contract
  96. What happens when a party delegates the obligation to pay?
    The delegator is still liable if the delegee does not perform.
  97. Define novation.
    Novation is a substitute of a new contract for an old contract and allows an original obligor to avoid liability. It requires consent from the original obligor.
  98. What are the requirements of novation?
    Novation requires that the original obligor repudiates liability to the original promisee, and the promisee accepts performance from the delegate without reserving rights against an obligor.
  99. What elements are required in order for the Statute of Frauds to apply to a contract?
    The Statute of Frauds requires that a contract be in writing, signed by the party to be charged, and must contain the essential elements of the deal.
  100. What 5 subjects will the Statute of Frauds apply to?
    • 1. Marriage
    • 2. Suretyship
    • 3. One Year
    • 4. UCC
    • 5. Real property
  101. Define suretyship.
    A contract under which one party promises a second party that he will be responsible for any debt of a third party.

    A suretyship does not apply if the main purpose is to benefit the surety and the promise is to reimburse for a monetary loss (like in an indemnity contract).
  102. When will the Statute of Frauds not apply to land contracts?
    It will not apply to licenses, leases, or easements of less than one year.
  103. When may a land contract be taken out of the Statute of Frauds?
    If, subsequent to an oral contract, one of the parties engages in a subsequent act that shows existence of the contract.
  104. Under the UCC, when does the Statute of Frauds apply to the sale of goods?
    When the price is more than $500.
  105. What must a writing include under the UCC for the Statute of Frauds to apply?
    • 1. It must indicate that a contract has been entered into
    • 2. It must identify the parties
    • 3. It must contain quantity terms
    • 4. It must be signed by the party against whom inforcement is sought.
    • *This writing does not have to be the actual contract as long as it contains the above elements.
  106. Does the Parole Evidence Rule apply to oral agreements?
    No. The Parole Evidence Rule only applies when the agreement or part of it has been reduced to a writing.
  107. How does the Parole Evidence Rule deal with subsequent agreements?
    The Parole Evidence Rule allows for the introduction of subsequent agreements.
  108. How does the Parole Evidence Rule deal with contracts entered into earlier between parties?
    The Parole Evidence Rule does not prevent evidence of contracts entered into earlier.
  109. Does the Parole Evidence Rule prevent evidence in support of a defense to contract formation?
    No.
  110. Is evidence of course of performance, course of dealing, or trade usage prevented under the Parole Evidence Rule?
    No.
  111. The Parole Evidence Rule applies when one party seeks to influence the _________________ of a written document by ________________.
    • Interpretation
    • Using extrensic evidence to add to or interpret terms
  112. When is extrensic evidence allowed under the Parole Evidence Rule?
    • Only when a contract is partially integrated. To determine if a contract is partially integrated, look to the intent of the parties.
    • The evidence allowed cannot contradict the terms.
  113. What happens if a condition is not satisfied?
    If a condition is not satisfied then some duty is excused.
  114. How does a condition differ from a promise?
    Failure to perform a condition is not a breach, but failure to perform a promise is a breach.
  115. What are the two types of conditions?
    Express and Implied
  116. Is de minimus failure allowed in an express condition?
    No. The condition must be complied with precisely.
  117. When will you normally see an implied condition?
    Courts usually impose implied conditions to avoid injustice or when the court believes that the parties intended to have the condition but didn't address it in the contract.
  118. Is substantial performance acceptable for an implied condition?
    Yes, it is enough to satisfy an implied condition.
  119. What are the two special conditions?
    Satisfaction and time.
  120. Describe how a satisfaction clause works.
    A satisfaction clause conditions performance on the satisfaction of a party. It leaves discretion in the hands of one party but is constrained by good faith. If it doesn't involve aesthetic judgment, it can be examined against a reasonable person standard.
  121. What is a clause that conditions payment on the occurence of some event?
    Instead of being considered an absolute condition for payment, it is a guide for when payment should happen.
  122. What happens when substantial performance is not achieved in a contract?
    The other party will be excused of its duty to perform.
  123. Define the Perfect Tender Rule.
    The Perfect Tender Rule states that substantial performance is not sufficient and that strict adherence must be met.
  124. What happens when a condition is suspended?
    When a condition is suspended, the condition is restored upon expiration of the suspension.
  125. What happens when a condition is excused?
    When a condition is excused, the party having the benefit of the condition can never raise it as a defense-it can never be restored.
  126. Can conditions be reinstated if they have been suspended?
    Yes, but only if it is reinstated before the condition is due and before the party detrimentally relies on the suspension.
  127. Must a breached-agaisnt party perform in order to recover in a material breach?
    No, the breached-agaisnt party may recover without performance.
  128. Under Common Law, must the breached-against party perform?
    The Common Law requires that a breached-agaisnt party perform if the breaching party has substantially performed.
  129. What may a breached-against party do under the UCC?
    A breached-against party may withhold its own performance whether or not the breach is de minimus (remember, the UCC requires Perfect Tender and complete performance).
  130. How does anticipatory repudiation work under Common Law?
    A clear and unequivocal repudiation of a contract triggers anticipitory repudiation. The repudiation can be in the form of words or writing.
  131. What is the effect of a repudiation?
    A party can treat a repudiation as equivalent to a breach; returned performance is not required and the reputed-against party can sue for damages. The repudiated-against party may also ignore the repudiation and demand performance.
  132. How is retraction of repudiation similar to an offer?
    A retraction of a repudiation is an offer to breach.

    • Repudiation can be accepted in 3 ways:
    • 1. Signal acceptance
    • 2. Act in reliance
    • 3. Commence an action for breach of contract
  133. Does repudiation apply to unilateral contracts?
    No, repudiation only applies to bilateral contracts.
  134. When does anticipatory repudiation exist under the UCC?
    When one party provides clear and unequivocal repudiation.
  135. What does the UCC allow a party to do who fears a breach?
    • The UCC allows the party to adequately demand assurance. To demand assurance, you must do the following:
    • 1. There must be grounds for insecurity
    • 2. Then a party can demand assurance
    • 3. The party can also suspend performance until assurance is given
    • 4. Failure to give an assurance within reasonable time can be treated as a repudiation.
  136. What remedies exist once a contract has been breached?
    • 1. Expectation damages
    • 2. Consequential damages
    • 3. Incidental damages
    • 4. Punitive damages
    • 5. Liquidation damages
    • 6. Nominal damages
    • 7. Reliance damages
    • 8. Restitution damages
  137. Define expectation damages.
    Expectation damages intend to put the breached-against party in the position they would be in had the contract been performed.
  138. How do you calculate expectation damages?
    Market value at time of performance - Contract price
  139. Define consequential damages.
    Consequential damages are foreseeable losses, like profits.
  140. Define incidental damages.
    Incidental damages are damages incidental to a breach.
  141. What are the limitations of damages?
    • 1. Foreseeability
    • 2. Certainty
    • 3. Mitigation
  142. Do punitive damages exist in contract law?
    It is extremely rare and you will probably never see it
  143. Define nominal damages.
    Nominal damages may be awarded when a party has won a case but there are no or minimal damages.
  144. Define liquidation damages.
    Contracts may contain clauses that specify damages if there is a breach. Liquidation clauses must be reasonable as to the actual damages or to anticipated damages when the contract was entered into, and they are more likely to be upheld if actual damages are hard to calculate.
  145. What may a party do if their liquidation clause fails?
    The party may still use basic damage calculations.
  146. Define reliance damages.
    Reliance damages are an alternative to expectation damages that seeks to put the breached-against party in the position they would have been if there were not contract. They usually include expenses incurred in reliance on a contract.
  147. Define restitution damages.
    Restitution damages intend to allow recovery when ther is no contract (it has been void for mistake), and it attempts to restore to a plaintiff a value conferred to the defendant. These are often awarded in contracts void because of mistake and in quasi contracts.
  148. When will specific performance be rewarded?
    When monetary damages are insufficient or inadequate.
  149. What are the key factors in determining when specific performance will be awarded?
    • 1. Difficulty in proving damages with reasonable certainty
    • 2. Difficulty in procuring suitable substitute performance
    • 3. Likelihood that monetary damages will be collected
  150. When is specific performance most likely to be used?
    In real estate cases because real estate is considered unique so substiute performance is impossible.
  151. What are the buyer's remedies under the UCC when nonconforming tender is an issue?
    The buyer can either accept the goods and pursue damages or reject the goods or the non-conforming part of the goods. If a buyer wants to accept the goods that are non-conforming, the buyer may recover the contract price - market value at the time of performance; and consequential and incidental damages.
  152. Under the UCC, what is the buyer's remedy when the goods have not been delivered or there has been a proper rejection by the buyer?
    • The buyer can collect expectation damages plus incidental and consequential damages.
    • They buyer may "cover" (buy goods elsewhere) and then will be entitled to the replacement price - contract price.
    • In the case of rare or unique goods, the buyer can get specific performance.
  153. Define replevy.
    The buyer may obtain identified undelivered goods from the seller only if the goods are unvailable in market place.
  154. What is a seller's remedy if the buyer refuses to pay after the goods have been delivered?
    The seller can sue for contract price.
  155. Generally, a seller cannot recover goods that have been delivered unless...
    • 1. The buyer receives the goods while insolvent, or
    • 2. The seller learns of buyer's breach while the goods are in transit
  156. What remedy does the seller have is she still has the goods?
    Contract price - market price + incidental damages - expenses saved
  157. What remedy does the seller have if she resells goods?
    Contract price - actual resale price
  158. On January 5, a creditor lent $1,000 to a debtor under a contract calling for the debtor to repay the loan at the rate of $100 per month payable on the first day of each month. On February 1, at the debtor’s request, the creditor agreed to permit payment on February 5. On March 1, the debtor requested a similar time extension and the creditor replied, “Don’t bother me each month. Just change the date of payment to the fifth of the month. But you must now make the payments by cashier’s check.” The debtor said, “Okay,” and made payments on March 5 and April 5. On April 6, the creditor sold the loan contract to a bank, but did not tell the bank about the agreement permitting payments on the fifth of the month. On April 6, the bank wrote to the debtor: “Your debt to [the creditor] has been assigned to us. We hereby inform you that all payments must be made on the first day of the month.” Can the debtor justifiably insist that the payment date for the rest of the installments is the fifth of each month?
    Yes, because the creditor could assign to the bank only those rights the creditor had in the contract at the time of the assignment.

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