Contract Law Overview and IRAC Method
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Questions and Answers

What type of law governs contracts that involve the sale of goods?

  • Article 1 of UCC
  • Common law
  • Common law and Article 2 of UCC
  • Article 2 of UCC (correct)

What is the predominant purpose test used for in contract law?

  • Assessing the fairness of contract terms
  • Determining the enforceability of a contract
  • Deciding which law applies to a mixed contract (correct)
  • Identifying whether a contract is void or voidable

How is an implied contract formed?

  • By a formal offer and acceptance
  • By verbal communication between parties
  • By the conduct of the parties involved (correct)
  • Through written agreements

Which of the following is true about a void contract?

<p>It never existed and cannot be enforced by anyone. (D)</p> Signup and view all the answers

Which legal concept prevents unjust enrichment without a formal agreement in place?

<p>Quantum meruit (A)</p> Signup and view all the answers

What must exist for a contract to be considered validly formed?

<p>An offer, acceptance, and consideration. (B)</p> Signup and view all the answers

Which type of contract involves both explicit terms and potentially implied terms?

<p>Express contract (A)</p> Signup and view all the answers

What does the term 'consideration' refer to in contract law?

<p>The benefit or value exchanged between parties (D)</p> Signup and view all the answers

What was the primary reason the ship's captain refused to pay the fishermen $100?

<p>The fishermen were legally bound to catch salmon for $50. (A), The fishermen had not provided new or different consideration. (B)</p> Signup and view all the answers

In which situation can a party modify the contract due to unforeseen circumstances?

<p>If during performance an obstacle that was unforeseen arises. (D)</p> Signup and view all the answers

What is considered a mutual mistake in contract law?

<p>Both parties are unaware of an essential fact that affects the contract. (A)</p> Signup and view all the answers

How can misrepresentation render a contract voidable?

<p>It must induce detrimental reliance and be material. (B)</p> Signup and view all the answers

What constitutes an example of unilateral mistake?

<p>One party is confused about the contract but the other is not. (B)</p> Signup and view all the answers

Which of the following exceptions to the pre-existing legal duty rule applies when there is a genuine disagreement about the obligation?

<p>Honest dispute regarding the original duty (C)</p> Signup and view all the answers

What type of mistake allows the adversely affected party to void a contract if they did not bear the risk?

<p>Mutual mistake (D)</p> Signup and view all the answers

Which of the following situations does not generally qualify for consideration under contract modifications?

<p>Parties create an agreement regarding their past agreements without new terms. (D)</p> Signup and view all the answers

What renders a contract voidable if the innocent party is deceived to their detriment?

<p>Fraud (A)</p> Signup and view all the answers

What type of duress involves threats of immediate physical harm?

<p>Physical duress (B)</p> Signup and view all the answers

In which case was the concept of procedural unconscionability demonstrated?

<p>Williams v. Walker Thomas Furniture (A)</p> Signup and view all the answers

What does substantive unconscionability refer to?

<p>Unreasonably oppressive terms (D)</p> Signup and view all the answers

Which of the following statements about minors and contracts is correct?

<p>Minors can void contracts unless ratified at 18. (D)</p> Signup and view all the answers

What situation describes ambiguity in a contract?

<p>Parties interpret a term differently despite a clear agreement. (D)</p> Signup and view all the answers

Which type of threat in duress leaves no reasonable alternative but to agree?

<p>Economic duress (D)</p> Signup and view all the answers

What are the three requirements concerning ambiguity in a contract as shown in Raffles v. Wichelhaus?

<p>Neither party is aware of the ambiguity. (A)</p> Signup and view all the answers

What occurs when one party performs their duty and the other party repudiates the contract?

<p>Discharge of duty of performance (A)</p> Signup and view all the answers

Which of the following describes a circumstance that would release a party from their contractual obligations due to unforeseen changes?

<p>Impracticability (A)</p> Signup and view all the answers

In the case of Krell v. Henry, what legal concept was demonstrated when the purpose of the agreement was undermined?

<p>Frustration of purpose (D)</p> Signup and view all the answers

What form of change in circumstances could lead to the discharge of a duty of performance if a contract becomes impossible to fulfill?

<p>Supervening illegality (B)</p> Signup and view all the answers

What essential element must be present for parties to enter into a rescission agreement?

<p>Performance still owed by both parties (A)</p> Signup and view all the answers

Which of the following options best describes a contract modification under common law?

<p>Requires new consideration to be binding (C)</p> Signup and view all the answers

What type of condition interrupts a duty of performance after an event has failed to occur?

<p>Condition subsequent (B)</p> Signup and view all the answers

Which scenario would be classified as impracticability of performance?

<p>Material costs increase tenfold due to shortages (C)</p> Signup and view all the answers

Under what condition can a promisee recover in quantum meruit for breach of contract?

<p>When the promisee has conferred services that were not compensated. (B)</p> Signup and view all the answers

What must be established for a restitution claim to be valid?

<p>The conferring party had a reasonable expectation of compensation (D)</p> Signup and view all the answers

Which of the following best describes the limits of consequential damages in a breach of contract?

<p>They are only those losses that were foreseeable by both parties. (B)</p> Signup and view all the answers

In the context of third-party rights, who is referred to as the 'promisor'?

<p>The party who makes the promise to benefit the third party (A)</p> Signup and view all the answers

In the case of Rockingham County v. Luten Bridge Co., what obligation does a party have after a contract has been repudiated?

<p>To mitigate damages and stop if further expenses are incurred. (B)</p> Signup and view all the answers

Which type of beneficiary has enforceable contract rights because they are specifically named in the contract?

<p>Intended beneficiary (B)</p> Signup and view all the answers

What criteria must liquidated damages meet, according to Lake River Corp. v. Carborundum Co.?

<p>They must be a reasonable estimate of potential damages at the time of contract formation. (C)</p> Signup and view all the answers

What distinguishes an assignment from a delegation in contract law?

<p>Assignments involve transferring rights, while delegations involve transferring duties (B)</p> Signup and view all the answers

What is a significant feature of specific performance as a remedy?

<p>It is difficult to obtain and typically granted for land contracts. (D)</p> Signup and view all the answers

Who can sue under a third party beneficiary contract?

<p>The intended beneficiary (A)</p> Signup and view all the answers

What is a key requirement for a third party beneficiary to have vested rights?

<p>They must manifest assent to the contract (D)</p> Signup and view all the answers

What is the correct definition of an 'assignor' in the context of assignments?

<p>The party who makes the assignment of rights (B)</p> Signup and view all the answers

In which situation does a creditor beneficiary gain the right to sue the promisee?

<p>When there is an obligation already owed to them (B)</p> Signup and view all the answers

Flashcards

Contract Formation

Requires agreement (offer & acceptance) and consideration.

Express Contract

A contract formed by words (oral or written) of the parties.

Implied Contract

A contract formed by the conduct of the parties.

Void Contract

A contract that is null and unenforceable from the start.

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Voidable Contract

A contract that may be rendered unenforceable by one party.

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Quantum Meruit

A fictional contract created to prevent unjust enrichment.

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Predominant Purpose Test

Used to determine if a contract involves goods or services.

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Consideration

Something of value exchanged between parties in a contract.

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Pre-existing Duty Rule

A promise to do something you're already legally obligated to do isn't considered new consideration.

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New/Different Consideration

Adding something new or different to a contract, avoiding the pre-existing duty rule.

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Honest Dispute

A good-faith disagreement about a contract's terms, allowing a modification to be enforceable.

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Unforeseen Circumstances

Unexpected events justifying a modification to a contract due to a new obstacle.

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Mutual Mistake

Both parties are wrong about a key fact affecting the agreement, allowing the contract to be undone.

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Unilateral Mistake

One party is mistaken about a key fact, often harder to use as a defense for contract voidance.

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Misrepresentation

False or misleading statement that makes a contract voidable if material to the agreement.

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Formation Defects

Problems with how a contract was created (e.g., mistake, misrepresentation) that can make a contract invalid or voidable.

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Fraud

A deliberate lie or omission in a contract, making it voidable if the innocent party is harmed.

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Duress (Physical)

Entering a contract due to the threat of immediate physical harm.

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Duress (Economic)

Entering a contract due to an improper threat of not fulfilling a contract.

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Unconscionability (Procedural)

Lack of a fair bargaining process, often with unfair surprises.

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Unconscionability (Substantive)

Contract terms overly harsh or oppressive.

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Ambiguity (Contract)

Unclear terms in a contract, making it harder to understand.

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Infancy

A minor (under 18) can void a contract, except for necessities (food, shelter).

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Contract Voidability

A contract that can be canceled due to a legal flaw.

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Condition Subsequent

An event that occurs after the contract is formed, which cuts off a party's duty to perform.

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Unforeseen Post Formation Changes

Events that occur after the contract is made, such as supervening illegality, that make performance impossible or illegal.

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Impossibility of Performance

When performance of the contract becomes objectively impossible due to events beyond the parties' control.

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Impracticability of Performance

When performance becomes excessively burdensome or expensive, making it unreasonable to continue.

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Frustration of Purpose

When the underlying purpose of the contract becomes meaningless due to unforeseen events.

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Parties Subsequent Agreement

A new contract formed after the original contract that alters, modifies, or replaces the original obligations.

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Rescission Agreement

An agreement where both parties mutually promise to end the original contract before performance is fully completed.

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Modification Agreement

An agreement where parties mutually agree to change the terms of an existing contract.

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Restitution

A legal remedy that prevents unjust enrichment by requiring a defendant to return a benefit unjustly received.

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Assignment

Transferring contract rights to a third party, allowing them to enforce the original contract.

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Delegation

Transferring contract duties to a third party, but not the rights.

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Third-Party Beneficiary

Someone who benefits from a contract although not originally a party to it.

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Intended Beneficiary

A third party explicitly named and intended to benefit from a contract. They have contract rights.

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Incidental Beneficiary

A third party who benefits from a contract, but doesn't have contract rights.

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Assignor

The party who transfers their rights in a contract.

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Consequential Damages

Damages that are a result of the breach, but not directly caused by the breach itself. They must be foreseeable by both parties at the time the contract was made.

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Mitigation of Damages

A duty on the non-breaching party to take reasonable steps to minimize their losses after a breach. If they fail to do so, they may be barred from recovering some damages.

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Liquidated Damages

A clause in a contract that specifies a predetermined amount of damages to be paid in the event of a breach. This amount must be a reasonable estimate of actual damages at the time the contract was made.

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Specific Performance

A remedy in which a court orders a party to perform their obligations under the contract. It is a very rare remedy, usually granted only for unique or irreplaceable items, such as land.

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Study Notes

Exam Style IRAC

  • Students should always have an action when suing for a remedy, like suing for promissory estoppel or receiving restitution damages.

Contract Formation

  • A contract is an enforceable promise that creates binding agreements with legal recourse.
  • The mnemonic device "Love For Dogs Treat Every Rover Terrifically" can help remember the seven contract questions (L: Law, etc.).
  • Laws governing contracts are either common law or Article 2 of the UCC (Uniform Commercial Code), covering the sale of goods.

Contract Classification

  • Contracts are classified by formation:
    • Express: Contracts formed by words (oral or written).
    • Implied: Contracts formed by conduct.
    • Quasi/Constructive/Fictional/Quantum Meruit: Contracts implied by law to prevent unjust enrichment.

Contract Formation Exceptions

  • Offers lacking quantity are not legally valid. Exceptions:
    • Requirements contracts and Output contracts (UCC Article 2).
  • Prices are required at common law (except in UCC sales of goods, where price may be negotiable or "reasonable").
  • Advertisements are not offers unless they are specific and describe quantity and manner of acceptance.

Termination of Offers

  • Offers can be terminated by:
    • Revocation: Offeror revokes the offer (offeror can revoke anytime before acceptance, except in certain circumstances like option contracts, merchant firm offers, detrimental reliance)
    • Rejection: Offeree refuses the offer.
    • Counteroffer: A rejection of the original offer with a new offer.
    • Lapse of Time: The offer expires after a stated or reasonable time.
      • Death or Incapacity: Offeror's death or incapacity will terminate the offer.

Acceptance

  • Acceptance must mirror the offer's terms to be valid (at common law). UCC 2-207 provides different rules for merchants in the sale of goods, where disagreements in terms may still create a contract.

Consideration

  • Consideration is a bargained-for exchange of legal value.
  • Promises to pay pre-existing legal obligations aren't consideration (except under the UCC or if there's a new/different consideration or honest dispute about duty or unforeseen circumstances.)

Consideration Alternatives

  • Promissory Estoppel: A substitute for consideration when a promise induces reliance, which can create an enforceable promise.

Defenses to Formation

  • Mistake, Misrepresentation, Fraud: A defense to contract formation if material and causes harm.
  • Duress (physical or economic): A defense to contract formation if induced improperly.
  • Unconscionability (procedural or substantive): A defense to contract formation if the contract is overly harsh or oppressive.
  • Lack of Capacity (Minors, Insanity, Intoxication): A defense to contract formation if the person entering into the contract lacks the legal capacity.
  • Illegality: The contract's subject matter is illegal.

Defenses to Performance (excuse contract performance)

  • Substantial Performance: Performance that is not perfect but substantially achieves the outcome of the contract.
  • Material Breach: A breach that significantly undermines the contract's benefit.
  • Conditions: Events or stipulations that must occur before or after duty to perform.
  • Waiver: Voluntarily relinquishing a condition.

Statute of Frauds (SOF)

  • Certain contracts need to be in writing to be enforceable (MY LEGS): Marriage, Year, Land, Executor, Goods ($500+) and Surety, and exceptions to SOF

Contract Defenses (Mistake, Misrepresentation, Fraud, Duress)

  • Mistakes (mutual and unilateral), Misrepresentation (innocent or fraudulent), Fraud, and Duress are valid defenses to contract formation
  • When the mistake is material, the contract is voidable by the affected party.

Breach of Contract

  • Breach is any deviation from the promised performance.
  • Different types of breaches (minor or material).
  • Contract can be excused if there is a condition to performance that is not met or if there is frustration of purpose.

Remedies for Breach

  • Expectation damages aim to put the non-breaching party in the position they would have been in if the contract had been performed.
  • Reliance damages compensate the non-breaching party for losses incurred in reliance on the contract.
  • Restitution damages return any benefits the breaching party received from the contract.

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Description

This quiz covers essential concepts of contract law, including formation, classification, and exceptions. Students will learn about the IRAC method for analyzing legal issues in contracts and the mnemonic to remember key contract questions. Test your understanding of enforceable promises and their legal implications.

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