Contracts Exam Preview 1 Fact Pattern and 4 Short Answer (with one issue, only a paragraph answer) Open

book and open note Case references are needed 4 hours Public Policy is only needed when it makes sense Review FORMATION 1. Intent to be bound to a legally binding relationship (Lucy v Zahmer), an objective test. 2. Consideration: a bargained for exchange (the billiards and swearing case), it doesnt matter the benefit and the detriment. (The difference is Kirksy v Kirksy: the house for the nothing, gifts, and the Tiffanys diamond ring case [conditional promise]) Pre-existing duty rule (Alaska Packers, the guys that were supposed to fish that demanded more money after they agreed to fish) Past Consideration (Anna Saks Finberg) she worked 40 years, and they decide to give her the pension after that. Forbearance of Legal Right giving up a legal right is valid consideration (ie the babys daddy case) 3. Offer: would a reasonable person in the officers position think this a invitation to enter a contract (the exact specs and then the price vs. how much would you sell Bumper Hall Penn for?) Must sound like you are committed not just interested 4. Acceptance: must be in form offer sets forth. The offer can ask for acceptance in anyway it wants (except silence [ie there must be some explicit act]) (Ford v Allied [times where performance is deemed to be acceptance]) (International Filter; the acceptance must be communicated to offeror, but that can dispensed upon by the offer, this is same as the mid term question with Hams wife) (Case where the guy buys the lumber, cannot say he entered contract b/c he didnt do anything specific to the job where the acceptance required him to perform. Terminate the Offer: lapse of time, death, rejection, and revocation (anti speculation principal, can still revoke offers that are irrevocable). No side can be bound when one is not. (Dickenson v Dodds; Wild West type case [the show down]). Firm Offer: you must have consideration for holding the offer open Unilateral Clerical Mistake (Elsinore): guy makes offer, but has a clerical mistake. Can get out of offer b/c of the clerical mistake. Illusory Promise: No consideration, though it might seem like it. Limitation (Lady Duff Gordon) is reasonable efforts imposed.

Reliance: Alternative to CONSIDERATION, (Anna Saks Fienberg 2, [remember the elements of reliance], was the reliance reasonably induce, did it occur, could justice be served if not up held). (Starr Paving: offer, reasonably induced reliance, reliance occurred, can justice be avoided? Yes to these then the offer is binding without consideration). Generally it is not reasonable to rely upon an offer alone. Avoid Statute of Frauds. Statute of Frauds: Some types of agreements must be in writing. Assurity: exception is that when someone is getting something for themselves it is okay, but if someone else then it has to be in writing. (Richard v Richard; the performance that seems to suggest there is a contract, ie reliance [Manarco] a maid that agrees to work until she gets the house and has worked for 20 years) Defects Status/Capacity: age and mental illness (is when you deny people rights to contract you deny them the ability to commerce) Duress: you have to find the wrongful threat that overcomes the will (subjective), then the contract in unenforceable. Undo Influence: A number of factors that lead to undo influence (this is the gay teacher case). Cannot make a high-pressure sale undo influence. Misrepresentation: not a term of the agreement, some background thing that is not a term of the agreement (other stuff to do with this to follow ie the juju farm). Contract Interpretation Parol Evidence Rule: after the agreement is final is it INTEGRATED? If yes, you cannot add anything, if no then you can add some additional terms, but cannot contradict it. (Masterson v Sine) Partys Intent: New York Rule: Plain meaning rule. 2 step process: 1. Look at the contract and decide if there is ambiguity on its face (high quality steel). 2. If an ambiguity is found then we can hear extrinsic evidence. (THINK THE CHICKEN CASE) California Rule: We dont need to look at the contract to see if something is contradictory. Just goes right to step 2, you can always go to extrinsic evidence. Young Doctrine (this follows the 2nd step of the NY/Cali rule): 1) If one party knew what the other party meant then that meaning is ascribed (ie I knew you meant Barak Obama then we are bound by that term), 2) if there are different subjective meanings then we go to objective evidence (what would a reasonable person think? 3) Both had different subjective meanings and there is no objective meaning (a la the Peerless; dont get hung up on proper names ie Barak Obama thing) then the contract is rescinded. Substantive Problems: McKinnon v Benedict (limited to equitable remedies) Unfair result

Black Industries v Bush (a big markup is not a problem that the courts will fix) Contracts of Adhesion: Are the terms under discussion dickard or boilerplate (dickard is argued over [ie the price] vs boilerplate [background that you didnt think about]). If it is boilerplate 2 things, 1. Did it create an unfair surprise? 2. Is it unconscionable? If one of those 2 things are met the contract is set aside. Form Selection Clause and Arbitration: Not unfair and not unconscionable (Carnival Cruise Line Case) Unconscionably: A court will not enforce a contract that shocks the its conscious. (Consumer driven when not operating at arms length.) (Frosty Fresh case) (Repossession clause was super unfair). Public Policy: The state says that the contract violates the policy of the state (ex covenant not to compete it hurts the market of the state) Good Faith: agreements have to be performed in good faith (the SAT case), dont have to negotiate in good faith though (Hams trip to Hong Kong). Remedies: PUT THESE AT THE END OF THE EXAM, ASSUME BOTH SIDES WIN AND GIVE REMEDIES IN EACH CASE. ALWAYS GIVE THE STANDARD Standard: put the party in had the contract been performed, and sometimes you can get specific performance (unique goods). Duty to Mitigate: (bridge case) When the other party has breach you must take the actions necessary to limit your damages. (ie when you find out the other side is not going to pay you have to stop working) (example when Ham sells his car and he finds out you arent going to pay up he can sell to someone else and sue for difference) Take or pay, (Shirley McClain) Foreseeability: Hadley (crank shaft) standard: what would the party expect to incur as a probable result as a breach. (This is like the currier that knows the importance of the package, ie charge more for the expensive thing) Liquid Damages: 1. Damages must be difficult to calculate. 2. Must be reasonable approximations of the damages. (Construction contract that paid out per day, when it is delayed you pay as such). Excuse Doctrine Mutual Mistake of Fact: must look at the basic assumption that the contract was founded on, but that turned out to be wrong. Not even thought about (the juju farm case or the preggers cow case). Impracticability: (Taylor v Caldwell; the theater burning down), implied assumption that is made impracticable by some external factor that has changed so fundamentally and so broadly that the contract is no longer a contract. 3 factors: unexpected event, no risk allocation, and the event has to make performance impracticable. Frustration of Purpose: Similar to impracticable (same 3 factors), but makes the contract not makes sense as it disrupts the basic purpose of this contract

(ex the flat renting, for the coronation it is no longer any purpose without the coronation). Performance Nature of the Obligations: Conditional obligations (usually concurrent). Obligation to arbitrate is not concurrent. Breach of Conditional Obligations: is this a material breach? If not that you CANNOT terminate the contract. If a breach is not material you can sue for breach, but you cannot terminate (ie sue for damages). If it is material breach, you can choose to continue the contract and sue for the breach OR you can suspend the contract/terminate the contract, but you MUST know if the breach is material. Adequate Assurance of Due Performance: You MUST have a real serious reason (ie news reports to think that the other side is going bankrupt, and this is found out AFTER the contract is made) to demand assurance of performance. Anticipatory Repudiation: A party, before it is obligate to perform announces that it WILL NOT perform the contract. Can the injured party sue and make alternative arrangements to seek alternative performance (obligation to mitigate). Dont need to wait and must seek alt performance.