Contracts Flashcards

A lease agreement states: 'This lease is contingent upon the tenant obtaining financing by March 1.' The tenant cannot obtain financing by that date. What type of condition is this, and what is the legal effect?

Answer: Condition precedent; the tenant's duty to perform the lease never arises

A condition precedent is an event that must occur before a contractual duty arises; failure of the condition means the duty never comes into existence.

A condition in a contract benefits only one party. That party, without consideration, orally communicates that it will not insist on the condition. Later, before the other party detrimentally relies, the first party tries to reinstate the condition. Under contract law, may it do so?

Answer: Yes, a condition can generally be retracted before the other party detrimentally relies on the waiver

A waiver of a condition can be retracted before the other party materially changes position in reliance on the waiver; after detrimental reliance, retraction is barred by estoppel.

After a dispute arises over the amount owed under a contract, the parties agree that the debtor will pay $800 in full satisfaction of a genuinely disputed $1,200 claim, and the creditor accepts. Is this agreement enforceable even though the creditor gave up $400?

Answer: Yes, because accord and satisfaction of a genuinely disputed claim is enforceable — the compromise itself is consideration

Accord and satisfaction of a bona fide disputed claim is enforceable because surrendering a disputed legal claim constitutes valid consideration, even if one party receives less than originally claimed.

A developer contracts with a city to build a stadium. Later, a new law is enacted making the specific type of structure illegal to build. Which doctrine most likely discharges the developer's contractual duty?

Answer: Supervening illegality as a form of impossibility/impracticability

When a supervening law makes performance illegal after contract formation, this qualifies as supervening illegality — a recognized category of impossibility that discharges the duty to perform.

A company contracted to sell corn from a specific harvest. The harvest was destroyed by an unexpected flood. The seller claims it is discharged from the contract. Which best describes the applicable doctrine?

Answer: Impossibility due to destruction of the specific subject matter of the contract

When a contract is for specific identified goods and those goods are destroyed through no fault of either party before risk of loss passes, the seller is discharged by impossibility due to destruction of the specific subject matter.

A company leased a building near a planned parade route, paying a premium rent. The government later cancelled all public events, making the building's location worthless for the planned purpose. Which doctrine best describes the company's defense against paying rent?

Answer: Frustration of purpose — an unforeseen event destroyed the principal purpose of the contract

Frustration of purpose excuses performance when an unforeseen supervening event substantially frustrates the principal purpose of the contract, even though performance is technically still possible.

Under the common law, a contract modification generally requires consideration. However, under the UCC, a modification to a sales contract requires:

Answer: Good faith, but no new consideration is required

Under UCC § 2-209, a modification to a contract for the sale of goods needs no consideration to be binding — good faith is the operative requirement, though a signed writing may be required if the original contract contains a no-oral-modification clause.