Applicable Law/Has an Agreement been Formed?

Question 1

What contract law applies on MBE? On NY?

Answer 1

MBE: Common Law for everything not related to sale of goods. Article 2 for sale of goods. NY: Also Article 2A for leases (all leases, both consumer and commercial).

Question 2

What law applies to a contract of mixed goods and services?

Answer 2

Not sure, most states apply law of whichever is predominant.

Question 3

What is a contract?

Answer 3

A legally enforceable agreement.

Question 4

What is restitution? What remedy does it give?

Answer 4

A quasi-contract that protects against unjust enrichment. It is a remedy of last resort. It usually gives the REASONABLE VALUE of the benefit conferred, not the contract price. Ex. Affleck has a contract to make 5 movies for $20 million. He makes one and Sony refuses to pay him. The statute of frauds barred Affleck from enforcing the contract. He can recover the REASONABLE VALUE of the single film that he made.

Question 5

How much does a party normally receive in restitution?

Answer 5

The reasonable value of the benefit he conferred, not the contract price.

Question 6

How can a offer to a bilateral contract be accepted?

Answer 6

In any reasonable way. This includes a promise to perform, etc.

Question 7

How can an offer to a unilateral contract be accepted? How is one created?

Answer 7

ONLY by performance. Created by: 1) The offer expressly states it can only be accepted by performing. 2) It is a reward, a contest, or a prize.

Question 8

What is a unilateral contract?

Answer 8

A contract that can only be accepted by performance.

Question 9

How do you analyze a contract on the bar?

Answer 9

1) Is there an agreement? 2) Is it enforceable? 3) What are the terms? 4) Did the parties perform the terms? 5) If there was non-performance, is there an excuse for non-performance? 6) What are the remedies?

Question 10

What is the definition of an offer?

Answer 10

A manifestation of the intent to be bound.

Question 11

When are advertisements offers?

Answer 11

The general rule is that advertisements are not offers. However, advertisements can become offers when there is a QUANTITY TERM. Ex. First come first serve.

Question 12

What happens if there is no price term in a potential offer? Is it an offer?

Answer 12

The court will read a “reasonable” price into an offer, unless it is a contract for the sale of real property.

Question 13

What term must be specified in an offer?

Answer 13

Quantity.

Exception: A requirements contract is ok under Article 2 despite uncertain quantity.

Question 14

When may a requirements contract be unenforceable?

Answer 14

When there is a sudden increase in needs that surprises the buyer.

There can be fluctuation, but it can’t be way out of line.

Question 15

How do you analyze offer an acceptance?

Answer 15

1) Was there an offer?
2) Was the offer terminated?
3) Was there acceptance?

Question 16

How may an offer be terminated?

Answer 16

1) Lapse: An offer lapses after either a stated term or a reasonable time.
2) Revocation: An offer terminates when the offeror revokes the offer. (Generally, an offer can be revoked anytime before acceptance, directly or indirectly).
3) Rejection: An offer terminates when the offerree rejects it.
4) Death: The death of either party before acceptance terminates an offer, assuming it is not irrevocable.

Question 17

When does an offer with no stated term terminate?

Answer 17

After a reasonable time.

Question 18

How may an offeror revoke an offer?

Answer 18

1) Direct Revocation: The offeror indicates directly to the offeree that he has changed his mind about the deal. If mailed, a revocation is effective upon receipt.
2) Indirect Revocation: The offerror engages in conduct that indicates that he’s changed his mind about the deal AND the offeree is aware of the conduct.

(Example of Indirect Revocation: Offeror sells his Honda to someone else. Offeree learns that offerror has already sold the Honda. Offeree thus cannot accept the offer because there is conduct + awareness of revocation.

Question 19

When can an offer NOT be revoked?

Answer 19

1) Option
2) Firm Offer
3) Foreseeable Reliance (subcontractor exception)
4) Starting to perform unilateral contract on MBE

Question 20

Does an option contract require consideration?

Answer 20

Yes an option requires consideration on the MBE. [but maybe it’s a firm offer!]

In NEW YORK, a signed written promise not to revoke is enforceable even without payment.

Question 21

What constitutes a firm offer?

What does it do?

Answer 21

A firm offer prevents the offerror from revoking an offer. Can only be under article 2?

It is formed when:

1) A merchant
2) Promises in a signed writing
3) To keep an offer open.

A firm offer can be for a stated period of time, but not to exceed 3 months.

If the firm offer states no period, a reasonable time will be imputed, still not to exceed 3 months.

Question 22

Can you have a firm offer under common law?

Answer 22

No, you can only have a firm offer under Article 2.

Question 23

When does foreseeable reliance allow an offer to become irrevocable?

Answer 23

When a subcontractor has supplied a bid (offer to perform services) to a general contractor, because the subcontractor knows the general contractor will rely on the subcontractor’s bid in computing its own bid.

Question 24

When does starting to perform in a unilateral contract make an offer irrevocable?

Answer 24

On the MBE: Offerror cannot revoke once performance starts.

In NEW YORK: an offer can be revoked all the way up until complete performance.

Question 25

When can a unilateral offer be revoked in New York?

Answer 25

All the way up until complete performance [unlike MBE, on which it cannot be revoked once performance has begun].

Question 26

What constitutes starting to perform a unilateral contract?

What is NOT enough?

Answer 26

Mere preparation does not make an offer irrevocable, performance must actually begin.

Question 27

When is a revocation effective?

Answer 27

Upon receipt.

Question 28

What does offerree’s rejection of an offer do?

Answer 28

Terminates the offer.

Question 29

What does a counteroffer do?

Answer 29

A counteroffer acts as a rejection and terminates the offer.

Question 30

Is bargaining treated as a counteroffer?

Example?

Answer 30

No. The following is not a counteroffer (does not terminate theoffer): “Will you take $20,000 less?”

The following is a counteroffer: “I won’t pay $500, I will only pay $400.” (This terminates the original offer and acts as a new offer).

Question 31

What is a conditional acceptance?

What does it do?

Answer 31

A conditional acceptance is not an acceptance at all.

It operates as a rejection and a counteroffer.

Example: In purported acceptance of an agreement to act in a movie, offerree says “I agree, provided that my movie gets top billing.” This is NOT an acceptance, because it is conditional.

Question 32

What happens when a purported acceptance varies the terms of an offer?

Answer 32

1) Common Law: An acceptance must mirror the offer (Mirror Image Rule).

Example: LL sends T a signed lease that states nothing about pets. Tenant adds, “T may keep a pet,” signs lease and returns it to LL. Has T accepted? NO. Under common law changing/adding virtually any term operates as a rejection and a counteroffer.

2) Article 2: 2-207. No mirror image rule. The offeree’s adding or changing a term does not prevent acceptance.

a) Does the new/changed term become part of the agreement? The offeree’s term is only included IF:

A) Both parties are merchants

B) There is no material change that will cause hardship or surprise

C) There is no objection within a reasonable time.

Question 33

When does an offeree’s new/changed term make it into an agreement?

Answer 33

The offeree’s term is only included IF:

A) Both parties are merchants

B) There is no material change (that will cause hardship or surprise)

C) There is no objection within a reasonable time.

If the term is material/these aren’t fulfilled, there is STILL an acceptance! Just on the old terms!

Question 34

Is a disclaimer of all warranties a material term for 2-207 purposes?

Answer 34

Yes! Unless it is customary in the industry.

Question 35

What is one way to determine whether a term is material for purposes of 2-207?

Answer 35

If it is customary in the industry, it is not material.

Question 36

Is “Saturday delivery” a material term for 2-207 purposes?

Answer 36

No! If between merchants and not rejected, this term will become part of the contract!

Question 37

How does death affect an offer?

Answer 37

The death of either party before acceptance terminates a revocable offer, but not an irrevocable offer like an option.

Question 38

What determines how an offer be accepted?

Bilateral vs. Unilateral?

Answer 38

The language of an offer determines the manner of acceptance. (example: If offer states you can only accept this offering by showing up at my house, then that controls).

Bilateral Contract: Promise or starting performance.

Unilateral Contract: Only startingperformance.

Question 39

Does starting performance of a bilateral contract mean acceptance?

Answer 39

YES. If the contract is bilateral, starting performance is acceptance and thus includes with it the implied promise to finish the job.

Contrast with starting performance in a unilateral contract - there, starting performance is NOT acceptance and thus there is no obligation to finish the job. Completing performance is acceptnace.

Question 40

Is starting performance of a unilateral contract acceptance?

Answer 40

No. Completion of performance is acceptance, both on MBE and NY.

Don’t be confused between what is acceptance and whether an offer can be revoked.

Question 41

How can you tell if an offer to paint someone’s house is unilateral or bilateral?

Answer 41

Whether the language of the offer states that the offer can only be accepted by performance (would make it unilateral).

Question 42

Is improper performance an acceptance?

I.e., if there is an offer to paint a house brown and offeree paints it white?

Answer 42

Common Law: This constitutes a simultaneous breach and acceptance.

Article 2: Simultaneous breach and acceptance unless seller is offering the goods as an accomodation to buyer. (Seller must state he is offering the goods as an accomodation). – There there is no acceptance and thus no breach.

Question 43

Is an offeree’s silence acceptance if the offer states “accept by doing/saying nothing?”

Answer 43

No, offeror cannot single-handedly turn offeree’s silence into acceptance.

Question 44

When is an acceptance effective?

Answer 44

When mailed. (Mailbox Rule).

Mailbox rule does not apply to irrevocable offers (offeree is already protected against revocation), or when the contract specifies otherwise.

Question 45

How do acceptances/revocations work by mail?

How about rejections?

Answer 45

Revocations are effective upon receipt, and acceptances are effective when sent (even if lost in the mail).

If an offeree sends both an acceptance and a rejection by mail, it is a race to see which gets there first.

(Remember, that acceptances are effective when received - no mailbox rule - if the offer is irrevocable, like an option). And, the contract can override the mailbox rule.

Question 46

Can the parties contract around the mailbox rule?

Can offeror override the mailbox rule in an offer?

Answer 46

Yes and yes, an offer can override the mailbox rule. (Ex “Your acceptance must be received by May 9th,” means what it means.

Question 47

Does an offer terminate automatically at the end of an option period?

Answer 47

Depends on the language of the offer, but generally yes on the MBE.