Contracts Black Letter Law

Question 1

Common Law

Answer 1

Applies to contracts for

 1. Services or 
 2. Real estate. 

When analyzing a contracts question on the MBE, always apply common law, unless there is a transaction for the sale of goods (then apply Art. 2 UCC)

Question 2

Predominant Purpose Test

Answer 2

Applies when a transaction involves both:

 1. Sale of Goods and
 2. The Rendering of Services

Determines which law applies to the entire transaction.

EXCEPTION –> Divisible Contracts, when the payment for goods can be easily separated from the payment for services.

Question 3

What is a Contract?

Answer 3

A contract is a legally enforceable agreement that is created through the process of 
1. Mutual assent (i.e., 
      a. Offer plus
      b, Acceptance
2. Consideration, with
3. No valid defenses

Question 4

Mutual Assent

Answer 4

Occurs upon:

1. Acceptance of a
2. Valid Offer to
3. Contract.

Question 5

How is a party’s intent judged in contract law?

Answer 5

A parties intent is judged by the “Objective Theory” of contracts and judged by outward objective facts, as interpreted by a reasonable person.

The intent of a party is what a reasonable person in the position of the other party would believe as a result of that party’s objective manifestation of intent.

When the other party knew or should have known that the party lacked the intent to enter into a contract, a contract is not formed.

Intent is NOT the subjective intent or belief of a party.

The party’s mere subjective lack of intent is not sufficient to prevent the formation of a contract.

Question 6

Offer

Answer 6

1. An objective manifestation of a
2. Willingness by the offeror
3. To enter into an agreement
4. That creates the power of acceptance in the offeree.

It is a communication that gives power to the recipient to conclude a contract by acceptance.

Question 7

Intent

Answer 7

Intent is:

1. The Present desire of a person to be legally 2. Objective standard theory

Question 8

Knowledge by the offeree

Answer 8

The offeree must have knowledge of the offer in order to have the power to accept the offer.

Question 9

Terms

Answer 9

For a contract to exist, the terms of the contract must be certain and definite, or the contract fails for indefiniteness.

Question 10

CL Essential terms

Answer 10

Under CL –> all essential terms must be covered in the agreement:

1. Parties
2. Price
3. Subject
4. Quantity
5. Descriptions

Question 11

UCC Essential Terms

Answer 11

Under UCC –> The only essential term is QUANTITY.

As long as the parties intend to create a contract, the UCC “fills the gap” if other terms are missing, such as the time or place for delivery, or even the price for the goods.

Question 12

Can a K be formed under the UCC if Quantity is NOT stated?

Answer 12

YES!

Under the UCC, a contract is formed if

1. Both parties intend to contract and
2. There is a reasonably certain basis for giving a remedy if a breach occurs.

Both:
1. Requirement Contracts, and
2. Output Contracts
Satisfy UCC contract formation requirements even without naming specific quantities because the UCC implies good faith as a contract term.

Question 13

Duration Term

Answer 13

In most ongoing contracts, if a duration term is not specified in the agreement, courts will imply that the contract will last for a reasonable period of time.

Question 14

Employment contracts without a Duration

Answer 14

If an employment contract does not state duration, there is a rebuttable presumption that the employment is “at will.”

In an employment-at-will relationship, either party can terminate the relationship at any time, without the termination being considered a breach of the contract (unless the termination is against public policy, such as when an employee is discharged for filing a discrimination claim).

EXAM NOTE* When presented with a question involving an employment agreement that is not at will, use a traditional breach-of-contract analysis.

Question 15

Can an Employment Contract be enforced for Permanent Employment?

Answer 15

If an employment contract provides for “permanent employment,” most courts hold that, in the absence of a proven contrary intention, the employment is “at will,” because the duration term in the contract is considered too vague.

If the offer promises “lifetime employment,” some courts hold that the agreement is for at-will employment, while others take the term literally.

Question 16

CL - Missing terms

Answer 16

A contract may still be formed when a term is missing, if it appears that the parties intended to create a contract. The court may supply the missing term because there is a presumption that the parties intended to include a reasonable term.

Question 17

UCC - Missing Terms

Answer 17

The UCC “fills the gap” for missing terms other than subject matter and quantity, such as:

1. Time (reasonable) or
2. Place for delivery (the seller’s place of business),
3. The time of payment (when the buyer is to receive the goods),
4. The assortment of goods (reasonable choice of the buyer), and
5. The price for the goods.

If the contract omits a price or if the parties agree to set the price in the future and then fail to agree, the UCC supplies a reasonable price at the time of delivery. UCC § 2-305. The contract must have an objective standard for the court to reference. UCC § 2-305.

Question 18

Vague terms

Answer 18

When the terms of the contract are vague,
- NO presumption made
because
- The parties have manifested an intent that cannot be determined due to the vagueness of the terms.

Question 19

Language

Answer 19

An Offer must contain words of

1. Promise,
2. Undertaking, or
3. Commitment

• as distinguished from words that merely indicate intention to sell or interest in buying

The offer must also be targeted to a number of people who could actually accept.

Question 20

Invitation to deal

Answer 20

Invitations to deal ARE NOT Offers

Types of Invitations to deal include:

1. Inquiries, and
2. Advertisements

• UNLESS-

The Advertisement is associated with a stated reward.
If the Ad is associated with a Stated Reward, the Ad must be:
1. Sufficiently specific, and
2. Limiting as to who may accept
for the Ad to qualify as an offer
(e.g., “Used car for sale for $5,000.
First come, first served.”).

The more definite the statement (e.g., “I will sell you X for…”), the more likely it is to be an offer*

Question 21

Termination of offers

Answer 21

An offer CAN NOT be Accepted if the Offer has been Terminated.

Offers can be terminated in the following ways:

1. Time Lapse
2. Death/Mental Incapacity
3. Counteroffer
4. Illegality
5. Revocation
6. Rejection