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MBE > Contracts - Formation and Defenses to Formation/Enforceability > Flashcards

Contracts - Formation and Defenses to Formation/Enforceability Flashcards

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1
Q

Armadillos From Texas Play Rap, Eating Tacos

A 
Applicable law;
Formation;
Terms;
Performance;
Excuse of nonperformance;;
Remedies;
Third-party problems.
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2
Q

A quasi-contract/restitution exists in equity if

A

(1) P conferred a benefit on D;
(2) P reasonably expected to be paid; and
(3) D is unjustly enriched if P not paid

**This is NOT a contract. Recovery is through restitution. Focus on the value of the benefit conferred.

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3
Q

A unilateral contract exists where the offer

A

expressly requires PERFORMANCE as the only possible method of acceptance. Generally acceptance requires FULL performance. Once performance has started, the offer becomes irrevocable. If substantial preparations, look for quasi-contract/promissory estoppel.

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4
Q

On the bar, assume that all contracts are _____ unless _______ or _______.

A

bilateral (a contract that is open as to the method of acceptance);

(1) reward, prize, or contest
(2) offer expressly requires performance for acceptance

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5
Q

Article 2 of the UCC applies to contracts for

A

primarily (1) sales of (2) goods.

**Even for private parties. Article 2 has additional special provisions that apply if (1) one or both parties are merchants and (2) if the seller is a merchant “with respect to the goods”

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6
Q

Under the UCC, “goods” are

A

tangible, movable, personal property.

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7
Q

The UCC does not apply to contracts for

A

(1) services
(2) real estate
(3) employment
(4) construction
(5) anything else that is not the sale of goods

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8
Q

If a contract is for mixed subject matter (sale of goods plus something else), the general rule is

A

the “all or nothing rule” based on the contract’s “predominant purpose.”

Apply either all UCC or all common law depending on whether the “predominant purpose” is for a sale of goods or for something else.

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9
Q

Some factors to consider when determining the “predominant purpose” of a contract are

A

(1) purchase price allocation to goods versus the other subject matter (“SM”)
(2) the amount of time spent on the other SM
(3) the sophistication of the service or other SM
(4) words in the K typical to a sale of goods

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10
Q

Under a mixed deal, if the contract itself divides payment between the sale of goods and the other subject matter, apply

A

UCC to the sale of goods and common law to the other subject matter.

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11
Q

Contract formation requires

A

(1) offer; (2) acceptance; (3) consideration

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12
Q

The test for whether an offer has occurred is whether

A

whether a reasonable person in the position of the offers would believe that his or her assent creates a contract

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13
Q

An offer is a

A

manifestation of an intention to contract, words or conduct showing commitment.

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14
Q

Under common law, an offer that is missing price and/or description of real estate (if for land)

A

is not a definite offer under common law. Absence of price is fatal.

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15
Q

Under the UCC, an offer that is missing the price

A

can still be a legally sufficient offer.

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16
Q

Under the UCC, if an offer is missing the price, the default is

A

(1) a reasonable price

(2) the parties’ subsequently agreed to price

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17
Q

If there is a vague or ambiguous material term in an offer, the offer is

A

is NOT a legally sufficient offer under either the UCC or common law.

Look for terms like appropriate, fair, or reasonable on the bar. These make an offer invalid.

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18
Q

If a sale of goods contract is missing the quantity term, it is

A

generally invalid under the UCC.

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19
Q

If a contract for a sale of goods that states the quantity in terms of the buyer’s requirements or the seller’s output, it is

A

valid requirements/output contract under the UCC.

**Look for words like “all”, “only source”, “sole source”, “required”, “produced”.

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20
Q

With respect to a change in the quantity of goods required under a valid requirements/output contract, a buyer cannot

A

make an unreasonably disproportionate increase in demands.

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21
Q

Generally, an advertisement is not an offer unless

A

it is in the nature of a reward or is specific as to quantity and expressly indicates who can accept.

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22
Q

The four ways to terminate an offer are

A

(1) lapse of time
(2) revocation by words or conduct of offeror of which offeree is aware
(3) rejection by offeree
(4) death

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23
Q

An offeror can revoke an offer through words or conduct through

A

(1) making an unambiguous statement to the offeree
(2) unambiguous conduct indicating an unwillingness or inability to contract OF WHICH THE OFFEREE IS AWARE**

**If offeree learns of conduct through a “reliable source” it can be sufficient to terminate.

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24
Q

An offer can be terminated due to lapse of time if

A

the time is stated in the K or, if unstated, a reasonable time.

**Look for dates in the fact pattern, if more than 30 days pass between offer and acceptance, raise the issue.

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25
Q

Revocation of an offer sent through the mail is effective when

A

received by the offeree. Need not show that the offeree actually received it, sufficient to show that it arrived at offeree’s place of business or home address if private party.

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26
Q

An offer cannot be revoked after

A

it has been accepted.

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27
Q

Generally, an offer can be revoked any time

A

prior to acceptance

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28
Q

The four situations in which an offer cannot be revoked are

A

(1) option contracts
(2) Merchant Firm Offer Rule
(3) Reasonably foreseeable detrimental reliance
(4) Start of performance pursuant to an offer of a unilateral contract

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29
Q

An option contract occurs when there is

A

(1) a promise to keep an offer open

(2) the promise is supported by consideration, even nominal

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30
Q

Under the UCC’s Merchant Firm Offer Rule, an offer cannot be revoked for ______ if it is a/an

A

three months;

(1) offer to buy or sell goods;
(2) signed, written promise to keep the offer open; and
(3) the seller is a merchant (any person in any business for bar exam purposes)

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31
Q

For UCC’s Merchant Firm Offer Rule, a merchant is

A

any person that is in business

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32
Q

The UCC’s Merchant Firm Offer rule ________ apply to oral offers

A

does not

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33
Q

The Merchant Firm Offer rule has a maximum time limit of

A

three months. This is a hard and fast limitation even if the offer states a longer time frame.

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34
Q

The Merchant Firm Offer Rule does not apply unless there is a signed, written promise to

A

keep the offer open

(note: this is an examiner favorite. don’t be tricked by a fact pattern that involves a written offer for a sale of goods by a merchant but that does NOT include an express promise to hold the offer open)

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35
Q

Under the UCC’s Merchant Firm Offer Rule, if the offer does not state a time period, the rule is that the offer is open

A

for a reasonable time and the seller cannot revoke for that reasonable time (as determined by the court)

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36
Q

An offer cannot be revoked if there has been detrimental reliance by the offeree that is

A

reasonably foreseeable.

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37
Q

On the bar exam, “bids” should be treated as

A

offers.

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38
Q

The start of performance pursuant to an offer of a unilateral contract makes the offer irrevocable for

A

a reasonable amount of time to complete performance.

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39
Q

Mere preparation pursuant to an offer of a unilateral contract (does/does not) make the offer irrevocable.

A

does NOT. But check out the reasonably foreseeable detrimental reliance rule.

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40
Q

The three methods of indirect rejection popular on the bar exam are

A

(1) counteroffers
(2) conditional acceptance
(3) additional terms (common law only)

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41
Q

A counteroffer _______ the original offer and becomes a ______.

A

terminates; new offer.

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42
Q

Counteroffers are not “bargaining,” bargaining does not

A

terminate the offer.

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43
Q

A “mere inquiry” (does/does not) kill an offer.

A

does not.

**Be careful with the language used. A declarative sentence is a counteroffer. A question counts as “mere bargaining”

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44
Q

A conditional acceptance (does/does not) kill an offer.

A

does.

**Look for words like if, but, provided, so long as, on the condition that.

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45
Q

Under common law, an “acceptance” that adds new terms is treated like a

A

counteroffer, not an acceptance. Adding new terms violates the “mirror image rule.” Acceptance must mirror the terms of the offer exactly.

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46
Q

Under UCC Article 2, a response to an offer that adds new terms is generally treated

A

as an acceptance. This is a “seasonable expression of acceptance. The response cannot make the new terms a condition of acceptance.

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47
Q

Under UCC Article 2, the general rule is that additional terms included in a response to an offer (are/are not) part of the contract

A

are

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48
Q

Under UCC Article 2, additional terms in a response to an offer are not part of the contract if

A

(1) one of the parties is not a merchant; or
(2) the term materially changes the offer; or
(2) the original offeror objects to the change

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49
Q

Under UCC Article 2, if additional terms are included in a response to an offer and one of the parties is NOT a merchant, the additional term is treated like

A

a mere proposal that is to be separately accepted or rejected. It is NOT automatically a part of the deal.

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50
Q

If a party dies prior to acceptance, the offer is

A

terminated. The other party need not be aware of the death so long as it happens before the acceptance is effective.

51
Q

The two exceptions for the termination of an offer at death are

A

(1) options contracts

(2) part performance of an offer to enter into a unilateral contract

52
Q

An offer can be accepted only by a person who

A

(1) knows about the offer and (2) is the person to whom it was made.

53
Q

Offers (can/cannot) be assigned, unless it an an offer for

A

cannot; an options contract.

54
Q

An offeror can always control the method of acceptance, but if the offer does not specify, the six general fact patterns for accepting an offer are

A

(1) the offeree fully performs
(2) the offeree starts to perform for bilateral contracts (full performance required to accept a unilateral contract)
(3) the offeree promises to perform
(4) the mailbox rule
(5) seller of goods ships nonconforming goods
(6) silence by offeree

55
Q

Full performance constitutes an acceptance of an offer unless

A

notice of performance was required. Look at

(1) the terms of the offer
(2) whether the offeree has reason to believe the offeror will not learn of acceptance

56
Q

A promise to perform is a valid acceptance of an offer unless the offer

A

expressly requires performance for acceptance.

57
Q

The three general rules to remember for the mailbox rule are

A

(1) generally, communications are effective when received
(2) generally, ACCEPTANCE is effective when sent (the mailbox rule)
(3) if a rejection is sent first, ignore Rule (2).

58
Q

If a seller of goods accepts an offer by shipping nonconforming goods, the general rule is that this constitutes

A

acceptance then breach.

59
Q

If a seller of goods accepts an offer by shipping nonconforming goods but offers an explanation/accomdation for the nonconformance, this constitutes

A

a counteroffer and no breach. Buyer can refuse the goods.

60
Q

An offeree’s silence is not acceptance, unless

A

(1) custom indicates silent acceptance is reasonable; or
(2) the offeree by words or conduct agrees that silence is acceptance (“if you don’t hear from me before Friday we have a deal”)

61
Q

The nine reasons for not enforcing a contract are

A

(1) lack of consideration or consideration substitute
(2) lack of capacity
(3) statute of frauds
(4) existing laws that prohibit performance
(5) misrepresentations
(6) duress
(7) unconscionability
(8) ambiguity in the words of the agreement
(9) mistakes at the time of the agreement as to material facts

62
Q

The definition of “consideration” is a

A

bargained for legal detriment.

63
Q

The four forms of consideration are

A

(1) performance (doing something not legally obligated to do)
(2) forbearance (not doing something legally entitled to do)
(3) promise to perform
(4) promise to forbear

64
Q

In order for consideration to be “bargained for,” it must be

A

asked for by the promisor in exchange for the promise.

65
Q

A promise in exchange for a promise (consitutes/does not constitute) consideration.

A

constitutes.

66
Q

A promise is “illusory” if the promise is conditioned on

A

a condition solely within the control of the promisor.

67
Q

The adequacy of consideration (is/is not) relevant.

A

is NOT. But look for “sham” transactions.

68
Q

Past consideration (is/is not) valid consideration

A

is NOT

69
Q

Under the one exception to the past consideration rule, past consideration is valid consideration if

A

(1) performance was expressly requested and promisee expects to be paid; or
(2) material benefit rule: the promisor previously received a direct material benefit (i.e. had HIS life saved)

70
Q

Under the common law’s pre-existing contractual or statutory duty rule, doing what you are already obligated to do

A

is not sufficient consideration.

71
Q

The three exceptions to the preexisting duty rule are

A

(1) addition to or changes in performance obligations
(2) unforeseen difficulty so severe as to excuse performance
(3) third party promise to pay

72
Q

Under UCC Article 2, there is no pre-existing duty rule, ____ is the test for changes in an existing sale of goods contract.

A

good faith

73
Q

Part payment as consideration for release: Partial payment is not consideration for a debt that is

A

(1) due; and
(2) undisputed

**Paying a debt off early in exchange for its reduction is sufficient consideration.

74
Q

The two consideration substitutes are

A

(1) written promise to satisfy an obligation for which there is a legal defense (look for statute of limitations on debts)
(2) promissory estoppel

75
Q

If a statute of limitations has expired, but a debtor makes a written promise to pay back some of the debt, the promise is

A

sufficient consideration, despite the legal defense of the statute of limitations.

76
Q

Promissory estoppel requires

A

(1) a promise
(2) reliance that is reasonable, detrimental, foreseeable
(3) enforcement is necessary to prevent injustice

77
Q

The three persons who lack capacity to contract are

A

(1) infants (minors, people under 18)
(2) mental incompetents
(3) intoxicated persons if other party has a reason to know

78
Q

If a party lacked capacity, that party has the right to

A

disaffirm the contract.

**Note that a minor can enforce a contract AGAINST a party with capacity, but not the other way around.

79
Q

If a party that lacked capacity retains the Benefit of the contract after gaining capacity, there is an

A

implied affirmation and the contract is enforceable.

80
Q

Under the “doctrine of necessaries,” a person who does not have capacity is legally obligated to pay for things that are

A

necessary like food, clothing, medical care, shelter.

There is no contract liability, but instead “quasi-contract,” so payment is based on the reasonable value of the benefit conferred.

81
Q

The method for approaching a Statute of Frauds question is

A

(1) Is the K within the SoF?
(2) If so, is the SoF satisfied?
(3) Is there a SoF defense?

82
Q

The six Statute of Frauds categories are

A

(1) promises in consideration of marriage
(2) promises by executor or administrator to pay the obligation of the estate from his own funds
(3) promises to answer for/guarantee the debts of another (surety, must be promise to pay IF someone else does not)
(4) services contract not capable of being performed w/in a year of date of contract
(5) transfer of a real estate interest for more than 1 year
(6) sales of goods for $500 or more

**The first three are frequently tested as the WRONG answer on the exam. The last three are most frequently tested.

83
Q

The “main purpose exception” to the Statute of Frauds requirement for promises to guarantee the debts of another states that

A

the promise does NOT fall w/in the Statute of Frauds if the main purpose of the purchase was to benefit the promisor (e.g. house owner O guarantees the sale on credit of paint to painter P who is going to paint O’s house)

84
Q

Early termination clauses (do/do not) take service contracts out of the Statute of Frauds.

A

do NOT

85
Q

If a contract for a task that cannot be possibly be performed w/in a year does not specify a timeframe, the contract (does/does not) fall within the Statute of Frauds.

A

does NOT. You have to imagine what you can do with unlimited resources.

86
Q

Lifetime contracts (do/do not) fall within the Statute of Frauds.

A

do not

87
Q

A one-year lease (does/does not) fall within the Statute of Frauds.

A

does NOT. The lease must be for MORE THAN one year. But it might fall w/in SoF if you sign a one-year lease that does starts a month later.

88
Q

Does a sale of goods for $500 fall within the Statute of Frauds?

A

Yes. The rule is $500 OR MORE.

89
Q

The Statute of Frauds can be satisfied through

A

(1) performance
(2) a writing
(3) judicial admission of a sale of goods agreement

90
Q

The rules for satisfaction of the Statute of Frauds vary depending on whether the subject matter of the contract is

A

(1) services
(2) goods
(3) real estate transfer

91
Q

____ performance by either party satisfies the Statute of Frauds for services contracts.

A

Full

92
Q

____ performance of a services contract does NOT satisfy the Statute of Frauds

A

Part

93
Q

____ performance of a sale of goods satisfies the Statute of frauds but

A

Part; but only to the extent of the part performance.

**Look to whether the goods have been delivered or not.

94
Q

Under the specially manufactured goods exception to the Statute of Frauds, the Statute of Frauds is satisfied when

A

the seller makes a “substantial beginning”** of the making or obtaining the goods.

**Enough has been done to show that these goods are made to order.

95
Q

___ performance by a buyer of real estate can satisfy the Statute of Frauds.

A

Part

96
Q

Part performance by a buyer of real estate is any two of the three

A

(1) payment (full or close to full)
(2) possession
(3) improvement

97
Q

Full payment by a buyer of real estate (does/does not) satisfy the Statute of Frauds.

A

does not

98
Q

The writing requirement for the Statute of Frauds is evaluated under the

A

(1) all material terms test: who and what.

2) MUST be signed by the party to be charged (the defendant

99
Q

Under the UCC, in order to be satisfy the Statute of Frauds, the writing must contain

A

a quantity term.

**DON’T need a price term

100
Q

The exception to the UCC’s Statute of Fraud’s requirement is called the _______ and requires _______.

A

Merchant Confirmatory Memorandum rule;

(1) both parties are merchants
(2) one party sends a signed confirmatory memo to the other
(3) the other party had reason to know of the memo’s contents
(4) the other party fails to respond within 10 days

101
Q

Under the UCC’s “judicial admissions” exception to the Statute of Frauds, judicial means the statement was _______ and admission means the statement _______.

A

(1) by the defendant acknowledging the “agreement,” NOT a statement saying they had an enforceable K
(2) appeared in pleadings, testimony, or in response to discover

102
Q

Under the Equal Dignity Rule for authorization to enter into a contract for someone else, the authorization must

A

be in writing if the underlying contract must be in writing. If the underlying contract is not subject to the SoF, the authorization need not be in writing.

103
Q

A contract modification must be in writing if

A

the new contract with the change in place falls within he SoF. If the new contract with the change does not fall w/in the SoF, the modification need not be in writing.

104
Q

Under common law, contract provisions that require all modifications be in writing

A

are ignored.

105
Q

Under the UCC, contract provisions that require all modifications be in writing are

A

effective unless waived.

106
Q

If the subject matter of a contract is illegal, the agreement

A

is void.

107
Q

If the subject matter is legal but the purpose is illegal, the agreement

A

is enforceable only by the person who did not know of the illegal purpose (e.g. hitman purchases a plane ticket to go to the victim’s city, airline can enforce the agreement but the hitman cannot)

108
Q

There is no requirement of _____ in contract law to assert a misrepresentation claim.

A

fraud. Even an honest misrepresentation suffices for misrepresentation and recission.

109
Q

The two types of misrepresentation are

A

(1) false assertion of fact

(2) concealment of facts

110
Q

The two types of duress are

A

(1) physical

(2) economic

111
Q

Economic duress requires

A

(1) an improper threat (bad guy); and

2) no reasonably alternative but to agree (vulnerable guy

112
Q

The doctrine of unconscionability empowers a court to refuse to enforce all or part of an agreement if there is

A

(1) unfair surprise; or
(2) oppressive terms AT THE TIME OF THE AGREEMENT

**Look out for long term Ks that now look one-sided but were not one-sided at the time of the K.

113
Q

Under the ambiguity doctrine, there will be no contract if

A

(1) parties use a material term that is open to at least two reasonable interpretations; and
(2) each party attaches different meaning to the term; and
(3) neither party knows or has reason to know the term is open to at least two reasonable interpretations

114
Q

Under the ambiguity doctrine, if one party knew of the ambiguity but the other party does not, there (is/is not) a contract _______ under the _________ understanding of the ambiguous term.

A

is; INNOCENT party’s.

115
Q

Under mistake of fact existing at the time of contract, there will be no contract if

A

(1) both parties are mistaken
(2) about a basic assumption of fact
(3) that materially affects the agreed exchange.

116
Q

Mistake of fact as to value (does/does not) render a contract unenforceable.

A

does NOT.

117
Q

If there is a unilateral mistake of fact, generally the mistake (will/will not) prevent formation of the contract.

A

will not.

118
Q

The two exceptions to the unilateral mistake rule are

A

(1) palpable, obvious mistakes

(2) mistakes discovered before significant reliance.

119
Q

Under unilateral mistake, the contract IS voidable by the mistaken party if the non-mistaken party

A

knew or had reason to know** of the mistake made by the other party. The mistaken party can enforce the contract under its understanding of the terms.

**Look for palpable, obvious mistakes on the exam. Also, the mistake must be material and the mistaken party must not have borne the risk, just like with mutual mistake.

120
Q

Under the majority rule, acceptance of an option is effective only when _________ by the _______, the ___________ for acceptance does not apply to options contracts.

A

received; offeror; mailbox rule.

121
Q

Under the mailbox rule, if an acceptance is misaddressed, the acceptance becomes effective upon its

A

receipt.

122
Q

A contractor’s reasonably reliance on a subcontractor’s bid creates an

A

unilateral option contract.

123
Q

In the case of a unilateral options contract, a rescission promise must be supported by

A

(1) an offer of new consideration; or
(2) elements of promissory estoppel (detrimental reliance); or
(3) the offer’s manifestation of an intent to make a gift of the obligation owed her

MBE (15 decks)

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