K Formation

Question 1

ACCEPTANCE

When has an offer been accepted?

NOTE: NY Distinction

Answer 1

ACCEPTED when…

METHODS OF ACCEPTANCE → 3 TESTABLE ISSUES PERTAINING TO ACCEPTING AN OFFER:

Method #1)
When the the offer says so: the language of the offer cntrls
→ E.g., the offer says “you can accept this offer by reporting for work on Monday”→you can only accept by showing up on Monday

Method #2)
Starting performance on a bilateral K:
GENERAL RULE: starting performance on a bilateral K is an implied obligation to FINISH

EXCEPTIONS: FULL COMPLETED PERFORMANCE REQUIRED FOR Unilateral K to be accepted: starting performance on a UNILATERAL K, is NOT acceptance (no obligation to finish!); ONLY finishing performance ISacceptance
→ SIDE BAR (related to revocation of offer but not related to this point on acceptance) → REMEMBER, w/a UNILATERAL K:
for MBE, once performance has begun, offeror CAN’T revoke offer
BUT
in NY, offeror can revoke up until completion
→ Regardless of this revocation point, the offeree is NOT contractually obligated to finish under a unilateral K just because he started to perform (b/c no acceptance until full performance) but with a bilateral K he is obligated to finish once he has started to perform

Method #3)
Accepted under the 3-D Fact Pattern:
(i) DISTANCE
(ii)DELAY
(iii) DIFFERENT COMMUNICATION

4 RULES:
Rule 1: Communications OTHER THAN ACCEPTANCE are effective only when received
Rule 2: ACCEPTANCE is generally effective only when MAILED (i.e. “the MAILBOX RULE”)
Rule 3) If a REJECTION is mailed before an acceptance is mailed, then neither is effective until received
Rule 4) You CANNOT use the mailbox rule to meet an OPTION DEADLINE

→ NOTE: DOESN’T matter if the letter got lost in the mail; PROVIDED the letter was correctly addressed

→ Compare with revocation by offeror, which is effective ONCE received by offeree

EXCEPTIONS to Mailbox Rule → Original Offer explicitly states otherwise (that the offer is effective once RECEIVED)
→ Option Offers (Irrevocable offers), which must be RECEIVED by deadline
→ Offeree sends REJECTION first, which makes it a RACE (i.e. whichever gets to offeror FIRST controls)

Method #3) Improper performance…

Under Common LAw and Art. 2/UCC:
when the seller sends the wrong goods w/o explanation, the law treats this as a SIMULTANEOUS acceptance AND breach
BUT
THERE IS AN ACCOMMODATION EXCEPTION:
If the seller is sending the goods as an ACCOMMODATION to the buyer (i.e. an explanation is attached) (this has to be made clear) → shipment is then treated as a counteroffer (either the buyer accepts and pays FULL K price, OR she doesn’t and there are no damages)

NOTE: ACCEPTANCE IS NOT, when…
1) Offeree remains silent (generally)
→ Not allowed – E.g. “I’ll take your SILENCE as acceptance of this offer”

Question 2

BILATERAL vs. UNILATERAL K

What is thedifference b/t a bilateral K and a unilateral K?

Answer 2

BILATERAL K: an offer can generally be accepted in ANY reasonable way (“flexible”)

UNILATERAL K: an offer can be accepted ONLY by performing (“inflexible”)

AN OFFER IS BILATERAL UNLESS IT FALLS UNDER ONE OF THE 2 typical fact patterns: → Offer expressly says can only be accepted by performance (UNILATERAL)
→ Offer of reward, a contest or a prize

FOR FORMATION OF A K: Look FIRST to see if there is an agmt, THEN see if it’s legally enforceable

Question 3

APPLICABLE LAW: BODIES OF K LAW

What are the bodies of K law?

Answer 3

1) Art. 2 UCC: applies to a “sale of goods” “Goods” = tangible, movable, personal property

DOES NOT MATTER if the parties are merchants or not

In a “MIXED K”, if goods are more significant, then UCC applies

In a “MIXED K”, if the contract EXPLICITLY divides payment between the goods and the other parts then UCC will apply to the goods portion

2) COMMOM LAW: applies to all other non-good Ks
(i) REAL ESTATE
(ii) SERVICES

In a “mixed K”, if non-goods portion (e.g. services portion) is more significant, then common law applies

NOTE:

On MBE: the lease of goods is classified as under COMMON LAW, but…

BUT

NY DISTINCTION:
3) Art. 2A UCC: applies to a LEASE of goods (but NOT the lease of real property)

Question 4

DURESS DEFENSE

What is the “duress” defense?

Answer 4

Ks induced by duress or undue influence are VOIDABLE and may be rescinded by ∆ (the intimated party) as long as NOT affirmed

ECONOMIC DURESS:
Look For:
1. Bad Guy – Guy making improper threat which is usually a threat to breach an existing contract
2. Vulnerable Guy – Guy w/no reasonable alternative

→ NOTE: normally ECONOMIC duress is rare, BUT withholding something someone needs IS economic duress if: (i) the party threatens to commit a wrongful act that would threaten the other K-ing party’s finances; AND (ii) there are no adequate means available to prevent the threatened loss (BASICALLY economic extortion)

UNDUE INFLUENCE
Look For:
1. Special Relationship Between the Parties
2. Improper persuasion of the weaker by the stronger

Question 5

LACK OF CAPACITY DEFENSE

What is the “lack of capacity” defense?

NOTE: NY Distinction

Answer 5

Categories lacking capacity =

(i) minors (under 18);
(ii) intoxicated (other party must have reason to know of intoxication); OR
(iii) mentally incompetent (lacks ability to understand agreement)

General rule = an incapacitated ∆ MAY disaffirm the K (i.e. it’s VOIDABLE but ONLY by ∆)
→ If there is IMPLIED affirmation (retaining the benefit ONCE (re-gaining capacity), then the K is no longer VOIDABLE

QUASI-K
Through the doctrine of Quasi-K which is not contract law, an incapacitated party is liable for conferred NECESSITIES (e.g. food, shelter, clothing, medical care), but only for the reasonable value of the provisions (NOT necessarily the K price)

NY DISTINCTION:
Certain Ks by infants CANNOT BE VOIDED (i) Life insurance Ks by 14 yr olds +
(ii) Educational loans by 16 yr olds +
(iii) Realty K related to the marital home
(iv) K involving artistic or athletic services

NY DISTINCTION:
For mentally incapacitated
→ Adjudicated incompetent→ K void
→ Unadjudicated incompetent→ K NOT voidable UNLESS incompetent can restore other party to previous position

Question 6

MISREPRESENTATION / NON-DISCLOSURE

What is the “misrepresentation/non-disclosure” defense?

Answer 6

Depends on TYPE of misrepresentation:

1. MISREPRESENTATION:
   Look For
   (i) A statement of FACT made BEFORE the contract;…
   (ii) by one of the contracting PARTIES;..
   (iii) that is FALSE;…
   (iv) that is FRAUDULENT or MATERIAL; and…
   (v) which INDUCES the contract
   → NOTE: WRONGDOING IS NOT RQRD for MATERIAL misrepresentations
   → NOTE: Misrepresentations TEND TO MATTER on the BAR EXAM
2. NON DISCLOSURE:
   Generally, person making K has NO DUTY to disclose what she knows BUT
   (i) Look for Fiduciary-like Relationship or DUTY OR CONCEALMENT as exceptions to the general rule of no duty to disclose

OVERALL ANALYSIS:
A. Look for Fraudulent misrepresentation/non-disclosure: If one induces another into a K by using a fraudulent misrepresentation/non-disclosure, the K is VOIDABLE if there is justified reliance

B. Non-fraudulent misrepresentation/non-disclosure: If one party innocently misrepresents/doesn’t disclose, the K is VOIDABLE if there is justified reliance AND the misrepresentation is MATERIAL

Question 7

MISTAKE DEFENSE

What is the “mistake” defense?

Answer 7

Two types of mistake…

1) MUTUAL MISTAKE: if BOTH parties entering into a K are mistaken about a material fact that goes to the essence of the K, then the K is VOIDABLE by the adversely affected party
→ BUT person seeking relief CANNOT have BORE the risk of the mistake

2) UNILATERAL MISTAKE: if ONE party has a mistake, it generally does NOT render the K voidable
→ EXCEPTION: if the non-mistaken party knew OR had reason to know of the mistake made by the other party, the K IS voidable by the mistaken party

Question 8

LACK OF CONSIDERATION

What is the “no consideration” defense?

NOTE: NY Distinction

Answer 8

Consideration = a “bargained for exchange”/”legal detriment”; a person can bargain for a promise, performance OR forbearance
→ Consideration fact patterns have people doing stuff that they were ASKED to do

3 Steps to Analyzing Consideration Issues:
Step #1: Identify the promise breaker

Step #2: Determine if promise breaker asked for anything in return for her promise (i.e. bargained for it)
THIS WILL MOST LIKELY BE THE ISSUE

Step #3: Determine if the person looking to enforce the bargain suffered a legal detriment

STEP #2: DETERMINE IF THERE WAS CONSIDERATION

1) Exchange of Promises = CONSIDERATION
(e.g. A promises to buy B’s house and B promises to sell her house to A)
BUT:
Illusory promises are NOT enforceable
→ (e.g. We agree that I can buy as many widgets AS I WANT for $100 each”; the quantity amt is TOO indefinite)
→ (e.g. We agree that I reserve the right to terminate the agreement at any time w/o notice; illusory promise)
→ (e.g. We agree that I reserve the right to terminate the agreement on 10 days notice; ACCEPTABLE Promise)

2) Adequacy of consideration is IRRELEVANT if there is a bargain (quid pro quo)
→ Even a PEPPERCORN counts!

2) Past Consideration ≠ real consideration!
→ Past (moral) consideration (a promise given in exchange for something already done) ≠ real consideration!

NY DISTINCTION (NY General Obligation Law): 
→ Past/moral consideration IS valid consideration IF it's expressly stated in a signed writing and performance can be proven

BUT
Past Consideration = real consideration when:
(i) EXPRESSLY requested by promisor; AND
(ii) The is an expectation of making a payment by the promisee (e.g. Lisa in danger asking Apu to save her knowing that Apu expects to be paid for aiding her)

3) MODIFICATIONS – COMMON LAW ONLY:
Past Contractual or Statutory DUTY ≠ real consideration! → Generally, doing what you are already legally obliged to do is not new consideration for a new promise to pay you more to do merely that (e.g. promising to pay ‘Lil John $5K more when there was an existing contract for him to sing. The promise is not new consideration and the agreement is not legally enforceable)
BUT
→ If there is a CHANGE to the past contractual or statutory duty then the new promise counts as consideration
ALSO
→ If there was an unforeseen difficulty so severe as to excuse the past contractual or statutory duty then the new promise counts as consideration
ALSO
→ If a 3rd Party is the one that is making the promise/providing the consideration then it is valid even if there was a past past contractual or Statutory duty b/c the 3rd party was not involved in that past duty
ALSO
→ If there is a WRITTEN promise to satisfy an obligation for which there is a LEGAL DEFENSE then it is enforceable without new consideration

NY DISTINCTION (NY General Obligation Law): 
→ Existing duty consideration IS valid consideration IF it's expressly stated in a signed writing and performance can be proven

→ NOTE: UCC: NO PREEXISTING DUTY RULE IN UCC!
Art. 2/UCC: consideration is NOT REQUIRED to modify a K, just need to show good faith

4) Partial pmt of an EXISTING debt≠ real consideration!
(i) Due and Undisputed: Partial pmt of an EXISTING debtis not valid consideration (e.g. “I’ll pay $x in return for forgiving balance”);
BUT…
(ii) NOT YET DUE, DISPUTED, Time-bared (SOL) debt: a written promise to pay a debt which is no yet due, in dispute by the parties or has been barred by SOL IS enforceable even w/o consideration

SUBSTITUTE FOR CONSIDERATION = PROMISSORY ESTOPPEL
On the bar exam, someone will do something that they were not asked to do. Normally this is in violation of the requirement that the promise breaker needed to have asked for something in return for her promise. Therefore, the action needs to have been taken b/c a promise was made that was relied upon.
ELEMENTS:
(i) A PROMISE…
(ii) that has been REASONABLY RELIED UPON in a way that is DETRIMENT and which was FORESEEABLE…
(iii) and enforcement is NECESSARY to AVOID INJUSTICE
***The detriment was NOT bargained for but promissory estoppel can still apply to enforce the contract
→ This is a “last resort” remedy by the ct

Question 9

PUBLIC POLICY DEFENSE

What is the “public policy” defense?

Answer 9

K can be VOID if violates public policy…

2 BAR EXAM FACT PATTERNS TO LOOK FOR:

1) NON COMPETE COVENANT:
a ct will invalidate or narrow an agreement w/a covenant not to compete that operates as a restraint of trade, depending on…
→ Scope of covenant (duration and geography): the farther in location and the longer in duration, the more likely void
→ Need for covenant (uniqueness of services provided): top chef vs. bus boy

2) EXCULPATORY CLAUSE:
CAN limit liablity for NEGLIGENCE, BUT NOT GROSS NEGLIGENCE OR INTENTIONAL torts

Question 10

UNCONSCIONABILITY DEFENSE

What is the “unconscionability” defense?

NOTE: NY Distinction

Answer 10

2 types…

1) Substantive: the TERMS are inherently unfair/oppresive given relative bargaining pwrs (e.g. indentured servitude)
→ Tested as of the time the agreement was made

2) Procedural: the agmt PROCESS was unfair (e.g. sneaky terms in very small print)/unfair surprise

→ NOTE: generally “unconscionability” is NOT valid; act must “shock the conscience”

***NOTE: NY Distinction: BOTH Procedural AND Substantive unconscionability are RQRD

Question 11

LEGALLY ENFORCEABLE

11 DEFENSES AGAINST FORMATION OF K

What are the 11defenses against formation of a K?

Answer 11

1) Lack of Consideration
2) Lack of capacity(making the K voidable)
3) Statute of Frauds (SOF)
4) Illegality
5) Public Policy
6) Misrepresentationinducing Agmt
7) Non-disclosureinducing Agmt
8) Duress / Undue Influence (economic or physical)
9) Unconscionability
10) Ambiguity in words of Agreement
11) Mutual mistake of a material fact at time of agmt

Question 12

EXPRESS K vs. IMPLIED K

What is the difference b/t express K and implied-in-fact K?

Answer 12

Express K = created by the parties’ WORDS (oral or written)
vs.
Implied-in-fact K = created by the parties’ CONDUCT

Question 13

TERMINATING AN OFFER

What are the 4 ways anoffer can be terminated?

Answer 13

1) LAPSE: an offer lapses after a STATED TERM or a REASONABLE TIME has passed
2) REVOCATION (BY OFFEROR ONLY): an offer terminates once the offeror revokes the offer (before acceptance by offeree)
3) REJECTION (BY OFFEREE ONLY): an offer terminates when the offeree rejects it (via inappropriate response)
4) DEATH: death of EITHER party before acceptance terminates a revocable offer, BUT NOT an irrevocable offer (i.e. an option)

Question 14

REJECTION (BY OFFEREE ONLY)

What are the 3 waysan offeree rejects an offer (termination)?

Answer 14

REJECTION = an offer terminates when the offeree rejects it (by an inappropriate response)

3 METHODS OF INDIRECT REJECTION

Method #1) COUNTEROFFER: a valid COUNTEROFFER acts as a rejection by offeree (e.g. Offeree: “I will pay no more than X”)
→ NOTE: mere bargaining does NOT act as a rejection (e.g. Offeree: “will you take X?”)
→ NOTE: IF OFFER IS AN OPTION then COUNTEROFFER WILL NOT act as a rejection
→ NOTE: IF the counteroffer is accepted then it did not terminate the offer

Method #2) CONDITIONAL “ACCEPTANCE”: is not an acceptance at all!
→ ACCEPTANCE + Add’l Words (“the Joe Biden) (e.g. Offeree: “I accept provided that X”)
→ LOOK FOR THE FOLLOWING WORDS: if; only if, provided; so long as; but; on condition that…

Common Law and Art. 2/UCC differ:
→ UCC: Conditional acceptance = TERMINATION
→ COMMON LAW: Conditional acceptance = REJECTION AND COUNTEROFFER that can be accepted by conduct

Method #3) ACCEPTANCE WITH AN ADDITIONAL TERM ADDED BY OFFEREE:

Common Law and Art. 2/UCC differ
→ Common Law: Acceptance must MIRROR the offer (the MIRROR IMAGE RULE) – a response to an offer that adds new terms is treated like a counteroffer rather than acceptance

→ Art. 2/UCC: If Offeree’s acceptance adds add’l terms that are NOT a condition of his acceptance then it is a valid acceptance
BUT
→ Offeree’s term IS included ONLY IF:
(i) both parties are MERCHANTS;
(ii) the offer DOES NOT expressly ltd acceptance to the terms of the offer
(iii) there is NO MATERIAL CHANGE (i.e. material = likely to cause hardship or surprise to offeror; NOTcustomary in industry); AND
(v) offeror DOES NOT OBJECT w/in a reasonable time

→ Otherwise, the K is formed w/o the offeree’s add’l term (which has to be expressly accepted by offeror)

Question 15

QUASI-K

What is restitution (a quasi-K)?

Answer 15

An equitable remedy that protects against UNJUST ENRICHMENT

Restitution is the remedy of LAST result

Recovery in restitution is the REASONABLE VALUE of the benefit conferred (NOT the K price)

Question 16

OFFER: REVOCATION

TERMINATING AN OFFER

When is an offer revocable (and irrevocable)?

NOTE: NY Distinction

Answer 16

GENERAL RULE = an offer can be revoked any time before acceptance by…

1) DIRECT revocation (the offeror indicates DIRECTLY to the offeree that he has changed his mind about the deal)
2) INDIRECT revocation (the offeror engages in CONDUCT that indicates that he’s changed his mind AND the offeree is aware of this conduct)
3) TIMING: a revocation is effective ONLY WHEN it is received by the offeree

4 EXCEPTIONS where an offer CANNOT be revoked…IRREVOCABLE OFFERS

EXCEPTION #1) Option: an option is a promise not to revoke an offer or to keep the offer “open” that is PAID FOR
→ A promise is not enough to keep an offer open, EVEN if in writing (unless it’s a Firm Offer)

EXCEPTION #2) FIRM OFFER (Art 2/UCC):
“(i) In a SALE OF GOODS, if…
(ii) a party who is a merchant…
(iii) promises in a signed writing to keep an offer open…
the offer is IRREVOCABLE for up to 3 months OR, if not specified, a reasonable amount of time up to 3 months)”
→ NOTE: USE THIS EXACT WORDING IN A NY ESSAY

→ NOTE: the terms “merchant” and “signed” are broadly defined under Art. 2/UCC

→ No consideration is necessary to support this offer

NOTE:
NY DISTINCTION: NY GENERAL OBLIGATION LAW
→ Under NY general obligation law,
(i) The FIRM OFFER rule applies to the sale of goods
(ii) for all other Ks: a signed written promise NOT to revoke is enforceable even w/o consideration AND the irrevocability DOES NOT have a 3-month limit

EXCEPTION #3) REASONABLE DETRIMENTAL RELIANCE
→ AN OFFER CANNOT BE REVOKED IF THERE HAS BEEN:
(i) Reliance that is before acceptance that is…
(ii) Reasonably foreseeable…and
(iii) Detrimental

→ when it’s REASONABLE that the offeree would RELY on the offer to her DETRIMENT, AND the offeree DOES rely, then the offer will be held IRREVOCABLE for a reasonable length of time
→ This is RARE esp if offeree can easily accept before detrimentally relying
→ Ct. will step in only when the”interests of justice require it”

EXCEPTION #4) PARTIAL PERFORMANCE ON UNILATERAL K:
→ An offer for a unilateral K (acceptance by performance) becomes irrevocable once performance ACTUALLY begins
→ Mere preparation is not enough to lead to irrevocability: Mere preparation is NOT partial performance and can’t stop revocation under this exception (but MAY be irrevocable under promissory estoppel)

NY DISTINCTION: START of performance DOES NOT make unilateral K irrevocable

Question 17

SoF → AGREEMENTS WITHIN SoF

What agmts are w/in the statute of frauds (SOF)?

NOTE: NY Distinction

Answer 17

CONTRACTS WITHIN SoF: “MY LEGS”
M→Marriage
Y→Year Peformance NOT capable w/in one year

L→Land
E→Executor
G→Goods
S→Suretyship

1) Marriage: a promise where the consideration is marriage (e.g. offering something of value in exchange for marriage like a prenup)

2) Year (Peformance NOT CAPABLE w/in one year): a promise that cannot be performed w/in 1 year from time agmt is MADE
(i) K Specifies time period > 1 yr (e.g. 3-yr employment K)
(ii) Delayed start date so that K completion > 1yr (e.g. a 1-yr employment K that starts NEXT month

→ NOTE: lifetime Ks (“I’ll work to I die”) are NOT w/in this category b/c “to I die” is actually capable of being perfomed in a year becasue people are “capable” of dying at any point in time
→ ***NY DISTINCTION: lifetime Ks DO COUNT w/in SOF
→ if a K’s performance is THEORETICALLY possible w/in 1 yr then it’s outside the SOF (doesn’t matter that performer is lazy, as long as it is possible if UNLIMITED resources were utilized then it is capable of being performed w/in 1 year and therefore outside SoF (e.g. K to cut down all the trees in Manhattan)

3) Land: ALL transfers of interests in Real Estate are w/in SoF – a promise creating an interest in land must be evidenced by a writing (real property, fixtures, mtgs, greater than1YRleases or easements, etc)
BUT EXCEPTION FOR LEASES
→ A Lease of 1 year or less is NOT w/in SOF

→ NY DISTINCTION: NY SoF also includes Ks to pay commission or finder’s fees unless an attorney, auctioner, or licensed real estate broker is involved
→ NY DISTINCTION: In a principal/agent rel., when dealing with an “interest in land,” the agent must be authorized in writing (or the principal must ratify)

4) Executor (or Administrator): a promise by executor to PERSONALLY pay estate debts (from own funds)

5) Goods (for $500 or more) (UCC): a K for
(i) sale of goods; AND
(ii) K ≥$500

→ NY DISTINCTION: in NY under Art. 2A/UCC, the LEASE of goods for ≥$1000 must be in writing (don’t be tricked by monthly price for a YEARLY K)

6) Suretyship: the promise to answer for debt of ANOTHER if that person defaults
→ Look for talk of a “Guarantee” – promise must be a guarantee for it to be a K withing the SoF and NOT a straight promise to pay
→ BUT there is a MAIN PURPOSE EXCEPTION! – If the “main purpose” of the obligation that the guarantor is guaranteeing is also to benefit the guarantor then this type of K will NOT be within the SoF
* NOTE: On the BAR EXAM this type of K is almost never found to be w/in the SoF

NOTE re K modification: must be in writing ONLY IF the K AS MODIFIED(not original K) is w/in the SOF
→ If not req’d to be in writing, MAY be orally modified, UNLESS UNDER THE UCC, the K says no oral modification (NOTE: under common law, the K cannot prohibit oral modification)

→ NY DISTINCTION: additional agmts that MUST be in writing (w/in SOF)

1) Assignment of an insurance policy
2) A promise to pay a DISCHARGED debt
3) An agmt to pay a finder’s fee/broker’s commission (EXCEPT to an atty, auctioneer, OR licensed RE broker)

Question 18

SATISFYING SoF THROUGH A WRITING

What is a satisfactory writing for Satisfying the SOF?

NOTE: NY Distinction

Answer 18

RECALL:

1) Not every writing satisfies the SoF
2) The SoF Can also be satisfied w/o a writing in some cases

Satisfying Through a Writing:

Depends on the type of agmt…

1) Sale of Goods (Art. 2/UCC):
Must contain:
(i) an indication that a K for the sale of goods exists;
(ii) aQUANTITY term (# OR good faith requirements); AND
(iii) be SIGNED by the would-be ∆ (the breaching party)
***→ NY DISTINCTION: There is a limited exception to requiring a signed writing by both parties when the transaction is between two merchants and there is a delay in responding.

2) Lease of Goods (Art. 2A/UCC)
***[NY ONLY]:
Must state:
(i) that it’s a LEASE (including rental pmts, # of pmts, and duration); AND
(ii)must be SIGNED by the would-be ∆ (the breaching party)

3) ANY other K: 
COMMON LAW
MUST CONTAIN: 
(i) ALL MATERIAL terms (who/what); AND 
(ii) be SIGNED by the would-be ∆ (the breaching party)

4) JUDICIAL ADMISSION
∆ ADMISSION OF K IN JUDICIAL PROCEEDING:
→if ∆ admits that there is a Kin a deposition, testimony, pleading, etc, then DON’T need writing to satisfy SOF
(e.g. ∆ states: “we agreed but we never put it in writing.”)

5) MERCHANT’S CONFIRMATORY MEMO
ONE party can use its own SIGNED writing to satisfy SOF against the OTHER party(would-be ∆)…
…IF:
(i) BOTH parties are MERCHANTS;
(ii) the writing claims AGREEMENT/has QUANTITY; AND
(iii) there is no WRITTEN objection w/in 10 DAYS

Typical fact pattern: 2 merchants agree over the phone AND one sends a written confirmation, which can be used against other party if it defaults

Question 19

SATISFYING SoF BY PERFORMANCE

What are the 3 means of satisfying theSOF by Performance?

What role does ESTOPPEL play in satisfying SoF?

NOTE: NY Distinction

Answer 19

The 3 types of contracts and the rules associated with them for satisfaction of the SoF by performance are …

[Rule #1]
Real Property
“Part Performance” Satisfies SoF BUT ALSO Requires AT LEAST TWO of the THREE of the following:
(i) buyer is in POSSESSION of the property;
(ii) buyer made SOME PAYMENT;
(iii) buyer made IMPROVEMENTS to the property
***→ NY DISTINCTION: SOF also not applicable when there has been part performance of a lease agmt
→ Recall that Leases of ONE YEAR or LESS are NOT WITHIN the SOF — legislative exception to ensure that short-term leases are NOT invalidated by SOF)

[Rule #2]
Services Contract
“Full performance” by EITHER PARTY is Rqrd to satisfy SoF
→ If the full performance by either party of a service K has occurred, then no need to be evidenced by writing
→ NOTE: PARTIAL PERFORMANCE IS NOT SUFFICIENT to satisfy SoF; would THEN need evidence of writing
→ e.g. P agrees to work for D for 3 yrs. P works for 13 months and then D fires P w/o cause. P sues D for break of contract. D asserts SoF defense. IS K w/in SoF and has it been satisfied by P’s working for 13 months? Answ = YES and NO. SoF Defense applies!

[Rule #3]
Sale of Goods ≥ $500 (Art. 2/UCC)
General rule is that part performance satisfies SoF for goods BUT ONLY to the EXTENT OF THE PART PERFORMANCE (custom goods exception)

LOOK FOR:

1) Goods accepted OR paid for by buyer:
SOF satisfaction ONLY applies to goods accepted OR paid for, NOT the whole K!
→ NOTE: if the K goods CANNOT be apportioned, then partial pmt satisfies SOF for WHOLE good

2) Custom-made goods:
IF custom made goods are NOT suitable to anyone else, AND IF the seller has made a SUBSTANTIAL BEGINNING (it is clear that the seller is working on the custom made order) then SoF satisfied

Recall Estoppel
Some cases hold that plaintiff’s reliance on ∆s promise to put the agreement in writing can estop ∆ from asserting SoF defense

Recall Suretyship
1) “Main purpose” exception:if the g’tor gets pecuniary gain from the surety, then it’s NOT w/in SOF and there’s no need for a writing
→ NY DISTINCTION: NY doesn’t recognize the main purpose exception, so you’d STILL need a writing signed by would-be ∆

Question 20

OFFER

What is an offer?

Answer 20

OFFER = a manifestation of an intent to be bound

Issues with Offers:

1) OPEN PRICE TERM:
UCC → OK to be an offer as the ct can read a “reasonable” price into K by looking at the intent of the parties

Real Estate (Common Law) → NOT an OFFER - PRICE & DESCRIPTION OF LAND ARE RQRD

2) VAGUE OR AMBIGUOUS MATERIAL TERMS:
UCC & COMMON LAW → NOT an OFFER
→ COMMON VAGUE TERMS USED IN ASSOCIATION W/MATERIAL TERMS:
(i) Appropriate
(ii) Fair
(iii) Reasonable
(e.g. stating “I will sell my car at a fair price” is NOT an offer”)

3) REQUIREMENT K → OPEN QUANTITY TERM isOK under Art. 2/UCC for Requirement Ks; PROVIDEDthe requirements don’t UNREASONABLY vary as to take seller by surprise → Increase must not be unreasonably disproportionate to past demands

4) ADVERTISEMENTS, generally are NOT OFFERS(!), but rather invitations to submit an offer EXCEPTIONS:
(i) When advertisement is calling attention to an award
(ii) where the ad specifies a QUANTITY term AND EXPRESSLY indicates WHO CAN ACCEPT then it’s likely an offer (e.g. “1 coat for $1 - first come first served”)

5) PRICE QUOTATIONS: generally are NOT OFFERS
EXCEPTION: Price quotation sent in response to an inquiry IS an OFFER

Question 21

CONTRACT DEFINITION

Answer 21

CONTRACT = AGREEMENT + LEGALLY ENFORCEABLE

Question 22

AGREEMENT

WHAT ARE THE 3 KEY ISSUES PERTAINING TO THE PROCESS OF AGREEMENT?

Answer 22

1) OFFER
→ Was there an offer?

2) TERMINATION OF OFFER
→ Was the offer terminated?

3) ACCEPTANCE
→ Was the offer accepted?

Question 23

OFFER: TERMINATION

What are the four ways to TERMINATE an OFFER?

Answer 23

1) LAPSE OF TIME:
→ A lapse of time will terminate an offer if there was a stated deadline for acceptance or if the lapse was for a reasonable amount of time to terminate the offer
→ TIP: Anytime the time of the offer and the time of the acceptance are provided, look to see if there was a lapse sufficient to terminate the offer.

2) DEATH of a party prior to acceptance:
→ GENERAL RULE: Death or incapacity of either party after an offer is made but BEFORE acceptance, terminates the offer
→ EXCEPTION for IRREVOCABLE OFFERS (option offers in which consideration was received)

3) REVOCATION
→ Only offeror may revoke
→ Words or conduct of offeror can revoke an offer

4) REJECTION
→ Only offeree may reject
→ Words or conduct of offeree can reject an offer

Question 24

ACCEPTANCE

Who can accept an offer?

Answer 24

Generally, an offer can only be accepted by a person who…

1) Knows about the offer at the time of acceptance; AND
2) Is the person to whom it was made

NOTE: Offers CANNOT be ASSIGNED UNLESS OPTION

NOTE: OPTIONS CAN be ASSIGNED UNLESS the option otherwise provides

NOTE: A person must have been AWARE of a REWARD to be able to accept it (must be aware of offer to accept)

Question 25

ACCEPTANCE

what is the effect of an acceptance?

Answer 25

When an offer is accepted, then:

1) NO REVOCATION; and
2) NO REJECTION

THE CATERPILLAR IS A BUTTERFLY!

Question 26

SoF

How are SoF Questions Analyzed?

Answer 26

Overview:
SoF is a statute designed to prevent fraudulent claims as to the existence of a contract from entering the court
→ SoF makes it harder to make false claims of their being a K by requiring the claimant to have objective proof for certain types of Ks

When Analyzing a SoF Question, ASK:
Question #1: Is the K w/in the SOF?
Quetsion #2: Has the SoF been satisfied so that the plaintiff may have their day in court?

Question 27

Other Issues Where SoF Appears on Bar Exam Questions

Answer 27

1) When is written proof required of the authorization to enter into a K for someone else?
→ EQUAL DIGNITY: Law requires an authorization in writing ONLY IF the K that will be signed by party so authorized is a K of the type that is within the SoF
→ Authorization have “EQUAL DIGNITY” with the underlying agreement

2) When is written proof required for a K MODIFICATION?
2 STEPS IN ANALYSIS
(i) STEP 1: Look at the deal in the MODIFIED state
(ii) Determine if the MODIFIED deal is within the SoF
IF the DEAL AS MODIFIED is W/IN the SoF then the MODIFICATION agreement must be in writing

3) When are K provisions REQUIRING that ALL MODIFICATIONS be made in WRITING enforceable?
(i) Common LAW:
Under common law, the K CANNOT expressly require that ALL modifications be made in WRITING
(i) Art 2/UCC:
Under the UCC, K provisions EXPRESSLY REQUIRING written modifications are EFFECTIVE unless waived
→ NOTE: When analyzing IF EXPRESS PROVISIONS REQUIRING MODIFICATION IN WRITING are w/in the SoF, whether or not the K is w/in the SoF is not a part of the analysis.
(e.g. contract to sell car for $400 that expressly states that modifications must be in writing. A party claiming that the price had been changed. A writing of the modification will be rqrd.)

Question 28

ILLEGALITY DEFENSE

What is the “illegality” defense?

Answer 28

1) Illegal Subject Matter
If the subject matter is illegal then the agreement is NOT ENFORCEABLE

2) Illegal Purpose
If the subject matter of the agreement is LEGAL, but ∆ had an illegal purpose for entering into the agreement, if the plaintiff WAS NOT AWARE of ∆’s illegal purpose the the K is ENFORCEABLE

Question 29

AMBIGUITY DEFENSE

What is the ambiguity defense?

Answer 29

There will be no contract if:

1. The parties use a MATERIAL TERM that is OPEN to at least two REASONABLE INTERPRETATIONS;
2. EACH PARTY ATTACHES DIFFERENT MEANING to the term;
3. NEITHER party KNOWS or has reason to know that the term is open to at least two reasonable interpretations

NOTE: IF there is a PARTY that knows of the Ambiguity then there will be a K with the meaning of the TERM that is understood by the party that was NOT aware of the ambiguity