MBE - Contracts Flashcards
Contains NY Distinctions throughout.
What are the key areas of applicable contract law on the MBE?
(1) Common law
(2) Article 2 of UCC
What types of Ks does Article 2 apply to?
Contracts for the SALE OF GOODS
Goods - moveable, personal property.
The common law for contracts applies to ____?
All types of contracts EXCEPT contracts for the sale of goods.
A contracts with B for the sale of a toupee for $5, what law applies?
ARTICLE 2 UCC
It does not matter the PRICE or whether the parties are merchants or not. If goods involved, Article 2 applies
Martha buys “Guide to Insider Trading” book and the price includes a free class, what law applies?
Article 2 UCC - still.
With Ks for mixed goods & services key is to determine WHICH IS MORE IMPORTANT.
Here, it is the book.
M buys ticket for class, that comes with a free textbook, what law applies?
Common law.
This is a contract for services (class) - more important.
What is a legally enforceable agreement?
Contract
What remedy protects P from unjust enrichment whenever contract law yields an unfair result?
Restitution.
Remedy of last resort.
If restitution is applicable, what can P recover if victorious?
Reasonable value of benefit conferred.
NOT Original contract price.
What type of contract can be accepted in any reasonable way?
Bilateral Contract. (Extremely flexible).
What type of contract can be accepted only be performance?
Unilateral (Inflexible)
What is the first step in determining whether there is an agreement?
Was there an offer?
What is the definition of offer?
A manifestation of intent to be bound.
What is the most common trick on the bar with regard to offer?
Advertisements!
Trick is to be able to spot an advertisement, which are generally NOT offers.
Is an advertisement generally an offer? Why or Why not
No.
Because there is commonly no “quantity term” and an unlimited number of people could accept.
What is the exception to the general rule that advertisements are not offers?
An ad that specifies quantity.
Generally, indefiniteness results in an unenforceable offer, what are two exceptions?
(1) Open Price term, court usually reads in a “reasonable” price except regarding sale of real property.
(2) Requirements Contracts
How can an offer be terminated?
(1) Lapse
(2) Revocation
What occurs if an offer has lapsed?
The offer has been terminated. An offer lapses after a STATED TERM of a REASONABLE TIME has passed.
Who has the power of revocation?
The OFFEROR has the power to revoke an offer, which results in termination.
What is the general rule regarding revocation?
An offer can be revoked any time before acceptance.
How can an offer be revoked?
(1) Direct revocation, or
(2) Indirect revocation.
What is required for successful INDIRECT REVOCATION of an offer?
The offeror engages in CONDUCT that indicates he has changed his mind, AND the offeree is AWARE of conduct
On March 1, A offers to sell Jessica his Honda for $500. The next day I see my Honda to R, can Jessica still accept my offer?
YES.
While conduct indicating seller has changed mind is present, there is NO EVIDENCE Jessica was AWARE that seller changed mind and sold car.
What are the four exceptions where an offer cannot be revoked?
OFFS
(1) Option
(2) Firm Offer
(3) Foreseeable Reliance before Acceptance
(4) Starting Performance in a Unilateral K
What is an option?
A promise to keep an offer open that is PAID FOR.
A promises B to keep his offer open for a week, can A still revoke?
YES - merely promising to keep an offer open is not enough.
Z promises to keep his offer open IN WRITING, what result?
MBE: Z can still revoke.
What is a Firm Offer?
Under Article 2, if a MERCHANT promises in a SIGNED writing to keep an OFFER OPEN, the offer is irrevocable.
Note - terms merchant and signed are broadly defined under Article 2.
Does a firm offer have a time limit, if so what?
Yes - 3 month time limit.
What is the difference between a void contract and a voidable contract?
Void contracts cannot be enforced, but an aggrieved party may elect to enforce a voidable contract.
Ultimately, void = K without any legal effect from beginning.
While voidable = K where both parties can elect to avoid K (by raising defenses)
What is required to form a contract?
MUTUAL ASSENT (Offer + acceptance)
CONSIDERATION
NO applicable DEFENSES to formation
What is required to qualify as consideration?
(1) Bargained for exchange (something of legal value)
OR
(2) Substitute for consideration, such as promissory estoppel, detrimental reliance or good faith modification under UCC
When is a revocation effective?
Effective when RECEIVED by offeree.
When is a written communication received?
When it is DELIVERED to recipient’s place of business through which the contract was made or another location authorized to receive this type of communication.
Does not matter when recipient actually reads it.
What occurs when a merchant states in writing that an “offer will be open for 10 days.”
FIRM OFFER under Article 2.
(i) Merchant
(ii) offers to sell goods in a signed writing
(iii) and the writing gives assurances that it will be held open.
When is a revocation timely?
When received by offeree.
What is the effect of part performance of a unilateral contract?
Offer can NO LONGER be revoked.
Distinguish PREPARATION to perform – substantial preparations to performed do not make the offer irrevocable BUT may constitute detrimental reliance.
What is the effect of a counteroffer generally
Operates as a rejection, but mere bargaining does not.
What is the effect of a conditional acceptance?
Generally not an acceptance at all. Its actually a rejection.
However, offeror can still accept the conditional offer to form contract.
What is the mirror image rule?
Under COMMON LAW, there must be an absolute and unequivocal acceptance of each and every term of offer.
Any different or additional terms in the acceptance make the response a Rejection or Counteroffer.
What is the battle of the forms provision?
Under ARTICLE 2, (which abandoned the mirror image rule) the proposal of additional or different terms by the offeree in a definite and timely acceptance DOES NOT constitute a rejection and counteroffer,
but rather is EFFECTIVE as an acceptance, unless the acceptance is expressly made conditional on assent to new/changed terms.
Under Article 2, the offeree’s new or altered term is included ONLY IF…
(1) Both parties are MERCHANTS
(2) There is no MATERIAL CHANGE, and
(3) No objection within a REASONABLE TIME
Regarding a potential K for the sale of goods, an offeree’s written acceptance that DISCLAIMS ALL WARRANTIES (when the offer makes no mention of warranties) results in what?
Offeree’s change to disclaim all warranties would likely NOT BE INCLUDED - it is an example of a material change.
Material change = change that is likely to cause HARDSHIP or SURPRISE for offeror.
If one party dies before acceptance, what result?
Death of either party before acceptance terminates a revocable offer,
however, death does not terminate an irrevocable offer (like an option).
What is the general rule regarding acceptance?
The language of the offeror controls.
Under a bilateral K, what is the function of starting performance?
Stating performance IS ACCEPTANCE (and carries implied promise to finish the job).
Under an unilateral K, what is the function of starting performance?
Starting performance IS NOT ACCEPTANCE (so there is no obligation to finish job).
Completing performance is acceptance.
H offers me $10,000 to paint his house, and I can only accept by painting the House. Once I start painting, can H still revoke his offer?
MBE: NO
NYBE: H can revoke until completion.
What is the effect of an improper performance under the common law?
Simultaneous acceptance and breach.
What is the effect of an improper performance under Article 2?
Simultaneous acceptance and breach UNLESS seller is sending the goods as an accommodation to buyer.
Mail Box Rule
Acceptance by mail or similar means creates a K at the moment of dispatch (placed in mailbox) provided the mail is properly addressed and stamped.
Note exceptions exist.
What are the exceptions to the Mail Box Rule?
(1) Offer STIPULATES that acceptance is not effective until received, or
(2) Option K is involved
To what is the mail box rule applicable?
ACCEPTANCE only. It does not apply to other events in the contract setting, such as rejection or revocation.