Contracts And Sales Mbe

Front 1

7 General Issues (AFTPRET)

Back 1

Applicable Law
Formation of K
Terms of K
Performance
Remedies for Unexcused Nonperformance
Excuse of Nonperformance
Third-Party Problems

Front 2

Unilateral K on the MBE

Back 2

Offer requires performance as the ONLY possible means of acceptance.

Typically reward/prize/context or express in offer

Front 3

Article 2 of UCC applies to...

Back 3

Sale of Goods - tangible personal property

Front 4

Law applied to real estate transactions.

Back 4

Common Law

Front 5

Law applied to services contracts

Back 5

Common Law

Front 6

Mixed Deals

Back 6

More important part = applicable law (UCC v. C/L)

UNLESS - K divides payment for services/goods

Front 7

General requirements for an agreement.

Back 7

OFFER

NO TERMINATION

ACCEPTANCE

Front 8

What is an offer?

Back 8

MANIFESTATION of an INTENTION of one person to CONTRACT

Shown with WORDS or CONDUCT

Front 9

Deficient offers (PRICE)

Back 9

An offer for real estate without a price is invalid.

Sale of goods -- No price/no problem

Front 10

Material terms in an offer must be...

Back 10

Appropriate, fair, and reasonable

Vague or ambiguous material terms --> NO OFFER (UCC and C/L)

Front 11

Offers for requirement/output

Back 11

(1) Allowed (not vague or ambiguous)

(2) Buyer increase ok as long as in line with prior demands

Front 12

Advertisements and price quotations (Offers)

Back 12

NOT offers...

UNLESS

Reward or prize / 'first come first served'

Front 13

(General) Four methods of termination of offer.

Back 13

(1) Lapse of time
(2) Death of a party PRIOR to acceptance
(3) Words/conduct of offeror (revocation)
(4) Words/conduct of offeree (rejection)

Front 14

Requirements for revocation.

Back 14

(1) Unambiguous statement TO OFFEREE of revocation (Sharon in the shower with me)

(2) Unambiguous conduct indicating revocation that offeree is AWARE OF
(See Tom driving the car you were offered to sell me)

Front 15

What is an option.

Back 15

Promise to keep offer open in exchange for consideration

Option makes offer irrevocable for the time period

Front 16

What is the Firm Offer Rule?

Back 16

(1) Offer to buy or sell goods
(2) Signed, written promise to keep offer open
(3) Offeror is a merchant

Open for period written or 3 months whichever is shorter.

Front 17

Promissory Estoppel

Back 17

Offer cannot be revoked if there has been
(1) Reliance that is
(2) Reasonably foreseeable and
(3) Detrimental

Front 18

The start of performance of a unilateral contract has the effect of ...

Back 18

making the offer irrevocable.

However, mere preparation is NOT enough.

Front 19

Methods of indirect rejection of an offer.

Back 19

(1) Counteroffer
(2) Conditional Acceptance
(3) Additional Terms to a C/L K

Front 20

Effect of Additional Terms to a Sale of Goods K

Back 20

(1) Is there a K (i.e. is it a 'seasonable expression of acceptance)
(2) Is the additional term PART of the K?
-Only if (a) both are merchants; (b) add'l term is NOT material; and (c) add'l term not objected to by original offeror

Front 21

Start of Performance as Acceptance

Back 21

Unilateral K - NO, only performance is acceptance, but starting will make offer irrevocable

Normal K - treated as implied promise to perform

Front 22

Acceptance at a distance rules

Back 22

Acceptance - effective when MAILED
unless rejection mailed before acceptance, then it's a race.
All other communications, effective when received.
CANNOT use mailbox rule to meet option deadline.

Front 23

Assignability of offers and options.

Back 23

Offers = Non-assignable
Options = Assignable

Front 24

General legal reasons for not enforcing an agreement

Back 24

(1) Lack of consideration
(2) Lack of capacity
(3) Statute of Frauds
(4) Illegality
(5) Public policy
(6) Misrepresentations
(7) Nondisclosure
(8) Duress
(9) Unconscionability
(10) Ambiguity
(11) Mistakes as to material facts

Front 25

Approach for lack of consideration questions

Back 25

(1) Who breached
(2) Did that person ask for something in return for promise?
(3) What legal detriment did the person trying to enforce sustain?

Front 26

Legal Detriment

Back 26

Anything that you'd otherwise be able to do but you give up as consideration for a return promise.

You don't need ACTUAL detriment (it doesn't matter if I 'promise never to poop in the shower' if that was never an issue, I still have the right to poop in the shower, so it's a legal detriment)

Front 27

Illusory Promise

Back 27

A fake promise - 'I promise, unless I don't want to'

Front 28

Past Consideration

Back 28

Generally, not allowed.

EXCEPTION: EXPRESSLY requested by promisor and EXPECTATION of payment by promisee (You ask and he expects)

Front 29

Pre-existing duty rule

Back 29

General (C/L): Doing what you're supposed to do is not new consideration / New consideration required for modification.

Exceptions: Unforeseen difficulties but you agree to do it anyway even though you would be excused, addition or change in performance, third-party giving you something for doing what you're already supposed to do ("Hey, Mitchell, I'll give you $20 bucks if you don't poop in the shower, too!")

Front 30

Pre-Existing Duty Rule (Art. 2)

Back 30

New consideration NOT required for modifications made in GOOD FAITH

Front 31

Part-Payment of Debt as Consideration

Back 31

Only allowed if debt is either not yet due or undisputed.

e.g. I'll give you 10 bucks now instead of paying you the 20 I owe you in a week = Consideration

Front 32

Consideration Substitutes

Back 32

(1) Written promise to pay obligation that is legally defensible (??)
(2) Promissory Estoppel - (A) Promise; (B) Foreseeable, detrimental, and reasonable reliance; (C) Justice want the damn thing enforced

Front 33

Lack of Capacity

Back 33

(1) Infant - under 18 (Infant can enforce but can't be enforced)
(2) Mental Incompetents
(3) Intoxicated persons IF THE OTHER PARTY HAS REASON TO KNOW

Front 34

Statute of Frauds (K's within SoF)

Back 34

(1) Promises to answer for the debts of another (Suretyship)
(2) Service not capable of performance w/in 1 year
(3) Transfers of interest in real estate
(4) Sale of goods $500 or more

Front 35

Main Purpose Exception to Suretyship Promises

Back 35

If the main purpose of the promise to pay the debt of another is to BENEFIT the GUARANTOR (I'll pay Gordy's tab because it allows me to get my drink on) the promise is NOT within the SoF

Front 36

Satisfaction of SoF by performance (Real Estate)

Back 36

(1) Improvements to the land
(2) Payment
(3) Possession

Any one of the three

Front 37

Satisfaction of SoF by performance (Service Ks)

Back 37

Full performance by either party satisfies the SoF

Part performance DOES NOT satisfy the SoF

Front 38

Satisfaction of SoF by performance (Goods)

Back 38

(1) Part performance ok but ONLY to the extent of the part performance (i.e. if delivered goods - OK, if undelivered - no)
(2) Specially manufactured goods - SoF satisfied when seller makes SUBSTANTIAL BEGINNING

Front 39

Satisfaction of SoF by writing

Back 39

(1) (Non-Article 2) All Material Terms Test

(2) (Article 2) Sale of Goods + Quantity = good writing

Front 40

When can you enter into a written K for someone else / when is written authorization required?

Back 40

(1) You always need authorization
(2) Authorization needs to be in writing only if the K is within the SoF

Front 41

When do you need written proof of K modification?

Back 41

When the modification (alleged deal) would make the K one that was within the SoF

Front 42

Is a contract provision that requires all modifications be in writing valid?

Back 42

NO - Ignore that language completely.

UNLESS - it's under UCC / Such a provision is ok unless it's waived

Front 43

Non-enforcement because of illegality

Back 43

The SUBJECT MATTER must be illegal

An illegal purpose doesn't make a K unenforceable as long as the plaintiff didn't know that the other party's purpose was illegal

Front 44

Elements of misrepresentation

Back 44

(1) Statement of fact before the K
(2) by one of the parties
(3) that is false, and
(4) induces the K

Even 'honest' misrepresentation can lead to rescission

Front 45

Is nondisclosure a ground for unenforceability?

Back 45

Generally no, no duty to disclose. You need wrongdoing (fiduciary relationship OR concealment)

Front 46

Elements of duress

Back 46

Look for (1) A bad guy; and (2) A vulnerable guy.

Most common: economic duress (no other options for the one party, forced to make K)

Front 47

Undue Influence

Back 47

(1) Special Relationship
(2) Improper persuasion of the weaker by stronger

Front 48

Unconscionability

Back 48

(1) Unfair surprise and oppressive terms are
(2) tested as of the time the agreement was made
(3) by the court

Front 49

Ambiguity

Back 49

(1) Parties use material term that is open to at least 2 reasonable interps
(2) Each party attaches different meaning to the term
(3) Neither knows or has reason to know the term has other reasonable interpretations

= NO CONTRACT (Think of the ships Peerless)

Front 50

Mistake of Fact at Time of K

Back 50

Mutual Material Mistake of Existing Fact = K not enforceable

Unilateral Mistake of Material Fact = enforceable unless other party had reason to know of the mistake

Front 51

The Mays/May Nots of Parol Evidence (by PURPOSE)

Back 51

(1) Change/Contradict - may NOT
(2) Mistake of integration - MAY
(3) Showing a defense - MAY
(4) Showing ambiguity - MAY
(5) Additional terms - MAY IF - (a) written agreement only a partial integration; (b) additional terms would ordinarily be in a separate agreement

Front 52

Hierarchy of CONDUCT as a source of K terms

Back 52

(1) course of PERFORMANCE - Same K/Same parties
(2) course of DEALING - Same parties / similar K
(3) Custom and Usage - similar parties / similar K

Front 53

Difference in delivery obligations for sale of goods by common carrier (UCC)

Back 53

SHIPMENT Ks - seller completes obligation when it (1) gets goods to a common carrier; (2) makes reasonable arrangements for delivery; and (3) notifies buyer

DESTINATION Ks - Seller completes delivery obligation only when goods arrive at destination

Front 54

Determining shipment v. destination K

Back 54

FOB

FOB + city where seller is or where goods are = SHIPMENT

FOB + any other city = DESTINATION

Think of the place following FOB as the place where you're free from obligation (e.g. FOB SELLER CITY, seller is free)

Front 55

Rules for Risk of Loss

Back 55

(1) Agreement controls first
(2) Breaching party liable for uninsured loss
(3) Common Carrier Delivery = Risk with seller until it fulfills delivery obligations
(4) Catch All = (1) Risk shifts from merchant-seller to buyer on RECEIPT of goods; (2) Risk shifts from nonmerchant seller when goods are TENDERED

Front 56

What are express warranties of quality?

Back 56

Specific words that PROMISE, DESCRIBE, or state FACTS. More than puffing.

Front 57

What is the implied warranty of merchantability?

Back 57

When you buy goods from a merchant, there is an automatic term added to the K by law that the goods are FIT FOR THE ORDINARY PURPOSE

Merchant = Deals in GOODS OF THAT KIND

Front 58

What is an implied warranty of fitness for a particular purpose?

Back 58

(1) Buying good for particular purpose
(2) Relying on seller to select suitable goods
(3) Seller has reason to know about your reliance

Front 59

Limitations on warranty liability

Back 59

(1) Statute of Limitations - Four Years
(2) Privity (Don't sorry)
(3) Buyer's examination of goods - NO implied warranties for defects that would have been obvious during examination
(4) Disclaimer - not for express warranties / 'As is'
(5) Limitation of Remedies - even express warranties

Front 60

Perfect Tender

Back 60

(1) Only applies to sale of goods
(2) Applies to GOODS and DELIVERY
(3) Less than perfect tender = buyer's option of rejection in good faith

Front 61

Rejection of Goods

Back 61

(1) Distinguish rejection of offer from rejection of goods
(2) No perfect tender - buyer may (a) retain and sue; or (b) reject all or any and sue for damages.
(3) Rejection option limited by CURE, INSTALLMENT CONTRACT, and ACCEPTANCE
(4) Buyer must take reasonable care of rejected goods

Front 62

When does seller have option to cure?

Back 62

(1) Seller reasonably believed what she sent would be acceptable
(2) Time for performance has NOT YET EXPIRED

Front 63

What is an installment contract and when can a buyer reject it?

Back 63

Installment K Authorizes
(1) delivery of goods in separate lots
(2) to be separately accepted

Buyer can reject the installment only when there is a SUBSTANTIAL IMPAIRMENT

Front 64

Acceptance of non-conforming goods and its effect

Back 64

(1) Acceptance = no later rejection
(2) Payment w/o inspection = NOT acceptance
(3) Failure to timely reject = acceptance
(4) Retention w/o objection = acceptance

Front 65

How does a buyer of goods properly revoke an acceptance?

Back 65

(1) Nonconformity substantially impairs value of goods
(2) No way of knowing until later (e.g. seller's assurance)
(3) Revocation occurs within a reasonable time after discovery of nonconformity

Front 66

When can you get specific performance?

Back 66

When remedy at law is inadequate / unclean hands (Real estate w/ no later BFP, Sale of unique goods, NEVER for performance)

Front 67

When can a seller reclaim from an insolvent buyer of goods?

Back 67

(1) Buyer must have been insolvent AT THE TIME that it RECEIVED the goods
(2) Seller must demand return of goods within 10 days of receipt

Front 68

What is the purpose of money damages?

Back 68

To compensate plaintiff / NOT to punish defendant

Front 69

Measure of expectation damages.

Back 69

(1) Dollar value of performance without breach
(2) Dollar value of performance with breach
(3) Comare

Front 70

Calculating damages for sales of goods

Back 70

(1) Who breached
(2) Who has the goods
(3) Was there a later 'replacement' deal?

Front 71

Damages for seller's breach in sale of goods

Back 71

Seller Breaches/Buyer Keeps Goods = FMVPerfect - FMVAsDelivered or Cost of Repair

Seller Breaches/Seller Has Goods == FMVTime of discovery - K Price OR Reasonable replacement - K price WHICHEVER IS HIGHER

Front 72

Damages for buyer's breach in sale of goods

Back 72

Buyer Breaches / Buyer keeps goods = K Price

Buyer Breaches / Seller has goods = K Price - resale unless seller can't resell

Front 73

Lost profits for lost volume seller

Back 73

If seller has a REGULAR INVENTORY, seller can prove lost profit because of the breach by buyer.

Front 74

What are incidental damages?

Back 74

Costs incurred in dealing with breach (storage of goods, finding replacement in service K, etc.)

Test is NOT foreseeability

Front 75

What kind of consequential damages can one get?

Back 75

FORESEEABLE consequential damages.

Consequential damages are limited to damages arising from P's SPECIAL CIRCUMSTANCES

Front 76

What are liquidated damages? What limits are placed on them?

Back 76

LD = K provision fixing the amount of damages in case of breach.

Can't be tantamount to penalty

Test: (1) Damages difficult to forecast at time of K; (2) provision is REASONABLE forecast = LD ok

Front 77

When does anticipatory repudiation occur and what is the effect?

Back 77

Ant. Rep. is unambiguous statement or conduct (1) that repudiating party WILL NOT perform (2) made prior to time performance was due. (More than, "I might not be able to...")

Gives rise to immediate claim for damages for breach.

Front 78

What can you do if the other party is unsure about performance (less than Ant. Rep.)?

Back 78

In writing, demand adequate assurance. Can suspend performance until you get that if it's commercially reasonable.

(1) Reasonable grounds for insecurity; (2) written demand for adequate assurance; (3) commercially reasonable to stop performance until you're assured.

Front 79

When is a breach material? What is the effect of a material breach?

Back 79

Material Breach:
(1) When performance quality is completely off (painting house purple instead of white)
(2) When amount of performance is substantially lacking (look at fractions - painted one house of 20 = mat. breach)

Material breach = Other party may be excused from performing and recover damages

Front 80

What is an express condition?

Back 80

Language that limits obligations created in the K.

Triggers; if, if only, provided that, etc.

Front 81

Difference between an express condition and a conditional acceptance

Back 81

Placement of the language

Conditional acceptance = language is in the offeree's response

Express condition = language is in the agreement

Front 82

How much does a party have to comply with an express condition?

Back 82

Generally, STRICT compliance is required.

If it's a 'personal satisfaction' condition = honest and good faith

Front 83

Who can waive an express condition?

Back 83

Only the person benefiting from the condition.

Look for words or behavior that suggest waiver.

Front 84

What is the difference between conditions precedent and conditions subsequent?

Back 84

CP excuse performance until/unless they occur.

CS will happen after performance starts but can end/alter performance if/when it occurs.

Front 85

What is an accord and satisfaction? What is the effect?

Back 85

Agreement by parties already contractually obligated to each other to accept a different performance in satisfaction of the original obligation.

If new agreement (ACCORD) is perform (SATISFACTION), the original obligation is excused.

If new agreement (ACCORD) is not performed (NO SATISFACTION), the other party can recover on either the original obligation or the accord.

Front 86

What is a novation?

Back 86

An agreement between BOTH parties to an existing contract to the substitution of a NEW PARTY

Front 87

Who is liable after a novation is properly executed?

Back 87

The substituted party is liable, the original obligated party is excused.

Front 88

What is delegation and how is it different from novation?

Back 88

Unlike a novation, delegation does not require the agreement of both original parties and does NOT excuse the original promisor in light of the substitute's failure to perform.

Front 89

What is the effect of death of a party after a contract has successfully been entered into?

Back 89

Generally, no effect. Contractual obligations do not disappear.

UNLESS, the decedent is a "special" person for the K

Front 90

What is a third-party beneficiary

Back 90

A person who is not a party to the K but is able to enforce the K others made for her benefit

Front 91

Intended v. Incidental Beneficiary

Back 91

Only intended beneficiaries have K rights. Intent of parties determines who is what

Intended beneficiaries = Will be named in K

Front 92

Creditors v. Donees

Back 92

Typically will be a donee / if the 3PB was a creditor BEFORE the K, he is a creditor now

Front 93

When are 3PB rights vested? What is the effect of 3PB rights vesting?

Back 93

When the 3PB knows of the rights and
(1) Relies on them; or
(2) Assented to them as requested

You can't cancel or modify a K without the permission of a 3PB whose rights have vested.

Front 94

In a 3PB case, who can sue whome?

Back 94

(1) Beneficiary - Promisor
(2) Promisee - Promisor
(3) Beneficiary CANNOT sue promisee
(4) UNLESS it's a creditor beneficiary recovering on a pre-existing debt

Front 95

What is an assignment?

Back 95

A transfer of rights under K law.

Front 96

Prohibiting Assignments v. Invalidating Assignment

Back 96

Prohibition ('Don't') = Go ahead and assign, but assignor is liable for breach / assignee can enforce the assignment

Invalidation ('Can't') = Assignment = breach / Assignee gets no rights, can't enforce

If unsure, go with prohibition

Front 97

Common law when K is silent about assignments

Back 97

You can't assign if it substantially changes the duties of the obligor

Substantial changes = Where the obligor will have to perform (move to another city, etc.) / NOT who is paid

Front 98

Do assignments require consideration?

Back 98

No, but w/o consideration, they are revocable.

Front 99

In an assignment case, who can sue whom?

Back 99

(1) Assignee - obligor
(2) Assignor for consideration CANNOT sure obligor
(3) Obligor has same defenses against assignee as it would against assignor (e.g. non-performance)

Front 100

What are the implied warranties in an assignment for consideration?

Back 100

(1) Right assigned actually exists
(2) Right assigned is not subject to any defenses by obligor
(3) Assignor will do nothing after assignment to impair its value

NO warranty as to what the obligor will do

Front 101

What happens when there are multiple assignments?

Back 101

Gratuitous = last assignee wins

For consideration = first asignee wins

Front 102

What is a delegation?

Back 102

When a party to a contract transfers work under that contract to a third party.

Front 103

Assignment v. Delegation

Back 103

Assignment is the transfer of RIGHTS or BENEFITS while a delegation is a transfer of DUTIES or BURDENS

Front 104

When are duties delegable?

Back 104

Generally, all duties are delegable.

UNLESS (1) K prohibits delegations or assignments; or (2) personal services Ks that call for VERY SPECIAL skills

Front 105

What happens if a delegate doesn't perform?

Back 105

(1) Delegating party is ALWAYS liable
(2) Delegatee is liable ONLY if she receives CONSIDERATION from delegating party