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169 Cards in this Set

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What 2 kinds of K law does the Multistate BEX test?
(1) CL of Ks &
(2) Art 2 of UCC
What does Art 2 of the UCC apply to?
Art 2 applies ONLY to a sale of goods
What qualify as "goods"? What are 2 important things that do not qualify & are therefore NOT covered?
= moveable, personal property

REAL PROPERTY & SERVICES are not covered by Art 2
Does Art 2 only apply to merchants & what is the min price required for it to cover a transaction?
IN GENERAL, it does NOT matter if the parties are merchants & does NOT matter what the K price is (applies to EVERY sale, regardless of price & people involved)
What if the K is for a loan to purchase goods? Art 2?
Loan = governed by CL… DO NOT focus on purpose of K!!!
What if it is a mixed K for goods & services? For example, the sale of a book that comes w/ a free class?
key on Bar = which element is more important – the goods or the services? In this e.g. = the guide b/c that’s what he wants & class is just an added incentive to buy

= whatever is more important governs
What 3 areas does the NY BEX test?
(1) the common law of
contracts with NY variations;
(2) Article 2 of the UCC for sales of goods; &

(3) Article 2A of the UCC for leases of goods.

(They will hit NY distinctions hard on 1st day!)
What kinds of leases does Art 2A apply to?
Art 2A applies to EVERY lease OF GOODS whether it is a business lease or a consumer lease (like Art 2 w/ sales)
What K law do you look to for a lease in an apartment building?
Art 2A does NOT apply b/c involves a building AND NOT lease of goods!
What 3 areas does the MS BEX focus on?
i. formation, ii. remedies AND iii. express conditions!
What is the defintion of a contract?
= legally enforceable agreement
(Agreement is not synonymous w/ K; look 1st to see if you have an agreement & then look to see if is legally enforceable)
What is an express contract?
= created by the parties words EITHER oral OR written
What is an implied contract?
= created by the parties’ conduct
What are the different rules for an express vs. an implied K?
SAME rules apply to express & implied Ks!
What is a quasi-contract?
= an equitable remedy (not a K!!!) that applies whenever the application of K law yields an unfair or inequitable result. Quasi-contract is not limited by K rules!!!! It protects against unjust enrichment.

(****This is big on NY bar & they want to see a paragraph on it if the K situation leads to an unfair result)
What can be recovered under quasi-K?
Gets reasonable value of the benefit conferred & not the K price (reasonable value = usually less than K price)

e.g. services rendered & then someone refuses to pay (don't get K price but get reasonable value of benefit conferred)
What is a bilateral K?
= offer that can be accepted in ANY REASONABLE way (= extremely flexible)
What is a unilateral K?
= inflexible & involves an offer that can only be accepted by performance (anything else is NOT good enough)
What is the rule for determining a bilateral vs. a unilateral K?
ALL K = bilateral UNLESS the offer says it can be accepted only by performance.

Specifically look for the words "only by..." to get a unilateral K
What is an offer & how do you identify it?
= a manifestation of an intention to be bound, created by words or conduct

Look at context & content to see if constitutes an offer
Are advertisements offers? What is the reason why or why not?
= usually NOT an offer under K law

Regardless of what they say, usually NOT offers b/c there is NO QUANTITY TERM
What if the advertisement says: "1 blue dress just like Monica's, only $1! First come, first served."
= limited exception

YES = offer b/c this ad specifies quantity & who can accept (the 1st person that comes in).

EXAM TIP: trick on BEX is spotting what qualifies as an advertisement (won’t call it that & they will ask you if the person accepted the offer BUT there was no offer b/c actually an Ad!)
What if seller agrees to sell buyer a car for a reasonable price - Offer? Why or why not?
No.
Vague or ambiguous terms, like "reasonable" or "fair" (not an offer)
What is a "Requirements" K? What is its special feature?
= arises under Art 2 & ok that there is no specific quantity mentioned (you don’t need a specific #)

E.g. "Flatus Café offers to buy all its requirements of beans for the next 5 years for $1 per can."
What words should clue you into the fact that it is a requirements K? What do you have to watch out for?
If you see the words "all" or "only" will do (& make it a requirements K) even w/o word “requirement”… BUT YOU MUST LOOK OUT FOR a sudden increase
For the last 3 years, the Café has ordered 1,000 cans a year, on a K that does not include a quantity term. Can the Café require seller to deliver 2,000 cans this year?
No – the buyer cannot take the seller by surprise. Any increase cannot be out of line w/ the buyers prior demands. On BEX, it won’t be close.
What if a buyer is acting in good faith when he increases the quantity on a requirements K?
Even if the buyer is acting in good faith, it doesn’t matter. It still wouldn’t be fair. Any increase cannot be out-of-line w/ prior demands… can’t take him by surprise
***What happens if there is an open price term in the K? Is it void?
(CL differs from Article 2 = ripe for testing!)
Considered to be too indefinite under CL but not under Art 2
What are the restrictions regarding the content of a K generally?
Cannot have terms that are vague or ambiguous
S sends B a letter in which S "offers to sell B Blackacre." The letter does not state a price. Is the letter an offer?
No b/c Blackacre is real property, not sale of goods, & so art 2 does NOT apply. Must look to CL... under CL an offer HAS TO CONTAIN a price, so here there is NOT an offer
S sends B a letter in which S "offers to sell B a painting of Blackacre." The letter does not state a price. Is the letter an offer?
= a sale of goods so Art 2 applies & don’t need a price term. Art 2 will simply fill in the gap
What is the rule regarding offers that have terminated?
Rule = an offer CANNOT BE ACCEPTED if it has been terminated
What are the 4 ways an offer can be terminated, thereby barring its acceptance?
(1) Lapse of Time
(2) Offeror’s Revocation
(3) Offeree’s Rejection
(4) Death of Either Party before Acceptance
When does an offer terminate b/c of lapse of time?
= terminates after a stated term has passed or after a reasonable time has passed, if no stated term
Does the Offeror have to revoke his offer directly?
Revocation may be EITHER Direct or Indirect
What is a direct revocation?
= a statement by the offeror to the offeree indicating unambiguously that the offeror has changed her mind.
***What is an Indirect Revocation?
= conduct by the offeror unambiguously indicating a change of mind AND OFFEREE IS AWARE OF THE CONDUCT (must have both the conduct AND the awareness)
If I sell my Honda to Mischa Barton on January 4, can Meg still accept my offer?
YES – there is conduct indicating that he has changed his mind (= selling of the car) BUT there is NO E that Meg knew about it
When is revocation of an offer effective?
= ONLY effective if it is received BEFORE acceptance.(EFFECTIVE only ON RECEIPT
How does the mailbox rule apply to revocation?
It does NOT apply to revocation… only to acceptance
Generally, the offeror can revoke at any time before acceptance. However, there are 4 situations where an offer CANNOT be revoked - what are they?
(1) option (2) detrimental reliance (3) Part performance of unilateral & (4) Firm offer under Art 2
What is an option?
= a promise to keep the offer open that’s paid for (w/ consideration) = buyer buying time w/in which to make up her mind
P offers to paint O’s house for $5,000 & promises not to revoke the offer for 7 days. Can P still revoke the offer?
Yes b/c merely promising to keep it open is not enough (need something more... like consideration)
What are the 2 requirements for detrimental reliance?
i. reasonable &
ii.foreseeable
What is the ONLY fact-patter where reliance before acceptance will make it irrevocable?
= extremely rare… usually reliance before acceptance is NOT protected.
= Contractor relies on a subcontractor’s bid (b/c Contractor uses the subcontractor’s bid in computing its own bid)
***O offers P $5,000 to paint her house. The offer states that it can be accepted only by performance. P starts painting O’s house. Can O still revoke?
MS Exam, answer = NO b/c once painter starts, owner can no longer revoke

HOWEVER, in NEW YORK, the offer CAN BE revoked until performance is COMPLETED (NY follows a minority rule)
***O offers P $5,000 to paint her house burnt orange. The offer states it can be accepted only by performance. P buys paint & goes to O’s house, but has not started painting. Can O revoke?
YES b/c mere preparation is NOT enough to make the offer irrevocable!!!! The offeree must actually start performance for this exception to apply
What is a firm offer under Article 2?
= a signed, written promise by a merchant to keep an offer open. ARTICLE 2 ONLY so only if you have a sale of goods! Can only be made by a merchant (which = business person b/c broadly read))
Smart Auto Sales, Inc., offers to sell Bart Simpson a 1971 Porsche. The offer is in writing, is signed by Smart, and provides that Smart will not revoke for 2 weeks. Can Smart still revoke?
Not for 2 weeks b/c it is a firm offer (signed & written)… point = firm offer DOES NOT have to be paid for b/c under Art 2 the signed writing takes the place of payment)
What happens if a firm offer says it will not be revoked for 6mths?
A firm offer has a 3 MONTH cap! So it is scaled back to 3mths… here firm only for a 3mth period even though it says 6mths.
Can you have an option in place of a firm offer?
Yes - in contrast, an option has NO TIME LIMIT & does NOT have to be made by a merchant. You can have an option under Art 2 (if you have consideration then you don’t need firm offer provision of Art 2... firm offers only apply where there is no consideration)
What if a merchant promises not to revoke an offer, signed & in writing, but they make no mention of time?
Will be firm for a reasonable time not to exceed 3 mths.
***Smart Auto Sales, Inc. makes a signed, written offer to sell Bart Simpson a 1971 Porsche. Can Smart still revoke?
***YES b/c there is NO PROMISE to keep the offer open! This is a trick Q b/c trying to fool you into not looking for a promise to keep it open. Not every signed written offer by a merchant = a firm offer!!!! Must have promise to keep it open as well.
S Realty Co. offers to sell Blackacre to Bart Simpson for $50,000. The offer is in writing, is signed by S, and provides that S will not revoke for 2 weeks. Can S revoke the offer?
YES on the Multistate- does NOT involve a sale of goods & so not a firm offer. No $ paid so not an option. No reliance on the offer. No performance has started.
***HOWEVER in NY a signed written promise NOT TO REVOKE IS ENOUGH even w/o payment!!!!!! A signed writing takes the place of consideration (the same way it does under Art 2).
Who can make an irrevocable offer through a signed writing in New York?
ANYBODY can make an irrevocable offer w/ signed writing (you do not have to be a merchant!) and it does not have to be for the sale of goods.
What happens if a buyer makes a counteroffer?
= operates as a rejection, but bargaining does not.
Eva offers to sell Greenacres to Zsa Zsa for $50,000. Zsa Zsa responds, "Dahlink, I vill only pay $49,000." Eva refuses. Can Zsa Zsa later accept Eva's original offer?
No – Her counteroffer terminates the offer so it’s too late for her to turn around & accept
Eva offers to sell Greenacres to Zsa Zsa for $50,000. Zsa Zsa responds, "Dahlink, vill you take $49,000?" Can Zsa Zsa later accept Eva's original offer to sell Greenacres for $50,000?
Yes b/c if the offeree simply asks a Q, that’s considered mere bargaining & NOT a rejection.
What happens if the buyer makes a conditional acceptance?
= operates as a rejection & terminates the offer. If buyer tries to attach conditions to her acceptance, it = a rejection
Disney sends Bill Clinton an offer to appear in the film, "Waiting to Inhale." Bill agrees on the condition that (or "provided that"/"so long as"/"if") he get top billing. Is there an agreement?
No, no agreement b/c a conditional acceptance is NOT an acceptance at all
***What happens when an acceptance contains additional or different terms? What if it falls under Art 2?
*** = operates as a rejection under the common law, but not under Art 2!!!!
What is the "Mirror Image Rule"?
Under COMMON LAW, the acceptance must mirror the offer
Landlord sends Tenant a signed lease. The lease is silent about pets. Tenant adds, “Tenant may keep a parrot,” signs the lease & returns it to Landlord. Is there an agreement?
No b/c under CL an acceptance must exactly mirror an offer; therefore the tenants adding a clause operates as a rejection.
Why do additional terms not prevent agreement/acceptance under Art 2? In other words, why is there no mirror image rule?
Policy of Art 2 = to make it easier to enter into a K
***What happens to the offeree's additional terms under Art 2?
= RARELY get into the contract! They DO NOT automatically become part of the K

***Offeree’s additional terms almost never become part of the K; same is true for the offeree’s different terms; Art 2 favors offeror in this area… acceptance is still effective!
The offeree’s additional terms become part of the contract only if 3 Requirements met - what are they?
(1) Both parties are merchants;
(2)The term is not a "material" change; AND
(3) The offeror does not object within a reasonable time.
B makes a written offer to buy 100 widgets from S for $1,000. The offer does not mention warranties. S’s written acceptance disclaims all warranties. Is there an agreement? What effect does the disclaimer have & why?
Yes b/c Art 2 does NOT have a mirror image rule; under Art 2, it can be effective even though it adds a term (& can be considered accepted)

BUT NO the agreement does NOT include S's disclaimer
b/c even if both parties are merchants, the disclaimer is a material change that is one likely to cause hardship or surprise to the offeror
***What if the term that offeree adds is customary in the particular trade or industry?
*** Then it is NOT a material change!!!!!!! Term = usage of trade
What if S had not disclaimed all warranties, but had merely added "Saturday delivery"?
Btw merchants this term would be included b/c NOT a material change.
What if an offeror objects to an insignificant change made by the offeree when he accepts the K under Art 2?
Then the term would be out b/c the offeror had objected to it... PT = an offeror can keep out even an insignificant change merely by objecting to it
On April 2, X makes an offer to Y. X dies on April 6. Can Y still accept X’s offer?
No b/c the offer was terminated by X’s death on April 6th & it does NOT matter whether Y knows about it.
On April 2, X makes an offer to Y. Y pays X $100 for a 7-day option. X promises not to revoke the offer in exchange for the $100. X dies on April 6. Can Y still accept X’s offer?
Here we have an option… Y can still accept as long as Y does so w/in the 7 day period. Death does not terminate an irrevocable offer.

= a NARROW EXCEPTION for irrevocable offers!!!!
What controls the manner of acceptance of an offer?
The offer can (but usually does not) control the manner of acceptance.


In other words, the offeror is the master of the acceptance, but normally doesn’t
. On Monday, the Donald emails Kwame an offer of employment that states, “You can accept this offer only by reporting for work on Thursday.” Kwame emails back the following response, “I am pleased to accept your offer.” Has Kwame accepted the Donald’s offer?
No. Usually offers can be accepted by giving a promise, by performing or by starting performance BUT NOT HERE b/c language controls! = unilateral K & would have to show up on Thursday
What if the offer does not specify how it must be accepted?
Usually offers can be accepted by giving a promise, by performing or by starting performance
. B faxes S an order for widgets stating, “You can accept this offer only by shipping within 24 hours.” S faxes back: "Accept your offer. I will ship within 24 hours." If S does not ship w/in 24hrs, is S liable to B for breach of K?
Words "only by" indicate it’s a unilateral K… same rule under Art 2 as CL; so can only be accepted by performing. Since S did not ship w/in 24hrs, S did not accept the offer & is not liable for breach of K, regardless of whether he made a promise
B faxes S an order for widgets stating, "Widgets must be shipped within 24 hours." S faxes back: "Accept your offer. I will ship within 24 hours." Has S accepted B’s offer?
Yes – b/c unlike previous e.g., there is no "only be shipping" language. So in this e.g. a promise is good enough & the seller is indeed liable for breach.
What happens if the offeree begins performance in a bilateral K?
Start of Performance as Acceptance = acceptance to enter into a bilateral K but not a unilateral K
***O offers P $5,000 to paint her house. O’s offer states P can accept only by performance. P starts painting O’s house. Has P accepted O’s offer so that P is now bound to paint O’s house? Can O still revoke her offer?
***No – b/c an offer to enter a unilateral K can only be accepted by completing performance!!!!! Here painter has not accepted & does NOT have to finish the job

****O CANNOT REVOKE on MBE! That’s why it’s called a unilateral K (= one-sided) b/c once offeree begins to perform the offeror is bound but the offeree is not & can still walk away
What happens if the performance is improper? Does it still counts as acceptance?
Improper Performance as Acceptance = usually operates as acceptance…
O offers P $5,000 to paint her house white. P does not respond with words; instead, P paints the house maroon. Has P accepted O’s offer, so that O can sue for breach of contract?
= e.g. of implied K where K created by conduct & not words.

YES – has accepted b/c improper performance operates as acceptance of an offer & as a simultaneous breach
B orders a Britney CD from S. S ships an Incubus CD instead. What result?
ART 2!!!
Same result as at CL = simultaneous acceptance & breach
B orders a Britney CD from S. S ships an Incubus CD instead, but includes a note saying, "I’m out of Britney, but am sending Incubus in the hope it meets your needs." Has S accepted?
ART 2!!!
Demonstrates narrow exception… “accommodation” = magic word; seller has NOT accepted b/c told buyer that it is merely sending the wrong goods as an accommodation (so no acceptance & no breach… can’t be sued for breach)
Does silence count as acceptance?
NOT = acceptance!!!
I leave a note on your outline at the break: "I offer to sell you my Honda for $5,000. If I don't hear from you by 9 p.m. tonight, you've accepted." You say nothing. Have you accepted?
No b/c the offeror cannot single-handedly turn the offeree’s silence into acceptance. Too much chance that offeree would be bound against her will. It would not be fair.
When is an acceptance effective? Why?
Mailbox Rule: acceptance is effective when mailed [Policy: protects the offeree, who can rely on a K being formed once he mails an acceptance... want to protect an offeree against offeror’s revocation]
Why does acceptance & revocation get tricky in the realm of communications?
B/c acceptance effective when mailed & revocation is effective only on receipt
What if Offeror never received Offeree's acceptance letter?
Doesn’t matter – burden of loss is on the offeror (might not seem fair but that’s the rule)
What are the 4 Exceptions to the Mailbox Rule?
i. Does NOT apply if offer provides otherwise (Mail Box Rule = a default rule!)
ii. b. Does NOT apply to an Irrevocable Offer (e.g. an option) b/c the offeree does NOT need the protection of the Mailbox Rule
iii. Does NOT apply if Acceptance, then rejection
iv. Does not apply to rejection, then acceptance (mailbox rule does not apply... whichever arrives FIRST = EFFECTIVE)
What happens when there is an acceptance then a rejection?
Mailbox Rule still applies UNLESS (1) rejection gets there first AND (2) the offeror must rely on the overtaking rejection (= VERY LIMITED)
Captain Kirk offers to sell the Starship Enterprise to the Klingons for $5 million. His offer provides, "Your acceptance must be received by January 9." On January 9, the Klingons mail their acceptance. Captain Kirk receives it on January 11. Is Captain Kirk bound?
No b/c the offeror can override/trump the mailbox rule
Captain Kirk offers the Enterprise to the Klingons for $5 million. They pay him $3,000 for his promise to hold the offer open until January 9. On January 9, the Klingons mail their acceptance, which Captain Kirk receives on January 11. Is Captain Kirk bound?
No b/c since not received by Jan 9th = not effective
Slash gets a letter from the Dixie Chicks inviting him to join the group. On May 14, he mails a letter accepting the offer. On May 16, he mails a letter rejecting it. Slash’s rejection letter arrives on May 18. His acceptance letter arrives on May 20. Is his acceptance effective?
YES - effective b/c K formed under Mailbox rule on May 14th when he mailed his acceptance. But what happens if rejection gets there first & Dixie Chicks rely on it? Then it wouldn’t be fair to let Slash enforce the K in that case.
Now assume that Slash mails a letter rejecting the offer on May 14, then mails a letter accepting it on May 16. Which is effective—the rejection or the acceptance?
Depends on which one gets there first… it is essentially a race. Mailbox rule does not apply if a rejection is sent first b/c offeree who initially rejects does not need the protection of the mailbox rule 9b/c not going to go out & rely on a K being formed). Acceptance here becomes effective only on receipt.
What are defense against formation the equivalent of?
= flaws in the agreement process that prevent you from enforcing it against me
What are the 8 defenses against formation?
(1) Defendant’s Lack of Capacity to Contract
(2) Duress
(3) Misrepresentation
(4) Mistake of Fact in Existence at Time of Agreement
(5) ***Lack of Consideration or a Substitute for It
(6) Illegality at time of agreement: distinguish illegal subject matter from illegal purpose.
(7) Public Policy
(8) Unconscionability (look for oppressive terms or unfair surprise at time of agreement)
What are the 3 categories under Defendant's lack of capacity to K?
(1) under 18; (2) intoxicated; (3) mentally incompetent
What is the incapacitated defendant's RT w/ regards to the K formed?
= RT to disaffirm (avoid) the contract
Sean Penn makes an agreement to sell his Harley to 17-year-old Lindsay Lohan for $27,000. Sean breaches. Can Lindsay enforce the agreement against him?
Yes she can. All we care about is the DEFEDENT’S capacity & Plaintiff’s is irrelevant (& an infant can bring a lawsuit)
Sean Penn makes an agreement to sell his Harley to 17-year-old Lindsay Lohan for $27,000. Lindsay breaches. Can Sean enforce the agreement against her?
No b/c Lindsay can disaffirm or get out of their agreement
Sean Penn makes an agreement to sell his Harley to 17-year-old Lindsay Lohan for $27,000. Sean believes Lindsay is 18 because Lindsay told him she was 18. Can Sean enforce the agreement against her?
DOES NOT MATTER what she told him. Only Q is whether she was 18 or older at the time of the agreement – either he was or he wasn’t.
***What happens if an incapacitated party impliedly reaffirms a K by retaining the benefit of the K w/o complaint after she gains capacity?
Then K becomes enforceable
Sean Penn makes an agreement to sell his Harley to 17-year-old Lindsay Lohan for $27,000. . What if Lindsay retains the Harley without complaint after she turns 18?
Then Sean can enforce the K against her. Looking for (1) D lacked capacity at the time of the agreement (2) D later gains or regains capacity AND (3) D retains the benefit of the agreement w/o complaint!!!!!!!!!!!!
What happens if an incapacitated person contracts for necessities?
= liable for necessaries (food, shelter, clothing, or medical care), BUT ONLY on a quasi-contract basis. They are NOT liable for the K price… only liable for the reasonable value of the benefit conferred
Landlord leases an apartment to tenant for $800 a month. Tenant is mentally incompetent. Is tenant legally obligated to pay for the use of Landlord’s apartment?
YES b/c shelter is a necessary so he is liable but only on a quasi-K basis (only liable for the reasonable value of the shelter & not the K price)
What kind of duress are you more likely to see on BEX?
Watch out for economic duress (& not physical)
Princeton Review threatens to shoot me unless I lecture for them. I agree. Is our agreement legally enforceable?
No b/c CANNOT threaten physical harm
S & B enter a contract for S to deliver 100 Elmo dolls to B for $1,000. S later refuses to deliver them unless B also agrees to buy 100 Kermit dolls for $2,000. S is the only source for the Elmo dolls, which B needs immediately. B agrees to buy the Kermit dolls. S then delivers the Elmo dolls. Is the agreement to buy the Kermit dolls enforceable?
No b/c buyer only agreed to buy b/c of economic duress
What are the 3 Things To Look For w/ Duress?
(1) Threat to break an existing K unless the other party gets another deal or a better deal
(2) Other party agrees only b/c he needs to get the 1st deal done AND
(3) There is no other alternative (e.g. seller is the only source)
S usually sells umbrellas for $3. When it rains, S increases the price to $10. During a storm, B agrees to buy an umbrella from S for $10. B pays S $10 & receives an umbrella. After the storm, can B get any money back from S on the ground of duress?
No NOT economic duress. This does not arise to the level of economic duress. This simply is the seller taking an advantage of a favorable situation
What qualifies as misrepresentation?
= misrepresentation or non-disclosure about a material fact
***S tells B his house has no foundation problems. The statement induces B to agree to buy it. S honestly believes that the house has no foundation problems, but it does. Is B bound?
***No b/c under K law, EVEN AN HONEST & INNOCENT MISTAKE can be a fatal flaw in the agreement process as long as it’s material.
What happens if there is a Mutual Mistake of Material Existing Fact?
= there is a defense against formation of the K
Madonna contracted to sell her home on Fire Island to Justice Scalia for $3 million. Neither was aware that a fire had destroyed the house 2 days earlier. Is Justice Scalia bound?
No he is excused by the mutual mistake b/c the existence of the house was central to the K
B and S agree on the sale of a drawing for $75,000. Both B and S believe the drawing is a Warhol. After the agreement, but before performance, they learn that it is not a Warhol. Is their agreement enforceable?
No b/c the artist’s identity was a significant aspect of the K… that gives a defense against formation b/c material fact /significant aspect of the K
What if the drawing is a Warhol, but is worth only $1,000, not $75,000, as both believed?
Buyer is still stuck w/ the deal b/c a ***mistake as to mkt value is generally NOT considered to be material B/C CT’s assume that the buyer should have had it appraised before agreeing to pay $75,000
What 2 things is mistake allowed for & what is it not allowed for? What is the general rule?
***Mistake must go to whether something exists or to what something is BUT NOT what something is worth
What happens when there is a unilateral Mistake of Material Existing Fact?
Generally does not constitute a fatal flaw b/c too easy for 1 party to invent a mistake
B and S agree on the sale of a drawing for $75,000. B believes the drawing is a Warhol. S does not believe the drawing is a Warhol, and does not know that B believes it is. After the agreement, but before performance, B learns the drawing is not a Warhol. Is the agreement enforceable?
Yes b/c mere fact that 1 party was laboring under a mistaken belief about the facts is NOT a fatal flaw in the agreement process UNLESS the other party is aware of the mistake
***What is the definiton of Consideration?
= "bargained-for legal detriment/benefit" can take form of return promise, performance or forbearance
The agreement between B and S provides for the sale of bar exam “flash cards” by S & payment of $100 by B. B now refuses to pay S the $100. Was there consideration for B’s promise to buy the flash cards?
Yes – seller’s promise to sell was consideration for the buyer’s promise to buy it; one promise can be consideration for another
I promise to pay you $100 if you stop listening to recordings by Nine Inch Nails. You do what I asked. Is there consideration for my promise to pay you the $100?
Yes your forbearance is consideration for my promise… you did what I asked you to do so I have to pay the $
What is the rule regarding "past consideration"?
"Past consideration" is NOT consideration at all
In August, Simon helps Paula unload a U-Haul. In September, Paula promises to pay Simon $300 for his help unloading the U-Haul. Paula now refuses to pay him. Was there consideration for Paula’s promise to pay Simon?
No b/c Paula didn’t ask for anything in return & past consideration is not consideration at all (CANNOT bargain for something that has already been done!)
In August, Simon helps Paula unload a U-Haul. In September, Paula promises to pay Simon $300 for his help unloading the U-Haul. Paula now refuses to pay him. Paula’s promise to pay Simon for his help was in writing. Consideration?
***NY DISTINCTION! Writing would not matter on MBE but in NY past consideration IS BINDING IF it is expressly stated in a SIGNED WRITING & CAN BE PROVED!
NY love to test on this!
Does consideration have to be adequate?
Adequacy = irrelevant
We agree that I will pay you $500 for your John Denver "Greatest Hits" CD. The CD is only worth $10. Is there consideration for my promise to pay you $500?
May be a stupid bargain but it’s enforceable nonetheless. Law doesn’t care about adequacy of consideration as long as there is a bargain. Law doesn’t use a scale.
***What is the "Pre-existing duty rule" & what does it apply to?
***Frequently tested on MBE b/c different rules under CL & under Art 2.
Consideration is required to modify a K under CL; in general, it applies to K modifications
Ashlee Simpson contracts to sing at Owner’s venue for $25,000. Upon her arrival, Ashlee asks for $30,000 for the same performance covered by the contract. Owner agrees to pay her $30,000. Ashlee performs. Owner then refuses to pay the extra $5,000. Is there consideration for Owner's promise to pay Ashlee the extra $5,000?
No b/c Ashlee is only doing what she is already obligated to do. Ashlee cannot enforce
Ashlee Simpson contracts to sing at Owner’s venue for $25,000. Upon her arrival, Ashlee asks for $30,000 for the same performance covered by the contract. Owner agrees to pay her $30,000. Ashlee performs. Owner then refuses to pay the extra $5,000. Owner’s promise to pay the extra $5,000 is in writing. Is there consideration?
Wouldn’t matter on multi-state BUT IN NEW YORK the pre-existing duty rule does NOT apply if the modification is contained in a SIGNED WRITING!!!!
Ashlee Simpson contracts to sing at Owner’s venue for $25,000. Upon her arrival, Ashlee asks for $30,000 for the same performance covered by the contract. Owner agrees to pay her $30,000. Ashlee performs. Owner then refuses to pay the extra $5,000. But Ashlee had also agreed to sign autographs for an hour after the concert in exchange for the additional $5,000 - consideration?
Then there would be consideration for the owner’s promise to pay the extra $ (agreeing to do something more)
***What if the promise to pay the extra $5,000 is made by a local record store, not by Owner?
*** Pre-existing duty rule does NOT apply to a promise made by a 3rd Party... pre-existing duty rule is a bar ONLY TO the 2 parties in the original K
How does the pre-existing duty rule work in Art 2 situations?
No Pre-existing duty rule under Art 2!!!! Drafters want to make it easier to modify a K.
S contracts to sell 100 widgets to B for $700. Later, S and B orally agree to increase the price to $900. Is B’s promise to pay the extra $200 enforceable?
Yes it is as long as there is good faith. Why? B/c no pre-existing duty rule under Art 2... all you need is good faith!
***What happens when there is partial payment as consideration for promise to forgive balance of DISPUTED debt?
= adequate consideration
You owe Visa $2,500. The debt is due & undisputed. You & Visa orally agree that if you pay $2,000 immediately, Visa will forgive the other $500 of the debt. You pay Visa $2,000, but Visa sues you for the other $500! Was your payment of $2,000 consideration for Visa’s promise?
No b/c there was NOT any debt in dispute!!!!!
You owe Visa $2,500. The debt is due & undisputed. You & Visa orally agree that if you pay $2,000 immediately, Visa will forgive the other $500 of the debt. You pay Visa $2,000, but Visa sues you for the other $500! Your agreement with Visa was in writing. Was your payment of $2,000 consideration for Visa’s promise?
Same result on MBE, BUT IN NEW YORK you do NOT need consideration if the promise to forgive the balance of the debt is in a signed writing
You & Visa have a disputed debt situation & you both orally agree that if you pay $2,000 immediately, Visa will forgive the other $500 of the debt. You pay Visa $2,000, but Visa sues you for the other $500! Was your payment of $2,000 consideration for Visa’s promise?
Yes, the release is enforceable b/c the law favors settlement of disputed claims (law wants the parties to settle their disputes amicably)
What happens if the promise to pay debt is barred by SOL?
Written promise to pay a debt, collection of which is barred by SOL, is STILL enforceable even w/o consideration
You owe Visa $2,500. Legal action to collect the debt is barred by the statute of limitations. Nonetheless, you write Visa: "I know I owe you $2,500. I will pay you $2,000." Is your promise to pay Visa $2,000 legally-enforceable?
Yes b/c - on this fact-pattern only - where collection of the debt is barred by SOL, the writing serves as a substitute for consideration both in NY & on the MBE
What 2 things are required for promissory estoppel to be a substitute for consideration?
(1) a promise &
(2) foreseeable, detrimental reliance on the promise

If you read through the fact-pattern & there is no consideration (= a fallback position & a substitute for consideration)
Tenant leases an apartment from Landlord under a lease that expires next month. Landlord promises Tenant to renew the lease at the same rent for another year. In reliance on Landlord’s promise, Tenant repaints the apartment. Landlord then refuses to renew the lease. Was Tenant’s painting the apartment consideration for Landlord's promise to renew the lease?
NO b/c landlord was NOT asking for anything in return (no bargain)… mere benefit to landlord or detriment to the tenant was not enough.
= gratuitous promise b/c made w/o getting any consideration in return
Tenant leases an apartment from Landlord under a lease that expires next month. Landlord promises Tenant to renew the lease at the same rent for another year. In reliance on Landlord’s promise, Tenant repaints the apartment. Landlord then refuses to renew the lease. Can Tenant enforce Landlord’s promise to renew on any other ground?
Yes, promissory estoppel b/c one party made a promise & there was foreseeable detrimental reliance on that promise by the other party… makes it enforceable even in the absence of consideration
Tony Soprano hires Uma Thurman to kill a rival mobster for $20,000. If Uma does not kill the rival, can Tony sue for Uma breach of contract?
No b/c the subject matter of the agreement is illegal so it’s unenforceable but there is a flaw b/c nature of the agreement is illegal & therefore unenforceable
Uma agrees to buy a non-refundable ticket on American Airlines from Los Angeles, where Uma lives, to Newark, where the rival lives. If Uma does not pay for the ticket, can American recover from Uma for breach of contract?
Yes assuming that American Airlines did not know about Uma’s illegal purpose (that agreement to buy was not illegal)
What 2 things are you looking for under the public policy defense against formation?
1. Covenants not to compete
2. Exculpatory clause (a clause eliminating contract liability)
***What happens if a covenant not to compete = a restraint on trade?
***CT will invalidate or narrow if it

Consider both the need for covenant & the scope of it
Tony sells the Bada Bing to Guido. The agreement provides that Tony will not open another bar within 5 miles of the Bada Bing for one year. Is this covenant legally enforceable?
All depends on whether the CT finds that the geographic & time limits are reasonable under the circumstances

Policy = balance of freedom of K against restraint on trade
***Tavern on the Green requires all its employees to sign a K that prohibits an employee from working for another restaurant in N.Y.C. for 90 days. Is this covenant legally enforceable?
ALSO CHECK IF THERE IS A NEED FOR K IN THE 1ST PLACE
***Have to ask - Was there a reasonable need for the protection? (e.g. chef would be true b/c talent’s are unique but not true for a busboy)
Can’t be sure based on these facts… depends on the kind of employee we’re talking about
What can you not use an exculpatory clause for?
= gross negligence or intentional torts
Builder contracts to remodel Owner’s home. The contract provides that Builder will not be liable for damages caused by negligence of its employees. Is this clause enforceable?
Yes you can contract away liability for negligence but you CANNOT contract way liability for intentional torts or gross negligence
What do you look for w/ Unconscionability? 2 things
= look for 1. oppressive terms or 2. unfair surprise AT TIME OF agreement

Clause or entire K that shocks the conscience of the CT… looking for terms that are oppressive or unfair at the time that the parties enter into agreement… doesn’t matter that it looks unconscionable later on (or if it turns out to be)… always look for something more than this subject in an essay b/c it will NOT be the entire subject of the Q
What 8 Ks fall under the SOF?
1. Transfer of an interest in real estate of more than one year’s duration
2. Service contract incapable of being fully performed within a year from the date of the agreement
3. Sale of goods for $500 or more.
4. Lease of goods where lease payments total $1,000 or more
5. Promise to “answer for” the debt of another (limited to guarantees)
6. Promise by an estate representative to use her own funds to pay estate expenses
7. Promise in consideration of marriage
8. Miscellaneous provisions of the New York Statute of Frauds [assignment of insurance policy; promise to name beneficiary of insurance policy; agreement to pay commission or finder’s fee]
***Bill Gates alleges that Gilligan orally agreed to sell Gilligan’s island to him for $400,000. Is their agreement within the SOF?
***Yes – almost every SOF situation deals w/ an oral agreement (always think SOF when you see “oral agreement”)
“W” alleges that J.R. orally agreed to grant him an easement on Southfork. Is their agreement within the SOF?
Transaction does not have to be a sale – easements, leases & other transfers of interests in property are covered by SOF
What is the 1 EXCEPTION for a transfer of real estate & SOF?
EXCEPTION CARVED OUT FOR 1 YR LEASES
“W” alleges that Builder orally agreed to build a fence around his ranch in Crawford, Texas. Is their agreement within the SOF? CHECK!!!!!!
Does NOT fall in SOF
***What should you ignore when evaluating service Ks under SOF?
= ignore what actually happens; look at what might have happened under the terms of the contract
Woody Woodpecker alleges that on February 8, 2004, "W" orally agreed to have Woody cut down all the trees on his ranch. Is this agreement within the SOF? What is Woody doesn’t finish up his task until more than 1yr later?
No – b/c specific tasks don’t present a SOF problem b/c in theory, any task can be performed w/in 1 yr.
Doesn’t matter what actually happens.
***Big Bird alleges that Sesame Street orally agreed to employ him for the rest of his life. Is this agreement within the SOF?
NOT ON THE MBE – lifetime Ks do NOT fall w/in SOF b/c big bird could die w/in that year

***Lifetime Ks DO fall w/in SOF in NY
Big Bird alleges that Sesame Street orally agreed to employ him for 3 years. Is this agreement within the SOF?
A specific time period greater than 1 yr falls w/in SOF (so lifetime K does not have to be in writing on MBE but a 3yr K does)
***Big Bird alleges that Sesame Street orally agreed to employ him for 1 year, starting next Monday. Is this agreement within the SOF? In other words, when does the clock start to run for the SOF?
***Clock starts to run at the time of the agreement AND NOT when performance is going to begin
Here for 1 yr + a few days so falls w/in SOF (not 1yr from today)
***How does duration of the performance affect SOF? How is SOF calculated in reference to performance length?
**** Duration of performance is totally irrelevant. If it will occur more than 1yr later, a writing is required. Q = can it be FULLY PERFORMED w/in 1 yr from date created
Sear’s alleges that Senator Hilary Clinton orally agreed to buy a whitewater raft for $500. Is this agreement within Art 2’s SOF?
Yes b/c you have a sale of goods for $500 or more (so falls w/in Art 2 SOF)
BUT NO MIN $500 for application of UCC in general!!!
Dell Leasing Co. alleges that Roger orally agreed to lease a computer for one year for $300 a month. Is such an agreement within the Statute of Frauds?
Remember Art 2(A) = only NY! NOT on MS!

Answer = Yes – Bar Examiners will give you the monthly rent & expect you to do the calculation
Here = $3,600 for the term of the lease & so falls w/in SOF b/c over $1,000
Debtor owes Creditor $1,000. Creditor alleges that Guarantor orally agreed to pay the $1,000 if Debtor did not pay. Is this agreement to pay if Debtor doesn’t pay within the SOF?
Yes - look for language "if the debtor did not pay" – that makes it w/in SOF b/c that is a guarantee; guarantor is a back-up & only liable if debtor doesn’t pay
Demi Moore alleges that Ashton Kutcher orally agreed to renounce all claims to her assets if she would marry him. Is such an agreement within the SOF?
Yes prenuptial & post-nuptial agreements are w/in the SOF
Demi alleges that Ashton orally agreed to marry her. Is this agreement within the SOF?
No - a mere promise to marry is NOT w/in SOF. In other words, it is not consideration for marriage & so no writing required
What 2 Miscellaneous provisions of the New York SOF MUST YOU KNOW FOR NY (NY DISTINCTIONS!)?
***(1) Assignment of an insurance policy & (2)Broker’s fee