Mbe Contracts

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Contracts that are primarily for the sale of goods are covered under

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Article 2 UCC

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Contract for both services and goods which controls

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General rule: all or nothing/more important controls; UNLESS (K) divides payment, then split between UCC and common law

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General rule regarding the need for an offer to contain all material terms

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Not generally required

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Offers for the sale of real estates must include

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Price and Description

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Sale of goods offer must contain; valid despite lack of

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Quantity; Price

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Common law and UCC: Effect of vague or ambiguous material terms

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Not an offer

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Advertisments as offers?

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Not an offer; EXCEPTIONS 1. Rewards 2. If specific as to quantity and expressly who can accept

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Methods of Termination of Offers (Revocation)

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1. Lapse (by stated/reasonable time) 2. By word/conduct offeror - must be unambiguous 3. By words/conduct offeree -

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Multiple offers as revocation?

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No, mere fact of multiple offers does not indicate revocation

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Revocation sent through mail effective when

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Received

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Offers that cannot be revoked (4)

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1. Option 2. Firm Offer (UCC) 3. Detrimental Reliance reasonably forseeable 4. Start of performance on a unilateral contract (for reasonable time to complete)

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Option contract

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- A promise to keep an offer open AND - It's supported by consideration

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Firm Offer (4)

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- Offer to buy/sell goods - Signed, Written promise to hold offer open - Party is a merchant - Valid for up to 3 months

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Three ways an offeree can reject an offer

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1. Counter-offer 2. Conditional acceptance 3. Additional terms (common law only)

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Counter-offer

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Terminates the offer and becomes a new offer

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Conditional Acceptance (if, provided, so long as, but, on condition that)

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It terminates the offer and becomes a new offer

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Rejection via Additional Terms to a common law (K); Mirror Image Rule

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An "acceptance" that adds new terms is treated like a counter-offer rather than an acceptance

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Additional Terms in response to an offer under the UCC; Battle of the Forms; two separate questions raised

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1. Is there a (K) 2. Is the additional term a part of the (K)

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Under the UCC, a response to an offer that adds new terms (but does not make agreement to them a condition of acceptance) is generally treated

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As an acceptance to the offer(must still determine which terms control)

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Additional term as part of the acceptance and one party is not a merchant - the additional term is

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Merely a proposal - offer is accepted as it was made; additional terms included in acceptance do NOT control

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Additional terms as part of the acceptance where both parties are merchants - general rule and 2 exception:

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Additional term is part of the contract; UNLESS 1. Term materially changes the offer OR 2. Offeror objects to the change

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Effect of death of a party prior to acceptance

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Terminates the offer (except for option contracts and part performance of offer to enter into unilateral contract)

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Who can accept an offer

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The person to whom it was made if they know about it

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Assignment of offers is limited to

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Options

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Methods of acceptance (3)

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1. Complete performance 2. Start of performance (unless offer requires "performance") 3. Offeree promises to perform

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Issue to consider when acceptance is made through complete performance

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Notice (look for geography issue)

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In an employment contract where the duration is not specified, the contract is

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Terminable at will

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Under the UCC, terms that can be supplied by a "reasonablenss" standard include (2)

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- Reasonable price - Reasonable time to perform

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A revocation terminates the offeree's power of acceptance only if it is communictated to him

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Before he accepts

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Offers made by publication may be terminated by

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By comparable means

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Revocation by indirect communication will kill an offer if (3)

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- Correct information - From a reliable source - That would indicate to a reasonable person that the offeror no longer wishes to make the offer

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Revocation is effective when

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Received or when published

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Distinguish start of performance which makes an offer irrevocable for a reasonable time to complete from

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Preparations to perform - not enough to form an acceptance

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Rejection is effective when

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Received by the offeror

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Effect of rejection of, or counter-offer to, an option contract

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Does NOT constitute a termination of the offer; offeree is still free to acept; UNLESS the offeror has detrimentally relied on the rejection

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If either of the parties dies or is adjudicated insane prior to acceptance

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The offer is terminated even without notice of such event (exception - option contracts, and unilateral performance contracts)

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If both parties are merchants, additional terms automatically become part of the (K) unless (3)

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- They materially alter it - The offer expressly limits acceptance to the terms of the offer OR - The offeror objects to the particular terms

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While an offer may be accepted by an means reasonable, the offeror may limit acceptance to a particular means but must do so

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Unambiguously

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Mailbox Rule: acceptance at the moment of dispatch UNLESS (2)

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1. Offer stipulates not effective until received OR 2. If it's an option (K) (an acceptance under an option (K) is effective only upon receipt)

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Offeree sends a rejection and then sends an acceptance

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Mailbox rule does NOT apply; whichever one is received first controls

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Silence as acceptance

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If the offeree silently takes offered benefits, courts will find an acceptance (especially if reinforced by prior dealings)

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Shipment of nonconforming goods: Common law

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Rejection

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Shipment of nonconforming goods: UCC

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Acceptance and breach; UNLESS sender gives accomodation notice

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Effect of accomodation with shipment of nonconforming goods

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- Buyer is not required to accept and may reject - Where buyer rejects, seller is not in breach and may reclaim said goods

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If a past obligation would be enforceable except for a technical defense to enforcement the courts will

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Enforce a new promise if - It is in writing OR - It has been partially performed (terms of new promise control)

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Where there is the possibility of value in a bargained for act courts will

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Find adequacy of consideration

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A promise to perform a voidable obligation despite the absence of new consideration

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Enforceable

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What consideration needed for an agreement modifying a contract subject to the UCC

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Needs no consideration to be binding; only good faith requirement

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Is forbearance to sue on a valid claim consideration

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Yes

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Compare common law approach and UCC approach to requirements and outputs contracts where there is no previoulsy established business

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- Common law: it's illusory - UCC: apply good faith and proceed

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Conditional promises as consideration

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Valid consideration UNLESS the condition is entirely within the promisor's control

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Right to cancel or withdraw is valid consideration is

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This right is restricted in any way (i.e. right is good for 60 days)

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Define a surety

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Promise to pay the debt of another

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Is a surety enforceable without considerations

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Depends on whether the surety is compensated; if acting gratuitously there will be a problem; also a matter of timing - surety must make the promise before or concurrent with the creditor's promise to perform

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Where there is a right of the promisor to choose among alternative courses of performance the promise is

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Illusory UNLESS every alternative involves some legal detrminet to the promisor (BUT selection of an actual detrminet will cure)

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If the power to choose rests with the promisee/third party, the promise is

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Enforceable as long as at least one alternative involves some legal detriment

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Modification of a contract under the UCC - necessity of consideration

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Not necessary to a good faith written or oral modification

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If there's a Mutual Mistake of fact, the contract may be voidable by the adversely affected party if (3)

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- Mistake concerns a basis foundation of the (K) - Mistake has a material effect - The party seeking avoidance did not assume the risk of mistake

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Where only one of the parties is mistaken as to the facts, the mistake will NOT prevent formation of a (K) UNLESS

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The nonmistaken party knew or had reason to know of the mistake made by the other party (will not be able to Snap Up the offer)

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If the consideration or subject matter of a (K) is illegal this will provide

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A defense to enforcement; (K) is void and unenforceable

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Voidable (K) exists where one party is

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- Under age of majority (unless married) - Mentally incapacitated (including intoxicated) - Under duress/coercion - Victim of fraud in the inducement

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Statute of Frauds requires these certain agreements to be in writing (6)

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- Executor/Adminstrator promises to personally pay estate debts - Promise to pay the debt of another (Suretyship) - Marriage - Interest in land - Performance not within one year - Goods priced at $500 or more

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Between intended and incidental beneficiaries who can recover

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Only intended beneficiaries recover

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Factors to consider in determining intent to benefit a third party (3)

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- Is the third party expressly designated - Is performance to be made directly to the third party? - Does the third party have any rights under the contract

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When do the rights of an intended beneficiary vest (3 possibilities)

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1. When the beneficiary assents to the promise in a manner invited by the parties 2. When he brings suit to enforce the promise OR 3. When he materially changes position in justifiable reliance on the promise

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While generally all rights under a (K) may be assigned there are several exceptions including (5)

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- If the assignment would substantially effect bligor's duty or risk - Common law options and requirments (K) - (UCC may uphold on good faith) - Rights expected to arise under a (K) of employment not then exisiting - Where prohibited by law

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Effect of (K) clauses prohibiting the assignment of (K) rights generally

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Does not bar assignment; rather gives obligor right to sue for breach if an assignment is made

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While assignments generally do NOT need to be in writing certain ones do (4)

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1. Wages 2. Land 3. More than $5k 4. Securirty interests

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Applicability of consideration to assignments

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Not necessary

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When do the rights of an assignee "vest" so that the assingment becomes irrevocable

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- If an assignment has been given for consideration - A gratuitous assignment where the obligor has already performed -

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As an assignment establishes privity of (K) between the obligor and assignee, the assignee may enforce

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His rights directly against the obligor

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What rights would a sub-assignee have against the original assignor

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None b/c there is no privity

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With respect to priority of competing assignments consider

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- Is the assignment revocable (any subsequent assignment is considered to effect revocation) - Is there BFP (they always win) - UCC has adopted first in time filing rules

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General rule is that all duties under a (K) may be delegated -the exceptions are for

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- Duties involving personal judgment and skill - Where (K) provision prohibits (given strict effect) - Requirements and outputs (K)

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Delegation can be either written or oral - key factor to identify is

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Delegator must manifest a present intention to the make the delegation

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Where X and Y contract and Y delagates his duties, what is his liability with respect to X

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Will always remain liable to X

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The liability of a delagate is a matter of

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Whether there has simply been a delegation or that plus an assumption of duty (i.e. a promise to perform supported by consideration)

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Parol Evidence Rule

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Where there is an agreement in writing, with the intent it be the full integration, any prior expressions are inadmissible to vary the terms of the writing

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Partial integrations cannot be_________; but may be _________

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- Cannot be contradicted - Can be supplemented by proving up consistent additional terms

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Parol evidence does not prohibit evidence used to

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- Attack the credibility of the agreement - Clarify uncertain/ambiguous terms - Show true consideration paid - Alterations made subsequent to the integration

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UCC: a party cannot contradict a writing, but he may add consistent additional terms unless (2)

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1. There's a merger clause 2. The court determines the writing reflects full and final integration

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Between promises and conditions, courts prefer

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Promises

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Substantial performance can satisfy complete performance where a condition is

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Constructive, but not where the condition is express

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Substnatial performance will not stand where (2)

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- Material non-performance - Willful breach

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Where the substantially performing party is able to enforce the contract what right does the other party have

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Mitigate by deducting damages due to incomplete performance

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UCC Perfect Tender rule allows

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The buyer has the right to reject goods that do not conform to the contract in any manner

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Six exceptions to the perfect tender rule

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1. Parties agree otherwise 2. Rejection of goods to an installment (K) requires substantial impairment of value 3. Buyer accepts the non-conforming goods 4. A bad faith rejection by buyer in relation to an immaterial defect may preclude his right of rejection 5. If time remains for seller to perform 6. Failure of seller to properly make shipment gives buyer the right to reject only if material delay or loss occurs

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Three test must concurrently be satisfied to find a "divisible" (K)

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1. Performance of each party is divided into parts 2. The number of parts due from each is the same AND 3. Each performance is the quid pro quo of the other

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Discharge for impracticability requires

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- Extreme and unreaonsable difficulty AND - Difficulty was not anticipated

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Discharge by novation: new (K) substitutes a new party - four elements to meet

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1. A previous valid contract 2. Agreement among ALL parties 3. Immediate extinguishment of al (K) duties between original parties AND 4. A valid and new enforceable (K)

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Discharge by accord and satisfcation is a

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Two step process

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Accord - an agreement to substitute performance requires

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Consideration

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Define satisfaction

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The performance of the accord agreement; discharges both the original (K) and the accord agreement

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If debtor breaches on an accord the creditor may

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Sue either on the original obligation or from breach of the accord agreement

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If creditor breaches on the accord debtor may pursue one of two options

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1. Rasie the accord agreement as an equitable defense and ask that the (K) be dismissed OR 2. Wait until he is damaged and bring an action for breach of the accord

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Payment in full check

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Where there's a bona fide dispute and creditor accepts a check noting "payment in full" accord and satisfaction is accomplished

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A minor breach provides the aggrieved party a

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Remedy; NOT relief from duty to perform

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Minor breach coupled with anticipatory repudiation allows the non-breaching party to

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Treat the actions as a material breach (i.e. sue immediately); courts of wary of this; note UCC modifies this to allow salvage