PMBR Flash Cards - Contracts - 2007

Torts
Property Contracts
.
rum Evil Constitu
2007 Multistate Le al Studies Inc.
Copyright 2007 by MULTISTATE LEGAL STUDIES, INC.

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Offer
Describe an offer.
MULTISTATE MULTISTATE SPECIALIST
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ANSWER
An offer is the manifestation of a willingness to enter into a contract which justifies the offeree in believing that his acceptance will create a contract. Whether a statement constitutes an offer is determined objectively (i.e., would a reasonable offeree have believed that the offeror intended to create a power of acceptance), rather than subjectively (i.e., did the offeror, in fact, intend to create the power of acceptance in the offeree?).
EXAMPLES
Price quotations in advertisements, fliers and catalogs ordinarily do not constitute an offer (unless there has been an explicit commitment to sell a specified number of items upon particular terms). Bids submitted to general contractors by prospective subcontractors are ordinarily considered offers, unless the former should have realized that the bids were not so intended. Promises made by one family member to another are usually not considered "offers", unless the circumstances strongly indicate that the offeror intended her statement to have legal consequences if accepted.
EXAMINATION TIP: The party attempting to
avoid the transaction would raise this issue whenever there is an ambiguity as to whether
an offer has been made.
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MULTISTATE SPECIALIST
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Mistakes in Computation
Describe when an offer which is based upon mistaken calculations or an error in transmission is capable of acceptance.
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ANSWER Offers containing an error resulting from (1) miscalculation by the offeror, or (2) misprints in its transmission, are not capable of acceptance where the error was so obvious that the offeree should have realized that a mistake had been made.
EXAMPLE
In determining if a mistake was "so obvious" that the offeree should have realized that an error had been made, two factors are frequently considered: (1) the closeness in amount of the next best offer (i.e., if the mistaken "offer" quoted a price of $60,000, and the next best offer was $150,000, the offeree probably should have recognized that a mistake had been made), and (2) the offeree's prior experience with respect to the type of transaction involved (i.e., if the best offer received in the past was $80,000, and the offer in question is $35,000, the offeree arguably should have recognized that a mistake had been made).
EXAMINATION TIP: Where the facts of a
hypothetical indicate only that a mistake was made by the offeror or the transmitting entity which he/she had selected, analysis of the two factors described above will determine if the offeror can avoid the agreement.
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Firm Offer
Describe a "firm" offer.
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PI'S ant MULTISTATE SPECIALIST
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ANSWER
A firm offer is one which (1) pertains to a sale of goods, (2) is made in a signed writing by a merchant, and (3) assures the offeree that it will be held open. It is non-revocable for the time stated or a reasonable period of time, but in no event may the offeror's inability to revoke exceed three months. UCC Section 2-205.
EXAMPLES
A (an attorney) offers to sell his lawnmower to B (a doctor) for $200, and states in a signed writing that his offer is "firm" for one month. One week later, however, A informs B that his offer is revoked. Immediately thereafter, B advises A that the offer is accepted. A's revocation is valid since he is not a "merchant" with respect to lawnmowers (i.e., he is not in the business of selling those items). Thus, no "firm offer" was made (even though A purported to make his offer non-revocable). Joe, who owns a tract of residential homes, promised (in writing) to sell one of them to X for $50,000. Prior to X's acceptance, Joe withdrew the offer. Joe's revocation would be valid. He had not made a firm offer because: (1) no assurance that the offer would not be withdrawn had been given, and (2) Joe is not a merchant (i.e., he is a vendor of land, not goods).
EXAMINATION TIP: The firm" offer doctrine per-
tains only to contracts for the sale of goods. UCC Section 2-205.
EXAMINATION TIP: Unlike most other frequently-
tested UCC sections, 2-205 does require a
merchant.
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Offer Material Terms
Describe the requirement that an offer be sufficiently definite as to its material terms.
M ULTISTATE SPECIALIST
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ANSWER
At common law, an offer must articulate the material terms of the bargain or else the offeree would have no idea what to accept.
EXAMPLE
X offers to sell his home to B for $100,000, and B accepts. If X later seeks to avoid the transaction, he could argue that the offer was not sufficiently definite as to the following material terms: (1) when the transaction was to close, (2) what type of deed (quitclaim or warranty) X was to convey to B, and (3) whether the entire purchase price had to be paid in cash (or could B pay a portion of it on credit)? However, it might be implied into the agreement that (1) closing must occur within a reasonable period of time, (2) the deed would be the type which is ordinarily utilized in similar transactions in that locale, and (3) payment had to be entirely in cash. EXAMINATION TIP:
The "definiteness" issue often arises on exams where the purported offer is made in a single sentence. "Gap fillers" are frequently implied into an agreement to cure this type of alleged defect. in supplying material terms where an agreement was actually intended. UCC Section 2-204(3). Unless the circumstances indicate otherwise, (1) price, (2) place of delivery, and (3) time of performance can all be implied into an agreement. UCC Sections 2-305, 2-308 and 2-309, respectively.
EXAMINATION TIP: The UCC is quite liberal
pirsibite
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Offer Unilateral Contracts
Describe an offer for a unilateral contract.
MULTISTATE M ULTISTATE SPECIALIST
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ANSWER
An offer for a unilateral contract is one which
can be accepted only by (1) performance of a specific act, or (2) refraining from performing an act which the offeree was otherwise entitled to undertake.
EXAMPLE
X advises Y that, if the latter paints his (X's) barn within three days, he will pay $500 to Y. Even if, at that time, Y advises X that he will paint the barn within three days, no contract is formed. Y can accept X's offer only by actually painting the structure. If X offers to pay Y $500 "for painting his barn," Y could probably accept by a promise or actually painting the structure within a reasonable period of time.
EXAMINATION TIP: Where it is unclear
whether the offer is one for a unilateral or bilateral contract, acceptance may be made by either a promise or performance.
EXAMINATION TIP: Issues pertaining to the
unilateral/bilateral contract distinction arise in the context of revocation (i.e., an offeror is attempting to revoke his offer prior to the time the act described in the offer has been completed). If the offer is bilateral in nature, and the offeree accepts by a promise, the offeror's ability to revoke is extinguished. However, if an offer is unilateral in nature, it can ordinarily be revoked at any time prior to the offeree's having made a substantial beginning toward performance.
pinkie
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Offeree's Obligations Unilateral Contracts
Describe the obligations of an offeree under an offer for a unilateral contract.
M ULTISTATE SPECIALIST MULTISTATE
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ANSWER An offeree under a unilateral contract ordinarily has no obligation to the offeror until his performance is completed. In some jurisdictions, however, where the offeror (1) is aware that the offeree under a unilateral contract has commenced performance, and (2) relies upon the completion of such undertaking, the offeree's conduct may be construed as an implied promise to complete performance. Rest. 2d. Section 90.
EXAMPLES
A promises to pay B the sum of $500 if B paints the former's barn within three days. B purchases the necessary paint and goes to A's barn. However, just before the job is begun, C offers B $700 to paint his (C's) barn. B then left A's premises and commenced work on C's structure. A could not successfully sue B, since no contract between them had arisen. Purchasing the paint was mere preparation. A promises to pay X the sum of $500 if the latter will build a rowboat for the former. A observes X commence work on the craft and pays a $50 entrance fee for an upcoming rowboat race (assuming that X would complete the job before the competition). If X completes the rowboat, but then desires to sell it to Z, A might be able to successfully contend that X had impliedly promised to complete the craft for him.
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Acceptance
Describe an acceptance.
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ANSWER
An acceptance is the expression of present, unequivocal, unconditional assent by the offeree to each and every term of the offer. Unless the offeror specifies a particular mode of acceptance, it can ordinarily be made in any reasonable manner.
EXAMPLES
X sends a letter to Y, offering to sell the latter widgets at 5 cents apiece. The letter also states that "if the price is acceptable, please mail me a confirmation to that effect." Y calls and advises X that the contract has been accepted. X then responds that (1) the offer is revoked, and (2) Y's telephonic acceptance is invalid (i.e., acceptance had to occur by mailing a confirmation). However, since X's offer had not stipulated that acceptance could be made only by mailing the confirmation, Y's acceptance was probably valid. X writes to Y, offering to sell the latter an automobile for $400.00 and stating that, unless X hears from Y to the contrary in 3 days, he (X) will assume that Y accepts his offer. Unless X and Y had previous dealings which would lead X to reasonably believe that Y's inaction constituted an acceptance, Y's failure to respond to X's letter would not create a contract.
EXAMINATION TIP: Inaction ordinarily does
not constitute acceptance.
MUL TISTATE SPECIALIST
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Mirror Image Rule
Describe the "mirror image" rule.
MULTISTATE SPECIALIST M ULTISTATE
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ANSWER
If an offeree's purported acceptance varies the terms of the offer in any manner, her response is ordinarily deemed to constitute both a rejection and a counter-offer.
EXAMPLES
A offered to sell Blackacre to B for $500,000. B responded that he "accepted" A's offer, but insisted that A repair the defective doorbell (a task which could be completed for about $25.00) before the transaction was consummated. B's response would constitute a rejection and counter-offer. If B then advised A that he accepted the offer (without requiring repair of the doorbell), A could refuse to sell Blackacre to B (B's earlier response having constituted a rejection). A offered to sell Blackacre to B for $500,000. B responded that he accepted A's offer, provided a current title report disclosed no impediments to A's title. Assuming it would be implied into an agreement for the sale of land that the vendor's title be free of any conflicting interests, the "mirror image" rule would not be violated. B's acceptance did not vary the terms of the offer (i.e., the stipulated requirement was already implicit in A's statement).
EXAMINATION TIP: Where the transaction
involves the sale of goods, the "mirror image" rule may be inapplicable. UCC Section 2-207.
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MULTISTATE SPECIALIST LTISTATE SPECIALIST
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Additional Terms Acceptance Under UCC
Describe the UCC rule pertaining to additional terms contained in an acceptance or confirmation.
9
ANSWER
Additional terms contained in an expression of acceptance or written confirmation become part of a contract between merchants, unless:
ANSWER
(1) an expression of acceptance was made conditional on assent to the additional terms, (2) the offer explicitly limited acceptance to its terms, (3) the additional terms materially alter the contract, or (4) notification of objection to the additional terms is given within a reasonable time after notice is received.
EXAMPLES
A and B agree on the telephone that A will sell 100 widgets to B at $2.00 each. B then sends a confirmation to A which contains an arbitration clause. Assuming (1) A and B were merchants, and (2) A did not object to the arbitration clause after receiving B's confirmation, the arbitration clauses would become part of the parties' agreement if this provision did not "materially alter" the contract. X sends Y an offer to sell the latter 100 widgets at $2.00 each. Y responds that he accepts, but would pay only $1.95 per widget. Because Y's response materially alters
the terms of the bargain (it goes to price), UGC Section

2-207 would not be applicable. Y's response constitutes both a rejection of X's offer and a counter-offer.
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MULTISTATS SPECIALIST
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Offer
Describe the "lapse" rule pertaining to termination of an offer.
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ANSWER
An offer lapses (1) automatically, after the time stated for acceptance has expired, or (2) where no time for acceptance has been specified, after a reasonable period of time.
EXAMPLES
In a written memo, A offers to sell his used car to B for $2,000. Five days later, B tenders the required amount to A. A could contend that a reasonable period of time had expired prior to B's purported acceptance (and therefore A's offer had lapsed). A sends a letter to B dated January 4, whereby A offers to sell Blackacre to B for $10,000. However, the writing states that the offer will expire "in 10 days." B, who received A's letter on January 6, validly accepts A's offer on January 15. B's acceptance is timely because she accepted within 10 days after receipt.
EXAMINATION TIP: Where an offer is made
in a face-to-face or over-the-telephone context, it ordinarily expires when the discussion is concluded, unless a contrary intention is communicated to the offeree by the offeror. Rest. 2d, Section 40.
EXAMINATION TIP: Where a dated writing
contains an offer which states that it will be held open for a specified number of days, the time period within which to accept ordinarily commences from the date of the offeree's receipt (rather than from the date upon which the letter or telegram was sent).
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Rejections/Counter-offers
What is the effect of a rejection or a counter-offer by the offeree?
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ANSWER
An offer terminates automatically when it has been rejected by the offeree or the latter has made a counter-offer.
EXAMPLES If in response to an offer to purchase a desk for $75.00, the offeree responded (1) "No way, that's too high" (a rejection), or (2) "I'll pay you $60.00 for it" (a counteroffer), the original offer would be extinguished. The offeree no longer has the right to accept the offer (even on its originally proposed terms). A mere inquiry by an offeror (i.e., "Would you take $60.00 for it?"), however, does not constitute a rejection. Despite this question, the original offer probably could still be accepted (assuming it had not otherwise lapsed).
EXAMINATION TIP: Where a rejection is
mailed by the offeree, and the latter then dispatches a valid, overtaking acceptance (i.e., one which reaches the offeror prior to the rejection), the acceptance will ordinarily be controlling. On the other hand, if the rejection arrives first, the fact that the acceptance was dispatched will not control.
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MUL
SPECIALIST
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12
Revocation of Offer
Describe how an offer is terminated by a revocation.
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ANSWER Revocation of an offer by the offeror is ordinarily effective when the offeree (1) receives notice from the offeror, prior to acceptance, that the latter's offer is withdrawn, or (2) learns, from a "reliable source," of an act or statement by the offeror which is inconsistent with her offer. A revocation, however, probably does not occur merely because the offeree learns that the offeror has made a similar offer to another party.
EXAMPLE
A offered to sell Blackacre to B for $50,000. Three days later, before having accepted A's offer, B learned from A's best friend that A had just sold the land to C. At the moment B acquired knowledge of the sale, A's offer would be revoked.
EXAMINATION TIP: Where a valid accep-
tance is followed by an overtaking revocation, the acceptance will ordinarily be controlling.

EXAMINATION TIP: Since (1) a valid accep-
tance is effective upon dispatch, and (2) a revocation is effective only when actually communicated to the offeree, a revocation which is dispatched after a valid acceptance has been made is ineffectual (even though the offeror had not received the acceptance).
This result is sometimes called the "mailbox rule."
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/ MULTISTATE SPECIALIST
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13
Output/Requirements Contracts
Describe an "outputs" or "requirements" contract.
13
ANSWER requirements contract is one in which the buyer promises to purchase all of her requirements of a particular product from the seller, and the seller agrees to sell such amount to the buyer. An outputs contract is one in which the vendor agrees to sell her entire output of a particular product to the buyer, and the latter agrees to purchase that amount from the former.
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EXAMPLE
If A and B entered into a requirements contract, and A's typical requirements prior to the agreement were 500 widgets per month, B probably would not be obligated to fill an order from A for 750 widgets during a particular month (i.e., this amount being a 50% increase over A's normal requirements).
EXAMINATION TIP: "No quantity
unreasonably disproportionate to any (1) stated estimate, or (2) in the absence of a stated estimate, normal or otherwise comparable prior output or requirements, may be `tendered or demanded' ". UCC Section 2-306(1).
POSSIMP MULTISTATE SPECIALIST
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14
Pre-existing Duty Rule
Describe the pre-existing duty rule.
MULTISTATE MULTISTATE SPECIALIS T
14
ANSWER
A promise given in exchange for (1) a promise
to undertake an act, -or- (2) the actual undertaking of an act, which the promisee was already legally obliged to perform, is not enforceable, because the promisor receives no consideration in exchange for his promise.
EXAMPLE
A, who owed $500 to B, advised B that the debt would not be paid, unless B promised to wash A's car after payment was made. B agreed. However, after A made the $500.00 payment, B refused to wash A's car. A could not successfully sue B for the price of a car wash. A was already under an undisputed, pre-existing duty to pay $500 to B. The fact that A relinquished his "right" to breach the contract with B is not significant (Foakes v. Beer).
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15
Pre-existing Duty Rule (UCC)
Describe the UCC exception to the pre-existing duty rule.
15
ANSWER
Where a contract involves the sale of goods, modifications of it in a manner which benefits only one of the parties is enforceable without consideration, if the modification was obtained in good faith. UCC Section 2-209(1).
EXAMPLE
A and B agreed that A would sell 100 widgets to B for $2.00 each. A subsequently advised B that he would be obliged to charge $2.25 for each widget to offset unanticipated production costs. B agreed to the increase. B's promise to pay an additional 25 cents per item would probably be enforceable (even though B received no additional benefit for the increased price).
EXAMINATION TIP: A modification which is
not obtained in good faith is unenforceable. If in the Example, A knew that B needed the widgets to meet a delivery deadline with C, and therefore would agree to an increased amount per widget to avoid default to the latter, B could subsequently repudiate her promise.
EXAMINATION TIP: This exception to the pre-
existing duty rule applies only to situations where the underlying transaction involves
the sale of goods.
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i MULTISTATE SPECIALIST
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16
Mutual Mistake
Describe the mutual mistake doctrine.
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ANSWER Where, at the time a contract was made, both parties were mistaken with respect to a material fact upon which the agreement was premised, contract will be void, and recission will be the appropriate remedy.
EXAMPLES
Where (1) two parties entered into an agreement for the purchase and sale of a residential home, and (2) it was subsequently discovered that a large deposit of oil is located below the surface of the land, the mutual mistake doctrine would not be applicable. Each party received that for which he had bargained (the seller had desired to sell a home, and the buyer had desired to purchase it). Buyer agreed to buy a Picasso painting from Seller. If it was subsequently determined that the work had been done by another artist, Buyer could probably rescind the transaction. In this instance, there was a mutual mistake of fact going to the essence of the contract. If A agrees to purchase a residential home from B because she (incorrectly) believes oil lies beneath the surface of the land, A cannot later avoid the agreement when her mistake becomes evident, unless B knew that A was entering into the agreement with that understanding.
EXAMINATION TIP: Unilateral mistake is
ordinarily not a basis for avoiding a contract.
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Option Contract
Describe an option contract.
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ANSWER
An option contract is one in which the offeror,

for consideration, has relinquished his usual right to revoke an offer for a period of time (either the time specified in the option agreement, or a reasonable period of time if no precise duration has been stipulated).
EXAMPLE
A offers to sell Blackacre to B for $50,000. B advises A that he needs 30 days to determine if he can obtain that amount. B promises to deliver his used vehicle to A within two weeks if the latter will extend the offer for one month. If A agrees, the parties have entered into an option contract.
EXAMINATION TIP: If acceptance of the offer
contained in the option contract is not made by the offeree within the requisite period of time, the offer will automatically cease to exist.
EXAMINATION TIP: In a few jurisdictions, an
offer is binding as an option contract, without consideration, if it (1) is in writing, (2) is signed by the offeror, (3) recites a purported consideration for the option, and (4) proposes an exchange of fair terms within a
reasonable period of time. Rest. 2d Section

8 7(1)(a).
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Forbearance to Sue
Describe the forebearance to sue rule.
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ANSWER
Forebearance to sue is good and valuable consideration even where no valid claim exists, if the promisor reasonably believes that he has a valid claim.
EXAMPLES
A was hurt as a consequence of B's negligent driving. A threatened to sue C (B's father and the car's owner). A erroneously (but nevertheless in good faith) believes that, under applicable law, C is liable for his son's operation of the car. C, unaware that he has no liability for B's negligent driving, promises to pay $500 to A in settlement of the latter's claim against him. If C subsequently attempted to renege upon his promise because of a lack of consideration (i.e., C received no benefit from the promise made to A, since A could not have successfully sued C), A would probably prevail. A owes $500 to B for breaching a contract to sell the latter widgets. If B delivers a signed, written release of that obligation to A, B's claim is discharged (even though B received no consideration for relinquishing her rights against A).
EXAMINATION TIP: Any claim arising out of
an alleged default of a commercial contract can be discharged, without consideration, if the aggrieved party signs and delivers a waiver of such right to the breaching party. UCC Section 1-107.
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Illusory Agreements
Describe an illusory agreement.
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ANSWER An illusory agreement is one in which a party
(1) has assumed no obligation to the other, or (2) can unilaterally avoid his obligations to the other.
EXAMPLES
Where A is to receive a commission for the sale of items produced by B, but A never specifically obligated herself to undertake any efforts to sell B's items, B might contend that the contract is illusory. However, a court could find that there was an implied promise by A to use her "reasonable best efforts" to market B's products (Wood v.
Lucy Lady Duff Gordon).

A contract between X and Y provides that Y may terminate the agreement upon "5 days notice to X". It is probably not illusory. Even if Y gives notice immediately after the contract is made, she must still perform under the agreement for five days.
EXAMINATION TIP: Implied
terms or promises sometimes afford the consideration necessary to avoid the illusory doctrine.
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Statute of Frauds
Describe the Statute of Frauds and the contracts subject to this defense.
20
ANSWER
To be enforceable, contracts within the Statute of Frauds must be memorialized in a writing (or group of related writings) which (1) indicates that a contract has been formed, (2) contains the essential terms, and (3) is signed by the party against whom enforcement is sought. Contracts within the Statute of Frauds include: (1) any transfer of an interest in real property, (2) a contract involving an executor or administrator, (3) one that cannot, by its terms, be performed within one year from the date upon which it was made, (4) guarantees (promises to perform the obligations of another), (5) promises in consideration for an agreement to marry, and (6) contracts for the sale of goods with an aggregate price of $500.00 or more. UCC Section 2-201. EXAMINATION TIP: The writing which is
necessary to satisfy the Statute of Frauds may be created after the contract was formed.
EXAMINATION TIP: Where an agreement, as
modified, is one of the types of contracts described above, the modification must also be memorialized in a writing which satisfies the Statute of Frauds to be enforceable.
EXAMINATION TIP: You can remember
the Statute of Frauds with the mnemonic MYLEGS: Marriage, 1 Year, Land, Executor, Guarantee, Sale of Goods of $500.
plistbse
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Guarantee Agreements
Describe a guarantee agreement.
21
ANSWER
A guarantee is a promise to be liable for the
obligation of another person (the debtor). The guarantor makes the promises to the debtor's obligee (the person to whom the debtor is obligated).
EXAMPLES
If A is considering making a loan to B, but is apprehensive about B's ability to repay it, A might require C to guarantee B's obligation (i.e., C would repay the debt to A if B was unable to do so). C's promise to A would be subject to the Statute of Frauds (and so, if not embodied in a writing signed by C, would ordinarily be unenforceable). A offered to make a loan to B. However, B was reluctant to accept. B was unsure if his usual income would be sufficient to cover the monthly loan payments. If C promised to indemnify B with respect to his contract with A (i.e., make any of the monthly payments to A if B was unable to do so, provided B would repay C at a stipulated interest rate), and B accepted C's offer, C's promise to B would be an indemnity (i.e., a promise made to a potential debtor). Indemnity agreements need not satisfy the Statute of Frauds to be enforceable.
MULTISTATS SPECIALIST
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22
Main Purpose Rule
Describe the "main" or "primary" purpose exception to the Statute of Frauds.
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ANSWER
A guarantee promise is not subject to the Statute of Frauds if the guarantor's main or primary purpose in making his promise to the debtor's obligee was to further his own interests.
EXAMPLES
A, a subcontractor who was working on a home owned by C, became involved in a good faith dispute with the general contractor, B. As a consequence, A refused to continue his work. C then orally promised to pay A if B failed to do so by a specified date. Since C's purpose in guaranteeing B's obligation to A was arguably to protect his own interests (i.e., the completion of his home), C's promise need not be in writing to be enforceable. Rest. 2d, Section 116. A desired to buy a new car, but was advised by the vendor that his (A's) parents would have to guarantee the credit portion of the purchase price. If A's parents did so orally, their debt would not be enforceable under the Statute of Frauds. Their promise was obviously to benefit A, rather than themselves.
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23
One-Year Rule
Describe the "impossibility of performance within one year" rule pertaining to the Statute of Frauds.
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ANSWER Where a contract, by its terms, cannot possibly be performed within one year from the date upon which it was made, it must satisfy the Statute of Frauds to be enforceable.
EXAMPLES
A and B entered into an oral agreement on December 15, whereby B would be A's chauffeur for a specified salary during the succeeding calendar year. The contract is within the Statute of Frauds. It cannot, by its terms, be performed within one year from the date upon which it was made (the contract would not conclude until December 31 of the following year). D agrees to be A's chauffeur for the rest of A's life. Since A (even if he is a relatively young person) might die within one year from the date upon which the contract was made, the agreement is not within the Statute of Frauds. The contract is not, by its terms, impossible of performance within one year from the date upon which it was made. A and B orally agree that B will be A's chauffeur for a period of two years, but if B inherits $10,000, he will be discharged from his obligations. The contract is within the Statute of Frauds. A stipulated contingency which could excuse performance does not remove a contract from the Statute of Frauds.
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24
Offeror's Right to Terminate
Describe when the offeror's usual ability to terminate an offer prior to acceptance ceases to exist.
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ANSWER
An offeror cannot revoke an offer where: (1) she has entered into an option contract, (2) she has made a firm offer, (3) the offeree has foreseeably and detrimentally relied upon the offer, and (4) (in the case of an offer for a unilateral contract), the offeree has made a substantial beginning toward completion of the agreement.
EXAMPLES
X (a sub-contractor) submits a bid to Y (a prime contractor), who integrates it into an offer which is made to Z (who requested several construction entities to submit bids relating to the construction of an office building). After Y's bid was submitted to Z, X revokes his offer (i.e., a construction bid in the construction industry is ordinarily viewed as an offer) to Y. Assuming Y could no longer alter his bid to Z, X might be estopped from revoking his offer to Y (i.e., Y has foreseeably and detrimentally relied upon X's bid to him). X promises to pay $50,000 to Y, when the latter constructs and delivers a particular type of sailboat to the former. Y purchases the necessary materials and begins building the craft. When he has completed about 1/4 of the boat, X attempts to revoke his offer. X's purported revocation is invalid. He must now permit Y to have a reasonable period of time to complete construction of the sailboat. Rest. 2d. Section 45.
git L MULTISTATE SPECIALIST
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25
Completed Performance
Describe the "completed performance" exception to the Statute of Frauds rule pertaining to contracts which cannot, by their terms, be performed within one year.
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ANSWER
Even if a contract is not, by its terms, capable of performance within one year from the date upon which it is made, where either side has fully performed his obligations, the agreement is enforceable (despite lack of compliance with the Statute of Frauds).
EXAMPLES
A orally promised to prepare B's case summaries for the 3 years during which the latter attended law school. At the end of that time, B would pay $15,000 to A. If A fully performs his obligations under the agreement, B cannot subsequently contend that the lack of a writing makes his obligation unenforceable. A and B orally agree that B will be A's chauffeur for a period of 2 years, for which services A agrees to immediately pay B the sum of $10,000. If A pays the $10,000 to B, the contract is enforceable, despite the lack of compliance with the Statute of Frauds. Rest. 2d, Section 130.
plods,*
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Part Performance Doctrine
Describe the "part performance" doctrine, under the common law Statute of Frauds.
potable
/MULTISTATE SPECIALIST
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ANSWER
Many courts will enforce an oral promise or agreement pertaining to the transfer of an interest in land where the transferee has (a) taken possession of the land, or made significant improvements to the real property, and, (b) in some states, paid at least a portion of the purchase price.
EXAMPLES
X orally agrees to sell his property, Blueacre, to Y for $350,000. Y pays X $250,000 as a down payment and installs a new septic system on the property. X then attempts to back out of the sale, citing the Statute of Frauds. Under part performance doctrine, Y will probably be entitled to the property. A agrees to sell his family home, Whiteacre, to B for $20,000. B pays A $4,000 as a down payment. A then decides to back out of the deal, citing the Statute of Frauds. A will probably prevail, as B has neither taken possession of the property nor made significant improvements to it.
EXAMINATION TIP: A few courts take the
view that specific performance should be permitted in this context whenever a grantee has '"so changed his/her position that injustice can be avoided only by specific enforcement"; Rest. 2d, Section 197.
41.1111910 MULTISTATE SPECIALIST
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Non-Objecting Merchant Rule
Describe the nonobjecting merchant rule exception to the UCC's Statute of Frauds rule.
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/MULTISTATE SPECIALIST
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ANSWER Between merchants, where a writing in confirmation of the contract is sent by one party to the other, which writing would be effective (i.e., satisfies the UCC's Statute of Frauds' requirements) against the sender, the Statute of Frauds is deemed to be satisfied if (1) the confirmation is sent within a reasonable time after the agreement was made, and (2) the recipient fails to object to it within 10 days after receipt. UCC Section 2-201(2).
EXAMPLE
A and B, who are each merchants, orally agree on the telephone that B will furnish 500 widgets to A at $4 per item. Since the aggregate price of the goods is $500 or more (i.e., $2,000 in this instance), the UCC's Statute of Frauds must be satisfied. If (1) promptly after the telephone conversation, B sent a signed acknowledgement describing the terms of their agreement to A, and (2) A failed to object to the writing within 10 days after its receipt, the Statute of Frauds defense could -not- be successfully raised by A (even though he never signed a memorandum pertaining to the transaction).
IP MULTISTATE SPECIALIST
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Part Performance Rule
Describe the "part performance" exception to the UCC's Statute of Frauds rule.
28
1NSWER
To the extent that goods have been (1) accepted by the seller, or (2) paid for, by the buyer, a contract within the UCC's Statute of Frauds is enforceable, despite the absence of a writing.
EXAMPLES
A orally ordered 500 widgets from B at $4 per item. Since the aggregate price is "$500 or more" (i.e., $2,000), the Statute of Frauds is applicable. If B delivered, and A accepted, 100 widgets, A would be liable for payment of those items (i.e., A would be liable to B for $400), despite the absence of a writing. B could, however, contend that the balance of the agreement is unenforceable under the Statute of Frauds. A telephonically ordered 500 widgets from B at $4.00 per item. If A prepaid $1,000 to B, A could enforce the contract to the extent of 250 widgets. However, A probably could not enforce the balance of the contract (i.e., the sale of the remaining 250 widgets).
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possine
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Specially Manufactured Goods UCC
Describe the "specially manufactured goods" exception to the UCC's Statute of Frauds rule.
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ANSWER Where (1) goods are to be specially manufactured for the buyer, (2) they are not suitable for sale to others in the ordinary course of the seller's business, and (3) the circumstances reasonably indicate that the goods are for the buyer, an oral contract is enforceable, notwithstanding lack of compliance with the Statute of Frauds, if the vendor had (1) made a substantial beginning with respect to the manufacturing of the items, or (2) undertaken substantial commitments for their procurement, prior to repudiation of the agreement by the buyer.
EXAMPLE
X orally contracted with Y for the latter to construct a speedboat pursuant to a blueprint delivered by the former to Y. After Y had expended $16,000 to purchase the necessary raw materials, X orally advised Y that (1) he had decided not to participate in the race for which the speedboat was being built, and (2) therefore, he had no need for the craft. Since (1) Y had expended $16,000 prior to receiving X's notice of repudiation, and (2) X's blueprint was probably unique, the "specially manufactured goods" exception to the UCC's Statute of Frauds rule would be applicable.
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Promises to Marry
Describe which contracts pertaining to marriage are within the Statute of Frauds.
possisie
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ANSWER
Where a person promises consideration to another for the latter's promise to marry the former, the agreement is ordinarily within the Statute of Frauds.
EXAMPLES
A orally promised to give 1,000 shares of IBM stock to B, if she would marry him. B accepted A's offer. If A subsequently changed his mind and declined to marry B, A's promise to deliver the stock would not be enforceable under the Statute of Frauds. Mrs. A and Mrs. B were the mothers of X and Y, who were engaged to be married. Mrs. A and Mrs. B orally agreed that each would give $10,000 to her son and daughter, respectively, when the latter two persons married (an event which was already scheduled to occur in one month). If the marriage occurred and Mrs. B repudiated her obligation to give $10,000 to her daughter, her promise would not be enforceable. In this instance, no consideration was offered in exchange for a promise to many.
pmabiP
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Statute of Frauds
Describe the effect of failing to comply with the Statute of Frauds.
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ANSWER A contract which is within the Statute of Frauds is voidable, not void. Failure to comply with the Statute of Frauds is a defense to breach if it is raised in a timely manner. Where the Statute of Frauds is applicable, no evidence pertaining to the oral promise or agreement may be admitted.
EXAMINATION TIP:
Assignments of a contract which is within the Statute of Frauds ordinarily need not be in writing. X and Y entered into a written agreement, whereby X would purchase Blackacre from Y. X orally assigns the agreement to Z. Y cannot successfully defend against an action against him by Z by claiming that the X-Z assignment is unenforceable because it was not in writing. When a defendant successfully raises a Statute of Frauds defense, a plaintiff may still recover under a quasicontract theory.
EXAMINATION TIP:
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Aggregation of Documents Rule
Describe the "aggregation of documents" rule pertaining to the Statute of Frauds.
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ANSWER
Several writings may be aggregated to meet the requisites of the Statute of Frauds, provided their inter-relationship is reasonably apparent from the face of the documents.
EXAMPLE
A submitted a signed, written offer to B for the purchase of Blackacre from the latter for $50,000. B orally accepted it. Two days later, B sent a letter to A, stating that she (1) had changed his mind about selling Blackacre pursuant to A's offer, and (2) was sorry for any inconvenience her decision might cause A. Although (1) B never signed A's memorandum, and (2) B's letter did not contain the essential terms of the agreement (i.e., the price of Blackacre), a court might aggregate A's offer and B's letter, since the latter refers to the former. In such event, the Statute of Frauds would be satisfied (i.e., taking both writings together, the essential terms are embodied in a memorialization signed by B).
EXAMINATION TIP:
This rule applies to both common law and UCC contracts.
tossabss
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Quasi-Contract/ Statute of Frauds
Where a contract is not enforceable under the Statute of Frauds, may there be recovery under a quasi-contract theory?
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ANSWER
When a contract is not enforceable by reason of the Statute of Frauds, courts will sometimes permit the plaintiff to recover in quasi-contract for the reasonable value of the benefit bestowed upon the defendant.
EXAMPLE
A orally agreed to summarize B's cases during the 3 years B was in law school for $5.00 per summary. Since the agreement, by its terms, cannot be completed within 1 year, it is within the Statute of Frauds. It is therefore unenforceable. Three months into B's first semester, B advised A that (1) A's services were no longer necessary, and (2) no payment to A would be made. A could probably recover for the reasonable value of the time which she expended on B's behalf prior to his repudiation.
EXAMINATION TIP: Where recovery is per-
mitted in quasi-contract, the contractual rate of compensation is not dispositive. While A might be awarded $5.00 per case summary, she could alternatively be reimbursed at a greater (or lesser) rate. Market value is often used as a measure.
EXAMINATION TIP: Where a plaintiff has
foreseeably relied in a substantial, detrimental manner upon the defendant's promise to reduce an oral agreement to writing, the latter might be estopped from asserting the Statute of Frauds.
potable
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Agreements with Minors
Describe the effect of contracts between an adult and a minor.
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ANSWER
Contracts between an adult and a minor are ordinarily voidable at the option of the latter, provided he disavows the agreement within a reasonable period of time after reaching majority. The minor may, however, enforce the contract against the adult.
EXAMPLE
A and B entered into a contract whereby A, an adult, agreed to sell a bike to B (a 17-year old) for $100. If the age of majority is 18, B could repudiate the agreement, provided he acts within a reasonable period of time after reaching majority.
EXAMINATION TIP:
Where a minor disaffirms a contract, he is ordinarily liable for the reasonable value of any necessaries (i.e., food, shelter, clothing, etc.) received pursuant to the agreement under a quasicontract theory. If a minor fails to disaffirm a contract within a reasonable period of time after reaching majority, he is deemed to have affirmed the agreement.
EXAMINATION TIP:
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MUL TISTATE SPECIALIST
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Express Conditions Precedent
Describe an express condition precedent.
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MULTISTATE SPECIALIST MULTISTATE
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ANSWER
An express condition precedent is an event, not certain to occur, which the parties have agreed must occur before performance under an existing agreement becomes obligatory.
EXAMPLE A and B agreed that A would purchase Blackacre from B for $50,000, if A, within 30 days, could obtain a loan for that amount at an interest rate not exceeding 10%. The acquisition of the loan is a condition precedent to A's obligation to purchase Blackacre. If A is unable to obtain financing within 30 days, she is not obliged to purchase Blackacre. If, however, A fails to exercise her reasonable best efforts to obtain the loan, the condition is deemed to be satisfied.
EXAMINATION TIP:
There is no substantial performance of an express condition precedent. A agrees to sell his car to B for $1,000, provided B runs a 5-minute mile within the next two weeks. B makes several attempts within the stipulated period, but his best "time" was 5:02 minutes. A's obligation to sell B the car for $1,000 has been discharged (even though B failed to satisfy the condition precedent by only 2 seconds). A could, of course, waive the condition precedent, since this provision was obviously inserted for his
benefit.
"mobs*
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Personal Satisfaction
Describe the effect of an express condition precedent which is based upon personal satisfaction.
36
&NSWER
Where one party's obligation is expressly conditioned upon his satisfaction with the other side's performance, an objective (i.e., reasonable person) or subjective (good faith belief) standard will ordinarily be implied into the determination.
EXAMPLE
A and B agree that (1) A will paint a portrait of B, and (2) if B is satisfied with the picture, she would pay $5,000 to A. After the painting is completed, B advises A, in good faith, she is dissatisfied because the portrait makes her appear too elderly. B is discharged from any obligation, whatsoever, to A. A cannot even recover the costs incurred for paints and other materials.
EXAMINATION TIP: Where the determination
involves matters of a business or commercial nature, an objective standard (i.e., reasonable person) will usually be implied into the agreement. Where the underlying agreement involves matters of a personal or aesthetic nature, good faith is implied. Where a contract stipulates that the satisfaction of another party is a condition precedent, the good faith standard is ordinarily utilized.
EXAMINATION TIP: Recovery in quasi-
contract may not be obtained where it is inconsistent with an express condition precedent.
potable
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Conditions Subsequent
Describe a condition subsequent.
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ANSWER
A condition subsequent is an event, not certain to occur, whose occurrence extinguishes an outstanding contractual obligation.
EXAMPLES
A and B enter into a contract whereby B agrees to be A's chauffeur for A's life, at the rate of $250 per week; provided, however, if B's uncle dies and leaves the latter an inheritance in excess of $10,000, B may leave A's employ. The death of B's uncle and bequest to B of an amount in excess of $10,000 are conditions subsequent to the A/B agreement. If both occur, B may, at his option, leave A's employ. A, a franchisee, enters into a requirements contract with B, to supply the latter with stools to be obtained by A from her franchisor, C. If (1) C terminates the franchise agreement with A, and (2) the A/B contract said nothing about this contingency, continuation of the franchise arrangement might be viewed as a condition subsequent of A's obligations to B.
EXAMINATION TIP: The burden of proof
with respect to the occurrence of a condition subsequent is upon the defendant. (The plaintiff has the burden of proof with respect to the occurrence of an express condition precedent).
EXAMINATION TIP: Conditions subsequent
are sometimes implied into an agreement.
loossinto
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Constructive Conditions
Describe a constructive condition.
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ANSWER
A constructive condition is an event, not certain to occur, which is implied into certain types of contractual agreements.
EXAMINATION TIP: The typical situations in
which constructive conditions are implied into a contract are the following: (1) Where one party's promises in a bilateral contract will take a period of time to perform, and the other's promises can be performed instantaneously, substantial performance of the initial party's promises is a condition precedent to the latter's obligation to perform his promises, (2) If the promises of each party can be performed simultaneously, each party's performance (or readiness to perform) is a condition concurrent to the other party's performance, and (3) Where one party must perform his promises by a fixed date and no time is prescribed for the other party's performance, substantial performance by the former is a condition precedent to the latter's obligations.
postinte
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Constructive and Express Conditions
Describe the major differences between constructive and express conditions.
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ANSWER
A constructive condition is not written or spoken, whereas an express condition is. The substantial performance doctrine applies to constructive conditions, but is not applicable with respect to express conditions.
EXAMPLES
A and B enter into an agreement, whereby A promises to paint B's barn for $1,000. Nothing is said as to time of payment. However, since A's promise would take a period of time to perform and B's performance (the payment) could be done instantaneously, substantial performance by A of his obligations is a constructive condition precedent to B's duty to pay A. If A completed the job, but did a small portion of it in a sloppy manner, B would nevertheless be obliged to pay A (since A had substantially performed). B could, however, deduct an amount from the contractual price equal to the cost which would be incurred to complete A's promised performance. If, on the other hand, an express condition precedent to B's obligation to pay A was completion of the job to B's good faith satisfaction, B (assuming he was, in fact, dissatisfied with A's performance) would have no liability to A.
pats* h
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Perfect Tender Rule
Describe the UCC's "perfect tender" rule.
40
ANSWER
Where a transaction involves the sale of goods, the seller's performance must ordinarily strictly conform to the agreement, or the buyer may reject the items (i.e., the seller is in material breach of the contract if his tender is not perfect). UCC Section 2-601.
EXAMPLE
A orders 100 widgets from B. If (1) B sends only 99 widgets, or (2) one of the 100 widgets is defective, A can reject the entire order and sue B for damages. A could also, at her option, accept any amount of the tendered widgets, and sue B for the balance.
EXAMINATION TIP: The 'perfect tender" rule
is subject to several exceptions: (1) Where an installment contract exists, the seller (if he gives adequate assurance of cure) must be given an opportunity to cure a defect in any installment which does not substantially impair the value of the whole contract (UCC Section 2-612), and (2) Where the seller had reasonable grounds to believe that the tender would be acceptable to the buyer, he may, if he seasonably notifies the buyer, have a further reasonable period of time to substitute a conforming tender (UCC Section 2-508).
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Installment Contracts
Describe an installment contract.
41
ANSWER An installment contract is one which requires or authorizes the delivery of goods (1) in separate lots, or (2) to be accepted separately, even if the agreement contains a clause stating "each delivery is a separate contract" (or its equivalent). UCC Section 2-612(1).
EXAMPLES
X, the best Bananas Foster chef in town, contracts with Y, a banana grower, to sell him 100 pounds of bananas each weekday for the next two months. Y will deliver the bananas to X's restaurant each weekday morning. This would be an installment contract. If Y delivers only 95 bushels of bananas to Y one Wednesday morning and X sues for breach of the installment contract, Y will probably prevail. The minor variance in quantity does not substantially impair the value of the entire contract.
EXAMINATION TIP: Under an installment
contract, a seller is not in material breach if a default with respect to one or more installments does not substantially impair the value of the whole agreement.
MU
MULTISTATE SPECIALIST LTISTATE
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Material Breach/ Quasi-Contract
Describe the interface between the material breach and quasi-contract doctrines.
42
ANSWER
Where a party has materially breached, he cannot recover under the contract. However, the breaching party will sometimes be permitted to recover the value of the benefit bestowed upon the other side under a quasicontract theory.
EXAMPLE
X agreed to build a tavern for Y, but the completed structure failed to conform to the contractual stipulations (i.e., the building was supposed to be 400 feet by 200 feet, but as constructed was only 360 feet by 180 feet). Y could assert that a material breach has occurred, and therefore she is obliged to pay X nothing. If X has substantially performed, he can recover the agreed upon consideration, less an offset equal to the amount it would cost Y to correct his breach. However, even if X's breach is material, he might still be permitted to recover an amount equal to the benefit his labor had bestowed upon Y.
EXAMINATION TIP:
Substantial performance and material breach are sides of exactly the same coin. If a party has substantially performed, she has not materially breached the agreement. Conversely, i f a party has materially breached, she has not substantially performed. EXAMINATION TIP: The material breach doctrine is often asserted as a defense by the party attempting avoid his obligations under
an agreement.
pitsabir
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Divisibility Doctrine
Describe the interface between the material breach and the divisibility doctrines.
43
ANSWER
A divisibility theory is sometimes utilized to mitigate the harsh effects of the material breach doctrine (pursuant to which a breaching party could recover nothing under the contract).
EXAMPLE
X contracts to build four houses for Y for a total price of $50,000. X completed three of the homes, but not the fourth one. Y could take the position that a material breach has occurred, and therefore he owes X nothing. In response, X could assert the substantial performance doctrine (pursuant to which he could recover under the contract, less an offset equal to his breach). X could also argue that the contract was actually four separate agreements (each house to be constructed for $12,500). Under this theory, X would be entitled to $37,500 for the three homes constructed, less Y's damages for X's noncompletion of the last house.
EXAMINATION TIP: Whether a contract
will be deemed to be divisible or not is usually a question of the parties' intent. This is determined from all of the pertinent circumstances.
psitsbo
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Recovery in Quasi-Contract
Describe the circumstances pursuant to which recovery in quasi-contract may be permitted.
44
ANSWER
Quasi-contract is an equitable doctrine which permits recovery under circumstances where it would be unfair to allow the defendant to completely avoid his obligations to the plaintiff.
EXAMPLE
X notices a break in a fence holding Y's cattle in a remote pasture. In order to prevent the escape of the animals, X repairs the break. Y would be liable to pay X the reasonable value of such service as a matter of law, to avoid Y's unjust enrichment.
*EXAMINATION TIP: Quasi-contract is ordi-
narily applied where (1) the plaintiff rendered performance with the expectation of being compensated, and (2) the defendant was aware of this expectation. These situations frequently occur where the defendant can successfully assert an affirmative defense (i.e., Statute of Frauds, material breach, etc.) to the plaintiff's action.
EXAMINATION TIP: When you see the words
"unjust enrichment", think quasi-contract!
pm In
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Waiver
Describe the waiver doctrine.
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pitiable
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ANSWER
A waiver occurs where a party explicitly or implicitly (i.e., through his conduct) forgives a prospective term or condition to be performed by the other side.
EXAMPLE
A agrees to construct a home for B, containing 2-foot square windows. A informs B, however, that only windows which are 20 inches square are readily available. If B advises A that the smaller windows may be utilized, B would have waived the provision calling for 2-foot square windows.
*EXAMINATION TIP: A waiver can ordinarily
be retracted (1) before the other party has changed her position in reliance thereon, and (2) where an additional, reasonable extension to perform the term or condition in question is permitted. Assume that, in the Example, B changes his mind about permitting the 20-inch windows prior to the time A purchased the smaller items. Since A has not changed his position in reliance upon the waiver, retraction by B is probably permissible. However, B might have to give A additional time to complete the house, since the initial waiver may have delayed A's performance.
pstabro
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Frustration of Purpose
Describe the frustration of purpose doctrine.
plumbs*
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ANSWER Where (1) one party has a special purpose for entering into a contract (of which the other side is aware), and (2) that purpose is frustrated by a subsequent, unforeseeable event (the risk of which was not assumed by the party asserting this doctrine), she is relieved of her prospective performance until the frustrating event has ceased to exist.
EXAMPLE
X Hotel contracts with nearby Y Tennis Club to pay $500 per month to Y to reserve three tennis courts for guests of X's Hotel. Subsequently, the X Hotel is destroyed by a fire. If Y continues to demand the $500 per month payment, X could assert the frustration of purpose doctrine. Since the special purpose of the contract was to afford guests at X's hotel a place to play tennis, X's monthly obligation would probably cease during the time the hotel was inoperable. However, when X Hotel was rebuilt, it would be obliged to resume its monthly payments to Y.
EXAMINATION TIP: The frustration of pur-
pose doctrine is not negated by the fact that the party asserting it is capable of performing her obligations under the agreement. Thus, in the Example above, the fact that X Hotel can afford to make the $500 per month payments while the structure is being rebuilt is not significant.
EXAMINATION TIP: The subsequent event must be neither foreseen (subjective) or forseeable (objective) at the formation stage.
pitaint*
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Impossibility of Performance
Describe the impossibility of performance doctrine.
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ANSWER
There are two types of impossibility, subjective impossibility and objective impossibility. Subjective impossibility occurs when it becomes impossible for a party to perform his obligations under a contract, but it would be possible for some other person to perform under some set of circumstances. Objective impossibility occurs when performance would not be possible by anyone under any circumstances at any time.
EXAMPLES
On Tuesday, A hires B to mow A's lawn on the following Saturday. On Thursday, B breaks his leg. On Friday, someone breaks into B's garage and steals his lawnmower. B's performance will not be excused because, while it is probably impossible for him to mow A's lawn, someone else could do so. On Tuesday, A hires B to mow A's lawn on the following Saturday. On Wednesday, A's lawn becomes infested with a type of grub that quickly eats and destroys grass. By Saturday, the lawn is merely dirt. B's performance is excused because no one could mow A's lawn under any circumstances. Note that, if A replants the grass, B may have a subsequent duty to mow.
EXAMINATION TIP:
In personal service contracts, the death, illness or incapacity of a party will ordinarily excuse her performance. Note, however, that in the EXAMPLES above, we have an ordinary contract, not a personal
service contract (i.e., it is not a contract calling for a unique skill or qualification).
plash,*
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Anticipatory Repudiation
Describe an anticipatory repudiation.
48
ANSWER
An anticipatory repudiation occurs where a party to a bilateral contract (1) unequivocally advises the other that his prospective performance will not be forthcoming, or (2) voluntarily undertakes an act which makes his ability to perform dubious. An anticipatory repudiation can be retracted prior to the time that the aggrieved party has (1) materially relied upon it, or (2) advised the repudiating party that the repudiation will be treated as final.
EXAMPLE
On September 1, X entered into a contract to sell Blackacre to Y. The deed and purchase price were to be exchanged on December 1. On October 1, X sold Blackacre to Z. Y can immediately sue X for breach of their contract. Rest. 2d, Section 264.
EXAMINATION TIP: Where
an anticipatory repudiation occurs by words, the language must be unequivocal. A statement by one party that he is "unsure" or "doubtful" that his performance can be completed by the required date would probably not constitute an anticipatory repudiation. The doctrine of anticipatory repudiation does not apply to unilateral
EXAMINATION TIP:
contracts or to bilateral contracts where one party has fully performed.
plods.*
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Anticipatory Repudiation
Describe the effect of an anticipatory repudiation.
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ANSWER
Where an anticipatory repudiation has occurred, the aggrieved may (1) treat her obligations as discharged and immediately sue for breach of the agreement (unless the innocent party has completely performed and the repudiating party's only remaining obligation is the payment of money), or (2) urge the other side to retract his repudiation.
EXAMPLES
On May 1, A promises to paint B's barn within two weeks. In return, B promises to pay A $1,000 on June 1. After A completes about 30 % of the barn, B advises A on May 15 that he will not pay the latter. A would not be obliged to complete the job, and could commence a breach of contract action against B. If, immediately after A completed painting B's barn on May 15, B repudiated his promise to pay A, A would have to wait until June 1 to commence an action against B.
EXAMINATION TIP:
The anticipatory repudiation doctrine is frequently asserted as a defense (i.e., a party justifies his nonperformance by asserting that the other side had previously made a prior anticipatory repudiation).
MULTISTATE SPECIALIST MU LTI STATE
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Reasonable Insecurity Doctrine
Describe the "reasonable insecurity" doctrine.
50
ANSWER
Where, in a transaction involving the sale of goods, one party has reasonable grounds for insecurity, she may demand adequate assurances from the other side that prospective performance will be forthcoming. If such adequate assurances are not received within a reasonable period of time (not exceeding 30 days), the innocent party may treat the other as if the latter had made an anticipatory repudiation. UCC Section 2-609.
EXAMPLE
X and Y had agreed on February 1, that (1) X would deliver an airplane to Y on May 1, and (2) Y would tender 1/2 of the purchase price of $250,000 to X on March 1 and the balance ($250,000) to X upon delivery of the aircraft. However, on February 15, Y heard rumors that X was almost insolvent. Since these circumstances would probably constitute "reasonable grounds for insecurity," Y could (1) refrain from making the March 1 payment, and (2) demand adequate assurances from X of his ability to perform. If X fails to give Y such adequate assurances, Y can treat X as being in breach of contract.
EXAMINATION TIP: The "reasonable insecu-
rity" doctrine allows one party to, in effect, "push" the other side into an anticipatory repudiation (even though the latter has not said or done anything to indicate that performance might not be forthcoming).
possimP
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Commercial Impracticability
Describe the commercial impracticability doctrine.
51
ANSWER Where the transaction involves a sale of goods, if (1) a post-contract contingency occurs, (2) the non-occurrence of which was a basic assumption upon which the contract was made (i.e., was unforeseeable and not a risk assumed by the vendor), and (3) such contingency makes the vendor's performance commercially impracticable, the seller is relieved of his obligations while such impracticability exists. UCC Section 2-615.
EXAMINATION TIP:
Where the impracticability is only partial in nature (i.e., as a consequence of an oil embargo, suppliers of gasoline can obtain only 60% of the amount they normally purchase), a vendor is obliged to perform any outstanding contracts to the extent that he is able to do so.
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Novation
Describe the novation doctrine.
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ANSWER
Where a third party offers to perform the promises of another (the obligor) pursuant to an existing agreement, and the other party (the obligee) to the contract agrees to (i) release the obligor, and (ii) substitute the new party in lieu of the obligor, a novation has occurred. As a consequence, the obligor is relieved of her obligations under the original agreement.
EXAMPLES
X enters into a contract with B, whereby A is to deliver 20 widgets to B each month. X validly assigns all of his rights and obligations under the contract to C. X and C expressly advise B of the assignment. If C failed to deliver the widgets, B could bring an action against both X and C. No novation has occurred. B did not explicitly agree to substitute C in lieu of X. A delegation of duties does not relieve the original obligor of his obligations to the obligee. X owes $1,000 to Y, payable in one month, for goods previously delivered by Y to X. Z advises Y that if Y will release X from the underlying obligation, he (Z) will make the payment. If Y accepts this offer, a novation has occurred and X is released from his obligation to Y.
,1 MULTISTATE SPECIALIST
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53
Accord and Satisfaction
Describe an accord and satisfaction.
53
ANSWER
An accord is an agreement whereby one party agrees to accept performance which is different from that presently owed to her. The satisfaction occurs when the accord is performed (thereby discharging both parties from their contractual obligations). If the accord is not satisfied, the obligee can sue under either the old contract or for breach of the accord.
EXAMPLE
A owes $1,500 to B for performance previously rendered by the latter to the former. A does not dispute his obligation to B. B, however, agrees to accept A's car in lieu of payment, if it is delivered to him (B) within one week. If A agrees, the parties have entered into an accord. If A fails to deliver the car within a week, B could sue A (1) to convey the vehicle, or (2) to recover $1,500. If B delivers the car, an accord and satisfaction has occurred, and A's obligation is extinguished.
EXAMINATION TIP: An accord and satisfac-
tion should be distinguished from a compromise. Under the latter doctrine, where a claim or defense is disputed in good faith and the parties reach a compromise, the original obligation is totally extinguished and the obligations created under the compromise agreement are substituted in lieu
thereof.
MU
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54
Specific Performance
Describe when specific performance is likely to be granted.
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cn
MULTISTATE SPECIALIST MULTISTATE hAV
54
ANSWER Specific performance is likely to be granted when (1) the transaction involves a transfer of land, or (2) monetary damages would be difficult to calculate. Where the transaction involves a sale of goods, specific performance is granted where the goods are "unique" or "other appropriate circumstances" exist. UCC Section 2-719. However, specific performance will rarely be granted where a personal service agreement is involved.
EXAMINATION TIP: A potential loss of good-
will is often a sufficient justification for granting specific performance (i.e., a buyer will lose the good-will of her prospective customers if she is unable to obtain the items from the seller).
EXAMINATION TIP: With respect to personal
service or employment agreements, the proper remedy is money damages.
plinks*
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55
Liquidated Damages
Describe the circumstances under which a liquidated damages clause is enforceable.
55
ANSWER
Liquidated damage clauses are enforceable where (1) damages would otherwise be extremely difficult to determine, (2) the parties made a bona fide effort to estimate the damages which would result if a breach occurred, and (3), in some states, the damages stipulated are reasonable in light of the actual losses sustained by the plaintiff. The goal of a liquidated damages clause must be to fairly compensate the aggrieved party.
EXAMPLE
X agrees to sell Blackacre to Y for $10,000. They enter into a written agreement, providing that (1) X is to deliver the deed to Blackacre after Y accomplishes certain acts (i.e., deposits the purchase price into the escrow, etc.), and (2) if Y fails to accomplish these things, she will forfeit a $1,000 deposit which was placed into the escrow. The latter provision (a liquidated damages clause) would probably be enforceable. It would be difficult for X to prove that he could have sold Blackacre to someone else while the sale to Y was pending (i.e., no one would offer to purchase Blackacre if X was already obligated to sell the land to another).
EXAMINATION TIP: The
existence of a liquidated damages clause does not preclude the aggrieved party from alternatively seeking specific performance. clause which purports to be a liquidated damages clause but which actually punishes the breaching party will not be enforceable.
EXAMINATION TIP: A
MU
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56
Expectation Damages
Describe the "expectation damages" doctrine.
56
ANSWER
To the extent possible, an aggrieved party should be put in the position she would have been had the defendant performed his contractual obligations (i.e., the plaintiff is entitled to recover all monetary damages resulting from the defendant's breach).
EXAMINATION TIP:
The foregoing rule is subject to several qualifications; (1) A plaintiff can only recover losses which are calculable (i.e., reasonably susceptible of estimation),
(2) The damages must have been reasonably foreseeable at the time the contract was made, (3) The aggrieved party must mitigate damages to the extent he is capable of doing so, (4) The plaintiff must avoid incurring unnecessary damages, and (5) Where expectation damages would be unreasonably disproportionate to the losses sustained by the aggrieved party, some courts permit the plaintiff to recover only her actual damages.
'
M UL
SPECIALIST
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57
Obligation to Mitigate
Describe the "mitigation of damages" doctrine.
M ULTISTATE 'MULTISTATE SPECIALIST
57
ANSWER
Where a breach of contract has occurred, the aggrieved party must mitigate his damages to the extent it is possible to do so.
EXAMPLE
X was to deliver 100 widgets to Y on June 1, at $10 per item. On May 1, X advised Y that he would not deliver. Y urges X to perform. On June 1 (the contractual date of delivery), the widgets had increased to $20 per item. Assuming a reasonable period of time to await performance by X was 2 weeks (when the price per widget was only $12 each), Y could recover only $200 from X.
EXAMINATION TIP: Where a personal ser-
vices contract is involved, the party providing such services is obliged only to accept employment which is substantially similar to that which she had contracted to perform.
EXAMINATION TIP: Where the transaction
involves a sale of goods, an aggrieved buyer must "cover" (assuming he is capable of doing so) in order to be able to recover consequential damages. UCC Section 2-715(2)(a).
EXAMINATION TIP: Where an anticipatory
repudiation has occurred, an aggrieved party who urges the other side to perform cannot recover damages which were
incurred beyond a reasonable period time after the repudiation.
pitaiw
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58
Reliance Damages
Discuss the "reliance
damages" doctrine.
58
ANSWER Where an aggrieved party's damages are not capable of estimation and specific performance is inapplicable, she may recover any expenditures made in reliance upon the contract.
EXAMPLES
X contracts with Y newspaper to run a full page ad which was prepared by a professional graphics company. The ad was about X's new book and indicated that X would (1) be at Z's bookstore at a specified time, and (2) autograph his book. Y, however, failed to run the ad. As a consequence, X claims that she lost $10,000 in royalties. It is probably impossible to determine how many persons would have purchased X's book if the ad had appeared. Therefore, X's damages are not reasonably susceptible of estimation. However, X could probably recover the (1) amount paid to Y, (2) costs of creating the ad, and (3) expenses incurred in traveling to and from Z's bookstore. A rents space at a convention center for vendors of rare coins. The convention center, however, refuses A admission (erroneously claiming that his check had not been received). Since it is impossible to determine how many orders A would have obtained, he can probably recover his reliance damages only (i.e., expenditures pertaining to attendance at the convention).
EXAMINATION TIP: A
plaintiff's claim to reliance damages is subject to the requirements of foreseeability, unavoidability, and certainty.
posthe
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59
Avoidability Doctrine
Describe the "avoidability of damages" doctrine.
59
ANSWER
An aggrieved party cannot ordinarily recover for damages which she could have avoided.
EXAMPLES
X contracts to build a bridge for Y. After half of the job has been completed, Y repudiates the agreement. Nevertheless, X completes the bridge. X would not be able to recover for the materials and labor expended after receiving Y's notice that the contract had been canceled. X agrees to build and sell a boat to Y for $30,000. X anticipates a $10,000 profit from the transaction. After X expends $14,000 for materials, Y repudiates the agreement. If X, in good faith, believes that a completed craft can be sold for $20,000, he may finish it. If X is correct, Y would be liable for only $10,000 (rather than $24,000, less the salvage value of the incomplete boat). If, however, X sells the completed boat for only $7,500, he could still sue Y for $22,500.
EXAMINATION TIP: An aggrieved seller of
goods may complete the manufacture of an item (despite a buyer's anticipatory repudiation), if, in the former's "reasonable commercial judgment," the buyer's damages will be lessened by completion and sale of the goods. UCC Section 2-704(2).
#4t blP MULTISTATE SPECIALIST
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60
Disproportionate Damages Rule
Describe the "actual value of loss" exception to the "expectation damages" rule.
potable
60
ANSWER Where an aggrieved party's expectation damages would be "grossly disproportionate" to the harm she actually sustained, the court may limit her recovery to only the actual value of her losses.
EXAMPLE
A promises to build an apartment house for B for $300,000. The structure is to have a pool with dimensions of 30' X 40'. When A completes the job, B discovers that the pool was actually 24' X 36'. Since A's breach is probably not material, he is entitled to recover under the contract, less damages equal to the extent of the breach. B might contend that she is entitled to deduct an amount equal to that which it would cost her to break two sides of the pool and restore it to the original contractual specifications (approximately $48,000). A could argue, however, B should be able to recover only the overall diminishment in the value to the apartment house (i.e., approximately $10,000). Assuming A's failure to construct the swimming pool in accordance with the contract was not deliberate, his argument would probably be successful.
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61
Third Party Beneficiary Agreements
Describe a third party beneficiary agreement.
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ANSWER
One is a third party beneficiary ("intended beneficiary") where (1) permitting her to enforce the promisor's promise would effectuate the parties' (the promisor and promisee) intentions, and (2) performance by the promisor will satisfy the promisee's obligation to pay money to the third party beneficiary, or (3) the circumstances indicate that the promisee intended the beneficiary to receive the promised performance. Rest. 2d., Section 133.
EXAMPLE
X (a famous person) and Y agree that (1) X will speak at Y's annual convention, at which approximately 15,000 people will be present, and (2) Y will pay for X's stay at the ABC Hotel (reputed to be the best inn in that city). ABC Hotel learns of this agreement, and immediately notifies X and Y that it would be pleased to have X stay there. However, Y subsequently advises X that it would be more convenient if X stays at the DEF Hotel (which is nearer to the convention hall). X agrees to do so. If ABC Hotel sues Y for failing to rent one of its rooms for X, it would probably not be successful. Although the X-Y agreement alluded to the ABC Hotel, it was probably neither party's intention to bestow a benefit on that establishment. Rather, the ABC Hotel was selected simply for X's comfort. The ABC Hotel is merely an incidental beneficiary and would have no rights under the X-Y contract.
EXAMINATION TIP: When analyzing whether
a third party can recover under a contract, always apply the "intend to benefit" test. Was the third party intended to benefit from the agreement between the promisor and promisee? Your answer to this question must be 'yes".
posabse
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62
Vesting of Third Party Beneficiary Rights
Describe when the rights of a third party beneficiary vest.
62
ANSWER
The rights of a third party beneficiary vest when he has (1) relied upon the underlying contract, (2) instituted suit against the promisor, or (3) expressly assented to the underlying contract in response to a request for assent by the promisor or promisee; Rest. 2d, Section 311. EXAMINATION TIP: Prior to vesting, a third
party beneficiary's rights can be extinguished or modified by agreement between the promisor and promisee.
EXAMINATION TIP: In some common law
jurisdictions which have not adopted the Restatement 2d, distinguishing between a "creditor" or "donee" beneficiary may be important for purposes of vesting. A creditor beneficiary is a person to whom the promisor (1) owes an obligation, or (2) believes she owes an obligation. A donee beneficiary is a person upon whom the promisee desires to confer a gift. Under the common law, a donee beneficiary's rights vest when the contract is made. Thereafter the third party beneficiary's interests cannot be altered without her consent. However, a creditor beneficiary's rights vest only after he has (1) detrimentally relied upon the agreement, or (2) explicitly assented to the contract.
postibie
MULTISTATE SPECIALIST TI
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63
Rights of Third Party Beneficiary
Describe the rights of a third party beneficiary against the promisor.
63
ANSWER
A third party beneficiary can ordinarily commence an action against the promisor for the latter's non-performance. The promisor may, however, assert any defenses which she could have raised against the promisee, based upon the underlying contract.
EXAMPLE
A and B orally enter into a contract, whereby A would deliver 100 widgets to B for $1,000. A requests, and B agrees, that B pay the contractual amount to C. If the widgets which A delivers to B are defective, B could assert this material breach against C. (Prior to acceptance of the widgets, B could have also asserted the Statute of Frauds against C, since the contract involves the sale of goods with an aggregate price of $500 or more.) If the widgets were not defective and were accepted by B (thereby precluding B from asserting the Statute of Frauds), but C previously owed $1,000 to B by reason of a prior loan, B could not offset C's prior obligation against the $1,000 payment owed to C under the A/B agreement. The loan obligation is not related to the underlying contract between A and B.
pmIw
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64
Rights of Third Party Beneficiary
Describe the rights of a third party beneficiary against the promisee.
64
ANSWER
A third party beneficiary ordinarily has no rights against the promisee as a consequence of the promisor's non-performance. However, where (1) the third party beneficiary's rights had vested, and (2) the promisee nevertheless accepted the performance owed to the third party beneficiary, the latter can sue the promisee for converting the consideration.
EXAMPLES
A agrees with B that, in return for A's delivering 50 widgets at $100 each to B, B will deliver a new car to C (a nephew of A's, upon whom A desires to bestow this gift). C learns of this agreement and relies upon it by purchasing expensive new tires for the vehicle she expects to receive. However, A subsequently requests B to pay the price of the widgets to him, and B complies with this request. If C's reliance upon the A/B agreement is deemed to be material (thereby preventing A and B from divesting her interest), C could sue A (or B) to recover the value of the car. If C's reliance is not viewed as material, she could not successfully sue A. In the foregoing Example, B could have refused A's request to pay him (A) the price of the widgets, and (2) performed by purchasing the car for C.
PMtibir MULTISTATE SPECIALIST
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65
Non-Assignability
Describe when, even in the absence of a nonassignability clause, a contract may not be assigned or delegated.
65
ANSWER
A contract may not be assigned (or its duties delegated) where: (1) the rights and duties are personal in nature, or (2) when the transaction involves a sale of goods, an assignment of rights or delegation of duties will materially change the non-assigning party's burden or materially impair his chances of obtaining the bargained for performance. UCC Section 2-210.
EXAMPLES
X hires Y, for $1,000, to paint a picture of X's wife. Y assigns the agreement to Z. Assuming X retained Y because the latter has previously demonstrated an expertise with respect to portraits, the agreement could not be delegated by Y. On May 1, A offers to paint B's barn for $1,000. The job was to be completed by June 30 and paid for by B on July 15. B accepts A's offer. On May 10, however, B sells his farm and assigns the outstanding contract with A to C. A may not have to perform the underlying agreement. Although painting a barn requires no special skill or expertise, the underlying agreement contains a creditterm (i.e., A is obliged to render performance to B prior to receipt of payment). Such clauses are often viewed as being personal in nature.
1.111.1101 MULTISTATE SPECIALIST
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66
Assignor's Rights
Describe the rights of an assignor and the obligor after an assignment has been made.
n
0
n
cn
MULTISTATE SPECiALIST MULTISTATE
0-i
66
ANSWER Once an assignment for consideration has been made, the assignor ordinarily has no remaining rights in the underlying agreement. An obligor (i.e., the non-assigning party) is relieved of liability to the assignee to the extent she had performed under the underlying contract prior to receiving notice of the assignment.
EXAMPLE
Assume that, for consideration, X is obligated to pay $100 per month to Y, for one year, starting January 1. Y assigns his right to receive these payments to Z on December 20. Before X receives notice of the assignment, X makes the January 1 payment to Y. Although Y had no right to receive the January payment, X is not obligated to repay the January installment to Z (i.e., the payment was made before X had notice of Y's assignment to Z). Z could recover the January payment back from Y under an unjust enrichment theory.
EXAMINATION TIP: Prior to (1) delivery of
an appropriate token or writing, or (2) detrimental reliance by an assignee, a gratuitous assignment may be revoked by the assignor.
Pinnibe MULTISTATE SPECIALIST
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67
Obligor's Rights
Describe the rights of an obligor against the underlying assignee.
n
0
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cn
ii
67
ANSWER
An obligor may assert any defenses against the assignee which he could have asserted against the assignor based upon the underlying agreement; unless (a) the obligor has specifically waived this right (UCC Section 9-206), or (b) the assignee is a holder in due course.
EXAMPLES
A and B enter into a oral agreement whereby (1) A would be B's chauffeur for 3 years, and (2) B would pay $2,000 per month to A. A assigns his right to receive his compensation under this contract to C. If (1) B fails to pay C for the initial 2 months of the agreement, and (2) C sues B, B could assert the Statute of Frauds as a defense (i.e., the contract is one which cannot, by its terms, be performed within 1 year from the date upon which it was made). B could not, however, offset against the payments due to C a prior debt which C owed to her (B). C's previous obligation to B is not a defense based upon the underlying agreement. A and B enter into an agreement which provides that each side waives his right to assert any defense against the other's assignee. A assigns his rights under the contract to C. When C sues B to recover for non-payment of goods which A had sold to B, B claims that the goods are defective. As a consequence of the waiver, however, B would have to pay C. B could recover for the payment for the defective goods from A.
MU
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68
Assignee's Rights
Describe the rights of an assignee against her assignor.
68
ANSWER
Where the assignor, for consideration, has assigned her rights against an obligor, there is an implied warranty that the obligor has no defenses to the assignor's claim which are based upon the underlying contract. However, there is no implied warranty as to the obligor's financial ability to pay the debt.
EXAMPLES
C paid $50.00 to A for the right to collect A's claim for $75.00 against B (which was due in 2 weeks). However, when C (on the due date) demands $75.00 from B, B claims that A failed to complete the work necessary to earn the $75.00 fee. Assuming B's assertion is correct, C can recover the $50.00 payment which she previously made to A. If, on the other hand, B is unable to pay the $75.00 obligation because he is insolvent (rather than because A's work was defective), C has no recourse against A. An assignee ordinarily assumes the "credit risk" of the obligor. For consideration, X assigns his right to a $1,000 payment from Y under an existing contract to Z. Y, however, asserts an offset against Z for a previous loan made to the latter. Since Y's purported defense is invalid, Z would have no right to recover back any consideration paid to X for the assignment.
1.011"1.10 MULTISTATE SPECIALIST
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69
Obligee's Rights
Describe the rights of the non-assigning party against the assignor and delegatee.
pimbite
69
ANSWER Where a delegatee fails to perform the obligations due to the non-assigning party (the obligee), the latter can (1) sue the delegatee, if there has been an assumption of the delegator's duties (i.e., the obligee is a third party beneficiary of the delegator-delegatee agreement), and (2) sue the delegator.
EXAMPLE
X enters into an agreement to purchase Y's business for $100,000, payable in ten annual installments of $10,000 each. Before the first payment is made, X assigns "the agreement" to Z. By failing to object to the obligation to make payments to Y under the contract, Z has probably assumed X's obligations to Y. UCC Section 2-210(4), Rest. 2d, Section 160(2). If Z failed to pay Y, Y could sue X and Z (since Y is a third party beneficiary of the X-Z agreement). X, of course, would be entitled to only one satisfaction of the obligation owed to her.
EXAMINATION TIP:
An assumption of duties is usually implied where the delegatee accepts an assignment of rights under an executory contract without indicating that he is refusing to accept (i.e., such by taking "subject to" the underlying agreement) the delegator's duties. UCC Section 2-210(4) and Rest. 2d, Section 160(2).
potable
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70
Describe the parol evidence rule.
n 0 n
MU M ULTISTATE SPECIALIST
mi
70
ANSWER When a writing is a total integration (i.e., the complete and exclusive embodiment of the parties' agreement), no evidence of any prior or contemporaneous promise or agreement may be admitted which contradicts, varies or adds to the contract. EXAMINATION TIP:
In determining i f a writing is a total integration, a "merger" clause (i.e., "this agreement constitutes the sole and exclusive understanding of the parties hereto') is often dispositive.
EXAMINATION TIP:
In the absence of an integration clause, evidence of additional promises which do not contradict the writing are admissible (1) under the common law, where the parties, situated as were those to the agreement, would not ordinarily be expected to include the alleged prior agreement or promise into the subsequent written contract, or (2) where the transaction involves the sale of goods, the alleged prior agreement or promise would not "certainly have been included" in the subsequent written contract. UCC Section 2 202.
-
EXAMINATION TIP: Agreements
made subse-
quent to a partial or complete integration are not within the parol evidence rule.
postiov
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PMBR Flash Cards - Contracts - 2007

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PMBR Flash Cards - Contracts - 2007

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Torts

rum Evil Constitu

2007 Multistate Le al Studies Inc.

Copyright 2007 by MULTISTATE LEGAL STUDIES, INC.

1247 6th Street

Santa v1onica l CA 90401

MULTISTATE MULTISTATE SPECIALIST

EXAMINATION TIP: The party attempting to

an offer has been made.

EXAMINATION TIP: Where the facts of a

Describe a "firm" offer.

EXAMINATION TIP: The firm" offer doctrine per-

tested UCC sections, 2-205 does require a

Offer Material Terms

EXAMINATION TIP: The UCC is quite liberal

Offer Unilateral Contracts

Describe an offer for a unilateral contract.

MULTISTATE M ULTISTATE SPECIALIST

EXAMINATION TIP: Where it is unclear

Offeree's Obligations Unilateral Contracts

Describe the obligations of an offeree under an offer for a unilateral contract.

M ULTISTATE SPECIALIST MULTISTATE

EXAMINATION TIP: Inaction ordinarily does

not constitute acceptance.

MUL TISTATE SPECIALIST

Mirror Image Rule

Describe the "mirror image" rule.

MULTISTATE SPECIALIST M ULTISTATE

EXAMINATION TIP: Where the transaction

MULTISTATE SPECIALIST LTISTATE SPECIALIST

Additional Terms Acceptance Under UCC

the terms of the bargain (it goes to price), UGC Section

Describe the "lapse" rule pertaining to termination of an offer.

MULTISTATE M ULTISTATE SPECIALIST

EXAMINATION TIP: Where an offer is made

What is the effect of a rejection or a counter-offer by the offeree?

EXAMINATION TIP: Where a rejection is

Describe how an offer is terminated by a revocation.

MULTISTATE MULTISTATE SPECIALIST

EXAMINATION TIP: Where a valid accep-

tance is followed by an overtaking revocation, the acceptance will ordinarily be controlling.

This result is sometimes called the "mailbox rule."

Describe an "outputs" or "requirements" contract.

MULTISTATE M ULTISTATE SPECIALIST

EXAMINATION TIP: "No quantity

POSSIMP MULTISTATE SPECIALIST

Pre-existing Duty Rule

Describe the pre-existing duty rule.

MULTISTATE MULTISTATE SPECIALIS T

Pre-existing Duty Rule (UCC)

Describe the UCC exception to the pre-existing duty rule.

MULTISTATE M ULTISTATE SPECIALIST

EXAMINATION TIP: A modification which is

the sale of goods.

Describe the mutual mistake doctrine.

MULTISTATE M ULTISTATE SPECIALIST

EXAMINATION TIP: Unilateral mistake is

ordinarily not a basis for avoiding a contract.

MULTISTATE MULTISTATE SPECIALIST

Describe an option contract.

An option contract is one in which the offeror,

EXAMINATION TIP: If acceptance of the offer

reasonable period of time. Rest. 2d Section