MBE Rapid Fire - Contracts

Mutual assent (offer + acceptance);

Consideration (bargained for legal detriment); and

No defenses to formation

Contract made by both sides; i.e. mutual promises

Requires full performance as the method of acceptance

An outward, objective manifestation of willingness to enter into a bargain;

That creates the power of acceptance in the offeree (i.e. nothing left to do except say “yes”)

Parties

Subject matter

Price

Quantity

Counter-offer;

Death;

Incapacity;

Lapse;

Rejection; or

Revocation

Option contracts;

Firm offers;

When there is detrimental reliance;

When offeree has started performance on a unilateral contract

rejection + new offer

Acceptance must be a mirror image of every single term of the offer

If any part of the terms are different, it will function as a counter-offer and rejection

The terms will automatically become part of the contract, unless:

the terms materially change the contract;

the offeror objects; or

the offer explicitly limited the offer to the original terms

Promise to ship the goods; or

Shipping the goods within a reasonable time period

Yes, but also constitutes breach

Acceptance is effective upon DISPATCH

Acceptance will be effective if received BEFORE the rejection

Acceptance effective upon dispatch (regardless of whether rejection is received before)

Detriment to promisee (promisee forgoes something of value); or

Bargained-for exchange (must not be nominal)

Yes, unless:

New obligations on both sides; or

Existence of circumstances unforeseen by either party

No, as long as both parties are acting in good faith

Entire contract is void and non-existent

Valid contract unless one party seeks to void it

A valid contract that cannot be enforced if one party halts performance

Duress

Incapacity

Illegality

Misrepresentation

Misunderstanding

Mistake

Public Policy

Statute of Frauds

Undue Influence

Unconscionability

Declare the entire contract void;

Strike the unconscionable clause while leaving the rest; or

Rewrite the offending clause to make it conscionable

Adhesion contracts (“take it or leave it”)

Contracts with boilerplate terms

Contracts with hidden terms that are vague or confusing

Grossly excessive price

Disproportionate consequences for minor breach

Provisions unreasonably limiting warranties or remedies

Illegal Subject Matter: Illegal and completely void & unenforceable

Illegal Purpose: Voidable by party who:

Did not know of the purpose; or

Knew but did not facilitate the purpose and the purpose does not involve “serious moral turpitude”

⚠️ Note: If both parties knew of the illegal purpose, K is void and unenforceable

By the adversely affected party if:

Both parties had a mistake of fact when the contract was formed;

About a material assumption of the contract;

Adversely affected party did not assume risk of the mistake; and

Mistake cannot be fixed by reformation

The adversely affected party can void if:

There was a mistake as to basic assumption when K was formed;

About material effect of K; and

Adversely affected party did not assume risk of the mistake

AND either:

Mistake would make K unenforceable; or

Other party had reason to know of mistake; or

Mistake was the other party's fault

Parties had a prior agreement;

Parties agreed to put the prior agreement in writing; and

There is a difference in the prior agreement and the writing due to mistake

Is there a significant business justification (e.g. access to trade secrets);

Is the scope reasonable in duration and geographical reach; and

Is there an express provision of a covenant not to compete?

⚠️ Note: Courts can choose to enforce only reasonable provisions of a non-compete

Writing

K must be signed in writing & contain essential elements of the deal

Performance

Service K's (for most goods, full performance satisfies SOF; for custom goods, substantial beginning work is sufficient)

Specially manufactured goods (delivery satisfies SOF)

Real estate K's if buyer does 2 of the 3 following acts:

Full or part payment of the purchase price

Possesses the property; or

Improves the property

Marriage;

Contracts that cannot be performed within a year;

Land interests (real estate sales and leases > 1 year);

Executor (contracts for an executor or administrator to answer for the duty of a decedent);

Suretyship for another's debts; and

Contracts for the sale of goods for a price of $500 or greater

A memorandum of the sale that includes:

Indication that K has been made;

Identity of the parties;

Quantity; and

Be signed by the party asserting the SOF defense

Yes, unless:

There is language providing a basis for measuring quantity; or

K is an output or requirements K

When the buyer completes 2 of the 3 following acts:

Full or part payment of the purchase price;

Possesses the property; or

Improves the property

Course of dealing

Trade usage

Course of performance

Express terms

Express terms (most important)

Course of performance

Course of dealing

Trade usage (least important)

Presumption that K's are partially integrated; allows addition of non-contradictory terms unless the parties would have "certainly" included them (UCC § 2-202)

K was only partially integrated

To show that K does not exist/was never formed (evidence of misunderstanding, mistake, etc)

As defense to enforceability (duress, illegality, etc)

To resolve ambiguities

To prove condition precedent

To supplement or explain terms w/ evidence of trade usage/past dealings (UCC § 2-202 - sale of goods only)

To help court intrepret K by showing parties' subjective understanding of terms

UCC § 2-305 "fills the gap" with the missing term because it is presumed the parties intended to include the term

Performance is not excused until after event occurs

(e.g. Max will continue taking the bar exam until he passes it)

Condition must take place before performance/another event is triggered

(e.g. Max will take Kathy on a trip to Europe if he passes the bar exam)

The party who would have benefited from the condition is discharged from their performance obligations, unless there was waiver, bad faith conduct, or forfeiture/great loss may result to one of the parties.

Waiver: The party who would have been discharged by the condition's failure may waive that right and perform anyway, making their obligations absolute.

Bad Faith Conduct: bad faith conduct will excuse a condition if the benefitting party fails to take steps necessary for the condition to obtain, or interferes with the fulfillment of the contract.

Avoiding Forfeiture: a court may excuse a condition if fulfillment of that condition would cause one of the parties great loss or forfeiture.

Substantial performance will satisfy the party's obligations, and the aggrieved party will not be discharged from their performance obligations.

The doctrine of substantial performance applies to contracts for services, often construction contracts.

A defense available (under both common law and UCC) when performance has been rendered impossible by unexpected events that took place after the contract was formed. If the defense is successful, both parties are excused from performance.

Extent to which the aggrieved party will be deprived of the benefit that she reasonably expected to receive under the contract;

Likelihood that the breaching party will cure within a reasonable time and within the purposes of the contract;

​​This factor is important for determining material breach vs. substantial performance

Extent to which the aggrieved party can be compensated by damages to make up for the defective performance

Extent to which the breach was willful or in bad faith rather than merely negligent or innocent

Extent to which the breaching party will suffer great loss or forfeiture if a material breach is found

Implied in all K's:

Duty to not wrongfully interfere with performance; and

Duty to cooperate

As long as a party substantially performs (even if they did not meet every requirement), the other party is still obligated to perform their obligations

⚠️ Note: unless it is an express condition precedent, in which full performance is required, substantial performance will suffice

These three elements are required to show performance under the contract is impracticable:

The impracticability arose out of an unforeseen contingency;

The risk was not assumed nor allocated by the parties;

The increased cost of performance is now far greater than either party had reasonably anticipated

The party's principal purpose of entering into the contract is substantially frustrated; and

Non-occurrence of the event that caused the frustration of purpose was an implicit underlying assumption of the contract

Shipment contracts?

Destination contracts?

Risk of Loss in Carrier Cases:

Shipment K's → Risk of loss transferred to buyer once seller delivers goods to common carrier

Destination K's → Risk of loss transferred to buyer when goods are tendered at the destination

If seller is not a merchant → ROL passes to the buyer upon tender of delivery

​​Only tender of delivery is required, not actual receipt by the buyer

If seller is a merchant → ROL passes to buyer when the buyer physically takes possession of the goods

Or

As specified in the contract; or

By the breaching party if one party has breached

Requires absolute perfect tender of goods as specified in the contract

⚠️ Does not apply to installment contracts or when parties agree otherwise

The buyer must inspect the goods, and "if the goods or tender of delivery fail in any respect to conform to the contract, the buyer may:

a. reject the whole; or

b. accept the whole; or

c. accept any commercial unit or units and reject the rest."

UCC § 2-601

Before the window for performance on the K has elapsed, so long as the seller gives the buyer notice of the intent to cure; or

If the seller reasonably thought that buyer would accept the nonconforming goods, the seller may substitute a conforming delivery, so long as the seller gives the buyer notice of their intent to cure and cures within a reasonable time

UCC § 2-508(1)

Warranty of:

Title

Merchantability

Fitness for a particular purpose

A 3rd party beneficiary of the contract; the promisee seeks performance by the promisor to fulfill an obligation owed to the third party creditor beneficiary.

More info: Third Party Beneficiaries, First Restatement

A third party beneficiary to the contract; the promisee seeks performance from the promisor in order to make a gift to a third party donee beneficiary.

A third party who benefits from performance of the K, even though the benefit to them wasn't the parties' primary intent in forming the K

Someone for whom the contracting party intended to benefit with the contract; can seek enforcement of K

They do not have any rights to seek enforcement of the contract

Against the Promisor: always, because promisor is under an obligation to the beneficiary

Against the Promisee: never concerning enforcement of the promised performance under the new contract; a 3rd party beneficiary will only have rights against the promissee if there was a prior obligation between promissee and third party beneficiary

A third party intended beneficiary's interest vests when any of the following are met:

Beneficiary sues;

Beneficiary justifiably changes her position of reliance on the K and notifies the parties;

At the request of the parties, the beneficiary manifests assent to the contract; or

The contract's express terms state that the rights have vested

When the promisor does not perform, the promisee has a claim for breach of contract against the promisor, and may possibly seek specific performance or damages, BUT…

If the promisor's performance is intended to benefit a donee beneficiary, then the promisee has no damages, but specific performance may be appropriate.

If the promisor's performance is intended to benefit a creditor beneficiary, then the promisee may seek enforcement of the promisor's obligation

Rights are not assignable when:

Assignment would materially alter the risks or obligations with respect to the other party to the contract;

Assignment would violate the law or public policy

The obligor has a personal interest in providing their service to the obligee rather than a 3rd party

The contract specifies that assignments are prohibited

Revocable: all gratutious assignments unless:

Assignee has collected the payment / received the gift / symbollically received the gift, or

Assignee has detrimentally relied on the assignment

Irrevocable: assignments made with consideration

Generally all contractual duties are delegable, unless:

The performance of the service is personal, and the beneficiary of the performance values the unique service (character, reputation, taste, discretion, skill) of the intended performing party

Examples: nanny service; tattoo artist;

The contract specifies that delegation is prohibited

Where the cost to perform significantly exceeds the market value of such a performance

Where the party cannot calculate expectation damages with reasonable certainty

Where the damages are unforeseeable

Where damages could have been mitigated or reasonably avoided

Any expenditures made in preparation for performance or in actually performing

-minus-

Any loss the breaching party can prove the aggrieved party would have suffered had the contract been fully performed

Calculation is within the court's discretion, and as justice may require the court generally uses one or some combination of:

The reasonable value or cost of benefits conferred

The amount the other party's property has increased in value due to the benefits received

Cover

Difference b/w market price & K price

Incidental damages

Consequential damages

Consequential damages are losses to the buyer because of a particular need or use for the goods.

Only the buyer can get consequential damages against the seller (not the other way around), and only when the losses were reasonably foreseeable to the seller.

The nonbreaching party is expected to take reasonable steps to mitigate damages after a breach.

If they don't, their damages can be reduced, but the breaching party can't sue them for failing to take reasonable steps

Rewriting the contract to include the intent of the parties

Available if:

Prior agreement existed; (oral or written)

Agreement was put into writing; and

Difference between prior agreement and written expression due to mistake

When the seller is a lost volume seller.

Seller can recover if they resell the item to another buyer, and can show that they would have made the sale regardless of the breach (meaning they would have made 2 sales w/o breach but they only made 1 w/ breach)

For example, Max sells couches. Ian breached his K to buy a couch from Max. Max was able to sell the same couch to Carly, but since Max is a couch-dealer, he would have sold the couch to Carly regardless of whether Ian breached. Thus, he missed out on two sales b/c of the breach.