Contracts And Sales Bar Exam - Bar Exam Outlines

Contracts & Sales

APPLICABLE LAW

• Multistate Bar Exam

  • Article 2: applies to sale of goods

    • "goods" are moveable, personal property

  • Common Law: applies to any other contract (including leases)

CONTRACT FORMATION

• Vocabulary

  • Contract

    • A legally-enforceable agreement.

    • An express contract:

      • is created by the parties' WORDS

    • Implied-in-fact contract:

      • is created by the parties' CONDUCT

  • Restitution (Quasi-Contract)

    • Protects against unjust enrichment whenever contract law yields an unfair result

    • Restitution is remedy of last resort

  • Bilateral Contract

    • Where an offer can be accepted in any reasonable way

    • Express or performance

  • Unilateral Contract

    • Where offer can be accepted only by performing

    • Inflexible: offer says can only be accepted by performance

      • Reward, context, prize: only by doing what specified

  • BAR TIP

    • Look first for an agreement, then see if it's legally enforceable

• Was there an Offer?

  • Definition:

    • A manifestation of an intention to be bound

  • Advertisements:

    • An ad is generally NOT an offer

    • Exception:

      • Where the ad specifies a quantity

  • Indefiniteness: See if any of the terms are too indefinite to be enforced

    • Open Price Term

      • Court will read in a "reasonable" price except for in sale for real property which must have a price

    • Requirements Contract (Article 2)

      • Art. 2 allows quantity to be measured by the buyers needs/requirements

      • BUT even if ordering in good faith, sudden increases in requirement, disproportionate to a prior order not allowed

        • Cant take seller by surprise

• Was the Offer Terminated?

  • Lapse:

    • An offer lapses after a stated term or

    • After a reasonable time has passed

  • Revocation

    • Offer terminates when the offeror revokes the offer

      • General Rule: An offer may be revoked at any time before acceptance

        • Direct Revocation:

          • Offeror indicates directly to the offeree that he has changed his mind

        • Indirect Revocation:

          • Offeror engages in conduct that indicates has changed mind

          • Offeree is aware of the conduct

      • 4 Exceptions:

        • Option

          • An option is a promise to keep the offer open that is paid for (consideration)

• Firm Offer

  • If a MERCHANT promises in a SIGNED WRITING to keep an OFFER OPEN, the offer is irrevocable

  • Note: Merchant & Signed are BROADLY defined

  • BUT,

    • offer, even if states longer period, may only be held open for 3 months.

    • If don't state time period, then good for 3 months

    • Does not have to be supported by consideration

  • Exam Tip: In sale of goods, look for option 1st (no limits) If no option, then look for firm offer (has limitations)

• Foreseeable Reliance Before Acceptance

  • Reliance before acceptance rarely foreseable: offeror expects offeree to accept 1st & then rely

  • BUT: Where have a bidding situation, it is foreseeable for the subcontractor to rely on the offer (sub bid) by using it in his own before actually accepting

    • He can't accept till he gets the contract

    • Not fair to let sub revoke own bid,

• Starting to Perform a Unilateral Contract

  • With a unilateral K, once offeree starts to do job, offeror can no longer revoke

  • Mere preparation does not = performance start under this exception, but it could be foreseeable reliance under previous exception

• Timing: A Revocation is effective WHEN RECEIVED

• Rejection

  • Counteroffer

    • Operates as a rejection, but mere bargaining does not

      • If just a question about if would do something, just bargaining and not counter offer

  • Conditional Acceptance:

    • Operates as a rejection & counter-offer

• Acceptance Varying Offer

  • Common Law

    • Acceptance must mirror offer (MIRROR IMAGE RULE)

  • Sale of Goods (Article 2)

    • No Mirror Image Rule

      • Offeree's adding or changing term DOES NOT prevent acceptance

    • Offeree's Term included ONLY IF:

      • Both parties MERCHANTS

      • NO MATERIAL CHANGE; and

      • NO OBJECTION w/ REASONABLE TIME

  • Exam Tips:

    • Sometimes offeree's term doesn’t make it in, but still contract

    • If term is customary in industry, its NOT material (examiner will say so)

      • Material= one likely cause hardship or surprise for offeror

        • ex. Disclaimer of warranties

        • BUT STILL CONTRACT

• Death

  • Death of either party BEFORE acceptance terminates a REVOCABLE offer

• Has Offer Been Accepted?

  • Language of Offer Controls

    • Look to offer to see how can be accepted, and must comply if specified

• Starting Performance

  • Bilateral Contract

    • Starting performance is acceptance and carries with it an implied promise to finish the job

  • Unilateral Contract

    • Completing performance is acceptance; merely starting performance is not

• Improper Performance

  • Simultaneous acceptance AND breach

  • Sale of goods & Common law same rule

  • Sale of Goods Exception:

    • Where seller sends note "to try and ACCOMMODATE your needs"

      • Sending wrong goods as "accommodation" not acceptance, so no breach cause no K

• Offeree's Silence

  • General Rule: no acceptance

• Timing of An Acceptance

  • General Rule:

    • Acceptance effective when mailed (MAILBOX RULE)

      • Applies even when sent rejection first but acceptance got there first

  • Exception:

    • Offer States Otherwise

      • Offeror can override mailbox rule

    • Irrevocable Offer

      • Acceptance must have been RECEIVED by date indicated on irrevocable offer

      • Mailbox Rule doesn’t apply

    • Rejection Sent First

      • Depends on which gets there first

• Is the Agreement Legally Enforceable? Defense Against Formation

  • Lack of Capacity

    • Categories:

      • Minors

      • Intoxicated

      • Mentally incompetent

    • General Rule:

      • An incapacitated DEFENDANT has the right to DISAFFIRM the contract

        • Doesn’t have to but can if wants avoid

      • But the non-minor defendant cannot disaffirm, and it will be enforceable by the minor

    • Implied Affirmation

      • Retaining the Benefit after gaining capacity

        • Affirms the contract, lose right to disaffirm

        • OK CAN DISAFFIRM TILL 19

    • Exception

      • Incapacitated party liable for NECESSITIES(food, shelter, med care),

        • But only for the reasonable value, not the contract price

• Duress, Fraud, Illegality

  • All about the formation and making it so not a contract formed

• Ambiguity /Misunderstanding

  • Parties on different wave lengths

  • No contract unless 1 party knew or had reason to know of the other parties meaning

    • If this is so, then contract, and the innocent parties meaning prevails

Ex. I agree sell my piano to buyer, I have to pianos; old one and baby grand; buyer thinks I mean my baby grand but I mean my old one, but I know buyer has seen the baby grand, I should know she means the baby grand, and I should have said so. She gets the baby grand

• Mistake

  • Mutual Mistake About a Material Fact

    • Both on same page but what thinking doesn’t accord with facts

      • Ex. S agree sell painting to B, but neither aware that fire destroyed painting 2 days ago

        • No contract cause painting was central to deal & both mistaken about it

        • BUT, mistake as to value NOT MATERIAL

• Unilateral Mistake

  • Almost never a defense

  • One parties mistake not a fatal flaw in process UNLESS

    • Other party knew of had reason to know about it

• No Consideration

  • Oklahoma

    • Consideration for written K is presumed

  • Definition

    • "Bargained-for legal detriment/benefit"

      • Can bargain for a promise (usual case), performance, or even forbearance

  • (Past Consideration) is a Misnomer

    • Actually not consideration at all

      • Can't bargain for something already done

      • Oklahoma: moral obligation (past consideration) for a Previous Benefit is Consideration

  • Adequacy of Consideration

    • Irrelevant

    • Courts won't inquire into the adequacy of the consideration as long as there is a bargain

  • Contract Modification

    • Common Law:

      • NEW CONSIDERATION is required to modify a contract (Pre-Existing Duty Rule)

        • Cant be used as a defense against a 3rd party, cause no pre duty owed to them

      • Oklahoma: don’t need new consideration if modification is in writing

• Sale of Goods

  • Consideration is NOT REQUIRED to modify a contract for the sale of goods, but must have GOOD FAITH to seek modification

• Partial Payment of a Debt

  • IF debt due and undisputed then will need new consideration

  • If debt is disputed though, partial payment early or something to that affect agreement then is consideration

• Time-Barred Debt:

  • A written promise to pay a debt, collection of which is barred by SOL, is enforceable even without consideration

    • So even though cant enforce the old debt, can enforce the new written promise to pay

• Promissory Estoppel as SUBSTITUTE for CONSIDERATION

  • Foreseeable reliance may make a promise enforceable, even without consideration

• BAR TIP

  • PROMISSORY ESTOPPEL is the right answer ONLY IF there is NO CONSIDERATION

STATUTE OF FRAUDS

• When A Writing Is Required

  • Interest in Real Property

    • Including an agents authority to w/r/t property must be in writing cause underlying transaction falls within SOF rule

• Performance Cannot be Completed Within I year of the Making

  • Doesn’t matter if actually takes more than a year

  • AS LONG AS FULL PERFORMANCE w/in a year was theoretically POSSIBLE, no writing required by SOF

• Sale of Goods for $500 or More

  • But for any goods accepted by buyer, contract...