Contracts Bar Outlines by kmaghakhani

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This contracts outline contains principles of contract and sales law as well as remedies issues involving contracts. It also contains examples of various contracts principles and is organized in a way to draw important distinctions between nuances of contract law. This outline is intended to be used for the MBE and essay portions of any bar examination.

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									                                                                             CONTRACTS OUTLINE
   I. CL : applies to contracts involving real estate, personal services, sale contract other than goods
  II. UCC : applies to contracts for the sale of “goods” = tangible, movable personal property (other than money)
      A. Sale: transfer of title in exchange for a price
      B. UCC imposes good faith =(honesty in fact) in performing & enforcing K’s (subjective) & observance of reasonable commercial standards of fair dealing
      C. Merchant held to obj standard of fair dealing in trade. Merchant = (1) regularly deals in goods of kind sold (2) holds himself out as having special knowledge/skill
            in those goods or (3) has agent representing merchant
 III. Mixed deal: UCC applies to mixed deal where the more important part is the sale of goods Unless K divides payment btw svc & goods then UCC applies to sale of
      goods & CL to the rest;
      A. Svc contract with materials being incidental to contract w/b governed by CL unless materials cost more than labor

FORMATION: A valid contract requires (1) offer (2) acceptance & (3) consideration
  I. OFFER: An offer is a proposal manifesting a present intention to contract which creates the power of acceptance on the Offeree.
     A. Elements: (1) offer must manifest present intent to K (2) m/b communicated to Offeree (3) stating material terms w/certainty & definiteness
         1. Intent: Whether present intent to K exists is judged by whether a reasonable person in Offeree’s position would believe his assent creates a contract
              a. invitations seeking offers: price lists are construed as preliminary proposals inviting offers
              b. Price Quotes Where seller sends a catalog or price quote IN RESPONSE to buyer's REQUEST then catalog sent is an offer
              c. Advertisements : can be an offer IF (1) its in the nature of reward, or (3) specifies the quantity and expressly indicates who can accept and
                     accepted by person who knows of the adv.
              d. Auction: "without reserve" Auctioneer makes an offer to sell at any price bid by highest bidder, once auctioneer calls for the bids, the goods can't be
                     withdrawn by him even if only bidder has low bid
         2. Material Terms: GR: all material terms not required, though material terms must be sufficiently Certain & definite
              a. Vague or ambiguous material terms w/n be an offer under both UCC & CL [“appropriate, fair, reasonable”]
              b. Sale of Real estate: requires Price and Description
              c. Sale of Goods: Quantity is required but not Price, offer exists if parties intended K
              d. Requirements/Output Contract: [“all, only, exclusive”] Contract for sale of goods that states the quantity of goods to be delivered under the contract
                     in terms of buyer’s requirements or seller’s output is valid & may be increased by buyer if in line w/prior demands & not unreasonably
         3. Communicated to Offeree: offer effective when offeree rcvd

       A. Revocation: Revocation is unambiguous words or conduct by Ofror to Ofee of unwillingness or inability to contract that ofee is aware of.
           1. 3 Revocation Rules:
                a. Offers are freely revocable before acceptance.
                b. Effective when RECEIVED by the offeree or when communicated to him
                c. Making of multiple offers is not revocation of offers previously made to others
           2. Irrevocable offers:
                a. Option K: An option K exists where (1) offeror has promised to keep the offer open/promised not to revoke for stated time AND (2) the promise is
                    supported by consideration (something of value bargained for in exchange for the promise)
                    i. Offer is irrevocable during the option period if consideration to keep option of is received acknowledgement of receipt isn't enough to keep
                           option open i.e if payment isn't received offerror can revoke during "option" period
                    ii. After option period, if the offer hasn't been revoked it can still be accepted
                    iii. Rejection of the option K doesn't terminate the offer- c/still accept during option period UNLESS offror detrimentally relied on the rejection
                b. UCC Firm Offer- A signed written offer by a merchant to buy or sell goods promising to keep the offer open for a stated period is irrevocable
                    for that period, if none stated then reasonable time, but never longer than 3months,
                    i. NO CONSIDERATION required
                    ii. If Ofee supplied Firm offer Form, the Offror m/separately sign it to be bound
                c. Detrimental reliance: by Ofee that is reasonable foreseeable by offror
                d. Start of performance on a unilateral K: creates an option K which gives offeree reasonable time to complete performance
                    i. Once ofee begins to perform- offror can't revoke
                    ii. Mere preparation to perform is not enough to prevent revocation ex buying paint ; unless ofee detrimentally relied ( buying specialty hard to
                           find color) in which case he can recover in PE

                                                                   Copyright 2012. All rights reserved
   B.    Termination by Operation of Law
         1. Lapse of Time: offer remains open for time stated or reasonable time (usually 30 days)
         2. Death or incapacity of a party prior to acceptance terminates the offer EXCEPT (1) Option K or (2) Start of performance of a unilateral K
   C.    Rejection: An offeree may reject an offer (1) expressly (2) by making a counteroffer or (3) by failing to accept within a reasonable time stated in the offer
         1. Effective when RECEIVED
         2. Counteroffer: is a rejection of the original offer & terminates offerees power of acceptance ; become new offer

     A. CL: Acceptance is a manifestation of willingness to be bound by the contract.
         1. Elements: An acceptance must be (1) unequivocal, communicated to offeror, (2) accepted by terms of offer “Mirror Image” and (3) made w/knowledge of
         2. Mirror Image Rule: Conditional Acceptance - with or without proviso
               a. Under CL, acceptance must mirror the offer. Acceptance which states that acceptance is expressly conditioned on assent to new term: “if, only if,
                     provided, on condition that, but” - is treated as a REJECTION and COUNTEROFFER
               b. But if parties act as if K exists, then their conduct is treated as acceptance of the counteroffer
         3. Method of Acceptance
               a. Bilateral K: An offer for a bilateral K seeks a promise in return unless it requires performance or reward
                           (1) Promise to perform is acceptance of a bilateral K
                           (2) Start of Performance is acceptance of bilateral K where the offer is SILENT as to the method of acceptance - start treated as implied
                                  promise to complete
               b. Unilateral K: An offer for a unilateral K seeks performance as the only method of acceptance
                           (1) Unilateral K can be accepted only by complete performance of the requested act (not start of performance) AND
                           (2) Must be done with knowledge of the offer
                           (3) Consideration here is the offerrees performance
                     ii. Complete Performance: of a unilateral K is acceptance, No duty to notify of performance Unless (1) offer requires notice or (2) offeree has
                           reason to believe that offeror will not hear of the acceptance b/c he's in a place different than place of performance;[ if no notice given when
                           required offeror excused from any k duties ie paying]
                     iii. Start of Performance of the requested act in a unilateral K creates and OPTION K is NOT ACCEPTANCE, it is an implied promise to
                           compete, completion is required for acceptance ,
                           (1) Offeree is NOT obligated to continue if he only starts performance b/c he hasn’t accepted yet
                           (2) Offerror must give offeree reasonable time to complete, he can't revoke
     B. UCC: Acceptance doesn't have to mirror the offer, acceptance can be made by any reasonable manner indicating intention to K unless the offer indicates
         1. Conditional Acceptance
               a. "proviso" : acceptance conditioned on assent to new terms under the UCC no contract exists Unless Offeror acts in which case a K exists based
                     on the parties conduct
                     i. K limited to terms which writings agree on plus supplemental terms by UCC (so proviso is out) [this also applies where Offeror's form prohibits
                           adding new/inconsistent terms]

               b.     Additional Terms no proviso
                      i. Both parties Merchants: Acceptance that adds new term (no proviso)is treated as an acceptance & additional terms becomes part of K
                            (1) additional term materially changes offer (in which case K exists under og terms) or
                                  (a) Material change is one that substantially affects the economic risks or benefits or changes usual remedy for K breach
                            (2) Offeror objects to the change w/I reasonable time, or
                            (3) offer expressly limited acceptance to terms of offer
                      ii. Non-Merchant: If one or both parties aren’t merchants, the additional term is a proposal which m/b separately accepted/rejected by Offeror
               c.     Different Term: Split of authority where acceptance adds different term either (1) treated as new term or (2) “knock out” conflicting terms in offer &
                      acceptance are knocked out & replaced by UCC gap fillers

         2.    Offer for “prompt or immediate shipment” can be accepted by (1) promise to ship, (2) shipment of conforming goods, or (3) shipment of non conforming
               a. Offer that states method of acceptance is by shipment – only shipment w/b acceptance
               b. Shipment of Wrong goods: operates as an acceptance & breach UNLESS accommodation sent (i.e., explanation) which operates as counteroffer &
                      No Breach
                                                                 Copyright 2012. All rights reserved
   C.    Acceptance rules for UCC & Common Law
         1. Ambiguous Offer: Where and offer is ambiguous as to method of acceptance, acceptance can be made by performance or promise to perform
         2. Mail Box Rule: if offeree is invited to accept by mail (where offer is mailed), acceptance is effective when DISPATCHED (ie mailing property addressed &
              stamped letter)
              a. Acceptance sent then rejection - Acceptance is effective (mailbox applies) UNLSES the rejection arrives first & offeror detrimentally relied on it
                   i. Improperly mailed acceptance is effective when RECEIVED
              b. Mailbox rule doesn't apply: Generally communication effective when RECEIVED
                   i. Revocation is effective when RECEIVED
                   ii. Rejection before acceptance – whichever RECEIVED first
                   iii. Mail Box rule does NOT APPLY to Option K: acceptance of option K is effective if RECEIVED by option deadline

         3.    Who can Accept: (1) person who knows about the offer and (2) who is the person to whom it was made
         4.    Assignment: Offers can’t be assigned; Options can be assigned unless Option states otherwise

    A. Defined: “Bargained for Legal Detriment” that is either a benefit for Promisor or detriment for Promisee
        1. Bargained for :asked for by Promisor [promise maker/breaker] in EXCHANGE for his promises
        2. Legal detriment: forms of consideration
            a. Performance (doing something not legally obligated to do)
            b. Forbearance: not doing something legally entitled to do
                  i. Honest Dispute: ex. both parties surrender their rights due to an honest dispute, implies valid consideration (accord & satisfaction case)
                  ii. Surrendering an INvalid legal claim: can be consideration if (1) Rp could believe the claim was valid (2) it can be pursued in good faith
            c. Promise to perform: “B promises to buy & S promises to sell”
            d. Promise to forbear
    B. Adequacy of Consideration: not inquired into by courts unless things is completely devoid of value
        1. Implied Promises: promises made without words, such as ordering a meal, impose implied promise to pay

   C.    Not Consideration:
         1. Illusory Promise: where only one party is bound to perform – not valid consideration
              a. Promisor has control over condition or knows condition won’t occur “B promise to sell UNLESS she changes her mind” (distinguish from promise to
                     perform which is valid form of consideration)
              b. Option K WITHOUT a irrevocability provision
         2. Past Consideration: things that already happened before a promise was made can’t be consideration Unless (1) expressly requested and (2) expectation
              of payment (ex Apu saving Lisa’s life)
         3. Pre-existing Duty: performance of preexisting contractual or legal duty is not valid consideration. A duty is preexisting only if owed to the promisee
              a. CL: Doing what you are already legally obligated to do is not new consideration Unless
                     i. There is an addition or change in performance OR
                           (1) L promised L additional money if he would sing X instead of Y
                     ii. Uunforeseen difficulty so server as to excuse performance OR
                           (1) sound system breaks, L promises K more $ if he still performs
                     iii. 3rd party promise to pay: preexisting duty rule does not apply if duty is owed to a another person and 3 person promises to pay to have x do
                           exactly what he had a duty to do
              b. UCC: Consideration is not required to modify existing K for sale of goods or Firm Offer
                     i. Good Faith is the test for changes to an existing SOG contracts
         4. Moral Obligation: alone can’t be consideration unless necessary to prevent injustice
         5. Part Payment: as consideration for release i.e., promise to forgive debt
              a. If
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