Term
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Definition
INDIRECT REVOCATION: The offeror engages in conduct that
indicates he's changed his mind and the offeree is aware of the conduct. |
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Term
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Definition
FIRM OFFER (Article 2): In a sale of goods, if a merchant promises in a signed writing to
keep an offer open, the offer is irrevocable. Note: The terms “merchant” and “signed” are
broadly defined under Article 2. |
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Term
| Carmax makes a signed, written offer to sell a BMW. Can Carmax still revoke? |
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Definition
YES. [ask yourself "what's missing?"] No promise to keep the offer open.
- trick Q --> very likely to appear on MBE. |
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Term
Subcontractor S submits a bid to do electrical work on a hotel project for $250,000. Contractor C relies on S's bid in
computing its own bid on the project. Can S still revoke its offer? |
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Definition
No, because S knows that C will rely before accepting.
FORESEEABLE RELIANCE [very rare] |
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Term
Dr. House offers me $10,000 to paint his house. The offer states that it can be accepted only by painting the house. I
start painting the house. Can House still revoke his offer?
What if I had bought paint, but not yet started painting the house? |
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Definition
| 1) On the MBE, the answer is NO -- once I start to do the job --> House can no longer revoke. However [***NY DIST***] in NY, the offer can be revoked UNTIL PERFORMANCE HAS BEEN COMPLETED. |
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Term
On Monday, I offer to sell Jessica my Honda. On Tuesday, I mail her a letter revoking the offer. On Wednesday,
Jessica accepts. On Thursday, she receives my letter. Is my revocation effective? |
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Definition
NO, because a revocation is effective only when it is received (Thursday), and Jessica had already accepted on Wednesday.
- MBE love to test on timing issues. |
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Term
1) Chelsea offers to sell her house to Whitney for $500,000. Whitney responds, "I will only pay $460,000." Chelsea
refuses. Can Whitney later accept Chelsea's original offer?
2) What if Whitney had responded, “Will you take $460,000?" |
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Definition
1) NO, because W's counteroffer terminated Chelsea's original offer. (it was an "inappropriate response" --> acts as rejection)
- but consider next companion hypo (common on bar)
2) - a question is considered "mere bargaining" (not a rejection) --> so offeree can still accept. |
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Term
Walt Disney Studio sends Bill Clinton an offer to appear in the eagerly-awaited film, "Waiting to Inhale." Bill agrees
provided that he gets top billing. Is there an agreement? |
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Definition
No, a conditional acceptance is actually a rejection.
note: D can always agree to condition to create an agreement. [REVIEW THIS ANSWER] |
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Term
ACCEPTANCE VARYING OFFER:
Common law differs from Article 2. |
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Definition
a. COMMON LAW: Acceptance must mirror offer ("Mirror Image Rule").
b. SALE OF GOODS (Article 2): Acceptance does not have to mirror offer.
i. NO MIRROR IMAGE RULE: The offeree's adding or changing a term does not
prevent acceptance under Article 2. However….
ii. **OFFEREE'S TERM IS INCLUDED ONLY IF:
(A) BOTH PARTIES ARE MERCHANTS;
(B) THERE IS NO MATERIAL CHANGE; and
(C) NO OBJECTION WITHIN A REASONABLE TIME. |
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Term
Landlord sends Tenant a signed lease that says nothing about pets. Tenant adds, “Tenant may keep a pet,” signs the
lease and returns it to Landlord. Has Tenant accepted Landlord's offer? |
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Definition
| No, under common law, adding or changing a term constitutes a rejection. |
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Term
B makes a written offer to buy 100 widgets from S for $1,000. The offer does not mention any warranties. S's written
acceptance disclaims all warranties. Is there a contract?
Does the contract include S's disclaimer? |
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Definition
YES, because under Article 2, acceptance can be affective even though it adds or changes a term.
- A2 applies because sale of goods.
[- ***(b)(ii) "no material change" req is EXTREMELY IMPORTANT]
Here, contract does NOT include disclaimer, because even if both parties are merchants, the disclaimer is a MATERIAL CHANGE (something likely to cause "hardship or surprise" for the offeror).
BAR EXAM TIP: If term is customary in the industry it's not material. [Look for this on MBE!]
Offeror can keep out even a minor change by OBJECTING w/in a reasonable time. |
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Term
Buyer sent Seller a purchase order for one lamp at $3,500. Seller mailed back its standard form, confirming quantity
and price, but added: “Acceptance of your order conditioned on a crating charge of $100.” What is the relationship between Buyer and Seller? |
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Definition
| -trick: this is a "Conditional Acceptance" and therefore a rejection under the prior exception (trick question -- looks like its testing on battle of forms but its NOT). |
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Term
| Death of either party before acceptance |
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Definition
DEATH: Death of either party before acceptance terminates a revocable offer, but not an irrevocable offer,
like an option. |
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Term
Chef Tom emails Fabio a job offer that states, “You can accept this offer only by reporting for work on Monday.”
Fabio emails back, “I accept!” Has he accepted the offer? |
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Definition
| NO, usually offers can be accepted by a promise --> but NOT this offer because language of offer controls and the offer said he could accept only by reporting for work on Monday. |
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Term
B faxes an order for widgets stating, “I need the widgets shipped within 24 hours.” S faxes back: “I promise to ship
the widgets within 24 hours.” Has S accepted B's offer? |
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Definition
| YES, because (unlike previous hypo) there is no "only by" language. Therefore, a promise to ship is good enough. |
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Term
STARTING PERFORMANCE
BILATERAL CONTRACT
vs
UNLIATERAL CONTRACT |
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Definition
BILATERAL CONTRACT: Starting performance is acceptance (and therefore carries with it an
implied promise to finish the job).
UNILATERAL CONTRACT: Starting performance is not acceptance (so there is no obligation to
finish the job). Completing performance is acceptance. |
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Term
House offers me $10,000 to paint his house. His offer does not specify how to accept [bilateral].
I start painting the house. Have I accepted House's offer so that I am bound to finish the job? |
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Definition
YES. A bilateral contract can be accepted in any reasonable way --> so starting performance is good enough (and once you start you must finish the job).
- **however, in unilateral contract, starting performance is NOT acceptance --> so not obligation to finish the job. |
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Term
1) House's offer states that I can accept only by painting the house [unilateral]. I start painting. Have I accepted the
offer so that I am bound to finish the job?
2) Once I start painting his house, can House still revoke his offer? |
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Definition
1) NO, a unilateral contract can be accepted only by COMPLETING performance. Therefore I have NOT accepted the offer and do NOT have to finish the job.
2) Not on the MBE. (seems unfair -- but remember that House chose this type of offer [where he cannot revoke but I can walk away])
[***NY DIST***] In NY, House can revoke all the way up to the time I complete performance. |
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Term
IMPROPER PERFORMANCE
1. COMMON LAW
2. SALE OF GOODS (Article 2): |
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Definition
1. COMMON LAW: Simultaneous acceptance and breach.
2. SALE OF GOODS (Article 2): Simultaneous acceptance and breach unless seller is sending the
goods as an accommodation to buyer.
- "accommodation" is a "magic word" |
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Term
“Mailbox Rule”
****
On May 6, Captain Kirk offers to sell the Starship Enterprise to the Klingons for $5 million. On May 7, they mail an
acceptance. On May 8, they receive a letter revoking the offer. Result? |
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Definition
GENERAL RULE: Acceptance is effective when mailed (“Mailbox Rule”).
- lost in the mail irrelevant -- burden of loss still on offeror once acceptance mailed.
- exceptions: MAILBOX RULE DOES NOT APPLY:
1) TO IRREVOCABLE OFFER
2) where offer states otherwise
3) REJECTION sent FIRST
***
Since acceptance effective when it is mailed, and revocation only effective upon receipt, offer was accepted on May 7th.
- typical MBE question (the letters crossing in the mail) -- always 1 or 2 MBE questions on "Mailbox Rule" |
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Term
On Monday, Seller offered to sell Buyer his camera for $400. On Wednesday, Buyer mailed an acceptance. On
Thursday, Buyer called to tell Seller, “I have no interest in buying your camera.” On Friday, Seller received Buyer's
letter agreeing to purchase the camera.
If Seller brings an action against Buyer for breach, how should the court rule?
(A) For Buyer, because the description of the subject matter was too indefinite.
(B) For Buyer, because Seller received the rejection before he received the acceptance.
(C) For Seller, because Buyer's letter accepting the offer was effective when mailed.
(D) For Seller, because Buyer's attempted rejection was oral. |
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Definition
(A) wrong because nothing indefinite here.
(D) wrong because whether oral/written irrelevant
(B) is wrong -- trap set by examiners --> the Mailbox Rule still applies
So correct answer is (C) - courts should rule for seller because buyer's acceptance was effective under Mailbox Rule. |
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Term
Captain Kirk offers to sell the Enterprise to the Klingons for $5 million. They pay him $3,000 to hold the offer open
until May 9. On May 9, the Klingons mail an acceptance. On May 10, Kirk calls to revoke his offer. On May 11, he
receives their acceptance. Is Captain Kirk bound? |
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Definition
| NO, because Kirk could revoke the offer after May 9th. It doesn't matter that Klingons mailed acceptance on may 9th because MAILBOX RULE DOES NOT APPLY TO IRREVOCABLE OFFER, so the acceptance will be effective only when it is received. |
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Term
Captain Kirk offers to sell the Enterprise to the Klingons for $5 million. They mail a rejection on May 8 and then
mail an acceptance on May 9. Is Captain Kirk bound? |
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Definition
| It depends. It is a race -- whichever one gets there first is effective. (because mailbox rule does not apply) |
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Term
LACK OF CAPACITY:
CATEGORIES:
GENERAL RULE
EXCEPTION |
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Definition
1. CATEGORIES: Minors (under 18); intoxicated; mentally incompetent.
2. GENERAL RULE: An incapacitated defendant may disaffirm the contract.
3. IMPLIED AFFIRMATION: Retaining the benefit after (re-)gaining capacity.
4. EXCEPTION: An incapacitated party is liable for necessaries (i.e., food, shelter, clothing, and
medical care), but only for the reasonable value, not the contract price. |
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Term
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Definition
ECONOMIC DURESS: Rarely a successful defense against formation unless….
3 requirements:
1) Threat to break existing contract;
2) Buyer only agreed to 2nd deal to get the 1st deal done; and
3) because there is no reasonable alternative
- very rarely a successful defense against formation -- unless the facts are just like the hypo here. |
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Term
MISREPRESENTATION/NON-DISCLOSURE OF A MATERIAL FACT
S tells B his house has no foundation problems. That statement induces B to agree to buy S's house. S honestly
believes the house has no foundation problems, but it does. Is B bound? |
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Definition
No
- even an honest, innocent misrepresentation (or nondisclosure) is a fatal flaw in the agreement process as long as it concerns a MATERIAL fact.
-*highlight "material" --- on exam, issue often hinges on the "materiality" |
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Term
| AMBIGUITY/MISUNDERSTANDING |
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Definition
AMBIGUITY/MISUNDERSTANDING
B and S contract for the delivery of cotton on the "Peerless." B means the one sailing in May; S, the one in July.
Neither knows or has reason to know there are 2 ships named Peerless. Result?
- No contract -- because of the "ambiguity."
Where the parties are on "different wavelengths."
What if B knows or has reason to know there are 2 ships named Peerless?
Then there is a contract on the seller's terms.
Rule: the INNOCENT party's meaning will prevail. (so since buyer knew he could have cleared it up and since he didn't we take the seller's terms) |
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Term
MISTAKE ABOUT A MATERIAL FACT
1. MUTUAL MISTAKE
2. UNILATERAL MISTAKE |
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Definition
1) MUTUAL: either/both parties excused by their mutual of MATERIAL fact.
***rule: (for bar exam purposes) a mistake as to VALUE is NOT considered "material."
[**most likely question type on bar**]
2) UNLIATERAL: one party's mistake is not a fatal flaw in the agreement process UNLESS the other party knew or had reason to know about it. |
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Term
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Definition
a. MBE: “Past consideration” is not consideration at all!
b. NYBE: “Past consideration” is consideration if it's expressly stated in a signed writing and
can be proven. |
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Term
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Definition
CONTRACT MODIFICATION [common law differs from Article 2]
a. COMMON LAW: New consideration is required to modify a contract. Performing a preexisting duty is not enough [“Preexisting Duty Rule”].
- **NY DIST: In NY, you do NOT need consideration for a modification, if the modification is in a SIGNED WRITING.
b. SALE OF GOODS (Article 2): Consideration is not required to modify a contract, but you
must show good faith. |
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Term
Ashlee Simpson contracts to sing at Owner's club for $25,000. On arrival, she demands $30,000 instead. Owner
agrees to pay her $30,000. After Ashlee performs, Owner refuses to pay her the
extra $5,000.
1) ***Is there consideration for Owner's promise to pay Ashlee the extra $5,000?
2) What if Owner's promise to pay the extra $5,000 is in writing? |
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Definition
1) No, because Ashley did not do anything extra -- she just did what she was already obligated to do (her "preexisting duty"), therefore there is NO CONSIDERATION for the extra $5k (because she didn't do anything extra to earn it).
- [VERY IMPORTANT AND REPEATEDLY TESTED ON -- know difference b/w common law vs. article 2]
2) On MBE -- does NOT matter.
[***NY DIST***] In NY, you do NOT need consideration for a modification, if the modification is in a SIGNED WRITING.
- NY examiners LOVE to test on this issue.
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Term
Michael Kors contracts to sell a frock to Heidi Klum for $4,000. Later, they agree to increase the price to $4,500. Is
Heidi's promise to pay the extra $500 enforceable? |
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Definition
Yes, as long as there was a GOOD FAITH REASON for raising the price. (remember, you do NOT need consideration to modify a K under Article 2 -- all you need is good faith).
- VERY LIKELY TO BE TESTED ON MBE. |
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