MBE Contracts

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  1. Option Ks
    The majority view is that the acceptance of an option is effective only when received by the offeror, so the usual "mailbox rule" does not apply to make the acceptance effective on dispatch.
  2. Option Ks
    When the time the offer will remain open is specified in the offer, if it is not accepted within that time, the offer terminates due to lapse of time.
  3. Option Ks
    the consideration exchanged by the offer for the offeror's promise not to revoke need not be "adequate"--generally, consideration of any value is sufficient to support an option
  4. Promises to make Gifts
    Promises to make gifts in the future are unenforceable even if they are in writing and are intended by the promisor to be enforceable. 

    • A promise to make a gift does not involve a bargained for exchange, and the requirement of consideration is not fulfilled.
    • >>: In order to be part of the bargain, the element of consideration must be part of the bargained-for exchange (not something that had already been given--emotional support given before does not count; emotional support from there on counts)
  5. Promissory Estoppel
    Under the doctrine of promissory estoppel, where there is a substantial detrimental reliance by a party on a promise of the promisor, the promise will be enforceable even absent consideration.
  6. Gratuitous Promise
    Even without consideration, Restatement says promisee can enforce promise if he reasonably and foreseeably relied on the promise.  The promise is enforceable under promissory estoppel principles.
  7. Should K to pay debts of another be in writing?
    Yes. Ks in which one party promises to pay the debt of another must be in writing.

    Suretyship promises fall under SOF.

    Surety will be bound by her promise to pay another's debt as long as she makes her promise before the creditor performs or promises to perform; the surety need not receive any separate consideration.
  8. What is an illusory promise?
    A promise is illusory when there is not consideration on both sides of the K.
  9. Battle of the Forms (recurring MBE fave)
    UCC: An acceptance containing additional or different terms is effective as between merchants UNLESS the offer expressly makes his acceptance conditional on assent by the offeror to the additional terms. 

    Otherwise, the additional different terms would become part of the contract because they are merchants,

    UNLESS (1) it materially altered the original terms of the offer (i.e., changed a party's risk or the remedies available); (2) the offer had expressly limited acceptance to the terms of the offer; or (3) the offeror objected to the terms within a reasonable time after notice of it.
  10. Unilateral Mistake
    Where one party makes a unilateral mistake about a basic assumption on which the K is based, and the other party knew or had reason to knw of the mistake, the mistaken party will be allowed to rescind the K. 

    Making a unilateral mistake alone, however, is not sufficient to allow the mistaken party to rescind the K (only when other party should have known that the first party made mistake).
  11. Mutual Mistake
    Occurs when both parties to a K are mistaken about existing facts relating to a basic assumption on which the K is made.
  12. K Modifications (UCC-Article 2) (movable goods)
    Consideration is not required for an enforceable modification; however, any modification will be subject to the general Code requirement of good faith and fair dealing, which requires honesty in fact and conformity with reasonable commercial standards. 

    *UCC abolishes the preexisting duty rule and the requirement of additional consideration to support a modification.
  13. Memoranda between Merchants
    Goods, $500=SOF under UCC

    If both merchants, a memoranda of the terms of the sale sent by one to the other satisfies the  SOF unless the party receiving the memo objects within 10 days.
  14. Order for "Prompt Shipment"
    Movable goods=Article 2 UCC

    An order for "prompt shipment" may be accepted by shipment of either conforming or nonconforming goods, and a contract is created upon such shipment. 

    • Receiving party may:
    • (1) reject the nonconforming shipment and sue for damages; or 
    • (2) accept the shipment, notify the seller of the breach, pay the K price, and seek damages even after accepting the nonconforming goods. 

    *Even where a buyer rightfully rejects a nonconforming tender, the buyer is under no obligation to reship prior to receipt of reasonable instructions from the seller.
  15. "Cover" Damages: Article 2 UCC (movable good)
    When a seller fails to deliver goods as promised, the buyer may "cover" by making a reasonable purchase of substitute goods, and then may recover as damages the difference bween the K price and the "cover" price.
  16. Third Party Beneficiaries (MBE Fave)
    • The rights of a 3PB do not vest until: 
    • (1) it manifests assent in a manner invited or requested by the parties;
    • (2) it learns of the K and detrimentally relies on it; or
    • (3) it brings a lawsuit to enforce its rights. 

    Until a 3P's rights have vested, a modification of the K can take place without the consent of the 3P.
  17. Parole Evidence Rule (conditional precedent exception)
    In general, parol evidence rule bars oral evidence contradicting written agrmt which was intended to be final and exclusive embodiment of the parties' agrmt. 

    HOWEVER, one exception to this general rule provides that parol evidence is admissible to show a condition precedent to the existence of a K.
  18. Anticipatory Repudiation (MBE fave)
    • Language may constitute an expression of doubt as to one's ability to perform under the K without being an outright refusal. 
    • >>This will not be an anticipatory repudiation, but a prospective inability to perform. 

    • If there is an an anticipatory repudiation, then the nonbreaching party can:
    • (1) sue for damages,
    • (2) contract with a 3P, or
    • (3) do nothing. 

    If the fact pattern language amounts to a prospective inability to perform, the innocent party may suspend performance until he receives adequate assurances that performance will be forthcoming.
  19. Excuse of delay in Performance
    The doctrines of impracticability of performance OR impossibility of performance are defenses that can be used not only to excuse performance totally, but also to excuse the delay in performance.
  20. Perfect Tender Rule
    is incorporated into every K for the sale of goods except where the K specifies different terms or where there is an explicit installment contract.
  21. Insolvent Buyer
    if the buyer becomes insolvent, the seller could, under the UCC, require that the buyer pay cash upon delivery or give assurance of payment.
  22. Assignments
    A creditor's right to receive money due from a debtor is a right that can be assigned, regardless of whether the debt is evidenced by a writing (neither writing nor consideration are required for the validity of an assignment).
  23. Gratuitous Assignments
    generally revocable

    EXCEPT when the assignor is estopped from revoking bc he should reasonably foresee that the assignee will change his position in reliance on the assignment and such detrimental reliance occurs. 

    One way in which a gratuitous revocable assignment may be terminated is by the assignor taking performance directly from the obligor.
  24. Novation
    when a new K substitutes a new party to receive the terms of the old K
  25. Damages
    Unless there is an expressed condition that would reasonably be understood to provide for forfeiture of payment unless there is full performance, a breaching party may seek restitution damages for the fair value of any benefit conferred, the reasonable value of services provided. 

    • Nonbreaching party has choice of remedies:
    • (1) may enforce the benefit of the bargain and elect to pay breaching party the K price minus the cost of finishing the job by some other means; OR
    • (2) may rely on the material breach as a reason to set aside the bargain, in which case the nonbreaching party need only pay the breaching party the net benefit received (i.e. reasonable value of services less any damages incurred due to breaching party's failure to perform)
    The primary objective of K damages is to put the nonbreaching party in the same position that he would have been in had he K been performend. 

    The normal measure of damages is expectation damages.

    The breaching party will prevail in a restitution action only if the nonbreaching party seeks to keep the value of the benefit conferred without paying and, therefore, is unjustly enriched.
  27. UCC 4 MEASURES OF DAMAGES (when a buyer defaults after putting down a deposit)
    (1) the deposit can serve as liquidated damages if the K so provides, within certain limits. 

    (2) when a deposit is given and there is no liquidated damages provision, the seller may keep 20% of the K price or $500, whichever is less. HOWEVER, if actual damages are more, the seller may collect actual damages rather than the statutory amount.

    • Two Measures of Actual Damages:
    • (1) traditional expectancy damages (resale price minus K price); OR
    • (2) when the seller is a dealer and the traditional measure of damages is inadequate to put him in as good a position as he would be in if the sale went through, then the measure of damages is lost profit. 

    NOTE** even a defaulting party has the right to recover a portion of the deposit back in restitution if the amt of the deposit exceeds the K damages to which the non-defaulting party is entitled.
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MBE Contracts
MBE Contracts
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