Multistate Bar Examination (MBE) Contracts Syllabus

Distinguish mutual mistake from unilateral mistake as a defense.

Mutual mistake (both parties wrong about a basic assumption materially affecting the exchange, risk not allocated) makes the contract voidable by the adversely affected party. Unilateral mistake usually does not unless the other party knew or should have known of the mistake (or enforcement would be unconscionable).

What must be shown for fraudulent misrepresentation to void a contract?

(1) A false assertion of material fact, (2) made knowingly/recklessly (scienter), (3) with intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damages. The contract is voidable by the deceived party.

What is the difference between duress and undue influence?

Duress is an improper threat that leaves no reasonable alternative but to assent (contract voidable). Undue influence is unfair persuasion by a party in a dominant/confidential relationship overcoming the other's free will.

What two elements define an unconscionable contract, and when is it measured?

Procedural unconscionability (unfair bargaining process, e.g., hidden terms, unequal power) and substantive unconscionability (grossly unfair terms). Unconscionability is assessed at the time of formation; courts may refuse to enforce or limit the clause.

What transactions does UCC Article 2 govern, and who is a 'merchant'?

Article 2 governs contracts for the sale of goods (movable, tangible personal property). A merchant is one who regularly deals in goods of the kind or holds themselves out as having special knowledge/skill regarding the goods.

For mixed goods-and-services contracts, what test determines whether the UCC applies?

The predominant purpose test—the UCC applies if the contract is predominantly for goods; common law applies if it is predominantly for services. (Exception: some states 'gravamen' test looks at which part caused the harm.)

How does UCC 2-204 differ from the common law on contract formation certainty?

Under the UCC, a contract can form even if terms are left open, so long as the parties intended to contract and there is a reasonably certain basis for a remedy. Open price, place, or time can be filled by UCC gap-fillers; quantity generally cannot.

State the UCC 2-207 'battle of the forms' rule between merchants.

A definite acceptance with additional terms still forms a contract. Between merchants, additional terms become part of the contract unless: the offer limits acceptance to its terms, the new terms materially alter the deal, or the offeror objects within a reasonable time.

Under UCC 2-207, what happens to additional terms when one party is a non-merchant?

The additional terms are treated as mere proposals for addition and do not become part of the contract unless expressly assented to by the other party.

What is the UCC gap-filler for price when none is stated?

Under UCC 2-305, the price is a reasonable price at the time of delivery if the parties intended to contract but left price open or to be agreed/set by a standard that fails.

What contracts fall within the Statute of Frauds (must be in writing)? Use the MY LEGS mnemonic.

Marriage (consideration of marriage), contracts that cannot be performed within one Year, Land transactions, Executor/administrator promises to pay estate debts personally, Goods of $500 or more (UCC), and Suretyship (promise to answer for another's debt).

What does the Statute of Frauds require the writing to contain?

It must (1) evidence a contract, (2) identify the essential terms (and quantity under the UCC), and (3) be signed by the party to be charged. The UCC requires only a writing signed by the defendant indicating a sale of goods and stating quantity.

Name the main exceptions that satisfy or remove the Statute of Frauds for the sale of goods.

(1) Specially manufactured goods, (2) admission in pleadings/testimony, (3) part performance (payment or delivery accepted) to the extent performed, and (4) the merchant confirmatory memo (failure to object within 10 days binds the receiving merchant).

What is the part-performance exception to the Statute of Frauds for land contracts?

An oral land contract may be enforced (specific performance) if the buyer does two of three: pays part/all of the price, takes possession, and/or makes substantial improvements—acts unequivocally referable to the contract.

State the parol evidence rule.

When parties reduce an agreement to a writing intended as a final expression, evidence of prior or contemporaneous oral, and prior written, agreements that contradict or (if fully integrated) supplement the writing is inadmissible.

What is the difference between a partial and a complete (total) integration under the parol evidence rule?

A partial integration is final but not complete—consistent additional terms may be added. A total integration is final and complete—no additional terms may be added, only those that contradict are barred plus any supplementary terms.

List evidence that the parol evidence rule does NOT bar.

Evidence to: show a defense to formation (fraud, duress, mistake, illegality), clarify ambiguity, establish a condition precedent to effectiveness, show a subsequent (later) modification, or (UCC) supply course of dealing/usage of trade/course of performance.

What is a condition in a contract, and what are the three timing types?

A condition is an event (not certain to occur) that must occur, unless excused, before performance becomes due. Types: condition precedent (must occur before duty arises), condition concurrent (occur simultaneously), and condition subsequent (cuts off an existing duty).

Distinguish an express condition from a constructive (implied) condition and the standard of compliance for each.

An express condition is stated by the parties and requires strict/literal compliance. A constructive condition is imposed by courts to ensure order of performance and requires only substantial compliance.

How may a condition be excused?

By waiver, estoppel, the protected party's wrongful prevention/hindrance of the condition, voluntary disablement, anticipatory repudiation, impossibility, or to avoid forfeiture (for non-material conditions).

What is the common law substantial performance doctrine?

A party who substantially performs (only minor, non-willful deviations) may recover the contract price minus damages for the defects. Material breach, by contrast, bars recovery on the contract. The doctrine does not apply where compliance is an express condition.

What is the UCC perfect tender rule?

Under UCC 2-601, the buyer may reject goods if the tender fails in any respect to conform to the contract—accept all, reject all, or accept any commercial units and reject the rest. (Limited by cure, installment contracts, and good faith.)

What is the seller's right to cure under the UCC?

A seller may cure a nonconforming tender by notifying the buyer and making a conforming delivery within the contract time. After the time has passed, the seller may cure within a reasonable time if it reasonably believed the tender would be acceptable.

List the principal ways contractual duties can be discharged.

Full performance, rescission, accord and satisfaction, novation, modification, release, account stated, impossibility, impracticability, frustration of purpose, condition subsequent, lapse, and operation of law.

Distinguish accord and satisfaction from novation.

An accord is an agreement to accept a different (often lesser) performance to satisfy an existing duty; satisfaction is performing the accord, which discharges the original duty. A novation substitutes a NEW party for an original party, with all parties' assent, discharging the replaced party.

Define impossibility, impracticability, and frustration of purpose.

Impossibility: performance objectively cannot be done (death of essential person, destruction of subject matter, supervening illegality). Impracticability: extreme/unreasonable difficulty from an unforeseen event whose non-occurrence was a basic assumption. Frustration: performance is still possible but the purpose is destroyed by an unforeseen event known to both parties.

What is a material breach and its consequence for the non-breaching party?

A breach that substantially impairs the value of the contract (the injured party does not receive the substantial benefit of the bargain). It excuses the non-breaching party's counter-performance and allows immediate suit for total breach.

What factors determine whether a breach is material?

Extent the injured party is deprived of expected benefit, adequacy of compensation, extent of part performance/forfeiture by breacher, likelihood of cure, and good faith of the breaching party (Restatement factors).

What is anticipatory repudiation and what are the non-repudiating party's options?

An unequivocal statement or voluntary act before performance is due that a party will not perform. The other party may: (1) sue immediately for breach, (2) suspend performance and await performance, (3) treat the contract as discharged, or (4) urge performance. Repudiation can be retracted before the other party relies or sues.

When a party has reasonable grounds for insecurity under the UCC, what may they do?

Under UCC 2-609, demand adequate assurance of performance in writing and suspend their own performance. Failure to provide assurance within a reasonable time (max 30 days) is treated as a repudiation.

What is the goal of expectation damages and how are they measured?

To put the non-breaching party in the position they would have occupied had the contract been performed (benefit of the bargain). Generally = loss in value + other/consequential + incidental losses − costs avoided − loss avoided.

Distinguish reliance damages from restitution damages.

Reliance damages reimburse expenses incurred in reliance on the contract, restoring the plaintiff to their pre-contract position. Restitution damages recover the value of a benefit conferred on the defendant, preventing unjust enrichment (measured by benefit to defendant).

What are consequential damages and the limitation on recovering them (Hadley v. Baxendale)?

Consequential damages are losses beyond the contract itself flowing from the breach (e.g., lost profits). They are recoverable only if they were foreseeable to the breaching party at the time of contracting—arising naturally or from special circumstances the breacher knew.

State the duty to mitigate damages.

The non-breaching party cannot recover damages that could have been avoided with reasonable effort. Avoidable losses are not recoverable; reasonable mitigation expenses are recoverable. (Common law term—UCC uses cover.)

What is the buyer's measure of damages for a seller's breach under the UCC (non-delivery)?

Buyer may recover cover damages (cost of cover − contract price) if buyer covers in good faith, OR market damages (market price at time buyer learned of breach − contract price), plus incidental and consequential damages, minus expenses saved.

What is the seller's measure of damages for a buyer's breach under the UCC?

Generally contract price − market price (at time/place of tender) + incidental damages, OR contract price − resale price if seller resells in good faith. A lost-volume seller may instead recover lost profit. Seller may recover the price for accepted goods or goods that cannot be resold.

When is specific performance available as an equitable remedy?

When the legal remedy (damages) is inadequate, the contract terms are definite, mutuality/feasibility of enforcement exists, and no defenses apply. It is presumed for land contracts and unique goods; it is NOT granted for personal-service contracts.

What are the equitable defenses to specific performance?

Laches (unreasonable delay causing prejudice), unclean hands (plaintiff's own wrongdoing in the transaction), and the sale to a bona fide purchaser.

When is a liquidated damages clause enforceable?

When (1) actual damages were difficult to estimate at formation, and (2) the stipulated amount is a reasonable forecast of probable harm. If it operates as a penalty (grossly disproportionate), it is unenforceable.

What is an intended third-party beneficiary versus an incidental beneficiary?

An intended beneficiary is one the parties intended to benefit and who can enforce the contract (creditor or donee beneficiary). An incidental beneficiary benefits only by happenstance and has no enforcement rights.

When do a third-party beneficiary's rights 'vest,' and why does it matter?

Rights vest when the beneficiary (1) manifests assent to the promise, (2) sues to enforce it, or (3) materially/justifiably relies on it. After vesting, the original parties cannot modify or rescind the contract without the beneficiary's consent.

Whom can an intended third-party beneficiary sue, and whom can the promisee sue?

The beneficiary can sue the promisor on the contract (subject to the promisor's defenses). A creditor beneficiary may also sue the promisee on the underlying debt. The promisee can sue the promisor to enforce the promise.

What is an assignment of rights, and what is its effect?

An assignment is the present transfer of a contract right to a third party (assignee). It extinguishes the assignor's right and gives the assignee the power to enforce it directly against the obligor.

What rights are NOT assignable?

Assignments that would materially change the obligor's duty/risk (e.g., personal-service or requirements contracts changing quantity), assignments barred by law/public policy, and assignments validly prohibited by contract (though anti-assignment clauses are often read to bar only the right, not the power).

As between successive assignees of the same right, who prevails?

Majority rule: the first assignee for value prevails (first in time). Minority/exceptions: a later assignee who first obtains payment, a judgment, a novation, or possession of a token/document, or who detrimentally relies in good faith without notice, may prevail.

What is delegation of duties, and which duties cannot be delegated?

Delegation is appointing another to perform one's contractual duties. Non-delegable duties: those involving personal skill/judgment or special trust, where the contract prohibits delegation, or where delegation would materially alter the obligee's expectancy.

Does delegation relieve the delegating party of liability?

No. The delegator remains liable for performance unless there is a novation. If the delegatee assumes the duty for consideration, the obligee becomes an intended beneficiary and can sue the delegatee as well.

What is an express warranty under UCC 2-313 and how is one created?

An express warranty is created by any affirmation of fact or promise about the goods, any description of the goods, or any sample/model—each made part of the basis of the bargain. Mere opinion, puffery, or value statements do not create one.

What is the implied warranty of merchantability and when does it arise?

Under UCC 2-314, a warranty that goods are fit for their ordinary purpose (pass without objection in the trade, adequately contained/labeled, of fair average quality). It is implied in every sale by a merchant who deals in goods of that kind.

What is the implied warranty of fitness for a particular purpose?

Under UCC 2-315, when ANY seller has reason to know the buyer's particular purpose and that the buyer is relying on the seller's skill/judgment to select suitable goods, there is an implied warranty that the goods fit that particular purpose.

How can the implied warranty of merchantability be disclaimed?

By mentioning 'merchantability' (must be conspicuous if written), or by using language like 'as is,' 'with all faults,' or expressions making plain there is no implied warranty, or by the buyer's examination/refusal to examine, or by course of dealing/usage of trade.

How is the implied warranty of fitness for a particular purpose disclaimed, and how do disclaimers interact with express warranties?

A fitness disclaimer must be in writing and conspicuous (general language like 'there are no warranties beyond this writing' suffices). Express warranties generally cannot be disclaimed—a disclaimer inconsistent with an express warranty is inoperative.

What are the limits on contractually limiting remedies under the UCC?

Parties may limit/modify remedies (e.g., repair-or-replace, exclude consequential damages), but a limited remedy that fails of its essential purpose allows resort to UCC remedies, and limiting consequential damages for personal injury in consumer goods is prima facie unconscionable.