Multistate Essay Examination (MEE) Contracts and Sales Syllabus

What is the effect of a contract made by a minor?

It is voidable by the minor. The minor may disaffirm before or shortly after reaching majority, or ratify it expressly or by conduct upon reaching majority. Minors remain liable for necessaries (quasi-contract).

Distinguish mutual mistake from unilateral mistake.

Mutual mistake: both parties err on a basic assumption materially affecting the exchange — the adversely affected party may rescind (unless he bore the risk). Unilateral mistake: only one party errs — generally enforceable unless the other party knew/should have known of the mistake or enforcement would be unconscionable.

What are the elements of fraudulent misrepresentation (fraud in the inducement)?

(1) A false assertion of material fact (or concealment), (2) made knowingly/recklessly (scienter), (3) with intent to induce reliance, (4) justifiable reliance, and (5) resulting damages. Renders the contract voidable.

What is unconscionability and when is it tested?

A contract or term so unfair/oppressive it shocks the conscience. Requires procedural (unfair bargaining, e.g., hidden terms, no choice) and substantive (unfair terms) elements. Tested at the time the contract was made; court may refuse to enforce or strike the term.

Which contracts fall within the Statute of Frauds (must be in writing)?

MY LEGS: Marriage (in consideration of), contracts not performable within one Year, Land interests, Executor promises to pay estate debts personally, Goods of $500 or more (UCC), and Surety (promise to answer for another's debt).

What does the Statute of Frauds writing require to be enforceable?

A writing (or writings) that reflects the essential terms and is signed by the party to be charged. Under the UCC, only quantity and the signature are essential.

List the main exceptions to the UCC Statute of Frauds.

(1) Merchant's confirmatory memo (binds receiving merchant who doesn't object within 10 days); (2) specially manufactured goods; (3) admission in pleadings/testimony; (4) goods accepted or paid for (enforceable to that extent).

How does part performance satisfy the Statute of Frauds for land?

An oral land contract becomes enforceable when the buyer does two of three: (1) pays all/part of the price, (2) takes possession, and/or (3) makes substantial improvements.

What is the parol evidence rule?

When parties reduce an agreement to a writing intended as the final integration, evidence of prior or contemporaneous agreements (oral or written) that contradicts or varies the writing is inadmissible.

What evidence is NOT barred by the parol evidence rule?

Evidence to: (1) clarify ambiguity, (2) show a defense to formation (fraud, duress, mistake, illegality), (3) show a condition precedent to effectiveness, (4) show a separate consistent additional term (if writing is only partially integrated), and (5) show a subsequent modification.

Under the UCC, how may a final writing be explained or supplemented?

By course of performance, course of dealing, and usage of trade — these are admissible even for a fully integrated writing (unless carefully negated), and by consistent additional terms unless the writing was intended as complete and exclusive.

What is the hierarchy of interpretation evidence under the UCC?

Express terms control over course of performance, which controls over course of dealing, which controls over usage of trade. (Express > performance > dealing > trade usage.)

What is a condition in a contract?

An event (other than the passage of time) that must occur before a performance becomes due (condition precedent) or that discharges a duty (condition subsequent). Non-occurrence of a condition means the duty never arises (vs. breach of a promise).

Distinguish a condition from a promise.

A promise is a commitment to act; its breach gives rise to damages. A condition is an event qualifying a duty; its non-occurrence excuses the conditioned duty but is not itself a breach. Ambiguous language is construed as a promise to avoid forfeiture.

Name five ways a condition can be excused.

(1) Waiver/estoppel, (2) wrongful interference/prevention by the protected party, (3) actual breach, (4) anticipatory repudiation, and (5) avoidance of disproportionate forfeiture (substantial performance/excuse of immaterial condition).

What is the common law doctrine of substantial performance?

A party who substantially performs (no material breach) may recover on the contract, minus damages for the defective performance. It applies to common law constructive conditions, NOT to the UCC sale of goods.

What factors determine whether a breach is material?

Restatement factors: extent the injured party is deprived of expected benefit, adequacy of compensation by damages, extent of part performance/forfeiture, likelihood of cure, and good faith of the breaching party. Material breach lets the nonbreacher suspend/cancel; minor breach only allows damages.

What is the perfect tender rule under the UCC?

In a single-delivery goods contract, if the goods or tender fail in any respect to conform, the buyer may reject all, accept all, or accept any commercial units and reject the rest. (Tender must be perfect, subject to cure and installment-contract rules.)

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

A seller may cure a nonconforming tender: (1) within the original contract time by notice and re-tender, or (2) beyond the contract time if the seller had reasonable grounds to believe the tender would be acceptable, by giving notice and curing within a reasonable time.

What is the standard for rejecting an installment under a UCC installment contract?

A buyer may reject an installment only if the nonconformity substantially impairs the value of THAT installment and cannot be cured. The whole contract is breached only if the defect substantially impairs the value of the WHOLE contract.

What is anticipatory repudiation and what may the nonbreaching party do?

An unequivocal statement or conduct before performance is due indicating a party will not perform. The other party may: (1) sue immediately, (2) suspend performance and wait, (3) treat it as discharged, or (4) urge retraction. Repudiation may be retracted before the other party relies or cancels.

What are an aggrieved party's options when reasonably insecure about the other's performance (UCC)?

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

What is the implied warranty of merchantability?

In every sale by a merchant who deals in goods of the kind, the goods are warranted to be fit for their ordinary purpose (pass without objection in the trade, adequately packaged/labeled, fungible goods of fair average quality). Implied by law; need not be stated.

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

Arises when the seller (any seller, not just a merchant) 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, and the buyer so relies.

How can implied warranties be disclaimed under the UCC?

By conspicuous language. Merchantability disclaimer must mention 'merchantability' (can be oral if conspicuous); fitness disclaimer must be in writing and conspicuous. Both are disclaimed by 'as is,' 'with all faults,' or by the buyer's examination of the goods.

What is an express warranty under the UCC?

Any affirmation of fact or promise, description of the goods, or sample/model that becomes part of the basis of the bargain. Mere opinion or 'puffery' is not an express warranty.

Name the ways contractual duties can be discharged.

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

Distinguish impossibility, impracticability, and frustration of purpose.

Impossibility: performance is objectively impossible (death of essential person, destruction of subject matter, supervening illegality). Impracticability: extreme/unreasonable difficulty due to an unforeseen event whose non-occurrence was a basic assumption. Frustration: performance is possible but the purpose has been destroyed by an unforeseen event; the other party knew of that purpose.

Distinguish accord and satisfaction from a novation.

Accord and satisfaction: an agreement to accept a different performance to discharge an existing duty (accord), discharged only when the new performance is rendered (satisfaction). Novation: substitution of a new party for an original party, with all parties' consent, immediately discharging the original obligor.

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

To put the nonbreaching party in the position it would have occupied had the contract been fully performed (the 'benefit of the bargain'). Generally: loss in value + other/consequential loss − cost avoided − loss avoided.

Compare reliance and restitution damages.

Reliance damages reimburse expenses incurred in reliance on the contract, restoring the party to its pre-contract position (used when expectation is too speculative). Restitution restores to the nonbreaching party the value of any benefit conferred on the breaching party, to prevent unjust enrichment.

What are the limitations on contract damages?

(1) Foreseeability (Hadley v. Baxendale — consequential damages must have been foreseeable at contracting); (2) certainty (damages provable with reasonable certainty); (3) mitigation (no recovery for avoidable losses); and (4) causation.

How are liquidated damages clauses enforced?

Enforceable if: (1) damages were difficult to estimate at the time of contracting, and (2) the amount is a reasonable forecast of probable harm. A clause that operates as a penalty is unenforceable (UCC also allows testing against actual harm).

What are the UCC buyer's remedies when the seller breaches?

Cover (buy substitute goods; recover cover price − contract price + incidental/consequential − expenses saved); market damages (market price at time buyer learned of breach − contract price); specific performance for unique goods; replevin; damages for accepted nonconforming goods (warranty); and the right to reject/revoke acceptance.

What are the UCC seller's remedies when the buyer breaches?

Resell and recover (resale price vs. contract price + incidental − expenses saved); market damages (contract price − market price); lost-profit (lost-volume) damages; action for the price (if goods can't be resold or buyer accepted); withhold/stop delivery; and reclaim goods from an insolvent buyer.

When does a UCC seller recover lost-volume profits?

When the seller has an effectively unlimited supply and would have made both the breached sale and the resale, so resale does not actually mitigate. The seller recovers the lost profit (plus incidentals) it would have earned on the buyer's order.

When is specific performance available?

When the legal remedy (damages) is inadequate — typically for unique subject matter such as land (always presumed unique) or rare/unique goods. Not available for personal service contracts (court may enjoin competing work instead).

What equitable defenses may bar specific performance?

Laches (unreasonable, prejudicial delay), unclean hands (plaintiff's own wrongdoing in the transaction), and sale to a bona fide purchaser. Also unconscionability and impossibility of performance.

What is reformation and rescission?

Reformation: an equitable remedy rewriting a writing to reflect the parties' true agreement, used for mutual mistake or fraud in expressing the deal. Rescission: cancellation of the contract, returning parties to the status quo ante, available for grounds like mistake, fraud, duress, or misrepresentation.

Who is an intended third-party beneficiary and what rights do they have?

A non-party the contracting parties intend to benefit (creditor or donee beneficiary). Once their rights vest, they may sue to enforce the contract. Incidental beneficiaries have no enforceable rights.

When do a third-party beneficiary's rights vest?

When the beneficiary: (1) manifests assent at one party's request, (2) detrimentally relies on the promise, or (3) sues to enforce. Before vesting, the original parties may freely modify or rescind; after vesting, they cannot without the beneficiary's consent.

What is the difference between assignment of rights and delegation of duties?

Assignment transfers a party's contractual rights (to receive performance) to a third party (assignee). Delegation transfers the performance of a party's duties to a third party (delegate). Rights are assigned; duties are delegated.

Which rights cannot be assigned, and what is the effect of an assignment?

Rights cannot be assigned if they materially change the obligor's duty/risk, are personal, or are barred by law or a valid anti-assignment clause. A valid assignment extinguishes the assignor's rights; the assignee may enforce directly against the obligor, who may raise defenses good against the assignor.

Which duties cannot be delegated, and does delegation discharge the delegator?

Duties cannot be delegated if they are personal (special skill/judgment) or barred by contract. Delegation does NOT discharge the delegating party's liability — they remain liable if the delegate fails to perform (unless there is a novation).