NextGen Bar Exam Contracts and Sales Syllabus

When can a party avoid a contract for a unilateral mistake?

A unilateral mistake about a basic assumption with material effect, where the mistaken party did not bear the risk, AND either (1) enforcement would be unconscionable, or (2) the other party knew or had reason to know of (or caused) the mistake.

What is duress in contract law, and what is its effect?

Duress is an improper threat that leaves the victim no reasonable alternative but to assent. Physical compulsion (e.g., forced signature) makes a contract void; other wrongful threats (including economic duress) make it voidable by the victim.

What are the elements of undue influence?

Undue influence is unfair persuasion of a party who is (1) under the domination of the persuader, or (2) by virtue of the relationship is justified in assuming the persuader will not act inconsistently with his welfare. The resulting contract is voidable.

Distinguish procedural from substantive unconscionability.

Procedural unconscionability concerns unfairness in the bargaining process (e.g., hidden terms, adhesion, unequal bargaining power, no meaningful choice). Substantive unconscionability concerns unfairly oppressive/one-sided terms. Courts typically require some of both, measured at the time of formation, and may refuse to enforce all or part of the contract.

When will a court refuse to enforce a contract on public policy grounds?

A court may refuse enforcement when the contract violates a statute or important public policy (e.g., contracts to commit crimes/torts, certain non-competes, exculpatory clauses for gross negligence). Courts weigh the interest in enforcement against the public policy violated.

Which contracts fall within the Statute of Frauds (the MY LEGS categories)?

Marriage (contracts in consideration of marriage); Year (cannot be performed within one year of formation); Land (interests in real property); Executor/administrator (to pay estate debts from own funds); Goods of $500 or more (UCC); Suretyship (promise to answer for another's debt). These must be evidenced by a signed writing.

What does the UCC Statute of Frauds require for a sale of goods of $500 or more?

A writing sufficient to indicate a contract was made, signed by the party to be charged, stating a quantity term. The contract is enforceable only up to the quantity stated. The price, time, and other terms may be omitted.

List the main exceptions that satisfy or excuse the Statute of Frauds for goods.

(1) Specially manufactured goods not suitable for resale (once seller substantially begins); (2) admission in pleadings/testimony; (3) part performance—enforceable to the extent of goods paid for or accepted/received; (4) the merchant's confirmatory memo rule (a signed confirmation not objected to within 10 days binds the receiving merchant).

State the parol evidence rule.

When parties reduce an agreement to a writing they intend as final, the parol evidence rule bars admission of prior or contemporaneous oral (and prior written) statements that contradict or, if the writing is fully integrated, supplement the terms. A partially integrated writing may be supplemented by consistent additional terms but not contradicted.

List key situations where parol evidence is admissible despite the rule.

To: (1) explain/interpret ambiguous terms; (2) show a defect in formation (fraud, duress, mistake, illegality, lack of consideration); (3) show a condition precedent to the contract's effectiveness; (4) prove a separate consistent collateral agreement; (5) show a subsequent modification (the rule bars only prior/contemporaneous statements).

What interpretation canons apply when contract language is ambiguous?

Courts give terms their ordinary meaning (or technical meaning in a trade), read the contract as a whole, prefer interpretations that make the contract valid, and construe ambiguities against the drafter (contra proferentem). Course of performance, course of dealing, and usage of trade are used to interpret meaning.

How does the UCC fill gaps in a sale-of-goods contract that omits terms?

The UCC supplies default 'gap-filler' terms: price = a reasonable price at delivery; place of delivery = seller's place of business; time = a reasonable time; payment = due at time and place of delivery. A contract does not fail for indefiniteness if the parties intended to contract and there is a reasonably certain basis for a remedy. (Quantity, however, must be specified.)

Distinguish a condition precedent from a condition subsequent.

A condition precedent must occur before a duty to perform arises. A condition subsequent is an event whose occurrence extinguishes an already-existing duty. (The party seeking to benefit from a condition precedent generally bears the burden of proving its occurrence; the party asserting a condition subsequent bears the burden.)

Distinguish express conditions from constructive conditions, and explain the doctrine of substantial performance.

Express conditions are agreed by the parties and require strict (literal) compliance; constructive (implied) conditions are imposed by law and satisfied by substantial performance. Under substantial performance, a party who substantially (but not fully) performs a constructive condition may recover on the contract minus damages for the shortfall—this doctrine does not apply to express conditions or to the UCC's perfect tender rule.

What is an express warranty under the UCC, and how is it 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, that becomes part of the basis of the bargain. Mere opinion or 'puffery' (sales talk) does not create an express warranty.

State the implied warranty of merchantability—who gives it and what it guarantees.

Implied warranty of merchantability is given automatically by a merchant who deals in goods of that kind. It guarantees the goods are fit for their ordinary purposes, of fair average quality, adequately packaged/labeled, and conform to label promises.

State the implied warranty of fitness for a particular purpose and its elements.

Arises when (1) the seller (any seller, not just a merchant) has reason to know the buyer's particular purpose, (2) the seller knows the buyer is relying on the seller's skill/judgment to select goods, and (3) the buyer in fact relies. The goods are warranted fit for that particular purpose.

How may a seller effectively disclaim implied warranties under the UCC?

To disclaim merchantability, the disclaimer must mention 'merchantability' and, if written, be conspicuous. To disclaim fitness, it must be in writing and conspicuous. Both are disclaimed by expressions like 'as is' or 'with all faults,' or by the buyer's examination/refusal to examine as to obvious defects.

In a contract involving a common carrier, when does risk of loss pass under a shipment contract versus a destination contract?

Shipment contract (e.g., FOB seller's city): risk passes to the buyer when the seller delivers conforming goods to the carrier. Destination contract (e.g., FOB buyer's city): risk passes when the goods are tendered to the buyer at the destination. If unspecified, the default is a shipment contract.

When no carrier is involved, when does risk of loss pass from seller to buyer under the UCC?

If the seller is a merchant, risk of loss passes when the buyer takes physical possession (receipt) of the goods. If the seller is a non-merchant, risk passes upon the seller's tender of delivery. (Note: a breaching seller bears the risk until cure or acceptance.)

State the standard for excusing performance by impossibility/impracticability.

Performance is excused when, after formation, an unforeseen event makes performance objectively impossible or commercially impracticable, the non-occurrence of that event was a basic assumption of the contract, and the party seeking excuse did not bear the risk and was not at fault (e.g., death of an essential person, destruction of subject matter, supervening illegality).

What are the elements of frustration of purpose?

(1) A supervening event (2) substantially frustrates a party's principal purpose, (3) the non-occurrence of that event was a basic assumption of the contract, and (4) the frustrated party did not bear the risk and was not at fault. Performance is still possible but has lost its value to the frustrated party, who is excused.

What factors determine whether a breach is material (common law)?

Factors (Restatement 241): (1) extent the injured party is deprived of expected benefit; (2) adequacy of compensation in damages; (3) extent of forfeiture by the breaching party; (4) likelihood the breaching party will cure; and (5) good faith of the breaching party. A material breach excuses the non-breaching party and allows suit for total breach; a minor breach allows damages but the duty to perform continues.

What is anticipatory repudiation and what options does it give the non-repudiating party?

Anticipatory repudiation is a clear, unequivocal statement or act before performance is due indicating a party will not perform. The non-repudiating party may: (1) sue immediately for breach; (2) suspend performance and wait until the performance date; (3) treat the contract as discharged; or (4) urge retraction. The repudiating party may retract until the other party materially changes position or treats it as final.

State the perfect tender rule and identify where it applies.

Under UCC 2-601, in a single-delivery sale of goods, if the goods or tender fail in any respect to conform to the contract, the buyer may reject all, accept all, or accept any commercial units and reject the rest. It applies to UCC goods contracts (not installment contracts, which use a 'substantial impairment' standard, and not common-law contracts).

When does a seller have a right to cure a nonconforming tender under the UCC?

A seller may cure: (1) if the time for performance has not yet expired, by notifying the buyer and making a conforming tender within the contract time; or (2) even after the time expires, if the seller had reasonable grounds to believe the nonconforming tender would be acceptable (with or without money allowance), upon seasonable notice and a conforming tender within a further reasonable time.

State the formula for expectation (benefit-of-the-bargain) damages.

Expectation damages = (loss in value caused by the breach) + (incidental and consequential damages) − (any cost or loss avoided by not having to perform). The goal is to put the non-breaching party in the position as if the contract had been fully performed.

Distinguish reliance damages from restitution damages.

Reliance damages reimburse expenses incurred in reliance on the contract, putting the plaintiff in the position as if the contract had never been made. Restitution damages disgorge the benefit conferred on the defendant (reasonable value), preventing unjust enrichment; available even absent an enforceable contract (quasi-contract).

What are the three principal limitations on recovery of contract damages?

(1) Foreseeability—consequential damages recoverable only if foreseeable at formation (Hadley v. Baxendale); (2) Certainty—damages must be proven with reasonable certainty, not speculative; (3) Mitigation (avoidability)—no recovery for losses the non-breaching party could have reasonably avoided. Also: causation.

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

The buyer may: (1) cover by buying substitute goods and recover (cover price − contract price) + incidental/consequential damages − expenses saved; (2) recover market damages = (market price at time buyer learned of breach − contract price) + incidentals/consequentials − savings; (3) seek specific performance for unique goods; (4) recover for accepted nonconforming goods (warranty damages) and revoke acceptance in proper cases.

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

The seller may: (1) resell the goods in good faith and recover (contract price − resale price) + incidentals − savings; (2) recover market damages = (contract price − market price) + incidentals − savings; (3) recover the full contract price for accepted goods or goods that cannot be resold; (4) recover lost-profit (lost-volume seller); (5) withhold/stop delivery.

Distinguish intended from incidental third-party beneficiaries, and explain when a beneficiary's rights vest.

An intended beneficiary (one the parties intend to benefit—creditor or donee) can enforce the contract; an incidental beneficiary cannot. Rights vest when the beneficiary (1) detrimentally relies, (2) manifests assent at a party's request, or (3) sues on the promise. Before vesting, the original parties may modify or rescind freely.

Distinguish assignment of rights from delegation of duties, including limits on each.

Assignment transfers contract rights to a third party (assignee); delegation transfers performance of duties to a delegatee. Rights are freely assignable unless the assignment materially changes the obligor's risk/duty, is barred by contract, or is prohibited by law. Duties are delegable unless they involve special skill/personal judgment, the obligee has a substantial interest in personal performance, or the contract bars it. A delegating party remains liable unless there is a novation.