MBE WORKSHOP: CONTRACTS PROFESSOR LISA MCELROY DREXEL UNIVERSITY SCHOOL OF LAW

Size: px

Start display at page:

Download "MBE WORKSHOP: CONTRACTS PROFESSOR LISA MCELROY DREXEL UNIVERSITY SCHOOL OF LAW"

Jodie Thomas
5 years ago
Views:

MBE WORKSHOP: CONTRACTS PROFESSOR LISA MCELROY DREXEL UNIVERSITY SCHOOL OF LAW CHAPTER 1: CONTRACTS Editor's Note 1: The below outline is taken from the National Conference of Bar Examiners' website.

1 MBE WORKSHOP: CONTRACTS PROFESSOR LISA MCELROY DREXEL UNIVERSITY SCHOOL OF LAW CHAPTER 1: CONTRACTS Editor's Note 1: The below outline is taken from the National Conference of Bar Examiners' website. NOTE: Examinees are to assume that Article 2 and Revised Article 1 of the Uniform Commercial Code have been adopted and are applicable when appropriate. Approximately half of the Contracts questions on the MBE will be based on categories I and IV, and approximately half will be based on the remaining categories II, III, V, and VI. Approximately one-fourth of the Contracts questions on the MBE will be based on provisions of the Uniform Commercial Code, Article 2 and Revised Article 1. I. Formation of contracts (with part IV, 50% of the exam) A. Mutual assent 1. Offer and acceptance 2. Indefiniteness or absence of terms 3. Implied-in-fact contract 4. Pre-contract obligations based on reliance B. Consideration 1. Bargain and exchange and substitutes for bargain: moral obligation, reliance, and statutory substitutes 2. Modification of contracts: preexisting duties 3. Compromise and settlement of claims II. Defenses to enforceability A. Incapacity to contract B. Duress C. Undue influence D. Mistake, misunderstanding E. Fraud, misrepresentation, and nondisclosure F. Illegality, unconscionability, and public policy G. Statute of frauds III. Parol evidence and interpretation IV. Performance, breach, and discharge A. Conditions 1. Express 2. Constructive 3. Obligations of good faith and fair dealing in performance and enforcement of contracts 4. Suspension or excuse of conditions by waiver, election, or estoppel 5. Prospective inability to perform: effect on other party B. Impracticability and frustration of purpose C. Discharge of contractual duties D. Express and implied warranties in saleof-goods contracts E. Substantial and partial breach and anticipatory repudiation V. Remedies A. Measure of damages for breach; protecting the expectation interest

2 B. Consequential damages: causation, certainty, and foreseeability C. Liquidated damages and penalties D. Avoidable consequences and mitigation of damages E. Rescission and reformation F. Specific performance; injunction against breach; declaratory judgment G. Restitutionary and reliance recoveries H. Remedial rights of breaching parties VI. Third-party rights A. Third-party beneficiaries 1. Intended beneficiaries 2. Incidental beneficiaries 3. Impairment or extinguishment of third- party rights 4. Enforcement by the promisee B. Assignment of rights and delegation of duties Themis Bar Review, LLC MBE Workshop: Contracts

3 1. Focus on contract formation. TOP FIVE THINGS TO KNOW FOR CONTRACTS 2. Where there s a UCC rule, learn the distinction between common law and UCC. 3. Ask yourself whether there s an enforceable agreement and, if not, explore other theories of recovery. 4. Dates can be very important where many dates appear in a fact pattern, draw a timeline. 5. If a fact pattern mentions a conversation or a telephone call, take note. MBE Workshop: Contracts 2016 Themis Bar Review, LLC 3

4 CHAPTER 2: CONTRACTS - PRACTICE QUESTIONS Tip #1: Focus on contract formation. A homeowner entered into a contract with a landscaper. The contract specified that the homeowner would pay the landscaper $10,000 upon completion of a list of projects. The landscaper performed the work while the homeowner was away on vacation. When the landscaper sought payment, the homeowner refused, noting that a tree had not been trimmed as required by the contract. The landscaper responded that, since he would now have to forego other work in order to trim the tree, he would do it but only if the homeowner agreed to pay him a total of $10,500 for his services. The homeowner, desperate to have the work completed, agreed. Once the work was completed, however, the homeowner gave the landscaper a check for $10,000, and refused to pay more. The landscaper sued for breach of contract. Is the landscaper likely to succeed in his claim? A. No, because an enforceable contract cannot be renegotiated. B. No, because there was no consideration for the promise to pay $10,500 and no unanticipated circumstances arose. C. Yes, because there was a valid modification of the contract. D. Yes, because the landscaper suffered a detriment by foregoing other work. Answer choice B is correct. At common law, a promise to perform a preexisting legal duty does not qualify as consideration because the promisee is already bound to perform. In this case, the landscaper had a preexisting legal duty to trim the tree, and thus there was no consideration to support the homeowner's promise to pay an additional $500. Answer choice A is incorrect because an enforceable contract may be renegotiated. Even when there is a preexisting legal duty, there will be consideration if the promisee gives something in addition to what is already owed or varies the preexisting duty. Answer choice C is incorrect because modification of a services contract must be supported by consideration. Or some circumstances that were not anticipated when the contract was made must have arisen, and modification is fair and equitable in light of those circumstances. Answer choice D is incorrect because the fact that the landscaper had to forego other work would not serve as consideration in this case because the landscaper was under a preexisting legal duty Themis Bar Review, LLC MBE Workshop: Contracts

5 Tip #2: Where there s a UCC rule, learn the difference between the common law and the UCC. Completing an online form, a customer ordered a handmade colored glass ornament to hang in the window of her home. In a box labeled "Comments," the customer wrote, "red, please." Via , the online retailer sent a notice acknowledging the order, but reserving the right to send an ornament in any color. The retailer shipped the customer a green ornament. Which of the following arguments would not support the customer's position that she does not have to pay for the ornament? A. The retailer shipped nonconforming goods. B. The customer did not separately agree to receive an ornament in any color. C. Because customer was not a merchant, the retailer's additional term in acknowledgment is not part of contract. D. The retailer's acceptance did not mirror the customer's offer. [Answer explanation on next page] MBE Workshop: Contracts 2016 Themis Bar Review, LLC 5

6 CHAPTER 3: CONTRACTS - PRACTICE QUESTIONS Tip #2 Answer Explanation Answer choice D is correct. The mirror image rule, which states that acceptance must mirror the terms of the offer, does not apply to a sale of goods, such as a glass ornament. Answer choices A, B, and C are incorrect because they all support the customer's position that she does not have to pay for the ornament. Answer choice A is incorrect because the failure of the retailer to ship conforming goods (i.e., a red ornament) would constitute a breach of the retailer's contract obligations. Answer choice B is incorrect. Because the customer is not a merchant, any additional terms in the acceptance are treated as a proposal. This proposal must be separately accepted by the customer in order to become part of the contract. Answer choice C is incorrect because, if the acknowledgement is an acceptance, since the customer is not a merchant, a different term (i.e., an ornament of any color) is not part of the contract Themis Bar Review, LLC MBE Workshop: Contracts

7 Tip #3: Ask yourself if there s an enforceable agreement, and, if not, explore other theories of recovery. A local philanthropist, during a lecture to a class of high school students, promised to pay the college tuition of any student who received a perfect score on a college admissions test. Immediately after the lecture, a student told the philanthropist that he accepted the philanthropist's promise. The student thereafter signed up for a preparatory class for the test, hired a private tutor at significant expense, and quit all of his extracurricular activities. Shortly before the student took the test, the philanthropist's assistant contacted the student and told the student that the philanthropist withdrew his promise to pay for college. The student took the test and received a perfect score. The student sued the philanthropist based on the promise. Is the student likely to receive relief in his suit against the philanthropist? A. No, because the philanthropist revoked his offer before the student received a perfect score. B. No, because there was no consideration for the philanthropist's promise. C. Yes, because the student detrimentally relied on the philanthropist's promise. D. Yes, because the student accepted the philanthropist's offer prior to revocation. Answer choice C is correct. The doctrine of promissory estoppel (detrimental reliance) can be used under certain circumstances to enforce a promise that is not supported by consideration. A promise is binding if the promisor should reasonably expect it to induce action or forbearance, it does induce such action or forbearance, and injustice can be avoided only by enforcement of the promise. In this case, the student enrolled in a test preparation course, hired a private tutor, and quit his extracurricular activities in reliance on the promise. Moreover, the philanthropist should have reasonably expected such actions. Accordingly, the student will likely receive some relief, although he may receive reliance damages (e.g., money expended to pass the test) rather than expectation damages (i.e., payment of the student's college tuition). Answer choice A is incorrect because, although an offer can generally be revoked at any time before acceptance, an offeror's power to revoke an offer is limited when an offeree has detrimentally relied on the promise. Answer choice B is incorrect because the doctrine of promissory estoppel would likely apply to allow the student some relief despite the absence consideration. Answer choice D is incorrect because the offer could be accepted only by performance, that is, by achieving a perfect test score. MBE Workshop: Contracts 2016 Themis Bar Review, LLC 7

8 Tip #4: Where dates appear in a fact pattern, draw a timeline. A homeowner met with a contractor regarding remodeling the homeowner's kitchen. At the conclusion of their meeting, the contractor told the homeowner that he would charge her $9,000- $10,000 for the work, but that he would get back to her with a definite price once he returned to his office. When he arrived at his office, the contractor had a voic from the homeowner, saying that she would pay him $9,000 for the work they discussed. The contractor promptly returned her phone call, and left her a voic saying that he would do the work for $9,500, which the homeowner received. The next day, the contractor, having a change of heart, tried unsuccessful to reach the homeowner by phone. He left her a voic that he would do the work for $9,000 after all, and that he would start the following day unless he heard otherwise from her. The next day, the contractor showed up at homeowner's house, ready to begin. What best describes the relationship between the parties? A. A contract was formed when the contractor left the final voic . B. A contract was formed when the homeowner received the final voic . C. A contract was formed when the contractor showed up to begin work on the kitchen. D. There is no contract between the parties. [Answer explanation on next page] Themis Bar Review, LLC MBE Workshop: Contracts

9 CHAPTER 4: CONTRACTS - PRACTICE QUESTIONS Tip #4 Answer Explanation Answer choice D is correct. An offer is terminated by rejection. A modification of the terms of the offer acts as a rejection of the original offer and as a new counteroffer. In this case, the contractor's first voic served as a rejection of the homeowner's original offer of $9,000 and a counteroffer of $9,500. The original offer was terminated; the contractor could not later accept the homeowner's offer. Accordingly, no contract was formed. Answer choices A, B, and C are incorrect because the contractor rejected the homeowner's offer and thus there was no contract. MBE Workshop: Contracts 2016 Themis Bar Review, LLC 9

10 Tip #5: If a fact pattern mentions a telephone call or a conversation, take note. An adult daughter called a local restaurant to place a large delivery order. The restaurant generally requires a credit card for all delivery orders, but the daughter's father, who is a regular at the restaurant and happened to be there when the daughter placed the order, told the clerk that, in the event the daughter failed to pay for the food, he would do so. The restaurant delivered the order to the daughter, who, having decided to order something else instead, refused to accept or pay for the food. Can the restaurant collect from the father? A. No, because the father's promise was made orally. B. No, because a third party will not be held liable for the contract obligations of another. C. Yes, because the father promised to pay. D. Yes, because a parent is liable to pay for necessities provided to a child. Answer choice A is correct. The Statute of Frauds applies to suretyship agreements (i.e., one person's promise to pay the debts of another). Here, the daughter ordered food and was obligated to pay for the food. However, the father also promised to pay for the food if the daughter did not. This promise created a suretyship agreement. Since this agreement was not in writing, the restaurant cannot enforce it. Note that some oral suretyship contracts can be enforced (indemnity contracts and contracts wherein the surety's main reason for paying the debt is the surety's own economic advantage), but those circumstances are not present here. Answer choice B is incorrect because third parties may be liable for the debts of another if they agree to be sureties. In such cases the surety agreement must generally be in writing. Answer choice C is incorrect because, although the father did promise to pay for the food if his daughter failed to do so, the Statute of Frauds applies to a suretyship agreement. Since the agreement was not in writing the father's promise is unenforceable. Answer choice D is incorrect because, although a parent is liable for necessities, such as food, provided by a third party to a minor child, a parent is not liable for necessities provided to an adult daughter or son Themis Bar Review, LLC MBE Workshop: Contracts

BAREXAMDOCTOR.COM UNLIMITED ESSAYS AND PTS ONLINE! ESSAY APPROACH. Bar Exam Doctor. CONTRACTS ESSAY

BAREXAMDOCTOR.COM UNLIMITED ESSAYS AND PTS ONLINE! ESSAY APPROACH. Bar Exam Doctor. CONTRACTS ESSAY ESSAY APPROACH www.barexamdoctor.com CONTRACTS ESSAY I. DOES THE UCC APPLY? a. The UCC governs all Ks for the sale of goods b. The UCC also has special rule governing transactions between merchants c.