BAR EXAM : MBE: CONTRACTS

MBE: CONTRACTS 2023
CONTRACTS AND SALES

INTRODUCTION

VOCABULARY

I. Unilateral Contract: results from an offer that expressly requires performance as the only
possible method of acceptance
II. Bilateral Contract: all other forms. Usually offer is silent as to the method of acceptance.
a. Bilateral contract unless:
i. Reward, prize, or contest;
ii. Offer expressly requires performance for acceptance
III. Quasi-Contract: equitable remedy

APPLICABLE LAW

I. Common Law: applicable law for any contract that is not sale of goods.
II. Article 2 UCC: applies to contracts that are primarily for sales of goods.
a. Factors:
i. Type of transaction (sale); and
ii. Subject matter of transaction (tangible, personal property – goods)
III. Mixed Deals:
a. General Rule: the most important part of the deal controls whether common law or UCC
applies.
b. Exception: if contract divides payment, then apply UCC to sale of goods part and common
law to the rest.
Overview of Agreement Process on
FORMATION OF CONTRACTS Bar:
Initial communication (offer); (2) what
I. Contract: an agreement that is legally enforceable. happens after the initial
II. Offer: communication (termination of the
offer); and (3) who responds and how
a. Test: Manifestation of commitment
i. A offer is a manifestation of an intention of one person to contract (words or conduct
showing commitment by one person)
ii. Standard: whether a reasonable person in the position of the offeree would believe
that his or her assent creates a contract.
b. Watch Out:
i. Content:
1. Missing price term in sales contract
a. Sale of real estate (common law) requires both a price and description
of the property  without a price term, there is no offer.
b. Sale of goods (UCC Art. 2) does not require a price term  there is
still an offer without a price term
2. Vague or ambiguous material terms  never an offer under either common
law or UCC
3. Requirement Contracts/ Output Contracts: A contract for the sale of goods
can state the quantity of goods to be delivered under the contract in terms of
the buyer’s requirements or seller’s output
a. Requirements or output contracts are not vague or ambiguous and
are, therefore, valid.
b. Increase in Requirements: buyer can increase requirements so long as
the increase is in line with prior demands. No unreasonably
disproportionate limitation on increases.
ii. Context:
1. General Rule: an advertisement or price quotation is not an offer.
2. Exceptions:

, MBE: CONTRACTS 2023
a. An advertisement can be a unilateral offer if it is in the nature of a
reward. (See Carbolic Smoke)
b. An advertisement can be an offer if it specifies quantity and expressly
indicates who can accept.
c. Price quotation can be an offer if it is sent in response to an inquiry.
III. Was the Offer Terminated? Offers generally create the power of acceptance in the person to
whom the offer was made (the “offeree), creating a contract. However, an offer cannot be
accepted if it has been terminated.
a. Lapse of Time: either the time stated or a reasonable time after the offer is made
b. Death of a Party Prior to Acceptance:
i. General Rule: death or incapacity of either party after the offer, but before
acceptance, terminates the offer.
ii. Exception: irrevocable offers.
c. Words or Conduct of Offeror (Revocation):
i. General Rule: An offeror may freely revoke an offer.
1. How to Revoke:
a. Later unambiguous statement by offeror to offeree of unwillingness or
inability to contract; or
b. Later unambiguous conduct by offeror indicating an unwillingness or
inability to contract that offeree is aware of.
ii. Exception: Irrevocable Offers
1. Option Contract: An offer can be revoked if the offeror has not only made an
offer but also:
a. Promised to keep the offer open; and
b. This promise is supported by payment or other consideration.
2. UCC Firm Offer Rule: An offer cannot be revoked for up to three months if:
a. The offer is to buy or sell goods;
b. There is a signed, written promise to keep the offer open; and
c. The party is a merchant (generally a person in business)
3. Reliance: An offer cannot be revoked if there has been:
a. Reliance that is
b. Reasonably foreseeable; and
c. Detrimental
4. Unilateral Contract: The start of performance pursuant to an offer to enter
into a unilateral contract makes that offer irrevocable for a reasonable time
to complete performance.
a. Mere preparation is never enough to make an offer irrevocable.
d. Words or Conduct of the Offeree (Rejection):
i. Counteroffer: generally terminates the offer and creates a new offer.
1. Distinguish from bargaining, which does not terminate an offer; and
2. Counteroffers do not terminate option
ii. Conditional Acceptance: a conditional acceptance terminate the offer [look for “if,”
“only if,” “provided that,” “so long as,” “but,” or “on condition that.”
1. Common Law: any conditional acceptance is a rejection and a counteroffer
that can be accepted by conduct.
2. UCC: any conditional acceptance is a rejection
iii. Additional Terms:
1. Mirror Image Rule: under common law, a response to an offer that adds new
terms is treated like a counteroffer rather than an acceptance.
2. Seasonable Expression of Acceptance: UCC Art. 2
a. Is there a contract: an offer that adds additional or different terms,
but does not make the terms a condition of acceptance, is generally
treated as an acceptance;