Contracts Big Picture Outline

When addressing a contracts essay or MBE question, you need to follow a very strict outline. Do not jump ahead, as you cannot address the issue of damages before you know what type of law applies.

I cannot stress how important it is to analyze a question, either essay or MBE, in this particular order. This will help assure that you do not miss any issues and organize your essay in a coherent fashion.

First, you have to decide WHAT LAW TO APPLY

This ALWAYS has to be the first question you ask yourself.

• UCC Article 2, if the contract deals with the sale of goods. Goods are a tangible movable item.
• Common Law, if the contract deals with services, land, or something other than goods.

Next, and you can NEVER skip this, you must ask IS THERE A CONTRACT

•  A contract is a legal relationship between two or more parties with:
• Offer → a manifestation of the intent to enter into a contract. Be sure that you distinguish a genuine offer from an advertisement or an invitation to deal. Analyze whether there is an intent to contract.  Know the difference between a UCC firm offer and the common law option contract.
• Acceptance → a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. Also, pay attention to whether the mode of acceptance is reasonable under the circumstances, since the offeror can dictate a means of acceptance.
  • Bilateral Contract: promise for a promise where the acceptance is a return promise.
  • Unilateral Contact: promise for performance where the acceptance is the return performance.
  • This is another place where common law and the UCC differ; common law states that there has to be a “mirror image,” where the UCC allows for battle of the forms.
• Consideration → bargained for legal detriment. Are both parties doing something, or giving something, they are not legally obligated to do? In addition, be sure it was actually bargained for, and not in the past.
  • Is there a consideration substitute? Such as promissory estoppel? This is synonymous with detrimental reliance.

Next, consider whether any DEFENSES BAR THE CONTRACT

• Lack of capacity → is one party a minor or otherwise lacking in capacity?
• Duress or coercion  → has one party been forced into the contract in some way?
• Fraud  → was the contract entered into under false pretenses?
• Illegality  → is the subject matter of the contract illegal? I.e., a contract to kill someone will not be enforced.
• Mutual mistake  → if both parties are mistaken as to a basic assumption of fact that has a material effect on the contract.
• Unilateral mistake  → if only one party is mistaken, this is generally not a defense. However, if the other party knew or had reason to know of the mistake, it will be a defense to the formation of the contract.
• Unconscionability  → is the contract unconscionable? The court looks at a multitude of factors.
• Statute of Frauds → does the contract need to comply with the statute of frauds? And if it needs to comply, does it? Namely, is there a writing that is signed by the party to be charged? Or, in the alternative, has there been substantial or full performance?
  • M – contract in anticipation of marriage
  • Y – a contract that will take over a year to complete
  • L – a contract for the sale of land
  • E –a contract to be an executor
  • G – a contract for a sale of goods over $500
  • S – a contract for surety ship

Then, and only after the first 3 steps, you INTERPRET THE CONTRACT

• Modification: Has the contract been modified in any way? Have there been any changes, either oral or written, to the original agreement? Is there a preexisting duty owed by one of the parties?
  • Remember that under common law one needs consideration, while under the UCC consideration is not required.
• Parol Evidence: any prior or contemporaneous oral or written statements that vary or contradict a fully integrated agreement cannot be brought in. However, if there is a partial integration, a prior or contemporaneous oral or written statement can come in to supplement, so long as it doesn’t contradict. Be wary of things that aren’t really parol evidence. Remember you can always bring in prior or contemporaneous statements to prove that there was not a contract (see conditions and defenses to contracts).
• What if a term is AMBIGIOUS? Then we look to, in order:
  • Course of Performance → what has previously been done in this particular contract?
  • Course of Dealings → what has previously been done in prior contracts between these particular parties?
  • Trade Usage: customary trade practices.

Finally, is there an EXCUSE FOR NON-PERFORMANCE

• Express Condition Precedent: where the performance is conditional on the occurrence of some event and the condition is stated in the agreement.
• Implied Conditions: implied by law.
  • Precedent: must occur before the performance or before the performance is excused.
  • Concurrent: must occur at the same time performance is rendered.
  • Subsequent– if it occurs, it extinguishes the absolute duty to perform.
• Impossibility: is the contract impossible for ANYONE to perform? Be wary, if someone somewhere can perform, it is not truly an impossibility.
• Frustration of Purpose: has the purpose of the contract been frustrated? For example, if you rented a room to watch a parade, and the parade gets canceled, that would be frustration of purpose.
• Impracticability: has the contract been made commercially impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made? Essentially, did something that neither party could foresee happen to make the contract commercially impracticable? Bear in mind that commercially impracticable is not the same as merely no longer profitable.
• Subsequent Agreement by the Parties: just like two consenting adults can contract for what they want, they can also agree to contract OUT of something.

Was there an ANTICIPATORY REPUDIATION

Ask yourself 2 questions

• Is the Contract fully executory (has neither party performed)? If yes, there may be an anticipatory repudiation. If no, anticipatory repudiation is not applicable and the party must give the other party time to perform.
• Did one party unequivocally state an inability or unwillingness to perform? If yes, then there may be an anticipatory repudiation. If no, but grounds for insecurity exist, the other party may request adequate assurances of performance. If such assurances are not received, it may be treated as an anticipatory repudiation.
• If there was an anticipatory repudiation, a party need not wait for the time for performance and may treat the contract as breached and sue immediately for damages.

Next, if the duty to perform is not excused, ask yourself: 

HAS THERE BEEN A BREACH

Please do not get to this step until you have analyzed absolutely EVERYTHING else.

• Is it major?
• Is it minor?

Are there any:  

THIRD-PARTY BENEFICIARY, ASSIGNMENT OR DELEGATION ISSUES

• TPB: intended or not?
• Delegation: a party can delegate duties
• Assignment: a party can assign rights

Finally, WHAT IS THE REMEDY

Never end a contracts essay without talking about a remedy. Why would you bring a breach of contract claim without asking for a remedy?

• Expectation: what the non-breaching party would have had if the contract had been fully performed. This is the most common type of damages.
• Reliance: to put the non-breaching party in the position they would have been before the contract was made.
• Restitution: this is to prevent unjust enrichment and is used on things like promissory estoppel.
• Consequential: things like lost profits, but it must be foreseeable.
• Incidental: any damages that are “extra,” such as storage costs, costs to resell, etc.
• Liquidated: where the contract specifies the amount of damages in the event of breach. This will be upheld so long as it is reasonable.
• Specific Performance: only used when goods are sufficiently unique.