!

MBE$Strategies$for$Contracts$and$Sales!
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1.$Introductory$tips:$$

•! Contracts!and!Sales!is!one!of!the!hardest!subjects!for!students!to!master.!There!are!many!topics!
and!sub>topics!within!this!subject.!In!order!to!do!well!on!Contracts!and!Sales!problems,!you!must!
be!committed!to!memorizing!the!nuances!of!the!law.!So,!if!you!are!struggling!to!answer!questions!
correctly,!rather!than!increasing!the!quantity!of!questions!you!answer!each!day,!increase!the!time!
you!spend!memorizing!and!actively!reviewing!your!outline.!!!
•! If!you!are!having!trouble!mastering!Contracts!and!Sales,!it!is!worth!it!to!consider!making!your!own!
outline!(or!your!own!charts!and!diagrams!for!concepts!you!have!trouble!with).!Many!students!feel!
much!more!“in!control”!of!the!material!after!they!make!and!memorize!their!own!Contracts!and!
Sales!outline.!!
•! If!an!MBE!question!quotes!the!language!of!a!contract,!pay!attention!to!it!!The!question!is!using!
quotes!because!it!needs%them.!That!means!the!language!is!important.!It!could!be!raising!a!UCC!2>
207!“battle!of!the!forms”!issue,!a!parol!evidence!rule!issue,!an!interpretation!issue,!a!contract!
formation!issue,!among!a!variety!of!other!issues.!Pay!special!attention!to!quoted!language.!!
•! If! an! answer! choice! asks! you! to! make! a! judgment! you! are! not! qualified! to! make,! it! cannot! be!
correct.!Sometimes,!for!example,!an!answer!choice!for!a!Sales!question!regarding!UCC!2>207!will!
say!that!a!shipping!term!“materially!alters”!the!contract.!!Even!if!it!sounds!right,!it’s!probably!not!
since!the!answer!choice!asks!you!to!make!an!assumption!you!are!not!qualified!to!make.!!(A%tip%is%
to%look%for%the%word%“if”.%If%the%question%states%in%a%widget:shipping%contract,%“The%shipping%term%
won’t%be%a%part%of%the%contract%because%it%materially%alters%the%contract,”%that%answer%is%not%as%
good%as,%“The%shipping%term%won’t%be%a%part%of%the%contract%if%it%materially%alters%the%contract.”%
The%word%“if”%recognizes%that%soon:to:be:lawyers%are%not%expected%to%know%if%a%shipping%term%on%
a%box%of%widgets%materially%alters%a%contract.)%!
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2.$Be$aware$of$the$differences$between$performance$obligations$under$common$law$and$the$UCC.$$$
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Common$Law$Performance$Obligations:$$
Under!common!law!(e.g.,!service!contracts),!“substantial!performance”!is!required!in!order!for!the!other!
party’s!duty!to!arise.!Thus,!if!there!is!a!minor$breach!by!one!party,!the!other!party!must!still!perform!his!
duty!(but!can!also!sue!for!breach!of!contract!or!deduct!damages!for!the!breach).!!(An!exception!to!this!is!
if!there!is!an!express!condition,!but!these!conditions!are!not!covered!here.!Please!review!your!outline.)!
!
Problem:!!
A!homeowner!and!a!cleaning!company!entered!into!an!agreement!whereby!the!cleaning!company!agreed!
to!clean!the!homeowner’s!house!over!the!course!of!a!weekend.!The!contract!detailed!a!long!list!of!specific!
tasks!that!the!cleaning!company!would!undertake.!One!of!the!tasks!that!the!cleaning!company!agreed!to!
undertake! was! dusting! the!tops!of!the!chandeliers!and!replacing!broken!light!bulbs.!Nevertheless,!the!
cleaning!company!neglected!to!replace!two!broken!light!bulbs!in!the!living!room.!After!two!full!days!of!
cleaning,!the!cleaning!company!asked!for!full!payment!from!the!homeowner.!!

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What!are!the!obligations!of!the!homeowner?!!
(A)! The! homeowner! is! not! obligated! to! pay! anything! to! the! cleaning! company! because! the! cleaning!
company!breached!an!express!condition!of!the!contract.!
(B)! The! homeowner! is! not! obligated! to! pay! the! contract! price! to! the! cleaning! company;! rather,! the!
homeowner!must!only!pay!the!reasonable!value!of!the!work!completed.!!!
(C)! The! homeowner! is! obligated! to! pay! the! full! contract! price! to! the! cleaning! company! because! the!
cleaning!company!substantially!performed!its!duties.!
(D)!The!homeowner!is!obligated!to!pay!the!cleaning!company!but!may!deduct!the!damages!for!the!minor!
breach!from!the!total!amount!it!pays!the!cleaning!company.!!!
$
The! correct! answer! is! (D).! The! homeowner! must! pay! the! cleaning! company! pursuant! to! the! contract!
because!the!cleaning!company!“substantially!performed”!under!the!contract.!The!cleaning!company!did!
breach!the!contract,!but!its!breach!was!minor.!Thus,!the!homeowner!must!perform!and!may!simply!deduct!
the!damages!for!the!minor!breach.!(A)!is!incorrect!because!despite!the!fact!that!the!cleaning!company!
breached!the!contract,!it!was!a!minor!breach.!There!would!be!an!extreme!injustice!if!the!cleaning!company!
was!not!paid!anything.!(B)!is!incorrect!because!the!court!will!look!to!the!contract.!There!is!no!reason!to!
find!an!alternative!non>contractual!theory!here!as!the!parties!had!a!contract.!(C)!is!incorrect!because!the!
homeowner!may!deduct!damages!for!the!minor!breach.!!$$$$
$
UCC$(Sale$of$Goods)$Performance$Obligations:$$
OneGshot$Deals:$
The!“perfect!tender”!rule!is!required!for!“one>shot”!deals.!(A!one>shot!deal!exists!when!a!buyer!orders!
goods!that!come!in!one!shipment!rather!than!in!installments.)!Pursuant!to!the!perfect!tender!rule,!if!the!
buyer!receives!anything%other%than%exactly%what%he%ordered,%he%can%reject%the%goods.!!
!
If!you!order!a!black!coat!and!get!a!navy!blue!coat,!you!can!reject!the!navy!blue!coat.!If!you!order!100!blue!
bicycles!and!receive!99!blue!bicycles!and!1!red!bicycle,!you!have!three!options.!First,!you!can!reject!all!100!
bicycles.!Second,!you!can!accept!all!of!the!bicycles.!Third,!you!can!reject!the!commercial!unit!that!the!1!

MBE$Tip:$A$note$on$“curing”$an$incorrect$shipment:!!There!are!two!scenarios!where!the!seller!can!
“cure”!his!defective!shipment!and!send!the!right!goods!even!if!he!initially!sends!the!wrong!goods!in!
one>shot!deals.!!!
•!First,!if!the!seller!still!has!time&to&perform!under!the!contract!(e.g.,!if!the!bicycles!were!due!to!be!
shipped!by!July!1!and!the!seller!sent!them!early!–!for!example,!June!1),!then!the!seller!can!“cure”!and!
send!the!proper!goods!so!long!as!he!does!so!by!the!deadline.!!
•! Second,! if! the! seller! thought& the& buyer& would& accept& the& nonconforming& goods! (e.g.,! maybe! he!
shipped!a!better!model!of!the!bicycle,!thinking!the!customer!would!be!thrilled!to!receive!the!upgraded!
model!for!the!same!price,! when! in!reality! the! customer! wanted!the!model!it! ordered).!Other!than!
those!two!scenarios,!there!is!not!a!right!to!cure!in!a!one>shot!deal!!!
!
Keep!this!in!mind,!because!a!lot!of!students!erroneously!believe!that!there!is!always!a!right!to!cure.!
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red!bicycle!was!a!part!of!but!accept!the!rest!of!the!bicycles.!It!is!your!call.!But!if!it!is!an!order!that!comes!
in!one!shipment!and!it!is!not!perfect,!you!can!reject!the!goods!!!
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Installment$contracts:$$
The!UCC!does!not!follow!the!perfect!tender!rule!for$installment$contracts.$(An!installment!contract!is!one!
that!requires!or!authorizes!the!delivery!of!goods!in!separate!lots!to!be!separately!accepted.!Basically,!it!is!
when,!pursuant!to!the!contract,!the!buyer!is!not!getting!all!of!the!goods!at!once.!They!are!delivered!in!
separate!shipments!or!“installments.”)!The!buyer!can!only!reject!an!installment!when!the!nonconformity$
substantially$impairs$the!value!of!that!installment!and!cannot$be$cured.!The!buyer!can!only!reject!the!
entire!contract!when!the!nonconformity$substantially$impairs!the!value!of!the!whole$contract.!The!buyer!
must!seasonably$notify!the!seller!of!cancellation.!!$
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The!standard!for!rejecting!goods!under!an!installment!contract!is!much!higher!than!the!standard!for!one>
shot! deals! as! courts! want! to! “keep! installment! contracts! going.”! Generally,! businesses! enter! into!
installment! contracts! and! courts! do! not! want! a! business! to! use! any! minor! breach! to! “get! out! of”! an!
installment!contract.!So,!the!UCC!states!that!the!nonconformity!must!substantially%impair%the!value!of!the!
contract!and!must%not%be%able%to!be!cured!for!a!business!to!reject!an!installment.!!!
!
Let’s!say!a!grocery!store!enters!into!a!contract!with!a!farmer!to!ship!it!50!gallons!of!2%!milk.!The!farmer!
sends!the!store!48!gallons!of!2%!milk!and!2!gallons!of!whole!milk,!due!to!an!oversight.!The!grocery!store!
can!accept!all!50!gallons,!reject!all!50!gallons,!or!reject!the!defective!commercial!units!(i.e.,!the!2!gallons!
of!whole!milk).!That!is!because!this!is!a!one>shot!deal!so!the!perfect!tender!rule!applies.!The!goods!were!
not!perfect.!(And!note,!unless!the!farmer!sent!the!goods!early!under!the!contract!and!still!has!time!to!
perform,!there!is!no!automatic!right!to!cure!for!the!farmer!)!!
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Let’s!change!the!facts!and!say!that!the!contract!was!an!installment%contract.!So,!for!example,!the!grocery!
store!agreed!to!buy!50!gallons!of!milk!every!other!week!for!6!months.!This!makes!it!an!installment!contract!
because!the!goods!are!not!all!being!shipped!at!once.!!
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If!the!grocery!store!receives!48!gallons!of!2%!milk!and!2!gallons!of!whole!milk,!can!the!grocery!store!reject!
all!50!gallons?!No.!The!nonconformity!can!be!cured.!Here,!the!farmer!could!simply!say!“sorry,!I’ll!ship!the!

Summary$of$Performance$Obligations!
•!!At!common$law,!if!one!substantially&performs!her!duties!under!the!contract,!then!the!other!party!
must!perform.!(The!exception!to!this!is!if!there!is!an!express$condition,!in!which!case!exact!performance!
is!required.)!!

•!Under!the!UCC,!the!seller!has!to!provide!perfect&tender!to!the!buyer!unless!an!exception!applies!(e.g.,!
an!installment$contract).!If!a!buyer!receives!imperfect!goods!in!a!“one>shot”!deal,!then!he!may!accept!
or!reject!those!goods.!If!he!rejects,!the!seller!has!a!right!to!cure!only!if!there!is!time!for!performance!left!
or!if!the!seller!reasonably!believed!the!imperfect!goods!would!be!accepted.!If!he!accepts!the!goods,!he!
can!no!longer!reject.!However,!he!may!still!be!able!to!revoke!his!acceptance!(discussed!below).!!!

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2!gallons!of!2%!milk!right!away.”!Also,!there!is!a!good!argument!that!shipping!two!gallons!of!whole!milk!
does!not!substantially!impair!the!value!of!the!contract.!!
3.$Revocation$of$acceptance$of$goods$is$a$much$higher$standard$than$rejection.$$$

Remember!that!normally!under!the!UCC,!for!one>shot!deals! MBE$Tip:!Do!not!confuse!revocation!of!goods%with!
you! can! reject! goods! if! they! are! not! “perfect”.! However,! revocation!of!an!offer.!Revoking!one’s!acceptance!
what! if! you! already! accepted! the! goods! and! only! then! do! of!goods!occurs!after%a%contract%is%already%formed!
you! realize! they! are! defective?! You! can! no! longer! reject! and!goods!are!delivered!then!accepted.!Later,!for!
goods!once!you!accept!them.!However,!you!may!be!able!to! whatever!reason,!the!buyer! decides!he! wants!to!
revoke%your%acceptance%of!the!goods.!! revoke!that!acceptance.!!

If!you!have!already!accepted!the!goods!and!want!to!revoke! Revoking! an! offer! occurs! before! an! offer! is!

your!acceptance!of!them,!the!perfect!tender!rule!does!not! accepted.! Remember! that! contract! formation!
apply!!You!must!show!much!more!than!simply!showing!the! requires!an!offer,!acceptance,!and!consideration.!
goods!are!not!“perfect”!!This!is!a!highly!tested!principle!on! So!if!one!revokes!his!offer,!a!contract!has!not!even!
the!MBE!and!many!state!essay!exams.!! been!formed,!as!there!is!no!offer!to!accept.!!

So,!what!is!the!standard?!What!does!a!buyer!have!to!show! Students! mix! up! these! two! types! of! revocation,!

in!order!to!revoke!his!acceptance!of!goods?!The!buyer!can! but! if! you! recognize! how! different! they! are! in!
revoke!his!acceptance!of!goods!when:! terms! of! the!timeline!when!they!take!place,!you!
will!keep!them!straight!!!
•! the!nonconformity!substantially$impairs$the$value$
to$him,!$
•! he!accepted!it!because!he!had!a!reasonable$belief$that$the$nonconformity$would$be$cured$(and!
it!was!not)!or!he!did!not!discover!the!nonconformity!because!the$nonconformity$was$difficult$to$
discover$or!because$of$the$seller’s$assurances,$$
•! he! revokes! within! a! reasonable$ time$ after$ he! discovers! or! should! have! discovered! the!
nonconformity,!and$
•! before!any!substantial$change$in$condition$of$the$goods$which$is$not$caused$by$their$own$defect.!$
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For!example,!let’s!say!you!buy!skis!on!sale!in!the!summer!and!the!skis!are!supposed!to!be!adjustable!to!fit!
a!variety!of!ski!boot!sizes.!You!try!on!the!skis!and!everything!seems!to!be!fine.!However,!when!you!go!
skiing!six!months!later!you!notice!that!the!ski!boots!are!constantly!becoming!disconnected!from!the!skis.!!
Can!you!reject!the!goods?!No.!It!is!too!late!to!reject!the!goods!as!you!have!had!them!for!six!months.!(So,!
the!perfect!tender!rule!would!not!apply!)!!

However,!you!could!likely!revoke%your%acceptance!if!the!nonconformity!substantially!impaired!the!value!
to!you!(i.e.,!you!could!not!use!the!skis),!you!did!not!discover!the!nonconformity!because!it!was!difficult!to!
discover!(i.e.,!you!had!to!go!skiing!to!discover!it!and!you!bought!the!goods!in!the!summer),!you!revoked!
within!a!reasonable!time!after!going!skiing,!and!you!revoked!before!a!substantial!change!in!condition!of!
the!goods!not!caused!by!their!own!defect!(i.e.,!you!didn’t!otherwise!damage!the!goods!before!revoking!
your!acceptance).!!!!

Below!is!a!chart!that!summarizes!rejection!and!revocation!of!goods.!!

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! Buyer!receives!improper!goods.!Question:!Did!he!
effectively!reject,!and!if!not,!can!he!revoke!his!acceptance?!!
!

Can$he$reject?!(He!must!do!this!in!a!timely!manner!)!$! Did$he$accept?!!(If!the!buyer!failed!to!make!an!effective!
rejection!(e.g.,!he!waited!too!long!to!reject),!his!only!option!is!to!
! revoke$his$acceptance.)!!

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Rejection:$! Revocation$of$Acceptance:!
OneGShot$Deal:$The!Perfect$Tender!rule!applies.$He!can! The!buyer!can!revoke!his!acceptance!when:!
reject!for!any%reason!in!good!faith.!!He!can!reject!all,! !(1)!the!nonconformity!substantially$impairs$the$value$to$him;!
accept!all,!or!reject!some!commercial!units!and!accept!the! and!!
rest.!(Note:$The$seller$only$has$a$right$to$cure$if$he$ (2)!he!accepted!it!because!he!had!a!reasonable$belief$that$the$
performs$before$the$contract$date$or$if$he$reasonably$ nonconformity$would$be$cured$(and!it!was!not)$OR!he!did!not!
believed$the$nonconforming$goods$would$be$accepted.)$$ discover!the!nonconformity!because!the$nonconformity$was$
difficult$to$discover$or!because$of$the$seller’s$assurances;!and!!
Installment$contract:$The!buyer!can!only!reject!an! (3)!he!revokes!within!a!reasonable$time$after$he!discovers!or!
installment!when!the!nonconformity$substantially$impairs$ should!have!discovered!the!nonconformity;!and!!
the!value!of!that!installment!and!cannot$be$cured.!!$ (4)!before!any!substantial$change$in$condition$of$the$goods$
which$is$not$caused$by$their$own$defect.!!

Problem:!
One! winter,! a! man! purchases! swimming! goggles! from! a! nearby! dive! shop.! The! man! does! not! use! the!
swimming!goggles!until!a!couple!months!later!when!the!weather!gets!warmer.!Upon!using!the!swimming!
goggles,!he!discovers!that!there!is!a!defect!in!the!lens!that!causes!water!to!flood!the!goggles,!rendering!
the!goggles!effectively!useless.!The!next!day,!the!man!brings!the!goggles!back!to!the!store!and!demands!
his!money!back.!!

The!man’s!best!argument!to!receive!his!money!back!is:!!
(A)!the!swimming!goggles!are!defective!so!he!is!rejecting!them.!
(B)!the!swimming!goggles!are!defective!so!he!is!revoking!his!acceptance!of!them.!
(C)!the!store!breached!the!implied!warranty!of!fitness!for!a!particular!purpose.!!
(D)!the!harm!suffered!by!the!man!was!a!foreseeable!result!of!the!store’s!negligence.!!!

Here,!the!facts!specifically!tell!us!that!“the!man!does!not!use!the!swimming!goggles!until!a!couple!months!
later”!–!thus,!it!is!too!late!to!“reject”!the!goods.!Rejection!must!take!place!sooner.!However,!the!buyer!
may!still!be!able!to!revoke!his!acceptance!of!the!goods.!Here,!all!above!elements!of!revocation!are!present.!
The!defect!poses!a!substantial!impairment!to!him!as!he!cannot!use!the!goggles.!The!defect!was!difficult!
to!discover!right!away!because!he!bought!the!goggles!in!the!winter.!He!revoked!his!acceptance!right!after!
he! discovered! the! defect! (the! next! day)! and! the! facts! do! not! indicate! any! substantial! change! in! the!
condition!of!the!goods.!Thus,!(B)!is!the!answer.!!

(A)!is!incorrect!because!rejection!must!take!place!sooner.!Here,!he!held!on!to!the!goods!for!a!long!enough!
time!(a!couple!months)!that!he!likely!“accepted”!the!goods.!(C)!is!incorrect!because!while!the!store!may!
have!breached!the!implied!warranty!of!merchantability!(by!selling!goggles!that!did!not!keep!water!out),!

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there!are!no!facts!that!indicate!the!implied!warranty!of!fitness!for!a!particular!purpose!was!breached.!
That!warranty!is!only!invoked!when!the!buyer!relies!on!the!seller!to!select!goods!to!fit!a!particular!purpose.!
Here,!there!is!no!indication!that!the!buyer!relied!on!any!statement!by!the!seller!to!meet!some!particular!
purpose!of!his.!(D)!is!incorrect!as!there!are!no!facts!indicating!that!the!store!was!negligent.!(He!could!
potentially! have! a! strict! liability! tort! claim! but! (D)! only! discusses! negligence.! Further,! be! aware! of! any!
answer!choice!that!seems!to!discuss!a!totally!different!area!of!law!–!they!are!often!wrong.)!!

4.$$Know$the$intricacies$of$UCC$2G207$(“battle$of$the$forms”)$and$how$it$differs$from$the$common$law$
“mirror$image”$rule.$$
$
These!issues!come!up!when!there!is!a!written!offer!and!a!written!acceptance!that!is!somehow!different!
than!the!offer!(i.e.,!it!has!a!different!or!additional!term).!!
$$
Common$Law$Mirror$Image$Rule:$
This!common!law!“mirror!image”!rule!applies!when!there!is!a!contract!for!services.!It!says!that!in!order!
for! an! acceptance! to! be! a! valid! acceptance,! the! acceptance! must! be! the! mirror$ image! of! the! offer.!
Otherwise,!it!operates!as!a!counteroffer!and!rejection.!So!the!acceptance!cannot!contain!a!different!or!
additional! term! in! order! to! be! a! true! acceptance!! If! there! are! additional! or! different! terms! in! the!
“acceptance,”!then!the!“acceptance”!is!actually!a!rejection!and!counteroffer!and!no!contract!is!formed!by!
the!papers!alone.!
!
The!last$shot$rule!states!that!if!the!parties!proceed!to!act!like!a!contract!was!formed,!look!who!sent!the!
last!piece!of!paper!before!performance!to!see!what!the!terms!are.!This!is!explained!below.!$
!
Let’s!say!that!Alan!agrees!to!provide!landscaping!for!Bob.!Alan!says,!“For!$1,000,!I!will!purchase!flowers,!
three!fruit!trees,!four!rose!bushes!and!plant!them!in!accordance!with!a!detailed!design!plan.”!Bob!says,!“I!
accept!your!offer!except!I!require!five!rose!bushes!to!be!planted.”!!
!
Alan!made!an!offer!in!this!case.!Was!Bob’s!“acceptance”!a!real!acceptance?!No,!it!was!not!because!Bob’s!
acceptance!was!not!the!“mirror!image”!of!the!offer.!It!had!a!different!term.!So,!instead,!it!is!a!rejection!
and!counteroffer.!!
!
But!let’s!say!that!Alan!starts!to!landscape!anyway.!He!purchases!the!flowers,!three!fruit!trees,!and!four!
rose! bushes! and! begins! landscaping.! Now,! a! contract% has% been% formed! because! Alan! is! acting! like! a!
contract!has!been!formed.!So,!does!Alan!have!to!plant!five!rose!bushes!or!can!he!get!away!with!planting!
four?!He!must!plant!five.!Under!common!law,!always!look!to!see!who!sent!the!last%piece%of%paper.!Those!
terms!are!part!of!the!contract.!What!happened!in!this!case!was!that!Alan!made!an!offer.!Bob!rejected!that!
offer! and! made! a! counteroffer! when! he! slightly! changed! the! terms.! Then,! Alan! accepted! Bob’s!
counteroffer!by!performance!(that!is,!by!beginning!landscaping).!In!other!words:!!

•! Alan:!“For!$1,000,!I!will!purchase!flowers,!three!fruit!trees,!four!rose!bushes!and!plant!them!in!
accordance!with!a!detailed!design!plan.”!This$is$an$offer.$$

!
! PAGE!6!!
!

•! Bob:!“I!accept!your!offer!except!I!require!five!rose!bushes!to!be!planted.”!This$is$a$rejection$and$
counteroffer.$$
•! Alan! begins! performing.! Alan$ has$ accepted$ Bob’s$ counteroffer$ and$ a$ contract$ is$ formed$
according$to$Bob’s$terms.$$

Uniform$Commercial$Code$(UCC)$Battle$of$the$Forms$2G207:$
The!Uniform!Commercial!Code!2>207!applies!whenever!
MBE$ Tip:$ A! general! rule! to! remember! for!
there! is! a! sale% of% goods! and! whenever! the! offer% and%
MBE!purposes!is!that!common$law$applies!to!
acceptance%look%different%from%one%another.!!
service! contracts.! The! Uniform$ Commercial$
!
Code!(UCC)!applies!to!the!sale!of!goods.!So!if!
Note!that!there!are!three!types!of!scenarios!to!be!aware!
you! are! getting! your! yard! landscaped,! hair!
of:!!
cut,! or! car! serviced,! common! law! applies!
because! these! are! all! services.! If! you! are!
•! The! first! is! when! the! offeree! sends! a! “fake!
buying!books,!a!new!laptop,!or!groceries,!the!
acceptance.”!Here,!a!contract!is!not!formed!by!
UCC! applies! because! these! are! all! tangible!
writings,! but! the! parties’! actions! could! still!
objects!that!you!are!buying.!
create!a!contract.!
•! The! second! is! when! the! offeree! sends! an! Note:!The!UCC!applies!regardless%of%whether%
acceptance! with! an! additional! term! that! was! the%parties%are%merchants!and! regardless% of%
not! found! in! the! offer.! Here,! a! contract! is! the%price%of%the%contract.!!
formed!by!the!parties’!writings.!
•! The! third! is! when! the! offeree! sends! an! $
acceptance!with!a!term!that!is!different!from!a!term!in!the!offer.!Here,!a!contract!is!formed!by!the!
parties’!writings.!!

We!will!discuss!these!three!scenarios!below.!Make!sure!to!consult!the!chart!at!the!end!of!this!section!as!
well.!!
!
First$question$to$ask:$Does$the$UCC$apply?$$
Make!sure!that!the!contract!is!for!a!sale!of!goods!before!applying!these!nuanced!rules!!!
!
Second$Question:$Was$the$purported$acceptance$a$“real$acceptance”$or$a$“fake$acceptance”?$!
I!say:!“I!offer!to!sell!you!my!car!for!$10,000.”!You!reply:!“I!accept!your!offer!but!my!acceptance!is!expressly%
conditioned!on!you!replacing!the!tires!and!the!headlights.”!!
!
Is! your! “acceptance”! a! real! acceptance?! No.! You! said! “I! accept…but! only! if…”! Basically,! you! are! not!
accepting!the!offer!and!you!are!making!your!acceptance!conditional!on!me!doing!something!(replacing!
the!tires!and!headlights).!If!you!see!this!“conditional”!language,!then!our!writings!do!not!form!a!contract!!
I!simply!made!an!offer!and!you!rejected!it!and!made!a!counteroffer.!(We!call!this!a!“fake!acceptance”!
because!it!looks%like!an!acceptance!but!it!is!not—but!don’t!say!the!words!“fake!acceptance”!on!the!bar!
exam!)!!
!

!
! PAGE!7!!
!

But%what%if%we%act%like%a%contract%exists?!
What!if!you!give!me!$10,000!and!I!give!you!my!car?!Whose!terms!control?!Do!I!have!to!replace!the!tires!
and!headlights?!If!we!act!like!a!contract!exists,!the!law!will!find!a!contract!to!exist.!However,!the!UCC!
states!that!the!terms!of!the!contract!are!the!writings%that%both%parties%agree%upon!and!UCC%gap%fillers.!So!
because!our!writings!do!not!“agree”!on!the!provision!that!I!have!to!replace!the!tires!and!headlights,!I!will!
not!have!to!replace!them.!!
!
“Gap!fillers”!are!standard!terms!that!the!UCC!will!imply!if!nothing!is!otherwise!stated.!For!example:!!

•! If!we!do!not!state!the!time!for!delivery,!the!UCC!will!imply!a!reasonable%time.!
•! If!we!do!not!state!the!price!or!our!method!of!deciding!the!price,!the!price!is!a!reasonable%price%at%
the%time%for%delivery.$!!
•! If!nothing!is!said!about!when!payment!is!due,!payment!is!due!at!the!time!and!place!that!the!buyer!
receives!the!goods.!!!

So!in!this!case,!our!writings!do!not!form!a!contract.!However,!our!actions!do.!The!terms!of!the!contract!
will!be!the!ones!we!“agree!upon”!(which!is!basically!that!I!will!give!you!my!car!for!$10,000),!plus!any!gap!
fillers!(e.g.,!you!pay!me!at!the!time!you!receive!the!car).!The!term!regarding!the!replacement!of!the!tires!
and!headlights!will%not%be!part!of!the!contract.!In!summary,!here!is!what!happened:!

•! Me:!“I!offer!to!sell!you!my!car!for!$10,000.”!This$is$an$offer.$$
•! You:!“I!accept!your!offer!but!my!acceptance!is!expressly%conditioned!on!you!replacing!the!tires!
and!the!headlights.”!This$is$a$rejection$and$counteroffer$because$of$the$“expressly$conditioned”$
language.$The$acceptance$was$conditional$upon$agreeing$to$a$term,$so$it$is$not$a$real$acceptance.$$
•! We!exchange!the!car!and!the!$10,000.!Our$writings$do$not$form$a$contract$but$our$actions&do.$
The$terms$of$the$contract$are$the$terms$found$in$both$of$our$writings$and$gapGfillers.$$

Third$Question:$If$there$is$a$“real$acceptance,”$whose$terms$are$in?$
Additional&Term:&
I!say:!“I!offer!to!sell!you!my!car!for!$10,000.”!You!reply:!“I!accept!your!offer.!However,!if!there!is!any!
dispute!as!to!this!contract,!we!are!required!to!resolve!the!dispute!using!arbitration.”!
!
Is!your!“acceptance”!a!real!acceptance?!Yes.!There!is!no!language!that!says!“I!accept!but!only!if…”!or!“My!
acceptance!is!expressly!conditioned!on…”!Here,!there!is!a!plain!acceptance.!There!is!simply!an!additional%
term!(an!arbitration!clause)!added!to!the!acceptance.!Is!this!additional!term!a!part!of!the!contract?!
Are$we$both$merchants?!If!we!are!not,!the!answer!is!no,!the!term!is!not!part!of!the!contract.!(It!is!merely!
a!“proposal”!which!can!be!accepted!or!rejected.)!!
!
If$we$are&both&merchants,$then$ask$three$questions:$

•! Does$ the$ offer$ expressly$ limit$ acceptance$ to$ the$ terms$ of$ the$ offer?! (Does! the! offer! say,! for!
example,!“Acceptance!is!expressly!limited!to!the!terms!of!this!offer”?!In!this!case,!it!does!not.!If!

!
! PAGE!8!!
!

the! offer! did! “expressly! limit”! acceptance! to! the! terms! of! the! offer,! a! court! would! honor! that!
clause!and!limit!acceptance!to!the!terms!of!the!offer.!After!all,!the!offeror!is!master!of!his!offer.)!!
•! Do$the$additional$terms$materially$alter$the$contract?!If!a!term!materially!changes!the!contract,!
it!will!not!control.!For!example,!if!I!said,!“I!offer!to!sell!you!my!car!for!$10,000”!and!you!said!“I!
accept.! Also,! you! have! to! give! me! your! truck! too.”! This! additional! term! materially! alters! the!
contract!!Does!an!arbitration!clause!materially!alter!the!contract?!There!is!a!split!of!authority!but!
most!courts!say!it!would!materially!alter!the!contract.!!!
•! Did$ the$ offeror$ object$ within$ a$ reasonable$ time?! If! I! called! you! soon! after! receiving! your!
acceptance!and!I!said!“I!object!to!the!arbitration!clause,”!then!it!would!not!be!part!of!the!contract.!!

If!any!of!these!above!three!things!occurred,!then!the!additional!term!is!not%part!of!the!contract.!Otherwise,!
if!both!parties!are!merchants,!it!is!part!of!the!contract.!So,!here!is!what!happened:!

•! Me:!“I!offer!to!sell!you!my!car!for!$10,000.”!This$is$an$offer.$!
•! You:!“I!accept!your!offer.!However,!if!there!is!any!dispute!as!to!this!contract,!we!are!required!to!
resolve!the!dispute!using!arbitration.”$This$is$an$acceptance$that$adds$an$additional$term.$Thus,$
a$contract$is$formed$at$this$point.$Whether$the$additional$term$is$part$of$the$contract$depends$
on$whether$we$are$both$merchants$(if$we$are$not,$it$is$not).$If$we$are,$then$it$still$depends$on$
the$answers$to$the$above$three$questions.$$!

Different&term:!!
I!say:!“I!offer!to!sell!you!my!car!for!$10,000.!Pick!it!up!at!my!house.”!You!reply:!“I!accept!your!offer.!
Deliver!the!car!to!my!house.”!

These!are!different%terms!(rather!than!additional)!because!it!is!impossible!for!both!terms!to!control.!That!
is,!I!cannot!have!you!pick!the!car!up!at!my!house!and!deliver!it!to!your!house!!Thus,!these!terms!contradict!
one!another.!!
!
Here,! we! have! a! contract! (because! there! is! a! “real! acceptance”—that! is,! we! do! not! see! any! language!
making! your! acceptance! conditional! on! me! agreeing! to! the! additional! terms).! The! question! is:! Whose!
terms!are!in?!The!UCC!follows!the!“knockout”!doctrine!for!different!terms.!It!will!knock!out!both!terms!
and!use!gap!fillers!to!“fill!in!the!gap.”!What!do!the!UCC!gap!fillers!say!about!delivery?!They!say:!If!it!is!not!
specified!in!the!contract,!the!place!for!delivery!is!the!seller’s&place!of!business!or!home!(unless!the!goods!
have!been!identified!and!the!parties!know!they!are!in!a!different!place,!then!that!is!the!place!of!delivery).!!!
!
Thus,!both!of!our!terms!would!be!“knocked!out”!and!the!UCC!would!fill!in!the!gaps!with!a!provision!stating!
you!have!to!pick!up!the!car!from!my!home!(as!I!am!the!seller).!!So,!here!is!what!happened:!

•! Me:!“I!offer!to!sell!you!my!car!for!$10,000.!Pick!it!up!at!my!house.”!This$is$an$offer.$!
•! You:! “I! accept! your! offer.! Deliver! the! car! to! my! house.”$ This$ is$ an$ acceptance$ that$ contains$ a$
different$term.$Thus,$a$contract$is$formed$at$this$point.$The$UCC$will$“knock$out”$our$different$
terms$and$then$fill$in$the$gap$with$the$UCC$gap$filler$that$controls$delivery.!

!
! PAGE!9!!
!

Problem:!
On!July!1,!a!grocery!store!sent!an!order!to!a!candy!company!to!purchase!500!bags!of!candy!for!the!price!
of!$1,000,!which!was!the!price!quoted!on!the!candy!company’s!website.!On!July!7,!the!candy!company!
mailed!the!grocery!store!a!form!which!stated!“We!are!pleased!to!accept!your!offer.!However,!we!condition!
our! acceptance! on! your! agreement! to! pay! for! the! goods! five! days! before! delivery.”! The! form! was!
otherwise!identical!with!respect!to!the!quantity,!price,!and!the!product!ordered.!!

As!of!July!7,!which!of!the!following!is!an!accurate!statement!concerning!the!relationship!between!the!
grocery!store!and!the!candy!company?!!

(A)!There!is!a!contract!that!includes!the!term!regarding!prepayment!so!long!as!it!does!not!materially!
alter!the!contract.!!
(B)!There!is!a!contract!that!does!not!include!the!term!regarding!prepayment!as!that!term!is!merely!a!
proposal,!which!the!grocery!store!can!choose!to!accept!or!reject.!!
(C)!There!is!no!contract!because!the!candy!store!expressly!conditioned!its!acceptance!on!the!grocery!
store’s!acceptance!of!an!additional!term.!!
(D)!There!is!no!contract!because!the!candy!store’s!purported!acceptance!contained!a!term!that!was!not!
found!in!the!offer!letter.!!

The!answer!is!(C).!Here,!no!contract!is!formed!by!the!writings!alone!because!the!acceptance!was!a!“fake!
acceptance”—that!is,!it!was!expressly!conditioned!on!the!grocery!store!agreeing!to!an!additional!term.!
Thus,!it!served!as!a!rejection!and!counteroffer.!(Note,!if!the!parties!acted!like!a!contract!existed,!then!a!
court! would! find! that! a! contract! did,! in! fact,! exist.! The! contract! would! not! contain! the! delivery! term,!
though,!as!“both!writings”!did!not!agree!to!it,!and!the!UCC!gap!fillers!would!not!require!prepayment.)!(A)!
is!not!correct!because!in!this!case,!no!contract!exists!at!all.!(B)!is!not!correct!for!the!same!reason.!(D)!is!
not!correct!because!it!applies!the!common!law!mirror!image!rule.!In!this!case,!the!UCC!2>207!rule!would!
apply!as!the!contract!is!for!a!sale!of!goods!(candy).!!

Problem:!
A!teacher!agreed!to!sell!his!car!to!his!neighbor.!The!teacher!wrote!the!neighbor!a!letter!that!stated,!“I!
offer!to!sell!you!my!car!for!$15,000.”!It!had!various!other!terms.!The!neighbor!wrote!the!teacher!a!reply!
that!stated,!“I!accept!your!offer.”!The!reply!was!identical!to!the!offer;!however,!it!also!had!a!term!that!
stated,!“The!seller!agrees!to!purchase!new!tires!prior!to!delivering!the!vehicle.”!There!was!no!further!
correspondence!between!the!parties.!!

Which!of!the!following!is!an!accurate!statement!concerning!the!legal!relationship!between!the!teacher!
and!the!neighbor?!

(A)!There!is!a!contract!between!the!teacher!and!the!neighbor!that!does!not!include!the!term!regarding!
the!tires!if!the!term!materially!alters!the!contract.!
(B)!There!is!a!contract!between!the!teacher!and!the!neighbor!but!it!does!not!include!the!term!regarding!
the!tires,!as!that!term!is!merely!a!proposal!that!the!teacher!can!accept!or!reject.!!
(C)!There!is!not!a!contract!between!the!teacher!and!the!neighbor!because!the!neighbor’s!purported!
acceptance!contained!an!additional!term!not!found!in!the!teacher’s!offer.!!

!
! PAGE!10!!
!

(D)!There!is!not!a!contract!between!the!teacher!and!the!neighbor!unless!the!parties’!actions!show!that!
they!intended!a!contract!to!exist.!!

The!answer!is!(B).!The!UCC!applies!because!this!is!a!sale!of!goods!(a!car).!However,!the!parties!are!not!
merchants.!So,!the!additional!term!is!merely!a!proposal!that!can!be!accepted!or!rejected!by!the!teacher.!
The!parties!have!a!contract!but!the!term!is!not!automatically!included.!(A)!is!incorrect!as!this!only!applies!
if!both!parties!are!merchants.!Here,!we!have!a!teacher!and!his!neighbor.!The!facts!do!not!indicate!that!
either! party! is! a! merchant.! (C)! is! incorrect! because! an! additional! term! in! the! acceptance! would! not!
automatically! preclude! contract! formation! in! a! contract! for! the! sale! of! goods.! (D)! is! incorrect! because!
there!is!a!contract!based!on!the!writings,!as!the!acceptance!was!not!expressly!conditioned!on!assent!to!
the!additional!term.!!

There!is!a!chart!on!the!next!page!that!summarizes!UCC!2>207.!On!the!following!page,!there!is!a!blank!
chart.!Since!UCC!2>207!is!commonly!tested!on!the!MBE!(and!since!it!is!so!nuanced!),!we!recommend!you!
memorize!the!chart.!One!way!to!“actively”!do!this!is!to!make!copies!of!the!blank!chart!and!keep!filling!it!
in!until!you!are!able!to!fill!in!the!entire!chart!by!memory.!!
!
$ $

!
! PAGE!11!!
 !

Different$or$Additional$Terms$in$the$Acceptance$or$Confirmation$

! Does!the!transaction!fall!under!the!UCC?!
!
! Yes! No!

!
Did!the!“acceptance”!say!that!the!acceptance! Common!Law:!Mirror$Image$Rule!applies.!!
&
was!expressly!made!conditional!on!assent!to! The!“acceptance”!is!treated!as!counter>offer!
the!different!or!additional!terms?!!!
& and!if!the!parties!act!like!a!contract!exists,!
then!whoever!sent!the!last!piece!of!paper!
&
gets!their!terms!in!(“last!shot!rule”).!!
& No! Yes!
&
A!contract!is!formed!
& No!contract!is!formed!by!the!writings.!It!was!a!“fake$acceptance”!!
(so!long!as!there!was! (counteroffer).!However,!if!the!parties!still!acted!like!they!had!a!
&
a!definite!and! contract,!the!terms!of!the!contract!are!the!writings!that!both!
seasonable!
& parties!agree!upon!and!UCC!gap!fillers.!!
expression!of! !
&
acceptance).!!
& &
&
&
Are!the!terms!different!or!additional?!!
&
&
Different! Additional!
!
Additional!terms!are!
Majority$Rule:$Knock$
! First!question:!Are!both! “proposals”!which!can!be!
No!
Out$Doctrine$applies.! parties!merchants?!! accepted!or!rejected.!!
!
The!different!terms!are!
knocked!out!and!
! ! !
replaced!by!UCC!Gap! Yes!
! Additional!
fillers.!!!
! terms!are!part!
Minority!Rule:!Treat! Second:!Ask!three!questions:!!
No! of!the!contract.!!
!
the!same!as!additional! 1.!Does!the!offer!expressly!limit!acceptance!to!
terms.! ! the!terms!of!the!offer?!! !

! ! 2.!Do!the!additional!terms!materially!alter!the! Additional!terms!
contract?!!! are!not!part!of!
! the!contract.!
3.!Did!the!offeror!object!within!a!reasonable!
! time?! Yes (They!are!proposals!
which!can!be!
accepted!or!
Did!you!answer!yes!to!any!of!them?!!
rejected).!

! !
! PAGE!12!!
 !

Different$or$Additional$Terms$in$the$Acceptance$or$Confirmation$–$Blank$Chart$

!
Does!the!transaction!fall!under!the!UCC?!
!
! Yes! No!

!
Did!the!“acceptance”!say!that!the!acceptance! Common!Law:!Mirror$Image$Rule!applies.!!
&
was!expressly!made!conditional!on!assent!to! The!“acceptance”!is!treated!as!counter>offer!
the!different!or!additional!terms?!!!
& and!if!the!parties!act!like!a!contract!exists,!
then!whoever!sent!the!last!piece!of!paper!
&
gets!their!terms!in!(“last!shot!rule”).!!
& No! Yes!
&
A!contract!is!formed!
& No!contract!is!formed!by!the!writings.!It!was!a!“fake$acceptance”!!
(so!long!as!there!was! (counteroffer).!However,!if!the!parties!still!acted!like!they!had!a!
&
a!definite!and! contract,!the!terms!of!the!contract!are!the!writings!that!both!
seasonable!
& parties!agree!upon!and!UCC!gap!fillers.!!
expression!of! !
&
acceptance).!!
&
&
&
Are!the!terms!different!or!additional?!!
&
&
Different! Additional!
!
Additional!terms!are!
Majority$Rule:$Knock$
! First!question:!Are!both! “proposals”!which!can!be!
No!
Out$Doctrine$applies.! parties!merchants?!! accepted!or!rejected.!!
!
The!different!terms!are!
knocked!out!and!
! ! !
replaced!by!UCC!Gap! Yes!
! Additional!
fillers.!!!
! terms!are!part!
Minority!Rule:!Treat! !!
! of!the!contract.!!
!
the!same!as!additional!
terms! ! !

! ! Additional!terms!
are!not!part!of!
! the!contract.!
! ! (They!are!proposals!
which!can!be!
accepted!or!
rejected).!

! !
! PAGE!13!!