MBE Tip of the Day: Contracts and Sales

Answer to the Contracts and Sales MBE Question

Subject: Contracts and Sales

Legal Issue: Statute of Frauds and Risk of Loss

Legal Rule and Analysis:

All contracts for the sale of goods greater than $500 must be in writing.  This means that there needs to be some writing that evidences the existence of a contract, including a quantity term, signed by the party to be charged.  If this is present, then we don’t need to consider any of the exceptions to the Statute of Frauds.  Once an enforceable contract has been established, the risk of loss must be considered.In this case, the man and the manufacturer orally agreed that the man would purchase four chairs for $600.  Since this is a contract for the sale of goods greater than $500, it needs to be in writing, signed by the party to be charged, in order to be enforceable.  When the man sent the email to the manufacturer, he clearly indicated the presence of a contract between the parties, included a quantity term, and signed the email.  An electronic signature is valid.  Thus, this writing was sufficient to satisfy the Statute of Frauds and make the contract enforceable, even though the man was trying to back out of the contract.

We next consider risk of loss.  A carrier contract is formed when a third party carrier delivers the goods.  Carrier contracts can be either shipment or destination contracts, which affects the risk of loss.  A shipment contract generally does not require the seller to deliver the goods to a specific destination, and it is the default when the contract is silent regarding other terms of delivery.  In a shipment contract, the seller must get the goods to the carrier, make appropriate arrangements for shipping, and notify the buyer of the shipment.  If the seller does this, it is not liable for any damage occurring during transit.

This contract would be a carrier contract because a third party is delivering the goods.  It would also be a shipment contract as opposed to a destination contract because the contract is silent in regards to any delivery destination.  The manufacturer got the goods to the carrier, made all the arrangements, and notified the man of the shipment.  Thus, the manufacturer would not be responsible for any losses that occurred during transit.

Conclusion: The manufacturer will prevail because there is a valid, enforceable contract against the man and the risk of loss has passed to the man.

Look at the answer choices provided. Choose an answer choice that matches your conclusion. Review the other answer choices provided. 

The answer choice (B) is therefore correct. (A) is incorrect because we do not need to use any sort of detrimental reliance equity theories when there is a valid and enforceable contract. (C) is incorrect because there is an enforceable contract as the man signed a writing (the email) that evidenced the existence of the contract and contained a quantity term.  The Statute of Frauds has been satisfied.  (D) is incorrect because the risk of loss has already transferred to the man.  The manufacturer is not responsible for any losses that occur during transit.

MBE Tip: Try not to get distracted by things meant to confuse you!  The Examiners love to try to trick you into picking the wrong answer.  In the above question, it would be all too easy to say that there is no enforceable contract since it looks like the man tries to back out of an oral agreement.  However, the way he did so actually sealed his fate.  He created a signed writing that evidences the existence of a contract, making it enforceable against him.  Focus on the law and try not to fall for the Examiners’ tricks!