Compensatory Damages

Damages in Contract Law can be confusing. It's worth memorizing the following:

The goal of compensatory damages is to put the non-breaching party into the position that party would have been in had the contract not been breached. By memorizing that line, it's just some simple math that'll guide you to the correct answer. X contracted to do some work for y and the contract called for x to be paid $1,000. Y breached and x found similar work for z at a price of $700. X now has $700 from z. If x were to collect $1,000 from y, x would have $1,700. That would put x in a better position than x would have been in if the contract hadn't been breached. Too much for x, so you don't want to choose that answer. If x collects $300 from y, x will have $700 from z, and 300 y. X will have $1,000, the exact amount x would have had had there been no breach. The math checks out and you're done at least for compensatory damages.

A Quick Distinction

~Not Hearsay: the statement is not offered for the truth of the matter asserted. It falls outside the rule against hearsay, and it’s admissible.

~Non Hearsay: the statement is offered for the truth of the matter asserted, but is excluded or exempted from the rule against hearsay, and is admissible. ~Hearsay But An Exception: the statement is offered for the truth of the matter asserted. It’s not excluded or exempted from the rule against hearsay, but is admissible even though it’s hearsay.

Default (Article 9: UCC)

Towards the end of the life cycle of a secured transaction comes default. Default provides the right of a secured party to proceed against collateral. On the bar exam, it's almost always the case that this right is triggered by the debtor's failure to pay a debt. 

One avenue for the secured party after default is to use self help and take possession of the collateral. This can only be done, however, if there will not be a breach of the peace. If the secured party breaches the peace, the secured party loses the authorization to re-possess and may actually be sued for conversion if the collateral is re-possessed. Other intentional torts like battery, assault, etc., are also on the table. 

What does it mean to breach the peace? Any conduct by the secured party that has the potential to lead to violence is a breach of the peace. The standard isn't very high: if the debtor physically occupies the space where the secured party intends to acquire the collateral, that may be sufficient to prevent the secured party from using self help to acquire the collateral. If the debtor verbally objects, it almost certainly is. Merely breaking and entering onto property to acquire the collateral, however, isn't necessarily a breach of the peace if the debtor is not present on the property at the time of the breaking and entering. 

Because of this limit involving breach of the peace, self help is not always available. Another avenue is to use judicial process. Replevin is a common judicial process used to acquire collateral after the debtor has defaulted. Another option is for the secured party to make equipment unusable and then to dispose of it on the debtor's property (provided doing so does not breach the peace). If the collateral is accounts, the secured party might provide notice to the account debtor to pay the secured party rather than the party that defaulted. 

Once the secured party possesses the collateral, the secured party might choose to retain the collateral in full or in part. Or, the secured party might choose to sell, lease, license, or otherwise dispose of the collateral in a public or private sale. To sell the collateral, reasonable written notice of intent to sell must be given to the debtor and to any sureties on the debt as well as to any other secured parties. There are a few exceptions here: for example, notice need not be given if the collateral is consumer goods or if the collateral is perishable or its value threatens to decline rapidly. The notice must be sent within a reasonable time before sale.

The notice must adequately describe the parties and the collateral and every aspect of the sale must be commercially reasonable. That's to say, the secured party must show that it made an effort to obtain the best price for the collateral. 

Even after default, the game is not entirely over for the debtor. Any time before the secured party has resold the collateral, retained the collateral through possession, or has entered into a contract for disposition of the collateral, the debtor may redeem the collateral by fulfilling all obligations secured by the collateral including paying for any reasonable expenses. Typically, to redeem will require paying off the entire debt, not least of which is because there's generally an acceleration clause in the agreement between the secured party and the debtor that requires full payment upon default. 

MBE Tip

There's a saying: "if you wish to upset the law that all crows are black, it is enough to prove one single crow to be white."

On the MBE, imagine a Torts question asking if a battery has occurred. An answer choice says something like "yes, because there was a harmful contact." That's the equivalent of a black crow. It provides very little relevant information to answer the question because it doesn't tell you whether any of the elements are not satisfied.

An answer choice that says "No, because there was no contact" is the equivalent of a white crow. There's nothing else to be said if there was no contact. No contact, no battery. This isn't a Torts tip; it's a tip you can apply throughout the entire test. Any answer choice that eliminates a required element should be given plenty of consideration. An answer choice that merely tells you that one of many elements have been satisfied should be looked upon with lots of skepticism.

Buyers (Article 9 UCC)

The advice I give to students is that if strapped for time, there are three concepts to know well for Secured Transactions on the bar exam: attachment, perfection, and priorities as they relate to creditors. But if less strapped, I'd take some time to understand how buyers might work their way into the mix.

The relevant question here is whether a buyer might have better rights to the collateral than a creditor who has perfected a security interest in that collateral even if perfected before the buyer purchased the collateral. The key distinction here is between buyers in the ordinary course and buyers not in the ordinary course. A buyer in the ordinary course is one who buys goods in good faith, without knowledge that the sale violates the rights of another person. Further, the buyer must buy the goods in the ordinary course of business from a seller in the business of selling goods of the kind purchased. 

The significance of satisfying that definition for buyer in the ordinary course is that such a buyer takes free of any non-possessory security interests in the goods created by the buyer's seller. Importantly, this is true even if that security interest has been perfected and even if the buyer knows of the security interest (as opposed to knowing that the sale violates a security agreement). 

Things go a bit differently if the buyer is not in the ordinary course. A buyer not in the ordinary course (a buyer who does not satisfy the definition as stated above) take subject to perfected security interests. In contrast, such buyers take free of unperfected security interests unless they know of the security interest when they give value or take delivery of the collateral. 

There's an important exception for buyers not in the ordinary course that has appeared on the exam from time to time. Consumer goods are goods used or bought primarily for personal, family, or household purposes. In the case of consumer goods, a buyer (even if not in the ordinary course) takes free of a perfected security interest if the buyer without knowledge of the security interest buys for value consumer goods before a financing statement covering the consumer goods has been filed. This is called a consumer-to-consumer sale because for this rule to apply, the goods must be consumer goods in the hands of both the buyer and the seller. 

An interesting point to note here is that another rule states that a PMSI in consumer goods is perfected as soon as it attaches. This rule here regarding consumer-to-consumer sales incentivizes creditors to file a financing statement even though there may be automatic perfection. By filing the statement, there's less risk that a buyer not in the ordinary course will have priority over the creditor.

Fault (Torts)

You're working on a Torts question for the MBE. You see a young child get hit by a car, and you're ready to pick the answer claiming liability for the driver.

Was the driver at fault?

The child is now suffering from serious injuries and will suffer from those injuries for the remainder of his life.

Was the driver at fault.

The child's grandmother watched the child get hit by the car and now is suffering from severe and extreme emotional distress.

Was the driver at fault?

My point: The MBE writers will throw at you all the harm. But liability here doesn't result from harm; it results from fault. There are, of course, instances in which no fault is required for liability (see, for example, a person who owns a pet 🐅 ), but it would be fair to think of that as the exception to the rule, since there aren't all that many instances of strict liability. Animals, abnormally dangerous activities, and products.

In every Torts question, look for the fault.

Perfection (Article 9 UCC)

Next up in the lifeline of a secured transaction is perfection. Attachment gives the secured party rights against the debtor. Perfection will give a creditor rights superior to other creditors (as well as rights superior to other third parties other than creditors).

There are five ways to perfect a security interest: filing a financing statement; taking possession of the collateral; taking control of the collateral; automatic perfection; and temporary perfection.

A few of those ways should look familiar: taking possession of the collateral or taking control of the collateral was an element of attachment for some creditors. That means that if the other elements of attachment are satisfied, it may well be true that taking possession or control of the collateral will both attach a security interest, and perfect a security interest, all at the same time.

There’s actually quite a lot of nuance that goes into each of those ways to perfect a security interest. Will get into that in later posts. But the easiest one is automatic perfection. For purposes of the bar exam it would be enough to remember that perfection is automatic for a PMSI in consumer goods. A PMSI in consumer goods is perfected the moment it attaches.

Attachment (Article 9 UCC)

A few things about the subject of Secured Transactions on the bar exam: it's a subject that many students find challenging, and it's a subject that's tested with a high frequency. Not the greatest combination for those preparing for the exam.

I have a memory from a number of years ago when a student (I still think it was a clever joke, but I didn't want to ask in case he was serious) said to me "I have just one question to ask about Secured Transactions. What's a secured transaction?"

I'm writing up a resource to assist students with the subject but highly doubtful it'll be offered by July. So instead, I'll post occasionally on here leading up to July on this subject.

Best place to begin is with attachment, since that's sort of the starting line in a Secured Transactions essay. Attachment gives the creditor rights against the debtor.

It's all about the elements, and there are three elements to attachment: (1): the parties must agree to create a security interest; (2): value must be given to the debtor by the secured party; and (3): the debtor must have rights in the collateral (for example, ownership rights, or even just possessory rights).

Numbers 2 and 3 are straight forward: they are what they say. As for the first element, there are three ways to evidence that such an agreement has taken place: (1) the creditor takes possession of the collateral; (2) an authenticated security agreement is signed by the debtor; or (3): the creditor takes control of the collateral.

That third element might seem a bit suspect. Why control if you can take possession? But control is available when possession is not possible. For example, you can't possess electronic chattel paper (a type of collateral) so the option is available to instead take control of it.

There are nuances to some of the stuff above, but that's very much the framework for attaching a security interest. The next step from there would be to get some rights against creditors who might claim priority (rather than just the debtor): that's where perfection comes in.

Larceny

Someone walks into a store and decides to steal a coat. The person picks the coat up off the rack and realizes it's not a coat worth stealing. Returns it to the rack and leaves the store without the coat.

Larceny?

In life, nobody is getting charged with a crime for thinking about stealing a coat. On the MBE, yes, pick the answer that says it's larceny.

You're tested on theory, not reality. And, in theory, the elements of larceny have been ticked off. The intent to take and permanently deprive another of the other's property is satisfied. And, as for the taking and carrying away element, do enough of these questions and you'll realize that it doesn't require much. Merely picking the coat up off the rack will suffice.

Sometimes reality needs to be set aside to score points on the MBE. Don't pick the trap(!) answer: attempted larceny.

An Approach to Analyzing Hearsay

An approach you can apply to every hearsay question on the MBE:

1: Is the witness testifying to a statement that was made out of court.

No? Then it's not hearsay.

Yes? Then move on to the next step.

2: Is the out of court statement being offered for the truth of the matter asserted?

No? Then it's not hearsay.

Yes? Then move on to the next step.

3: Is the statement exempted from the rule against hearsay?

Yes? Then it's an admissible non-hearsay exemption.

No? Then move on to the next step.

4: Do any of the hearsay exceptions apply to the statement?

No? Then it's inadmissible hearsay.

Yes? Then it's hearsay, but it's admissible.

*That final point is worth reiterating. When you have an exception to the hearsay rule, that doesn't make the statement not hearsay or non hearsay. Rather, it's more accurate to say that some hearsay is admissible.

Peel Back the Onion

One thing about the MBE, it's going to test the exceptions. Think of studying for the MBE like peeling back an onion (and not just because of the crying thing). The first layer is the general rule, and sometimes that's as far as you'll need to go. But, mostly, you'll need to peel back layer 2 (the exception), layer 3 (the exception to the exception), etc. Most will know that under the UCC, a contract for the sale of goods priced at $500 or more is not enforceable without a writing. Layer 1. But instead of just knowing that, you need to know when a contract priced at $500 or more is enforceable without a writing at the time of agreement (deeper layers). There are 4 circumstances: ~if a merchant sends a written confirmation memo to another merchant stating the terms of the previous oral agreement, and the recipient does not object to that written memo within 10 days of receipt. ~if the goods are specially manufactured for the buyer, and not suitable for sale to others, provided that there has been a substantial beginning to the manufacturing of the goods, or substantial commitments for their procurement. ~if a party against whom enforcement is sought admits in pleadings, testimony, or etc., that a contract has been entered (not enforceable beyond the quantity admitted). ~if the goods were received and accepted, or if payment has been made and the goods were accepted. Under none of the 4 above circumstances is a writing required at the time of agreement even if the agreement is for goods priced at $500 or more. Peel back the .

Negating Required & Sufficient Conditions (LSAT)

If it rains prior to 1pm today, then the game is cancelled. But it's now after 1pm and it has not rained. Thus, the game is not cancelled. ❌

If it rains prior to 1pm today, then the game is cancelled. The game is not cancelled. Thus, it did not rain prior to 1pm today. ✅ 

The first example does not follow logically, but the second example does. Why? A perfectly acceptable answer is that the second example contains the contrapositive, and the first example does not. Although that's fine, it's a bit technical. 

A more thorough understanding requires knowing the difference between necessary and sufficient conditions. In the first example, raining prior to 1pm today is sufficient for guaranteeing that the game is cancelled. But just because something is sufficient for guaranteeing another thing, doesn't mean that it's necessary for the occurrence of the other thing. In other words, there could very well be reasons other than rain for why the game is cancelled; knowing that it did not rain does not allow drawing any conclusion about the cancellation of the game.

In the second example, the game being cancelled is a required or necessary condition once we know that it rains prior to 1pm today. It has to happen. And so because it's required once we know that it rains, knowing that the game was not cancelled allows for us to know with certainty that it did not rain prior to 1pm today. 

Negating a sufficient condition does not allow for drawing the conclusion drawn here. Negating a necessary condition does. 

This is why the following holds. 

Imagine an "if --> then" statement: x --> y

~x --> ~y ❌

but

-y --> ~x ✅

Character Evidence

Witness for the defense opens the door by offering good character evidence (reputation or opinion) of a trait pertinent to the crime for which defendant is tried. This is bad for the prosecution; the jury has just heard something good about the defendant. The jury might like the defendant now! What can the prosecution do? There are two options, and it's important to keep these options separate because they aren't identical. ~The prosecution might choose to cross examine the character witness. If it does that, it's not bound by reputation evidence or opinion evidence. It can offer specific instances of conduct to rebut the witness's prior testimony. ~The prosecution might choose to call up its own witness on direct to rebut the defendant's character witness. In that case, though, it'll be bound by reputation or opinion evidence. Why the difference? For a bar exam, the most important thing is to remember that there is a difference. But, at least for me, the "why" behind legal rules has been the way I've learned law.  

When cross examining the character witness, it's not only about the character of defendant; it's also about the credibility of the character witness. And it's entirely proper to impeach that character witness by asking about these types of specific acts.  

Memorizing

Someone on Reddit, while feeling overwhelmed with all of the law required to memorize for the bar exam, asked how to go about doing that.

You really want to get to the point where if a client came into the office and had a question for you (imagine it's one of the multiple questions at the end of an MEE fact pattern), the client would leave the office satisfied that his/her question was adequately addressed.

This is an important distinction from memorization. You don't need to write that an offer is a manifestation of intent to enter into yadda yadda. You just have to be able to address the law in a way that makes sense to you, so that you can use that law to then analyze whatever question was asked.

Try to understand the law in a way that doesn't require you to necessarily pull it from your memory. Take the time to understand it until you feel you'd be able to explain it to someone who understands it less than you do.

Double Jeopardy (Same Offenses)

Assume the following:

Offense 1: Elements A, B, C

Offense 2: Elements A, B, C, D Double Jeopardy requires not trying defendant for the same offense twice. Are these the same offenses? Yes. It may seem not with D in offense 2, but not in offense 1. But in order to be separate offenses there must be an element in each that is not in the other. There is no element in offense 1 that is not in offense 2. Consider a Venn Diagram. A, B, and C would fall within the intersection of the diagram, D would fall within the portion of a circle that only includes offense 2, and nothing would fall within the portion of a circle that only includes offense 1. Nothing falling only in the offense 1 circle is the tell that these are the same offenses (for this purpose).