Contracts

Question 1

Accord and Satifaction

Answer 1

An accord and satisfaction occur when there is performance of a duty other than what was stated in the contract and satisfaction is performance of the accord.

When there is a claim that is subject to dispute the claim can be discharged if the person who the claim is asserted tenders in good faith an instrument that contains a conspicuous statement of payment in full and the other party obtains payment.

If the claimant indorses the check “under protest” it has no effect if there was a good faith dispute over the debt.

The claimant may return the attempted payment-in-full within the 90-day time period set under the UCC.

Question 2

Noncompete

Answer 2

In Florida, a noncompete clause is based on reasonableness. Noncompete agreements must be “reasonably necessary to protect the legitimate business interest” of the party trying to enforce the agreement.

Question 3

Anticipatory Repudiation

Answer 3

Anticipatory repudiation is applicable when a promisor repudiates a promise before the time for performance is due. The repudiation must be distinct, unequivocal, and absolute. This allows the party to sue immediately for breach of contract or ignore it and demand performance.

Retraction is available if the nonbreaching party has not relied on the repudiation, accepted the repudiation, or commenced an action for breach of contract.

When the promisor makes an equivocal statement that signals a prospective inability to perform, a party can demand adequate assurances if there are reasonable grounds for insecurity.

Failure to provide adequate assurances within a reasonable time will be treated as a repudiation. UCC, demand must be in writing and give the other party a reasonable time to respond which cannot exceed 30 days.

Question 4

Battle of the Forms

Answer 4

Under the UCC a contract is formed even if the acceptance contains additional or different terms.

If one of the parties is a merchant than the terms of the offer control and the additional terms are merely a proposal and do not go in unless they are agreed to by the offeror. Gap fillers will be used to fill in any blanks.

It is important to note that courts will not gap fill quantity unless it is a requirement contract, output contract, or exclusive dealing contract. Furthermore, in this scenario the quantity will be determined by how much you would produce or purchase if you were acting in a commercially reasonable manner. – ADDITIONAL MEMORIZATION

If both parties are merchants than the additional terms automatically become part of the contract unless they materially alter the contract, the offer expressly limits acceptance to the terms of the offer (proviso language), or the offeror objects to the terms within a reasonable time.

If there are different terms, under the knockout rule, they will be knocked out of the contract and gap fillers will be used to fill in the blanks.

If there is not an agreement yet but there has been substantial performance that can lead to hardship the court will use gap fillers to fill in the unagreed terms and merge them together with agreed upon terms to complete the contract. 2-207(3). This is formation of contract by conduct. – ADDITIONAL MEMORIZATION

Question 5

Breach of Contract

Answer 5

A breach of contract occurs when the nonbreaching party does not receive the substantial benefit of its bargain. If the breach is material nonbreaching party may withhold performance and pursue any available remedies for the breach. If the breach is minor the nonbreaching party must still perform but may recover actual damages.

Under the UCC, all obligations must be strictly performed or the nonperforming party is in breach. Unless it is an installment contract.

Question 6

Perfect Tender Rule

Answer 6

Under the perfect tender rule, if the goods or the tender of delivery fail to conform to the contract (nonconforming goods), the buyer may accept the goods (and sue on warranty), reject the goods, or accept some and reject the rest. If the buyer rejects and there is still time for performance the seller has the right to cure.

Question 7

Installment Contract

Answer 7

An installment contract is a contract in which goods are to be delivered in multiple shipments, and each shipment is to be separately accepted by the buyer. Payment is then due upon each delivery.

If the seller tenders nonconforming goods under one segment, the buyer can reject if the nonconformity substantially impairs the value of that shipment to the buyer and it cannot be cured. If the seller makes adequate assurances to cure the nonconformity, then the buyer must accept the shipment

The buyer cannot cancel the contract in its entirety unless the nonconformity substantially impairs the value of the whole contract.

Question 8

Consideration

Answer 8

In Florida, consideration is a benefit, legal detriment, or both.

Question 9

Consideration Substitute: Promissory Estoppel

Answer 9

Despite the lack of consideration, promissory estoppel may be used to enforce a promise when it reasonably foreseeable the promise would induce reliance, the promisee does in fact rely on the promise to his detriment, and injustice can only be avoided by enforcement of the promise.

Question 10

Quasi-Contract

Answer 10

A contract when a plaintiff confers a benefit on the defendant, the plaintiff reasonably expected to get paid, and it would be unfair for the D to keep the benefit without paying for it.

Question 11

Contract Formation

Answer 11

In order to form a valid contract, there needs to be an offer, acceptance, consideration, and no valid defenses.

Question 12

Offer

Answer 12

Offer is the objective manifestation of an intent to enter into a contract with definite terms which is communicated to the offeree which creates the power of acceptance.

Question 13

Irrevocable Offers

Answer 13

Generally, an offer is revocable before acceptance occurs, unless the contract is an option contract, a firm offer, unilateral contract, or there is detrimental reliance.

An option contract is a contract that remains open for a period of time. An option contract requires additional consideration.

A firm offer is an offer by a merchant to buy or sell goods in a signed writing which gives assurances that it will be held open, it is irrevocable during the time stated or if no time is stated then it will be held open for a reasonable time not to exceed 3 months.

A unilateral contract is a promise for performance, when a party begins performance, the offer becomes irrevocable. The promisee has a reasonable time to complete performance but is not required to.

It was reasonably foreseeable that the offeree would detrimentally rely on the offer, in which case the offer will be irrevocable for a reasonable period of time.

Question 14

Contractor Sub-bid Offer

Answer 14

In the construction industry, a sub-bid is considered an offer. When a subcontractor submits a bid to a general contractor, then revokes or alters the bid after the general contractor has relied upon it, the original bid may be enforceable under the theory of promissory estoppel.

However, the sub-bid is merely an outstanding offer and the general contractor is not bound to accept if awarded the contract, they may go with another sub for a lower price.

Question 15

Acceptance

Answer 15

An acceptance is the manifestation of assent to the offeror’s terms that is communicated and absolute & unequivocal. Acceptance can be made in any reasonable manner unless the offeror requests a particular way to accept.

Common law follows the mirror image rule which means acceptance must mirror the terms of the offer or no contract is formed.

Question 16

UCC Acceptance

Answer 16

The UCC does not follow the mirror image rule and contract is formed even if the acceptance contains additional or different terms. If the offeror is not clear on acceptance, acceptance is valid by promise or performance. A prompt promise to ship or prompt shipment are both acceptable ways to accept unless otherwise provided in the offer.

If the seller ships nonconforming goods then the shipment is both an acceptance and breach of contract unless the seller notifies the buyer the nonconforming goods are tendered as an accommodation. The accommodation is deemed a counteroffer and buyer may accept or reject.

Question 17

Contract Modification

Answer 17

Modification is when there is a material change of a term in the contract. Under the common law a contract modification requires additional consideration.

The common law follows the preexisting duty rule which means a promise to do something you are already obligated to do is not consideration. Unless there is a change is performance, a third party promises to perform, or unforeseen difficulties excuse performance.

The UCC does follow the preexisting duty rule and does not require additional consideration only that the modification is done in good faith in accordance with commercial reasonableness standard.

Question 18

Debt Modification

Answer 18

If the amount of debt is not currently due or the amount is in dispute a debt modification will be binding.

Question 19

Illusory Promise

Answer 19

An illusory promise is a promise that pledges nothing because it is vague, and the promisor can choose whether or not to honor it. Such a promise is not legally binding.

Question 20

Compensatory Damages

Answer 20

Compensatory damages compensate the nonbreaching party for actual economic losses and put the parties in the position as if the contract had been fully performed (expectation damages). Expectation damages must be proven with reasonable certainty if they are too speculative the party may seek reliance damages.

Question 21

Reliance Damages

Answer 21

This is the reimbursement of out-of-pocket expenses paid out in reliance on another’s promise. This puts a party in the position as if the contract was never formed.

Question 22

Consequential Damages

Answer 22

Damages that are reasonably foreseeable as a result of the breach. Parties must be aware of the damages at the time of contract.

Question 23

Incidental Damages

Answer 23

Damages that are incidental to a party’s failure to perform (i.e., storage)

Question 24

Liquidated Damages

Answer 24

A liquidated damages clause is enforceable if the amount of damages was reasonable and actual damages were uncertain and difficult to prove.

Question 25

Attorney’s Fees

Answer 25

In Florida, an award of attorney’s fees is not permitted in a contract action unless authorized by statute or by the contract itself.

Question 26

Equitable Remedies Intro

Answer 26

When damages are an inadequate remedy a party may sue for specific performance which is used when property is unique, scarce, or where it is difficult or expensive to calculate damages. Land is always considered unique.

Question 27

Recission

Answer 27

Recission is available when there was no meeting of the minds (i.e., misrepresentation, duress, mistake) this unwinds the transaction and returns the parties to the positions they would have had if the contract had not been made.

Question 28

Restitution

Answer 28

Restitution is the return of a benefit conferred and is based on the defendants gain rather than the plaintiff’s loss

Question 29

Injunction

Answer 29

An injunction can be prohibitory (stopping an act) or mandatory (performing an act). For an injunction to be granted the plaintiff must show likelihood of success on the merits, irreparable harm in the absence of relief, the balance of equities tips in his favor, and the injunction is in the public interest. A permanent injunction may be awarded after a decision on the merits.

Question 30

Infancy

Answer 30

Infancy is when someone under 18 years of age enters into a contract. The contract becomes voidable at the option of the minor only. In Florida, the minor cannot use age as a defense if they fraudulently misrepresent their age.

Question 31

Mistake

Answer 31

Unilateral mistake is not a defense to contract unless it is unconscionable, or the other party knew or should have known of the mistake.

Mutual mistake is when neither party knew of the mistake and acted in good faith when contracting. Remedy is recission or reformation.

Question 32

Impossibility

Answer 32

Impossibility is if objectively nobody can perform the contract. (After the contract was made)

Question 33

Impracticability

Answer 33

Impracticability occurs when performance is still possible but unforeseen events have made performance too difficult, the nonoccurrence of the event was a basic assumption of the contract, and the party seeking discharge was not at fault

Question 34

Unconscionable

Answer 34

A contract is unconscionable when it is so unfair to one party that no reasonable person in the same position would have agreed to it. Procedural unconscionability enters into a contract due to deception or unequal bargaining power. Substantive unconscionability is the unfair substance of the contract.

Question 35

Duress

Answer 35

Duress is an improper threat that deprives a party of meaningful choice.

Question 36

Undue Influence

Answer 36

Undue Influence is the unfair persuasion of a party to enter a contract usually based on some type of special relationship.

Question 37

Intro

Answer 37

Florida’s adoption of the UCC Article 2 governs the sale of goods, which are anything movable at time of identification of the contract for sale. Strict common-law rules govern real estate and service contracts.

Question 38

Misrepresentation

Answer 38

Intentional/Fraudulent Misrepresentation - In Florida, the following elements must be proven for a fraudulent misrepresentation claim: (1) false statement about a material fact (2), made with scienter (3) made with the intent to induce reliance and (4) the reliance caused damages.

Negligent Misrepresentation - The elements of negligent misrepresentation are as follows: (1) misrepresentation, (2) breach of duty to plaintiff, (3) that causes material and justifiable reliance by plaintiff on the misrepresentation, and (4) damages.

Question 39

Parol Evidence Rule

Answer 39

Someone trying to add terms to contract.

Parol evidence applies only to agreements reached before or contemporaneously with the written contract. The admissibility of parole evidence will depend on the contract being a partial or total integration.

A contract is a total integration when the parties did not intend for anything else to be added. This is evidenced by a merger clause. If the contact is completely integrated the extrinsic evidence will not be admissible. Unless, there is an ambiguity, use of a defense, or condition precedent. In Florida, the ambiguity must exist on the face of the contract and must be latent.

If the contract is a partial integration extrinsic evidence will be admissible as long as the evidence does not contradict or materially alter the written contract.

Under the UCC, extrinsic evidence is always admissible to explain trade usage or course of dealings or performance.

Question 40

Statute of Frauds

Answer 40

The following contracts fall within the statute of frauds: consideration of Marriage, contracts that cannot be performed in a Year, Land contract, Executor, Guaranty, and Sale of goods of $500 or more. Also, in Florida, newspaper subscriptions, health care, and debt contracts fall under SOF.

Contracts that fall within the statute of frauds require a writing, signed by the party to be charged and must contain the essential terms of the contract (i.e., price, parties, delivery).

The only essential term for UCC contract is quantity unless it is an output, requirement, or exclusive dealing contract.

Question 41

Statute of Frauds: UCC Exceptions

Answer 41

Specially manufactured goods for the buyer that are not suitable for sale to others and the seller has made a substantial start towards manufacturing the goods.

Payment and acceptance by the seller or receipt and acceptance by the buyer.

When both parties are merchants and one merchant sends a signed written confirmation of an order that includes the quantity term and the other party does not object within 10 days this does not violate SOF and becomes an enforceable agreement – Confirming Memo

Question 42

Statute of Frauds: Partial Performance

Answer 42

Part Performance: if ALL of the following are satisfied by the buyer: (1) payment of part or all of the contract price (2) taking possession (3) making substantial improvement.

Question 43

Statute of Frauds: General Exceptions

Answer 43

Promissory Estoppel: if reliance on a promise was foreseeable and in fact the party detrimentally relied on the oral promise.

Judicial Admission when a party admits through discovery or testimony at trial there was a contract. (will be enforceable to the extent admitted).

Question 44

Third Party Beneficiary

Answer 44

Was the third person intended or incidental beneficiary?
An incidental beneficiary does not have any rights to enforce the contract. An intended beneficiary does have rights to enforce the contract if those rights have vested. Rights vest when the TPB knows or is told about the contract, detrimentally relies on the contract, or sues on the contract. An intended beneficiary rights may be revoked at any time before they vest.

Question 45

Express Warranty

Answer 45

In Florida, an express warranty is any promise, affirmation, description, sample, or model that is part of the basis of the bargain, unless it is merely an opinion.

A breach occurs when the product then fails to conform to the promise or description and the breach caused damages.

Question 46

Implied Warranty of Merchantability

Answer 46

An implied warranty is made by a merchant that the products sold are fit for consumption and for ordinary use. In addition, the implied warranty of merchantability will apply to a purchaser, purchaser’s family, and household guests.

The implied warranty of merchantability may be excluded if it is written conspicuously in the document and must include the word merchantability or AS-IS.

Question 47

Implied Warranty of Fitness for a Particular Purpose

Answer 47

A warranty that goods are fit for a particular purpose is implied when the seller has a reason to know that the buyer is looking for a particular product and the buyer relies on the seller’s skill to select the good.

A breach occurs when a person is injured by the product not performing its specific use.