Contracts Flashcards
Governing Law
The common law applies to contracts for services and land.
The UCC applies to contracts for the sale of Goods
Mixed – apply predominant purpose, test to resolve
- can apply both if a divisible contract
Formation
A legally enforceable contract is created through the process of mutual assent (i.e., offer and acceptance), consideration, and no valid defenses
Offer
An offer is an objective manifestation of a willingness by the offeror to enter into an agreement with the offeree that creates the power of acceptance in the offeree.
- the terms of the offer must be certain and definite. Under common law, all essential terms (i.e., the parties, subject matter, price, and quantity) must be covered in the agreement.
If the offer does not set a time limit for acceptance, the power of acceptance terminates at the end of a reasonable period of time. What constitutes a “reasonable period of time” depends on a variety of factors, including the nature of the contract, the purpose and course of dealing between the parties, and trade usage.
Breach
Once a duty to perform exists, nonperformance is a breach of contract unless the duty is discharged.
Under common law, substantial performance by one party does not relieve the other party of its duty to perform. If the breach is minor, the breaching party has nonetheless substantially performed.
Accord and Satisfaction
Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s existing duty.
A “satisfaction” is the performance of the accord agreement; it will discharge both the original contract and the accord contract.
If a claim is unliquidated or otherwise subject to dispute (as in this case), it can be discharged if (i) the person against whom the claim is asserted in good faith tenders a negotiable instrument (e.g., a check) that is accompanied by a conspicuous statement indicating that the instrument was tendered as full satisfaction of the claim (e.g., “Payment in full”), and (ii) the claimant obtains payment of the instrument.
Statute of Frauds
The Statute of Frauds requires certain contracts be in writing and signed by the party to be charged to be enforceable.
- MY LEGS
Parol Evidence rule
The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written. If the writing completely expresses all of the terms of the parties’ agreement, then it is a total integration, and the parties cannot introduce any extrinsic evidence (oral or written) of prior or contemporaneous understandings or negotiations. The intent of the parties determines whether there is total, partial, or no integration. A merger clause is evidence of a complete integration.
- Even when there is a full integration, evidence may be offered if it represents a distinct and separate contract.
non-compete clause
A court of equity will not generally specifically enforce a contract for personal services because it cannot supervise performance and forcing performance of a services contract would be akin to involuntary servitude.
However, when an employment contract includes a provision that the former employee not obtain employment that competes with the former employer, courts will generally specifically enforce such provisions. The violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the party seeking enforcement of the covenant.
The covenant must be reasonable in time, geographic area, and line of business. When not predicated upon the protection of trade secrets or as a result of a sale of a business, a restraint of six months or less is presumed to be reasonable.
Florida also requires that the employer plead and prove the covenant is justified by a legitimate business interest. Any restrictive covenant not supported by a legitimate business interest is unlawful and void.
- trade secrets or confidential business information
- goodwill associated with a specific geographic location or a specific marketing or trade area.
Defense: Mutual Mistake
Mutual mistake occurs when both parties are mistaken as to an essential element of the contract. In such a situation, the contract may be voidable by the adversely affected party upon proof of the following: (i) there was a mistake of fact existing at the time the contract was formed, (ii) the mistake relates to a basic assumption of the contract, (iii) the mistake has a material impact on the transaction, and (iv) the adversely affected party did not assume the risk of the mistake.
Defenses: Misunderstanding
A misunderstanding occurs when both parties believe that they are agreeing to the same material terms, but they in fact agree to different terms.
If the misunderstanding involves a material term, and neither party knows or should know that there is a misunderstanding, then there is no contract.
Expectation Damages – Real Estate
Expectation damages are intended to put the nonbreaching party in the same position as if the contract had been performed. Damages for failing to perform a real-estate sales contract are measured by the difference between the contract price and the market value.
Specific Performance – Land
When damages are an inadequate remedy, the nonbreaching party may pursue the equitable remedy of specific performance. Damages are always inadequate in contracts involving an interest in real property because every parcel of land is unique. However, a subsequent purchaser without notice of a prior sale cannot be required to specifically perform the contract.
