Contracts

Question 1

UCC vs. Common Law

Answer 1

UCC: Governs sale of movable goods

Common Law: Governs everything else including land and services

Question 2

Offer

invitation/advertisement

Answer 2

An objective manifestation of a willingness to be bound by the reasonably certain terms communicated to the offeree.

Creates power of acceptance in offeree

Advertisements are generally not offers unless it is in the nature of a reward or it is specific as to quanitty and expressly indicates who can accept (First come, First served)

Question 3

General Rule: Offer is Revocable

EXCEPTIONS:

Answer 3

Firm Offer (UCC): Requires a merchant to have a signed written promise to hold the offer open

Option Contracts (Common Law): For an option contract to bind offeror to hold that offer open, there must be consideration (something paid/given up/etc.)

Question 4

Firm Offer (UCC)

Answer 4

Exception to the general rule that an offer is revocable. Requires a merchant to have a signed written promise to hold the offer open

Question 5

Option Contracts (Common Law)

Answer 5

Exception to the general rule that an offer is revocable. To bind the offeror to hold that offer open, there must be consideration

Question 6

Acceptance

Answer 6

A manifestation of an intent by the offeree to be bound by the terms of the K

Mailbox Rule: Acceptance is effective when sent

Elements of Acceptance:

• Offeree with power of acceptance
• Deviant Acceptance (UCC): A contract is formed even if the acceptance contains additional or different terms. Whether the terms become part of the contract depends on the status of the parties. If at least one of the parties isn’t a merchant, the terms of the offer control and it counts as a proposal. If both parties are merchants, additional terms become part of the contract.
• Mirror Image Rule (CL): Acceptance must be identical to the offer, otherwise no contract is formed

Question 7

Consideration

Answer 7

“Bargained for exchange” Look for benefit to the promisor or detriment to the promisee. In FL, there only needs to be legal detriment on one side of the K for consideration.

Exception: Promissory Estoppel: A K can be enforced even if there is no consideration if there is a promise and foreseeable, reasonable detrimental reliance on that promise.

Question 8

Mistake

Answer 8

Defense to Formation

A belief, basic assumption of the K, is material, and adversely affects someone who did not assume the risk

Mutual Mistake: Both sides share the mistaken belief

Unilateral Mistake: Only one side has the mistaken belief. Generally not a defense unless the other party knew or should have known of the others’ mistake

Question 9

Statute of Frauds

Answer 9

Defense to Formation

Some K’s require a writing, signed by the party to be charged, with the essential terms.

K’s that must be in writing:

M marriage
Y k's that cannot be performed w/in 1 year
L land
E k's by executors of estates
G guarantee k's
S sale of goods > $500 + quantity (UCC)

Question 10

Misrepresentation

Answer 10

(Defense to Formation)

An untrue statement as to a material fact with detrimental reliance

Question 11

Fraud

Answer 11

(Defense to Formation)

An intentional lie as to a material fact with detrimental reliance

Question 12

Undue Influence

Answer 12

(Defense to Formation)

Unfair persuasion – look to relationship of the parties

Question 13

Lack of capacity

Answer 13

(Defense to Formation)

K’s entered into by minors are voidable at the option fo the minor

Question 14

Duress

Answer 14

(Defense to Formation)

Improper threat where a party has no choice but to acquiesce

Question 15

Breach

Answer 15

When a party is under an absolute duty to perform but does not

Perfect Tender Rule (UCC): A buyer can accept or reject any non-conforming goods in whole or in part
Exception: If the seller had reasonable grounds to think the buyer would accept the shipment

Benefit of the Bargain (CL): (argue both)
Material Breach: Did not get the benefit of the bargain. Non-breaching party does not have to perform.
Minor Breach: There was substantial performance. Still have to perform, but can get damages

Question 16

Anticipatory Repudiation

Answer 16

Argue Anticipatory Repudiation & Reasonable Grounds for Insecurity!

If there is an unequivocal refusal to perform or an act inconsistent with performance, the non-breaching party can:

1) Sue immediately
2) Encourage performance
3) Cancel the K
4) Wait

In FL, the non-breaching party must show they could perform

Question 17

Reasonable Grounds for Insecurity

Answer 17

Argue Reasonable Grounds for Insecurity & Anticipatory Repudiation!

If have reasonable grounds for insecurity, can ask for assurances. If other party does not give adequate assurances, can:

1) Sue immediately
2) Encourage performance
3) Cancel the K
4) Wait

Question 18

Conditions

Answer 18

May keep a duty to perform from arising

Precedent: Something that must occur other than the passage of time before a duty to perform arises
Ex: If I get financing I am going to buy your house… getting financing is condition precedent. Argument is didn’t breach because didn’t get the financing.

Concurrent: Performance is exchanged at the same time
Ex: I’ll buy your car for $500 so if don’t bring car, don’t need to bring $500

Question 19

Divisible Contract

Answer 19

An equitable remedy to avoid hardship that allows a breacher to recover for partial performance, but only if the performance of both parties an be divided into equal parts.

Question 20

Defenses to Enforcement

Answer 20

1) Illegality: Either the consideration or the subject matter is illegal… K is void
2) Impossibility: Circumstances have changed such that no one could perform this K
3) Impracticability: Extreme and unreasonable difficulty or expense that was not anticipated. Not just an increase in cost. In Florida, performance that is different from what was anticipated is sufficient
4) Discharge by Substituted K: If new K, can’t use old K

Question 21

Legal Remedies ($)

Expectancy Damages

Answer 21

Puts the party in the position they would have been in had the contract been performed. Must mitigate damages.

Buyer Breaches (UCC): Seller must resell
Resell –> K price - Resale price
~Resell –> K price - Market price
Lost Volume Seller –> Lost profits (since could have gotten profits from 2 sales if buyer didn’t breach)

Seller Breaches (UCC): Buyer must cover
Cover –> K price - Cover price
~Cover –> K price - Market price

Buyer can also get incidental and consequential damages

Question 22

Legal Remedies ($)

Restitutionary Damages

Answer 22

Available to the breaching or non-breaching party. Look for the benefit conferred on that party. Can get either expectancy OR restitution. Available even if no valid K

Question 23

Legal Remedies ($)

Reliance Damages

Answer 23

The amount expended on performance in reliance on the K or promise

Question 24

Legal Remedies ($)

Liquidated Damages

Answer 24

Damages that are agreed upon in the K. Must be reasonable (10% or less) and not a penalty.

Question 25

Legal Remedies ($)

Consequential Damages

Answer 25

Damages that flow indirectly from the breach. Must be foreseeable by both parties.

Question 26

Legal Remedies ($)

Incidental Damages

Answer 26

Damages that flow directly from the breach.

Question 27

Equitable Remedies

Answer 27

Specific Performance: Available only where a monetary award would be inadequate. For rare/unique things

Injunction: Stop other party from doing something

Rescission: Cancelling the K (mistake or misrepresentation)

Reformation: Court allows parties to rewrite a portion of K so that it reflects parties original intent more closely

Question 28

Specific Performance

Answer 28

Equitable Remedy

Available only where monetary award would be inadequate. For rare/unique things

Question 29

Injunction

Answer 29

Court order not to do something

Question 30

Rescission

Answer 30

Cancelling the K (mistake / misrepresentation)

Question 31

Reformation

Answer 31

Court allows parties to rewrite a portion of K so that it reflects parties intent more closely

Question 32

Modification

Answer 32

UCC: Good faith
CL: Consideration

Question 33

Parol Evidence

Answer 33

Bars prior or contemporaneous evidence to vary the terms of a fully integrated written agreement

Exceptions:

1. To clarify ambiguous terms
2. To establish the K was never formed (duress, fraud, mistake)

Question 34

Warranties

Answer 34

Implied Warranty of Merchantability: In every sale by a merchant, there is an implied warranty that the goods will be fit for their usual purpose. Can be disclaimed through written conspicuous disclaimer.

Implied Warranty for Particular Purpose: When any seller knows or has reason to know the particular purpose for which the goods are to be used and and that the seller is relying on the sellers judgment and skill. Can be disclaimed through written conspicuous disclaimer

Express Warranty: Arises by any affirmation of fact, promise, description, model or sample which is part of the basis of the bargain (e.g. the buyer could have relied on it.)

Question 35

3rd Party Rights

Answer 35

Assignment: transfer of rights under K

Intended Beneficiary: Cannot sue under K
Intended Beneficiary: Can sue under K
Incidental Beneficiary: If someone unintentionally benefits. Can’t sue under K.
Creditor Beneficiary: If primary purpose was to discharge an obligation. Can sue original promisee or 3rd person
Donee Beneficiary: If primary purpose was to make a gift. Cannot sue under K.

Original parties can change terms until beneficiaries rights vest

Beneficiaries rights vest when the beneficiary:

1) assents to the K
2) sues on the K
3) relies on the K

Delegation of Duties: Any contractual duty may be delegated unless it requires personal judgment or skill.