Contracts Flashcards
UCC vs. Common Law
UCC: Governs sale of movable goods
Common Law: Governs everything else including land and services
Offer
invitation/advertisement
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)
General Rule: Offer is Revocable
EXCEPTIONS:
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.)
Firm Offer (UCC)
Exception to the general rule that an offer is revocable. Requires a merchant to have a signed written promise to hold the offer open
Option Contracts (Common Law)
Exception to the general rule that an offer is revocable. To bind the offeror to hold that offer open, there must be consideration
Acceptance
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
Consideration
“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.
Mistake
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
Statute of Frauds
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)
Misrepresentation
(Defense to Formation)
An untrue statement as to a material fact with detrimental reliance
Fraud
(Defense to Formation)
An intentional lie as to a material fact with detrimental reliance
Undue Influence
(Defense to Formation)
Unfair persuasion – look to relationship of the parties
Lack of capacity
(Defense to Formation)
K’s entered into by minors are voidable at the option fo the minor
Duress
(Defense to Formation)
Improper threat where a party has no choice but to acquiesce
Breach
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
Anticipatory Repudiation
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
Reasonable Grounds for Insecurity
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
Conditions
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 $500
Divisible Contract
An equitable remedy to avoid hardship that allows a breacher to recover for partial performance, but only if the performance of both parties an be divided into equal parts.
Defenses to Enforcement
1) Illegality: Either the consideration or the subject matter is illegal… K is void
2) Impossibility: Circumstances have changed such that no one could perform this K
3) Impracticability: Extreme and unreasonable difficulty or expense that was not anticipated. Not just an increase in cost. In Florida, performance that is different from what was anticipated is sufficient
4) Discharge by Substituted K: If new K, can’t use old K
Legal Remedies ($)
Expectancy Damages
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
Legal Remedies ($)
Restitutionary Damages
Available to the breaching or non-breaching party. Look for the benefit conferred on that party. Can get either expectancy OR restitution. Available even if no valid K
Legal Remedies ($)
Reliance Damages
The amount expended on performance in reliance on the K or promise
Legal Remedies ($)
Liquidated Damages
Damages that are agreed upon in the K. Must be reasonable (10% or less) and not a penalty.
Legal Remedies ($)
Consequential Damages
Damages that flow indirectly from the breach. Must be foreseeable by both parties.
Legal Remedies ($)
Incidental Damages
Damages that flow directly from the breach.
Equitable Remedies
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
Specific Performance
Equitable Remedy
Available only where monetary award would be inadequate. For rare/unique things
Injunction
Court order not to do something
Rescission
Cancelling the K (mistake / misrepresentation)
Reformation
Court allows parties to rewrite a portion of K so that it reflects parties intent more closely
Modification
UCC: Good faith
CL: Consideration
Parol Evidence
Bars prior or contemporaneous evidence to vary the terms of a fully integrated written agreement
Exceptions:
- To clarify ambiguous terms
- To establish the K was never formed (duress, fraud, mistake)
Warranties
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.)
3rd Party Rights
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.
