Contracts Flashcards
The two bodies of law in contracts are
Common law and the UCC
The UCC applies to contracts that involve ___
the sale of goods
What are goods?
Movable things - not just goods in excesss of 500
____ is not goods and ____ are never merchants
Real property and real estate brokers
Common law applies to
anything other than goods
Mostly see common law contracts involving
real property and service contracts
An offer is __
an invitation to enter into a contract
Acceptance is ___
manifestation of intent to be bound to a contract
A counter offer is ___
rejection of the original offer and creation of a new offer
Consideration is ___
a bargained for exchange where one party receives a legal benefit or experiences a legal detriment
You should organize your contracts essay by ___
communication instead of category (ie. May 7 email)
Mailbox rule:
everything is effective when received EXCEPT acceptance
Acceptance is effective upon __
dispatch (when placed in mailbox)
Offers are revocable ___
at any time until acceptance
Option contracts:
A promise was made to keep the offer open for a certain period of time in exchange for valuable consideration
You cannot revoke a Merchant firm offer, which is:
If offer is governed by the UCC and the offeror is a merchant, his mere promise is sufficient to keep the offer open
You cannot revoke an offer if there is detrimental reliance, which happens when
the offeree takes reasonable foreseeable actions in reliance upon the offer and experiences a detriment
You cannot revoke an offer when it is a unilateral contract and ___
the offeree begins to perform
Mirror image rule (common law)
the offer and acceptance must match exactly in every respect. If the acceptance does not mirror the offer, it is treated as a counter offer
Mirror image rule (UCC)
UCC abolished the mirror image rule and the acceptance does not need to match the offer to form a contract
Modification occurs when
the parties have formed a valid contract and then attempt to change the terms before performance is complete
Pre-Existing Duty Rule
Contract modifications will generally be void because the new deal lacks consideration.
Modifications are acceptable if
new/different consideration is given OR if it is a contract for the sale of goods under the UCC and the reasonable modification is sought in good faith
Bilateral mistake
Mutual mistake where both parties mess up
Bilateral mistakes will be void if
the mistake concerns a basic assumption on which the contract is made, the mistake has a material adverse effect on the agreed upon exchange, and the adversely affected party didn’t assume the risk of the mistake
Unilateral mistake
one party messed up
Unilateral mistake is not a defense to the formation of a contract unless
the other party knew or should have known of the mistake
Misrepresentation or fraud IS ___
a defense to contract formation and will have similar fact patterns to unilateral mistake
SOF Acronym (FL)
MY LEGS Never Hurt
K is within the SOF when:
- Marriage is the consideration
- Contracts that cannot be performed within one year
- Land and real estate
- Executor’s promise to personally pay debts of an estate
- Goods of $500 or more
- Surety’s promise to pay another person’s debts
- Newspaper or magazine subscriptions
- Healthcare provider’s guarantee of outcome
SOF is satisfied when K is:
- Memorialized in writing
- Signed by party to be charged with the breach
- Contain the essential terms
For property, essential terms are:
PPP
Names of the parties, description of the property, and the price
Two categories of remedies:
legal and equitable
Legal remedies always use ___ to compensate non-breaching party for his loss
money
Equitable remedies may involve ____ or may involve ____
money or forcing a party to take an action
Specific performance is an ____ remedy
equitable
Specific performance is
an equitable remedy that compels the breaching party to perform under a contract. It is available when monetary damages are not adequate (e.g. for unique assets that cannot be replaced with money, like real property)
Look for situations where ___
there is no form of adequate money damages
All real property is
unique
Can never obtain specific performance on a ____ K
service
Can use SP to
enforce restrictions on employment, known as non-compete clauses
Non-compete clauses in FL will only be enforced if the terms are
reasonable - in time and geography
Discuss reformation when
K fails to reflect the intent of the parties
Reformation is an ___ remedy
equitable
Reformation is different from mistake because
the contract is just wrong. Parties knew what they wanted but the contract turned out wrong.
Remedies for fraud
Recission, constructive trust, and or equitable lien
If court applies recission then K is ___
voided and the parties must then restore any gains on the basis of the fraudulent K via restitution
Under a constructive trust __
the fraudulent party is deemed to hold the property in trust for the benefit of the injured party. He must then execute the trust and convey the property back to the rightful owner
equitable lien is when ___
the court imposes a lien on the property for the value of the judgment. the lien can potentially be foreclosed to satisfy the judgment.
When a court uses money to solve a contract dispute, the goal is to ___
compensate the plaintiff
Damages to compensate the plaintiff are called
compensatory damages
___ damages are not available for breach of K, but they are for torts
Punitive
Types of money damages
- Expectation
- Restitution
- Reliance
- Incidental
- Consequential
- Liquidated
Acronym for types of money damages
Every Road Rage Incident Causes Liability
Expectation damages are
the standard measure of contract damages. These are sufficient damages for the non-breaching party to buy a substitute performance.
The purpose of expectation damages (legal remedy) is to put the plaintiff in the ____
same economic position as if the contract was performed
The amount of expectation damages will always be based on
the plaintiffs loss
One approach to expectation damages is based on ___
market value - we value the plaintiffs loss based on a market price
The other approach to expectation damages is ___
substitution cost - value the plaintiffs loss based on the cost to replace or repair the subject matter of the K
With substitution cost you may be talking about the market price to fix/replace OR
the actual cost to fix/replace
Restitution is ___
a remedy used to correct unjust enrichment
Restitution is not a form of ___
damages
The law is unclear about whether restitution is a ____ remedy
legal or equitable
Unjust enrichment is the basis of ___ restitution
all
Unjust enrichment means that
a party received a benefit as a result of someone else’s misfortune
Restitution fixes the unjust enrichment by
forcing the defendant to pay money to the plaintiff
Restitution is measured by ____ not the plaintiffs loss
defendants gains
You cannot get both
expectation damages and restitution
First scenario where restitution is used is:
Have a promise that cannot be enforced as a contract for some reason, but one party was unjustly enriched
Second scenario where restitution is used is:
Have a valid contract and restitution is awarded as an alternative to legal damages, where the amount of legal damages is too difficult to ascertain or insufficient
Restitution is not about making the plaintiff whole, but rather ___
taking away unjust gains and making things right
Reliance damages are an ___ remedy
equitable
Definition of reliance damages
Reliance damages are an equitable remedy used to compensate the non-breaching party for reasonable foreseeable costs that he incurred in reliance upon the promise
We typically see reliance damages when
a party incurs out of pocket expenses in preparation for the agreed-upon performance OR when a party worsens his situation in reliance upon the promise in a way the promissor could have foreseen
Reliance damages put the plaintiff in the position she would have been in ____
had the K never been performed
For reliance damages, the damages spent by the P must be ___
reasonable
First scenario where reliance damages is used:
Have a promise that cannot be enforced due to some defect in formation, and we used promissory estoppel to seek reliance damages
Second scenario where reliance damages is used:
have a valid K and we cannot ascertain the amount of the legal remedy, or the legal remedy is insufficient.
We can use restitution or reliance when
legal damages are not available or not ascertainable
We can use restitution instead of legal damages when
it will result in larger compensation for the plaintiff
We can get both __
restitution and reliance damages
Incidental damages are a __
legal remedy
Definition of incidental damages:
incidental damages are the expenses that the non-breaching party incurs in finding replacement performance.
Incidental damages can also apply in some situations involving ___
the sale of goods
Consequential damages are ___
a legal remedy
Consequential damages are ___ easy to get
NOT
Consequential damages rule:
Consequential damages are special damages and reflect losses over and above standard expectation damages. They are recoverable only if, at the time the K was made, a reasonable person would have foreseen the damage as a probable result of the breach.
For consequential damages, D must:
- know or reasonably be able to foresee
- that breach would cause special harm to P
- outside the scope of the party relationship
- and that harm would not be wholly rectified by ordinary damages
Scenarios for consequential damages involve
lost profits from third parties
D’s first counter argument to consequential damages:
the special loss was not foreseeable
D’s second counter argument to consequential damages:
the amount of damages are too speculative.
Liquidated damages are a ___
legal remedy
Liquidated damages rule:
For liquidated damages, the parties to a K agree to the damages to be paid in the event of a breach. Typically, the amount of liquidated damages is stated in the K itself.
To obtain liquidated damages in FL
the amount of liquidated damages must be reasonably related to actual damages AND they must not be used as a penalty
