Contracts (Grossman) Flashcards
Contracts Essay Structure
1) Choice of Law
2) K Formation
3) Modification
4) Defenses
5) Breach
6) Remedies
7) Promissory Estoppel
8) Third Party Beneficiary
9) Anticipatory Repudiation
10) Misrepresentation
11) Warranties
12) Parol Evidence
Choice of Law: What law applies?
Common Law Contracts: services or land
UCC: sale of goods
-Always start w/ this analysis as 1st paragraph
Contract Formation
-Always start as 2nd paragraph; give offer; acceptance consideration
1) Offer - outward manifestation of an intent to enter into a contract w/ specific terms to offeree
2) Acceptance - communication of intent to enter into K on terms offered
3) Consideration - bargained for exchange between parties (there must be a legal detriment or benefit exchanged between the parties)
Offer
Outward manifestation of an intent to enter into a contract w/ specific terms to offeree
Acceptance
Communication of intent to enter into K based on terms offered
-Some sort of communication of your intent to enter into the K (i.e., by words or actions)
-You can accept by any reasonable means unless the offeror specifies a manner of acceptance. (make sure to always say this)
Consideration
Bargained for exchange between parties (there must be a legal detriment or benefit exchanged between the parties)
Are advertisements considered offers?
No - they are considered invitations to negotiate.
-Can become offers w/ more specific and definite terms.
When are offers revocable?
Offers are revocable until and unless the offeree accepts.
(Unless falls under 1 of 3 exceptions)
Counteroffer
Changes the terms of the initial offer.
-Now the original offeror has to respond.
When are offers irrevocable?
1) Option Contract: Promise to keep offer open for a specified period of time in exchange for additional consideration (must be between non-merchants)
2) Firm Offer: similar to an option K, but between merchants (need signed writing by person promising to keep offer open)
3) Unilateral Contract: promise for performance; once a person begins performing, the offer becomes irrevocable
Option Contract
-Promise to keep offer open for specified period of time.
-Needs additional consideration to be valid.
-Must be between non-merchants.
Firm Offer
-Similar to an option K, but between merchants.
-Need signed writing by person promising to keep offer open.
Unilateral Contract
This is a promise for performance.
-Once person begins performing, the contract has been accepted and the offer becomes irrevocable (but mere preparations don’t count).
Mirror Image Rule
-Applies only in common law
-The acceptance has to mirror the terms of the offer.
Acceptance under UCC
If there’s a sale of goods, different terms are ok unless they materially alter the terms of the offer.
Mailbox Rule
Under the mailbox rule, acceptance is effective upon DISPATCH.
-EXCEPTION: If rejection sent first, then followed by acceptance, whichever arrives first prevails.
Contract Modification
Modification is changing a material term of the K.
Two rules:
1) Common Law - there needs to be additional consideration for a valid modification.
2) UCC - no consideration needed, just good faith between the parties.
-Modifications can be done orally.
Statute of Frauds
Under the SOF, certain contracts need to be in writing and they are: MYLEGS
1) Marriage
2) Year (1 year or more)
3) Land
4) Executor (person appointed to carry out terms of will)
5) Guarantor (aka surety)
6) Sale of Goods ($500+)
Elements of a Writing for a Valid Contract under SOF
-Basic terms (if it’s goods, always put quantity)
-Signed by the party to be charged (can sign by use of a symbol)
Part Performance
-This is an exception to the SOF
-Applicable mainly with land sale contracts.
-Part performance = some payment plus either taking possession of the land or making improvements thereon
Merchant Confirmation
-This applies only if there’s a sale of goods hypo
Rule: If the sender sends a signed confirmation of the order including the quantity term and the purchaser does not object to the confirmation WITHIN 10 DAYS of receipt = exception to SOF
-This is considered a “writing” for SOF purposes
Contract with a Minor
The K is voidable at the option of the minor.
-Note: In FL, the minor can’t use the minority as a defense if they fraudulently misrepresent their age.
Mistake
Two types:
1) Unilateral Mistake: NOT a defense if 1 party mistaken UNLESS the other party knew or should have known of the party’s mistake
2) Mutual Mistake: Both parties were honestly in good faith mistaken (always a defense)
-Always be looking for this as a defense
Unilateral Mistake
Generally not a defense to the K if 1 party is mistaken as to a term or terms, UNLESS
other party knew of person’s mistake (i.e., they took advantage of it)
Impossibility
In viewing the K from an objective standard, nobody could perform the K (i.e., illegal, destroyed, etc.)
Impracticability
Due to unforeseen circumstances, though performance is possible, it’s now become too difficult or expensive.
-Note: In the real world, some fluctuation in prices are foreseeable, therefore the change in cost would have to be SO drastic that it wouldn’t be fair.
Breach of K
Ask: was the breach material or minor?
1) Material if breach is so substantial that the party ddi not get the benefit of the bargain (sue for total breach)
2) Minor if party still receives benefit of bargain (i.e., still got what you wanted, sue for actual damages to recover the difference)
Perfect Tender Rule
For the sale of goods, seller must give purchaser exactly what he ordered.
-If seller gives buyer non-conforming goods, then buyer may:
1) Accept
2) Reject
3) Accept in part & reject in part
Installment Contract
If Seller sends Buyer shipments of goods every week/month/etc., and one of those shipments is non-conforming, that’s NOT a material breach.
UNLESS the non-conforming installment impairs the value of the whole contract.
Legal Remedies for Breach of K
-Legal Remedy = money
-Default legal remedy = expectation damages (put the non-breaching party in the position he would’ve been in if the K had been performed) (however, this requires a reasonable certainty as to the amount of damages)
-Reliance Damages = if can’t get expectation; unreimbursed expenses
-Consequential Damages = foreseeable losses b/c of breach; special damages due to specific circumstances of non-breaching party
Expectation Damages
Put the non-breaching party in the position he would’ve been in if the K had been performed
-Note: This requires a reasonable certainty as to the amount of damages
Reliance Damages
If can’t get expectation damages; you should be able to at least recover for unreimbursed expenses
Consequential Damages
Foreseeable losses b/c of breach; special damages due to specific circumstances of non-breaching party
-Think: Lost profits or business opportunities
-Indirect losses as a result of the breach of the K
Equitable Remedies
Granted by the court when there’s no adequate remedy at law. (i.e., money won’t help)
-Most common: specific performance or recission
Rescission
This is another form of equitable remedy.
-This may occur when there was no meeting of the minds.
-The goal of rescission is to put the parties in the position they were in BEFORE the K was entered into.
-Look to argue this if there is MISTAKE or MISREPRESENTATION
Specific Performance
The court orders someone to perform. (most common equitable remedy)
-A court will grant specific performance when something about the nature of the K is unique (i.e., land).
Restitution
The return of a benefit conferred.
-I.e., I gave you something and I’m looking to get it back.
Promissory Estoppel
A promise which induces someone to rely to their detriment. (i.e., detrimental reliance based on your promise)
-Look for this if there wasn’t a real K (i.e., no consideration)
Third-Party Beneficiary
Was that 3rd person an intended or incidental 3rd party beneficiary?
-Intended: If the two parties intended to help the 3rd party. (may have rights under the K if it VESTED)
-Incidental: never has any rights under K.
When does vesting occur for an Intended 3rd Party Beneficiary?
An intended third-party beneficiary may have rights under the K but they must VEST.
-Vesting occurs when the third-party (1) is told of the agreement or learns of it; AND (2) begins to rely
Anticipatory Repudiation
This may occur when prior to the full performance of the contract, one party unequivocally refuses to perform.
-This counts as a total breach therefore the non-breaching party does NOT have to wait for the contract’s maturity date in order to sue.
-However, if the alleged breaching party does NOT ABSOLUTELY say he’s not going to perform, then the non-breaching party must DEMAND ASSURANCES.
Demand Assurances
If the alleged breaching party does NOT ABSOLUTELY say he’s not going to perform, then the non-breaching party must DEMAND ASSURANCES.
-If the alleged breaching party responds within a REASONABLE TIME, then the non-breaching party must wait until the contract’s maturity date to see if the other party actually performs.
-NOTE: Under the UCC, a demand for assurances must be IN WRITING and the response must be within 30 DAYS.
Misrepresentation
Did one party misrepresent the other? (i.e., fraud)
There are two types:
1) Intentional Misrepresentation: Intent to induce reliance of a material fact which causes damages (i.e., a lie)
2) Negligent Misrepresentation: A misrepresentation that was negligently made or not made (i.e., forgot to tell you something) which causes damages (based on such reliance).
–Usually occurs where there’s some sort of business/professional relationship.
Intentional Misrepresentation
Intent to induce reliance of a material fact which causes damages (i.e., a lie)
Negligent Misrepresentation
A misrepresentation that was negligently made or not made (i.e., forgot to tell you something) which causes damages (based on such reliance).
–Usually occurs where there’s some sort of business/professional relationship and someone is relying on the other person’s expertise.
Warranty of Merchantability
A promise from the Seller that the product will act or perform the way it’s supposed to.
Warranty of Fitness for a Particular Purpose
This is a type of warranty that asserts that the goods are suitable for the special purpose of the Buyer.
-This warranty is implied when the Buyer informs the Seller of the specific purpose or relies on the Seller’s skill or judgment to select the goods.
-This warranty is violated when the Seller provides goods that are unfit for the Buyer’s purpose.
Non-Compete Clause
Argue the REASONABLENESS of the provision. (both geographic + durational components) (i.e., saying employee can’t work for 5 years is not reasonable)
To be valid in Florida, a non-compete agreement must contain certain key components, such as:
- Being supported by a legitimate business interest;
- Imposing reasonable restrictions on the employee;
- Being in writing;
- Being signed by the employee;
- Providing consideration or benefits to the employee in exchange for their agreement to the restrictions.
Parol Evidence Rule
This deals with oral testimony between the parties to the contract that was done either before or contemporaneously with the signing of the contract.
-Situation: One party is trying to add those previous or external communications/negotiations into the contract.
-This “parol evidence” will be deemed admissible or not depending on whether there’s a partial or full integration of the contract.
Final (complete) Integration
This means that the parties did NOT intend for anything else to be added to the contract.
-A final integration K has a MERGER CLAUSE. (stating this is final among the parties)
-If there’s a final integration, then parol evidence is INADMISSIBLE unless it’s to clear up an ambiguity.
Partial Integration
In a partially integrated contract, parol evidence will be ADMISSIBLE as long as that evidence does not CONTRADICT or MATERIALLY ALTER a term of the contract.
Are liquidated damages provisions allowed in FL?
Florida courts can enforce liquidated damages, a predetermined amount of money set in some contracts to be paid if someone breaks the agreement, if they deem them reasonable.
Exceptions to Parol Evidence Rule
Parol evidence will always be admitted to:
1) clear up an ambiguity;
2) prevent fraud or duress;
3) in a sale of goods contract, to explain some sort of custom or trade usage in the business.
