Contracts (Grossman)

Question 1

Contracts Essay Structure

Answer 1

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

Question 2

Choice of Law: What law applies?

Answer 2

Common Law Contracts: services or land

UCC: sale of goods

-Always start w/ this analysis as 1st paragraph

Question 3

Contract Formation

Answer 3

-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)

Question 4

Offer

Answer 4

Outward manifestation of an intent to enter into a contract w/ specific terms to offeree

Question 5

Acceptance

Answer 5

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)

Question 6

Consideration

Answer 6

Bargained for exchange between parties (there must be a legal detriment or benefit exchanged between the parties)

Question 7

Are advertisements considered offers?

Answer 7

No - they are considered invitations to negotiate.

-Can become offers w/ more specific and definite terms.

Question 8

When are offers revocable?

Answer 8

Offers are revocable until and unless the offeree accepts.

(Unless falls under 1 of 3 exceptions)

Question 9

Counteroffer

Answer 9

Changes the terms of the initial offer.

-Now the original offeror has to respond.

Question 10

When are offers irrevocable?

Answer 10

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

Question 11

Option Contract

Answer 11

-Promise to keep offer open for specified period of time.

-Needs additional consideration to be valid.

-Must be between non-merchants.

Question 12

Firm Offer

Answer 12

-Similar to an option K, but between merchants.

-Need signed writing by person promising to keep offer open.

Question 13

Unilateral Contract

Answer 13

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).

Question 14

Mirror Image Rule

Answer 14

-Applies only in common law

-The acceptance has to mirror the terms of the offer.

Question 15

Acceptance under UCC

Answer 15

If there’s a sale of goods, different terms are ok unless they materially alter the terms of the offer.

Question 16

Mailbox Rule

Answer 16

Under the mailbox rule, acceptance is effective upon DISPATCH.

-EXCEPTION: If rejection sent first, then followed by acceptance, whichever arrives first prevails.

Question 17

Contract Modification

Answer 17

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.

Question 18

Statute of Frauds

Answer 18

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+)

Question 19

Elements of a Writing for a Valid Contract under SOF

Answer 19

-Basic terms (if it’s goods, always put quantity)

-Signed by the party to be charged (can sign by use of a symbol)

Question 20

Part Performance

Answer 20

-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

Question 21

Merchant Confirmation

Answer 21

-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

Question 22

Contract with a Minor

Answer 22

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.

Question 23

Mistake

Answer 23

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

Question 24

Unilateral Mistake

Answer 24

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)

Question 25

Impossibility

Answer 25

In viewing the K from an objective standard, nobody could perform the K (i.e., illegal, destroyed, etc.)

Question 26

Impracticability

Answer 26

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.

Question 27

Breach of K

Answer 27

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)

Question 28

Perfect Tender Rule

Answer 28

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

Question 29

Installment Contract

Answer 29

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.

Question 30

Legal Remedies for Breach of K

Answer 30

-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

Question 31

Expectation Damages

Answer 31

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

Question 32

Reliance Damages

Answer 32

If can’t get expectation damages; you should be able to at least recover for unreimbursed expenses

Question 33

Consequential Damages

Answer 33

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

Question 34

Equitable Remedies

Answer 34

Granted by the court when there’s no adequate remedy at law. (i.e., money won’t help)

-Most common: specific performance or recission

Question 35

Rescission

Answer 35

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

Question 36

Specific Performance

Answer 36

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).

Question 37

Restitution

Answer 37

The return of a benefit conferred.

-I.e., I gave you something and I’m looking to get it back.

Question 38

Promissory Estoppel

Answer 38

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)

Question 39

Third-Party Beneficiary

Answer 39

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.

Question 40

When does vesting occur for an Intended 3rd Party Beneficiary?

Answer 40

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

Question 41

Anticipatory Repudiation

Answer 41

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.

Question 42

Demand Assurances

Answer 42

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.

Question 43

Misrepresentation

Answer 43

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.

Question 44

Intentional Misrepresentation

Answer 44

Intent to induce reliance of a material fact which causes damages (i.e., a lie)

Question 45

Negligent Misrepresentation

Answer 45

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.

Question 46

Warranty of Merchantability

Answer 46

A promise from the Seller that the product will act or perform the way it’s supposed to.

Question 47

Warranty of Fitness for a Particular Purpose

Answer 47

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.

Question 48

Non-Compete Clause

Answer 48

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:

1. Being supported by a legitimate business interest;
2. Imposing reasonable restrictions on the employee;
3. Being in writing;
4. Being signed by the employee;
5. Providing consideration or benefits to the employee in exchange for their agreement to the restrictions.

Question 49

Parol Evidence Rule

Answer 49

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.

Question 50

Final (complete) Integration

Answer 50

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.

Question 51

Partial Integration

Answer 51

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.

Question 52

Are liquidated damages provisions allowed in FL?

Answer 52

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.

Question 53

Exceptions to Parol Evidence Rule

Answer 53

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.