Fl Contracts

Question 1

Revocability of Offers:

Answer 1

A K is generally revocable unless:

(i) consideration is paid to keep the offer open (option K);
(ii) it is a merchant’s firm offer;
(iii) offeror could reasonably expect offeree would rely to his

detriment (detrimental reliance); or

(iv) offer was for unilateral K in which performance has begun.

Question 2

Acceptance

Answer 2

Acceptance is the manifestation of the intention to be bound to a K

Common Law: Acceptance must follow the mirror image rule to form a K

UCC:

A K is formed even if there are additional or different terms. The status of the parties determines whether additional terms are included:

1. if one party is not a merchant -> the terms of the offer control;
2. if both parties are merchants -> the additional terms apply unless
   1) they materially alter K,
   2) the offer expressly limits acceptance to

the terms of the offer,

or

3) the offeror objects within reasonable time;

if there are conflicting terms -> a court may treat the conflicting term(s) like additional terms.

Question 3

Consideration

Answer 3

Consideration is a:

(i) bargained-for exchange between parties,
(ii) of something of legal value.

Question 4

Common Law Modification

Answer 4

If there is a pre-existing legal duty, no modifications are enforceable unless:

(i) new or different consideration is given;
(ii) the promise ratifies a voidable obligation;
(iii) the promise is made to third party;

or

(iv) there is an honest dispute as to whether a duty is owed.

Question 5

UCC Modification

Answer 5

A modification can be enforceable without consideration if the modification is sought in good faith.

Question 6

Negotiations

Answer 6

General Rules:

Offers are effective when received.

Rejections are effective when received.

Revocations are effective when received.

Question 7

Promissory estoppel

Answer 7

Promissory estoppel arises where one party makes promise that foreseeably will be relied upon by another party, and there is such reliance by that party. Also called detrimental reliance.

Note: This can be used to defeat a SOF defense.

Question 8

Statute of Frauds

Answer 8

Ks that fall under the SOF must be:

(i) memorialized in writing,
(ii) signed by the party to be charged,

AND

(iii) must contain essential terms

Note: for property/ Ks for the sale of land:
• the K must contain the parties, a description of the property,

the price; AND the signature must be subscribed by two witnesses on a deed.

Exception to the SOF: Merchant’s Confirmatory Memo:

(i) both parties are merchants;
(ii) signed writing claiming prior oral agreement;
(iii) no written objection within 10 days of receipt.

Question 9

SOF

Answer 9

Acronym for Ks that fall under the SOF: MY LEGS.

Marriage;

Contracts for More than One Year;

Sale of Land;

a. must contain PPPP:
i. description of property, parties, price

b. Defense to SOF: part-performance—established by 2/3 of
i. improvements,
ii. payment, and/or
iii. possession

Executor’s Promise to Pay Debts of Estate;

Goods of $500 or More;

Surety for Debts of Another.

Question 10

Unconscionability: Defense

Answer 10

Unconscionability is tested at the time the K is made.
K may be voidable where it’s extremely one-sided or unfair. This includes:

1. Ks w/ inconspicuous risk-shifting provisions
   a. (e.g., hidden disclaimers of warranty)

And

2. Ks of adhesion
   a. (e.g., “take it or leave it” Ks where there is no equal bargaining power).

Unconscionability may be grounds for discharge through impossibility or frustration of purpose.

Question 11

Ambiguity: Defense

Answer 11

The result of this defense depends on parties’ awareness of ambiguity:

(a) If neither party was aware—no K formed unless both parties happened to intend same meaning;
(b) If both parties were aware—no K formed unless both parties in fact intended same meaning;
(c) If one party was aware—binding K exists based on what ignorant party believed to be the meaning of ambiguous words.

Question 12

Capacity: Defense

Answer 12

Parties who don’t have capacity to K:

(a) infants,
(b) mental incompetents,
(c) intoxicated person if other party knows.

In FL: marriage of a minor removes incapacity

(a) the minor may be estopped from raising incapacity if the

minor induced the other party into K (by misrepresentation of age),

or

(b) the minor may choose to be bound by K upon reaching

majority.

Question 13

Duress/Undue Influence

Answer 13

• *Two Types**:
  (1) physical;

and
(2) economical (improper threat to breach existing K and

vulnerable party with no reasonable alternative).

Question 14

Illegality: Defense

Answer 14

Illegality is an affirmative defense.

If the underlying subject matter of the K is illegal, it is unenforceable. If the underlying purpose of the K is illegal, it is enforceable.

Question 15

Mistake: Defense

Answer 15

A mistake by both parties is a defense if:

1) the mistake concerns a basic assumption on which the K was

made;

2) the mistake has material adverse effect on agreed-upon

exchange;

3) the adversely affected party didn’t assume risk of the mistake.

Question 16

Parol Evidence

Answer 16

The Parol Evidence Rule prohibits the introduction of prior or contemporaneous oral (and written) statements that seek to vary terms of a fully integrated written K (i.e., K appears to reflect entire agreement).

Exceptions:

attacks on validity—oral testimony is admissible to show that a written K never came into being because it was subject to condition

precedent that was never satisfied or obtained through fraud (doesn’t attempt to alter K terms);

reformation;

common law—if a common law K’s terms are ambiguous, the K is admissible to prove its intended meaning (seeking to explain terms; not vary terms);

UCC—regardless of whether or not the terms are ambiguous, any K may be supplemented by evidence of:

usage of trade;

course of dealing; and

course of performance.

Question 17

Condition: Breach

Answer 17

Definition: A condition is an event that must occur or fail to occur, unless excused, before performance due (condition precedent) or that will release party from existing duty to perform (condition subsequent). Conditions may also be concurrent.

Waiver: A party may waive duty owed to them by words or conduct.

Question 18

Impossibility: Breach

Answer 18

Impossibility is measured by an objective standard, and it must arise after the was K entered into.

Examples:

(i) death or physical incapacity;
(ii) subsequently enacted law rendering K illegal;
(iii) subsequent destruction of aK’s subject matter ort he means of

performance if the promisor is not at fault.

Note: Destruction of building in progress doesn’t relieve a builder of their duty to perform.

Question 19

Impracticability

Answer 19

To qualify as impracticable, the obligated party must have encountered extreme and unreasonable difficulty or expense not anticipated at the time of contracting.

Question 20

Frustration of Purpose

Answer 20

Frustration of Purpose requires:

1) a supervening event;
2) that wasn’t reasonably foreseeable at time of entering into the

K;

3) that completely (or almost completely) destroys the purpose

of the K;
4) the purpose was understood by both parties.

Question 21

Anticipatory Repudation and other excuses

Answer 21

Anticipatory Repudiation: occurs where there is unambiguous statement/conduct:

(i) that the repudiating party will not perform;
(ii) made prior to or at time performance due.

Where words or actions make clear that a party is unwilling to perform, other party may

await performance for a commercially reasonable time, resort to any remedy for breach,

or

suspend their own performance.

Demand Adequate Assurances: If words or actions give reasonable grounds for insecurity, the other party can, in writing, demand adequate assurances and if commercially reasonable, suspend performance until given assurances.

Other Excuses of Nonperformance:

(a) Impossibility/Impracticability;
(b) Accord and Satisfaction: occurs when both parties to existing agreement agree to accept a different performance in satisfaction of existing obligation. When the new agreement (accord) is performed (satisfaction), performance of the original obligation is excused
(c) Novation: parties agree to substitute a new party to perform.
(d) Rescission
(e) Modification.

Question 21

Anticipatory Repudation and other excuses

Answer 21

Anticipatory Repudiation: occurs where there is unambiguous statement/conduct:

(i) that the repudiating party will not perform;
(ii) made prior to or at time performance due.

Where words or actions make clear that a party is unwilling to perform, other party may

await performance for a commercially reasonable time, resort to any remedy for breach,

or

suspend their own performance.

Demand Adequate Assurances: If words or actions give reasonable grounds for insecurity, the other party can, in writing, demand adequate assurances and if commercially reasonable, suspend performance until given assurances.

Other Excuses of Nonperformance:

(a) Impossibility/Impracticability;
(b) Accord and Satisfaction: occurs when both parties to existing agreement agree to accept a different performance in satisfaction of existing obligation. When the new agreement (accord) is performed (satisfaction), performance of the original obligation is excused
(c) Novation: parties agree to substitute a new party to perform.
(d) Rescission
(e) Modification.

Question 22

Divisibility

Answer 22

A K is divisible if:

(i) performance of each party divided into two or more parts under the K;
(ii) the number of parts due from each party is the same; and
(iii) the performance due by each party is quid pro quo of the other.
* If a party performs one unit of divisible K*, that party is entitled to agreed-on equivalent for that unit even if he/she fails to perform the other units.

Question 23

Breach

Answer 23

General Rule: A breach occurs where a party is under an absolute duty to perform and the duty hasn’t been performed (or performed inadequately/improperly)

A material breach discharges the nonbreaching party’s duty to perform.

In determining whether a material breach occurred, courts look at:

the extent to which the nonbreaching party receives substantial benefit;

the extent to which the nonbreaching party can be adequately compensated;

the extent to which the breaching party has completed performance or made preparation therefor;

the hardship upon parties should the K be terminated; negligent or willful behavior of breaching party;

and

the likelihood that breaching party will complete performance.

Question 24

Minor Breach/ UCC Perfect Tender

Answer 24

Common Law: If a breach is minor, the nonbreaching party is not discharged, BUT he/she can recover or deduct damages.

UCC: Perfect Tender Rule—The buyer has the right to reject the goods for any nonconformity, BUT the seller has the right to cure if:

there is time left under the K to perform and the seller gives

notice of intent to cure and does cure;

or

after the time for performance has passed, if the seller had reason to believe that nonconforming goods would be acceptable.

Question 25

Risk of Loss Damages

Answer 25

A K may specify the risk of loss:

• e.g., in F.O.B. K, the risk passes when the goods reach the specified destination.

Where a K does not specify the risk of loss:

Shipment Cases—if goods are being shipped, the risk passes to buyer when goods are turned over to a common carrier (unless otherwise agreed);

• Nonshipment cases—if goods aren’t shipped:
  1. *if the seller is merchant, risk passes when buyer takes physical possession; if seller isn’t merchant, the risk passes on tender of

delivery.

Question 26

Expectation damages

Answer 26

Rule: Expectation damages aim to give the non-breaching party the benefit of bargain.

Seller’s measure: The difference between the K The difference between the K price and the market price, or the K price and the resale price (look for lost volume)

buyer’s measure: The difference between the K price and the costs of replacement (cover)

Question 27

Incidental

Answer 27

Incidental damages are the expenses that the non-breaching party incurs in responding to the breach.

Question 28

Restitution

Answer 28

Rule: Restitution is an equitable remedy used to correct unjust enrichment; awarded based on the value of the benefit wrongly received.

Question 29

Consequential Damages

Answer 29

Rule: Consequential damages are special damages beyond expectation damages that are reasonably foreseeable. They are recoverable only if:

(1) reasonably foreseeably when K made;
(2) unavoidable through reasonable efforts; and
(3) provable with reasonable certainty.

Question 30

Reliance Damages

Answer 30

Rule: Reliance damages are an equitable remedy used to compensate the non-breaching party for reasonable foreseeable costs incurred in reliance; compensate plaintiff based on the value of performance.

Question 31

Liquidated Damages

Answer 31

Rule: For liquidated damages, parties to a K agree to damages to be paid in the event of breach.

Typically, the amount of liquidated damages is stated in the K itself.

They must be reasonably related to actual damages AND mustn’t be used as penalty.

Question 32

Specific Performance

Answer 32

Rule: Specific performance applies for situations involving goods or land that are rare or unique, but not for personal service Ks (breaching party can be enjoined from performing for someone else).

Question 33

Reformation (non monetary damages)

Answer 33

Rule: writing setting forth agreement changed to conform to original intent of parties.

Question 34

Punitive damages

Answer 34

Rule: Punitive damages are generally not awarded in K situations.

Nonbreaching party has duty to mitigate.

Question 35

UCC: Buyer Remedies

Answer 35

(1) seller breaches, buyer keeps goods

a. FMV if perfect – FMV as delivered

or

b. cost of repair;

(2) seller breaches, seller has goods

. a. whichever is greater->

i. market price at time of breach discovery – K price or

ii. reasonable replacement cost – K price.

Question 36

Seller Remedies

Answer 36

(1) buyer breaches, buyer keeps goods

i. contract price;

(2) buyer breaches, seller has goods

i. K price – resale

ii. if seller can’t resell, recovers K price.

Lost Volume: seller recovers lost profits from buyer’s breach (even if item resold) if seller can prove would have made sale to second buyer regardless of first buyer’s breach.

Question 37

Implied Warranties

Answer 37

Implied Warranty of Merchantability:

in every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantable can be specifically disclaimed through use of a conspicuous disclaimer mentioning “merchantability.”

Implied Warranty of Fitness for a Particular Purpose:

arises when any seller has reason to know the particular purpose for which goods are to be used and the buyer is relying on the seller’s skill and judgment

can be disclaimed only through a conspicuous written disclaimer (no specific words required).

Question 38

Express Warranties

Answer 38

Rule: Express warranties arise by any affirmation of fact, promise, description, model or sample

extremely difficult to disclaim since the language must be read consistently with the warranty and to the extent, they are inconsistent, the disclaimer is not given effect

disclaimers delivered to buyer after sale ineffective

Damages—difference between value of the goods accepted and the value they would have had if they had been as warranted.

Question 39

Third Party Rights: Types of Beneficiaries

Answer 39

Creditor Beneficiary—

promissee’s primary intent is to discharge obligation owed to fiduciary.

Donee Beneficiary—

promisee’s primary intent was to make a gift to the beneficiary.

Incidental Beneficiary—

persons who benefit but whom donee didn’t specifically intend to benefit.

Question 40

THIRD-PARTY RIGHTS

Answer 40

Intended TPB:

when do their rights vest?
1) third party is informed of their rights and accepts, or

2) third party learns of rights and relies

If rights have vested:

Third party has same rights and defense as original parties

Question 41

Assignments and Delegation

Answer 41

• No notice requirement or agreement in advance
  if you make a contract with Jon to mow your lawn, and another random guy shows up and says hes there to mow your lawn but you wanted to Jon, do you have to accept? Yes

o Assignments and delegations require “present intent to transfer”

§ When you’re doing the assignment question, make sure that what you’re transferring or giving to him, the assignment of the right, is now a present intent to transfer.

o So if Jon gives the mowing job to Bob, must Bob show up and do the work? Yes. Must he do a good job? Yes.

§ If either of those things don’t happen, can you sue Bob? Yes. § Can you also sue Jon? Yes.

• Unless, Jon and I executed a novation.

Novation: A release of the original party from the K.

If you assign the contract, even though in the K there is an agreement that

there would be no assignments, is the assignment still valid? Yes. However, I owe you damages for the breach.

Question 42

Anti Assignment Clause: and other TPB nuances

Answer 42

1) the assignment is still VALID but
2) the original party liable for money damages

However, if the original agreement says that any assignment is VOID, the assignment is invalid. Void is magic word

Exceptions to anti assignment clause:

• 1) Not valid if would materially alter risk of performance

) Unique or Personal Service o K cannot be transferred

o Specifically hiring someone for the unique or personal service

o Terms:
New party cannot change K terms

New party only gets the original rights and obligations

• Note: can the person that you assign the K to change the terms? NO. Because the person that you assigned it to only gets whatever the rights the original parties agree to.

o Transferring money to third party
§ Must give NOTICE before obligated to pay

Question 43

Parol Evidence

Answer 43

Adding more terms to a contract
• Must be information discussed PRIOR TO or AT THE TIME the parties entered the contract
o Don’t jump for the answer that parole evidence will keep stuff out.

Sometimes it will let stuff come in
• 1) is the K a complete final integration or partial integration?

o If it’s a complete or finally integrated contract, parole evidence will not be admissible.

• Means that you or I didn’t want anything else in the contract
• Generally, those contracts have what’s called a merger clause.

“this shall be the final agreement of the parties”

Or the court determines that it is a complete integration.

o Most common exception to final/complete integration hypo:

Bringing in evidence to clear up an ambiguity

Partial integration: parole evidence is admissible.
§ No merger clause in partial integration contract

What evidence can come in: anything that explains/supplements the contract. Consistent and additional new terms. When/where/how the K is performed

What can’t come in: evidence that contradicts or materially alters the K is NOT admissible

• Time when parole evidence is admissible:
o 1) any evidence to show fraud, duress, or mistake
o 2) any evidence to show a condition precedent
o 3) any evidence to show course of dealing, , how we usually buy and sell,

how we work together, trade customs, etc. for sale of goods K

Question 44

Shipment/Destination K

Answer 44

Non carrier case:
o Seller is a merchant: risk is on seller until buyer takes possession
o Seller is a nonmerchant: risk on seller until goods are tendered to buyer o Most common way is that there is a carrier.

Carrier situation:
o Shipment K:

§ your default rule. The ROL is on the seller until he gives them to the carrier. Once dropped off, the risk of loss goes to the buyer.

o Destination K:
§ the ROL is shifted to buyer when goods delivered to DESTINATION

FOB seller: tells you that it is a shipment K.

If it says FOB “ANYTHING ELSE” is a destination contract.

Requirements K:

o “I promise to deliver all the widgets that I have”
o If you see a requirements K, and then something happens and you cant go

through with it, as long as they acted in good faith then its okay.

Question 45

Non-conforming goods

Answer 45

The buyer may reject, accept, or reject in part and accept in part.

§ Must reject in reasonable amount of time.

§ If you accept, must pay amount of the goods in the OG K.

§ If the facts tell you the seller had reasonable grounds to think you

would accept the NC goods, then seller can fix that delivery if in a

reasonable amount of time.

§ Receiving NC goods prior to delivery date: seller can fix if given

reasonable notice and deliver the goods on time.

Question 46

Money damages under UCC:

Answer 46

o Seller’s damages: if the goods have been delivered and accepted, the seller will be able to get the K price.

§ If some or none have been delivered and haven’t been resold, then get contract price – market price

If resold: K price – resale price.

Seller can also get incidental damages

§ Lost volume seller

Seller can sell as many widgets as possible. Look for the answer about lost profits.

Expected profit + costs - any payment for reselling

o Buyer’s damages:
§ If seller breaches, buyer can recover

• Purchased replacement goods= (K price) – (cost of new goods)

No replacement goods= (K price) – (market price at time of breach)

(incidental/consequential damages) – (expenses saved)

Question 47

Equitable Remedies

Answer 47

Recoverable when remedy at law is inadequate. When money won’t help you. o Specific performance:

§ Court will make a party perform: for unique items. (land is always unique)

o Injunction: court will grant an injunction to prevent irreparable harm. § (i.e. pepsi leaking the secret formula to Coke)
§ Employment contracts, trade secrets, proprietary information

o Recission: no meeting of the minds. Lack of capacity, misrepresentation, duress, mistake. Lets make believe this never happened in the first place.

Question 48

Consideration

Answer 48

Bargained for exchange, don’t worry about quality o Illusory promise:

-Party making the offer retains control. This is not consideration

Gifts: The promise to give a gift is invalid consideration.

-Already gave a gift is valid consideration

Past or moral consideration: Not valid consideration

o Promise to pay debt barred by statute of limitations: Is valid consideration

Promise to pay a debt discharged by bankruptcy

o Is valid consideration

Promissory estoppel

o Detrimental reliance

Question 49

sale of goods $500

Answer 49

Exception: goods $500 or more
o Written confirmatory memo between merchants:

§ Contains how many, the merchant signs it, and the other merchant does not reject within 10 days of receipt:

1) partial performance will take K out of SOF

• 2) Merchant confirmation
o Confirmation signed by sender o Includes the quantity
o Does not object within 10 daysSale of goods $500 or more