Fl Contracts Essay

Front 1

Offer - Generally

Back 1

to be valid, it must create a reasonable expectation in the offeree that the offeror is willing to enter into a contract on teh basis of teh offered terms

Front 2

Offer - Determination of Reasonable Expectation

Back 2

(1) was there mutual assent (offer and acceptance)?
(2) was there consideration or some substitute for consideration (promissory estoppel)?
(3) are there any defenses to creation of the contract?

Front 3

Acceptance - Generally

Back 3

FL follows the general rules for acceptance - only parties to whom an offer has been addressed may accept

whether or not a valid acceptance has occurred depends on what law governs the contract

Front 4

Acceptance - Common Law

Back 4

mirror image rule

acceptance must be identical to the offer...otherwise, no contract is formed

Front 5

Acceptance - UCC - Generally

Back 5

contract is foremd even if the acceptance contains additional or different terms

whether the terms become part of the contract depends on the status of the parties

Front 6

Acceptance - UCC - Status of Parties

Back 6

(1) one of the parties isnt a merchant, the terms of the offer control

(2) both parties are merchants, additional terms become part of the contract UNLESS (a) they materially alter the contract, (b) the offer expressly limits accpetance to the terms of the offer, or (c) the offeror objects to the terms within a reasonable time

(3) if the offer and acceptance contain conflicting terms, a court may treat the conflicting term like additional terms

Front 7

Negotiations - Generally/Things to Look For

Back 7

(1) look for valid offer (not merely an invitation to deal)
(2) look for valid acceptance that hasnt been barred by revocation or rejection

Front 8

General Rules for Effectiveness

Back 8

(1) offers are effective when received
(2) rejections are effective when received
(3) revocations are effective when received
(4) under the mailbox rule, an acceptance is generally effective when sent
(5) when an offeree sends a rejection and then an acceptance, the mailbox rule doesnt apply, and te 1st communication to be received is effective
(6) when an offeree sends an acceptance and then a rejection, the mailbox rule generally applies unless the offeror receives the rejection 1st and changes her position in reliance on it

Front 9

Revocability of Offers - Generally

Back 9

an offer is revocable UNLESS:
(1) consideration was paid to keep the offer open for a certain period of time (option contract)
(2) it was a merchant's firm offer under the UCC (the offeror is a merchant who signs a written offer giving assurances that it will be held open)
(3) the offeror could reasonably expect that the offeree would rely to his detriment on the offer (the offer will be irrevocable for a reasonable period of time)
(4) the offer was for a unilateral contract in which performance has begun (the offeree has a reasonable time in which to perform)

Front 10

Consideration - Generally

Back 10

a promise must be supported by consideration to be enforceable

Front 11

Consideration - Requirements

Back 11

(1) bargained-for-exchange between the parties
(2) of something of legal value

***there must be a benefit to the promisor OR a detriment to the promisee***

Note: most moral consideration usually is NOT enough

Front 12

Consideration - Common Law

Back 12

if one of the parties has a pre-existing legal duty to perform, and then attempts to modify the contract, the modification isn't enforeable UNLESS:
(1) new or different consideration is given
(2) the promise ratifies a voidable obligation (a promise to pay a debt barred by the statute of limitations)
(3) the promise is made to a 3rd party
(4) there is an honest dispute as to whether a duty is owed

Front 13

Consideration - UCC

Back 13

a modification can be enforceable without consideration if it was sought in good-faith

the pre-existing legal duty rule doesn't apply

Front 14

Consideration - Promissory Estoppel

Back 14

if one party makes a promise that will foreseeably be relied upon and there is such reliance, the contract may be enforced to the extent necessary to remedy the detrimental reliance despite the lack of consideration

promissory estoppel may also be used to defeat a statute of frauds defense

Front 15

Statute of Frauds - Generally

Back 15

to be enforceable, a contract within the SoF must be memorialized in a writing signed by the party to be charged and must contain the essential terms of the contract

Front 16

Statute of Frauds - Signature

Back 16

the UCC is very liberal about what will constitute a signature

Front 17

Statute of Frauds - Writings

Back 17

Note: the "contract" need not be in writing...there need only be some written and signed proof

Front 18

Statute of Frauds - Contracts within the Statute

Back 18

Among others:
(1) promises creating an interest in land (possession plus valuable improvements may take the contract out of the SoF)
(2) promises that by their terms cannot be performed within 1 year
(3) agreements for the sale of goods for $500 or more, EXCEPT where:
(a) the agreement is for specially manufactured goods,
(b) the agreement is between merchants and one sent a confirmatory memo
(c) a party admits the contract in court or pleadings, OR
(d) part payment or acceptance has been made, which makes the contract enforceable to that extent

Front 19

Unconscionability - Generally

Back 19

a contract may be voidable where its clauses are extremely one-sided or unfair when made

this includes contracts with inconspicuous risk-shifting provisions (eg hidden disclaimers warranty) AND contracts of adhesion (eg "take it or leave it" contracts where the parties dont have equal bargaining power)

Front 20

Unconscionability - When do you Test for it?

Back 20

unconscionability is tested at the time the contract was made, not after (the contract must have been unfair at the time of execution)

Front 21

Unconscionability - Unequal Bargaining Power

Back 21

the defense is often applied where one party has substantially superior bargaining power

it is often a "wrong answer" that shoudl be discussed in an essay when a change of circumstances arises after a contract is made

such a change might be grounds for discharge through impossibility or frustration of purpose

Front 22

Mistake - Generally

Back 22

a mistake by BOTH PARTIES is a defense IF:
(1) the mistake concerns a basic assumption on which the contract was made,
(2) the mistake has a material adverse effect on the agreed-upon exchange, AND
(3) the adversely affected party didn't assume the risk of the mistake

Front 23

Mistake - Ambiguous Term

Back 23

NEITHER party aware: NO contract is formed UNLESS both parties intended the same meaning

BOTH parties aware: NO contract is formed UNLESS both parties intended the same meaning

ONE party aware: a binding contract exists based on what the ignorant party reasonably believed to be the meaning of the ambiguoug words

Front 24

Parol Evidence Rule - Generally

Back 24

the rule prohibits introduction of evidence of prior or contemporaneous oral statements (and prior written statements) that seek to vary the terms of a fully integrated written contract (a contract that appears to reflect the entire agreement of the parties)

Front 25

Parol Evidence Rule - Exceptions (4)

Back 25

(1) attacks on validity - oral testimony IS admissible to show that the written contract never came into being because it was subject to a condition precedent that never was satisfied or was obtained through fraud (because such evidence doesnt seek to vary the terms of the contract)

(2) reformation: a party may use parol evidence to establish the right to reformation due to mistake or the like

(3) common law: if a common law contract's terms are ambiguous, parol evidence IS admissible to prove the intended meaning (you are seeking to explain what the terms mean rather than seeking to vary the terms)

(4) UCC: whether or not the terms seem ambiguous, any contract may be supplemented by any evidence of:
(a) usage of trade
(b) course of dealing between the parties, and
(c) course of performance betwen the parties

Front 26

Conditions - Generally

Back 26

a condition is an event other than the passage of time that must occur or fail to occur, unless excused, before perfomance comes due (a condition precedent) or that will release a party from an existing duty to perform (a condition subsequent)

Note: conditions can also be concurrent

Front 27

Conditions - Waiver

Back 27

a party to whom a duty is owed may waive the duty

one having the benefit of a condition may indivate by words or by conduct that she wont insist on it

the courts, in certain circumstances, will enforce this expression on the basis that the party has "waived" the condition or is "estopped" from asserting it

Front 28

Impossibility - Generally

Back 28

impossibility excuses a party's performance

it is measured by an objective standard (nobody could perform according to the terms of the contract)

the impossibility must arise AFTER the contract was entered into

Front 29

Impossibility - Examples (3)

Back 29

(1) death or physical incapacity of a person necessary to perform the contract
(2) a subsequently enacted law rendering the contract illegal
(3) subsequent destruction of the contract's subject matter or means of performance IF the promisor wasnt at fault and it is truly impossible to fulfill the terms of the contract at ANY price

Front 30

Impossibility - Destruction of a Building

Back 30

doesnt relieve a builder of the duty to build because he MAY rebuild

Front 31

Impracticability - Generally

Back 31

the UCC excuses performance on a showing of something less than impossibility

impracticability requires that a party encounter extreme and unreasonable difficulty or expense that wasnt anticipated

a mere change in the difficulty or expense due to normal risks that could have been anticipated (increase in price of raw materials) isnt enough

Front 32

Frustration of Purpose - Generally

Back 32

can also excuse a party's performance IF
(1) a supervening event
(2) that wasnt reasonably foreseeable at the time of entering into the contract
(3) that completely or almost completely destroys the purpose of the contract, AND
(4) the purpose was understood by BOTH parties

Note: frustration isnt an argument that performance is impossible, it is an argument that it is pointless

Front 33

Discharge by Substituted Contract - Generally

Back 33

discharge by substituted contract occurs where the parties to a contract enter into a second contract that immediately revokes the 1st contract

the 2nd contract may revoke the 1st either expressly or impliedly

the 1st contract will be impliedly revoked if the second contract's terms are inconcistent with the terms of the 1st contract

Front 34

Discharge by Substituted Contract - Determination

Back 34

whether a 2nd contract will constitute a substituted contract depends on whether the parties intend an immediate discharge or a discharge only after performance of the 2nd contract

if an immediate discharge is intended, there is a substituted contract

Front 35

Discharge by Divisibility - Generally

Back 35

discharge by divisibility is designed to achieve equity between the parties, avoiding unnecessary hardship to one party or the other

a contract is divisible IF:
(1) the performance of each party is divided into 2+ parts under the contract
(2) the number of parts due from each party is the same, AND
(3) the performance of each part by one party is agreed on as the equivalent of the corresponding part from the other party (each performance is the quid pro quo of the other)

Front 36

Breach - Generally

Back 36

a breach of contract occurs when there is an absolute duty to perform and the duty hasnt been performed or has been performed inadequately or improperly

Front 37

Breach - Material Breach

Back 37

a material breach discharges the nonbreaching party's duty to perform

Courts will examine:
(1) the extent to which the nonbreaching party recieves the substantial benefit he could have anticipated from full performance
(2) the extent to which the nonbreaching party can be adequately compensated in damages,
(3) the extent to which the breaching party has completed performance or made preoparation therefor,
(4) the hardship upon the parties should the contract be terminated,
(5) the negligent or willful behavior of the breaching party, AND
(6) the likelihood that the breaching party will complete performance

Front 38

Breach - Substantial Performance - Generally

Back 38

Common Law: if a breach of contract is deemed minor (the nonbreaching party received the substantial benefit of the bargain), the nonbreaching party isn't discharged but can recover or deduct damages for the breach

Front 39

Breach - UCC Perfect Tender Doctrine - Buyer's Rights

Back 39

under the UCC, the buyer is said to have the right to a perfect tender and can reject goods for any nonconformity - even a minor one

Front 40

Breach - UCC Perfect Tender Doctrine - Seller's Rights

Back 40

the seller has a right to cure IF:
(1) there is time left under the contract to perform and the seller gives notice of the intent to cure and does cure
(2) after the time for performance has passed if the seller had grounds to believe that te nonconforming goods would be acceptable but the buyer reject

Front 41

Damages - Things to Consider (8)

Back 41

(1) Risk of Loss
(2) Expectation Damages
(3) Incidental Damages
(4) Consequential Damages
(5) Specific Performance
(6) Punitive Damages
(7) Unjust Enrichment
(8) Duty to Mitigate

Front 42

Damages - Risk of Loss

Back 42

the contract may specify which party bears the risk of loss (in an FOB contact, risk passes when the goods reach the specified destination)

IF NOT SPECIFIED:
Shipment Cases - if the goods are being shipped, risk passes to the buyer when the seller turns the goods over to a common carrier unless the contract specifically provides otherwise (in an FOB contract, the seller has the risk until the goods reach the FOB destination)

Nonshipment Cases: if the goods aren't shipped, if the seller is a merchant, risk passes on delivery to the buyer...if the seller is a non-merchant, risk passes on tender of the goods

Front 43

Damages - Expectation Damages

Back 43

give a party the benefit of her bargain...they attempt to put the non-breaching party into the position she would have been in had the contract been performed

MEASURE:
a seller's normal damages are for the difference between:
(1) contract price -- market price, or
(2) contract price -- resale price

if the seller has an unlimited supply of goods and has lost volume in sales by the buyer's breach, the seller can recover lost profits

Front 44

Damages - Incidental Damages

Back 44

the expenses that a nonbreaching party incurs in responding to a breach (the costs of finding substitute performance)

Front 45

Damages - Consequential Damages

Back 45

any damages that are a reasonably foreseeable result of breach

they are recoverable only if they are:
(1) reasonably foreseeable by the parties when the contract is made,
(2) unavoidable through reasonable efforts, AND
(3) provable with reasonable certainty

Front 46

Damages - Specific Performance

Back 46

can be awarded in equity if the contact is for something rare or unique (land, one-of-a-kind goods, or goods in short supply)

cannot be granted to force someone to perform under a personal service contract, because that would be tantamount to slavery

the breaching party CAN be enjoined from performing services for someone else during the term of the contract

Front 47

Damages - Punitive Damages

Back 47

generally are NOT awarded in contractual situations

Front 48

Damages - Unjust Enrichment

Back 48

if there is no contract OR if the contract fails, consider awarding quasi-contractual relief

this is a remedy imposed by courts to disgorge unjust enrichment

usually measure by the gain to the defendant, but it can be measured by the loss to the plaintiff if the normal measure wouldnt provide an appripriate remedy

the damages can exceed what could have been recovered in a contract action

Front 49

Damages - Duty to Mitigate

Back 49

the nonbreaching party has a duty to mitigate damages, generally by seeking substitute performance (similar goods, similar job, etc)

Front 50

Damages - Duty to Mitigate - Employment Situation

Back 50

in an employment situation, an employee who is discharged in breach of contract has a duty to mitigate damages by making reasonable efforts to obtain a position of the same rank and type of work in the same locale

the burden is on the employer to show that such positions were available

Front 51

Warranties - UCC Generally (3)

Back 51

(1) implied warranty of merchantability
(2) implied warranty of fitness for a particular purpose
(3) express warranty

Front 52

UCC Warranties - Implied Warranty of Merchantability

Back 52

in every sale by a merchant who deals in goods of the kind sold, there is an implied warranty that the goods are merchantible

they key question is: are the goods fit for the ordinary purpose for which such goods are used?

the implied warranty of merchantability can be disclaimed through the use of a conspicuous disclaimer mentioning "merchantability" if in writing

Front 53

UCC Warranties - Implied Warranty of Fitness for Particular Purpose

Back 53

this implied warranty arises when any selller, merchant or not, has reaosn to know the particualr purpose for which the goods are to be used and that the buyer is relying on teh seller's skill and judgment to select suitable goods

this implied warranty can be disclaimed through a conspicuous written disclaimer

no specific words are necessary

Front 54

UCC Warranties - Express Warranty

Back 54

arise by any affirmation of fact, promise, descrition, model or sample which is part of the basis of the bargain (the buyer could have relied on it)

they are extremely difficult (but not impossible) to disclaim since the language limiting express warranties must be read consistently with the waranty and to the extent they are inconsistent, the disclaimer isn't given effect

Front 55

Third-Party Rights - Who is a Third Party Beneficiary?

Back 55

a 3rd party beneficiary is a person who isn't a party to the bargain and who gives no consideration to support it, but who will benefit by a contract's performance

Front 56

Third-Party Rights - Types of Third Party Beneficiaries (3)

Back 56

(1) creditor beneficiary - a person is a creditor beneficiary if the promissee's primary intent is to discharge an obligation owed to the fiduciary
(2) donee beneficiary - a person is a donee beneficiary if the promissee's primary intent was to make a gift to the beneficiary
(3) incidental beneficiary - other beneficiaries (persons who benefit but whom the donee didnt specifically intend to benefit) are incidental beneficiaries (if a promisee provides that the promisor must use American Standard brand plumbing fixtures, the American Standard company benefits from the contract, but it is doubtful that that was the parties' intent)

Front 57

Third-Party Rights - Rights of Third Party Beneficiaries

Back 57

generally, a creditor or donee beneficiary (but not an incidental beneficiary) can enforce the contract against the promisor directly, but is subject to any defense that the primisor could have raised against the promissee

Front 58

Third-Party Rights - Changing the Contract

Back 58

the promisor and promissee are free to change the terms of the contract until the 3rd party beneficiary's rights vest

Front 59

Third-Party Rights - Vesting

Back 59

RIghts of a creditor beneficiary or donee beneficiary will vest when the beneficiary:
(1) assents to the contract
(2) brings suit to enforce the contract, or
(3) materially changes position in justifiable reliance on the contract

Front 60

Third-Party Rights - Enforcement of Contract

Back 60

if the promissee doesn't perform, a 3rd-party creditor beneficiary generally can sue the promissee on the obligation that was supposed to have been discharged by the promisor's performance, but a 3rd-party donee beneficiary generally cannot sue the promissee (because as between the promisee and the 3rd-party beneficiary, all that exists is a failed gift)

Front 61

Assignment of Rights/Declaration of Duties - Generally

Back 61

general rule: any contractual right may be assigned and any contractual duty may be delegated UNLESS the duty involves personal judgment or skill