1 A Contract Defined “A contract is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in.

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A Contract Defined

“A contract is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.”

Restatement (Second) of Contracts

8.3

Copyright Andrew Sargent 2001

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Sources of Contract Law

• Common Law of Contracts– Developed from early court decisions that

became precedent for later decisions.– Limited federal common law, but large body

of state common law.

• Uniform Commercial Code– Created a uniform system of commercial law

throughout the U.S. Applies to “goods”.

8.6


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Types of Contracts

• Implied-in-Law Contract– Quasi-contract– Legal remedy to prevent unjust enrichment– You notice that your neighbor’s child is

mowing your grass (as he/she has done inthe past) and you say nothing - you will be expected to pay a fair value for this service

Based on Expression

8-5Copyright Andrew Sargent 2001

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Check List for K Analysis

• Offer

• Acceptance

• Consideration

• Writing

• Capacity

• Legality/Public Policy Issues


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Definitions - Offer & Acceptance

• An offer is an objectively reasonable communication that creates the power of acceptance in the offeree.

• An acceptance is the unqualified agreement to the offer

• Each has required parts of course.


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Elements of Offer & Acceptance

• Offer (ppst); [UCC]

– Parties

– Price

– Subject

– Terms

• Acceptance (cat)

– Communicated

– Absolute– Timely


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Termination of an Offer

Revocationby offeror

Revocationby offeror

Rejectionby offereeRejectionby offeree

Counterofferby offeree

Counterofferby offeree

9.6

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Terminationby acts of the

parties

Terminationby acts of the

parties

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Termination byOperation of the Law

Termination byOperation of the Law

Termination of an Offer

Destructionof subject

matter

Destructionof subject

matter

Death orincompetency

Death orincompetency

Superveningillegality

Superveningillegality

Lapseof timeLapseof time

9.7

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Options

• Common Law

• UCC

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Acceptance

• Only an offeree can accept the offer.• Offeree’s acceptance must be unequivocal.

Also applicable is the mirror image rule.• Acceptance must be properly dispatched.

Effective upon dispatch.• Silence does not usually mean acceptance.• Offeree must accept the offer by

authorized communication, sometimes specific.

9.8


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Consideration

• What is it? • Do something you do not

have to do. • Do not do something you

have the right to do.• What to look for in facts –• What does offeror expect?• What does offeree expect?

Motivating Influence


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Consideration

• Bill promises to pay $75 for Betty’s collection of CDs;

• Betty promises to deliver the CDs upon payment of $75

• What is consideration? Actual performance or the mutual promises?

Benefit-Detriment Analysis


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Consideration

• Betty promises to pay $200 when Bill has climbed the flag pole.

• Where is consideration now?• Issue of Adequacy - not

generally a matter of concern


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Contracts Lacking Consideration

Illusory promisesIllusory

promises

Preexistingduty

Preexistingduty

Moralobligations

Moralobligations

Illegalconsideration

Illegalconsideration

Pastconsideration

Pastconsideration

© SoftKey

9.10

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Voidable Contracts

• Minors– Power to avoid obligation– Return existing consideration– Necessaries

• Incapacitated Adults– Insane; intoxicated

• Mistake– Bilateral -- voidable agreement– Unilateral -- enforceable agreement

• Fraud/Misrepresentation• Duress & Undue Influence

Competent Parties & Other Public Policy Issues


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Illegal Contracts

Usury lawsUsury lawsGamblingstatutes

Gamblingstatutes

10.6

Contracts inrestraint of trade

Contracts inrestraint of trade

Covenants notto compete

Covenants notto compete

Exculpatoryclauses

Exculpatoryclauses

ImmoralcontractsImmoral

contracts

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Unconscionable Contracts

• Courts will uphold a contract if the following are present:

– The contract is for lawful purposes, and

– All other elements of the contract are met.

• Courts are given discretion in determining conscionability.

10.9


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Elements of an Unconscionable Contract

Parties possessed severelyunequal bargaining power.

Parties possessed severelyunequal bargaining power.

Dominant party used bargainingpower to gain advantage.

Dominant party used bargainingpower to gain advantage.

The other party had noreasonable alternative.The other party had noreasonable alternative.

10.10

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Remedies for Unconscionability

The entire contract maybe set aside.

The entire contract maybe set aside.

The unconscionable partmay be set aside.

The unconscionable partmay be set aside.

Limit the applicability ofunconscionable part toavoid further damage.

Limit the applicability ofunconscionable part toavoid further damage.

10.11

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Formality of Contracts• Orally Stated v. Written Document –

General Rules• Statute of Frauds

– Types of Cases• Interest in Land• Secondary Promise• Performance Beyond One Year• Goods over $500

• Parol Evidence Rule8-13


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Remedies for Breach

• Damages– Compensatory– Consequential

(forseeability factor)– Liquidated damages– Nominal damages– Rescission and restitution

• Equitable remedies– Specific performance and

injunctions– Reformation

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Implied Warranties and UCC

• Merchantability; Fitness for a Particular Purpose; Title; Non-Infringement– “Prominent” disclaimers

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E-Commerce Issues

• “Click-wrap”, “Shrink-wrap”, etc. agreements and Pro CD, Inc. v. Ziedenberg, 86 F.3d 1447 (1996)

1 A Contract Defined “A contract is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in.

Documents

mean acceptance

power of acceptance

offerees acceptance

mutual promises

set of promises

limited federal common

large body of state

contract defineda contract