Professional Documents
Culture Documents
Contract Law Outline
Contract Law Outline
CONTRACTS OUTLINE
ENFORCEMENT: CONSIDERATION & PROMISSORY ESTOPPEL
Consideration
1. Consideration: to constitute consideration, a performance or a return promise
must be bargained for.
a. Bargained-for-exchange: performance or promise is sought by the
promisor in exchange for their promise and is given by the promise in
exchange for that promise. For example:
i. an act other than a promise
ii. a forbearance
iii. the creation, modification, or destruction of a legal relation
b. Illusory Contract: only one party promising a consideration that is so
insubstantial no obligations are imposed.
i. Unenforceable due to lack of consideration, lack of mutuality, and
indefiniteness.
c. Valuable consideration: to uphold a contract, consideration must be
something of value – something either beneficial to one party or
disadvantageous to the other.
(Hamer v. Sidway – Uncle promises $$ to nephew if he refrains from drinking)
i. Nominality Doctrine: nominal payments and vague statements of
consideration are insufficient to support a contract. Clearly SHAM
or nominal consideration.
(In Re Greene – man pays mistress $$$ hush money, she only has to pay $1)
ii. Adequacy Doctrine: (peppercorn) Mere inadequacy of
consideration will not void a contract. Valid contract exists if there
is some consideration.
(Batsakis – during war/famine in Greece bargained $25 for $2,000 USD in the future) (Wolford – old man
promises $10,000 if they name their son after him)
Definitiveness
3. Definitiveness: agreement must be sufficiently definite to enable a court to give
it an exact meaning. Otherwise, it is unenforceable.
a. Essential terms: type of good, quantity, time, and price.
a. How definite? Consider the intent of the parties. Did they intend to only
be bound once price was set? If not, then a contract can be definite
enough w/ out a set price. (UCC)
Trimmer v. Van Bomel – jack black movie. Promise to “support him for the remainder of his life” not
specific or definite enough for court to enforce specific performance. Courts cannot dictate terms, can
only enforce those agreements already in place.
**UCC more likely to gap fill if there was an intent to promise
Acceptance
2. Acceptance: A manifestation of assent to the terms set by the offeree in a
manner invited or required by the offer.
f. Offeror can require acceptance by any reasonable manner/medium. If
they do not specify how offer must be accepted, offeree can accept in any
reasonable way.
i. Acceptance by performance: requires at least part of what the
offer requests to be performed or tendered
ii. Acceptance by promise: requires that offeree complete every act
essential to making of the promise
g. Power of Acceptance Terminated: an offeree’s power of acceptance is
terminated at the time specified in the offer, or at the end of a reasonable
time.
(Ever-tite Roofing – accepted offer by showing up to do the work. Commencing work was an instrument
of acceptance laid out in contract and was done within a reasonable amount of time).
i. Offeree’s power of acceptance terminated if:
ii. Offeror manifests an intent NOT to enter into the proposed
contract.
iii. Rejection or counteroffer by the offeree
iv. Lapse of time
v. Revocation by the offeror
vi. Death or incapacity of the offeror or offeree
h. Direct Negotiations: When parties are bargaining face-to-face or over the
phone, the time for acceptance does not usually extend beyond the end of
the conversation.
Counteroffer
3. Counteroffer: an offer made by an offeree to offeror proposing a substituted
bargain differing from that proposed by the original offer.
i. Constitutes a rejection of original offer.
j. Restatement
i. Mirror Image Rule: offer can only be accepted if the offeree agreed
precisely and completely to the terms offered.
1. If terms differ, the “acceptance” is a counteroffer and
terminates the original offer.
ii. Last Shot Doctrine: If one or both parties performed, even though
mirror image rule had not been satisfied, both parties are bound to
the terms of the last offer.
UCC 2-207
k. UCC § 2-207. Additional Terms in Acceptance or Confirmation.
Erin Kitchens Wong
b. Did the parties expressly reserve the right not to be bound in the absence
of a signed writing?
c. Was there partial performance?
d. Have all the parties agreed on all terms?
e. Was the agreement one that would normally be reduced to writing?
5. Idiosyncratic Bargainer: “unreasonable” or idiosyncratic bargainer bears the cost
of such a system since they have to take special care to signal adequately their
belief.
f. If you are someone who wants something very specific, must be very clear
and specific in your contract.
6. Contract implied-in-fact: mutual intent to contract which does not come from
implied duty or obligation, but out of FACTS from which consent may be inferred
g. Requires:
i. Mutual agreement
ii. Intent to promise
iii. Implied in fact (not in words)
Bailey v. West – horse buyer and horse caretaker. Confusion about who actually owned the horse and
who should pay the caretaker for his services. Held there was no mutual agreement or “intent to
promise” b/w parties. No contract implied in fact.
(W.W.W. – contract contained a reciprocal cancellation provision, but p claims that provision was only
supposed to apply to him. When a contract is unambiguous and complete, it will be enforced according
to its terms.)
c. Restatement/Modern Common Law: Split hard/soft parol evidence rule.
i. Intent of the parties test. Considers evidence outside four corners
d. UCC: Soft parol evidence rule. Apply contextualism
i. Certain inclusion test: excludes extrinsic evidence of consistent
additional terms if the parties certainly, rather than naturally,
would have included such terms in their written agreement.
ii. Dealings, Usage of trade, course of performance can make
admissible evidence to explain or supplement ambiguous terms of
an agreement
e. Merger/Integration Clause: presumptively conclusive evidence of full
integration but can be a “rebuttable presumption” in some courts.
i. Ex) “this agreement sets forth the entire understanding of the
parties…”
Oral agreements
2. Oral Agreement can vary a written contract under the following conditions:
a. Agreement must be a collateral one
b. Must not contradict express or implied provisions of the written contract
c. Must be one that parties would not ordinarily be expected to embody in
writing
(Mitchell v. Lath – oral agreement to remove icehouse from property, but not included in written
contract. That would normally be included in written contract – case dismissed).
d. Evidence of oral contract terms are permissible if:
i. Contract is silent on the matter
ii. Alleged oral agreement doesn’t contradict or alter the meaning of
the written terms.
(Masterson – made oral agreement limiting the buyback option to family only to keep ranch in the
family. Exception to the parol evidence rule, extrinsic evidence allowed).
Plain Meaning Rule
Textualism & Contextualism
3. Contextualism: court strives to interpret contractual provisions using the context
under which the parties drafted the provisions.
a. Ex post approach which considers the effect of the holding on the parties
in the case at hand
b. Takes into consideration the fact that parties do not always draft clear
contracts, so in order to enforce a contract as the parties intended, judges
should look to outside evidence of the parties’ intent
c. Prevents the exploitation of unsophisticated individuals who enter into
contracts
Erin Kitchens Wong
4. Textualism: courts strive to interpret contractual provisions using the text of the
provisions alone
a. Ex ante approach, considers effect of the holding on parties in the future
b. Incentivizes parties to draft clear contracts
c. Treats parties in the case at bar as a means to an end
DEFINING TERMS
Promises, Conditions & Warranties
1. Promises, Conditions, & Warranties
a. Promise: if a party breaks a promise, the other party still has to perform
BUT they can sue for damages.
i. Can be modified
b. Condition: If a party violates a condition, then the other party does not
have to perform.
i. Can be waived
A condition is an event, not certain to occur, which must occur, unless its non-
occurrence is excused, before performance under a contract becomes due.
ii. Both parties can agree to waive condition
iii. Ambiguous terms will be ruled a promise, not a condition
iv. Nonoccurrence of condition will constitute a breach
(Howard v. Federal Crop – plowed their field right after crops were destroyed. Insurance contract
required that field not be plowed until after inspectors came. Contract did NOT create an express
condition b/c it did not have explicit language to that effect)
c. Express Warranty: created by seller when they:
i. Provide an affirmation of fact or promise relates to the goods
ii. Provide a description of goods
iii. Provide a sample or model of goods
iv. NOT Warranty: opinions, affirmation of value
v. Breach of Express Warranty=breach of contract
Oral Modification
2. Oral Modification
a. Pre-existing duty rule (Common Law): performance of a legal duty that is
already owed is insufficient consideration. Modification of a promise not
enforceable without new consideration
(Alaska Packers – fisherman demand more $$. Not enforceable b/c no consideration)
b. Restatement: a promise modifying a duty under a contract is binding if:
i. Contract not fully performed on either side
ii. Modification is fair and equitable, in light of circumstances that
were unforeseen by either party at time of contract (i.e. housing
prices went down)
iii. Provided by statute
Erin Kitchens Wong
BREACH
Substantial Performance
1. Breach: party has failed to fully perform by the due date. Injured party may sue
for a remedy.
a. Substantial Performance (Restatement): an equitable defense to breach
of contract asserted by a party who has substantially performed their
contract obligations prior to breaching the contract
i. If a party substantially performs obligations (only small details
omitted), it will not be forced to bear the replacement cost needed
to fully comply.
1. Instead, will owe the difference in value b/w full
performance and performance received.
ii. However, if other party’s performance materially impacts essence
of what was contract material breach
(Jacob & Youngs v. Kent – wrong type of pipe installed by contractors. Way too expensive to replace all
the piping, so court held they “substantially performed”)
Anticipatory Repudiation
2. Anticipatory Repudiation: a definite and unequivocal manifestation that the
party will not render performance. Injured party may sue immediately as if there
were a breach of contract and does not have to perform their part of the
promise.
(Hochster v. De La Tour – courier repudiated contract to travel with P, P obtained another on equally
good terms, but later than desired start date. P has option to file suit for damages immediately in
anticipation of breach)
a. Must be a voluntary affirmative act or sufficiently positive language to be
reasonably interpreted to mean that party will not or cannot perform.
i. Expressing doubts insufficient
b. Prospective inability to perform, with no assurances given in a reasonable
amount of time can be treated as anticipatory repudiation (i.e.
bankruptcy)
Erin Kitchens Wong
c. Repudiation alone gives rise to a claim for damages for total breach (even
before breach committed by non-performance or anything has been
received in exchange)
d. Can be nullified by retraction before other party materially relies on
repudiation
(Truman Flatt – entered into contract to purchase land, zoning permit denied so they requested
to be let out of contract, then decided to continue w/ contract anyway. Party can rescind or
retract anticipatory repudiation if other party has not materially relied upon it or provided
notice that it considers the contract repudiated)
3. Remedy for Anticipatory Repudiation: damages measured by market value at
the time the party learned of repudiation + a commercially reasonable amount of
time.
a. Some jurisdictions require mitigation of damages and just sue
immediately, others allow injured party to wait until time for performance
to mitigate.
REMEDIES
Damages
1. Damages
a. Nominal: no provable loss in a breach, court can award trivial sum of $$.
(i.e. client breaches contract, but you find another client easily at no extra
cost)
b. Expectancy: forward looking. Puts P in position they would have been if
the contract had been performed.
i. Measured by promised condition minus the present condition
ii. Provable loss.
iii. Value of performance that should have been rendered + any
incidental damages or recoverable consequential damages resulting
from breach, - any losses or costs that the injured party saved by
not having to perform the contract.
iv. If expectations damages are too speculative to measure, or they
would not have profited at all from contract reliance damages
c. Reliance: backward looking. Puts P back in position they were in before
the contract was made.
i. Measured by prior condition minus present condition
ii. Reliance, but no loss of profits.
iii. Injured parties expenditures minus any loss the injured party would
have sustained in the contract
iv. Can also be compensated for pain and suffering if they were
reasonably foreseeable consequence of a breach (nose job case)
Erin Kitchens Wong
POLICY
Autonomy theories: contract law enforces promises. There exists a moral obligation to keep
one’s promise.
Out of respect for autonomy and in trust
Great social utility to a general regime of trust and confidence in promises and
truthfulness
Promising transforms a morally optional activity into a morally mandatory activity
Autonomy theory to justify government power in moral obligations= “legal enforcement
of contract promotes individual freedom by giving people the power to bind themselves
with other”
But what about the freedom to change one’s mind? → freedom to renege on a promise
basically takes away the freedom to make binding commitments, impossible to have
both. But you DO have the freedom to make or NOT make a contract/promise.
Economic theories: view contract adjudication as a mechanism for creating rules and rights that
will provide incentives for individuals in the future
Asks how the enforcement of contract law will influence the behavior and promises of
people in the future
Erin Kitchens Wong
Reducing anxiety about the future through contracts/promises enhances social welfare
(gets rid of a social loss)
On the other hand, broken promises are a social cost and contract law encourages
promises
As a society, it has been accepted that the aggregate benefits of promise-making
outweighs the aggregate harms
Economic analysis suggests a ground for legal enforcement of promises
Pluralist theories: some argue that neither efficiency or autonomy alone can justify a legal
obligation to keep one’s promise
Pluralism argues that the courts pursue multiple goals including: efficiency, protection of
individual autonomy, and fairness. Fairness is necessary in order to do justice to both
parties involved.
UCC V. RESTATEMENT
1. 4 Key Differences:
a. Mirror Image Rule (Restatement) v. 2-207 (UCC)
b. Parol Evidence Rule
i. Restatement → common law. Split in approaches
ii. UCC → more liberal approach.
c. Textualism v. Contextualism
i. Restatement → split.
ii. UCC → contextualism
d. Substantial Performance (Restatement) v. Perfect Tender rule (UCC)