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Contract Law
Contract Law
What is a Contract?
o It is an enforceable promise
o Ways for parties to enforce obligations
o Binding agreements that provide legal recourse
o Assurances on life by relying on people’s words
o Protects economically encase other people does not honour their promise
You need to distinguish where or not you have a contract that is governed by common
law(general case law) or governed by Article 2 of the uniform commercial code which
governs sales of goods
Common law governs everything other than sales of goods.
Common law governs personal service contracts, employment contracts, real estate sale
contracts and look at the case law that governs these contracts
When you get a common law contract question apply to rules to the cases
Sale of goods such as a sale of a car, watch, laptop are covered by Uniform
Commercial Code of Article 2
Tangible personal property- Article 2
Article 2 defines goods as anything movable when identified to the contract
If you have a question that has both goods and common law, you need to use the all or
nothing rule. Which one is the more important part of your transaction.
Example 1: If I have a contract to sell you my Cadillac I exchange for $10,000 and I
agree to throw in 2 driving lessons.
o We have part goods(Cadillac) and part services(driving classes)
o What is the most important part of the transaction?
o It’s the sale of a Cadillac so sale of goods Article 2 rules will apply.
o The driving classes are just merely thrown in
Restatement of Law –
o Attempts by smart people (law professors, judges) in trying to restate/summarise
what the black letter law is
o They are not codified and not actual law but helpful summarise
3) Revocation- an act that the offeror engages in by taking back her offer in a clear
unambiguous indication of her unwillingness to contract with the offeree
revoking her offer. You cannot accept an offer that’s been revoked
4) Rejection- Acts that the offeree engages in in order to reject the offer. Examples
are:
o counter offers (invalidates original offer),
o conditional acceptance (ill accept but)
o Additional terms thrown in- In common law it is a termination of the
original offer because of the mere image rule which means it has to be
the exact terms of the contract and if any addition terms are thrown in it
invalids the contract it’s like a counter offer
Additional Terms in Article 2- you can have additional terms thrown in and it can be
valid acceptance and not termination
3) Acceptance- do we have a legally valid acceptance- in common law the mirror image
rule you have to have an acceptance that mere the term of the offer exactly
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o Article 2 UCC- As long as you have a reasonable expression of acceptance
even if you have additional terms thrown in you still have a contract formed.
Sometimes the additional terms are part of the deal unless they are a material
change of the terms of the offer
o Implied Contract- Looks at the parties conduct to help figure out whether a
contract was actually formed
Example: An oral 3-year employment contract that violates the statute of fraud
requirements that any long-term contract be in writing. This employee might
have still provided 6 months of labour to his employer. Later on, the employer
uses the statute of frauds defence to that oral employment contract
Statute of frauds oral contracts do no suffice however she still did provide
6 months of her labour
In this situation you might have a restitution recovery to prevent
defendant’s unjust enrichment
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After all she conferred a benefit (6months of labour) she had the
reasonable expectation that she would be paid, it came at the employers
express or implied request
We measure restitution by the reasonable fair market value of the benefit
conferred that’s the amount of money that takes away the defendant’s unjust
enrichment in restitution
o Void Contract- nullity from its inception- no one can enforce it because it never
existed in the eyes of the law
o Voidable Contract- Gives the aggrieved party the option of rendering the
contract unenforceable
This is important for defences because they will render contracts voidable
they will give your aggrieved party the option of rendering her contract
unenforceable only a few defences such as illegality if you contract is matter
is illegal we will render the contract void
Subject matter that falls within the statute of frauds (such as no writing)
Certain subject matter falls within the statute of frauds and if it does make sure you
get your agreement in writing
Mistake and Mutual Mistake- Where both parties are mistaken by fundamental
fact that govern their transaction and if that can grant relief such as render your
contract unenforceable
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Unilateral Mistake- where 1 party makes a mistake about their deal and whether or
not she can grant relief, avoid contract enforcement(harder) because if the other
party knew then why can’t they know?
Fraud- The seller knows that her house has termites but lies about it deliberately and
intentional lie or omission or might cover it up. (fraud defence to enforcement of that
contract)
Influence of the Parole evidence rule on what are the terms in the final agreement
between the parties
o whether or not some parties can bring in some oral testimony right before we sign
the contract seller also agreed to do X, Y or Z
o Parole evidence rule may prohibit the introduction of that evidence
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Parties conduct – If the parties had long history or dealings and they interpreted a term
in a certain way, that course of performance or dealing can help provide evidence of what
that term means in respect to future installments of the party’s contract
Trade Customs- Are community norms of what the party should be aware. It can help
insert terms into the party’s contract where the parties have omitted them
Perfect Tender Rule- Standard of performance under the UCC, 100% perfect tender.
i. If the seller delivers goods that are imperfect buyer will
generally have the right to reject, buyer has the right to insist on
a perfect tender
ii. In certain situations, the seller will have the chance to cure an
imperfect tender
iv. Risk of loss rules: such as if the goods get destroyed while there
in transit, UCC rules on who bares the risk of loss?
Minor breach- Still have to perform your obligation but can sue for
damages, does not excuse your performance
Conditions-
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Conditions president,
Conditions subsequent,
Classify conditions by timing and how they are formed
Standard for complying with those conditions
o Example: you have an express condition precedent in your
contract, you don’t have any obligation to perform your
duties under that contract until that express condition has
been strictly complied with that means close is not good
enough
6. R stands for Remedies- when there has been a breach what are
the remedies that are available?
Anticipatory and Repudiation Breach-
o someone makes a statement of non-performance
Retraction rules
o Remedies for excused for non-performance
Non-monetary remedies are:
o Specific performance- make your defendant honour the promise that he intended
to do. Make him specifically perform.
It is an equitable remedy it is only available if the legal remedy in
inadequate.
What is the legal remedy? Money, you have to first show that no
amount of money would adequately compensate the plaintiff for
her loss (most of the time it would)
o Reformation- getting the courts to rewrite a contract getting it to say what you
wanted or thought it was going to say
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o Reclamation- the right of an unpaid seller of goods to get her goods back
Monetary Remedies:
o Expectation Interest-
providing the aggrieved party, the amount of money that will put her in the same
position that she would have been in, had the contract actually been performed
o Restitution Damages:
looks at the defendant and how much has he been unjustly enriched?
It takes away the unjust enrichment of the defendant
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2) The person (assignee) who is assigned those rights can also
enforce that promise directly
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Contract Law- Video 2 Contract Formation(1h13 min)
Outcomes:
1) Offer
2) Termination of offer
3) Acceptance
4) Consideration
5) Conclusion
o After you understand what law applies- Common law or UCC Article 2
o Look at Contract Formation issues we wants to apply the objective theory which is
o What a reasonable person standard would be used to address whether a contract was
actually formed
o What a reasonable person would conclude looking at the manifestation or the words or
actions of the parties in the formation
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Dispute on whether Zehmer agreed to sell his farm to Mr. Lucy, even though
Zehmer wrote this offer of sale out to Mr. Lucy he later said he was merely joking
so I did not have subjective intent. Court said to bad it’s not about subjective intent
it’s about what a reasonable person would conclude.
1) Offer
2) Termination of Offer
3) Acceptance
4) Consideration
5) Conclusion
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Contract Law Video: Performance &
Discharge of Duty to Perform
Outcomes:
1) Introduction
2) Improper Performance
3) Failure of Conditions
4) Events that will Discharge Duty of Performance
5) Conclusion
1) Introduction
E- Stands for Excuse: Doctrines that might excuse a contract for performance
First: Must show that there was a valid contract formed (offer, no termination,
valid acceptance, valuable consideration
Second: Establishing the terms (how courts establish the terms between the
parties)
2) Improper Performance
Whether there is some reason/excuse why there should be an excuse of a parties non-
performance of their obligation under a contract. Here we will list excuses:
1. Breach:
When the opposing party has caused a breach (improper performance), we need to
distinguish what kind of breach.
Material Breach has the right to sue for damages for the breach and also to suspend
her own performance obligation.
The aggrieved parties performance is excused due to the other parties improper
performance/material breach
Minor Breach cannot excuse their own contract obligations and must still honor
their obligations under the contract. They still have the right to sue for damages but it
will be small
3) Failure of Conditions
Excuse due to failure of conditions
What is a Condition?
A condition is an event not certain to occur that can either trigger or terminate a parties
performance obligation.
They can be classified by their timing, source,
When looking for conditions, look for words like if, until, provided that, on the condition
that, so long as.
o Example: I agree with you to lease gym space and pay $1000 rent,
if I am first able to sell 2000 memberships to my new
health club. I do not have any duty of
performance/current obligations. I have to first get that
condition precedence satisfied by selling 2000
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membership and then once that condition precedence has
occurred then that will trigger my performance
obligation to pay $1000/month rent. But as of now I have
no duty yet. As condition precedence must be satisfied
first and once they are that will trigger the other parties
duty of performance and if it hasn’t the other party does
not need to perform his side of the bargain.
o Example: At a real estate closing the seller is going to turn over the
deed for their house at the same moment the buyer turns
over the cash to buy the house. These are viewed as
concurrent conditions to the other parties performance
obligations.
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Jacob & Youngs V Kent
Implied Condition and substantial performance is enough
Plaintiff Jacob & Youngs, built a house for Defendant Kent. Defendant specified that
all pipe in the house must be Reading pipe, but Plaintiff installed pipe that was not
Reading pipe. Defendant demanded that the work be redone, which would have
required the demolition and reconstruction of substantial parts of the house, but
Plaintiff refused. The measure of damages for a trivial(value) and innocent omission
is not the cost of replacement but the difference in value.
Issue. Is Defendant entitled to the cost of replacement of the pipe for Plaintiff’s breach of
contract?
No. Equity and fairness dictate that one who unintentionally commits a trivial wrong
will not be condemned to a fate so clearly out of proportion with the transgression.
To permit Defendant to recover the cost of replacement of the pipe would be unduly
oppressive. Defendant will be adequately compensated by recovering the difference
in value of a home with the Reading pipe and the value of the home, as it exists, with
a different kind of pipe.
Plaintiff, either intentionally or grossly negligently, failed to perform the contract.
Defendant had the right to have it performed correctly. Therefore, he is entitled to
replacement cost.
A person is entitled to damages that will permit him to complete that which he
contracted for as he intended it to be completed. However, where the cost of
completion is grossly and unfairly disproportionate to the good to be attained, the
measure of damages is the difference in value.
1. Failure to Cooperate(hinderance)
Is when you fail to cooperate in good faith with the occurrence of a
condition precedence, it will then be excused and will no longer able to be
relied on because its hindered from occurring
2. Substantial Performance
Will discharge an implied condition Jacob & Youngs V Kent.
Closeness
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1. Actual Performance
2. Tender of Performance-
It is an offer to pay or perform by one who is willing and able to do so.
3. Condition Subsequent-
The occurrence of a condition subsequent will cut off a duty of
performance
5. Impossibility/Impracticability
I. Impossibility-
It is objective, no one can get the job done anymore
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Taylor V Caldwell
Impossibility excuses their obligations
This case established the doctrine of impossibility through destruction of the subject
matter.
Plaintiff sued Defendant for breach of contract to rent out Defendant’s facility for
four concert dates. A party’s duty, under a contract is discharged if performance of
the contact involves particular goods, which without fault of either party are
destroyed, rendering performance impossible. The music hall burned down before
the concert was performed.
Issue. Whether the loss suffered by Plaintiffs, is recoverable from the Defendant?
No. The Defendant was discharged from performing, and his failure to perform was
not a breach of the contract.
The destruction of the hall without fault of either party excuses both parties due to
impossibility, the Plaintiff from using the concert grounds to perform and from
paying the money and the
Defendant from performing their promise to give the use of the hall for them to
perform, due to it being destroyed (as you cannot provide something that is destroyed
nothing there).
II. Impracticability-
It is when performance has become unduly and unreasonably expensive
or unburdensome to discharge your duty of performance or obligation.
It is still possible to perform but it is 10 times more expensive, severe
shortage or an item(famine). It has to rise to the level of impracticability
if you want your reasons to be excused
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A party’s duties are discharged where a party’s purpose is frustrated without fault by the
occurrence of an event, which the non-occurrence of which was a basic assumption on
which the contract was made.
Issue. When the subject of the contract is frustrated is non-performance of one of the
parties excused?
Yes.
Defendant is excused from performance because his purpose for entering into the contract
was frustrated. Defendant’s purpose of entering into the contract was to view the
coronation of the King.
The purpose was understood by both parties and regarded as the foundation of the
contract
Performance of the contract was not rendered impossible, since Defendant could remain
in the flat even though the coronation procession did not take place. However, Defendant
would not receive any benefit from staying in the flat, therefore he must be excused from
performing.
The court held that Defendant was excused from performing under the contract and
Plaintiff’s claim is dismissed due to excuse of frustration of purpose.
6. Later Agreement
A later formed contract that might discharge a parties previous obligation and may excuses
those previous obligation in the original contract.
I. Rescission Agreement
Is a situation in which the both parties exchange mutual promises to end the
original contract obligations.
Those original contract obligations will be excused and the parties no longer
have to perform as the contract has been rescinded by mutual agreement.
Make sure that there is still some performance still owed by each of the
contracting parties, this is called a executory contract.
Executory Contract is a contract that has no yet been fully executed. It is a contract
in which both sides still have important performance remaining.
II. Modifications
Is when the parties mutually agree to change their contract, modify it so that it says
something else
If you have a valid modification it will excuse the original contract obligations
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Requires new consideration in order to be binding
Instead, If it is asking someone for more money to do the exact same thing that she
already promised that she would do, that is a violation of the pre-existing legal duty
rule
If you want the new modification to be valid under common law, there needs to be
new consideration for it, something that the parties were not already obligated to do.
No new consideration then the modification is not enforceable under common law
All that is required under the UCC is that the modification must have been
made in good faith.
If you have that modification then the existing/original obligations will be
gone
III. Novation
Is a mutual agreement to substitute a new party to do the performance obligation
under your original contract
It is the same performance occurring but just a different person who
tackles that performance obligation
If there is a valid Novation where both the original contracting parties got
back together and they enter into a novation to substitute painter #2 in
place of painter #1. Painter 1 obligations are excused because home owner
has now agreed to take painter 2 instead to do the same performance just a
different guy doing the performance and novation will excuse
performance of the guy who gets replaced
It requires a mutual agreement of both parties of a original contract where
1 party gets substituted out or replaced
a. An Accord
Is an agreement by the parties to an existing obligation to accept a different
performance in satisfaction of the existing obligation
o Example: A creditor owes a debtor $1000, but then they get back
together as the creditor says if you deliver me 20
widgets I will forgive your debt of $1000. They then
enter into such an accord as it is an agreement by the
parties to an existing obligation to take a different
performance in satisfaction.
b. Satisfaction
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Is performance of the new agreement which is the accord. Accord and
satisfaction must go together, with accord alone it will not excuse the contract
obligations. But once they go together the old obligations will be excused
5) Conclusion:
Is Performance due or was there some excuse for non-performance
Material V. Minor breach
Failure of Conditions and
What Conditions look like and
How Conditions can they be satisfied or excused
Doctrine of Impossibility
Doctrine of Impracticability
Doctrine of Frustration of Purpose
Parties Subsequent later agreement as excusing their original contract obligations
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Contract Law- Video 5 MBE- Approach- (49 mins)
o There will be 28 Contract Questions on the MBE
o ½ will cover contract formation and performance, breach and discharge
o ½ will cover defenses, parole evidence, remedies and third-party rights
o 25% of hypos will be testing your understanding in Article 2 of the Uniform
Commercial Code
1. Contract law is permitting almost every aspect of our lives, try to connect rules to real life
fact patterns to help relate to the subject matter
2. Contract rules are common sense, fairness and how business people do transactions
3. Consider the purpose of the rules and put it in easy to remember terms, most buyers and
sellers use these terms without even knowing their formal language
4. Give an identity to each player in a contract- the seller, buyer a person you know
Once you know you are in a contract question look for game changing facts
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2) Dollar Amounts- how much the widgets cost or the amount if which the
offeror contracted to sell Blackarc. It can signal a Statute of Frauds issues,
damages issue, mistake issue
3) Contract formation words- these are words of offer, acceptance or
consideration
Example 3:
Owen offered Paul $500 if Paul paints Owens’s house
Paul says “no, I’ll do it for $600
Paul changes his mind, says “ok, I’ll do it for $500
NO CONTRACT
Paul never accepted,
Paul rejected the original offer by making a counter offer
Which now must be accepted by Owen to form a contract
Example 4:
Ronda saves Vinnie from falling ice, but Ronda breaks her
leg in the process
V offers to pay R’s salary while she recovers
V investments plummet and he now refuses to pay R
V does not have to pay because
NO CONTRACT
There is no consideration
No bargain for exchange
4)Words of Condition-
These includes words such as: “If, when and as soon as
Words of condition may trigger a parole evidence rule or basis of an excuse not
to perform under the contract
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