Contracts Law: Formation, Defenses, Interpretation, and Remedies

Comprehensive review flashcards covering contract formation (bargain theory, promissory estoppel, unjust enrichment), defenses (Statute of Frauds, incapacity, duress, undue influence, misrepresentation, mistake), post-formation changes, interpretation rules, and damages.

Under the bargain theory of contract formation, what constitutes consideration?

Consideration is a promise or performance that confers a benefit on the promisor or causes a detriment to the promisee, bargained for as mutual inducement.

What is the structural distinction between a bilateral contract and a unilateral contract?

A bilateral contract is an exchange of a promise for a promise (express or implied), whereas a unilateral contract is an exchange of a promise for performance.

What are the required elements of an offer under mutual assent?

An offer requires a manifestation of present intent to enter a bargain, certain and definite terms, communication to identified person(s), and conditions such that the offeree reasonably understands a contract forms with acceptance.

What is the mirror image rule in contract acceptance?

The rule establishing that the terms accepted must mirror the terms offered; an offeree changing a term kills the original offer and creates a new one.

What are the five elements of promissory estoppel?

(1) A promise; (2) conduct by the promisee in reasonable reliance on the promise; (3) the promisor should have reasonably expected the reliance; (4) the promisee's reliance caused them harm; and (5) injustice would occur if the promise were not enforced.

How do the strict and broad views of the promise element differ under promissory estoppel?

The strict view requires the promise to be clear and definite (similar to an offer), whereas the broad view evaluates the circumstances, including performance, course of dealings, and usage of trade.

What are the four elements required to prove unjust enrichment?

(1) A benefit was conferred; (2) the recipient had appreciation or knowledge of the benefit; (3) the benefit was retained by the recipient; and (4) it would be unjust not to address the enrichment.

In an unjust enrichment claim, under what two exceptions is a conferred benefit denied recovery?

Recovery is denied if the benefit was conferred as a gift or if the plaintiff acted officiously (unjustified interference in another's affairs, intermeddling, with no request).

Which types of agreements fall under the common law Statute of Frauds?

Contracts impossible to perform in under $1\,\text{year}$, contracts in consideration of marriage, contracts for the sale of land, contracts to pay another's debt, and in Georgia, contracts to revive a debt past the statute of limitations or to lend money.

What constitutes a sufficient writing under common law Statute of Frauds?

A writing that reasonably identifies the subject of the agreement, is sufficient to indicate a contract has been made between the parties, is signed, and states the essential contract terms with reasonable certainty.

What three elements are required for a sufficient writing under the UCC Statute of Frauds for the sale of goods over $\$500$?

(1) Sufficient to show a contract was made; (2) signed by the party against whom enforcement is sought; and (3) states the quantity of goods.

Under the UCC merchant's confirmation rule, within what timeframe must an objection be given after receipt?

An objection must be given within $10\,\text{days}$ of being received.

What recognized exceptions excuse compliance with the Statute of Frauds?

Promissory estoppel, full performance by both parties, full performance by one party (under the one-year provision), partial performance in the sale of land, and partial performance in other contracts.

Under the public policy balancing test, what factors are weighed in favor of enforcing a contract?

(a) The parties' justified expectations, (b) any forfeiture that would result if enforcement were denied, and (c) any special public interest in the enforcement of the particular term.

What are the rules regarding contract avoidance by an infant (minor) and its exceptions?

A contract is voidable prior to age $18$ (or within a reasonable time after). The infant may recover all consideration given and must return all gained. Exceptions: necessities of life otherwise unavailable (food, housing), minor misrepresentation of age, intentional harm to contract property, and statutory exceptions (student loans, insurance).

What is the distinction between the cognitive test and volitional test for mental illness incapacity?

Under the cognitive test, the party is unable to understand in a reasonable manner the nature and consequences of the transaction. Under the volitional test, the party is unable to act in a reasonable manner in relation to the contract and the other party has reason to know of the condition.

How do physical duress and duress by threat differ in their legal effect on a contract?

Physical duress renders a contract completely void, whereas duress by threat renders a contract voidable.

What four elements establish duress by threat?

(1) A threat; (2) the threat is improper; (3) the threat induces the manifestation of assent; and (4) there is no reasonable alternative.

What elements establish the defense of economic duress by threat?

(1) One party threatened non-performance unless the other agreed to a demand; (2) non-performance would cause irreparable injury or harm; and (3) there was no adequate alternative.

What elements establish undue influence?

(1) One party is under the domination of another; (2) improper or unfair persuasion by the stronger party (evaluated by an objective test); and (3) if done by a third party, the contracting party had reason to know or acted in bad faith.

What are the elements required to establish a mutual mistake defense?

Both parties made a mistake at the time of contract formation regarding a basic assumption that has a material effect on the contract, and the adversely affected party does not bear the risk of the mistake.

What additional element must be shown for unilateral mistake that is not required for mutual mistake?

The adversely affected party must prove either that enforcement of the contract would be unconscionable or that the other party had reason to know of the mistake.

What are the required elements to excuse performance due to post-formation changes?

A supervening event occurs after contract formation, the non-occurrence of the event was a basic assumption of the contract, the party seeking relief is not at fault, the event makes performance impracticable/impossible or frustrates the principal purpose, and the party seeking relief did not assume the risk.

When is a contract modification valid without new consideration?

Modification without consideration is valid if the existing contract is not fully performed and the promise modifying the contract is fair and equitable under changed circumstances, statutory, or required by justice due to reliance.

What is the hierarchy of authority used to interpret ambiguous or missing contract terms?

(1) Course of Performance, (2) Course of Dealings, and (3) Trade Usage.

Under the Parol Evidence Rule, how are partial and complete integrations treated regarding contradictory and supplementary evidence?

Contradictory evidence is never allowed for any integrated writing. Supplementary evidence is admissible for partially integrated writings to add consistent terms, but is not admissible for completely integrated writings.

When is a liquidated damages clause void under the common law rule?

A liquidated damages term is void under common law if the amount is determined to be unreasonable and the amount of damages is not difficult to ascertain.

What are the three main limitations on recovering expectation damages in contract law?

(1) Certainty (damages must be certain in amount and causation); (2) Foreseeability (losses must be a probable result of breach flowing from the ordinary course or known special circumstances); and (3) Mitigation (plaintiff cannot recover losses that could have been avoided without undue burden).

Under what circumstances is specific performance granted as a remedy?

Specific performance is granted when money damages are inadequate because the subject matter is unique (due to quality or personal association), has no fair market value, or when a substitute is difficult to obtain or damages are uncertain.