contracts 1

What is a contract?

A promise or set of promises the law gives a remedy for if breached.

What is a promise?

A manifestation of intent to act or not act in a way that justifies another in believing a commitment was made.

Who is the promisor?

The person making the promise.

Who is the promisee?

The person receiving the promise.

Who is a beneficiary?

A person benefited by performance, even though they are not the promisee.

Remedies

What is restitution?

Removes the benefit conferred on defendant by plaintiff.

What is expectation damages?

Puts plaintiff where they would be if the contract had been performed.

What is reliance damages?

Puts plaintiff where they would be if the promise had never been made.

What is disgorgement?

Removes defendant’s profit from breach.

What is specific performance?

Court orders defendant to give exactly what was promised.

Expectation damages formula

Loss in value + other loss − cost/loss avoided or avoidable.

When are damages foreseeable?

At the time of contract formation, and foreseeable to the breaching party.

Do you get punitive damages in contracts?

No, unless a statute or separate provision expressly allows it.

What does Rest. § 17 require?

Mutual assent + consideration.

What does consideration require under Rest. § 71?

A bargained-for performance or promise.

What can performance be?

Act, forbearance, or creation/modification/destruction of legal relation.

Under Rest. § 79, do courts care about equal value?

No, if consideration exists, no requirement of equal value or mutuality.

What is peppercorn consideration?

Fake/token consideration that is only a pretense.

What are the 3 functions of consideration?

Evidentiary, cautionary, channeling.

Is past performance consideration?

Generally no.

Is moral obligation consideration?

Generally no.

What happens if there is no consideration?

Promise is usually a gratuitous gift and unenforceable, unless reliance applies.

What is an illusory promise?

A promise that leaves one party free to perform or withdraw at unrestricted pleasure.

Are satisfaction clauses illusory?

No, if judged by objective standard or good faith.

What does UCC § 2-306 do?

Uses good faith/best efforts to save requirements/output contracts from being illusory.

When is forbearance of a claim consideration?

If the claim is doubtful or the forbearing party reasonably believes it may be valid.

in forbearance as consideration, does the claim have to actually be valid?

No, but it must be doubtful or honestly/reasonably believed valid.

Promissory estoppel rule

A promise is binding if promisor should expect reliance, reliance occurs, and enforcement is needed to avoid injustice.

Promissory estoppel elements

Promise, foreseeable reliance, actual reasonable reliance, injustice without enforcement.

Ricketts v. Scothorn

Grandfather’s promise induced granddaughter to quit work; enforceable by reliance.

Wright v. Newman

Father figure promised child support; mother relied; promise enforced.

Restitution rule

A person unjustly enriched at another’s expense may owe restitution.

Who cannot recover restitution?

Officious intermeddler who voluntarily confers an unrequested benefit.

Cotnam v. Wisdom

Doctors gave emergency care to unconscious man; restitution allowed.

Rest. § 24 offer definition

Manifestation of willingness to bargain so offeree reasonably understands assent is invited and will conclude the deal.

Basic offer test

Would a reasonable person think saying “yes” forms a contract?

Are price quotes offers?

Usually no, unless detailed enough that assent completes the deal.

What matters for price quotes?

Specificity, number of recipients, advertisement context.

Are ads usually offers?

No, usually invitations to negotiate.

When can an ad be an offer?

Clear, definite, explicit, and leaves nothing open.

Lefkowitz rule

“First come, first served” clear ad can be an offer.

UCC § 2-204 rule

Contract can exist despite missing terms or uncertain formation if conduct shows agreement and remedy basis exists.

Reward rule

Reward must induce the requested action.

Rest. § 51 reward rule

If offeree learns of reward after part performance, they can accept by completing performance.

Mistake in offer rule

If offeree knows or should know of offeror’s mistake, offeror is not bound.

Four ways to terminate an offer

Rejection, revocation, lapse, death/incapacity.

Revocation rule

Offeror can revoke before acceptance.

Indirect revocation rule

Valid if offeror takes definite inconsistent action and offeree learns from reliable source.

Dickinson v. Dodds

Offer revoked because offeree learned property was sold before acceptance.

Lapse rule

Offer expires at stated time or after reasonable time.

Death rule

Death of offeror or offeree terminates power of acceptance.

Acceptance must be what?

Absolute, unequivocal, unconditional.

Rest. § 50 acceptance

Manifestation of assent in manner invited or required by offer.

Who can accept an offer?

Only the person invited to furnish consideration.

Acceptance by promise rule

Offeree must use reasonable diligence to notify offeror, or offeror must receive acceptance seasonably.

Silence rule

Silence generally is not acceptance.

Exceptions to silence rule

Benefit accepted with chance to reject; offeror says silence can accept and offeree intends it; prior dealings.

Mailbox rule

Acceptance effective when properly dispatched.

What if acceptance is delayed or lost?

Still effective if properly dispatched.

Proper dispatch requires what?

Correct address and proper postage.

Improper dispatch rule

Effective only when received.

Option contract mailbox rule

Acceptance effective only when received.

Firm Offers / Option Contracts

UCC § 2-205 firm offer rule

Merchant’s signed writing assuring offer held open is irrevocable without consideration.

Max irrevocability under UCC § 2-205

Three months.

If no time is stated in firm offer?

Held open for reasonable time, not more than 3 months.

Option contract rule

Offer binding if writing signed by offeror, recites consideration, fair terms, reasonable time, or made irrevocable by statute.

Oral option contract valid?

Yes, if supported by real consideration.

Common law mirror image rule

Acceptance must match offer exactly or it is a counteroffer.

Rest. § 59

Conditional acceptance on additional/different terms is a counteroffer.

Rest. § 61

Acceptance requesting change is still acceptance unless made dependent on assent to change.

UCC § 2-207(1)

Definite and seasonable acceptance works even with additional/different terms unless expressly conditional.

UCC § 2-207(2)

Additional terms are proposals; between merchants they enter unless exception applies.

2-207(2) exceptions

Offer limits acceptance, term materially alters, or objection given.

UCC § 2-207(3)

Conduct can create contract even if writings do not.

Terms under 2-207(3)

Matching terms + UCC gap fillers.

Additional terms between merchants

Become part unless 2-207(2)(a), (b), or (c).

Different terms

Usually knocked out and replaced by gap fillers.

What must SOF writing show?

Parties, contract, subject matter, essential terms.

Contracts within SOF

Executor, suretyship, marriage, land, one-year, goods $500+.

SOF functions

Evidentiary, cautionary, channeling.

One-year provision test

Applies only if contract cannot possibly be performed within one year.

Lifetime contract under one-year rule

Outside SOF because person could die within one year.

Klewin rule

If contract does not expressly require more than one year, SOF may not apply.

Real estate broker commission contract

Usually outside land SOF.

Option to buy land

Inside SOF.

Boundary dispute agreement

Usually outside SOF.

Suretyship parties

Obligee = creditor; principal = debtor; surety = guarantor.

Novation rule

If new party fully replaces original debtor, not suretyship, so SOF does not apply.

Main purpose rule

Oral promise may be enforceable if promisor’s main purpose is own economic benefit.

UCC § 2-201

UCC goods SOF applies when?

Sale of goods for $500 or more.

UCC writing must include what essential term?

Quantity.

Who must sign the writing?

Party against whom enforcement is sought.

Merchant confirmation rule

Between merchants, confirmation binds recipient unless written objection within 10 days.

UCC SOF exceptions

Specially manufactured goods, admission in court, payment/acceptance or receipt/acceptance.

Three policing concerns

Status, process, substance.

Status defenses

Minors and mental incapacity.

Process defenses

Duress, undue influence, misrepresentation.