Contracts Law Outline: Formation, Defenses, Interpretation, Conditions, and Remedies

Comprehensive vocabulary flashcards covering contract formation, consideration, mutual assent, defenses, interpretation, conditions, breach, excuses, and remedies based on the lecture outline.

Contract

A promise or set of promises for the breach of which the law gives a remedy (§1).

Promise

A statement so made as to justify a promisee in understanding that a commitment has been made (§2).

Bilateral Contract

A contract in which both parties promise to perform.

Unilateral Contract

A contract where only one party promises action, and acceptance is completed through performance.

Consideration

An exchange of promises or performances between parties as part of a bargain (§71).

Gratuitous Promise

A promise offered with no expectation of compensation that is unenforceable as a contract.

Preexisting Duty Rule

The rule establishing that promising to do something one is already legally or contractually obligated to do cannot serve as valid consideration (§73, §89).

Legal Detriment

Refraining from a legal right or undertaking an act, which is sufficient to satisfy consideration in a bargain.

Illusory Promise

A promise that does not count as consideration because it does not limit the promisor's freedom of choice and leaves performance completely within their discretion.

Mutuality of Obligation

The agreement of both parties in a contract to be bound; required so that promises are not uncertain or arbitrary.

Satisfaction Clause

A contract clause making performance conditional upon satisfaction, evaluated either by an objective commercial standard (reasonable person) or a subjective standard (good faith regarding taste, fancy, or judgment).

Mutual Assent

A 'meeting of the minds' where both parties objectively accept the same terms, which are sufficiently ascertainable for judicial enforcement.

Offer

A manifestation of willingness to enter into a bargain, evaluated by whether a reasonable person in the position of the offeree would believe that assent is all that is necessary to create a contract (§24).

Mirror-Image Rule

A common law rule requiring acceptance to do nothing more than reflect the exact terms of the offer.

UCC 2-207

A provision abolishing the mirror-image rule, stating that a definite and seasonable expression of acceptance operates as an acceptance even if terms differ from the offer, unless expressly conditional on assent to additions.

Option Contract

An offer that is legally irrevocable for a specified period of time where the offeree remains unbound and the offeror cannot revoke (§87).

Mailbox Rule

A principle stating that an acceptance is valid when sent or dispatched, whereas offers and revocations are valid only upon receipt.

Statute of Frauds

A doctrine requiring a written memorandum showing contract existence and terms signed by the party to be charged for specific transactions, such as executorship, suretyship, marriage consideration, land interests, contracts exceeding one year, and UCC sales of goods of $\$500$ or more (§110, §131).

Doctrine of Part Performance

An exception to the Statute of Frauds granting discretionary equitable relief to parties who substantially and irretrievably change their position in reliance on an oral agreement.

Infancy Doctrine

The rule providing that contracts entered into by a person under the age of majority are voidable at the election of the minor before or within a reasonable time after reaching the age of majority (§14).

Cognitive Test

An incapacity standard recognized by most states allowing a party to avoid contractual obligations if they are unable to understand the nature and consequences of the transaction (§15).

Affective/Volitional Test

An incapacity standard allowing rescission if a party is unable to act reasonably in relation to the transaction and the other party had reason to know of the incapacity (§15).

Duress

A defense allowing a party to avoid contractual enforcement when coerced by an improper threat by the offeror that leaves the victim with no reasonable alternative but to accept (§174–§176).

Economic Duress

Deprivation of a party's free will through improper financial threats where the victim lacks any reasonable alternative or timely remedy.

Misrepresentation

An assertion not in accordance with the facts that is material or fraudulent upon which a party was justified in relying, inducing assent (§159, §162, §164).

Caveat Emptor

'Let the buyer beware'; a common law rule placing the burden of examination and discovery of defects on the purchaser.

Procedural Unconscionability

Defects in the bargaining process characterized by the absence of meaningful choice, gross disparities in bargaining power, deceptive terms, or adhesion contracts.

Substantive Unconscionability

Extreme unfairness in the contract's resulting terms that are unreasonably harsh, oppressive, or one-sided in an entirely irrational way.

Contract of Adhesion

A standardized form contract presented on a 'take-it-or-leave-it' basis with no opportunity for the non-drafting party to negotiate terms.

Knockout Rule

A UCC 2-207 mechanism where conflicting terms between forms cancel each other out and the resulting contractual gaps are filled by default UCC provisions.

Parol Evidence Rule

A rule stating that an integrated writing excludes evidence of prior or contemporaneous agreements offered to add to or contradict the final writing.

Completely Integrated Agreement

A writing adopted by the parties as a complete and exclusive statement of the terms of the agreement, excluding prior or contemporaneous evidence within its scope (§213, §215, §216).

Merger Clause

A contract provision explicitly stating that the written document constitutes the complete and final expression of the parties' agreement.

Covenant of Good Faith and Fair Dealing

An implied duty in every contract requiring that neither party do anything to destroy or injure the right of the other party to receive the fruits of the contract.

Condition

An event, not certain to occur, before performance under a contract becomes due (§224).

Condition Precedent

A condition that must occur before the contractual duties subject to it become due.

Substantial Performance

An insubstantial breach that satisfies a constructive condition, requiring the other party to render their return performance while retaining the right to damages for any minor deficiencies.

Material Breach

A failure of performance so significant under §241 that it constitutes a failure of a constructive condition, excusing the non-breaching party from performing their reciprocal obligations.

Perfect Tender Rule

A UCC 2-601 standard granting a buyer the right to reject goods that fail in any respect to conform to the exact requirements of the contract.

Prevention Doctrine

A rule stating that a party cannot benefit from the non-occurrence of a condition if that party intentionally frustrated or prevented its fulfillment in breach of good faith.

Waiver Doctrine

The voluntary and intentional relinquishment of the protection of a contract condition through words or affirmative conduct.

Divisible Contract

A contract that the court can treat as separate, independent performance obligations to allow proportional recovery for distinct parts substantially performed.

Mutual Mistake

A defense rendering a contract voidable when both parties are mistaken at the time of contracting regarding a basic assumption that has a material effect on the agreed exchange, provided the adversely affected party did not bear the risk (§152).

Impracticability

An excuse from performance arising after formation when performance becomes physically impossible, illegal, or extremely burdensome due to an unforeseen event contrary to a basic assumption, without fault of the party seeking excuse.

Frustration of Purpose

An excuse discharging contractual obligations when an unforeseen event, occurring without fault of either party, virtually destroys the mutually understood primary purpose for entering the contract.

Specific Performance

An equitable remedy ordering a breaching party to execute the specific terms of a contract, typically granted only when monetary damages are inadequate and judicial oversight is feasible, particularly in land contracts.

Expectation Damages

The standard contractual remedy designed to put the non-breaching party in as good of a position as they would have occupied had the contract been fully performed (§347).

Cost of Performance Rule

The majority approach to measuring expectation damages, awarding the non-breaching promisee the actual financial cost required to complete or remedy the defective performance.

Diminution in Value Rule

A minority damage measure calculating compensation by the difference in market value rather than the cost of completion, applied when the cost of remedying the defect is grossly disproportionate to the actual economic benefit.