Chapter 6 notes

Contract

A promise or set of promises enforceable by law. Oral or written agreements can both be binding.

Bilateral Contract

TWO promises + TWO performances. Both parties promise something AND both follow through.

Unilateral Contract

ONE promise + ONE performance. Acceptance happens by performing the act, not by promising. Ex: Reward offer — you only get paid after actually finding the lost item.

Express Contract

Both parties knowingly and explicitly agree to terms (spoken or written).

Implied Contract

Agreement formed through conduct/actions rather than words.

Quasi Contract

Not a real contract — courts enforce it to prevent unjust enrichment when one party unfairly benefits at another's expense, and no real contract exists.

Valid Contract

Has ALL required elements: mutual assent, consideration, capacity, and legality.

Void Contract

Missing a required element or not formed in accordance with the law, not enforceable.

Voidable Contract

The law gives one or more parties the right to cancel it. Ex: Contracts signed by minors.

Common Law

Governs contracts for SERVICES (legal, accounting, etc.) — made by judges through court rulings.

Statutory Law / UCC

Governs contracts for GOODS/PRODUCTS — based on the Uniform Commercial Code (written law).

Hybrid Contract

Has terms for both goods and services. Governed by whichever purpose is the predominant thrust of the contract.

Predominant Thrust

The main subject of a hybrid contract — determines whether common law or the UCC applies.

Digital Contract

An agreement expressed, signed, and exchanged electronically. Treated the same as paper contracts under UETA and the E-Sign Act.

Mutual Assent

Offer + Acceptance — both parties knowingly agree to the same terms. Required for contract formation.

Offer

A promise to do (or not do) something specific. Must be CLEAR, SERIOUS (objective intent), and COMMUNICATED.

Objective Intent

The offeror must genuinely intend to be bound — tested by what a reasonable person would believe, not just what the offeror says they meant.

Advertisements (General Rule)

Most ads are just invitations for the consumer to make an offer

Advertisements - That are binding

An ad CAN be a unilateral offer if it is specific enough (e.g., "$10 to the first 50 buyers Friday"). Specificity is key.

Acceptance

Agreement to an offer — can be in writing, verbally, or by conduct/action (for unilateral contracts).

Master of the Offer

The offeror controls the offer — they can terminate it, modify terms, or dictate how it must be accepted, up until acceptance occurs.

Revocation

Offeror withdraws the offer before the offeree accepts. Timing matters — must happen before acceptance.

Irrevocable Offers

Three types that CANNOT be revoked: (1) Option contracts, (2) Offers the offeree has partly performed or detrimentally relied on, (3) Firm offers by a merchant under the UCC.

Option Contract

Offeror agrees to keep the offer open for a set period in exchange for something of value (consideration). Cannot be revoked during that period.

Detrimental Reliance

The offeree makes preparations BEFORE accepting based on reasonable reliance on the offer — this makes the offer irrevocable.

Rejection

Offeree says no — their power to accept the original offer ends immediately.

Counteroffer

Offeree rejects the original offer and proposes new terms. Kills the original offer — offeree can no longer go back and accept it.

Mirror Image Rule

To accept an offer in a common law contract, you must accept it exactly as it was offered.

If you change anything important, your response is no longer an acceptance — it becomes a counteroffer instead.

Termination by Operation of Law

Offer automatically ends due to: lapse of time, death/incapacity of either party, destruction of subject matter, or supervening illegality (something legal becomes illegal).

Mailbox Rule

Acceptance is effective the moment it is SENT (dispatched) — not when the offeror receives it.

Silence as Acceptance

Courts will NOT enforce a contract where silence = acceptance, UNLESS the parties previously agreed that silence would count. You accept the offer by not responding

Insufficient Agreement

No mutual assent when terms are too vague OR one/both parties are mistaken about an important term.

Essential Terms

A valid contract needs: (1) parties, (2) subject matter, (3) time for performance, (4) price/consideration.

Restatement Test

A contract isn't void for vagueness if the terms are clear enough for a court to identify a breach and award a remedy.

Mistake (Contract Law)

An erroneous belief about an existing fact — not market conditions or financial ability.

Mutual Mistake

BOTH parties share the same wrong belief about a basic fact. Can be grounds to cancel the contract.

Unilateral Mistake

Only ONE party has the wrong belief. Generally NOT a reason to cancel — UNLESS the other party caused or knew about the mistake.

Consideration

The mutual exchange of benefits AND detriments — each party gives something up and gets something in return.

Legal Detriment

What a party gives up in exchange. Can be money, goods, services, property, or giving up a legal right (forbearance).

Forbearance

Giving up a legal right as consideration in a contract.

Nominal Consideration

Consideration stated in a contract but not actually exchanged (like $1). Still counts as long as the amount is truly nominal.

Preexisting Duty Rule

Promising to do something you are ALREADY legally obligated to do is NOT valid consideration — the contract is unenforceable. Exception: extreme unforeseen circumstances that make the original job significantly harder (like discovering toxic waste mid-construction).

Illusory Promise

A "promise" that doesn't actually commit a person to do anything — NOT valid consideration. Includes: deathbed promises, gift promises, promises of love/friendship.

Past Consideration

A benefit received BEFORE the contract was formed. Does NOT count as valid consideration — exchange must happen AFTER mutual assent.

Promissory Estoppel

If one party justifiably relies on the promise of another to their detriment. (1) a reasonable promise was made, (2) the other party actually relied on it and was harmed, (3) that reliance was foreseeable, and (4) justice requires compensation (good faith dealing).

Capacity

Both parties must have the legal ability to contract. Limited for minors and those with mental incapacity.

Minors in Contracts

Anyone under 18. Contracts are VOIDABLE at the minor's option — they can cancel. If they don't disaffirm after turning 18 within a reasonable time, the contract is considered ratified.

Mental Incapacity

A person lacks capacity if they cannot understand the nature/consequences of the contract OR cannot act reasonably and the other party knows it.

Legality

Both the subject matter AND the performance of the contract must be legal. Part of the legality requirement is that terms must be consistent with public policy.

Public Policy

Part of the legality requirement — contract terms must align with public policy objectives to be enforceable.