Comprehensive Contract Law Notes

Contracts Overview

  • Contract: A legally enforceable agreement between parties.
  • Contract Components:
    • Promise: Assurance of action or non-action.
    • Promisor: The one who makes a promise.
    • Promisee: The one to whom a promise is made.

Common Law & UCC

  • Common Law governs contracts related to:
    • Services
    • Real estate
    • Employment
    • Insurance
  • Uniform Commercial Code (UCC) governs:
    • Sale of goods
    • Lease of goods

Functions of Contract Law

  • Provides stability, predictability, and certainty in transactions.
  • Ensures enforceability and helps avoid potential disputes.
  • Supports a market economy by ensuring compliance and providing relief.

Requirements for a Valid Contract

  1. Offer: A definite proposal by one party.
  2. Acceptance: Agreement to the terms of the offer.
  3. Consideration: Value exchanged between parties.

Defenses to Enforceability of a Contract

  1. Lack of Capacity: If a party is intoxicated or a minor.
  2. Legality: If the contract is for an illegal purpose.
  3. Voluntary Consent: All parties must agree willingly.
  4. Form: Certain contracts must be in a specific format.
  5. Meeting of the Minds: Parties must understand and agree on the terms.

Classifications Based on Contract Formation

  • Bilateral: Mutual promises made by both parties.
  • Unilateral: One party makes a promise in exchange for performance.
  • Formal: Requires a specific form for creation.
  • Informal: No special form is necessary.
  • Express: Clearly stated terms.
  • Implied: Assumed through actions or circumstances.

Case Example: Weston V. Cornell

  • Leslie Weston was offered a five-year professorship at Cornell University, conditional on review.
  • After extensions and denials of tenure, she sued for breach of contract.
  • Court decided subjective beliefs don’t create triable issues; ruling favored Cornell.

Case Example: Boswell V. Panera Bread Co.

  • Managers sued for breach over a bonus based on performance; they argued it was a unilateral contract.
  • The court ruled managers substantially performed and thus Panera could not modify terms.

Types of Contracts

  • Executed Contract: Fully performed by both parties.
  • Executory Contract: Not yet fully performed.
  • Quasi Contract: Imposed by law to avoid unjust enrichment.

Contract Ambiguity

  • A contract is ambiguous when:
    1. Intent cannot be determined.
    2. Lacks a provision on a disputed term.
    3. A term has multiple interpretations.
    4. There is uncertainty about the provisions.

Rules of Contract Interpretation

  1. All contract terms should have reasonable, effective meanings.
  2. Contracts are interpreted as a whole.
  3. Specific clauses may be subordinate to the general intent.
  4. Ordinary meaning applies unless a technical definition is stipulated.
  5. Exact wording holds more weight than general language.
  6. Handwritten terms prevail over typed/printed ones.
  7. Ambiguities are interpreted against the drafter.
  8. Evidence from trade usage and dealings can clarify meanings.

Elements of Agreement

  • Offer Requirements:
    • Serious intent.
    • Reasonably certain terms.
    • Must be communicated.

Situations Lacking Serious Intent

  1. Opinions.
  2. Future intent statements.
  3. Preliminary negotiations.
  4. Invitations to bid.
  5. Advertisements.
  6. Auctions.

Case Example: Lucy v. Zehmer

  • Zehmer agreed to sell his farm to Lucy while drinking but later claimed he was joking.
  • Court decided against Zehmer as intent to contract was evidenced, reversing the initial ruling.

Acceptance

  • Must be unequivocal; any conditions may void acceptance.
  • Mode and Timeliness:
    • Acceptance via any communication means can be valid.
    • Mailbox rule applies: acceptance is effective once sent.

E-Contracts

  • Important considerations include visibility of provisions, acceptance, payment terms, etc.
    • Click Wrap: Acceptance by clicking on terms.
    • Shrink Wrap: Terms found within packaged products.

Online Acceptance Cases

  • Bailey V. Kentucky Lottery Corporation: Lottery winner disqualified due to incorrect contact info; court upheld lottery rules.

Consideration in Contracts

  • Must involve:
    1. Something of legally sufficient value.
    2. A bargain for exchange.

Agreements Lacking Consideration

  • Preexisting legal duties.
  • Past consideration.
  • Illusory promises.

Capacity to Contract

  • Minority: Contracts typically voidable by minors.
  • Intoxication: Can lead to voidable contracts.
  • Mental Incompetence: Contracts could be void based on mental capacity.

Legality of Contracts

  • Contracts that promote illegal activities are unenforceable.
  • Unconscionable contracts are those that are extremely unjust.

Writing Requirement (Statute of Frauds)

  • Certain contracts must be in writing:
    1. Real estate.
    2. Contracts longer than a year.
    3. Guarantees of debt.
    4. Prenuptial agreements.
    5. UCC goods over $500.

Promissory Estoppel

  • Valid if a promisee reasonably relied on a promise to their detriment.
  • Courts enforce promises when necessary to avoid injustice.

Parol Evidence Rule

  • Bars admission of prior agreements that contradict written contracts unless exceptions apply (e.g., modifications, ambiguities).

Integrated Contracts

  • Completely Integrated: Contains all terms of agreement.
  • Partially Integrated: Contains some terms but not all.