Contract Law

Overview of Contract Law

• Sources of Contract Law
  • Governed primarily by common law, except when superseded by statutory law.
  • Example: Sale and lease of goods governed by the Uniform Commercial Code (UCC).
• Function of Contract Law
  • Ensures enforceability of private agreement promises.

Definitions and Parties Involved

• Promise

  • Declaration to perform or refrain from a future act.
  • Promisor - party making the promise.
  • Promisee - party to whom promise is made.

• Contract Definition

  • A promise or set of promises that can be enforced by law.
  • Formed by parties agreeing to perform or refrain from some act.

Types of Contracts

• Parties in a Contract

  • Offeror: Makes the offer.
  • Offeree: Receives the offer.

• Bilateral vs. Unilateral Contracts

  • Bilateral Contract: Offeree accepts by promising to perform.
  • Example: Promise to mow a lawn for payment.
  • Unilateral Contract: Offeree needs to perform an act to accept.
  • Example: Reward advertisement for finding a lost dog.

• Express vs. Implied Contracts

  • Express Contracts: Terms explicitly stated (orally/written).
  • Implied Contracts: Terms inferred from conduct.
  • Example: Customer orders food at restaurant, which implies a payment for service.

• Quasi Contracts

  • Not true contracts but imposed by courts to prevent unjust enrichment.
  • Example: A plumber repairs a leak in your home without prior consent, and you are expected to pay.

Classification of Contracts

• By Performance

  • Executed Contracts: Fully performed by all parties.
  • Executory Contracts: Not yet fully performed by at least one party.

• By Enforceability

  • Valid Contract: Meets all requirements (agreement, consideration, capacity, legality).
  • Voidable Contract: Valid but can be legally canceled by one party.
  • Unenforceable Contract: Originally valid, but now unenforceable due to statute.
  • Void Contract: No legal effect or binding power.

Elements of a Valid Contract

1. Agreement

   • Comprised of an Offer and Acceptance.

2. Consideration

   • Legally sufficient value exchanged between parties.

3. Contractual Capacity

   • All parties must have the legal ability to contract (competence).

4. Legality

   • The contract’s purpose must be legal at the time of execution.

Offer and Acceptance

• Offer Definition

  • A proposal for a contract, which must be communicated, have serious intent, and contain definite terms.

• Acceptance

  • Voluntary agreement to the terms of the offer. Must be unequivocal and communicated.
  • Silence generally does not constitute acceptance.

Termination of Offers

• Methods of Termination

  • Revocation: Offeror withdraws before acceptance.
  • Rejection: Offeree declines the offer.
  • Counteroffer: New offer from offeree that rejects the original.

• Operation of Law

  • Lapse of time, destruction of subject matter, or death/incompetence of a party can terminate an offer.

Consideration in Contracts

• Definition
  • Value given in return for a promise (bilateral) or performance (unilateral).
• Requirements
  • Legally sufficient value and a bargained-for exchange.
  • Contracts cannot be based on past consideration or lack of true exchange.

Contractual Capacity

• Minors
  • Contracts are voidable at their option, except for contracts for necessities.
• Intoxicated Persons
  • Contracts can be voidable if the person couldn’t understand the contract due to intoxication.
• Mental Incompetence
  • If previously judged incompetent, contracts are void. Otherwise, contracts may be voidable if the person didn’t understand the terms.

Legality of Contracts

• Legal Purpose
  • Contracts formed for illegal purposes are void.
  • Must comply with statutes governing contract formation and enforceability.

Statute of Frauds

• Definition

  • Requires certain contracts to be in writing to be enforceable (e.g., contracts involving land, contracts that cannot be performed within one year).

• Exceptions

  • Oral contracts may be enforceable if performance was possible within a year, but not when impossible.