Introduction to contracts

Chapter 9: Introduction to Contracts

Case Study: Paul and the Eagle Scholarship

  • In 2019, Gigantic State University (GSU) advertised the "Eagle Scholarship" for top students (top 10% and SAT scores of 1350 or above).

  • Paul, a prospective student, relied on this information when choosing GSU, meeting the qualifications.

  • GSU confirmed his eligibility, but later Paul found out he no longer qualified due to changed requirements in the 2020 catalog.

  • Key Questions:

    • Is there a contract between GSU and Paul?

    • What type of contract exists, if any?

    • What legal framework applies?

    • If not a contract, is there another legal obligation?

    • Ethical considerations of GSU's actions.

Learning Objectives

  • LO 9-1: Explain what a contract is and its usefulness.

  • LO 9-2: Define terms related to contracts and apply them.

  • LO 9-3: Distinguish between common law and UCC applicability.

  • LO 9-4: Identify remedies under quasi-contract or promissory estoppel when no contract exists.

The Nature of Contracts

What is a Contract?

  • A contract is a legally enforceable promise or set of promises. Not all promises are enforceable.

  • Contracts enable parties to secure their agreements through legal means, enhancing confidence.

  • They facilitate planning, necessary for modern society.

Historical Context

  • The concept of contracts dates back thousands of years, gaining importance during the Industrial Revolution.

  • The principle of freedom of contract emerged, emphasizing the autonomy of parties in forming contracts.

  • Later developments acknowledged imbalances in bargaining power, leading to increased regulation and justice-focused contract law.

Methods of Contracting

Written vs. Oral Contracts

  • Generally, contracts don't need to be in writing to be enforceable unless specified by law.

  • Standardized Contracts:

    • Common in business; one party drafts terms and presents them.

    • Risks include possible ignorance of unfair terms by the signing party.

Basic Elements of a Contract

  1. Offer and Acceptance: A voluntary agreement formed through the exchange of proposals and acceptance.

  2. Consideration: Something valuable exchanged by both parties.

  3. Capacity: Both parties must have the legal ability to contract.

  4. Legality: The contract's purpose must be lawful.

Types of Contracts

Bilateral vs. Unilateral Contracts

  • Bilateral Contracts: Both parties make promises (e.g., leasing agreements).

  • Unilateral Contracts: One party makes a promise; the other party fulfills the promise (e.g., reward for found property).

Valid vs. Voidable vs. Void Contracts

  • Valid Contract: Meets all legal requirements and is enforceable.

  • Voidable Contract: May be canceled by one party due to factors like fraud.

  • Void Contract: No legal effect, e.g., illegal agreements.

Express vs. Implied Contracts

  • Express Contracts: Terms stated clearly (oral or written).

  • Implied Contracts: Terms inferred from behavior or circumstances.

Executed vs. Executory Contracts

  • Executed Contract: All obligations fulfilled.

  • Executory Contract: Obligations pending completion.

Special Contract Concepts

Quasi-Contract

  • Implies a contractual obligation to prevent unjust enrichment when no explicit contract exists.

  • Examples include cases where services are rendered under a misapprehension of contract.

Promissory Estoppel

  • Enforces a promise made without a formal contract when reliance on that promise leads to unfairness.

  • Established through cases where individuals relied on assurances to their detriment, preventing the promisor from denying the contract.

  • Key Case: Ricketts v. Scothorn exemplifies promissory estoppel, where reliance on a grandfather's promise was enforced despite lack of consideration.

Restatement of Contracts

  • The Restatement (Second) of Contracts reflects shifts towards broader, discretionary principles in contract law rather than rigid rules.

  • Influences court interpretations of contracts, particularly in relation to good faith and unconscionability principles.