Contract Law – Master Outline

CONTRACT LAW – MASTER OUTLINE (Modules 1–11)

MODULE 1 – COURSE FOUNDATIONS

• Purpose of Contract Law

  • Enforce promises
  • Allocate risk
  • Promote predictability
  • Enable economic exchange

• Two Systems of Contract Law

  • Common Law
  • Governs contracts for:
    • Services
    • Real estate
  • UCC Article 2
  • Governs sales of goods (tangible + movable)

• Formation Framework

  1. Mutual Assent
  2. Consideration
  3. No Defenses
  4. Proper Writing (if required by Statute of Frauds)

MODULE 2 – MUTUAL ASSENT (Offer + Acceptance)

• Offer Requirements

  1. Manifest intent to contract
  2. Certain and definite terms
  3. Communicated to offeree

• Non-Offers

  • Preliminary negotiations
  • Invitations to deal
  • Price quotes (unless detailed + definite)
  • Advertisements (unless clear quantity + “first come first served”)

• Termination of Offers

  • Revocation
  • Rejection
  • Counteroffer
  • Death/incapacity of offeror
  • Lapse of time
  • Destruction of subject matter

• Acceptance

  • Manifestation of assent to terms
  • Must occur in the manner invited by the offer
  • Silence is rarely considered acceptance (exceptions apply)

• Mailbox Rule

  • Acceptance is effective upon dispatch
  • Revocations effective upon receipt

MODULE 3 – UCC CONTRACT FORMATION

• Merchants

  • Defined as a person who deals in goods of the kind or has specialized knowledge pertaining to the goods

• UCC Formation Rule

  • A contract may be formed even if terms are open if parties intended to contract

• Firm Offer – UCC § 2-205

  • Must be made by a merchant
  • Must be in signed writing
  • Gives assurance it will be held open
  • No consideration required
  • Irrevocable for a reasonable time, maximum of 3 months

• Battle of the Forms – UCC § 2-207

  • Acceptance with additional terms may form a contract
  • Between merchants, additional terms generally become part of the contract unless:
    • Material alteration is made
    • The offer limits acceptance
    • Timely objection is provided

MODULE 4 – ACCEPTANCE PROBLEMS

• Mirror Image Rule (Common Law)

  • Acceptance must match the offer exactly in order to be effective

• UCC Approach

  • More flexible—intent to contract governs the formation of contracts

• Unilateral vs Bilateral Contracts

  • Unilateral: Acceptance occurs through performance of the act
  • Bilateral: Acceptance occurs through a promise to perform

• Beginning Performance

  • Can operate as acceptance depending on the terms of the offer

MODULE 5 – CONSIDERATION

• Definition

  • Consideration is a bargained-for exchange of legal value

• Elements

  1. Bargained-for
  2. Legal value provided
  3. Inducement of promise/performance

• Not Consideration

  • Past consideration
  • Gifts
  • Moral obligation (majority rule)
  • Pre-existing duty (common law)

• Legal Detriment

  • Defined as giving up something one has a legal right to do OR doing something one is not legally obligated to do

MODULE 6 – PROBLEMS WITH CONSIDERATION

• Illusory Promises

  • Defined as a situation with no real commitment leading to no consideration

• Past Performance

  • Past action cannot induce a promise of future performance

• Pre-existing Duty Rule

  • A promise to perform a pre-existing duty is not valid consideration
  • Exception (UCC): Modifications do not need new consideration if made in good faith

• Conditional Gifts

  • Not considered binding unless the condition benefits the promisor

MODULE 7 – CONSIDERATION SUBSTITUTES

• Promissory Estoppel

  • Elements:
  1. Promise
  2. Reasonable reliance
  3. Actual reliance
  4. Detriment
  5. Enforcement required to avoid injustice
  • Key Case: Feinberg v. Pfeiffer

• Moral Obligation + Material Benefit Rule

  • Enforceable under minority rule (Key Case: Webb v. McGowin) if:
  • Material benefit conferred, AND
  • Promise made afterward, AND
  • Necessary to avoid injustice

• UCC Merchant’s Firm Offer

  • Serves as a substitute for consideration when keeping an offer open

MODULE 8 – PAROL EVIDENCE RULE

• Purpose

  • To keep prior or contemporaneous evidence out of consideration when parties have reduced their agreement to writing

• Threshold Questions

  • Is the writing:
  • Integrated?
  • Fully or partially integrated?

• Fully Integrated

  • No contradictory or additional terms are allowed beyond the written document

• Partially Integrated

  • No contradictory terms are permitted but additional consistent terms are allowed

• Exceptions (Always Admissible)

  • Clarify ambiguity
  • Course of dealing, usage of trade
  • Fraud, duress, mistake
  • Subsequent modifications
  • Collateral agreements

• Key Cases

  • Mitchill v. Lath
  • Pacific Gas & Electric
  • Nanakuli Paving

MODULE 9 – STATUTE OF FRAUDS (SoF)

• Purpose

  • To prevent fraudulent claims by requiring that certain contracts be in writing

• MY LEGS Acronym

  1. Marriage
  2. Year (cannot be performed within one year)
  3. Land interests
  4. Executor personal liability
  5. Goods ≥ $500 (UCC)
  6. Suretyship (promise to pay the debt of another)

• Requirements of Writing

  • Must include:
  • Parties
  • Subject matter
  • Quantity for UCC
  • Essential terms
  • Signature of the party to be charged

• Exceptions

  • Full performance (one-year rule)
  • Part performance (land)
  • Part performance (goods: enforceable to the extent paid or accepted)
  • Specially manufactured goods
  • Merchant’s confirming memo (UCC)
  • Main purpose rule (suretyship)

MODULE 10 – DEFENSES TO FORMATION

• Capacity

  • Minors: contracts are voidable by minors (unless affirmed upon reaching the age of majority)
  • Mentally incapacitated: contracts may be void or voidable based on adjudication
  • Intoxicated persons: contracts are voidable if the individual cannot understand the nature of the transaction

• Necessaries Exception

  • Minors must pay the reasonable value of necessaries under a quasi-contract theory

MODULE 11 – OTHER DEFENSES

• Misrepresentation / Fraud

  • Elements:
  1. False statement of material fact
  2. Scienter (knowledge of the falsity or reckless disregard for the truth)
  3. Intent to induce reliance
  4. Justifiable reliance by the other party
  5. Resulting damages
  • Two Types of Fraud:
  • Fraud in factum: renders a contract void
  • Fraud in inducement: renders a contract voidable

• Mistake

  • Unilateral mistake: generally enforceable unless the non-mistaken party knew or should have known of the mistake
  • Mutual mistake: renders a contract voidable unless the party seeking to enforce the contract assumed the risk
  • Ambiguity: a contract may not exist unless both parties mean the same thing

• Duress

  • Physical duress: makes a contract void
  • Economic duress: makes a contract voidable if:
  • A wrongful threat is made
  • There is no reasonable alternative available
  • The threat caused assent to the contract
  • The party asserting duress created the crisis
  • Key Case: Austin Instrument v. Loral

• Undue Influence

  • Requirements include:
  • Excessive pressure was applied
  • Vulnerability of the person subject to influence
  • Unusual timing of the agreement
  • Existence of a confidential or fiduciary relationship
  • Key Case: Methodist Mission Home

• Illegality

  • Contracts with illegal subject matter are void
  • Contracts with an illegal purpose are void if both parties share the same illegal purpose

• Unconscionability

  • Two Types:
  • Procedural unconscionability: relates to unfairness during the bargaining process
  • Substantive unconscionability: refers to oppressive contract terms
  • Forms of Unconscionability:
  • Stealthy risk shifting
  • Adhesion contracts
  • Price unconscionability
  • Key Case: Williams v. Walker-Thomas