8.3
A Contract Defined
“A contract is a promise or a set of
promises for the breach of which the
law gives a remedy or the performance
of which the law in some way
recognizes a duty.”
Restatement
(Second) of Contracts
Copyright Andrew Sargent 2001
1
8.6
Sources of Contract Law
• Common Law of Contracts
– Developed from early court decisions that
became precedent for later decisions.
– Limited federal common law, but large body
of state common law.
• Uniform Commercial Code
– Created a uniform system of commercial law
throughout the U.S. Applies to “goods”.
Copyright Andrew Sargent 2001
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Types of Contracts
Based on Expression
•
Implied-in-Law Contract
–
–
–
8-5
Quasi-contract
Legal remedy to prevent unjust enrichment
You notice that your neighbor’s child is
mowing your grass (as he/she has done in
the past) and you say nothing - you will be
expected to pay a fair value for this service
Copyright Andrew Sargent 2001
3
Check List for K Analysis
•
•
•
•
•
•
Offer
Acceptance
Consideration
Writing
Capacity
Legality/Public
Policy Issues
Copyright Andrew Sargent 2001
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Definitions - Offer &
Acceptance
• An offer is an objectively
reasonable
communication that
creates the power of
acceptance in the offeree.
• An acceptance is the
unqualified agreement to
the offer
• Each has required parts
of course.
Copyright Andrew Sargent 2001
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Elements of Offer & Acceptance
• Offer (ppst); [UCC]
– Parties
– Price
– Subject
– Terms
• Acceptance (cat)
– Communicated
– Absolute
– Timely
Copyright Andrew Sargent 2001
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9.6
Termination of an Offer
Termination
by acts of the
parties
© SoftKey
Revocation
by offeror
Counteroffer
by offeree
Rejection
by offeree
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9.7
Termination of an Offer

Termination by
Operation of the Law
Destruction
of subject
matter
Lapse
of time
Death or
incompetency
Supervening
illegality
8
Options
• Common Law
• UCC
9
9.8
Acceptance
• Only an offeree can accept the offer.
• Offeree’s acceptance must be unequivocal.
Also applicable is the mirror image rule.
• Acceptance must be properly dispatched.
Effective upon dispatch.
• Silence does not usually mean acceptance.
• Offeree must accept the offer by authorized
communication, sometimes specific.
Copyright Andrew Sargent 2001
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Consideration
Motivating Influence
•
•
•
•
•
•
8-9
What is it?
Do something you do not
have to do.
Do not do something you
have the right to do.
What to look for in facts –
What does offeror expect?
What does offeree expect?
Copyright Andrew Sargent 2001
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Consideration
Benefit-Detriment Analysis
•
•
•
8-10
Bill promises to pay $75 for Betty’s
collection of CDs;
Betty promises to deliver the CDs upon
payment of $75
What is consideration? Actual
performance or the mutual promises?
Copyright Andrew Sargent 2001
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Consideration
•
•
•
8-11
Betty promises to pay $200
when Bill has climbed the
flag pole.
Where is consideration now?
Issue of Adequacy - not
generally a matter of concern
Copyright Andrew Sargent 2001
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9.10
Contracts Lacking Consideration
Illusory
promises
Moral
obligations
Preexisting
duty
© SoftKey
Past
consideration
Illegal
consideration
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Voidable Contracts
Competent Parties & Other Public Policy Issues
•
Minors
–
–
–
•
Incapacitated Adults
–
•
–
8-12
•
Insane; intoxicated
Mistake
–
•
Power to avoid obligation
Return existing consideration
Necessaries
Bilateral -- voidable agreement
Unilateral -- enforceable agreement
Fraud/Misrepresentation
Duress & Undue Influence
Copyright Andrew Sargent 2001
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10.6
Illegal Contracts
Gambling
statutes
Usury laws
Contracts in
restraint of trade
Exculpatory
clauses
Covenants not
to compete
Immoral
contracts
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10.9
Unconscionable Contracts
• Courts will uphold a contract
if the following are present:
–
–
The contract is for lawful
purposes, and
All other elements of the
contract are met.
• Courts are given discretion in
determining conscionability.
Copyright Andrew Sargent 2001
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10.10
Elements of an
Unconscionable Contract
Parties possessed severely
unequal bargaining power.
Dominant party used bargaining
power to gain advantage.
The other party had no
reasonable alternative.
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10.11
Remedies for Unconscionability
The entire contract may
be set aside.
The unconscionable part
may be set aside.
Limit the applicability of
unconscionable part to
avoid further damage.
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Formality of Contracts
•
•
•
8-13
Orally Stated v. Written Document –
General Rules
Statute of Frauds
– Types of Cases
• Interest in Land
• Secondary Promise
• Performance Beyond
One Year
• Goods over $500
Parol Evidence Rule
Copyright Andrew Sargent 2001
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Remedies for Breach
• Damages
– Compensatory
– Consequential
(forseeability factor)
– Liquidated damages
– Nominal damages
– Rescission and restitution
• Equitable remedies
– Specific performance and
injunctions
– Reformation
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Implied Warranties and UCC
• Merchantability; Fitness for a Particular
Purpose; Title; Non-Infringement
– “Prominent” disclaimers
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E-Commerce Issues
• “Click-wrap”, “Shrink-wrap”, etc.
agreements and Pro CD, Inc. v.
Ziedenberg, 86 F.3d 1447 (1996)
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