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Elon University School of Law
Levine, David S.

What is a Contract?

· Restatement 2d § 1: “a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.”

· Elements: an exchange relationship created by agreement containing at least one promise and recognized as enforceable in law.

· *Promises without remedies are legally irrelevant

What makes an Agreement into a Contract?

· Exchange relationship

o Relationship exists in which the parties commit themselves to each other for a common enterprise

o Purpose of relationship is reciprocal arrangement in which each party gives up something to get something else from the other

· Created by agreement

o Must be at least two parties in the agreement

o Must be voluntary

· Containing at least one promise

o At least one party must have committed to do something or refrain from doing something in the future

· Recognized as enforceable in law

o Binds the party who made the promise(s) and gives the party to whom the promise(s) was made the right to employ the power of the state, through its courts, to enforce them

· Cohen v. Cowles Media 1990, p.18

o Newspaper reporters made promise to politician and then broke the promise

§ Rule – A moral obligation alone, will not support a K

§ Courts think, “Why are the parties in the room, what are they trying to accomplish”

§ Rule – You need the intent to form a contract, not every promise has a legal remedy

The Enforcement of Contracts

· Remedies

o Focus only on repairing the economic harm of the breach and not aim to compensate for any of its noneconomic consequences

· Specific Performance

o Equitable remedy that requires performance of a promise

· Kilarjian v. Vastola 2004, p.27

o The court did not order specific performance on closing of house because both parties were blameless and D was a dying woman

§ Rule – The party seeking specific performance must stand in conscientious relation to his adversary; his conduct in the matter must have been fair, just and equitable, not sharp or aiming at unfair advantage

§ Rule – if enforcement of the K will be attended with great hardship or manifest injustice, the court will refuse its aid

§ Rule – the innocent party should receive the “benefit of the bargain”

· Compensatory (Expectation) Damages

o Intended to recompense the injured claimant for losses due to the breach of the K

o The sum of dollars that will place the injured party in the economic position that it would have occupied absent breach

o Plaintiff is awarded a sum of money that is equal to the extra cost of entering into a new transaction for a similar performance in substitution for the performance promised by the defendant

Uniform Commercial Code (UCC)

Keep in mind – “a state may not have adopted the UCC”

UCC Article 2

· Pertains only to the sale of tangible goods

· When dealing with a mixed sale of both goods and services – What is the more important part of the K?

· Pass v. Shelby Aviation 2000, p.41

o Gravamen Test

§ Looks to the portion of the transaction upon which the complaint is based

o Predominant Purpose Test

o It is an all or nothing test

§ Rule – to determine the Predominant Purpose of a K examine:

· The language of the parties’ K

· The nature of the business of the supplier of the goods and services

· The reason the parties entered into the K (what each bargained to receive)

· The respective amounts charged under the K for goods and services

· None of these factors alone is dispositive

Purpose of the UCC

· To simplify, clarify and modernize the law governing commercial transactions

Contractual Assent and the Objective Test

· Objective Standard

o Legal assent to a K is determined not by trying to ascertain if the parties subjectively believed that they had an agreement but by having regard to their apparent intent as shown by their overt acts and words

o In de

ntract by accepting the offer; the wording and context of the offer must make it clear to the reasonable offeree that her acceptance will bind the parties immediately, without the offeror having the opportunity to make the final decision

· An offer is something you can say “OK” to.

· Restatement 2d §203 (b) – “We interpret documents in accord with their plain language.”

Rules of interpretation

· Express words of communication – are significant terms omitted?

· Contextual Evidence – relationship of the parties; common practices/trade language

Advertisements as Offers

· General Rule: ads are “invitations” to make an offer, not an offer; generally solicitation

o Exception: when ad is “clear,” definite, explicit and leaves nothing open for negotiation, may be an offer

· Fletcher-Harlee v. Pote 2007, p.86

o P solicited price quote for concrete work from D, D responded with different terms. P relied on D’s response and D later refused to honor K, P sued for damages, D claimed that response was a counteroffer not acceptance

§ Rule – price quotations are normally not an offer

§ Rule – Must look to the entire situation

§ Rule – Plain meaning trumps context when plain meaning expressly speaks to an issue

· People v. Braithwaite 1994, p.88

o Informant recorded conversation with D about buying drugs, D claims no offer was made

§ Rule – the promise must be sufficiently definite in its terms to lead the offeree to understand that a bargain is being proposed and how the offeree may conclude it

§ Nothing was exchanged between the parties, no “bona-fide” offer