Contract
– Restatement Second of Contracts § 1
o A promise or a set of promises for the breach of which the law will give a remedy, or the performance of which the law in some way recognizes as a duty.
Contracting Process
– Invitation to deal (negotiate)
– Offer
o Acceptance
o Rejection
o Counter-offer
§ Acceptance
§ Rejection
§ Counter-Offer
§ Expire
o Expire
Damages
– Expectation Interest
o A/K/A The Benefit of the Bargain
o Have to determine what the person is out.
o EX: A offers to sell to B his car for 10,000. B accepts offer because the vehicle would cost him 12,000 anywhere else. A then decides not to sell the car. What is B entitled to?
§ The 2,000 difference in price
– Reliance Interest
o You rely on the fact that the contract will be fulfilled and you enter into an agreement with a third-party based on that reliance.
o * This reliance must be reasonable
o Your remedy is money paid into the third-party as well as any restitution and expectation
o EX: A offers to sell B her car. B accepts the offer. In reliance on the contract B orders blue ostrich skin seat covers for the car. A then decides not to sell B her car. Can B get any reliance interest?
§ Probably not, because ordering blue ostrich seat covers may not be a reasonable reliance.
– Restitution Interest
o The person who breaches the contract has to pay the other what was put into the contract as well as the benefit of the bargain.
o EX: A offers to sell car to B for 10,000. B accepts the offer and gives A 400 toward the price of the car. A then decides not to sell B her car. What damages does B have?
§ B should get restitution interest in the amount of 400 as well as an expectation interest in the amount of 2,000
– Specific Performance
o This is available upon occasion but is only used by courts when there is no other appropriate remedy.
§ EX: Subject matter of contract is land, or a unique artwork.
– Punitive Damages
o Punitive damages are not typically given in contract law, unless the breach was completely egregious.
Consideration
– Something given in exchange for a promise
– Test for determining consideration:
o Parties must benefit
o Parties must suffer some detriment
o Element of futurity has to exist
– Value of Consideration
o The adequacy of the consideration in a contract is typically not a factor that is reviewed by the court.
o A party can exchange something of high value for something of low value
§ Exception: if the court finds the contract to be unconscionable.
· Token consideration
o If the consideration is of no value it will usually not be legally sufficient.
· Sham consideration
o If the consideration is some sifnificant sum that was never paid and never was intended to be paid the consideration will be legally insufficient
· If the consideration does not currently have value, but
s great there might be consideration.
§ EX: You are told you can have something but you have to go get it, and you have to secure plane tickets, hotel room…etc.
– Illusory promises –
o When one party controls the entire exchange the promise is illusory.
§ EX: I’ll buy as much as I wish to buy from you.
o Illusory promises are not sufficient consideration for an enforceable contract.
o If the condition is put in the hands of a third party it is no longer illusory.
§ EX: I’ll buy your car if my son wants it.
o Look for language like:
§ I’ll buy as much as I want
§ I’ll buy what I wish
o Standards for determining satisfaction
§ Objective
· Reasonableness test
· This applies to the services
· Courts usually default to this standard
§ Subjective
· Generally only applies to services or goods artistic in nature.
o Settlement of lawsuit
§ If the lawsuit is settled on an act of good faith and the party reasonably believed that he has a good faith claim there is consideration.
– Moral obligation
§ Majority approach
· Mere moral obligation is not sufficient consideration for an enforceable contract
Minority approach
