I. A Roadmap for Contract Law
Principals of contracts
1. Was there an agreement or a promise?
2. Is there any reason that the agreement should not be enforced by the courts?
3. What are the terms of the contract?
4. Did each party perform?
5. Is there an excuse for the breach?
6. What are the legal consequences of breaching?
7. When do third parties have a duty under contracts they did not make?
1. Is there a provable contract?
2. Performance by the plaintiff (plaintiff fulfilled everything required by the K)
3. Breach by the defendant
4. Was there an excuse for the breach?
5. Breach caused damages and damages are recoverable in court
1. Definitions – a Contract is an agreement that is legally enforceable
a. Bilateral Contract:
An exchange of promises
R2d §17 – “manifestation of mutual assent”
A “promise for a promise”
b. Unilateral Contract: only one promise; results from an offer that requires completion of performance as acceptance
· If the performance has begun, the offer cannot be revoked; once the offeree begins performance they must be given the opportunity to complete performance pursuant to the K
· i.e. I offer you $10,000 to paint my house, but state that this offer can only be accepted by actually painting my house
· Three of four rule: For K both parties must have objective belief that they are agreeing and one party must also have subjective intent.
· The force majeure clause is not intended to buffer a party against the normal risks of a contract or risks they expressly assumed
*usual purpose is to protect parties against some types of unpredictable and catastrophic events that may adversely affect them
II. The Bargain Theory of Contract
a) 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 as a duty.” R2d §1.
b) Consideration is the inducement of a contract, something of value given in return for a performance or a promise of performance by another, for the purpose of forming a contract. This is a required element in the formation of a contract. *must be a bargained for exchange (bargained for if it is sought by the promisor in exchange for the promise)
2. Restatement:§71(1), §76, §77 Comment (a), §79, §175,
4. Options Contracts:an offer to contract and a paid for promise to keep the offer open for a certain time, Firm Offers under UCC §2-205, Restatement 2d §87(a)
5. Employment at Will
a) Permanent Employment is terminable at the will of either party without liability to the other.
b) giving up a job is not adequate consideration, but an incident necessary to accept the offer.
6. Moral Consideration and Past Consideration
a) Although not bargained for, there are two circumstances where a promise might seem worthy of enforcement
· (1) Promisor acts from a strong sense of duty (moral consideration)
· (2) Promisor is seeking to recompense the promisee for a previously conferred benefit (past consideration) **you cannot bargain for something that has already happened
a) a moral obligation will be sufficient consideration to support a subsequent promise (past consideration) where the promisor has received a material benefit even though there was no original duty or liability resting on the promisor
b) if the promisor conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched, it may not be consideration (See Harrington v. Taylor)
1. Promissory Estoppel – a promise which the promisor should reasonably expect [will] induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. R2d §90.
2. Equitable Estoppel and the emergence of Promissory Estoppel
a) Promissory Estoppel requires all of:
· (1) A Promise
· (2) Foreseeable reliance
· (3) Actual reliance
· (4) Injustice absent enforcement
b) Possible Applications
· (1) Promise to make a gift: The
ind the person making the declaration to the thing declared.
a) An offer creates, in the offeree, a legal power of acceptance.
b) to determine whether there was an offer, look at the content and the context
1. Content: not necessary to have all of the terms of the deal be spelled out in the offer however if an important term is vague tor ambiguous hen it may not constitute an offer
a. if in the first communication you see the words “fair” “appropriate” or “reasonable” then tell the professor that the vague expression creates problems and the communication may not be an offer because it is not sufficiently specific and is too vague to be enforced. (i.e. “we will pay you a fair salary”)
2. Context: Formal setting is more convincing as a formal offer
c) Advertisements: An advertisement constitutes an offer when it is clear, definite, explicit, and leaves nothing open for negotiation.
c) Preliminary Negotiations: R2d §26
3. Counteroffers and Mirror Image Rule
a) A counteroffer destroys (rejects) the original offer and replaces it for the original offeror to accept if he chooses – R2d §39.
b) R2d §36 lists possibilities under which an offer is terminated
· (1) The offeree rejects the offer or makes a counteroffer
· (2) At the time specified in the contract, or, failing that, at the end of a reasonable time
· (3) If the offeror revokes the offer
· (4) If the offeror dies or becomes incapacitated
c) Mirror Image Rule (common law only): R2d §59, R2d §61
· Both the UCC and the CISG are more liberal (standard forms and all).
· ***in order for an offer to be an acceptance it must look exactly like the offer