Contracts Outline

1) BASICS
a) Contract as Binding Promise.
i) 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.
ii) A promise is a pledge of future performance, or rather, a commitment.
iii) For the promise to be understood it must be reasonable.
b) Why do we have contracts?
i) Stability , Predictability , Fluid Economy, Individual Autonomy (Two people may strike their own deal)
c) Where do we get Contract Law?
i) English Common Law, Restatements , Universal Commercial Code (UCC).
d) Default vs. Immutable Rules.
i) Default Rules are rules that can be altered by the private agreements of the parties.
ii) Immutable Rules are contract rules that cannot be contracted around. They are rules that are established by both courts and legislatures.
e) Why don’t courts provide specific enforcements of the particular contract?
i) The court does not make you follow through with the contract, but it makes you pay money as damages. Why? Efficiency – The court does not want to have to monitor whether or not the contract was performed correctly. Money, however, has monetary value and can end to the dispute immediately
f) — Meaning & Enforcement—
i) Definition
(1) Need a promise
(2) Where law recognizes a duty of performance
(3) If there’s a breach – you get a remedy
g) Types
i) Unilateral – 1 promise: exchanging for performance – other party not bound to
ii) Bilateral – 2 promises
iii) Option contract – keeps offer open; limits promise’s right to revoke offer
h) Which law will govern?
i) With contracts for services – The Restatement: Not adopted so only Persuasive
ii) With contracts for goods – U.C.C.: Adopted and Binding
i) Remedies Overview (probably not on test)
i) Four Types:
(1) Restitution: Moves Δ back to where he was before the K.
(2) Expectation: Moves Π to where he would have been if the K had not been performed.
(3) Reliance: Moves Π to where he was before entering into the K.
(4) Specific Performance: Forces Δ to perform under the K.
j) Efficient Breach – hypo: D has K to sell to P for $1000, value rises to $1100. 3rd party promises to buy for $2000. Breach K with P, pay P the $100 value increase and sell to 3rd party.
k) Your contractual obligations outlive you

1. Consideration

Goods v. Service

Is it a Good or a Service?

i. UCC à Sale of Goods
ii. Restatement à Service

Predominant Factor Test:

i. When determining whether the K is for goods or services, the main method used is the predominant factor test—which is the predominant aspect of the K, goods or services?
1. Goods: Software, bubble gum, airplanes.
a. stuff that you can buy
2. Either: Electricity
3. Services: Beauty parlor, construction K’s, money loans.

*TEST* IS this a good or a service?

i. What good does it make?
1. Deemed to be a good then these laws are going to be different then if these were a service

Test for Inclusion or Exclusion:

i. Is not whether they are mixed, but, granting that they are mixed, whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of service, with goods incidentally involved.

Look at the transaction and try to figure out which aspect of the deal predominates.

i. (1) What makes the deal even a Goods Deal potentially>
1. All Goods must be moveable
a. Must be moveable when they are identified to the K
ii. (2) Does moveable “junk” predominate or does not predominate?
1. HYPO: Painted Canvass
a. Custom made goods are still goods!!!
2. Service Agreement: Hair, Construction Contracts
3. Things to Think About:
a. (a) What is the language of the K?
i. Such as equipment, goods, etc.
b. (b) Are there goods in the deal that are not moveable?
c. (c) Is the service billing separately from the billed object??

Consideration Definition

Mutual Cross-Inducement

i. Overall Definition:
1. To constitute consideration, a performance or return promise must be bargained for.
2. A performance or return promise is bargained for if it:
a. Is sought by the promisor in exchange for his promise, and
b. Is given by the promise in exchange for that promise
3. Perceived benefits qualify even if they never actually existed – we don’t really care if what was perceived to be a detriment was really a benefit or vice-versa
ii. The performance may consist of:
1. an act other than a promise
2. a forbearance – a legal opportunity forgone is enough to be forbearance
a. Hammer v Sidway – clean living gets you a payout
b. Langer v Superior Steel – what would be gratuitous pension was consideration because the promisor benefited from non-competition clause (forebearance).
3. the creation, modification or destruction of a legal relation
iii. Promise may be from a 3rd party OR to a 3rd party
1. Bodigan v Bodigan – benefit goes to the buyer of the house, detriment goes to ex-wife
iv. No Consideration for Past Events
1. May be important to the promisor but as far as consideration goes a promise cannot be based on past benefit because it cannot be inducing the party to receive something in the future. Past consideration is no consideration.
a. HYPO: If Paul saves Joe’s life in the war and this induces Joe to make a promise to Paul, Joe’s promise is not what induced Paul to save his life so there is no consideration

Mixed Motives

1. What is bargained for does not have to be the primary motive, it just has to act as some inducement for promise.
a. Impressing a hot chick can be the inducement to enter into buying a car that the buyer really doesn’t want. Still induced to buy, so it’s a K.
b. Thomas v Thomas – not looking like an ass for throwing out a widow is inducement, even if the one pound rent you charge isn’t.
2. Forbearance to assert a claim is consideration even if it is a false claim and there is no question by the other party about the facts or law at time of contract.
a. Fiege v. Boehm – he’s not the baby daddy, but she thinks he is and her forbearance is consideration. Good faith can exist even if you are wrong.

Nominal Consideration

i. The promise needs to be something that each party actually wants and cannot be indifferent to either party. There has to be some inducement
1. Fuzzy cough drop is not enough to bind a contract for the sale of Grandpa’s house but baking him cookies is.
2. In re green – A 1$ nominal payment is not consideration for D paying P’s rent and being her sugar daddy.

Gratuitous Promise

i. A gratuitous promise is on its face not supported by consideration because there is no cross-inducement. It can be canceled at any time before it is performed.
ii. Once a gratuitous promise has been performed the performing party can’t get their money back (gratuitous transfer)
iii. The fac