Select Page

Contracts
St. Johns University School of Law
Borgen, Christopher J.

Discouragement- involves benefits not received directly from promise; profits from a third party the profit of the breaching party- only get that when it’s the same as compensation or under tort
Note 3 – breach of fiduciary duty- someone by way of a contractual relationship owes the other party the highest level of care and concern for their clients interests
ie- lawyer is a fiduciary, doctor
-Snepp v. US case opened up the possibility of discouraging the profits if there’s some kind of tort besides the breach of contract

Restitution Interest- benefit conferred onto promisor by the promise
Weaknesses of Bargain Theory: a promisor is not able to make a binding promise without receiving something in return from, or reliance by, the promise
Strengths of Bargain Theory: allows the actual economic actors to allocate their own resources so it is economically efficient
Reforming Doctrine of Considerationà NY general obligations statute- 1- if in writing past act is valid consideration 2- no consideration for option contract if in writing, UCC 2-209 can modify sale of goods contract without consideration
We use objective test to maintain legal certainty and stability, much easier to quantify

Basic Contract Concepts
A) Definition
1) a promise that the law will enforce or at least recognize in some way
2) two kinds:
a) unilateral- a promise being exchanged for an act
b) bilateral- a promise exchanged for a promise
B) Function
1) forseeability- rights and obligations
2) legal protection
3) allocation of scarce resources
C) American Basis of Contract Law
1) Efficiency not Morality: should break contracts if it’s economically efficient … fiduciary duty to tell client what you know and realize; allowed to break a private agreement if you compensate
2) Efficient Breach: where the breaching party can compensate the non-breaching party’s expectation interest and that after they’ve done that the breaching party still comes out better off then had the contract been fulfilled
a) assumptions for the efficient breach to work
-externalities- for something to be efficient it would have to take into account externalities; other factors that effect the system
b) pareto superior v. pareto optimal
-pareto superior- when you can reorganize a transaction so that no one is worse off and someone is better off
-pareto optimal- when no one can be made better off without making someone worse off
c) criticisms: Efficient breach must take externalities into account, often changing the view of what is efficient, and appropriately. Efficient breach devalues the idea of a contract and fosters a habit of breaching, undermining the stability of promises. There are many other considerations than pure economic efficiency.

D) UCC, Restatement and Contractual Formalism
In the 19th century, text writers on contract law dealt with numerous specific types of agreements that were on the fringe of general contract law—common carriers, innkeepers, family agreements etc. The 20th century efforts of Samuel Williston were aimed at treating the subject of contracts as a whole and to illustrate its applicability to a wide range of issues. The formation of the first Restatement in Contracts in 1932 strengthened this conception of a formal body of contract law, drawing in agreements that had until that point been outside the reach of the law, such as family agreements.

E) Bargain Theory v. Benefit-Detriment T

the communication in 2 waysà one in which it is an offer and one in which it is not and compare to the actual communication
-Example 1: Actual: would not be possible…less then 16,000
Offer: I will sell for 16,000
Not offer: I will not listen to a bid of less than 16,000
à the actual communication is closer to the second
-Example 2: Actual: Lowest price is 900
Offer: I will sell for 900
Not Offer: I wont sell for less than 900
à closer to not being an offer since there’s no definite statement

C) Restatement 30: Forms of acceptance invited.
1. An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance.
2. Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.

D) Quotations/ Invitations to Offer
-offer that is:
-not directed to a specific person
-unclear on its terms

E) Advertisements as Offers
1) Generally: not an offer but rather an invitation to make an offer;
Because- 1- not specific, 2- generally understood that its just in stock but no comfort that it will still be in stock when you get there, 3- contract law is not the best way to regulate advertising