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Contracts
St. Louis University School of Law
Bodie, Matthew T.

Contracts
Bodie
Fall 2010
 
 
1)      What is a contract
a)      Restatement §1
i)        § 1 – Definition of contract
(1)    Promise or set of promises for the breach of which has a remedy or the performance of which the law recognizes as a duty
ii)       Legally enforceable
iii)     There is a remedy
iv)     Promise – one sided
v)      Restatement is not the law
(1)    Promotes logic, clarity, and justice of the law
(2)    Promise if foundation of restatement/case law
b)      UCC
i)        § 1-102(b)(3)
(1)    Agreement is bargain of parties in fact as found in language or inferred from other circumstances
ii)       § 1-102(b)(12)
(1)    Contract is total legal obligation that results from parties agreement
iii)     Contract is agreement/bargain with legal ramifications
iv)     Must be agreed upon by parties, meeting of minds, two sided
v)      UCC Miscellaneous
(1)    Law everywhere but Louisiana
(2)    Trumps common law if it is applicable
(3)    Goods are movable things
(4)    Dominant factor test determines if the UCC applies for the sale of goods
(a)    If the good is the dominant factor in the contract, then you can use UCC
(5)    Agreement is foundation in UCC
2)      Types of Contracts
a)      Express contract: Both sides have clearly stated by language (oral or written)
b)      Implied-in-fact contract:  based on conduct and not words – “intent to form contract”
c)       Quasi-contract (Implied-in-law, quantum merit, restitution): Contract that should have been formed, even though in actuality it was not.  Used when court wants to impose an obligation upon non-contracting party to avoid injustice and ensure fairness
d)      Promissory Estoppel: prevents one party from withdrawing a promise made to second party if the latter has reasonably relied on the promise, acted upon it to their detriment, and the reliance was foreseeable
e)      Moral Obligation: Based on actions made in past
3)      Relationship between Contract and Promise
i)        § 2 – Parties
(1)    Promise – Manifestation of intent to act or refrain from acting to demonstrate a commitment has been made
(2)    Promisor – manifests the intention
(3)    Promisee –manifestation is addressed
(4)    Third parties that benefit are beneficiaries
ii)       § 3 – Agreement and Bargain
(1)    Agreement – manifestation if mutual assent
(2)    Bargain – agreement to exchange promises or exchange promise for performance
iii)     § 4 – How to make a promise
(1)    Orally
(2)    Written
(3)    Inferred from conduct
iv)     § 5 – Terms
(1)    Promise term – portion of the intention or assent manifested relating to a particular manner
(2)    Contract term – portion of the legal relations coming from the promises relating to a particular matter
v)      § 2-105
(1)    Section 2 applies to transactions in goods
(2)    Goods are
(a)    Moveable at time of identification
(b)   Not money
(c)    If mixture of goods and services, substantial factor test decides
b)      What is a promise?
i)        Bailey v. West
(1)    Must intend to enter a contract to be bound by one (implied-in-fact)
(2)    One who volunteers is not able to recover for a breach(Quasi)
(3)    Taking an obligation with the hope of being paid is not grounds for Quasi-Contract
(4)    Quasi-contract arises from injustice and concepts of equity
(5)    Essential Elements of Quasi-Contract
(a)    Benefit conferred to D by P
(b)   Appreciation by D of the benefit
(c)    Acceptance and retention of the benefit by D under such circumstances it would be inequitable to retain the benefits without payment of value
ii)       Bolin Farms v. American Cotton
(1)    Cannot get out of a contract simply because you want to
(2)    The risk and financial reliance is a major reason to have contracts
(3)    Pacta Sunda Servanda – when party by his own doing creates a duty, he is bound to make it good, notwithstanding an accident by inevitable necessity
4)      Contract Remedies
a)      Basic Policies
i)        If there are no remedies for breach, there is no purpose of having contracts
ii)       Compensation is primary purpose
iii)     Can be awarded in damages
(1)    Usually Money
(2)    Most liquid way to compensate
iv)     Specific performance
(1)    Enforce terms of contract
(2)    Usually happens in contract for something unique
v)      Injunction
(1)    Party must stop doing something
vi)     Restoration
vii)   Declaration of rights
viii)  Arbitration
b)      Damages – Can only pick one method
i)        Restatement §344
(1)    Expectation Damages – where you’d be if contract were performed (Most common)
(a)    Party gets what they expected to get from contract
(b)   Breached party is placed in position it would have been if contract had been full performed
(c)    Goes as far forward as the other party could reasonably foresee
(i)      Only takes into account what one may reasonably know
(ii)    Makes an efficient breach co

mages
(1)    Incidental damages
(a)    Expenses incurred in inspection, receipt, transport, care, and custody of goods
(2)    Consequential damages
(a)    Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not be prevented
(b)   Injury to person or property proximately resulting from breach
vii)   Contract Theory: Every contract should either:
(1)    Perform
(2)    Pay Damages
(3)    Renegotiate
5)      Consideration
a)      Differentiates between contract and gifts (promise and agreement)
b)      Both Parties get value
i)        Each party must confer benefit or suffer detriment
ii)       Peppercorn Paradox
(1)    Even though the value is negligible, it still can be consideration
iii)     Nominal Consideration
(1)    Disguises a non-contract as a contract – gift contract as enforceable contract
(2)    Sham consideration
(3)    Does not count for consideration
(4)    Parties don’t intend it to be a real exchange
(5)    Not enforceable
(6)    Can be sufficient to hold open an option contract (RS 87)
iv)     Separating the two
(1)    Based largely on intent of parties
(2)    Based more on intent than the value
c)       Generally an exchange between two sides
d)      Restatement §17
i)        Must have a bargain in which there is a manifestation of mutual assent to the exchange and a consideration
e)      Restatement §71
i)        What constitutes consideration
(1)    Must have a performance or a return promise bargained for
(a)    It is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
(2)    Performance may consist of
(a)    Act other than a promise
(b)   A forbearance
(c)    Creation, modification, or destruction of a legal relation
(3)    Performance may be given to promisor or to another person
(4)    May be given by promisee or by some other person