Contracts Outline

I. Introduction to Contract Law
A. Scope and Limits of Contracts
1. Definition of Contracts – RS of Contracts §1
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.
2. Limits of K Law
a) K Law only deals with legally enforceable promises (In re Baby M – biological father and surrogate mother contract for father/his wife to receive full parenting rights and surrogate mother receives $10,000 for “expenses” and parental rights terminated)
(1) In re Baby M – court restored rights to surrogate/natural mother because the surrogacy contract conflicts with statutory provisions (this is about paying money for an adoption, the K skirts requirements of parental fitness for adoption, the K fails to gie birth mother right to rescind) and public policy (rich/poor divide – rich paying poor for their babies; consent is irrelevant – “this is the sale of a child”).
3.
B. Sources of Contract Law
1. Ask “What governs?” Is this common law, for services or property (RS governs)? Or Is it for sale of goods (UCC)?
2. Common Law
a) K is largely a common law subject; i.e., the law of K is largely case law (judge-made)
3. Statutory Law
a) Uniform Commercial Code (UCC) – Sale of Goods
(1) Article 2 of the UCC governs the sale of goods
(2) Does not apply to all commercial transactions (namely, real estate or personal service contracts)
(3) Adopted by every state except Louisiana (which has adopted parts of the UCC)
b) Statute of Frauds (SOF)
(1) Adopted by all states
(2) Governs the issue of when a contract must be in writing
c) State and Federal Statutes
4. Restatements (RS)
II. Contract Formation
A. Elements of Contract formation
1. Bargain – RS §17
a) Defined as mutual assent (offer and acceptance) and consideration
b) Also must be sufficiently definite
B. Mutual Assent
1. Generally
a) Objective Theory of Contractual Intent (Majority view)
(1) “What a reasonable person to whom an expression – words or conduct – has been addressed would understand the expression to mean.” (does not look at the parties’ actual, subjective intentions)
(2) Requires a manifestation of mutual assent (absent some fraud or other misconduct)
(3) Both signers manifest their assent by signing a contract
b) Subjective Theory of Contractual Intent (Minority view)
(1) Requires an actual “meeting of the minds” for K formation; this makes it difficult to truly meet the same mind of both parties
(2) This theory makes it difficult for each contracting party to be able to rely on the other party’s manifested intentions, without regard to their thoughts or mental reservations.
(3) Courts nowadays refer to “meeting of the minds” as shorthand for the “formation of a contract” and does not necessarily mean there is actual subjective meeting of the minds
c) Application of Objective Theory (RS §19)
(1) Sufficient manifestation of assent – Promisee must have actually believed, in conjunction with evidence showing Promisee was warranted in believing, that the Promisor is serious in entering a contract. (“whenever a party uses an expression he knows, or has reason to know, the other party would reasonably interpret as an offer or acceptance, and the other party does so interpret it”)
(2) Lucy v. Zehmer – L offers to buy Z’s farm while both are drunk at a bar. Z accepts the offer in jest, believing L did not have the $. They write out a K on a dinner bill and Z and his wife sign it. L takes the written K and tries to enforce it. Even if Z did not subjectively intend to sell the farm, the K is binding b/c L actually and reasonably believed it was a real transaction.
2. Express and Implied Contracts
a) Express Contracts
(1) When mutual assent is explicitly manifested in oral or written words of agreement
b) Implied-in-Fact Contracts
(1) When the promises of the parties are inferred from their acts or conduct, or from words that are not explicitly words of agreement.
(2) Mutual assent is inferred but real, thus, a true contract is formed
c) Implied-in-Law Contracts
(1) Where one party is required to compensate another for a benefit conferred in order to avoid unjust enrichment, rather than b/c there has been an actual or implied-in-fact promise to pay for the benefit.
(2) Not real contracts since the basis is unjust enrichment and not assent.
3. Offer:
a) Bilateral Contracts:
(1) Involves commitments on BOTH sides: an exchange of promises (offer and acceptance); mutual agreement to a bargained-for exchange of promises
(a) Offer – a direct, complete proposal that a contract be entered into, providing for an exchange of defined performances (RS §24)
(i) intent to enter into a bargain AND
(ii) definiteness of terms
(b) Has the offeror given away the power of acceptance? The giving of the right to the other to bind the offeror to a legal agreement
(c) Offeror is the master of the offer and defines the terms of the bargain
(d) TEST: ask “is there only one more thing to do?” (like accepting the offer). If yes, then it’s probably an offer
(e) E