VARIOUS PERSPECTIVES ON CONTRACT LEGAL THEORY
o Classical Contract Theory
n formalist approach
n objective rules with minimal intervention
n “legal formalism” over unconscionability and good faith – two hall marks of modern contract law
n no need to consider moral or political values
n (Williston – original reporter for the 1st Restatement; Langdell a Harvard Dean and “founder” of the case method)
o More Modern Approaches (though not necessarily more correct)
n Realists
n arguing for sociological jurisprudence
n decisions were affected by biases and personalities of judges and facts; lawmaking as policy making
n neutral principles of law is a fallicy; argue for flexible standards to allow for situational justice; humans have perceptions/ambiguity
n things like “unconscionability and good faith”.
n (Roscoe Pound – Dean of Harvard; Karl Llewellyn – principal drafter of the UCC)
n Law and Economics
n rules of law should promote efficiency in the market; forget about unconscionability
n intervene only where the free market has broken down; so where there is fraud or duress (Posner et. al.)
n Relational Scholars
n contract principles should preserve relationships between parties
n Moralists
n contract theories should promote the greater good
n some concepts of fairness and justice; opposed to legal formalists
n Crit’s
n deconstructionists who criticize the existing system as supporting the status quo and discriminating against those who are not currently in power; also race and gender
n General Definitions
o Contract- an agreement between two or more persons-not merely a shared belief, but a common understanding as to something that is to be done in the future by one of both of the parties.
n Three elements of a contract:
The agreement-in-fact between the parties
The agreement as written
The set of rights and duties created by one and two.
n Contract: a promise for the breach of which the law gives a remedy, the performance of which the law recognizes a duty.
o Promise: a manifestation of intention to act, or refrain from acting in a specified way.
n A promise can either be stated in words, written, implied (inferred wholly or partly from conduct)
n How is a contract formed (O+A+C)=K
o Offer
o Acceptance
o Consideration
n Evidence of the parties intent to create a legal obligation
n To constitute consideration, a performance or a return promise must be bargained for.
n Performance could consist of
n Act
n Forbearance
n Forbearance: the act of refraining from enforcing a right, obligation or debt
n Creation or destruction of a legal relationship
n Adequacy of Consideration; Mutuality of Obligation
n If the requirement of consideration is met, then no additional requirement of:
n Gain or advantage to promissor or loss to the promissee.
n Equivalence in the value exchanged
n Mutuality of Obligation:
n Def: The agreement of both parties to a contract to be bound in some way
n Types of contracts
o Bilateral contracts:
n An agreement upfront, a bargain for exchange
o Unilateral contract:
n Where the offeror seeks only performance and not a promise (one-sided)
n Acceptance by performance: (ex: offers for bonuses)
n Intention to be Bound:
o Rule: Unilateral mistake does not void the contract (compare to mutual mistake=no meeting of the minds à contract is voidable when m.m.)
n Case: Ray v. William G. Eurice and Bros, Inc (mutual mistake)
n Facts: Contract was entered and Eurice brothers signed without reading the changes Ray had made.
n Policy: True interpretation of an offer is NOT what the party making it thought it meant, but what a reasonable person in the position of the parties would have thought it meant. (example: Hooters case)
n Ex: Eurice (∆) were experienced builders. They should reasonably understand a proposed contract. Thus the mistake was unilateral and Eurice is bound.
n If you sign it without reading it, (and are capable of reading it or having it read to you), have capacity to understand the contract, you are bound.
n This case is so we learn that we look at contract law objectively; what one is objectively seen to have intende
tively did not intend its language to constitute a binding offer. Ad is enforced based on a reasonable persons interpretation, NOT what the offeror subjectively meant.
n Fine print is not enough, must consider the impact on the audience.
n Example of a deceptive bait and switch
n Binding offer implied due to deliberately misleading ad which intentionally lead reader to think offer existed.
n Consideration: promisor’s promise not enough to subject him to legal obligation. Consideration is requirement for contractual obligation. It is something of value received by promisor from promissee. Consideration is required so that casual gratuitous promises will not be deemed binding. Acceptance plus valid consideration equals an enforceable contract.
o Rule: forbearance(waiver) of a legal right is consideration for a contract
n Case: Hamer v. Sidway
n Facts: Uncle promises $5,000 if nephew agreed to refrain from drinking ect…until his 21birthday.
n Policy: the forbearance of a legal right is a detriment
o Rule: Forbearance of suit is deemed to be consideration for a contract; the forbearance must be bargained for and wasn’t granted unilaterally by party
n Case: Baehr v. Penn-Oil
n Facts:
n Plaintiff leased gas stations to Kemp. Kemp bought web-oil company and related property from defendant. Kemp was unable to meet payments to defendant so they sent an agent to help him manage the station.
n Defendant then tied Kemp’s assets up because he couldn’t pay
n Plaintiff contacted defendant for rent money
n Defendant promised that they would take care of it
n Plaintiff wrote a letter inquiring how and when he would get his rent checks, “or he would have to give it to an attorney to sue.”
