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Contracts
University of Illinois School of Law
Tabb, Charles J.

I) Contract Theory:
Interests Protected- Restitution, Reliance, Expectancy (predominant theory)
Enforcement theories: Will, Reliance, Efficiency (enforcement increases certainty)
Contracts Analysis: 1) Is there a contract? 2) Defenses? 3) Breach? 4) Excuse? 5) Remedy?
Contract- promise or set of promise for the breach of which the law gives a remedy, or the performance of which the law sees as a duty
-can be oral, written or implied in fact (must meet elements of explicit K- mutual assent w/ intent to promise)
-Objective Theory of Contracts- assent/intent viewed from perspective of reasonable other party (Lucy v Zehmer- sale of house while drinking) (Bailey v West- horse care case) (in context – taking into account prior course of dealings, usage, etc…)
-Enforceability- intent rules (over belief); if intent is ambiguous, enforceability is presumed in business context; non-enforceability is presumed in social/domestic context
Promise- a manifestation of intent to act or refrain from acting in a specified way, so made as to justify a promisee in understanding a commitment has been made (objective)           
Quasi-contract (implied at law)- benefit conferred; appreciation (prior to conferring of benefit), acceptance and retention of benefit making it inequitable not to pay (quantum meruit doctrine)
Unilateral Contract- promise to pay in return for performance, if offeree acts (must be definite, accepted)
II) Formation:
A) Mutual Assent (Offer and Acceptance)
Offer(§24)- manifestation of willingness to enter into a bargain; so made as to justify another in understanding that his assent to that bargain is invited and shall conclude; power of acceptance created in offeree.
                -requires specific language (Owen v Tunison- sale of lot; “wouldn’t be able to sell for less than 16k” not an offer)
                -bid solicitations, advertisements (unless with specific terms/particular numbers or words of commitment- clear, definite and explicit, leaving no room for negotiation- Lefkowitz) and auctions (unless explicitly without reserve) generally not valid offers (Leonard v Pepsico); rewards/awards generally offers (Carbolic)
Responses to an Offer: a) acceptance; b) rejection; c) counter-offer (rejection); d) “thinking about it”
Destruction of Power of Acceptance (§36): a) rejection (unless explicitly left open by offeror or offeree explicitly states a desire for further thought); b) counter-offer (§39)(§59-purported acceptances constituting counter-offers)(same exceptions); c) lapse of reasonable time (during conversation); d) revocation (upon receipt of revocation by offeree, making “lost revocations” possible; exceptions in part performance of unilateral K and in options contracts) (Central Investment Corp of Denver v Container Advertising Co.- takes into consideration time needed to prepare or perform, in this case recapitalization after loan default needed more than 10 days); e) death or incapacity
Irrevocable Offers (exception to default of freely revocable)
Subsidiary Promise/Option Contract- making offer irrevocable for stated period (consideration needed, unless signed with consideration recited)
Firm offers under the UCC (2-205)- 1) firm offer, 2) by merchant, 3) in signed writing; consideration need beyond three months,
Part Performance (in a unilateral contract) or Detrimental Reliance (§87 in a bilateral contract: reasonable and substantial action in reliance makes offer temporarily irrevocable to the extent necessary to avoid injustice); e.g. sub-contractor’s offer to a contractor, who bids in reliance)
Acceptance (§25)- manifestation of assent to the terms thereof made by the offere

enforcing: a) parties’ expectations; b) forfeiture from non-enforcement; c) special public interest in enforcement. Interests in non-enforcement: a) legislative/judicial manifestations of strength of policy; b) probability of non-enforcement supporting the policy; c) seriousness and deliberateness of misconduct; d) directness of link between term and misconduct
                Walters v Fullwood- K violating independent commitment (to NCAA) not enforceable
Effect of Performance on Improper Use – §182- In cases of substantial performance in agreement where the promisee’s intended use of the promised item/service is improper, enforcement is proper unless a) promisee acted to further improper use; or b) promisee knew of improper use and use risks grave social harm
Excusability/Party not in the Wrong §198- if enforcement is against public policy, restitution appropriate if a) party seeking made mistake of fact or minor legislation (malum prohibitum), or b) is not equally in the wrong (pari delicto)
B) Consideration- very lax requirements
-Promise does not constitute a K until consideration is given/counter-promise is made (James Baird Co v Gimbel Bros, Inc.- contractor’s reliance on accidental low bid by subcontractor, no K)
Imperfect obligation – created by a promise given without consideration.
1) Bargain/Exchange Requirement- promise given in exchange for promisee’s giving of legal value (promise or performance)(viewed from promisee’s perspective)