Select Page

Contracts
Wayne State University Law School
Hammer, Peter J.

I. What is a contract?
A. A contract ordinarily connotes an agreement between one 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 or both of them—agreement with legal effect—legally enforceable promise
B. A promise is a commitment or undertaking that a given event will or will not occur in the future and may be express or implied from conduct or language and conduct. A promise is legally enforceable where it:
1. was made as part of a bargain for valid consideration;
2. reasonably induced the promisee to rely on the promise to his detriment; or
3. is deemed enforceable by a statute despite the lack of consideration
C. Why do contracts have a temporal dimension: to define future obligations…but in courts we often settle disputes from the past; things change over time—some may not like the decisions made in the past
D. Four persons to every two person contract…why?
1. ex-anti (pre K) v. ex-anti (pre K) à enter into agreement
2. ex-post (post K) v. ex-post (post K)à in dispute about agreement
3. why dispute? Different wants and expectations at the time of performance than at the time of agreement
E. main issue is determining what types of agreements society will enforce (giving it legal effect)—determined by societal values
1. this may also act as a zoning tool—channel the dispute into the right area of law (tort, criminal etc.)
2. strategic behavior: legal rules do not have an effect if strategic behavior is present and do not have transaction costs—enforcement of only certain promises forces the parties to act rationally
a) examples of strategic behavior: holding out on selling business to prevent company from putting in shopping mall OR factory polluting and community persuades them to shut it down and they will pay for it (buy them out)
II. Classical v. Modern approach to contracts
A. Classical
1. rigid, legal formalism—Williston—original Restatement of Contracts
2. legal formalism: very uniform—strict rules—“cookie cutter formulas”—channeling common law
3. “mechanical sense” (Williston)—black letter law approach, particulars make no difference
a) law is more pronounced
b) civil law code (from Europe)—formalism on steroids, cookbook for how to apply the law, extremely rigid rules
B. Modern
1. more

a lawyer must view the judge as either a realist or a formalist and be able to argue their case accordingly
2. which view will benefit the client the most?
III. Sources of Contract Law
A. Judicial opinions
B. Statutory laws
C. Restatement of Contracts (1st or 2nd—not binding, merely persuasive—views of the judges)
D. UCC also becomes law after a case is decided
1. UCC is uniform proposal but not national law—each state has a variation of this
E. Relationship between the UCC and Common law
1. UCC originates from common law
2. does not govern all contract law—only the sale of “goods”—“goods” are moveable at the time of sale (or K formation)
F. Tests
1. test of “form” no longer relied on as much—ie: Wills, old English “seals”
2. test of substance
a) substantive basis of contractual liability
private autonomy: individuals have the power to effect, within certain limits, changes in their legal relationships