I. LAW OF CONTRACTS. The law of contracts is that part of the law dealing with the creation, transfer, or disposition of property rights through promises.
Contract law has the following components:
1.
2.
3.
II. DEFINITIONS.
1. Restatement (Second) of Contracts, §1 (1981)
2. Uniform Commercial Code, §1-201(11)
3. A contract is any agreement that can be enforced in a court.
4. A contract is a legally enforceable promise or set of promises.
III. CLASSIFICATIONS.
1. Valid, voidable or void (unenforceable)
2. Executed or executory
3. Bilateral or unilateral
4. Express or implied
4(a). Implied-in-Fact
4(b). Implied-in-law (Quasi Contract)
A quasi contract is not a contract, it is a remedy designed to do justice and avoid unjust enrichment.
(a) Benefit conferred
(b) Benefit is accepted and retained
(c) Circumstances are such that to allow retention would be unfair and inequitable.
(1) misconduct or negligence
(2) matter already covered by another contract.
Remedy usually only allows recovery of actual costs. Profit is generally not permitted.
IV. ELEMENTS/COMPONENTS OF A CONTRACT.
Depending upon the view taken, contracts may be divided into 2, 3, 4 or more elements:
(3)Your textbook (4)Your teacher (6)Another text
Offer
Acceptance
Agreement Agreement
Reality of Assent
Consideration Consideration Consideration
Competent parties Capacity
Legal Purpose Legality of Object
Form
V. AGREEMENT. A offer and its acceptance.
1. Offeror
2. Offeree
3. An offer v. an invitation to make an offer.
advertisements
price lists
catalogs
4. Termination of an offer
(a) revoked by offeror
(b) lapse by operation of law - death, insanity or destruction of the subject matter of the contract.
(c) rejection by the offeree
(1) outright
(2) attempted acceptance upon different terms - Counteroffer.
(3) mere inquiry as to whether or not other terms would be acceptable is not a counteroffer or rejection of the offer.
5. Acceptance of the offer may be an act (unilateral contract), a return promise (bilateral contract) or signing a written agreement (bilateral contract).
(a) Silence as acceptance
(b) Who can accept
(c) Time for taking effect
(1) deposited acceptance rule
(d) Mirror image rule
VI. CONSIDERATION. Consideration is the "price" paid to make a promise enforceable.
1. The two basic elements of consideration:
(a) legally sufficient: legal benefit/legal detriment
(b) bargained-for exchange: intentional bargained exchange
2. Adequacy of consideration
3. Promissory estoppel takes the place of consideration where equity requires a just result.
(a) reliance
(b) change of position
(c) reasonable expectation on part of promisor that promisee would take some substantial action or forbearance.
4. Recitals of consideration. Not enough to establish consideration.
5. Forbearance.
6. Preexisting obligations, either contractual or statutory.
7. Past Consideration
8. Illusory promise
(a) promisee already had the benefit or promisor the detriment.
(b) right to cancel at anytime and receive refund of all consideration paid.
VII. COMPETENT PARTIES. Agreements entered into by minors or mentally incompetent persons are generally voidable and in some cases void.
1. Minors receive special protection by law in an effort to promote justice and to protect minors from their presumed immaturity, lack of judgment and experience, limited will power and imprudence.
(a) Liable until disaffirms
(b) Return of consideration received
(c) Ratification
(d) Necessities
(1) implied-in-law contract
(e) Wrongful act, e.g. misrepresentation of age.
2. Mentally incompetent persons are those who are mentally ill and those who are intoxicated.
VIII. LEGAL PURPOSE. A contract has no legal purpose if its object
(1) is to violate the law,
(2) is to violate public policy
(3) cannot be accomplished without violating the law or public policy.
(4) tends to interfere with public health, safety, morals or general welfare.
1. An illegal contract is void. Void contracts are totally unenforceable. The court leaves the parties where it finds them.
2. Exceptions to above:
(a) person seeking relief is within the class of persons for whose protection the law made the conduct unlawful.
(b) person was induced by fraud or duress to enter into the illegal contract. The law may view this as though the person is not a party to the illegal contract.
(c) The doctrine of locus poenitentiae (a place for repentance.
IX. OTHER ASPECTS OF CONTRACTS.
1. The Statute of Frauds (England, 1677)
2. Parol evidence rule
3. Third parties to contracts
(a) Assignment of contract rights/obligations
(b) Third party beneficiaries
(1) donee beneficiary
(2) creditor beneficiary
(3) incidential beneficiary
(c) knowledge of assignment
(d) knowledge of beneficiary status
4. Performance and Discharge
5. Remedies. The purpose of a remedy for breach of contract is to put the innocent party in the same position they would have been in had the contract been fully performed.