Contracts
Contracts I
1. What is a Contract?
a. A contract is formed in any transaction in which one or both parties make a legally enforceable
promise. A promise is legally enforceable where it: (3)
i. Was made as part of a bargain for valid consideration;
ii. Reasonably induced the promisee to rely on the promise to his detriment; (or)
iii. Is deemed enforceable by a statute despite the lack of consideration.
2. Requirements of a Contract: O + A + C + (-Misc.) = K
a. Consideration – “the glue that holds the contract together” / A promise (+)…
i. Requires a bargained exchange in which each party incurs a legal detriment.
b. Misc – A Contract MUST be in absence of a Statute / Rule which voids the transaction (a contract is
made, but it is not enforceable because it violates a Statute / Rule)
c. O + A = mutual assent
3. Intent to Contract – The willful or purposeful desire to enter into a contract.
a. Outward Expressions of Intent –
b. Law will impute (attribute / ascribe) intent that corresponds with a person’s words or acts (Ob Test)
c. Secret undisclosed intent is irrelevant - Unless one knows the other had no intent to contract
4. Types of Contracts (2)
a. Formal – enforced because “particular formalities” were observed
i. K’s Under Seal – Sealed with person’s authorization (rubber stamp / signature)
ii. Recognizance – Promise made in open court
iii. Negotiable Instrument – “Checks, etc.”
b. Informal – are enforced because people have expressed their intent to act or not act.
i. Express – an agreement manifested by words – spoken or written – Definite O and A,
ii. Implied
1. Implied in Fact – an agreement manifested by conduct
2. Implied in Law (“quasi-contract”) – not a true contract, but an obligation imposed by
a court, to avoid an injustice or “unjust enrichment”
5. Mutual Assent – The intent of two parties to be contractually bound to each other
a. To determine MA – use the Objective test (view manifested intentions)
i. What would a reasonable person to whom an expression – words or conduct – has been
addressed understand the expression to mean.
6. Social Contracts – The existence of a familial relationship may affect the ability to create an enforceable
contract. Generally – social promises do not result in contracts.
7. Sources of Contract Law
a. Common Law – IS LAW. In most jurisdictions, contract law is not codified, and thus the primary
source of general contract law is case law
b. Uniform Commercial Code (UCC) – IS LAW.
i. UCC Applies to Goods.
1
,Contracts
ii. Common Law encompasses everything else (real estate, services, etc. - unless coded)
1. Goods – (Article 2, UCC) – All things which are moveable at the time of
identification at the time of contracting. (Crops are Goods)
2. Except Auctions – Everything falls under UCC in an auction. (Services, Real Estate)
iii. Gap Fillers in UCC – If contract is missing minor details Gap Filler preserves the contract.
1. We are responsible to know 3 of them
a. No Price – Reasonable Price
b. No Location – Pickup will be at the seller’s location.
c. No Time – Reasonable Time.
8. Contract Formation
a. Offer (I) – An offer is a yesable proposition that is definite in its terms, committed to its terms, and
communicated to the other party so that only agreement is necessary from the propositioned party.
i. Made by Offeror
1. Committed – The offeror must have a commitment to contract.
2. Definite – The terms of the O must be strictly defined
3. Communicated –
a. Verbally (Orally or Written)
b. Conduct – Implied in Fact – Conduct implies intent to be contractually bound
c. or BOTH
b. Acceptance (II) – An acceptance is an affirmative answer communicated to the offeror, which is
responsive in matching the terms of the offer, and is absolute and unequivocal in that it leaves no
doubt that the offeree intends to be bound to the terms of the offer.
i. Made by offeree
1. Responsive – Must meet the conditions of the offer
2. Absolute / Unequivocal – Must be absolute and firm in its acceptance
3. Communicated – The O/ee makes it clear to O/or willing to and agreeing to enter K
c. Consideration – A valuable consideration, in the sense of the law, may consist of a right, interest,
profit or benefit accruing to the one party / (or) some forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.
d. Promissory Estoppel – A legal theory designed to prevent injustice, under which a promise may be
enforced, even in the lack of C, where one party makes a promise knowing that it is likely to induce
reliance by another party, and it does in fact induce reliance by the other party to his or her detriment
e. Moral Obligation – A legal theory under which a court will enforce a promise made subsequent to
an expired statute of limitations, bankruptcy, infancy or in the case where, absent legal duty, one
party has received a material benefit.
f. Termination (III) – Terminating the power of Acceptance make K invalid
i. Revocation
ii. Rejection
iii. Lapse of Time
iv. Death / Incapacity
v. Counter Offer
vi. Battle of the Forms
vii. Indefiniteness
2
, Contracts
I. OFFER (Committed – Definite - Communicated)
1. Hold an Offer Open (3 ways)
a. Option – (CL) If you buy within this time frame – you can get it at this price.
i. Other side can revoke option at any time.
b. Option Contract – (CL) Paying to keep a K open for the time stated
i. If Option K was in writing, payment does not need to have been tendered.
c. Firm Offer – (UCC, 2-205) – (O + M + /s/w + Assurance = FO)
i. This offer is irrevocable for the time stated. No time/reasonable time BUT no longer than 3M
ii. If you want to hold an offer open for 4 months, you will have to pay for it in an Option
iii. Firm offer does not require Consideration.
iv. (O + M + /s/w + Assurance = FO)
1. Offer to buy and sell goods must be Commitment, Definite, Communicated
2. By a merchant (who deals in the kind of goods in offer)
3. In a signed (/s/) writing (any intentional reduction to a tangible form)
4. Gives assurances (O will not be revoked, will not be changed, will be held open, etc.)
2. Advertisements – Typically not considered an O unless the ad is very specific about the quantity of
items, who is eligible, and specific time frames. Typically regarded as an “Invitation to deal”
a. Problems with Ad – If you can get around these, may be considered an O.
i. Too Many Offerees.
ii.Too Little Quantity.
b. Statements by Doctors / Attorneys – Not offer unless “I guarantee!”
3. Unsolicited Mailings – The mailing of unordered merchandise will be considered a gift.
a. Except for Free Samples and Things sent by charities
4. Knowledge of the Offer – (Private vs. Government Rewards)
a. Rewards are offers – calling for an Act for acceptance.
i. Private Reward – You must be aware of the offer prior to your actions.
ii.Government Reward - Any citizen who performs the requested service is entitled to the
reward, even if claimant had no idea that the reward was being offered.
b. Police officers cannot accept ANY rewards.
5. Auctions – (UCC, 2-328 Apply to Everything with Auctions – goods, real estate, services)
a. Auctions with Reserve – Auctioneer can take item of block until certain $ is reached
i. Bidder makes the Offer – Each bid is an offer
ii. Auctioneer has power of acceptance (Until A he can take it off the block any time)
iii. A bidder may always withdraw his offer before the fall of the hammer.
b. Auctions without Reserve – Auctioneer cannot take item off the block.
i. Auctioneer makes the Offer.
ii.Bidder has power of acceptance – Each bid is an Acceptance
iii. If nothing is said – It is presumed to be an Auction with Reserve
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Contracts I
1. What is a Contract?
a. A contract is formed in any transaction in which one or both parties make a legally enforceable
promise. A promise is legally enforceable where it: (3)
i. Was made as part of a bargain for valid consideration;
ii. Reasonably induced the promisee to rely on the promise to his detriment; (or)
iii. Is deemed enforceable by a statute despite the lack of consideration.
2. Requirements of a Contract: O + A + C + (-Misc.) = K
a. Consideration – “the glue that holds the contract together” / A promise (+)…
i. Requires a bargained exchange in which each party incurs a legal detriment.
b. Misc – A Contract MUST be in absence of a Statute / Rule which voids the transaction (a contract is
made, but it is not enforceable because it violates a Statute / Rule)
c. O + A = mutual assent
3. Intent to Contract – The willful or purposeful desire to enter into a contract.
a. Outward Expressions of Intent –
b. Law will impute (attribute / ascribe) intent that corresponds with a person’s words or acts (Ob Test)
c. Secret undisclosed intent is irrelevant - Unless one knows the other had no intent to contract
4. Types of Contracts (2)
a. Formal – enforced because “particular formalities” were observed
i. K’s Under Seal – Sealed with person’s authorization (rubber stamp / signature)
ii. Recognizance – Promise made in open court
iii. Negotiable Instrument – “Checks, etc.”
b. Informal – are enforced because people have expressed their intent to act or not act.
i. Express – an agreement manifested by words – spoken or written – Definite O and A,
ii. Implied
1. Implied in Fact – an agreement manifested by conduct
2. Implied in Law (“quasi-contract”) – not a true contract, but an obligation imposed by
a court, to avoid an injustice or “unjust enrichment”
5. Mutual Assent – The intent of two parties to be contractually bound to each other
a. To determine MA – use the Objective test (view manifested intentions)
i. What would a reasonable person to whom an expression – words or conduct – has been
addressed understand the expression to mean.
6. Social Contracts – The existence of a familial relationship may affect the ability to create an enforceable
contract. Generally – social promises do not result in contracts.
7. Sources of Contract Law
a. Common Law – IS LAW. In most jurisdictions, contract law is not codified, and thus the primary
source of general contract law is case law
b. Uniform Commercial Code (UCC) – IS LAW.
i. UCC Applies to Goods.
1
,Contracts
ii. Common Law encompasses everything else (real estate, services, etc. - unless coded)
1. Goods – (Article 2, UCC) – All things which are moveable at the time of
identification at the time of contracting. (Crops are Goods)
2. Except Auctions – Everything falls under UCC in an auction. (Services, Real Estate)
iii. Gap Fillers in UCC – If contract is missing minor details Gap Filler preserves the contract.
1. We are responsible to know 3 of them
a. No Price – Reasonable Price
b. No Location – Pickup will be at the seller’s location.
c. No Time – Reasonable Time.
8. Contract Formation
a. Offer (I) – An offer is a yesable proposition that is definite in its terms, committed to its terms, and
communicated to the other party so that only agreement is necessary from the propositioned party.
i. Made by Offeror
1. Committed – The offeror must have a commitment to contract.
2. Definite – The terms of the O must be strictly defined
3. Communicated –
a. Verbally (Orally or Written)
b. Conduct – Implied in Fact – Conduct implies intent to be contractually bound
c. or BOTH
b. Acceptance (II) – An acceptance is an affirmative answer communicated to the offeror, which is
responsive in matching the terms of the offer, and is absolute and unequivocal in that it leaves no
doubt that the offeree intends to be bound to the terms of the offer.
i. Made by offeree
1. Responsive – Must meet the conditions of the offer
2. Absolute / Unequivocal – Must be absolute and firm in its acceptance
3. Communicated – The O/ee makes it clear to O/or willing to and agreeing to enter K
c. Consideration – A valuable consideration, in the sense of the law, may consist of a right, interest,
profit or benefit accruing to the one party / (or) some forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.
d. Promissory Estoppel – A legal theory designed to prevent injustice, under which a promise may be
enforced, even in the lack of C, where one party makes a promise knowing that it is likely to induce
reliance by another party, and it does in fact induce reliance by the other party to his or her detriment
e. Moral Obligation – A legal theory under which a court will enforce a promise made subsequent to
an expired statute of limitations, bankruptcy, infancy or in the case where, absent legal duty, one
party has received a material benefit.
f. Termination (III) – Terminating the power of Acceptance make K invalid
i. Revocation
ii. Rejection
iii. Lapse of Time
iv. Death / Incapacity
v. Counter Offer
vi. Battle of the Forms
vii. Indefiniteness
2
, Contracts
I. OFFER (Committed – Definite - Communicated)
1. Hold an Offer Open (3 ways)
a. Option – (CL) If you buy within this time frame – you can get it at this price.
i. Other side can revoke option at any time.
b. Option Contract – (CL) Paying to keep a K open for the time stated
i. If Option K was in writing, payment does not need to have been tendered.
c. Firm Offer – (UCC, 2-205) – (O + M + /s/w + Assurance = FO)
i. This offer is irrevocable for the time stated. No time/reasonable time BUT no longer than 3M
ii. If you want to hold an offer open for 4 months, you will have to pay for it in an Option
iii. Firm offer does not require Consideration.
iv. (O + M + /s/w + Assurance = FO)
1. Offer to buy and sell goods must be Commitment, Definite, Communicated
2. By a merchant (who deals in the kind of goods in offer)
3. In a signed (/s/) writing (any intentional reduction to a tangible form)
4. Gives assurances (O will not be revoked, will not be changed, will be held open, etc.)
2. Advertisements – Typically not considered an O unless the ad is very specific about the quantity of
items, who is eligible, and specific time frames. Typically regarded as an “Invitation to deal”
a. Problems with Ad – If you can get around these, may be considered an O.
i. Too Many Offerees.
ii.Too Little Quantity.
b. Statements by Doctors / Attorneys – Not offer unless “I guarantee!”
3. Unsolicited Mailings – The mailing of unordered merchandise will be considered a gift.
a. Except for Free Samples and Things sent by charities
4. Knowledge of the Offer – (Private vs. Government Rewards)
a. Rewards are offers – calling for an Act for acceptance.
i. Private Reward – You must be aware of the offer prior to your actions.
ii.Government Reward - Any citizen who performs the requested service is entitled to the
reward, even if claimant had no idea that the reward was being offered.
b. Police officers cannot accept ANY rewards.
5. Auctions – (UCC, 2-328 Apply to Everything with Auctions – goods, real estate, services)
a. Auctions with Reserve – Auctioneer can take item of block until certain $ is reached
i. Bidder makes the Offer – Each bid is an offer
ii. Auctioneer has power of acceptance (Until A he can take it off the block any time)
iii. A bidder may always withdraw his offer before the fall of the hammer.
b. Auctions without Reserve – Auctioneer cannot take item off the block.
i. Auctioneer makes the Offer.
ii.Bidder has power of acceptance – Each bid is an Acceptance
iii. If nothing is said – It is presumed to be an Auction with Reserve
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