Contracts Outline

Main questions

Contract formed?

Terms in Contract?

Meaning of Terms?

Rescind contract?

Breach/Substantial Performance?

Excuse performance?

Remedies?

WHICH PROMISES GET ENFORCED

Promise (1, 2, 4)

Consideration (71)

Adequacy (17, 79)

Promissory Estoppel Substitute for Consideration (90)

CONTRACT FORMATION

Manifestation of Assent (18, 19)

Offer (24, 32/62, 45)

Acceptance (50, 54, 56) (from syllabus: 25, 30, 40, 42, 45, 50 to 56, 62, 69)

Counteroffer (36, 39)

Battle of the Forms (2-207)

Assent in a Digital Age (Meyers/Nguyen)

Drennan Rule - Precontractual liability (87)

Lavel Test - Precontractual liability

Promissory Estoppel/Hoffman - Precontractual Liability (90)

Indefiniteness (33, 2-305)

Outputs/Requirements/Exclusive Dealing contract (2-306)

POLICING THE BARGAIN

Modification (73, 89, 2-209)

Duress (174, 175, 176)

Fraud (159-164)

Unconscionability (208, 2-302)

TERMS OF CONTRACT

Parol Evidence Rule (209-216, 2-202)

Interpretation (20, 2-202)

PERFORMANCE OF CONTRACT

Substantial Performance (241)

EXCUSES FOR NONPERFORMANCE

Mistake (151-154)

Impracticability/Frustration (261, 265, 2-615)

REMEDIES Specific Performance, Expectation Damages (limited), Liquidated Damages

Rescind contract

1. Mistake (voidable)

2. Fraud (voidable)

3. Duress (void if physical; voidable if economic/improper threat)

4. Unconscionability (voidable)

5. Ambiguity (R20) – void (Peerless)

6. Indefiniteness – contract unenforceable

Excuses Nonperformance

1. Impracticability

2. Frustration

BACKGROUND

t-Law: UCC v. Common Law

• UCC – exchange of tangible, movable goods

• Common Law – real estate, services etc.

• **if mix, look at if goods or services predominate

Goals of contract

• Promote value maximizing exchanges

• Promote autonomy (through contracting and planning for the future)

• Promote trust and reliance

t-Precontractual Liability – 3 ways to get it

1. Promissory Estoppel (Hoffman)

   • No offer, only a promise

   • Only if promisor acting in bad faith (ex. Goal post shifting)

   • (1) promise that promisor reasonably expects to induce reliance

   • (2) reliance

   • (3) justice requires enforcement (bargain context)

2. Drennan Rule - 87(2)

   • There is an offer but acceptance is delayed

     • Ex. Sub/gen contract scenario (Pavel) – construction sub bids are irrevocable for a reasonable amount of time if general relies

   • If offer reasonably expects to induce substantial reliance and offeree relies > an option contract is created in which offeror must hold offer open for reasonable time

3. Leval test - Binding oral negotiations?

   • Look at Ciaramella factors to determine which Leval category

     • (1) express reservation of intent not to be bound until signed writing

     • (2) type of contract normally written

     • (3) agreement of terms

     • (4) partial performance of contract

   • Leval categories

     • (1) Agree on all terms > binding preliminary agreement

     • (2) Agree on major terms but not others > binding preliminary commitment (obligation to continue negotiating in good faith)

     • (3) No agreement on major terms > no agreement

4. EXTRA: Quasi-contract

   • One type: quantum meruit – remedy for quasi contract

     • P gives D benefit > D accepts P’s benefit > D is unjustly enriched

UNIT 1 Enforceability of Promises

• Contract defined (RST-1)

  • Promise/set of promises the breach of which law gives remedy and performance of which the law recognizes as a duty

• Promise defined (RST-2)

  • Manifestation of intention to act or refrain from acting in a specified way, so made to justify promisee in understanding commitment has been made

• How promise may be made (RST-4)

  • May be stated in words either oral or written OR inferred wholly or partly from conduct

• Bargain defined (RST-17)

  • Bargain is required for formation of contract

  • includes (1) manifestation of mutual assent to the exchange and (2) consideration

t-CONSIDERATION

Required for an enforceable promise

• 1) Was there consideration? (RST-71) (y)

  • There was bargained for exchange

    • Bargained for if performance or return promise is sought by promisor and given by promisee > promises/consideration induced each other

      • Ex. Hamer – uncle promised 5k and Willie promised to refrain

    • Performance/return promise may be given to or by a third person

  • Mixture of gift and bargain = consideration (71 comment c)

• 2) Was consideration adequate?

  • Given consideration, court does not inquire into its adequacy

    • RST-79: No requirement of (1) benefit to promisor (2) detriment to promisee (3) equivalence in values exchanged (4) or mutuality of obligation

    • Ex. Batsakis (not require equivalence in values exchanges)

  • Especially when value of consideration not easily measurable – defer to appetite of parties and protect their subjective values

    • Ex. Wolford (naming of child after Lehman brings immeasurable pleasure)

  • POLICY for not inquiring into adequacy

    • Parties better able to subjectively value consideration

    • Want to encourage not deter formation of agreements

    • Incentivize investments – encourage high risk transactions (Batsakis, pay day loans)

    • Difficult from court to reverse-engineering transactions, so defer to the ex ante view

• 3) No consideration if

  • (1) gift promises/conditional gifts (mere condition attached to gift vs. offeror seeking an exchange)/ mere gratuity

    • Kirksey

  • (2) past consideration (Feinberg/Hayes)

  • (3) sham/nominal consideration (RST-79 comment d)

    • Disparity in value indicating that consideration was a mere formality or pretense – sham or nominal consideration

    • Ex. Exchange land of $1 - $1 is mere pretense

  • (4) consideration is something you don’t have legal right to do

    • Ex. Promise to kill someone in exchange for money

• Gross inadequacy of consideration that “shocks the conscience”> could indicate mistake, duress, or fraud to excuse (RST-79 comment e)

• Consider: business or intra-familial setting?

  ...

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