Ch 10: Nature And Terminology (Contracts)

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promise

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a person's assurance that the person will or will not do something

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When common law governs contracts

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The common law governs all contracts except when it has been modified or replaced by statutory law, such as the Uniform Commercial Code (UCC) or by administrative agency regulations.
Contracts relating to services, real estate, employment, and insurance, for example generally are governed by the common law of contracts
Contracts for the sale and lease of goods are govered by the UCC

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contract

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a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty
simply: it is legally binding agreement between 2+ parties who agree to perform or to refrain from performing some act now or in the future

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objective theory of contracts

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intent is determined by this not by the subjective intent, or belief, of a party.
A party's intention to enter into a legally binding agreement, or contract, is judged by outward, objective facts as interpreted by a reasonable person, rather than by the party's own secret subjective intentions

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Objective facts (used in the objective theory of contracts)

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Objective facts include:
1)what the party said when entering into the contract
2) how the party acted or appeared (intent may be manifested by conduct as well as by oral or written words)
3) the circumstances surrounding the transaction

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Requirements of a Valid Contract

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1) Agreement - includes an offer and an acceptance
2) Consideration - any promises made must be supported by legally sufficient and bargained-for consideration (something of value received or promised, such as money, to convince a person to make a deal)
3) Contractual capacity - both parties must have contractual capacity - law must recognize them as possesing characteristics that qualify them
4) Legality - it must be legal and not against the public policy

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Defenses to Enforceability of a Contract

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A contract may be unenforceable if the following requirements are not met
1) Genuiness of assent - ex: if the contract was formed as a result of fraud, undue influence, mistake, or duress, might not be enforceable
2) Form. Must be in whatever form the law requires (some need to be in writing)

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Types of Contracts

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1) Bilateral/Unilateral
2) Formal/Informal
3) Express/Implied in Fact

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Bilateral contract

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if the offeree (the party to whom the offer is made) can accept simply by promising to perform
"a promise for a promise"
contract comes into existance once the promises are exchanged (no actions must be performed)

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unilateral contact

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If the offer is phrased so that the offeree can accept the offer only by completing the contract performance.
"a promise for an act"
contract form the moment when the contract is performed
ex: if you carry this package across the Brooklyn Bridge, I'll give you $20.

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Problem with Unilateral Contracts

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when the promisor (the one making the promise) attempts to revoke (cancel) the offer after the promisee (the one to whom the promise was made) has begun the performance but before the act has been completed
today's views: An offer to form a unilateral contract becomes irrevocable once performance has begun

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Formal Contract

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contracts that require a special form or method of creation (formation) to be enforceable
EX: contracts under seal, letters of credit

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Informal contracts

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all other contracts (simple contracts)
No special form is required (except certain types must be in writing)

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Express contracts

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contract - the terms of agreement are fully and explicitly stated in words, oral or written

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Implied-in-fact Contract

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A contract that is implied from the conduct of the parties. Differs from express contract in that the conduct of the parties rather than their words creates and defines the terms of the contract

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Requirements for Implied-in-fact Contracts

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1) The plantiff furnished some service or property
2) The plantiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected
3) The defendant had a change to reject the services or property and did not

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Executed Contract

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A contract that has been fully performed on both sides

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Execuory contract

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A contract that has not been fully performed by the parties.
(If one party has performed but another has not contract is executed on one side and executory on the other - classified as executory

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Valid contract

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has the elements necessary to entitle at least one of the parties to enforce it in court
Elements:
1) agreement, 2) consideration, 3) legal capacity of parties, 4) legal purpose
valid contract can be enforceable, voidable, or unenforceable

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Voidable contract

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A valid contract but one that can be avoided at the option of one or both of the parties
If avoided both parties free from it, if ratified both parties must fully perform their respective legal obligations

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Unenforceable Contract

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A contract that cannot be enforced because of certain legal defenses against it
(It is NOT unenforceable bc a party failed to satisfy a legal requirement of the contract but because of some statute or law)

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Void Contract

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No contract at all. It produces no legal obligations on any of the parties

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Quasi contract

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contracts implied in law (not actual contracts). Fictional contracts created by courts and imposed on parties in the interest of fairness and justice.
Imposed to avoid the unjust enrichment of one party at the expense of another

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Quantum meruit

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"as much as he or she deserves"
describes the extent of compensation owed under a contract implied in law (quasi)

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Limit on Quasi-contractual recovery

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A party who has conferred a benefit on someone else unnecessarily or as a result of misconduct or negligence - can't invoke the principle of __ contract.
EX: car wash, accidently gets your car hand waxed, don't have to pay
When an actual contract exists generally doctrine of quasi contract can't be used

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Plain meaning rule

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When a contract's writing is clear and unequivocal, a court will enforce it according to its obvious terms. The meaning will be determined from the face of the instrument - from the written document alone.
A court cannot consider extrinsic evidence (any evidence not contained in the document itself)

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Rules for interpreting a contract

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see pg. 228 for list