Contract Formation

Consideration + Mutual Assent

Offer + Acceptance 1. Mutual inducement in the exchange of promises (a bargained for exchange)
2. Inducement: A's promise must induce B's behavior/detriment, so B's behavior (either a promise to act or refrain from an act) must be behavior that would have
1. Identify and describe the negotiations. occurred otherwise. If behavior was already done or would've been done anyway, not consideration. (benefit/detriment)
2. Identify and describe the essential terms (price, materials , payment). 3. Note that both parties exchanged material, non-sham promises.
3. Is there an offer that invites assent? 4. If mixed motives - at least some bargain (Thomas v. Thomas)
4. Is there an acceptance? 5. Mutuality of obligation - no free way out - both parties have ability to breach
6. Mutual assent - both intend to be in the agreement and be bound - use objective test
Duty Owed
Problems to Look out for:
Potential Problems: 1. Modifications: need new consideration (common law) or good faith (UCC) - unless NO CONSIDERATION -
1. Are there any counter-offers or conditional acceptances? (Mirror Image common law test is met for executory K's (watch out for coercive modifications) PROMISSORY ESTOPPEL 1) A
Rule, UCC 2-207) 2. Release: A saying won't enforce the K if B agrees to X promise that promisor could
2. Advertisements/Form Letters/Solicitations 3. Past consideration - can't make a promise for a detriment previously suffered reasonably expect promisee to
3. Revocation of Offer - Unless Irrevocable (watch out for option Ks!) 4. Gift promises - more often found between family members, often when there are two rely on; 2) Actual reliance
4. No notice of acceptance when required separate promises (Penny Problem) occurred that was REASONABLE;
5. Non-conforming goods 5. Conditional gift - condition is not what is motivating promisor to make the promise 3) Injustice can only be avoided by
6. Oral agreements that aren't in written contract (Parol Evidence Rule) 6. Nominal consideration ("I'll sell you my house for $1"): pretense/sham, attempting to enforcing the promise; 4) Limit
7. No knowledge of offer dress up gift as K (In re Greene) remedy as justice requires
7. Illusory Promise - free way out when one party can cancel at will (usually reliance damages)
8. Pre-existing duty: doing what you're legally obligated to do - not consideration

What type of K? Terms:

1. Bilateral (exchange of promises) 1. Is duty to perform based on a condition (aka something has to happen
2. Unilateral (promise in exchange for performance) before you must perform?
3. Take or Pay K 2. Ambiguous/Vague - look to extrinsic evidence, hierarchy of Nonperformance of duty express
What is the 4. Option K (four kinds) interpretation conditioned precedent?
duty? 5. Forward Sales K 3. Parol Evidence Rule - if writing isn't full and final expression of
6. Future Sales K agreement, can use evidence to supplement it
7. Contract Implied in Fact (conduct) 4. UCC: are there any gap fillers?
8. Contract Implied in Law (justice) 5. Is there a warranty?
9. Requirement, Output, Exclusive Dealings (UCC) 6. If over $500 in sale of goods, is it in writing (SOF)? If a party?s promise to perform is
subject to an external condition,
UCC: In the sale of Common Law: substantial Material breach: promisor there can be no breach of contract
Anticipatory Breach: Breach of
goods -> perfect tender performance rule. Minor fails, without justification, until condition has been fulfilled.
Breach rule. Anything breach requires other party to to perform when a
other party expressly Warranty?
repudiates by stating their Express or (Aka ? no duty to provide insurance
non-conforming can be perform, but he can receive promised performance is coverage until damage occurs).
intent to breach Implied?
considered a breach. the difference in value. due. Can sue and cancel.

Are there any Capacity: Statute of Frauds: Unconsionability: Unilateral or Mutual

K's for sale of goods for over $500 must be in Material
defenses to K's cannot enforce absence of meaningful Mistake: K's voidable
writing and signed by party against whom Misrepresentation: K
K against a choice on part of one of by adversely affected
enforcement? minor; mental enforcement is sought. K's with promises that the parties with contract
voidable even if innocent
party if he didn't bear
Can one party cannot be enforced within one year from date Fraud: intent to mislead,
incapacity terms unreasonably the risk + other
rescind/cancel? of K must be in writing. can include duty to disclose
favorable to other party. requirements

Lack of Defense of Impracticality: an Force Modifications Release

Rescission
Substantial Repudiation: Conditions: terms unforseen cost/event Majeure without (other party Novation:
of contract
Performance retraction of for timing and can release a party Clause: consideration agrees not delegated
by other
(common law) as anticipatory convenience; from K when such clause in or to enforce K duty to
long as breach
party if they
Defenses/justifications repudiation; condition excused cost/event wasn't contract exceptions if you agree perform
wasn't willful, minor have
for breach (non- no via waiver or foreseeable at time releasing (common to X). to third
breach requires adequate
reasonable forfeiture of contracting and parties from law) or Usually must party and
performance)? other to perform, legal
but can receive grounds for Defense for Breach makes performance performance in without be in writing relieved
grounds
difference in value insecurity; no of Warranty: sales impractical. Doesn't event of act of good and self of
(mistake,
repudation puffery, "as is" apply to forward K God/War/ faith or supported by obligations.
misrep/fraud,
disclaimers market fluctuations catastrophic coercive new
unconscionability)
event. (UCC). consideration.
Expectation Damages: these
Remedies and are the default, put Restitution Damages: usually in
Consequential Damages: Liquidated Buyer/Seller
Damages non-breaching party in the Reliance Damages: special damages caused directly by the breach Damages : Remedies for the
K implied in law or losing K, when
return non-breacher to because of the non-breacher's circumstances (such the defendant has unjustly
position as if the K was status quo (as if K had
parties specify in K sale of goods:
as lost profits) what the retained a benefit, and we want to
performed perfectly. never been made) by duty to mitigate,
Limitations: damages must be reasonably remedy/damages for restore the value of the benefit
K price + indicidental and reimbursing for losses foreseeable (knew or had reason to know) by can always get
breach will be. conferred to P
General Duty to consequential losses - cost incurred by reliance. breacher at time of K; can be limited in a contract for incidental damages,
Enforceable if
Mitigate! avoided by not having to Often used when sale of goods except when person is injured due to buyer can get
reasonable in light of
expectation damages too the good. consequential Equitable
perform. anticipated OR actual
damages if limitations Rescission: if party has valid
Expectation: best in breach speculative. harm caused by
are met. If breach of Remedies legal grounds for rescission, can
when K would otherwise be Calculation: losses breach AND
profitable for P and they Incidental Damages: warranty: value of void the contract and seek
incurred in reliance damages difficult to
goods as warranted -
cannot suitably mitigate costs reasonably incurred post breach in an attempt estimate at time of K. restitution.
on K - loss avoided value of goods as sold.
Reliance: best when to avoid loss. (such as seller's costs incurred in Excessively high
Limitations: non-breaching by not having to stopping delivery). Seller can get lost
anticipated profits are too liquidated damage
speculative, shifts burden of party has a duty to mitigate; perform. Exception (Jacob & Youngs): when incidental clauses will be
profits as a lost volume Specific Performance: rare, only
must be proved with reasonable *RELIANCE MUST BE damages far outweigh value loss, breach seller. Specific used when monetary damages are
proof of profits to breacher considered penalty
unintentional, and consequences trivial, courts will performance if good is inadequate, such as unique/rare goods
Restitution: best when loss certainty (if too speculative, will REASONABLE* clauses and
is guaranteed (losing K) or enforce "diminution in value" rare. or land. (Never for services - akin to
use alternative) unenforceable.
when a benefit was unjustly slavery)
retained