Contracts

Law School Legends

Professor David Epstein

I. Is There An Agreement?

A. Offers

1. A showing by words or conduct that the speaker or actor is committed

to the deal.

2. Watch for words in the communication that are unclear: fair,

appropriate, reasonable.

3. Generally, advertisements are not to be treated as offers.

B. Three things that can happen between offer and acceptance

1. Death or Incapacity of One Party – Terminates the offer.

2. Lapse of Time – Even if the offer is silent on a time limitation, the offer
is effective only for a reasonable period of time.

a. Look for facts that suggest that this is a time-sensitive agreement.

b. Watch for a time period that strikes you as being obviously too
slow.

3. Revocation of an offer – The only person who can revoke an offer is the
person who made the offer.

a. Was there a revocation?

i. Unambiguous words or conduct on the part of the

offeror.
Page 2 CONTRACTS LAW SCHOOL LEGENDS

b. Was the revocation effective?

i. The offeree must be aware of the words or conduct of

revocation.

c. Three situations in which an offer cannot be revoked

i. Option situation – A situation in which a person makes

an offer and promises to keep the offer open in
exchange for a payment.

ii. Firm Offer Rule – Sale of goods contracts. Offer must

be in writing and signed. The person making this offer
must be a merchant. The writing must contain an
express promise to keep the offer open. It does not have
to state a specific time. The court may supply a time up
to a three-month maximum.

iii. Reliance Rule – A person relies on an offer, and it is

reasonable and foreseeable that he would rely on the
offer.

1) Unilateral Contract – Where the offer clearly

indicates that it can be accepted only by
performance, and, in response, the offeree starts
to perform, that beginning of performance
makes the offer irrevocable.

C. Acceptance

1. Who can accept?

a. Generally, the only person who can accept an offer is the one to
whom it was made. Offers are not assignable.

b. Exception: Option offers are assignable.

2. When can a person accept an offer?

a. A person can accept prior to lapse of time or revocation.

b. Once an offer is rejected, it’s dead.

Page 3 CONTRACTS LAW SCHOOL LEGENDS

3. How does acceptance occur?

a. Look to see if there is any information in the offer as to how the

offer can be accepted. The offer can control the method of
acceptance.

b. Acceptance by Performance – Was this merely a start of

performance or was the performance completed?

i. Start of Performance –

1) The offer expressly provides that the start of

performance is acceptance.

2) The offer does not state how the offer is to be

accepted.

3) The offer expressly provides that it can be

accepted only by performance. This means that
the start of performance is not enough.

ii. Performance is Completed

1) Generally, any offer can be accepted by the

completion of performance.

c. Acceptance by Promise

i. Mailbox Rule – An acceptance will be legally effective as

soon as it is sent, but any other form of communication
(i.e., rejection, revocation) will not be effective until it is
received.

D. Indirect Rejection

1. Counter-offers are the same as rejections.

2. Conditional acceptances are the same as rejections.

3. Mirror Image Rule – A response to an offer must be exactly like the

offer. It cannot change or add anything.
Page 4 CONTRACTS LAW SCHOOL LEGENDS

II. Is There Any Legal Reason That This Agreement Should Not Be Enforced?

A. Lack of Capacity – Some people lack the capacity to enter into a contract,
which means that a contract cannot be enforced against the person who lacks
capacity (e.g. people under the age of 18.)

B. Duress

1. Physical Duress – Where one person had a gun to the head of another.

2. Economic Duress – Look for an improper threat by the person who is

trying to enforce the agreement.

C. Misrepresentation – Statements made by one person to the other before assent

was given.

D. Mistake – Erroneous conclusions of fact that each person came to on his own,
not because of what the other person said.

1. Mutual Mistake of Fact – Can be the basis for not enforcing an

agreement, but not every allegation of a mutual mistake renders the
agreement unenforceable.

2. Unilateral Mistake of Fact – Generally does not matter unless the other
party had reason to know of the mistake.

E. Ambiguity – In order to make an agreement unenforceable:

1. There has to be a term in the contract that has more than one
reasonable meaning.

2. Each person has a different meaning in mind.

3. Neither person had any reason to know about the other person’s
interpretation.

F. Illegality – If the subject matter of the contract is illegal, the agreement is

unenforceable.

G. Public Policy –

1. Exculpatory Clauses
Page 5 CONTRACTS LAW SCHOOL LEGENDS

2. Covenant Not to Compete

a. Whether there is a reasonable business need for the protection.

b. Reasonableness of the time limitation.

c. Reasonableness of the geographic limitation.

3. Contracts Relating to Parenting

H. Unconscionability –

1. Substantive unconscionability – Whether the terms of the contract were

unduly harsh or oppressive.

2. Procedural unconscionability – Dealing with the circumstances

surrounding the agreement.

I. Statute of Frauds – Designed to prevent people from claiming there was a

contract when there wasn’t one.

1. Within the Statute of Frauds

a. Sale of goods for $500 or more

b. Real Estate transaction that involves a transfer of an interest in

real estate that has a duration of more than one year.

c. Services contracts not capable of being performed within one

year of the date of the contract.

2. Special Proof of an Agreement – Writing

a. Writing must show who is making the deal.

b. Writing must show what the deal is.

c. Must be signed by the person against whom you are trying to

enforce the agreement.
Page 6 CONTRACTS LAW SCHOOL LEGENDS

i. Sale of Goods Involving Merchants – If there is a writing

that claims there is a contract and it is signed only by the
plaintiff, but it is sent to the defendant and he never
responds, under these facts, there is an enforceable
contract.

3. Alternative Way to Satisfying the Statute of Frauds

a. Part Performance – Statute of Frauds is satisfied if you can

establish any two of the following three facts:

i. There has been some payment by the buyer to the seller.

ii. The buyer has taken possession.

iii. The buyer has made improvements.

iv. In services contracts, part performance is not enough to

satisfy the Statute of Frauds.

J. Consideration

1. A Bargained for Exchange – Something that the person who is making

the promise is asking for in exchange.

2. Four Major Fact Patterns

a. Amount of consideration – The adequacy of consideration is

not a contract law issue.

b. Past consideration is not consideration.

c. Pre-existing Legal Duty Rule – When you change an existing

agreement, there needs to be new consideration.

d. Part payment of an existing debt is not consideration for a

promise to release or forgive the balance of the debt if the debt
was due and undisputed.

3. Promissory Estoppel – Reliance

Page 7 CONTRACTS LAW SCHOOL LEGENDS

III. What Are The Terms Of The Agreement?

A. Parol Evidence Rule

1. Vocabulary

a. Integration – Agreement has to be in writing. It is the written

version that is meant to be the final version of the deal.

b. Complete Integration – A judge could find the written version

to be the absolute final version of the deal.

c. Partial Integration – A judge could find that even thought this

was the final agreement, the parties did not necessarily have the
entire agreement written down.

d. Merger Clause – A contract provision that says that this is the

complete and final agreement.

e. Parol Evidence – Spoken or written words of the people who

made the agreement, made before the agreement.

2. Rule: The final, written version of the deal is more reliable than
anything that might have been said or written earlier.

3. Exceptions

a. A court can consider parol evidence to correct a mistake in

integration.

b. Generally, courts will consider parol evidence to explain an

ambiguity in a written agreement.

c. A situation where the parol evidence does not contradict the

terms of the writing, but simply adds to the terms of the writing,
and the court has concluded that the writing is not a complete
integration.
Page 8 CONTRACTS LAW SCHOOL LEGENDS

IV. Did The Contract Get Performed, And If Not, Is There Any Excuse For Not
Performing The Contract?

A. Excuse of Non-Performance

1. Look for a situation in which you are told that there was an agreement
and later, after the agreement, something happened. Does that
something that happened excuse performance?

a. Non or improper performance by the other party

i. Material Breach – Excuses the other party from

performing.

b. Anticipatory Repudiation – Did the other party, after entering

into the contract, say that she was not going to perform?

B. Failure of an Express Condition

1. Express Condition – An event not certain to occur which must occur

before performance is due.

2. Strict Compliance Test – 99 out of 100 is not strict compliance with an

express condition.

D. Impossibility, Impracticability, Frustration of Purpose – A later, unforeseen

occurrence

1. Watch for the relationship between the unforeseen occurrence on the

one hand and what the agreement upon performance was on the other
hand.

2. Frustration of Purpose

a. Must be an agreement that was based on a specific, mutually-

understood purpose.

b. There must be a later, unforeseen occurrence.

c. While this later, unforeseen occurrence does not make it

impossible to perform, it does largely eliminate the mutually
understood purpose.
Page 9 CONTRACTS LAW SCHOOL LEGENDS

D. Making of a Later Contract

1. Modification Agreement – Generally viewed as a brand new contract.

2. Novation – Both of the people who made the original contract agree on
a substitute for who is going to perform the contract.

3. Accord and Satisfaction – Both people mutually agree that something

different will be done instead of what was originally agreed upon.

a. Accord – Agreement to do something different instead

b. Satisfaction – Performance of the new agreement

V. Remedies: What Are The Legal Consequences Of Not Doing What You Agreed To
Do?

A. Specific Performance

1. Real Estate

2. Unique Goods

B. Punitive Damages – Not available in contract law.

C. Liquidated Damages – A contract provision that sets the amount of damages.

1. Validity:

a. The damages must be difficult to estimate.

b. The estimate must be reasonable.

2. Liquidated damages may not punish for a breach of contract.

D. Incidental Damages – Describe the costs the non-breaching party incurs in

coping with the breach. These are the costs of obtaining a replacement. These
are always recoverable.

E. Avoidable Damages – Damages that could have been avoided by the non-
breaching party. These are never recoverable.
Page 10 CONTRACTS LAW SCHOOL LEGENDS

F. Expectation Damages – The effort by the court to put the non-breaching party
in the same dollar position that he would have been in if the contract had not
been breached.

1. In dollar terms, what would the non-breaching party have received if

there had been no breach?

2. What did the plaintiff actually receive?

3. In dollar terms how do you get from what the plaintiff actually received
to what the plaintiff should have received?

G. Consequential Damages – Can only recover if consequential damages were

foreseeable by both parties at the time of the contract.

VI. Question Seven: When Do People Who Did Not Make The Contract Have
Contract Rights Or Duties Under The Contract?

A. Third-Party Beneficiary – Two people contract with each other with the shared
intention of benefiting a third person.

B. Assignment – Cannot make an assignment that substantially changes the duties

of the obligor.

C. Delegation – Two people make an agreement and later one of them delegates
his duties to someone else.

1. Not mutually agreed upon.

2. A delegation does not excuse.

3. A delegation for consideration creates a third-party beneficiary

obligation.