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Contract Law
Lawrence Siry
Overview • What is a Contract? (1)
– Contract Forma9on – Offer – Acceptance
• Enforcing a Contract (2) – Considera9on – Statue of Frauds
• Terms of Contract (3) – Parol Evidence Rule – Interpreta9on of Contracts
• Modifica<on and Avoidance of Contracts (4) – Promissory Estoppel – Voiding Contracts – Performance Problems
• Performance and Breach (5) – Execu9on of Contractual Du9es – Warran9es – Non-‐Performance – Remedies – Discharge
• Other Par<es (6) – Assignment and Delega9on – Third Party Contracts
OFFER
• What is an Offer?
• §24. OFFER DEFINED – An offer is the manifesta<on of willingness to enter into a bargain, so made as to jus<fy another person in understanding that his assent to that bargain is invited and will conclude it.
– An offer generally may be revoked un9l its accepted.
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Acceptance
– Hyde v. Wrench (1840)
– Brogden v Metroploitain Railway Co (1877)
– Butler Machine Tool v. Ex-‐Cell-‐O Corp. (1979)
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Acceptance • Tradi9onal Approach
– Clear acceptance – Acceptance by performance (unilateral)
• Modern Approach (UCC 2-‐206, Restatements 30(2). Acceptance by any reasonable means.
– Performance with knowledge of offeror.
• Acceptance by silence.
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Acceptance
-‐An Offer can dictate when it is effec9ve. -‐If silent, Acceptance is effec9ve when it is sent. -‐Why does this ma_er?
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Acceptance
• Communica9on of Acceptance to the Offeror – Implied Waiver – Postal Rule – Postal Rule applies only to acceptances, not offers or revoca9ons.
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WHAT IS A CONTRACT
• An Agreement between two or more par9es which creates rights and obliga9ons between the par9es, with the inten9on of the par9es to create legally binding responsibili9es.
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WHAT IS A CONTRACT? CONSIDERATION
• “…which creates rights and obliga<ons between the par<es…”
• Considera<on is where one party essen9ally pays for a good or a service from another party. The considera9on can be for something in the future, but not the past.
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WHAT IS A CONTRACT? CONSIDERATION
• Different Approaches:
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WHAT IS A CONTRACT? CONSIDERATION
: Each party receives both a benefit and detriment.
Example: Angela buys a horse from Barak for 100 E Angela’s detriment is that she has to pay 100E, her benefit is the horse. Barak’s detriment is that he has to give up his horse, his benefit is the 100E.
But at 9mes problema9c: Hamer v. Sidway
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Considera9on
• Hamer v. Sidway (NY 1891) • At his nephew’s wedding, Uncle, in presence of guests and family, promised that if nephew “would refrain from drinking, using tobacco, swearing and playing cards or billiards for money un9l he became twenty-‐one years of age he would pay him a sum of $5,000”
• Nephew “assented” and fully performed by not drinking, smoking etc.
• Uncle died and his estate refused to pay.
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Holding of Hamer v. Sidway • Uncle’s Estate-‐ no considera9on because nephew
benefited rather than harmed by refraining from various ac9vi9es.
• Court found that the promise was enforceable.
• Considera9on consists of either a benefit received by or detriment suffered by promisee because of
promise.
• Nephew refrained from doing things that had right or power to do he therefore suffered detriment.
WHAT IS A CONTRACT? CONSIDERATION
: Each party view his performance as the price of the other party’s promise or performance.
Bargain = Considera9on. Bargain need not be equal value unless unconscionable. “adequacy of a
bargain will not be disturbed by the courts unless grossly unequal.”
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WHAT IS A CONTRACT? CONSIDERATION
: Nominal Considera9on Unreasonable claims to forgo legal claims Illusory Promises Promises to do things already legally required
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WHAT IS A CONTRACT? CONSIDERATION
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: Nominal Considera9on
Excep9on where nominal considera9on is acceptable: op9on contracts
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WHAT IS A CONTRACT? CONSIDERATION
Bargain Promises: Caveat. When are bargains not enforceable: Unreasonable claims to forgo legal claims –will be held valid, only if a) reasonable b) held, by both par9es in good faith
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WHAT IS A CONTRACT? CONSIDERATION
Bargain Promises: Caveat. When are bargains not enforceable: Illusory Promises-‐ a statement that has the form of a promise, but lacks substance. -‐Agreements must have Mutuality -‐ : Miami Coca Cola BoAling v. Orange Crush (1924)
-‐Promises to perform excluded.
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WHAT IS A CONTRACT? CONSIDERATION
Promises to do things already legally required to perform. -‐public v. private/contractual du9es -‐Example: cops and witnesses
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Accord and Sa9sfac9on
• An Accord is an agreement that subs9tutes that which is demanded under the terms of the Contract, for another term.
• Sa9sfac9on occurs when the party (for whom the change of obliga9on was made) performs her duty under the modified terms-‐ then the original contractual duty is sa<sfied.
• Un9l performed, it may not be enforceable (execu9ve accord)
Considera9on (past, present and future)
• Past acts can not be good considera9on (not enforceable).
(1842) (good horse)
• Present acts are most common for of considera9on.
• Future acts are perfectly acceptable. (1842)
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Tricky Considera9on Issues
(what is it?) (what is sufficient?)
– Relied upon v. unrelied upon
– Excep9ons: Past debts barred by 9me • Implied promise • In wri9ng • New promise before the 9me has run
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Considera9on (what is it?) (what is sufficient?)?)
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• Thomas v. Thomas (1842)
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Tricky Considera9on Issues
(what is it?) (what is sufficient?)
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Considera9on Today Restatement §71. Requirement of Exchange
• (1) To cons9tute considera9on, a performance or a return promise must be
bargained for.
• (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. . . .
• Today American contract law has moved away from benefit/detriment analysis. Considera9on is seen as any performance or promise that is bargained for and given in exchange for promise.
WHAT IS A CONTRACT
• An Agreement between two or more par9es which creates rights and obliga9ons between the par9es, with the inten9on of the par9es to create legally binding responsibili9es.
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Legally binding Promise
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Vocaubulary
• Offer • Acceptance • Bargain • Detriment • Considera9on • Promissor/promissee
• Accord • Sa9sfac9on • Dona9ve • Implied • Writ • Assumpsit
Statute of Frauds
Certain contracts MUST be reduced to wri9ng.
• Marriage. • Land. • Contracts that take longer than a year. • Executor • Surety • IT IS RAISED AS A DEFENSE
• Subjec9ve inten9on • What the par9es really meant
• Objec9ve inten9on – What did the par9es seem to mean
What are the advantages and dis advantages of each?
