Chapter 53

Two elements of consideration

legally sufficient value and bargained for exchange; The first, as just outlined, is whether the promisee has incurred alegal detriment. (Some courts—although a minority—take the view that a bargained-for legal benefitto the promisor is sufficient consideration.) The second is whether the legal detriment was bargainedfor: did the promisor specifically intend the act, forbearance, or promise in return for his promise?

Restitution

(n.) the act of restoring someone or something to the rightful owner or to a former state or position; making good on a loss or damage

The doctrine of promissory estoppel is invoked in the interests of justice when three conditions are met:

(1) the promise is one that the promisor should reasonably expect to induce the promisee to take action or forbear from taking action of a definite and substantial character; (2) the action or forbearance is taken; and (3) injustice can be avoided only by enforcing the promise.

What did Sir Henry Maine mean when he wrote of society's movement "from status to contract?

(F)rom a condition of society in which all the relations of Persons are summed up in the relations of Family, we seem to have steadily moved towards a phase of social order in which all these relations arise from the free agreement of Individuals moving from fixed arrangements to free will

Tort vs. Contract Remedies - The choice involves at least considerations:

1. Statute of limitations. Most statutes of limitations prescribe longer periods for contract than for tort actions. 2. Allowable damages. Punitive damages are more often permitted in tort actions, and certain kinds of injuries are compensable in tort but not in contract suits—for example, pain and suffering. 3. Expert testimony. In most cases, the use of experts would be the same in either tort or contract suits, but in certain contract cases, the expert witness could be dispensed with, as, for example, in a contract case charging that the physician abandoned the patient. 4. Insurance coverage. Most policies do not cover intentional torts, so a contract theory that avoids the element of willfulness would provide the plaintiff with a surer chance of recovering money damages.

Whether a valid enforceable contract has been formeddepends in turn on whether:

1. The parties reached an agreement (offer and acceptance); 2. Consideration was present (some "price was paid for what was received in return); 3. The agreement was legal; 4. The parties entered into the contract with capacity to make a contract; and 5. The agreement is in the proper form (something in writing, if required).

The two fundamental concepts considered the twin cornerstones of business relationships:

Contract and Tort

Restatement of the Law of Contracts

A compilation of model contract law principles drafted by legal scholars. The Restatement is not law. The Restatement of Contracts won prompt respect in the courts and has been cited in innumerablecases. The Restatements are not authoritative, in the sense that they are not actual judicial precedents, but they are nevertheless weighty interpretive texts, and judges frequently look to themfor guidance.

Implied Contract

A contract formed in whole or in part from the conduct of the parties. An implied contract is one that is inferred from the actions of the parties. Although no discussion of terms took place, an implied contract exists if it is clear from the conduct of both parties that they intended there be one

Express Contract

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

What are the required elements of a contract?

A contract requires mutuality—an offer and an acceptance of the offer; it requires consideration—a "price" paid for what is obtained; it requires that the parties to the contract have legal capacity to know what they are doing; it requires legality.

Executed Contract

A contract that has been completely performed by both parties.

executory contract

A contract that has not yet been fully performed.

Compensatory Damages

A monetary award equivalent to the actual value of injuries or damage sustained by the aggrieved party.

Nominal Damages

A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered.

Unenforceable Contract

A valid contract rendered unenforceable by some statute or law.

Are all promises "contracts"?

All contracts involve promises, but all promises do not establish contracts

Specific Performance

An equitable remedy requiring the breaching party to perform as promised under the contract; usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property).

Consideration

Consideration, is the quid pro quo (something given or received for something else) between the contracting parties in the absence of which the law will not enforce the promise or promises made.

Acceptance

An offer is a manifestation of willingness to enter into a bargain such that it would be reasonable for another individual to conclude that assent to the offer would complete the bargain. Offers must be communicated and must be definite; that is, they must spell out terms to which the offeree can assent.

Offer

An offer is a manifestation of willingness to enter into a bargain such that it would be reasonable for another individual to conclude that assent to the offer would complete the bargain. Offers must be communicated and must be definite; that is, they must spell out terms to which the offeree can assent.

Basically, what does the Statute of Frauds require?

Certain contracts—governed by the statute of frauds—are required to be evidenced by some writing, signed by the party to be bound. The purpose here is to avoid the fraud that occurs when one person attempts to impose upon another a contract that did not really exist.

Degree of Completion

Completion considers whether the contract is yet to be performed or the obligations have been fully discharged by one or both parties.

Economic View of Contract Law

Contracts perform three significant economic functions: First, it helps maintain incentives to individuals to exchange goods and services efficiently. Second, it reduces the costs of economic transactions because its very existence means that the parties need not go to the trouble of negotiating a variety of rules and terms already spelled out. Third, the law of contracts alerts the parties to trouble spots that have arisen in the past, thus making it easier to plan the transactions more intelligently and avoid potential pitfalls

Incidental Damages

Damages that compensate for expenses directly incurred because of a breach of contract, such as those incurred to obtain performance from another source.

Enforceability

Enforceability is the degree to which a given contract is binding.

Explicitness

Explicitness is concerned with the degree to which the agreement is manifest to those not party to it.

Which is a binding contract? 1. Betty offers to give a book to Lou. Lou accepts. 2. Betty offers Lou the book in exchange for Lou's promise to pay $15. Lou accepts. 3. Betty offers to give Lou the book if Lou promises to pick it up at Betty's house. Lou accepts.

In American law, only situation 2 is a binding contract, because only that contract contains a set of mutual promises in which each party pledges to give up something to the benefit of the other.

In contract taxonomy, what are the degrees of explicitness, mutuality, enforceability, and of completion?

In general, contracts are classified along these dimensions: explicitness, mutuality, enforceability, and degree ofcompletion. Explicitness is concerned with the degree to which the agreement is manifest to thosenot party to it. Mutuality takes into account whether promises are exchanged by two parties or onlyone. Enforceability is the degree to which a given contract is binding. Completion considerswhether the contract is yet to be performed or the obligations have been fully discharged by one orboth parties.

Punitive Damages

Monetary damages that may be awarded to a plaintiff to punish the defendant and deter similar conduct in the future.

mutality

Mutuality takes into account whether promises are exchanged by two parties or only one.

primary sources of law for the three basic types of contracts

Real estate: common law; Services: common law; Sale of goods: UCC (as interpreted by the courts).

UCC Phases

Sales (Article 2) Commercial Paper (Article 3) Bank Deposits and Collections (Article 4) Letters of Credit (Article 5) Bulk Transfers (Article 6) Warehouse Receipts, Bills of Lading, and Other Documents of Title (Article 7) Investment Securities (Article 8) Secured Transactions; Sales of Accounts and Chattel Paper (Article 9)

Consequential Damages

Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.

Contracy

The Restatement says: "Acontract is a promise or a set of promises for the breach of which the law gives a remedy, or theperformance of which the law in some way recognizes as a duty." (Restatement (Second) of Contracts,Section 1) Similarly, the Uniform Commercial Code says: "'Contract' means the total legal obligation which results from the parties' agreement as affected by this Act and any other applicable rules of law." (Section 1-201(11)) A short-hand definition is: "A contract is a legally enforceable promise."

Agreement

The Restatement(Second) of Contracts defines agreement as a "manifestation of mutual assent by two or more persons to one another." (Section 3) The UCC defines agreement as "the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance." (Section 1-201(3)) The critical question is what the parties said or did, not what they thought they said or did

Contract

The parties create contract duties through a bargaining process. The key element in the process is control; individuals are in control of a situation because they have thefreedom to decide whether to enter into a contractual relationship.

Contract Remedies

The purpose of contract remedies is, for the most part, to compensate the non-breaching party for the losses suffered—to put the non-breaching party in the position he, she, or it would have been in had there been no breach.

What is the source of law for contracts involving real estate? For contracts involving the sale of goods?

UCC

Promissary Estoppel

Words and Actions lead someone to believe there is a contract present. Court will lean in favor of person who has the detriment; Simply stated, promissoryestoppel means that the courts will stop the promisor from claiming that there was no consideration.

Uniform Commercial Code (UCC)

a comprehensive statutory scheme that includes laws that cover aspects of commercial transactions It is the only "national" law not enacted by congress

Convention on Contracts for the International Sale of Goods (CISG)

a treaty that was formed by the United Nation in order to create a uniform international convention or model law. The resultant model law is commonly used to govern international sales agreements.

Partially Executed Contract

contract obligations have been filled by one party but not by the other party to a contract

Quasi Contract

court-imposed obligation to prevent unjust enrichment in the absence of a contract. . In fact, a quasi-contract is not a contract at all; it is a fiction that the courts created to prevent injustice

contract law asks two principal questions:

did the parties create a valid, enforceable contract? What remedies are available when one party breaks the contract?

Legal Detriment

doing an act one is not legally obligated to do or not doing an act that one has a legal right to do; an act, a forbearance, or a promise of such from the promisee. The detriment need not be an actual detriment; it may in fact be a benefit to the promisee ,or at least not a loss. At the same time, the "detriment" to the promisee need not confer a tangible benefit on the promisor; the promisee can agree to forego something without that something being given to the promisor.

In general, contracts are classified along these dimensions:

explicitness, mutuality, enforceability, and degree of completion.

When was the Statute of Frauds first enacted, by whom, and why?

first enacted in England in 1677 under the formal name "An Act for the Prevention of Frauds and Perjuries." The purpose of the Statute ofFrauds is to prevent the fraud that occurs when one party attempts to impose upon another a contractthat did not in fact exist

tort duties

obligations the law imposes.

Unilateral contracts

offeror promises something in return for the offeree's performance and indicates that this performance is the way acceptance must be made

Voidable Contract

one that is unenforceable by one party but enforceable by the other.

Bilateral Contract

promise for a promise; one in which the parties make mutual promises. Each is both promisor and promisee; that is, each pledges to do something and each is the recipient of such a pledge

Statue of Frauds

requires certain contracts to be in writing; " The purpose of the Statute of Frauds is to prevent the fraud that occurs when one party attempts to impose upon another a contract that did not in fact exist

4 Sources of Contract Law

the Constitution, federal and state statutes, federal and state case law, and administrative law