Module 3: Contracts

Question 1

Contract Law Sources

Answer 1

Generally not Federal or Federal Statue, generally common law of judicial precedent that have been developed over time that have been codified in Restatement (Second) of Contracts - book put together by judges and legal scholars to summarize common law - not itself law

Question 2

Contract definition

Answer 2

legally enforceable promise, must be in the future not immediately executed exchange - Can be oral, written, express, or implied (behaved as if we had a contract)

Question 3

Unilateral contract

Answer 3

Act of acceptance is act of performance, doing the action makes it a contract, not reciprocal (i.e. I’ll pay you $100 to clean the house

Question 4

Bilateral contract

Answer 4

I promise to do X and you promise to do Y

Question 5

Promisor, promisee, beneficiary definitions

Answer 5

Promisor: person who makes the contract, Promisee: person to whom the promise is made (Can often reverse and both parties be both in bilateral contract), Beneficiary: third party who may benefit from the contract b/w promisor and promisee Ex: child is beneficiary of a childcare contract

Question 6

Bailments

Answer 6

particular contractual relationship where you give goods but do not transfer ownership ex: giving your car to a car park for parking w/o transferring ownership of the car

Question 7

Requirements for Formation of Contract

Answer 7

Mutual Assent, Offer, Acceptance, Consideration (or Detrimental Reliance)

Question 8

Mailbox Rule Contract Acceptance

Answer 8

Offer deemed valid as soon as acceptance is mailed

Question 9

Consideration Rule re: gifts

Answer 9

Pledges of gifts are not binding, bargain for exchange for something I wouldn’t have received otherwise only

Question 10

Pre-existing Duty Rule Contracts

Answer 10

If already obligated to do something legally, consideration is not sufficient action to be new contract

Question 11

Doctrine of Promissory Estoppel

Answer 11

a party may recover on the basis of a promise made when the party’s reliance on that promise was reasonable, and the party attempting to recover detrimentally relied on the promise

Question 12

Legal Incapacity to Enter Contracts

Answer 12

Minors (except for life necessities or in cases of deception), mentally incompetent, intoxication

Question 13

Definition of Third-Party Beneficiary Contracts: Creditor, Donee

Answer 13

Creditor: I contract a person to pay a third party I owe money to;
Donee: Gift, I am forming a contract with party A to benefit party B, party B the donee receives a gift

Question 14

Contract Assignment

Answer 14

Assignor must show intent to assignee, does not have to receive consent of Obligor but must receive notification. Assignor can revoke unless assignment supported by consideration w/ assignee.

Question 15

Contract Delegation

Answer 15

Delegator still responsible to see the contract through if the delegate doesn’t perform. Duties cannot be delegated for specific talent/skill

Question 16

Statute of Frauds

Answer 16

Common law doctrine which states certain contracts must be in writing: Marriage, Year (anything farther in the future than one year), Land, Executor, Goods (worth more than $500), Surety (assurance that someone else’s contract will be performed)

Question 17

Contract Terms

Answer 17

Must be definite and certain, courts will err on the side of interpreting the contract towards being valid, Specific provisions given more weight

Question 18

Parol Evidence Rule

Answer 18

Parol Evidence Rule: extra testimony trying to explain after the contract is written and agreed is considered inherently unreliable - Can be used to define the meaning of the word with customary trade usage

Question 19

Types of Contract Breach

Answer 19

Failure to perform is a breach, extent of failure determines extent of damages: partial/trivial breach, material breach (unsubstantial performance), total breach, anticipatory repudiation (can demand assurances in advancd)

Question 20

Remedies for Breach of Contract

Answer 20

Compensatory damages (direct damages + consequential damages); duty to mitigate damages, given in diminution if substantial performance given; Restitution (payment for partial services provided); Specific performance (if money isn’t proper compensation); Liquidated damages (specified in contract) - no punitive damages

Question 21

Affirmative Defense to Contract Breach

Answer 21

Lack of capacity, violation of Statute of Frauds, distress, undue influence (weakened state), mutual or unilateral mistake, misrepresentation/fraud, unconscionability, statute of limitations

Question 22

Discharge of Contracts

Answer 22

by performance, Force Majeure (impossibility, impracticability, frustration of purpose), mutual recession, novation (creating a replacement agreement), accord and satisfaction (replacing terms of contract with substituted duties)

Question 23

Illegal Contracts and Public Policy

Answer 23

A contract that violates the law is void and unenforceable - Even if performance has begun, partial damages are generally not available; A contract that is legal but violates public policy statute no necessarily unenforceable but courts my order some restitution
Examples: Exculpatory Clauses or Restrictive Covenants