Introduction / What is a Contract & When Law Applies

Question 1

Types of Contracts

Answer 1

• Express contracts are formed by language, oral or written.
• Implied contracts are formed by conduct.
• Quasi-contracts are not contracts at all. Quasi-contract is the name given when an unenforceable contract results in unjust enrichment. Courts permit a plaintiff to bring an action in restitution to recover the amount of the benefit conferred on the defendant. This is discussed further in the Remedies module.

Question 2

Bilateral vs Unilateral Contracts

Answer 2

a. Bilateral Contracts—Exchange of Mutual Promises
* A bilateral contract is one consisting of the exchange of mutual promises; that is, a promise for a promise. Each party is both a promisor and a promisee. A bilateral contract offer can be accepted in any reasonable way. Most contracts are bilateral, which means that most offers are “indifferent” offers that may be accepted by promising or beginning performance. Unless expressly indicated otherwise, assume any contract is a bilateral contract.

b. Unilateral Contracts—Acceptance by Performance
* A unilateral contract is one in which the offeror requests performance rather than a promise. Here, the offeror-promisor promises to pay upon the completion of the requested act by the promisee. Once the act is completed, a contract is formed. A unilateral contract, which requires full performance, occurs in only two situations: (1) when the offeror clearly (unambiguously) indicates that completion of performance is the only manner of acceptance; and (2) where there is an offer to the public, such as a reward offer or a prize contest.
* Look for “Only By”: To identify a unilateral contract offer on the exam, watch for the magic words “only by” in reference to acceptance. For example, “My offer can be accepted only by” the specified act.

Question 3

Common Law vs. Article 2 Sale of Goods

Answer 3

Generally, the common law governs contracts. However, for contracts involving the sale of goods, Article 2 of the Uniform Commercial Code (“UCC”) applies. Article 2 has adopted much of the common law of contracts, but when the common law and Article 2 differ, Article 2 governs in a contract for the sale of goods.

2.1.2.1 “Goods” Defined
* “Goods” are all things movable at the time they are identified as the items to be sold under the contract. Thus, Article 2 applies to sales of most tangible things (including cars, horses, hamburgers), but doesn’t apply to the sale of real estate, services (such as a health club membership or employment), or intangibles (such as a patent), or to construction contracts.

Question 4

Merchant

Answer 4

• One who regularly deals in goods or kind sold; or
• Holds themselves out as having special knowledge or skills as to practices or goods involved

Question 5

Contracts Involving Goods & Nongoods