Contract Formation
Three elements of a valid offer
This defense to contract formation requires certain types of contracts to be in writing and signed to be enforceable.
Statute of Frauds
This occurs when an offeree responds to an offer with different or additional terms, terminating the original offer.
What is a counteroffer?
This is the primary goal of contract remedies: to put the non-breaching party in the position they would have been in if the contract had been performed.
What is expectation damages (or "benefit of the bargain")?
Elements of the three contractual causes of action.
What are:
Breach of Contract: (1) a valid contract existed, (2) defendant breached the contract, and (3) plaintiff suffered damages as a result
Unjust Enrichment: (1) Unjust and (2) enrichment
Promissory Estoppel: (1) A promise; (2) Conduct by the promise (or a third person, a relatively rare situation) in reliance on the promise; (3) The promisor should have reasonably expected the reliance (4) The promisee's reliance caused them harm; and (5) Injustice would occur if the promise were not enforced
3 Modes of Acceptance
2. By performance (unilateral)
3. if unsure, acceptance by either, if reasonable under circumstances
Under this defense, a contract is unenforceable if its formation or performance violates a statute or regulation.
What is illegality
Under the common law, this is required to modify an existing contract, but the UCC does not require it for sale of goods contracts.
What is consideration?
These are the three main types of monetary damages available in contract law.
What are expectation damages, reliance damages, and restitution?
Intended versus incidental third-party beneficiaries
Intended = Right to sue if intended
Incidental = No right to sue
What is
1. pre-existing duty rule
2. illusory promises
3. nominal consideration
4. conditional gift
5. gratuity/gratuitous gift
6. past consideration
A payday loan company offers a low-income worker a $500 loan with a 400% annual interest rate, requiring repayment of $2,000 within 30 days. The contract is presented on a "take it or leave it" basis with no opportunity to negotiate, and the worker needs money for emergency medical bills. Identify both types of unconscionability present in this scenario.
Qhat are procedural unconscionability (disparity of bargaining power, no meaningful choice, adhesion contract with no negotiation opportunity)
and substantive unconscionability (grossly unfair terms with 400% interest rate requiring 4x repayment)?
A counteroffer normally terminates the offeree's power of acceptance, but not when this type of contract exists.
What is an option contract?
A homeowner contracts with a painter to paint their house "eggshell white" for $5,000. The painter completes the job but uses "ivory white" instead, which is nearly indistinguishable. The homeowner refuses to pay, demanding the house be repainted. Under the doctrine of substantial performance, explain what damages, if any, the homeowner can recover.
What is: The painter substantially performed the contract despite the minor deviation. The homeowner must pay the contract price ($5,000) minus damages for the defect. Damages would be measured by difference in value (the difference between eggshell white and ivory white), which is likely minimal or zero since the colors are nearly indistinguishable, rather than cost of completion (repainting the entire house), which would be economically wasteful and disproportionate to the actual harm?
Assignment versus delegation of rights
Assignment = Transfer of Rights, contracting party completely relieved of liability
Delegation = Transfer of Duties, original contracting party still liable for obligations
The power to delegate a contractual duty is more restrictive than the power to assign a right because a different person performing could change the performance negatively, whereas allowing a different person to exercise a right is less likely to make a difference.
Define firm offers as well as the difference between a firm offer and an option contract
Instead of option contracts, UCC uses the firm offer rule. Firm offers are:
1. Signed written forms from a merchant to buy or sell goods;
2. Irrevocable without consideration
For the time stated, but no longer than three months
If the merchant wants to do longer than three months, make it an option contract
An option contract is a separate contracts that require the
offer to be open for a specific period of time. The offeree must provide consideration to keep the offer open, even if the consideration is minimal
Explain the difference between duress and undue influence, including the key relationship requirement for undue influence.
What is: Duress involves an improper threat that leaves no reasonable alternative but to agree; undue influence applies when a victim is vulnerable to persuasion due to a relationship of submissiveness, dependence, or trust (like family members, attorney/client, doctor/patient, or fiduciary relationships)?
Under UCC § 2-209, contract modifications need no consideration to be binding, but they must meet this requirement to be enforceable.
What is good faith?
Define the three main measures of contract damages (expectation, reliance, and restitution), explain when each is appropriate, and identify which measure typically yields the highest recovery for a plaintiff.
What is: (1) Expectation damages put the non-breaching party in the position they would have been in had the contract been performed (benefit of the bargain)—used when there's a valid contract and breach; (2) Reliance damages compensate for out-of-pocket losses incurred in reasonable reliance on the contract—used when expectation damages are too speculative or under promissory estoppel; (3) Restitution restores the value conferred on the breaching party to prevent unjust enrichment—used when there's no valid contract or when the non-breaching party prefers to recover the value given rather than expectation. Expectation damages typically yield the highest recovery because they include both reliance losses AND the expected profit from the contract?
Traditional versus Modern approach for interpreting an integrated agreement
TRADITIONAL APPROACH- 4 CORNERS
Determination made of the basis of the writing itself with no attention to the circumstances of credibility of the parol evidence. Courts examine ONLY the contract itself to determine whether the parties intended the contract to be fully integrated
MODERN APPROACH- CONTEXTUAL
Decision made on the basis of preliminary evaluation of the credibility of the parol evidence rather than the content of the writing alone. The court considers the parol evidence to determine all the terms that the parties likely meant to include in the contract
A university sends acceptance letters to 100 prospective students, but due to a clerical error, sends an additional letter to Student X stating "Congratulations! You have been awarded a full four-year scholarship covering tuition, room, and board." Student X immediately declines admission offers from two other universities where she had partial scholarships, pays a non-refundable deposit to the university, and moves across the country. The university discovers the error and informs Student X there is no scholarship. Analyze whether Student X can enforce the scholarship promise under: (1) traditional contract formation principles, (2) promissory estoppel, and (3) whether the university has any defenses. What remedy would Student X likely receive under each theory?
What is: (1) Traditional contract formation likely fails—no valid offer (unilateral mistake/clerical error), no consideration from Student X for the scholarship promise, and possibly no mutual assent; (2) Promissory estoppel likely succeeds—university made a clear promise, Student X reasonably and foreseeably relied by declining other offers and incurring costs, and injustice can only be avoided by enforcement; (3) University defenses: unilateral mistake (but weakened by Student X's detrimental reliance), lack of authority (if clerk lacked authority to make scholarship offers). Remedy: Under promissory estoppel, likely reliance damages (difference between declined scholarships and current costs, moving expenses, deposit) rather than full expectation damages (four-year scholarship value), though some courts might award full enforcement to prevent injustice?
A homeowner fails to disclose known asbestos in their home to a buyer. The buyer discovers it after closing and sues. What, if any, of the three types of misrepresentation (affirmative, concealment, nondisclosure) is present. State all required elements, and explain whether it matters if the seller's misrepresentation was fraudulent versus innocent/negligent.
What is: This is nondisclosure misrepresentation.
Elements: (1) material misrepresentation of fact, (2) by failing to reveal information relevant to the transaction, (3) that actually and justifiably induced the victim. The seller made a material misrepresentation by failing to disclose asbestos, which is relevant to the transaction and would have justifiably induced the buyer not to purchase (or negotiate a lower price). If fraudulent (seller knew about asbestos), the contract is voidable with lower materiality threshold; if innocent/negligent (seller didn't know), materiality must be higher—the asbestos must be objectively crucial to the bargain and likely to induce a reasonable person not to contract?
A construction contract is modified three times during performance, each time increasing the price. The owner later claims the modifications are unenforceable. Under what circumstances would the modifications be enforceable under common law versus the UCC if this were a contract for materials?
What is: Common law requires new consideration for each modification (pre-existing duty rule applies unless unforeseen circumstances); UCC requires only good faith and no consideration, but modifications must be in writing if the contract as modified falls under Statute of Frauds?
A software company contracts to deliver custom software by June 1. They deliver on August 1, causing the client to lose a major customer. Calculate expectation damages if: contract price was $50K, client paid $20K upfront, client spent $10K on temporary software, and client can prove $100K in lost profits from the lost customer. What additional doctrine might limit the lost profits recovery?
What is: $90K in expectation damages ($100K lost profits + $10K cover costs - $20K saved from unpaid contract balance), but the lost profits might be limited by the foreseeability requirement if the software company didn't know about the major customer at contract formation?
Explain the difference between a condition precedent versus a condition subsequent, and define excusing conditions as well.
CONDITION PRECEDENT:
- Gives rise to the duty to perform
- must occur before a duty to perform arises
- If a specific event occurs, a party must act
- If this happens, you must perform
- E.g.: If the Orioles win, I will sell you my signed jersey
- Plaintiff has burden of showing condition was violated, part claim breach
CONDITION SUBSEQUENT
- Extinguishes duty to perform
- can excuse performance that was otherwise required
- If the specific event occurs, the party no longer has to act
- You must perform but if this happens, your performance is excused
- E.g.: I will sell you my signed jersey, unless the Orioles win the game
- Defendant can use this as a defense explaining lack of performance, party denying breach
EXCUSING CONDITIONS
Waiver: Knowing and voluntary abandonment of a right (may be express or implied) by the party to whom the condition is owed.
E.g., Chauncey says to Nikkie, “I’ll sell you my signed jersey if the Orioles win tonight.” The Orioles lose, so the condition fails. After the game, Chauncey says, “I’ll still sell you the jersey.” Nikkie relies on that and buys a display case for the jersey. Later, Chauncey refuses to deliver it. Chauncey waived the condition by offering to proceed despite the Orioles' win. But Nikkie cannot force Chauncey to give her the jersey.