Contract = agreement that is legally enforceable by a court, voluntarily entered by the parties
Two or more parties to a contract:
Offeror = party who makes an offer to enter a contract
Offeree = party to whom an offer to enter a contract is made
Enforceable contracts require 4 elements:
1. Agreement = the parties must have an agreement
2. Consideration = bargaining that leads to exchange between the two parties
3. Contractual Capacity = the parties must be adults of sound mind
4. Lawful object = the contract must be of legal purpose
Common law contracts = major source of contract law, courts decisions become precedent for
later decisions (stare decisis)
Restatement of the Law of Contracts = compilation of model contract law principles drafted by
legal scholars. Not law – rather guidance for states and courts to use
UCC = governs sale of goods, created to provide uniform commercial law throughout the US
Contract Types:
Bilateral = offers that are open to the method of acceptance, usually created by exchange of
promises, creates an enforceable contract
Unilateral = offers expressly requiring performance as the only possible method of acceptance,
the offer can be revoked by the offeror any time prior to the offeree’s start of performance,
contract formed once act is completed
If type is ambiguous = bilateral contract
Formal Contracts = require a special form or special method for creation, negotiable instruments
(checks, notes, certificates of deposit), letters of credit, recognizance
Informal Contracts = simple contracts because no special form or method is required for their
creation, they are still valid and enforceable contracts (leases, sales contracts, service contracts)
Valid contract = a contract that satisfies all of the law’s requirements
Void agreement = has no legal effect (as if the contract never existed). Neither party can enforce,
usually because the purpose of the deal is illegal or because one of the parties had no legal
authority to make a contract
Voidable Contract = where one party has the option to terminate the agreement. If the option is
exercised – both parties are relieved of their duties
Unenforceable contract = where a legal defense to the enforcement of the contract exists (i.e. an
otherwise legally enforceable contract can’t be enforced)
Executed = a completed contract (fully performed contract)
Executory = where contract has not been fully performed
Contracts are either:
• Express contracts = a contract that is either stated orally or in writing
• Implied-in-facts contracts = contracts that are implied from the conduct of both parties
(rather than oral or written words)
o There is evidence of an objective manifestation and a mutual assent to be bound
to the terms of the contract
Quasi-Contract (Implied-in-law contracts) = contract created by law which is imposed as if the
parties had entered a contract to avoid unjust enrichment
• No actual contracts exist between the parties
• Used when:
o One person confers a benefit to another who retains that benefit
o Benefit provided with the “reasonable expectation” of compensation
o It would be unjust not to require that person to pay for the benefit received
• What’s recoverable = quantum meruit = reasonable value of the services rendered
• Limits = party who receives a benefit is not liable for the fair value in some situations
o Party conferred a benefit unnecessarily or conferred the benefit as a result of
misconduct or negligence
Contracts require mutual consent (offer & acceptance)
Offeror = person who makes the offer
Offeree = person who receives the offer
An offer requires three elements:
1. Offeror objectively intended to be bound by the offer
2. The terms of the offer must be definite or reasonably certain
3. Offer must be communicated to the offeree
Agreement:
1. Contract Intent
• Determined by the objective theory of contracts
o Whether a reasonable person viewing the circumstances would conclude
that the parties intended to engage in a contract
o Not determined by personal or subjective belief
• Consider:
o The words and conduct of the parties
o The surrounding circumstances
2. Definitive Terms
• Offer must be clear enough for the offeree to be able to decide whether to accept
or reject the terms of the offer:
• An offer must contain the following terms:
o Identification of parties
o Identification of the subject matter and quantity
o Consideration to be paid
o Time of performance
• Courts do allow some terms to be implied
o Parties or subject matter usually cannot be implied
o Price can be implied if there is a market or source for which to determine
the price of the item
o Time for performance can be implied
3. Communication
• Offer must be communicated to the offeree (or a representative or agent of the
offeree) by the offeror
o Communication can be oral, in writing, or any means of non-verbal
communication
Special Offer Situations:
Advertisements
• General advertisements and mass mailings
o Are invitations to make an offer
o A price quote = an invitation to make an offer
• Specific advertisements = where advertisement is so definite or specific (quantity
and who can accept) that it is apparent that the advertiser intends to bind itself to
the terms of the advertisement
o Are offers
Rewards = an offer to pay a reward is a form of a unilateral contract
• To be entitled to collect the reward the offeree must:
o Have knowledge of the reward prior to completing the unrequested act and
perform the requested act
Auctions
• Auction with reserve = unless stated otherwise the auction is normally an auction with
reserve
o Invitations to make an offer
▪ Seller reserves the right to refuse to sell to highest bidder
▪ Bidder may withdraw offer prior to acceptance
• Auction without reserve
o Participants reverse roles (from a reserve auction)
o Seller is the offeror
▪ Seller is obligated to accept the highest bid and cannot withdraw the goods
from sale
▪ Can still set a minimum price before item sells
Termination of an Offer
• By Action of the Parties
o Revocation = offeror can withdraw an offer anytime prior to its acceptance by the
offeree (even if promised to keep offer open for a longer period of time)
o Requirements
▪ Revocation must be communicated to offeree
▪ Revocation is effective upon offeree’s receipt
▪ Made by an express statement or offeree or by an act inconsistent with the
offer that offeree is aware of (e.g. selling the goods to another party)
o Public Offers
▪ If offer is made to the public (e.g. by newspaper) revocation must be by
the same means used to make the offer
• Option Contracts = an exception of revocation
o Created when the offeree provides consideration to the offeror to keep the offer
open for an agreed upon time
▪ Prevents the offeror from being able to revoke his or her offer during that
time
o Options do not terminate in the event of offeree or option holder’s death (unless
the contract is for personal services)
• Rejection of Offer
o Offers are terminated if rejected by the offeree
▪ Subsequent attempts by offeree to accept the offer are ineffective (creates
a new offer that original offeror can either accept or reject)
▪ Rejection can occur by words (oral or written) or conduct
o Is effective upon offeror’s receipt
• Counteroffers
o Terminates the offeror’s offer and creates a new offer
• Conditional acceptance
o A conditional acceptance terminates the offer and creates a new offer
▪ Look of “if”, “provided,” “so long as,” or “on the condition that”
• The law can terminate an offer:
o Subject matter is destroyed
▪ Prior to acceptance, if subject matter is destroyed through no fault of
either party the offer terminates
o Death or mental incapacity of the offeror or offeree
▪ Prior to acceptance when either the offeror or the offeree dies or becomes
mentally incompetent
▪ Notice to other party is not required
▪ Offer terminates immediately at event
o Supervening Illegality
▪ Prior to acceptance, a law that makes performance of the contract or th
purpose of the contract illegal terminates the offer
o Lapse of Time
▪ Offer terminates if offeree fails to:
• Accept within the time specified by the offer or within a
reasonable time (based on the circumstances) if no deadline is
specific
Acceptance = manifestation of assent by the offeree to the terms of the offer in a manner invited
or required by the offer
• Who can accept an offer?
o A person to whom the offer was addressed
o A member of a group that the offer was addressed to
• Unequivocal Acceptance
o Offeree must accept the terms as stated in the offer (aka mirror Image Rule)
o Grumbling acceptances are acceptance
• Silence as Acceptance
o Silence is usually not acceptance
o But it is acceptance in these circumstances:
