978-0134004006 Chapter 9 Lecture Note

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status to contract.” Sir Henry Maine

I. Teacher to Teacher Dialogue

enforce the contract rights and duties.

Students need to have some exposure to some of the working vocabulary of contract law. As

is the case with all specialized forms of endeavor, a contract has a language all its own, and a

basic knowledge of some of the key terms used in contracts is essential. The key contract terms

used tend to be dichotomous, and you can use that dichotomy as a learning tool. Take for

formalities (such as a negotiable instrument), or can it be done in any manner chosen by the

parties (informal) as long as the elements of contract are met?

Once the parties have formed an agreement, are the performance obligations already fully

met (executed), or are there still remaining performance obligations on the part of one or more of

power to avoid a contract after it has been entered into. These contracts are voidable, and

examples of this sort of situation can be found in cases involving young people with limited

mental capacity.

II. Chapter Objectives

1. Define contract.

2. List the elements necessary to form a valid contract.

3. Distinguish between bilateral and unilateral contracts.

4. Describe and distinguish between express and implied-in-fact contracts.

NATURE OF TRADITIONAL

AND E-CONTRACTS

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5. Describe and distinguish among valid, void, voidable, and unenforceable contracts.

III. Key Question Checklist

 What body of contract law will control the formation, rights, duties, and remedies of this

agreement?

 Are the four elements of a contract in place?

 How is this contract defined? Formal or informal? Executed or executory?

 Are there any defenses that make the contract unenforceable?

IV. Text Materials

Contracts are the basis for most of our activities. They are voluntarily entered into and the terms

Definition of a Contract

A contract is an agreement that is enforceable by a court of law or a court of equity.

Parties to a Contract – The offeror makes the offer to the offeree. The contract is created when

the offeree accepts the offer.

Elements of a Contract – Enforceable contracts require that there be an offer and acceptance,

Defenses to the Enforcement of a Contract – There are two defenses to the enforcement of a

Sources of Contract Law

Common Law of Contracts – This source of contract law developed from primarily state court

decisions became precedent.

Landmark Law: The Uniform Commercial Code (UCC)

The Restatement of the Law of Contracts – The Restatement, currently in its second edition, is

Objective Theory of Contracts

Critical Legal Thinking – This theory allows for consistency in handling contract formation and

breach of contract types of cases.

Nature of Traditional and E-Contracts

Case 9.1 Contracts: Facebook, Inc. v. Winklevoss

Circuit

Facts: Zuckerberg roomed with a set of twins at Harvard who alleged that Zuckerberg stole the

Issue: Is the settlement agreement enforceable?

Decision: The settlement agreement is enforceable.

E-Commerce

Electronic commerce and e-contracts have created a new set of problems to be considered.

Digital Law: Electronic Contracts and Licenses

Classifications of Contracts

Bilateral and Unilateral Contracts – A bilateral contract is a promise for a promise. The

exchange of promises creates the enforceable contract. A unilateral contract is one where the

Formal and Informal Contracts – Contracts may be formal, such as negotiable instruments,

letters of credits, recognizance, and contracts under seal, or informal or simple contracts, like

Executed and Executory Contracts – Contracts that have not yet been fully performed by either

side are called executory contracts; those that have been completed are executed contracts.

Express and Implied Contracts

Implied-in–Fact Contract – Implied-in-fact contracts require that the plaintiff supply property or

services to the defendant that they expected to be paid for, and that the defendant had an

opportunity to reject the property or services and failed to do so.

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Case 9.2 Implied-In-Fact Contract: Wrench LLC v Taco Bell Corporation

256 F.3d 446, 2001 U.S. App. Lexis 15097 (2001), United States Court of Appeals for the Sixth

Circuit

Facts: Rinks and Shields created a “Psycho Chihuahua” cartoon character that they promoted

for breach of an implied contract. The District Court granted summary judgment to Taco Bell,

and the plaintiffs appealed.

Issue: Is there a breach of an implied-in–fact contract?

Decision: Yes, and Taco Bell ultimately was forced to pay $30M plus $11.8M in interest to the

case back for trial.

Ethics Questions: Taco Bell really messed this one up and the court held them to be accountable

for their breach of ethics.

Critical Legal Thinking – To protect unilateral performance contracts and to protect parties who

Equity

Equity is resorted to when monetary damages are not sufficient or are not a proper remedy.

Their Contract

This explores a situation in which the court applied equitable remedies to protect the interests of

lessees. The landlord acted unethically in trying to keep what had become a coveted enterprise

for himself, and failing to accept the renewal option when there had been such a minimal delay in

giving notice. Recognizing equity places the United States in a morally superior position to other

nations in terms of handling breach situations.

V. Key Terms and Concepts

offer by the offeree.

 Actual contract—An actual contract may be either express or implied-in–fact.

Nature of Traditional and E-Contracts

parties.

 Article 2 (Sales)—Article 2 (Sales) prescribes a set of uniform rules for the creation and

enforcement of contracts for the sale of goods.

 Article 2A (Leases)—Article 2A (Leases) prescribes a set of uniform rules for the

creation and enforcement of contracts for the lease of goods.

parties; “a promise for a promise.”

 Common law of contracts—Contract law developed primarily by state courts.

 Consideration—A promise must be supported by a bargained-for consideration that is

legally sufficient.

 Contract—A contract is an agreement that is enforceable by a court of law or equity.

contract to be enforceable against them.

 E-contract law—Contract law that is based on electronic contracts (e-contracts) and

electronic licenses (e-licenses).

 Electronic commerce—The sale and lease of goods and services and other property and

the licensing of software over the Internet or by other electronic means.

moral rights, and natural law.

 Executed contract—A contract in which the essential elements to create a valid contract

are met but there is some legal defense to the enforcement of the contract.

 Executory contract—A contract that has not been fully performed by either or both sides.

 Express contract—An agreement that is expressed in written or oral words.

inferred from their conduct.

 Informal contract—A contract that is not formal. Valid informal contracts are fully

enforceable and may be sued upon if breached.

 Lawful object—The object of a contract must be lawful. Most contracts have a lawful

object.

contracts.

 Legally enforceable—A contract in which if one party fails to perform as promised, the

 Letter of credit—An agreement by the issuer of the letter to pay a sum of money upon the

receipt of an invoice and other documents.

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 Offer—An agreement requires an offer by the offeror and an acceptance of the offer by

the offeree.

enter into an express or implied-in-fact contract is judged by the reasonable person

standard.

 Recognizance—In a recognizance, a party acknowledges in court that he or she will pay a

specified sum of money if a certain event occurs.

sales contracts.

 Traditional contract law—UCC and common law contracts.

 Unenforceable contract—A contract in which the essential elements to create a valid

contract are met but there is some legal defense to the enforcement of the contract.

cover aspects of commercial transactions.

 Uniform Computer Information Transactions Act—A model act that establishes uniform

legal rules for the formation and enforcement of electronic contracts and licenses.

 Unilateral contract—A contract in which the offeror’s offer can be accepted only by the

performance of an act by the offeree; a “promise for an act.”

contractual obligations.

 Writing—The law requires that certain contracts be in writing or in a certain form.