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Chapter 09 - Introduction to Contracts
9-1
CHAPTER 09
INTRODUCTION TO CONTRACTS
I. OBJECTIVES:
B. Distinguish the terms used to describe contracts and apply those terms to actual contracts.
C. Distinguish the applicability of the common law of contracts and Article 2 of the Uniform
Commercial Code and identify which governs a given contract.
D. Identify the circumstances under which promissory estoppel or quasi-contract can afford a
remedy even though no contract exists.
II. ANSWER TO INTRODUCTORY PROBLEM
B. A unilateral contract, because GSU made a promise (to give the scholarship) that Paul
accepted by doing an act (getting the appropriate score on his SAT).
promissory estoppel.
approach.
III. SUGGESTIONS FOR LECTURE PREPARATION:
A. The Nature of Contracts
1. Define contracts as legally enforceable promises.
2. Note that the first decision point society faced in this context was whether to recognize
the idea of contracts at all--should any promise be legally enforceable?
a. Point out that once we had decided that some promises should be legally enforceable,
being sued).
Chapter 09 - Introduction to Contracts
9-2
b. Briefly discuss the basic elements of a traditional contract. Subsequent chapters
discuss these elements in detail so that students will be able to distinguish contracts
B. The Social Utility of Contract
industrial society.
2. Note the "private lawmaking" aspect of contracts.
C. The Evolution of Contract Law
1. Discuss the historical and social forces that shaped contract law and the resultant nature
of classical contract rules.
a. Give examples of the many different ways in which contracts can be formed.
2. Consider bringing examples of online contracts, such as Facebook’s Terms of Use, to the
1. Discuss interactions that students are likely to have encountered that are essentially
contractual—e.g., leases, lottery tickets, magazine subscriptions, even syllabi. Talk about
what it is that makes these relationships contractual.
2. Note that some level of agreement is at the heart of every contract.
Lambert v. Barron (p. 323): The parties to this case were friends. Barron, a contractor,
was going through some hard economic times due to problems with five pending
projects. His friend, Lambert, was concerned about his financial and emotional well-
services for him. Lambert billed Barron for $34,100 owed on the alleged contract, and
Barron refused to pay. Lambert sued him. Did Barron’s acceptance of Lambert’s help
indicate the formation of a contract, or was it merely an indication of a person accepting
the help of a friend? The court found that it was the latter, and no contract was formed.
E. Basic Contract Concepts and Types
1. Discuss the elements of contracts and the common transactions that are, in fact,
contracts.
a. Note that in bilateral contracts, both parties are bound and a contract is created when
they exchange promises to do something in the future (assuming that the other
elements of a binding contract are present).
Chapter 09 - Introduction to Contracts
9-3
obligation, but that despite some evidence of disfavor, courts sometimes use
3. Define a valid contract and distinguish it from an unenforceable contract.
4. Distinguish between voidable and void contracts. A void contract is never enforceable
5. Distinguish between express and implied contracts.
a. Note that a contract may be partially express and partially implied. For example,
Frank hires Sally to paint his house. They expressly agree on the price, completion
date, and color and quality of the paint. Even though they make no express
Symons v. Heaton, a text case that appears later in the chapter.
5. Distinguish between executed and executory contracts. You may wish to distinguish this
usage of the word "executed" from its more common business usage to denote the
signing of a document.
E. The Uniform Commercial Code
1. Discuss the nature and origins of the UCC.
a. Discuss the ways in which Code rules exhibit some of the basic tendencies attributed
requirement.
b. Note that although the UCC is a statutory source of law, it is in an evolutionary
process because it is subject to revision. Discuss the fact that there is an ongoing
states have enacted UCITA so far.
c. Note the Code distinction between merchants and non-merchants. Give some
familiar examples of each.
d. Discuss the application of the Code--Code rules technically apply only to contracts
for the sale of "goods." Discuss the meaning of goods and show how goods differ
from real estate, services, and intangibles. Point out that Code application does not
#7 and 9.
1) Note that many contemporary contract cases are "mixed" cases because they
involve elements of both goods and services (e.g., a construction contract). The
test most frequently used by the courts to determine whether or not the Code
Chapter 09 - Introduction to Contracts
9-4
applies is which element (goods or services) "predominates" in the contract.
Contracts calling for services involving significant elements of skill or judgment
that the trial court was correct in concluding that the UCC, rather than the
common law, controlled the mixed good-and services contract at issue. The
controlling rules.
Points for Discussion: Ask the students what the contract contemplated in terms
of good and services. Why does the court conclude that the goods aspect of the
contract predominated? (The components of the sound system were critical
under the contract’s language and purpose, and those components clearly were
aspect of the deal.)
2) Note also, however, the tendency of Code principles to "bleed-over" into
traditional contract cases. This is especially true of general Code ideas such as
"good faith" and "unconscionability."
F. Discuss the CISG (See The Global Business Environment on p. 325).
G. The Restatement (Second) of Contracts
provisions.
H. “Noncontract” Obligations
1. Explain the relationship of the “noncontract” obligations covered in this chapter to
contract obligations. Explain why courts created these doctrines.
a. Discuss the doctrine of quasi-contract. In some cases the courts, to avoid unjust
is a valid contract that covers the subject matter in question.
Symons v. Heaton (p. 331): The Supreme Court of Wyoming affirms the lower
court’s grant of summary judgment to the defendant (The Estate of Gary
Plachek) in a case brought by Plachek’s long-time friend, Curtis Symons.
Chapter 09 - Introduction to Contracts
9-5
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
his claim against Plachek’s estate for the value of the care and services he
provided to Plachek? Ask the students about each of Symons’s claims. Why
does he lose on the implied contract theory? (Among other things, no conduct
suggesting an agreement that if Symons stayed around and provided services, he
would be paid. Do your students agree?) Why does he lose on the unjust
enrichment claim? (Symons admitted he stayed because he wanted to stay, and
that he was fulfilling a commitment he had made to Plachek’s mother. Do your
students agree that there was no unjust enrichment?) Why does he lose on the
promissory estoppel claim? (There was no clear and definite promise on which
Symons relied to his detriment.)
Consider Symons again (see above).
b. Discuss the doctrine of promissory estoppel. Although traditional contract
principles afforded no protection to those who relied on the promises of others
when the other elements of a binding contract were not present, courts in this
century have been increasingly willing to do so.
note Symons (see above).
Aceves v. U.S. Bank (p. 334): Aceves obtained a loan from Option One (which
later transferred its interest to U.S. Bank) to buy a house. The loan was secured
by a 30-year mortgage (deed of trust) on the house at an initial rate of 6.35
percent that would become adjustable after two years. When the interest became
directly to discuss “loss mitigation.” Relying on the bank’s promise to work with
her on loan modification, Aceves did not resist the bank’s motion and did not
seek bankruptcy relief under Chapter 13. The bankruptcy court lifted the stay.
Aceves’ home was nevertheless foreclosed upon and she was evicted. She filed
four elements of promissory estoppel to the facts and found that the complaint
did state a claim for promissory estoppel.
Points for Discussion: This case is one person’s story from the “mortgage
foreclosure crisis” of recent years. You might expand on the type of mortgage
Chapter 09 - Introduction to Contracts
9-6
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Aceves had and the difference between bankruptcy under Chapters 7 and 13
Does your class agree with the court’s analysis of the applicability of promissory
estoppel’s elements—e.g., was the promise made here clear and unambiguous?
Why wasn’t the last-minute offer that Aceves refused considered to be a
fulfillment of the bank’s promise to negotiate?
Additional Examples: Problem Cases #3, #5, and #6.
2) Note that promissory estoppel is a classic example of an imprecise (what is
"injustice?") modern contract law rule. It enables courts to impose liability in the
principles.
3) Note, however, that promissory estoppel is unlikely to apply if a person relies on
expectations that are not traceable to a fairly clear promise.
Ethics in Action (p. 335): Quasi-contract plainly rests on an ethics-related
foundation--the idea that, in some circumstances, it is unjust to receive a benefit
compensation for them. The ethical basis for promissory estoppel may be found
in the idea featured prominently in the ethical and public policy problems in
Chapters 6 and 7; that those who unjustifiably cause harm to another are duty
bound to compensate that other for his injuries. Promisors who make promises
in relying on a promise which was otherwise legally unenforceable and, if not,
on what ethical basis the law finds itself in the business of protecting reliance
which is, in this sense, unreasonable.
IV. RECOMMENDED REFERENCES
A. RESTATEMENT (SECOND) OF CONTRACTS (1983).
B. E. Allan Farnsworth, CONTRACTS (3rd ed. 2004).
V. ANSWERS TO PROBLEMS AND PROBLEM CASES
1. Yes. The court applied the predominant factor test to determine whether the primary
Chapter 09 - Introduction to Contracts
9-7
primarily involved in the business of maintenance, service, storage, and upkeep of
App. 2000).
2. No. The lottery ticket was held to be a valid contract embodying legal rules and
LEXIS 2562 (1998).
3. No. The elements of promissory estoppel were satisfied. The jury had a basis for finding
LEXIS 824 (D. Conn. 2004).
the information they contain classifies as goods as well. The arrangement between POA
N.E.2d 805 (Ind. Sup. Ct. 2009).
App. 1989).
to apply to other less expensive colleges and enrolled in Clark. Allyson further alleged
that to avoid injustice, Ronald should be required to honor his promise to Allyson. Such
S.E.2d 395 (Ga. Ct. App. 2004).
7. The Supreme Court of Georgia ruled that the UCC did not apply. The issue on
appeal was whether the UCC applied to the settlement agreement. The court
Chapter 09 - Introduction to Contracts
9-8
approach to determining whether the UCC applied. The UCC would not apply, the court
Sup. Ct. 2009).
8. No. The court concluded that Palese had entered into a contract with the Lottery Office
available when there is an existing contract on point and because the Lottery Office did
9. No. Under section 2-105 of the UCC "goods “must be (1) a thing, (2) existing, and (3)
movable. Water is all three. All who have paid bills for water can attest to its movability.
1989).
10. Yes. Schumacher showed that he made substantial improvements on his parents’
land, that his parents knew of the improvements and either encouraged them or
Minnesota law does not allow a claim of promissory estoppel to override the
statute of frauds in the claim of either a promise of lifetime employment or a
App. 2001).
