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Chapter 3
This chapter undertakes the difficult job of explaining the law of contracts, at
least in sufficient detail for understanding the remainder of the book. (But
17.8) may mandate the contractor’s payment of a subcontractor within a certain
number of days after receipt of payment from the owner. (Of course, both of
these examples raise the complication that they involve subject matter not yet
learned by the students.)
Different questions may be used to give the students an intuitive
understanding of contract law:
• What is the difference between a bargain (or agreement) and a contract?
This question highlights the necessity of some sort of legally–recognized remedy
for the non–breaching party of a contract (but not for the non–breaching party of a
bargain).
• When does a bargain become a contract? This question focuses on the
requirement of consideration (bargained–for exchange), and its substitute of
detrimental reliance (promissory estoppel).
• What makes a contract complete? How many contingencies must the parties
anticipate?
• In a technical field such as construction, how are words of the trade to be
understood?
• How should a contract breach be treated? If a payment is one day late, may
the contractor walk off the job? Two days late? Is the amount of the payment
relevant? What are the advantages and disadvantages of requiring the breach to
be “material” before the non–breaching party is excused from performance?
• If the materiality of the breach is the test, what effect does such a fact-based
standard have on decision–making? Can safeguards be employed (e.g., cure
notices with defined cure requirements) to avoid having an arbitrator or a court
months or years later conclude the contractor’s breach was non–material?
1.) What are the three requirements that must be met in order for a contract to be
valid?
and (3) formal requirements applicable to some types of contracts.
2.) What is the objective theory of contracts?
3.) What is consideration?
4.) What is promissory estoppels and when might it be used in the construction
industry?
5.) What are the four primary variables that an unconscionability analysis focuses on?
6.) What is an implied contract term and what are the major sources of judicially
determined terms?
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dealing, under which each party extends a helping hand to facilitate the other
party’s performance, if doing so is not too burdensome to the first party.
7.) What is the parol evidence rule?
8.) What is a breach of contract?
9.) According to the Restatement (Second) of Contracts, what are the five factors used
in determining whether a particular breach is material and what is the legal
consequence of a finding the breach was material?
10.) How does a contractual breach by anticipatory repudiation occur?
