Contract Basics

Question 1

Contract Requirements

Answer 1

A contract is a promise or set of promises enforced by law

• i.e., a legally enforceable agreement

Requirements to form a valid K - a K is formed when there exists:

1. Mutual assent
   
   • i.e. a meeting of the minds
   • demonstrated by an offer and valid acceptance
2. Consideration
   
   • A bargained-for exchange of legal value between the parties
3. No defenses to K formation
   
   • No defenses to formation exist that would invalidate the K

Void, voidable, and unenforceable Ks - if there is a valid defense to K formation or enforcement, a K may become:

• Void - K never had any legal effect
• Voidable - one or both parties may elect to void the K
• Unenforceable - otherwise valid K that is unenforceable b/c a defense applies (e.g. incapacity, SOF)

Question 2

Types of Contracts

(Unilateral, Bilateral, Quasi-Contract)

Answer 2

Bilateral K - exchange of mutual promises

• Each party is a promisor and promisee
• E.g. A offers to sell his car to B for $5,000 and B promises to purchase A’s car at that price

Unilateral K - offer requires performance as the manner of acceptance

• Offeror-promisor agrees to pay upon completion of the act requested by the promisee; once act is completed, K is formed
• E.g. A promises to pay B $100 if B paints A’s fence; B is not obligated to paint A’s fence, but if B does, K is formed and A must pay B $100

Quasi-K - not a K, but rather a restitution remedy designed to prevent unjust enrichment; usually arises when there is an unenforceable agreement, but one side has realized a benefit

• Look for:
  
  • P has conferred a benefit to D;
  • P reasonably expects to be paid;
  • D knowingly accepted the benefit; and
  • D will be unjustly enriched if P is not compensated

Question 3

Applicable Law

Answer 3

Most Ks are governed by either common law or the UCC

Common law - applies to most Ks, except sales of goods

• Any K not involving the sale of goods should be treated under common law contract principles
• Most often arises in the form of Ks for real estate or services

UCC Article 2 - governs the sale of goods

• If both parties to a K are merchants, the UCC has additional special rules (e.g. acceptance with additional terms)

Mixed Ks - for Ks involving both goods and services, the predominant purpose of the K dictates the applicable law

• Exception - if K terms divide payment between the goods and the services, apply the UCC to the sale of goods portion of the K and common law to the remainder