LA BAR EXAM CODE III: CONTRACTS Flashcards
I. What are the kinds of contracts in Louisiana?
There are six kinds of contracts in Louisiana: (i) unilateral/bilateral Ks, (ii) onerous/gratuitous Ks, (iii) principal/accessory Ks, (iv) nominate/innominate Ks, (v) commutative K, (vi) aleatory K.
C.UB. PAK. GO. IN. A. Kave.
What are unilateral/bilateral Ks?
The distinction drawn between unilateral and bilateral contracts is based on whether one party alone assumes an obligation to another or whether parties assume reciprocal obligations.
If only one party to the contract incurs an obligation and the other party does not assume a reciprocal obligation, the obligation is unilateral.
If both parties to the contract bind themselves reciprocally, the contract is bilateral. Each party in a bilateral contract is both an obligor and an obligee.
What are onerous/gratuitous Ks?
The distinction drawn between onerous and gratuitous contracts is based on the reason for the obligor’s obligation.
If the reason why an obligor bound himself was to obtain a benefit for himself, the contract is onerous.
If the reason why an obligor bound himself was to benefit the obligee, the contract is gratuitous.
What are principal/accessory Ks?
The distinction drawn between principal and accessory contracts is based on whether the contract was entered into to provide security for another obligation.
A principal contract is a contract whose obligation is secured by an accessory contract.
If the contract was entered into to provide security for the performance of another obligation, the contract is accessory.
What are nominate/innominate Ks?
The distinction drawn between nominate and innominate contracts is based on whether the contract has been given a special designation.
A nominate contract is one given a special designation.
An innominate contract is one with no special designation.
What is a commutative K?
A commutative contract is one where the performance by one party is correlative to the performance by the other party.
What is an aleatory K?
An aleatory contract is one where the performance or extent of performance of any party to the contract depends on an uncertain event (e.g., an insurance contract).
Think, aleatory sounds like alien - that would be pretty uncertain.
II. What are the requirements for a valid contract?
In Louisiana, a valid contract requires (i) capacity, (ii) consent, (iii) lawful cause, and (iv) lawful object.
L.O.C.C.C.
What is capacity to K?
All persons have contractual capacity except: (i) unemancipated minors, (ii) interdicts, and (iii) persons “deprived of reason” at the time of contracting. A contract entered into by a party without contractual capacity is a relative nullity, but the contract may be rescinded only by the party lacking capacity or his legal representative.
You may assume that an individual has capacity for purposes of the exam, but do not forget to discuss the requirement, as long as the fact pattern does not include any suggestion that the individual is a minor, lacks the mental capacity as an interdict, or is otherwise lacking capacity.
What is consent - how is it evidenced?
Consent is evidenced by offer and acceptance.
No formalities are generally required for offer and acceptance.
Offer and acceptance may be made orally, in writing, or by action or inaction manifesting consent.
No formalities are required unless the law so prescribes or the parties have agreed to a certain form.
What is an offer?
An offer is the manifestation of intent to contract, with definite or reasonably certain terms, to an offeree.
An offer is personal to the offeree, is not assignable, and expires if either the offeror or the offeree dies or becomes incapacitated before acceptance.
An offer generally is revocable and may be revoked before acceptance.
The revocation must be received before the offer is accepted.
If the offer specifies a period of time for acceptance, it is irrevocable during that time.
If the offeror does not specify a time but intends to give the offeree a period within which to accept, the offer is irrevocable for a reasonable time.
How does an offer expire? Recall the differences between revocable and irrevocable offers.
A revocable offer expires if not accepted within a reasonable time.
An irrevocable offer expires if not accepted within the period during which it is irrevocable.
What is acceptance?
How is it effective?
What are the ways in which acceptance can be shown (performance, silence)?
What is nonconforming acceptance?
An acceptance is the manifestation of assent to agree to the terms of the offer in the manner required by the offeree.
Acceptance of a revocable offer is effective when the offeree transmits it (mailbox rule), so long as the acceptance is made in a manner and by a medium suggested by the offer or in an any other reasonable manner given the circumstances. Acceptance of an irrevocable offer is effective when the offeror receives it, which occurs when the acceptance comes into the offeror’s possession.
Acceptance can also be made by either commencement or completion of performance. If the offeror invites acceptance by performance and it is contemplated that the performance will be completed if commenced, a contract is formed when performance begins.
If an offer can be accepted only by a completed performance, the offeror cannot revoke the offer once performance has commenced for a reasonable time necessary to complete the performance.
The offeree, however, is not bound to complete the performance he has begun. If the offer is made irrevocable by or is accepted by performance, the offeree must give prompt notice unless the offeror knows or should know that the offeree has commenced performance.
When silence leads the offeror to reasonably believe that the offer has been accepted, the contracted is deemed confected.
An acceptance not in accord with the terms of the offer is a counteroffer (nonconforming acceptance).
How does the requirement of “cause” play into a valid K? What is detrimental reliance?
For an obligation to exist, there must be either: (i) a lawful cause (i.e., one not prohibited by law or public policy), or (ii) detrimental reliance.
Cause is the reason why a person obligates himself.
Cause is the functional equivalent of consideration at common law.
Both explain why some promises are enforceable while others are not.
However, cause is not the same as consideration.
A party need not express in his contract why he is binding himself. An obligation is valid even though its cause has not been expressed. A contract in which the parties do not express their true cause is called a simulation.
A promisor can be obligated by a promise under the doctrine of detrimental reliance if:
(i) the promisee relied on the promise to her detriment;
(ii) the promisor knew or should have known that the promisee would so rely; and
(iii) the promisee was reasonable in so relying.
Note that if the promise was a gratuitous one made without required formalities, then the promisee’s reliance is deemed not reasonable. Recovery under this doctrine is discretionary with the court.
How does the requirement of “object” play into a valid K?
Parties are free to contract for any object that is lawful, possible, and determined or determinable. An object is possible according to its nature; this relates to physical and moral impossibility, and not the parties’ ability to perform. The object must be determined at least as to kind but the quantity need only be determinable.
Quantity may be determined by the output or the requirements of a party, which must be set in good faith.