Reading Notes
Contracts, An Introduction
Contracts are promises between two parties that can be upheld in a court of law. If no promise was made, then you do not enter into a contract. Importantly, contracts occur out of social norms but gain their authority because of enacted and common law.
The simple contract can be broken down into four parts
- Offer
- Bargaining
- Acceptance
- Considerations
Offer
An offeror is the party who gives an offer. An offeree is a person to whom the offer is made. It follows along the lines of “I will sell you this car for $15,000.” The offer obviously being the car for the payment requested.
Bargaining
The offeree has several options after receiving an offer. They can ignore, accept, reject, or counteroffer. A counteroffer serves as a conclusion to the initial offer and an opening to a different offer.
Acceptance
Acceptance is when the offeree agrees to the offer and the conditions listed. After acceptance is completed, the contract is formed.
Consideration
Consideration are the things that was bargained for. For the purchase of a car, the car is one consideration while the money is another.
Other discussions
The remaining of the reading briefly discusses the enforceability of contracts including ensuring performance and what to do in the case of breach and requesting remedies.
Casebook: Chapter 1. An Introduction to the Study of Contract Law
A contract is a term that is used expansively and has a lot of variation in its understanding (just like all other forms of law). But there is a solid definition of what a contract is. According to the casebook:
[A contract is] an agreement between two or more persons as to something that is to be done in the future by one or both of them… For lawyers, contract usually is used to refer to an agreement that has legal effect.
Structure of Contract Law
Formation
Occurs through the process outlined earlier, through offers, acceptance, and consideration.
Interpretation and Implication
Sometimes, through the actions of parties, there are “implied terms” of an agreement. This part of the contract process discusses how the courts interpret contracts.
Defenses to Enforcement
Later, we will discuss why some parties “defend” that there is no need to enforce the agreement.
Nonperformance and its Consequences
If a condition is not met, then the agreement may not be carried out. However, if a necessary condition is not met, this is called a breach and there may be a remedy outlined by the courts to restore the injured party from a contract breach.
Rights and Duties of Third Parties
A third party could act as a beneficiary or as someone assigned to carry out the duties of the contract.
Sources of Contract Law
Just like any other form of law, contract law derives from common and statutory law. These are mandatory forms of law (if within the jurisdiction) that the court must abide by. Additionally, there are persuasive forms of law that the courts often use when evaluating cases. First are the restatements.
The American Law Institute (ALI) got together in 1923 to discuss the law and summarize the legal rules from statutes and common law. Their releases are called the Restatements. These restatements are released for nearly all forms of law. Of these restatements, the first to be released was the Restatement of Contracts in 2932. The Restatement (Second) of Contracts was released in 1979. Although only persuasive in all jurisdictions, this source is found to be highly influential.
Second of these persuasive sources are commentaries from legal scholars. Third is international Commercial Law.
The Perspective of Contract Theory
Contractual theory has changed drastically over time from those who focused on the rules of contracts to those who focused on the facts behind claims. There are several other forms of contract theory such as moral contract theory, and other versions of realists and doctrinal approaches.
I am somewhat of the opinion that the accurate approach to Contract theory resides somewhere in the middle of all of these. As more theories are developed, I believe we will approach a center. When the events of the day change and that center adjusts accordingly, contract theory will likewise need to account for those changes. This would occur by taking into consideration the past, present, and future assumptions of the development of contract theory.
Additional Notes
What is a contract?
Second Restatement of Contracts says, “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.”1
Not all promises are contracts. If we enforce it, it’s a contract. If we don’t enforce it, then it is not a contract.
Contract law is a product of various states enacted and common law. Although it is state based, the law is pretty uniform. This is because contracts cross state boundaries often to meet commercial needs. Additionally, many states adopt the Restatement (Second) of Contracts and the NCCUSL and the Uniform Commercial Code (UCC). Importantly, during this course, we will be focusing a lot on Article II of the UCC.
Often, we will want to note when and where a case arose. This is because these factors are important to understanding the context of the contract.
Contracts
We can divide our consideration of contracts into 3 parts
- Formation
- Enforceability
- Performance, Breach, and Remedies
Formation
- Offer
- Bargaining
- Acceptance
- Consideration
Offer
The Second Restatement of Contracts Section 24 defines an offer as:
“An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.”
Examples of offers include:
- “We will sell you…”
- “Here is our price…”
Bargaining
You have responses to an offer such as:
- Remaining silent. The offer could expire by terms, or the offeror my revoke (take back) the offer. This is neither an acceptance or rejection. Therefore, nothing happens until a party makes a decision.
- Manifestation of assent. This can be done by saying, “yes”. However, there are no magic words. There are several ways that one can accept an offer without saying, “yes, I want that.” If you mean, yes, then it could be an offer.
- Reject (“manifestation of intent not to accept”)
- Counter. Countering is often used as a rejection of the original offer and making a new offer.
Acceptance
Consideration
the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration
Considerations are unique, they are not a state of mind (I am considering this). Instead it is a noun referring to the objects that are being bargained over
Enforceability
There are some contracts that are required to be in writing or given only to adults. However, you could make arguments about mistakes, misrepresentation, duress, or undue influence.
Performance, Breach, and Remedies
Specific Performance
A specific performance is where a court orders a breaching party to perform. This is rare for a court to do. Instead, a court will provide damages. One of the instances where a specific performance may be provided is when land, or unique property (rare painting) is the matter in question.
Remedy
The purpose of providing a remedy is to put the non-breaching party in the condition where it would be if the contract had not been breached. So, you could have an auto theft and then the party should pay for it to be.
However, we are not in the deal of punishing a breaching party because there may be some moral reasons why there is breach of contract. So, the court rarely provides punitive damages. Punitive damages mean meeting the remedy to make things whole + extra. For example, say there needs to be 5,000 dollars remedy. A punitive damage is ordering the breaching party to pay the 5,000 dollars plus an extra 2,000 as punishment.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
