2. Chapter 10
Principles of Contract Law

3. Contract Law Terminology Formation of Contracts Formality of Contracts
Basic Issues
Terminology
Formation of Contracts
Formality of Contracts
Performance of Contracts
Contracts and Third Parties
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4. Contractual Terminology
Types of Contracts
Based on Enforceability
Valid, enforceable
Voidable
Invalid, unenforceable, void
Based on Form
Bilateral v. Unilateral
Based on Expression
Express contracts
Implied-in-fact contracts
Implied-in-law contracts
Based on Performance
Executory v. Executed
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5. Types of Contracts Bilateral Contract Unilateral Contract
Based on Form
Bilateral Contract
Promises are exchanged
Bill promised to pay $75 for Betty’s collection of CDs; Betty promises to deliver the CDs upon payment of $75
Unilateral Contract
Promise made in anticipation of performance
Betty promises to pay $200 when Bill has set up the computer system in Betty’s office
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6. Types of Contracts Express Contract Implied-in-Fact Contract
Based on Expression
Express Contract
Typical situation regardless of contract being in writing or orally stated
Mutually stated agreement
Implied-in-Fact Contract
Based on parties’ conduct
Example:
Self-serve gas station
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7. Types of Contracts Implied-in-Law Contract Quasi-contract
Based on Expression
Implied-in-Law Contract
Quasi-contract
Legal remedy to prevent unjust enrichment
Example
You notice that your neighbor’s child is mowing your grass (as he/she has done in the past) and you say nothing - you will be expected to pay a fair value for this service
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8. Types of Contracts Executed Contract Executory Contract Example
Based on Performance
Executed Contract
The expected performance of all parties is completed
Executory Contract
The expected performance of the parties has not yet occurred
Example
Bill has paid the $75 he promised, but Betty has not delivered the CDs
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9. Remedies for Breach Legal Remedies (Money) Equitable Remedies
Compensatory Damages
Consequential Damages
Liquidated Damages
Punitive Damages
Equitable Remedies
Specific Performance
Rescission
Restitution

10. Formation of Contracts
Elements of Valid Contracts
Offer
Expression of willingness to be committed
Acceptance
Expression of mutual assent
Consideration
Inducement to become contractually obligated
Competent Parties
Mentally able adults
Beware of
Minors
Incapacitated parties
Lawful Purpose
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11. Meeting of the Minds -- Mutual Asset
Offer and Acceptance
Meeting of the Minds -- Mutual Asset
Olivia says, “Art, are you interested in buying my used laptop computer for $450?”
Is there an offer?
If Art says, “Yes, I will buy your laptop for $450.”
Is there an agreement?
What exists now?
If Olivia responds, “Great, I will deliver it to you tomorrow in class at 10:00.”
What do we have now?
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12. Consideration Motivating Influence What does offeror expect?
What does offeree expect?
Benefit & Detriment Analysis
Promisor either wants
To gain a benefit
Or have promisee suffer a detriment
Or both
Example:
Bill and Betty
Bilateral
Unilateral
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13. Consideration
Benefit-Detriment Analysis
Bill promises to pay $75 for Betty’s collection of CDs; Betty promises to deliver the CDs upon payment of $75
What is the consideration?
Benefits and Detriments exchanged
What did Bill gain and Betty suffer and vice versa
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14. Consideration
Benefit-Detriment Analysis
Betty promises to pay $200 when Bill has set up the computer system in Betty’s office
Where is consideration now?
When does the contract become valid and enforceable?
Issue of Adequacy/Mutual Exchange
Not generally a matter of concern
Why?
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15. Voidable Contracts Minors Incapacitated Adults Mistake
Competent Parties & Other Issues
Minors
Power to avoid obligation
Return existing consideration
Necessaries
Incapacitated Adults
Mistake
Bilateral -- voidable agreement
Unilateral -- enforceable agreement
Fraud/Misrepresentation
Duress & Undue Influence
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16. Formality of Contracts
Orally Stated v. Written Document
General Rules
Statute of Frauds
Types of Cases
Interest in Land
Secondary Promise
Performance Beyond One Year
Goods over $500
Exceptions
Part Performance
Judicial Admissions
Parol Evidence Rule
Negotiations v. Amendments
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17. Performance of Contracts
Analysis of Conditions
Types of Conditions
Example
Bill promises to pay $75 for Betty’s collection of CDs; Betty promises to deliver the CDs upon payment of $75
Concurrent
Precedent
Subsequent
Insurance notification example
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18. Performance of Contracts
Analysis of Conditions
Satisfying Conditions
Substantial Performance
Betty promises to pay $200 when Bill has set up the computer system in Betty’s office
Excuses for Nonperformance
Impossibility
Impracticability
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19. Third Parties’ Interest
Beneficiaries
Donee
Creditor
Assignments
Betty Bank
Of Rights
Obligee (Assignor), Assignee
Tenant assigns the right to live in apartment
Bill Computer Services
Of Duties
Obligor (Assignor), Assignee
Tenant delegates obligation to pay rent to landlord
Impact on nonassigning original parties
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