Mutual assent:  for an agreement to be enforced, there must an acceptance of an offer.

definite/certain terms:  whether the subject matter is sufficiently definite depends on the type of contract it is—

   i.  real estate transactions:  require identification of land and price terms;

   ii.  sale of goods:  requires the quantity be certain, or capable of being made certain;

termination by offeror:

1.  revocation:  the offeror terminates the offer if he (1) directly communicates the revocation to the offeree; or (2) acts inconsistently with continued willingness to maintain the offer, and the offeree receives correct information of this from a reliable source.

   a.  when effective:  revocation is effective when received by the offeree (note:  publication of revocation is effective when published)

termination by offeree:

1.  rejection:  an offeree may reject an offer either expressly or by making a counteroffer. 

   a.  when effective:  a rejection is effective when received by the offeror

   b.  rejection of an option:  the offeree is still free to accept the offer within the option unless the offeror has detrimentally relied on the offeree’s rejection (e.g. sold it to someone else)

termination by operation of law:  the following events will terminate an offer by law—

A.  death or insanity of either party;

B.  destruction of the proposed contract’s subject matter; or

communicated (mailbox rule):  under the mailbox rule, if acceptance is by mail and properly addressed and stamped, it is effective at the moment of dispatch.  Note:  this rule applies only to acceptance—not to rejection or revocation.

 i.  limits on the mailbox rule:

   A.  does not apply if the offer stipulates that acceptance is not effective until received or if an option contract;

   B.  if rejection is sent, and then an acceptance, whichever arrives first is effective;

Consideration:  courts will enforce a bilateral or unilateral contract only if it is supported by consideration or a substitute

bargained for exchange:  the following are not consideration, because they were not “bargained for”—

i.  gift:  no bargain involved when one party gives a gift to another;

legal value:  usually a detriment to the promissee, where he promises something he is under no legal obligation to do, or refrains from doing something that he has a legal right to do. Note:  exchange of promises is valid consideration. 

i.  illusory promise:  not consideration, because there is no detriment to the person making the promise

1. Mutual Mistake

2. Unillateral Mistake

3. Mistake by Intermediary

4. Latent Ambiguity Mistakes

5. Misrepresentation

6. Lack of Consideration

7. Illegality

latent ambiguity mistakes:  if K has an ambiguous term, the result depends on the parties awareness of it:

A.  neither party aware—no contract unless both parties intended the same meaning;

B.  both parties aware—no contract unless both parties intended the same meaning;

1. Statute of Frauds

2. Unconscionabilty

Statute of Frauds (SOF):  certain contracts require the terms to be in writing to be enforceable.  This defense is waived if it is not raised.  A helpful mnemonic for when a writing is required—MY LEGS

i.  M—marriage:  promises in consideration of marriage;

ii. Y—year:  service contracts not capable of being performed within

one yearfrom the time of the agreement;

      iii. L—land:  promises creating an interest in land;

      iv. E—executor:  promises by executors or administrators to pay obligations of an estate out of his their own funds;

      v.  G—goods:  agreements for the sale of goods for $500 or more;

Delegation of Duties:  in the typical delegation situation, A (the obligor/delegator) promises to perform for B (the obligee).  B delegates his duty to C (the delegate).

1.  What is necessary for a delegation:  the delegator must manifest a present intention to make a delegation.  There are no special formalities to be complied with—it may be written or oral.

2.  What rights can be delegated:  generally, all duties may be delegated, unless (1) prohibited by the contract; (2) the duties involve personal judgment and skill; (3) delegation would change the obligee’s expectations (e.g. requirements and outputs contracts); or (4) a special trust was reposed in the delegator by the other party to the contract.

Exceptions to the Parol Evidence Rule:  evidence of the following is admissible:

1.  formation defects (e.g. fraud, duress, mistake, illegality);

2.  the existence of a condition precedent to a contract;

3.  the parties’ intent regarding ambiguous terms;

4.  consideration problems (e.g. consideration stated in the contract was never paid);

5.  a prior valid agreement which (as by mistake) is incorrectly reflected in the writing;

6.  a collateral agreement if it does not contradict or vary the main contract and if it is not so closely connected as to be part of the main contract; and

1.  condition precedent:  the condition must occur before performance is due.  (E.g. an agreement to pay $10,000 “if my house is sold by April 1.”  No payment is required unless the house is sold by April 1.)

2.  condition concurrent:  conditions to occur at the same time.  If one condition has occurred, performance of the other is due.  (E.g. Agreement to pay $100,000 for the farm.  Money and deed are exchanged in same transaction.)

a duty of performance becomes absolute when conditions are either performed or excused.  Conditions can be excused in several ways:

1. Anticipatory Repudiation

2. Substantial Performance

3. Divisibility of Contract

4. Waiver or Estoppel

divisibility of contract:  where a party performs one of the units of a divisible contract, he is entitled to the agreed equivalent for that unit even though he fails to perform the other units.  Three tests determine whether K is divisible:

  a.  the performance of each party is divided into two or more parts under the contract;

  b.  the number of parts due from each party is the same; and

Breach:  if the promisor is under an absolute duty of performance and the duty has not been discharged, then failure to perform in accordance with the contractual terms may be held to be a breach of contract.

1.  material breach:  when the nonbreaching party does not receive the substantial benefit of the bargain.  If the breach is a material one, the aggrieved party need not perform. Note: if “time is of the essence,” failure to perform is material breach

2.  minor breach:  may allow the aggrieved party to recover damages, but he still must perform under the contract.

1. Specific Performace/Injunction

2. Reclamation

Equitable Remedy. Look for and adequate remedy at law or unclean hands.

1. Real Estate

2. Unique Goods

3. Contract for Services

Right of unpaid seller to get its goods back.

1. buyer must be insolvent at the time it recv'd goods

2. Seller must demand the goods w/in 10 days of receipt

1. Expectation

2. Reliance

3. Restitution

4. Incidental

5. Consequential

6. Avoidable

7. Liquidated

Tests:

1. Damages were difficult to forecast at the time contract was made

2. the clause was a reasonable forecast