FORMATION OF CONTRACT

In contract law, intent is determined by the so-called “objective theory” of contracts and not by the subjective intent or belief of a party. The objective theory is key to determining whether an offer or acceptance is valid.

Whether a party intends to enter into a contract is judged by outward objective facts, as interpreted by a reasonable person. The intent of a party is what a reasonable person in the position of the other party would believe as a result of that party’s objective manifestation of intent. Thus, when the other party knew or should have known that the party lacked the intent to enter into a contract, a contract is not formed, whereas the party’s mere subjective lack of intent is not sufficient to prevent the formation of a contract.

Objective facts may include things that the party said when entering into the contract, the way the party acted or appeared at such time, and the circumstances surrounding the transaction. The circumstances surrounding the statement can be critical to determining what would be reasonable to believe.

MODIFICATIONS OF AN EXISTING CONTRACT

COMMON LAW (Need new consideration)

VS.

UCC (Parties agree in Good Faith)

At COMMON LAW, modification of an existing contract must be supported by consideration. Agreements to modify a contract may still be enforced if:

i) There is a rescission of the existing contract by tearing it up or by some other outward sign, and then the entering into of a new contract, whereby one of the parties must perform more than she was to perform under the original contract;

ii) There are unforeseen difficulties, and one of the parties agrees to compensate the other when the difficulties are discovered if those difficulties would make performance impracticable (see § II.A. Impracticability, infra); or

iii) There are new obligations on both sides.

2) UCC and consideration

Unlike under the common law, under Article 2, no consideration is necessary to modify a contract for the sale of goods, although there is a requirement of good faith by both parties. Thus, if one party is attempting to extort a modification, it will be ineffective under the UCC. Good faith requires honesty in fact and, in the case of a merchant, fair dealing in accordance with reasonable commercial standards.

1. Promise to Pay a Debt Barred by the Statute of Limitations: A new promise to pay a debt after the statute of limitations has run is enforceable without any new consideration.

2. Promise to Perform a Voidable Duty: A new promise to perform a duty that is voidable will be enforceable despite the absence of consideration, provided that the new promise does not suffer from an infirmity that would make it, in turn, voidable.

3. Promise to Pay Benefits Received—Material Benefit Rule: when a party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though, at common law, such a promise would be unenforceable due to lack of consideration.

4. Promissory Estoppel: The doctrine of promissory estoppel (detrimental reliance) can be used under certain circumstances to enforce a promise that is not supported by consideration.

1. MISTAKE
2. MISUNDERSTANDING
3. MISREPRESENTATION, NONDISCLOSURE, FRAUD
4. UNDUE INFLUENCE
5. DURESS: Improper Threat
6. CAPACITY TO CONTRACT

1. ILLEGALITY
2. UNCONSCIONABILITY
3. PUBLIC POLICY

2. Where a plaintiff confers a benefit on a defendant and the plaintiff has a reasonable expectation of compensation, allowing the defendant to retain the benefit without compensating the plaintiff would be unjust. Courts can permit the plaintiff to recover the value of the benefit in order to prevent the unjust enrichment. Although this type of action is often characterized as based on an implied-in-law contract or a “quasi-contract,” “quantum meruit” recovery does not depend on the existence of a contract.

A court may allow restitutionary recovery if:

i) The plaintiff has conferred a measurable benefit on the defendant;

ii) The plaintiff acted without gratuitous intent; and

iii) It would be unfair to let the defendant retain the benefit because either:

 (a) the defendant had an opportunity to decline the benefit but knowingly accepted it, or:

(b) the plaintiff had a reasonable excuse for not giving the defendant such opportunity (e.g., because of an emergency).

1. IMPRACTICABILITY (IMPOSSIBILITY)
2. FRUSTRATION OF PURPOSE
3. RESCISSION
4. RELEASE
5. DESTRUCTION OR INJURY TO IDENTIFIED GOODS

ELEMENTS OF IMPRACTIBILITY

1. Unforseeable events has occurred
2. Non-Occurrence of the event was a basic assumption of the Parties at time of contract formation
3. Party seeking the discharge is not in BREACH/At Fault

(UCC says seller must notify buyer when Impractibility happens)

Marriage - K Made upon consideration of Marriage

Suretyship - Answering to the debt of another

One Year - K that can't be performed within 1 year

UCC - Goods > $500

Real Property - Sale or interest in RP

 The parol evidence rule generally prevents a party to a written contract from presenting prior extrinsic evidence that contradicts the terms of the contract as written. The rule is concerned with whether any of the earlier oral or written terms are part of the parties’ contract, even though they are absent from the parties’ written agreement.

The failure of a condition relieves a party of the obligation to perform; the failure of a party to perform a promise constitutes breach.