MIDTERM REVIEW for law studebts2024 03 02.pdf

Contract Law: From Trust to Promise to Contract (Harvard University):
This course, offered by Harvard University, covers the theoretical background of contracts, trust, and promise.
It explores topics such as how contracts are formed through valid offers and acceptance, limits to enforcing contracts, issues excusing contractual performance, and available remedies for contractual breaches.
The instructor, Professor Charles Fried, is a leading authority on contract law and uses a unique storytelling approach to explain the subject.

1. Six Basic Contract Requirements
•Offer
•Acceptance
•Consideration
•Legality of Subject Matter
•Contractual Capacity
•Contractual Intent

2. The “Tripod”
Contract Formation
Offer Acceptance Consideration

3. Bilateral vs. Unilateral
•Unilateral Contract: Exchange of a Promise for an Act.
Distinction: Relationship/Contract is formed when the
requested act is completed.
•Bilateral Contract: Relationship/Contract is formed when
there is a Promise for a Promise exchanged.
Distinction: Relationship is formed at the exchange of
the promises.

4. Method of Creation
•Express Contract
•Implied-in-Fact Contract
•Implied-in-Law Contract (Quasi-Contract)

5. Executed vs. Executory Contracts
•Timing of a Contract:
Executed Contract
Executory Contract

6. Enforceability
•Valid Contract
•Void Contract
Quasi Contract
•Voidable Contract
Quasi Contract
•Unenforceable Contract

7. Chapter 2
Offer
•Definition: Proposal by one party to another party
manifesting an intention to enter into a valid
contract.
•Offeror: Person making the offer.
•Offeree: Person receiving the offer and has the
power to accept.

8. Elements of an Offer
•Three Elements of an Offer:
The offeror must manifest a present contractual intent;
The offer must be communicated to the offeree; and
The offer must be certain and definite with respect to its
terms.
•Common Law: Price, subject matter, parties to the
contract, and the time of performance of the
contractual provisions.
•UCC (Exception): Price can be missing in contracts for
sale of goods between between two or more
commercial traders (merchants) who have had a
history of past dealings

9. Contractual Intent
•Present Contractual Intent: For the offer to have
legal validity, it must appear to an objective,
reasonable person that the offeror actually intended
to make an offer.

10. Communication
•Communication: For an offer to be capable of acceptance,
the offer must be communicated to the offeree.
The precise method of communication is left to the
discretion of the offeror.
Oral, written, telephonic, and mechanical means of
communication are all considered legally sufficient
methods of communication.
An offer can be made to a group, or class, of persons, any
of whom is capable of accepting the offer.
Newspaper Advertisements: Most newspaper
advertisements are only “invitations” to the public to
make an offer or to come to an establishment.
•Exception: The more certain and definite the words
used by the advertiser, the more likely it is that the
ad will be considered an offer.

11. Certainty and Definiteness
1. Price of the contract;
2.Subject matter of the contract;
3.Parties to the contract; and,
4.Time of performance for fulfilling the contract.

12. Price
•No offer If the parties indicate in the offer that the price
will be left for future negotiations. Without knowing an
essential term, the parties cannot have mutual assent.
•UCC (Exception): Price can be missing in contracts for
sale of goods between between two or more commercial
traders (merchants) who have had a history of past
dealings.
•Any attempt by the parties to create a situation in
which one side has total discretion with respect to filling in
the terms will fail because of vagueness and indefiniteness.
•“Fair” is a subjective term. Terms such as a “fair profit,”
“fair price,” or “fair rate of interest” are too uncertain to be
enforceable.

13. Subject Matter
•Ambiguity: More than one interpretation – Can’t be
ambiguous!!
•Exception: Alternate Offers: Making alternative
proposals does not necessarily mean that the offer is
uncertain. Provided that each alternative is certain
and definite, the offeror is considered to be making
two offers. Acceptance of one cancels the other.
•Exception: Outputs Contract: In an output contract,
one party agrees to purchase all of the output of the
other party for a specified price.
•Exception: Requirements Contracts: If one party
agrees to purchase from a supplier all supplies
actually used during a given period.

14. Parties
•The offer is only open to the offerees.
The offer creates a power of acceptance in the
offeree. Therefore it is important to determine
who is capable of accepting the offer.
•Class: Group of Offerees
Any member of the class may accept the offer

15. Time for Performance
•Offers should not last indefinitely
•Time is of the Essence Provision: Such provisions create
urgency!
•If the parties neglect to mention time, the court will
interpret “reasonable time” as the intent of the parties.

16. Chapter 3
Acceptance
•Definition: Agreement to the proposal or offer by
another party.
•Mutual Assent: Meeting of the minds
Offer and Acceptance Combined.

17. Varying Terms
•Common Law:
Mirror Image Rule: Acceptance must “mirror” the
offer. Any variation is a counter offer.
•Uniform Commercial Code (exception) Terms can
vary if the contract is for the sale of goods between
two merchants.
Varying terms become part of the contract unless:
•The terms materially change the offer (case-by-
case basis)
•The offeror objects to the varying terms within
10 days.

18. Silence as Acceptance
•Common Law: Silence is not an acceptance, even if the
offeror says that silence will constitute acceptance.
Exceptions:
•Offeree solicited the offer.
•Implied in fact contract.
Uniform Commercial Code: Merchant can accept
by shipping goods.

19. When the offer cant be revoked
Option Contract: For consideration, an offeror
agrees to hold the offer open exclusively for the
option holder, or his transferee, for a specified
period of time.
Firm offer: means an irrevocable offer made by a
merchant (UCC).
•Consideration is not necessary for a firm offer.
•90 days.

20. Mailbox Rule
•Acceptance is effective upon Dispatch
•Revocation is effective upon Receipt
Exception: Option Contract: Acceptance is
effective upon receipt (offers left open for
consideration).

21. Termination of the Offer
•Rejection by Offeree:
•Revocation by Offeror:
•Lapse of time.
•The death or destruction of the subject matter.
•The death or insanity of the Offeror or Offeree.

22. Effect of Termination
•Once an offer has been terminated, either by act of
the parties or by operation of law, it can no longer
be accepted.
•Acceptance after termination = new offer or counter
offer.
•Parties change positions.

23. Chapter 4
Consideration
•Definition: A benefit conferred or detriment incurred
at the request of the other party.

24. Mutuality of Consideration
•Quid Pro Quo: Consideration applies to both parties
•Mutuality of Consideration: applies to both parties
[each party must give and receive consideration].
Bilateral Contracts: Promises made by both
parties is consideration
Unilateral Contracts: The act is consideration, and
its performance creates a duty to perform on the
part of the promisor.

25. Benefit vs. Detriment
•Benefit Conferred: is the exchange of the exact
object or service described in the contract.
•Detriment Incurred: For a “detriment” to qualify as
consideration, the person incurring the detriment
must:
1. give up a legal right,
2. at the request of the other party,
3. in exchange for something of legal value.

All three elements must coexist for the detriment
to qualify as consideration.

26. Five Circumstances Where
Consideration Fails
1.Past Consideration
2.Moral Consideration
3.Gifts
4.Illusory promises – Discretion to accept held
with the offeror
5.Pre-existing Duty Rule

27. Lack of Consideration
5. Pre-existing Duty Rule: Promises to do that which
one is already bound to do are not consideration.
•Common Law Exception: a preexisting duty may
be consideration for a new agreement if:
1. New/different consideration
2. Ratify voidable obligation
3. the duty is owed to a third person
4. unforeseen circumstances
•UCC Exception: Can modify under “Good Faith”.
Two Merchants.

28. Sufficiency of Consideration
•Buyer/Seller Beware: Courts will generally apply the
doctrines of buyer/seller beware:
•Nominal Consideration: small monetary value relative
to the consideration for which it is exchanged, is
always immediately suspect by the law. ($1 for the
sale of a car between strangers).
•Sham Consideration: Gifts – not sufficient.
•Conditional Promise: Provided that the consideration
promised has legal sufficiency, the contract will be
valid.

29. Promissory Estoppel
•Definition: Promissory estoppel is a doctrine originally
established by the courts of equity.
1. A promise was made.
2.A change in position of the promisee has occurred as
a result of the reliance of the promise (detriment).
3.The promisor intends on breaking the promise.
4.It would be inequitable or unfair for the promisor to
go back on the promise.

30. Quasi-Contract Distinguished
•Definition: There is no intention to contract, but the
plaintiff gives some benefits to the defendant, who
knows that the plaintiff expects compensation; it would
be unjust not to award the plaintiff damages.

31. Accord and Satisfaction
•Accord and Satisfaction: Mutual detriment (forbearance of
the right to sue) constitutes sufficient consideration for the
new agreement. Accord and satisfaction occur when both
parties agree to accept a performance of the contract
different from that originally agreed.
1. a valid contract;
2. a dispute between the parties with respect to that
contract; and
3. an agreement to compromise the dispute rather than
sue.

32. Personal Guarantee
•Guarantee: is a written promise to answer for the debts
of another (ie: Mortgages and Leases).
•Guarantor: Person making that promise.
•For the guarantee to be valid, the following requirements
must be met:
1. a valid contract is entered into between two or more
parties;
2. the guarantor creates the guarantee at the time the
contract is executed; and
3. the guarantee is in writing.

33. Chapter 5
Legality of the Subject Matter/Capacity
•Contracts that are entered into for an illegal purpose
are not enforceable.
1.Malum in Se: Violation of these rules go against all
public policy, and contracts violating them are
completely void and unenforceable.
2.Malum Prohibitum: Minor illegalities, those laws
created by statute that bar actions which are not,
in and of themselves, morally reprehensible.
Malum Prohibitum is a prohibited wrong, or
something prohibited by statutory regulation.

34. Legality of the Subject Matter
•Malum in Se: Violation of these rules go against all
public policy, and contracts violating them are
completely void and unenforceable.
Felonies.
Contracts in restraint of trade.
Contracts found to discriminate against a
protected category of citizen (race, age, sex,
national origin, and so forth); and
Contracts that are deemed unconscionable.

35. Legality of the Subject Matter
•Malum Prohibitum: Minor illegalities, those laws created by statute that
bar actions which are not, in and of themselves, morally reprehensible.
Statute of Frauds: requires certain contracts to be in writing
by statute.
Usury Laws: regulate the legal rate of interest that can be
charged for extending credit (unenforceable).
 Gambling: In certain areas where the statute do not allow
gambling.
 Licensing Statutes: Any contract that would violate the
government licensing statute.

36. Legality of the Subject Matter
•Malum Prohibitum: Minor illegalities, those laws created by statute
that bar actions which are not, in and of themselves, morally
reprehensible.
Statute of Frauds.
1. contracts for an interest in realty;
2. contracts that are not to be performed within one year;
3. contracts in consideration of marriage;
4. guarantees;
5. sale of goods valued at over $500; and
6. executors’ promises to pay the decedent’s debts.
Usury Laws.
Gambling.
Licensing.

37. Contractual Capacity
1.Age
2.Mental Capacity
3.Alcohol
4.Drugs

38. Age
•Age of Majority – Adulthood (18+).
•Minority: Individuals under the age of 18.
Minors: Children between the age of 14 and 18.
Natural Infants: Children younger than 7 (too young to
contract)
Children of Tender Years: Children between the ages of
7 and 14 (generally too young to contract).
Emancipated: Emancipated minors are those no
longer under the legal care of an adult; they are
responsible for all their own actions.

39. Age
•Minors may avoid contracts they enter into at any point up
to reaching their majority without being in breach of
contract. (Ie: Car Sale Example)
Exception:
•Minors cannot avoid items deemed essential to
support life such as food, clothing, shelter, and
medical aid (Necessaries).
•Emancipated minors cannot avoid contracts in most
cases.
•Minors cannot avoid contracts for education or
marriage (most states).
•Minors cannot avoid Contracts for voluntary military
enlistment simply because of age.

40. Mental Incapacity
Look at whether they are completely incapacitated or
suffer from occasional mental lapses.
•A mentally deficient person lacks contractual
capacity. If the person is in a mental institution, this
lack of capacity exists until such time as he is
adjudged mentally competent by an appropriate
authority.
•If a person suffers occasional mental lapses and is
not confined, his mental capacity is determined by
the nature of the contract and whether or not he
understands the nature of what he is undertaking.

41. Alcohol and Drugs
•A person who is under the influence of alcohol or
drugs is incapable of entering into a valid contract.
•The incapacity is only temporary.
•When the effect of the alcohol or drug wears off,
provided no other problems exist, the person is
considered to be contractually capable once again.