Chapter 9 Introduction to Contracts The essence of a contract is that it is a legally enforceable promise or set of promises When a set of promises has the status of contract a person injured by a breach of contract is entitled to call on the government courts to force the breaching party to honor the contract Freedom of contract idea that contracts should be enforced because they are the products of the free wills of their creators who should within broad limits be free to determine the extent of their obligations Standardized form contracts contracts that are preprinted by one party and presented to the other party for signing In most situations the party who drafts and presents the standardized contract is the party who has the most bargaining power and or sophistication in the transaction To qualify as a contract a set of promises must be based on a voluntary agreement which is made up of an offer and an acceptance of that offer In addition there usually must be consideration to support each party s promise Contract must be between parties who have capacity to contract and the objective and performance of the contract must be legal Shrinkwrap contracts packaging software in shrinkwrap and when shrinkwrap is broken contract is formed Unilateral contracts only one party makes a promise Bilateral contracts both parties exchange promises and the contract is formed as soon as the promises are exchanged Valid contract one that meets all the legal requirements of a contract Unenforceable contract is one that meets the basic legal requirements for a contract but may not be enforceable because of some other legal rule Voidable contract those in which one or more of the parties have the legal right to cancel their obligations under the contract Void contracts are agreements that create no legal obligations and for which no remedy will be given Express contract parties have directly stated the terms of their contract orally or in writing at the time the contract was formed Implied Contract when the surrounding facts and circumstances indicate that an agreement has in fact been reached an implied contract has been created Executed contract a contract is executed when all of the parties have fully performed their contractual duties The contract is executor until such duties have been fully performed Two bodies of law governing contracts Article 2 of the UCC and the common law of contracts Application of Article 2 expressly applies only to contracts for the sales of goods Goods are tangible movable personal property Article 2 does not apply to service contract Hybrid Contract one with goods and services In determining if Article 2 is applicable a court will ask which element goods or services predominates the contract Unconscionable contract one that is grossly unfair or one sided Merchants are held to a higher standard for being considered professionals in whatever specific area the good they are selling falls into Quasi contract unjust enrichment or contract implied in law it represents an obligation imposed by law to avoid injustice not a contractual obligation created by voluntary consent No one can be unjustly enriched by another Promissory Estoppel in numerous situations one person may rely on a promise made by another even though the promise and surrounding circumstances are not sufficient to justify the conclusion that a contract has been created because one or more of the required elements are missing Theory Key Concept Remedy Contract Voluntary Agreement Enforce Promise Quasi Contract Unjust Enrichment Reasonable value of services Promissory Estoppel Foreseeable Reliance Enforce promise or recover reliance losses Chapter 10 The Agreement Offer The person who makes an offer the offeror gives the person to whom she makes the offer the offeree the power to bind her to a contract simply by accepting the offer To distinguish an offer the courts look at three requirements 1 look for some objective indication of a present intent to contract on the part of the offeror 2 specificity or definiteness in terms of the alleged offer 3 look to see whether the alleged offer has been communicated to the offeree If a reasonable person familiar with all the circumstances would be justified in believing that the offeror intended to contract a court would find that the intent requirement of an offer was satisfied even if the offeror himself says that he did not intend to contract A proposal that fails to state specifically what the offeror is willing to do and what he asks in return for his performance is unlikely to be considered an offer One reason for this requirement is that definiteness and specificity in an offer tend to indicate an intent to contract where as lack there of tends to indicate that the parties are still negotiating and have not yet reached agreement Difference between UCC Section 2 204 on contract formation and classical common law says that sales contracts under Article 2 can be created in any manner sufficient to show agreement including conduct which recognizes the existence of a contract So if the parties are acting as though they have a contract by delivering or accepting goods or payment this may be enough to create a binding contract even if it is impossible to point to a particular moment in time when the contract was created The Code s gap filling rule allows courts to fill contract terms left open on matters of price quantity delivery and time for payment when such terms have been left open by the parties Generally speaking advertisements for the sale of goods at specified prices are not considered be offers Rewards advertisements offering rewards for lose property information etc tend to be viewed as unilateral contracts After a court has determined the existence and content of an offer it must determine the duration of the offer Was the offer still in existence when the offeree attempted to accept it If not no contract was created and the offeree is treated as having made an offer that the original offeror is free to accept or reject The general common law rule on revocations is that offerors may revoke their offers at any time prior to acceptance even if they have promised to hold the offer open for a stated period of time Firm offer irrevocable for a period of time In contrast to an option however a firm offer does not require consideration to be given in exchange for the offeror s promise to keep the offer open To be a firm offer the offer must 1 be made by an
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