Introduction to Contracts 04 28 2013 Nature of Contracts Not every promise is legally enforceable Contract law is ancient law but has evolved to reflect social change law merchant When a set of promises has the status of a contract a person injured by a breach of that contract is entitled to call on the government courts to force the breaching party to honor the contract State law 50 versions Private law between 2 individuals Purposes 1 Create certainty 2 Fairness 2 Consideration 3 Capacity 4 Lawful Object Elements of a contract no intent required 1 Agreement offer and acceptance Contract Classifications Unilateral Bilateral when contract is formed o Unilateral one promise in exchange for an act Frequent buyer card they have to give you a free product once you reach the amount needed o Bilateral one promise in exchange for another promise I promise to pay you if you pick up my dry cleaning Express Implied when contract is formed o Express oral written contract promising for exchange o Implied business exchange contract is implied between parties engaging in behavior that appears that they have a contract Executed Executory performance of contract o Executed both sides have performed o Executory neither side has yet performed one side has performed but the other side hasn t contract is in process of being performed Valid voidable void o Valid ready for contract to be enforced o Void court won t enforce contract o Voidable contract will be enforced unless you raise something that will get you out of it depends if one side raises correct legal reason to get out of the contract Sources of Contract Law Common law service law made by judge Uniform Commercial Code sale of goods only Convention on the intentional sale of goods CISG treaty large group of countries U S has signed applies if you re doing business with another country and they have signed if they did then convention applies UCC Sale of goods Goods tangible movable personal property Doesn t apply to services intangible property stocks intellectual property real estate Mixed sale situation Shelby vs Aviation whether goods or services predominates in the contract look at everything in the contract o Gravamen test focuses on claim part of contract at issue o Predominant factor test Non contract duties Quasi contract as if like a contract equity law what s fair or moral applies when there s unjust enrichment Promissory estoppel promise that isn t what you think actually harmed you wasn t an actual contract Pass V Shelby Aviation mixed sale situation Shelby aviation is being sued due to failure of bolts in plane to withstand turbulence Pass dies Predominant factor test us used o 1 language in contract 100 hour inspection o 2 nature of business is service allow customer to bring their own parts they don t sell parts o 3 reasons parties entered contract annual inspection o 4 amount charged services vs goods Reverse court decision Shelby aviation didn t provide goods all factors are met motion to dismiss If they used gravamen test they would have looked at specific part probably would have a different outcome of the case Hurdis Reality V Town of North Providence Hurdis Reality having sewage problems on property line he hired private sewer contractor and he repaired pipe Hurdis tried to get reimbursed for the money he spent and the town wouldn t Hurdis sued under quasi contract theory The city had a duty to maintain sewer and they knew he was going to fix it he had to get a permit through the town Court rules in favor of Hurdis town has to reimburse him Holt V Home Depot Holt complained to management and was terminated Home Depot had a promise that employees wouldn t be terminated if they complained which was in their handbook Home Depot claims handbook wasn t a contract Promissory estoppel no contract needed o 1 promise o 2 reasonable reliance o 3 actual reliance o 4 injustice Home Depot s motions were denied in favor of Holt Performance Remedies 04 28 2013 Breach of Contract Material breach vs non material breach o Material breach can cancel contract paint square on wall o Non material breach substantial performance can ask for reimbursement of cost to finish painting house paint 80 of house Did breach deprive part of reasonable expectation Factors o Magnitude of breach o Good faith o Timing o Extent that injured party compensated by damages Anticipatory Breach Excuses Anticipatory breach occurs if party indicates the party is unwilling or unable to perform Excuses for non performance o Impossibility death supervising legality something happens in between time of contract destruction of subject matter o Impracticability needs to be unforeseeable ex performing contract will force company to bankruptcy labor strike unforeseeable force majur clause superior force deals with impracticability ex natural disaster Remedies for Breach of Contract Legal remedies many damages o Compensatory damages o Nominal damages o Liquidated contractual damages pre agreement clause in contract that says how much they will pay you if they breach o Punitive damages in certain circumstances usually in it intentional torts Equitable remedies o Specific performance or injunction Specific performance something specific to do ex finish painting Injunction enjoin order to stop doing something injunction to stop stealing trade secrets Restitution o unjust enrichment Compensatory Damages benefit of the bargain Loss of value of performance the plaintiff expected expectation interest or losses suffered in reliance on other party promise Seller failure to perform difference in contract price and market reliance interest price Seller defective performance difference in value as warranted and value in defective condition plaintiff chooses one of the first three Consequential Special ex lost profits Incidental money after breach to avoid future loss Limitations on Legal Remedies Reasonable certainty Foreseeable to other party ex the other side could have seen if they breached you would lose profits Duty to mitigate duty to minimize damages minimize cost of damages jury can reduce damage award by you failing to mitigate your own damage The Agreement Offer 04 28 2013 Definition of an offer A promise Conditional on an act return promise or forbearance refraining from doing something Parties to a contract Offeror makes the offer Offeree receives the offer Offer Requirements Parties to a contract must have o 1 intent to enter binding agreement objective theory reasonable
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