Business Law Contracts

Contracts: A contract is an agreement between parties to perform some act (or refrain
from performing some act), the enforcement of which will be given the backing of legal
authority.
A contract is a promise that the law will enforce.
Elements of a contract (have to have all three to be a contract)
1. Offer
2. Acceptance
3. Consideration (Bargain for exchange)
Several Kinds of Contracts
1. Express Contract
a. Can be either oral or written, generally
b. May be bilateral (two parties promise each other. Buying a candy bar, he gives me
candy bar and I give him money) or unilateral (I will pay the first person to paint my
house 500.00. Invites performance. )
2. Quasi Contract (Quasi means, not really, not actually contract.)
a. Based on the theory of unjust enrichment. (even if there are no contract, if they
other person benefited from your behavior, than you should get paid. For example: I
finished painting your house, but you didnt pay me that 500.00 because you said it
was a jokewell, you still have to pay me.)
b. Used only when there was no valid contract, but equity demands that the situation
be treated as if there were
3. Implied in fact Contract
a. Formal elements of contract not present, but actions of the parties indicate an
intent to contract.
i. Even if there was no offer, ppl that behave in a manner that it was contract. If
you went into an accountant and ask for advice, there is no contract. But the
next day you go to the secretary and and give her files to give to the
accountant. So basically you just decided to pay the accountant
Offers
An offer is the manifestation of willingness to enter into a bargain, so made as to justify
another person in understanding that his or her assent to that bargain is invited and will
conclude it.
Elements of offer
1. Manifestation of present contractual intent.
2. Certainty and definiteness of terms.
3. Communication to the offeree.
Note: Intent to make an offer to required, but the test for whether or not such intent existed is to
look to objective manifestations of such intent.

Example: Coat 50 % off. This is just a fact. The first person in the door will get a coat for 5
dollars. This is an offer. (pepsi case, points and harrier jet, and case base on if this was an offer?
A reasonable person would know that it was a joke). The plaintiff lost the case.
CONTINUED LECTURE (September 16, 2010, Thursday)
One of the things he likes to talk about What you are going to find. Is the law isnt often what
were told there is. Mostly, its totally interpretive.
If its offer to a reasonable person, then its an offer. You cant just follow the letter of the law and
just be ok. Is a reasonable person going to believe that there was an offer and acceptance?
Alright Ill buy your car. It doesnt have a price. Usually you always have to price element in
order for it to be an offer.
Offeror (person making an offer). Offers can be revoked. Before you have a chance
to accept, the offeror can say nvm.
Revocation
1. Except in the case of an option contract (see below), the offeror has the power to revoke
her offer so long as acceptance has not yet been made.
2. Revocation should be clear and unambiguous and must be communicated in a reasonable
manner to the offeree(s)
3. Option Contract: a contract that, by the terms of its offer, is held open for acceptance for a
specified period of time (or a reasonable period of time, if the offer failed to specify.)
(example: sales to the offer of a home. So you make an offer on a house for 500,000. But a
person wants to buy it for 400,000 and says you have a 10 day period, you have a 10 day
period to make a decision [even if you reject the offer already]). Note: A reasonable time
for an offer, if not stated an amount of day for the offer, its usually a 30 day period for a
decision.)
Generally speaking, to revoke the advertisement you made, its reasonable to send out another
advertisement revoking the first offer.
ACCEPTANCE
Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a
manner invited or required by the offer. (Ex: I have this package and I want you to carry it across
the bridge and Ill pay you 50.00. And you get 2/3 way across and I decided that I dont need you
to carry it again and told you to come back. Well, you still have to pay me. Once performance
has begun replication is impossible.)
Unless the means of acceptance is specifically set forth in the offer, the offeree may accept the
offer by either words or by performance reasonable in the circumstances.
(note: click-wrap acceptance is legally binding, unless found to be unconscionable).
[Side note: Contract of adhesion (where you dont give someone a choice to even accept or not
accept) Unconscionability?]

Others way in which offers can fail

REJECTION
If the offeree rejects the offer, the offer is terminated (at least as to that offeree) unless the offer,
by its nature, could only be accepted by performance anyway.
LAPSE
(reasonable time period. If I make an offer and you never get back to me, the offer will expire).
Acceptance must be made either within a reaonbale time or within the timeframe provided by
the offer itself, otherwise, no K (or contract) is formed.
DEATH OR INCAPACTITY
Generally speaking, if the offeror dies before the acceptance is made, the offer is evaporate, vice
versa.
If either party to a potential contract either lacks the proper capacity (age, mental health, etc.) to
contract, or dies prior to the contract being properly formed, then no K.

Counteroffers (another mean where offer fails)

Ill buy your car for 1,000. Well, Ill sell it for 2,000.
Counteroffers eradicates offer. Erase them from legal memory.
Counteroffers made in response to an offer act as rejections of the original offer and as NEW
OFFERS, to be accepted or not by the new offeree (the original offeror)
(This is an artifact of the original, and now archaic, common law mirror image rule)

Another way to fail a contract

The Mailbox Rule
If I send you an offer by letter, I will buy your car for 1,000. That doesnt exist yet until you
receive it (until you open it and look at it). So now, you get that letter and look at it. You write to
me a letter back rejecting the offer. The minute you drop it in the mail box, it has legal effect.
Well, what if, you mail it to me in the mail and I wont get it to days later. The next day you
decided to want the offer. You decided to call him up and say you want the offer. And then I get
the letter well, the REJECTION STILL occurs. Once you drop it in the mail, it doesnt matter!
***Acceptances are effective when posted.
***Revocations are effective when received.
First Example:
1. On Sunday: A makes an offer to sell her car to B
2. Monday: A changes her mind and mails a revocation of Sundays offer to B
3. Tuesday: B mails a letter to A, accepting Sundays offer

4. Wednesday: B receives As revocation letter (mailed on Monday)

Contract? This is a contract. A has to sell a car to B.
E-mail does not fall into this Mailbox rule. Receive does not mean you read it, it means you
received.
Second Example:
1. Sunday: A makes an offer to sell her car to B
2. Monday: B mails A rejection of Sundays offer (rejection in mail does not arrive next day)
3. Tuesday: B Changes her mind and emails A an acceptance of Sundays offer
Contract? This is a contract. Emails are instantaneous.
Third Example:
1. Sunday: A offers to sell her car to B
2. Monday: B mails a letter to A, accepting Sundays offer
3. Tuesday: Bs acceptance letter has not yet arrives at As house. B speaks to A on the
telephone and rejects Sundays offer.
4. Wednesday: Bs acceptance letter (mailed Monday) arrives at As house. A drops the car
off at Bs house and wants her money.
You are communicating when you are dropping something in the mail.
This is a contract because B mailed a letter to A, accepting Sundays offer and when dropping
the mail, it doesnt matter, you are accepting the offer.
CONSIDERATION
1. Bargained for Exchange
2. Generally, the law takes no interest in the objective value of what is bargained for; a
mere peppercorn can suffice (so long as the consideration was not intended to be
insignificant on purpose, like selling your car for $1.00)
3. The parties must do something they otherwise would not have to do or refrain from doing
something it is their legal right to do.
Lets say your grandfather sits you down at thanksgiving and say I dont like the way youre
living. For you to quit drinking, smoking, partying, I will pay off your student loans. And then you
do so and then you get through college and then you tell your grandfather to pay off your
student loan. And then he said no, he said that so you can change yourself for the better. Is this
a consideration? Yeah because he made the offer and I performed. Although I benefited from this,
it was a different kind of benefitted.
Its not just doing something, it can be not doing something. Giving up the right to do something
is consider consideration.
Well, what if instead of giving up drinking, smoking, and partying, but like marijuana and drugs
instead, would this be consideration?
CONSIDERATION PROBLEMS
1. The Illusory Promise: looks like a contract, but doesnt have the ingredients to make a
contract. I promise to buy as many widgets as I want from you the buyer has not

legally obligated herself to buy any number of widgets and, thus, has given nothing up.
(you cant agree to agree. They fail because there is no consideration).
2. Pre-existing Duty: it is not consideration to promise to do a thing one is obligated to do,
nor to promise to refrain from doing something one is not privileged to do. (not
consideration: give me 30.00 or else Im going to punch you in the face.)
3. Unjust Enrichment and Promissory Estoppel (Stop or to hault): If a contract
would fail for lack of consideration, but one party has been materially, detrimentally hurt
by a reasonable reliance on the promise of the other party such that equity demands.
(stopping because of a promise. )
a. A clear and definite promise
b. That was relied upon by the promisee
c. Which reliance was justified (and foreseeable)
d. And to fail to enforce the promise would lead to an unjust result.
i. I.E.: Let say you have problems paying for school. And youre talking to his
friend about it. And his friend says to him: thats terrible, sign up for those
classes, buy the textbook, and his friend will pay for him. And then you go
buy the textbook and your friend decided to change his mind. Is this a
contract? Well, its clear and definite, but theres no consideration for his
friend. This could be an offer as a gift and a gift is not a consideration (this
could be an argument for his friend). Well, this is also unjustified because he
relied on the promise. Was this justified? Well, if my friend never paid his bill
then hes not reliable so this could not be justified, but in this case, he is
reliable so this is justified.
ii. Although theres no consideration, Unjust Enrichment and Promissory
Estoppel (Stop or to hault) This makes it enforceable at court.
Example: You have hired a taxi driver to drive you to Vegas and he want 1,000. You said OK and
will pay him when we get to Vegas. Well, you get to Cedar City, the taxi driver tells you that you
have to pay him $500 more if you want to go to Vegas. You get to Vegas. How much do you pay
him? $1000. This is because the driver isnt going beyond what he has to do (like drive to
California after that). This is illusory promise.
Consideration problems II
1. Contractual modifications require new consideration.
2. Past consideration is no consideration at all. (gave an example about giving about taking
care of someone and that someone is a famous NBA star now. And when you ask to get
something back out of it, this is past consideration.)
3. Gifts are not consideration.
Consideration Continued.
Strange wrinkles in contract law
Common Issues in Contract
1. Ambiguity as to terms (not clear. Generally, courts will look to the following, in order)
Example (for a.): You sell widgets. Second person decides to buy 500 widget (for $1 a
piece). And your employment cash out the check to begin shipping immediately. Well,
what kind of widgets did I buy? What is done if we dont know what to believe to? Failure
to totally be specific in a terms, doesnt violate it. It is still a contract. So you can say

a. Course of dealings between the parties

b. Standards within the industry or economic community
i. In the industry that in, you usually get blue widgets
c. Parol Evidence (to aid in interpretation of existing terms or to add a missing term).
Argue and sufficiently prove that there is ambiguity. Parol evidence would be this:
lets say I come and buy a car from him. He says that the car is new and your getting
a sweetheart deal on this car. And you go home and look at the car contract, it says
that it is sold as is. ? Evidence of draft, evidence of notes, hard evidence to get.
Lets say the price term is missing. You dont have a contract.
2. The Battle of the Forms
a. UCC 2-207 (the law wants deals to happens)
b. A situation that arises when two merchants are contracting
c. A merchant in this sense of the word has the meaning of any person or entity that
deals in the goods and services to be contracted for on a regular basis.
You and I are merchants. You sell widget and I sell machines to make the widgets. I send
you a contract for you to sign it. But you dont sign it. Instead, you have your lawyers and
make a new contract and send you a new contract to sign with my signature on it. Is this a
contract? No, not a consideration failure, but an acceptance failure. I have sign the
bottom, but she changed the contract and I havent agreed to that.
We do have a contract, the only thing is what are the term of the contract. If two regular
person dealing with this, it is not the case. It has to be two merchant being involved.
a. Attorneys fee (look for that).
3. The battle of the form (example)
a. Merchangt A and Merchant B are negotiating the purchase and sale of 1000 widgets
b. Merchant A sends a contract to Merchant B for signature.
c. Merchant B adds or alters provisions of that contract and returns it to Merchant A.
d. Is there a Contract?
e. Yes
f. But what are the terms of this contract?
g. They are whatever terms both versions have in common, plus whatever terms are
new UNLESS
h. Those new provisions MATERIALLY alter the contract or are EXPRESSLY objected to
within a reasonable time.
i. Missing terms are filled in by the court.
j. Material Terms are those affecting Price, Payment, Quality, Quantity
i. Delivery, or Liability /Dispute Settlement.
1. Express acceptance provision. (Write in the contract, clauses in
contract that prevent people to change it).
2. What if the contract is between a merchant and a non-merchant?
a. An artist want to buy widget and Im working on an art project. I
send a form of how many widgets I want and when. Well, you
change the contract and sent it back to me.
3. Then the differing or additional terms will be regarded simply as
proposals to be separately accepted or rejected.
4. Note: a contract will still exist as to any terms that are not disputed or
different!
4. The Statute of Frauds
Certain Contracts MUST be in a signed writing to be enforceable:

a. The sale of property interests in land (or leases to be longer than one year)
b. Contracts not to be fully performed within one year (note: if it is POSSIBLE for it to
be completed, even if only by Herculean effort, then the S.O.F does not apply.)
Example: (15.3 from the book). [example: pg 318. Damien promise to pay 300.00
to Gary for the rest of his life. Damien quits paying after 9 months. Contract was not
in writing. A lifetime, waiting for him to dies. Is a lifetime possible to be completed
in a year? NO. If the contract for something is longer than a year than it needs to be
in writing. ]
c. The sale of goods for more than $500
d. (note: exceptions are made for contracts that have been partly or wholly
performed.)
e. Promises to pay the deb of another (say my brother contracts with you to pay you
500.00 to for your notes for this class. You talk to me about my brother and says
that your brother seems like a dead beat and I say I will pay you. So you give him
the notes, and he doesnt pay you and you come to me to ask for money. And I
dont pay you. You so me, you will lose. Because IT HAS TO BE IN WRITING)
5. Tortious of interference with contract (with business relation)
a. The existence of a valid contract (or business relationship)
b. Knowledge of that contract (or business relationship) by the tortfeasor (the
defendant)
c. Intentional efforts on the part of the tortfeasor to induce one of the parties to the K
to breach. (make them want your widget instead buy saying oh the other persons
widget sucks, buy my widget. Mine are cheaper and better).
d. Breach
e. Harm to the other, non-breaching party.
6. Anticipatory Breach
A tells B that she will not be able to perform under the contract they have together, though, to
this point in time, she has fully performed. (monthly sending widget and cant do it anymore, but
you paid already for those widget).
This is an anticipatory breach and, if As communication that she will not be able to perform was
unequivocal ad it would be reasonable to do so, B may treat As communication as an immediate
breach if she so wishes. ( one person talk to the other, that is a Breach)
Excuses for Nonperformance
1. Unilateral Mistake
a. E.g., One party to a contract makes a grave error in the calculation of the
purchase price.
b. If that error either was recognized as such or should have been recognized by a
reasonable person in the industry, then this can be grounds upon which to either
negate the contract or substitute a new, corrective, price term.
c. Note: this is not the same as a business error, which variety of mistake does
NOT excuse performance.
Example: I sell a car on ksl and wanted to sell it for 12.000. but made a mistake and wrong 1200
instead. This is a unilateral mistake .
If Im selling the most expensive comic in the world 500. But really its worth 5,000. Then thats
your mistake. Its your fault for being dumb. Example: if I meant to sell it at 5,000, but wrote it at

500 this is a unilateral mistake and I have to prove that (tell judge that you have other people
that can testify for you because you tried to sell it to them for 5,000 ). WILL BE ON EXAM.
Mechanical error (honest error) instead of philosophical one (business or stupid error). Know
distinction.
2. Mutual Mistake
a. If both parties to a contract have made a material mistake about the same fact.
b. E.g., the two sailings of the Peerless. Two people make a contract. A person
wants the boat owner to ship something to the port of hong kong. The boat
owner says yes. But, both parties did not realized this. There were TWO ships
that were name the Peerless this is both at fault (mutual mistake). Example
about the golden idle.
3. Illegality
a. A contract to perform an illegal activity is no contract at all and, thus, is
unenforceable, excusing performance.
Excuses for None performance
4. Frustration of the Purpose
a. E.G., Krell, I will like to rent a room from you and get a window where I can watch
the parade below. That will be 100.00 for the room. On the day, it rains and the
parade is cancel. Krell wants his money back from the hotel. This is Frustration of
the purpose. Known to the party why he wanted the room. The manager knows
that it was for the parade and only for the Krell, so Krell gets his money back.)
5. Impracticability
a. Some intervening event has occurred, the nonoccurrence of which was a basic
assumption of the contract
b. The occurrence has rendered performance for one party extremely difficult
and/or expensive
c. That difficulty is beyond that which was anticipated by the parties.
i. So you hire someone to wash your car. You move so its impractical for
that person to fulfill the duty of the contract of washing my car.
ii. Im a contractor to build a home for you. I get on the land and it was a
boggy and on a marsh. (The land was not represented to me from what it
was presented to me. ) So this is impractical.
6. Impossibility
a. If performance of the contract is ACTUALLY, PHYSICALLY IMPOSSIBLE, the
performance is excused.
b. Note: not merely expensive or unexpectedly difficult. Courts take this literally: if
there is any possible way, with all the money in the world, to perform, then this
doctrine will not apply.
i. Example: if law says its illegal, then you cant do it. Or I was suppose to
paint your house and your house is swept away by a hurricane, so I cant
paint your house anymore (impossible).
Excuses For Nonperformance
7. Unclean Hands
a. If the plaintiff has acted in bad faith, equity might prevent their recovery for
nonperformance of a contract

i. Imagine that I hire you to reshingle my roof. And in the middle of the night
and I remove all the shingles. I cant sue you for that because Im the bad
person and doing it on purpose.
8. Laches
a. If the plaintiff has sat on their rights for an unreasonable amount of time, equity
may not award damages for nonperformance.
i. Like I was suppose to paint your house two years ago and you want to sue
me right now. Not going to happen, Laches. (knew or should have known)
ii. Example of squatters building a cabin on your property. You shouldve
known about it. If the persons been there for like 10 years, then it is there
land. (what if there is a fence build on firefighter property public property)
9. Fraud/Misrespresentation
a. If the plaintiff engaged in fraud or misrepresentation, equity may not award
damages
10.
Unconscionability
a. If the terms of the contract were unfair to one party to such a degree that it
shocks the conscience of the court, then nonperformance may be excused.
i. Someone offer her a loan of 60,000. This person charge her 20% interest
for month!!!! Outrageous! Beyond the pale!
(Usury: loaning money at predatory rate)
Remedies for breach of contract:
1. Damages (Benefit of The Bargain; expectation damages. You painted my house and I
didnt pay you. The money you should pay me and the profit that you couldve made.The
benefitted you couldve gotten. Money that I spent, and earn had I performed)
2. Damages (Reliances; were going to put the non breaching party in the position the party
was in before the contract. Put you back to the way you were back to the way you were
before the contract. Spend money I have paid for the paint).
3. Damages (Punitive; Where bad faith or unclean hands came into the equation. If someone
has been fraudulent punishing the bad actor. )
4. Damages (Liquidated; contract itself spells out what the damage will be. Like payment fee
on contract)
5. Damages (Nominal; judge dont like the case they had to hear. Like really stupid, its a
damage that we just have to award someone as a winner.)
6. Restitution (like reliance damages, remedies of equity can be anything (not money), we
contracted that you were going to buy my car for 1,000, I gave you my car, and you never
gave the money to me. Restitution is when you ask for the car, you want the car back. You
should always ask for everything in court!
a. Maltese Falcon? Exam? What? Usually he puts on exam.
7. Specific Performance (I want you do to what you contracted to do. I dont want the money
back, I want you to do what you said you would do in the contract)
8. Legal Fees and Costs
9. Rescission
10.Reformation (I would like you to change the term of this contract to reflect what it
shouldve been, falls in line with what my expectation was).

(Consideration: Money and promise (the delivering of cheeseburgers perhaps. The promise is the
consideration)
Kitt and Knights case. Knight paid Kitt lifetime of cheeseburger. Kitt breach this by stop paying.