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Contract Outline

Contract Outline

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Emmanule Ulubiyo Prof. MovsesianContracts I Fall 20091
Contract
:
is a promise or a set of promises for the breach of which the law gives a remedy, or theperformance of which the law in some way recognizes as a duty (Rest. 2d. of K §1)
I.
 
P
romise
:
is a manifestation of intention to act or refrain from acting in a specified way, somade as to justify a promise in understanding that a commitment has been made (Rest. 2d. of K §2)
Rul
es of Contract is fo
u
nd:
i.
 
Case book 
(common law) law common to all realms case decisions from judgesa)
 
Binding to all parties involvedb)
 
Stare Decisis to future litigationii.
 
U
CC
 statutes adopted by state legislatorsa)
 
G
overns only certain categories of contracti.
 
Art. III of UCC±±governs contract for sale of goods.a.
 
G
oods UCC 2-105 defines goods as moveable object at thetime of contract for sale (UCC does not provide all laws on saleof goods).b)
 
Binding on courts±±interpreted by Cts but change or overruleiii.
 
estatement
±±Legal encyclopedia±±restatement of the law as it existi.
 
Persuasive authority but not bindingii.
 
Can be adopted by Cts±± adopted portion becomes binding on that stateor jurisdiction
P
o
l
icy
easons: Why do we have K? Or enforce
l
ega
ll
y in Co
u
rts system?
1.
 
Facilitates exchange of goods and services2.
 
Increase economic efficiency3.
 
Facilitates private transactions of goods and services4.
 
Avoid huge litigation costs±±reduce thru predictability5.
 
Moral value±±right thing to do.
Tensions blw formalism & Pragmatism as mode of legal reasoning±±methods lawyer and judgesuse to resolve legal problems.
F
orma
l
ism:
advocate resolving legal problems through logical application of axiomatic principles (rules)±± apply rules to fact.E.g. Syllogistic:Principle: Only Ks in Latin are enforceableFacts: This K is in EnglishConclusion: K is not enforceable
P
ragmatism: ³
The life of the law has not been logic; it has been experienced´ Oliver WendellHolmes
Court should consider which result makes more sense as a matter of social policyE.g. Syllogistic: Principle: Only Ks in Latin are enforceableFacts: No one speak Latin todayConclusion: non-Ks are enforceableK oscillate b/w Formalism and Pragmatism
y
 
Formalism dominate in the first part of the 20
th
century
y
 
Realism dominated in the second part of the 20
th
century
y
 
Today ³The New Formalism´±±guessing both
 
The idea is Courts should notconsider policy (aside fromthose contained in the rules)Judges should not look at realworld consequencesThe key difference ishow much discretionis given to the judge
 
2
y
 
At all times, K law contains both elements
1
.
 
Types of 
P
romises:A.
 
Express
P
romise
is one in which the promissory intention is manifested by words
 
Need not be written
B.
 
Imp
l
ied
P
romise
two types±± Implied-in- Fact & Implied-in-Law1.
 
Imp
l
ied-in-
F
act
is one in which the promissory intention is manifested by conductrather than words. e.g. raising hand in an auction
Objective Theory of K:
K law look to Objective Intent it is not simply what ³you´ intent butwhat ³others´ understand you to mean.
y
 
Objective:
having an existence outside the mind of subject (what I think you mean)
y
 
S
u
bjective:
Having an existence inside the mind of The subject (what you think)2.
 
Imp
l
ied-in-Law
(Quasi)
K
a.
 
No manifestation of intent either express of implied-in-factb.
 
Imposes a promise on a party in the interest of justice
y
 
P did not intend to make a promise, but he should have
y
 
Ct will infer a promise to promote a fair result
E
l
ements of Q
u
asi K:
1.
 
confers a benefit to 
 
2.
 
Appreciation by 
 a.
 
 knew about the benefit and did not decline it
 b.
 
The unconscious 
 
3.
 
Circs are such that it would be unjust for  to retain the benefit withoutreimbursing
.
 
y
 
Reasons for having Implied-in-Law
 
o
 
To promote fairness
 Changed Circ
u
mstances:
Unexpected/Anticipated
 
The Traditional Rule: No excuse
 
P
acta
S
u
nt
S
ervanta
³agreement must be observed´
 
F
orce Maje
u
re C
l
a
u
se
Irresistible Force In the event of something unexpectedHappen, the party need not perform.
 
Impracticability and Frustration non occurrence of the event is thebasis assumption why the partiesmade the contract
2
.
 
emedy:
Three Measure of Damages:1.
 
Expectation Meas
u
re:
Using the expectation measure acourt will attempt to put the injured party in as good aposition had the contract been performed as expected. Injured party is given the benefit of the bargain.Expectation Damages:
 
Ct are reluctant to give
 
Ct suspicious of P¶s claim
 
Judged against indeterminable point
y
 
Jury sometimes are sympathetic to P and may award damagesw/o solid grounds
 
The test for K is an
objective test
that asks what a reasonable P wouldunderstand the promissory to intendThe Court will not protect partiesthat did not protect themselves. Theavailability of the clause made thecourt stricter about excuse b/c suchclause could have been added.
 
3
2.
 
e
l
iance Interest:
The measure that tries to put the injured party in the position that thecontract had never been made.3.
 
estit
u
tion Interest:
the measure of damages that will reimburse the injured party for whatever benefit he has conferred on the breaching party (defendant).
*None of these are punitive in nature. The court does not try to impose greater damage award greater than what the injured party lost. Want to deter futurebreaches not contracts.
P
 
is allow to elect which damages he/she seeks
II.
 
Consideration
:
K Theories:
P
ositive
±± 
Normative±± 
 
Types of 
P
romises:
1.
 
U
ni
l
atera
l
Contract
: an exchange of a promise for performance (
i.e.
I promise to giveyou $50 if you give me your case book«.when you give me the casebook, we have alegally enforceable contract--terms of which I now owe you $50).
K
exists when you give him the cash and not before2.
 
Bi
l
atera
l
Contract:
a promise exchanged for a promise; a contract is formed the momentboth promises are exchanged (
i.e.
I promise to give you $50 if you promise to give meyour casebook (and you promise)).
K
exists the moment promise was exchanged
In both contracts there is an exchange. To have a bargain, you must have an exchange.
Why do contracts have to have Consideration?
 
Cautionary: Serves as a formality that alerts people that they are doingsomething with legal consequence.
 
Evidentiary: Evidence for third parties that there is a legally bindingarrangement.
 
Channeling: Screening mechanism; not every promise can beenforced.
 
Economic: Leads to efficiency in the market place.
What constit
u
tes Consideration? Bargain + Lega
l
Detriment
Consideration requires
a bargained exchange
in which each party incurs a
l
ega
l
detriment
.
a.
 
Bargained for Exchange
Consideration is a bargained-for performance or returnpromise which is
given by the promisee in exchange for the promisor's promise.
 Consideration need not be furnished by or to the parties themselves as long as it is part of the bargained exchange.
i.
 
Even if the promissor's promise induced performance or a return promiseby the promisee, if such inducement was not sought by the promisor,there is no bargained exchange. In such circumstances, the promise ismerely an unenforceable gift. See Kirksey v. Kirksey
 b.
 
Lega
l
Detriment
The promisee must incur a legal detriment in exchange for thepromise.
Detriment can be an act or a promise
.Legal detriment exists where:
i.
 
promisee does or promises to do something he has no legal obligation to do; or 
ii.
 
refrains or promises to refrain from doing something he has a legal right to do.
Exceptions to Consideration: I-VI
I.
 
Bargain/Conditiona
l
Gift Test:
i.
 
If the detriment on the part of the promisee confers a benefit on the promisor then itis a bargain (mutually reciprocal).

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