Chapter 9

Introduction to
Contracts
1

Contract Theory
Contracts function to encourage
members of society to enter into
cooperative arrangements of such
variety that the law cannot
possibly anticipate them all.

The principle of freedom of contract says lets

not prejudge the value of a cooperative arrangement
no one has ever heard of before.

Judicial
Restraint. Court does not re-write
deal but enforces it, whether it
was wise or foolish.
Result: more predictable, less flexible
Activism. Court will modify deal,
create a deal or nullify a deal, if
the deal would be unjust.
Result: less predictable, more flexible

The whole duty of government is to

prevent crime and to preserve
contracts.
- Lord Melbourne, British Prime
Minister, 1779-1848

Types of Contracts
Offer for Bilateral and Unilateral
Express and Implied
Executory and Executed
Valid, unenforceable, voidable
and void

Offers for
Bilateral and Unilateral Contracts
Bilateral - Both parties make a promise.

Unilateral One party makes

a promise that the other party
can accept only by doing something.

Express and Implied Contracts

Express contracts the two parties
explicitly state all important
terms of their agreement.
Implied contracts the words and
conduct of the parties indicate that
they intended an agreement

Executory and Executed Contracts

Executory when one or more
parties have not fulfilled their
obligations.
Executed when all parties have fulfilled their
obligations

Sources of Contract Law

Common law Most of contract law evolved

in the common law over many centuries
Uniform commercial code (UCC) 1952.
governs commercial matters e.g. sale of
goods, negotiable instruments, bank deposits,
letters of credit, investment securities,
secured transactions (not services). All states
have adopted