College of Law

Contracts

Introductory Module
Fall 2023
Prof. César F. Rosado Marzán, PhD, JD
Index Card
Name, last name, and preferred pronouns (if any)?
Undergraduate institution and major?
Any graduate education?
Any relevant work experience?
Why law school?
Favorite TV show?

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Pedagogical Style
Cold-calling and Quasi Socratic
Small group discussion
Lecture with PowerPoint
Self-assessed midterm and module quizzes with asynchronous
video lectures
Encourage:
• Attend office hours (but be respectful of professor’s and colleagues’
time)
• Form study groups

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Analyzing a Ks Case
Facts
• Who are the parties?
• What role do they play (construction company, farmer, a consumer,
etc?)
• What’s the parties’ bargain?
• Nature of controversy?
Issue
Rule
Holding

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Sources of Contract Law
Case law
Second Restatement of Contracts (R2K)
• And some sections of the First Restatement
Article 2 of the UCC
• And perhaps some sections of other
Articles.
CISG (only a few sections)

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INTRODUCTION
TO CONTRACT
LAW

Putting together the edges of

the puzzle
What is a contract?
An agreement between two or more parties creating obligations
that are enforceable … at law.
• Black’s Law Dictionary

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Bailey v.
West
Bailey v. West:
Core Lessons

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 Lesson 1:
For K implied in fact, P needs to
prove all elements of a contract
including
Bailey v. • Mutual agreement & intent to
West promise.
• Need not be express
• Can be implied from conduct.
K implied in fact is a K because
it is an enforceable agreement!
R2K § 4

A promise may be
stated in
• words
• either oral
• or written,
or may be inferred
wholly or partly from
conduct.
 • Note: Later, we will learn that the basic
elements of a contract are:
Bailey v. • Offer
West • Acceptance
• Consideration or Detrimental
Reliance (Promissory Estoppel)
 Lesson 2:
Quasi Contractual Liability (K
implied in law):
• P (Bailey) must confer
Bailey v. •D
benefit to D (West), and

West • must appreciate benefit and

• accept benefit in a way that
would be inequitable (unfair).
Quasi K is not a K!
 Holding:
No contract because there was no
mutual agreement or intent to
promise between Bailey (horse
Bailey v. sitter) and West (horse owner).
West At time alleged K was made,
horse sitter knew that there was a
dispute regarding the horse's
ownership; he did know with whom
he was creating a K.
 No quasi K because
• “[C]ontroversy surrounded [the horse’s]
ownership, plaintiff could not reasonably
expect remuneration from defendant,
• nor can it be said that defendant
Bailey v. acquiesced in the conferment of a
benefit upon him.
West • The undisputed testimony was that
defendant, upon receipt of plaintiff's first
bill, immediately notified him that he
was not the owner of ‘Bascom's Folly’
and would not be responsible for its
keep.”
R2K § 2
Promise…
• A promise
• is a manifestation of intention
• to act or refrain from acting
• in a specified way,
• so made as to justify a promisee
in understanding that a
commitment has been made.

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Bailey's Argument on Appeal

“West, through his authorized agent, Kelly, made a

promise to pay for Bascom’s Folly by delivering and
unloading the horse from the van at my stables.
I, in turn, by my conduct in taking control of the horse
promised to provide usual and ordinary services
associated with my business.
Since this conduct is the normal and typical way in which I
enter into engagements to care for horses in my business,
the reciprocating conduct meets the definition of “promise”
in Restatement Section 2 and a contract is formed through
the exchange of conduct promises.”
Objective
Standards
Preference for the "reasonable
person"
Lucy v.
Zehmer
 The law imputes to a
person an intention
corresponding to the
Lucy v. reasonable meaning of his
Zehmer words and acts.
See also R2K § 2
Comment B.
 We must look at the
outward expression of a
Lucy v. person as manifesting his
Zehmer intention rather than to his
secret and unexpressed
intention.
INDEFINITE
PROMISES
AND OPEN
TERMS
 Even though a
manifestation of intention
is intended to be
R2K § 33 understood as an offer, it
Certainty cannot be accepted so as
to form a contract unless
the terms of the contract
are reasonably certain.
 The terms of a
contract are
reasonably certain if
they provide the basis
R2K § 33 for determining
Certainty • the existence of a
breach and
• for giving an
appropriate remedy.
Trimmer v.
Van Bomel
 Agreement to pay an
amount sufficient to take
care of all of plaintiff’s
Trimmer v. “costs and expenses for
sumptuous living and
Van Bomel maintenance for the
remainder of his life” was
too indefinite to be legally
enforceable.
 “It is a necessary
requirement in the nature
of things that an agreement
Trimmer v. in order to be binding must
Van Bomel be sufficiently definite to
enable a court to give it
exact meaning.” (Citing
Williston)
The UCC
 Unless the context
otherwise requires,
UCC
this Article applies to
§ 2-102 transactions in
goods…
 Goods means
• all things
• (including specially
manufactured goods)
• which are moveable
UCC § 2- • at the time of identification
105(1) • to the contract for sale
• other than the money in
which the price is to be
paid, investment securities
(Article 8) and things in
action (right to sue).
UCC § 2-105(1)
Goods also includes the unborn young
of animals and growing crops and
other identified things attached to
realty…
CISG
Art 1: Elements for K to fall
under International
Convention for the Sales of
Goods (CISG):
• Internationality (between
at least 2 parties in 2
states that have ratified the
convention)
• Sales of goods.
Parties may opt out (See Art
6).
 Even though one or
more terms are left
open a contract for
sale does not fail for
UCC indefiniteness if the
§ 2-204 parties have intended
to make a contract
Formation and there is a
in general reasonably certain
basis for giving an
appropriate remedy.
Wagner Excello Foods, Inc. v. Fearn Int’l, Inc.
 Exclusivity sales K
where Buyer would buy minimum
Wagner quantity
during a five-year period

Excello subject to agreement

• on price term
Foods, Inc. • every 4 months
• And would extend on yearly basis
v. Fearn subject to notice of termination that
must be given 120 to 90 days before

Int’l, Inc.
K expired.
did not necessarily fail for indefiniteness.
Otherwise, court could invalidate quantity
term (and other parts of the K).
 (1) The parties if they
so intend can conclude
UCC a contract for sale
§ 2-305 even though the price
Open Price is not settled. In such
a case, the price is a
Term reasonable price at
the time of delivery…
 (4) Where,
however, the parties
intend not to be
UCC bound unless the
§ 2-305 price be fixed or
Open Price agreed and it is not
Term fixed or agreed
there is no
contract...
Bargain vs. Gift
The Requirement of Consideration
 (1) To constitute
consideration, a performance
R2K § 71: or a return promise must be
Requirement bargained for.
Of Exchange; (2) A performance or return
Types Of promise is bargained for if it is
Exchange sought by the promisor in
exchange for his promise and
is given by the promisee in
exchange for that promise.
 (3) The performance may
R 2nd 71: consist of
Requirement Of
R2K § 71:
Requirement Of
Exchange;
(a) an act other than a
Types Of promise, or
Exchange
ExchangR2K e;
Types Of
Exchange
(b) a forbearance….
Hamer v.
Sidway
 “Consideration means not so much
that one party is profiting as that the
other abandons some legal right in
the present, or limit his legal
Hamer v. freedom of action in the future, as
an inducement for the promise of
Sidway the first.”
***Note, however, that the
contemporary idea of consideration is
even broader. See R2K § 71.
St. Peter v.
Pioneer Theater
 St. Peter v. Pioneer Theater

In unilateral contracts,
Performing party
consideration is
accepts offer and
provided when promise
provides consideration
induces performance
through performance.
by the second party.
In K,
consideration
need not have
any monetary
value.
 If the requirement of
consideration is met,
there is no additional
R2K § 79 requirement of
Adequacy of • A gain, advantage, or
benefit to the promisor;
Consideration or
• a loss, disadvantage, or
detriment to the
promisee; or
• Equivalence in the
values exchanged; or
• “mutuality of
obligation.”
 European Nobility

• Set “their own low prices for everything,”

paid suppliers with “crappy gifts” and
“gestures,” not with money, and
oftentimes “at their own leisurely pace,” if
they paid at all.
• From Marion Fourcade, “The fly and the
cookie: alignment and unhingement in
21st-century capitalism.”

Corlys Valeryan, Westeros richest man, and member of the King’s council.
https://variety.com/2022/tv/news/house-of-the-dragon-steve-toussaint-racist-trolls-
1235347554/
Adam Smith, The Wealth of Nations
“It is not from the benevolence of the butcher, the brewer, or the
baker that we expect our dinner, but from their regard to their
own self-interest. We address ourselves not to their humanity
but to their self-love, and never talk to them of our own
necessities, but of their advantages. Nobody but the beggar
chooses to depend chiefly upon the benevolence of his fellow-
citizens.” Adam Smith, The Wealth of Nations

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Contract
Defenses:
Should we
enforce a
contract
with penalty
clause
calling for a
pound of
flesh?
Williams v.
Walker
Thomas
 Unconscionable Ks:
Williams v. • Substantive:
Walker • Were terms so extreme as
Thomas to appear unconscionable
according to the mores and
business practices at the
time and place?
 Unconscionable Ks:
• Procedural: Did party have
reasonable opportunity to understand
the terms of the contract?
Williams v. • For example, were important
Walker terms hidden in a maze of fine
print and minimized by deceptive
Thomas sales practices?
• Consider
• Education
• Bargaining power
(alternative choices)
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Court may:
• Refuse to enforce
unconscionable K, or
R2K § 208 • Only enforce non-
unconscionable part, or
• Limit application of
unconscionable term.
 “The principle is one
of the prevention of
UCC § 2-302:
Unconscionable oppression and
Ks Comment 1 unfair surprise …
and not of … superior
bargaining power.”
 If the court as matter of law finds
the contract or any clause of the
contract to have been
unconscionable at the time it was
made the court may
UCC § 2-302:
Unconscionable refuse to enforce the contract, or
K it may enforce the remainder of the
contract without the unconscionable
clause, or
it may so limit the application of any
unconscionable clause as to avoid
any unconscionable result.
 When it is claimed or appears
to the court that the contract or
any clause thereof may be
unconscionable the parties shall
be afforded a reasonable
UCC § 2-302: opportunity to present evidence
Unconscionable as to its
K
commercial setting,
purpose and
effect
to aid the court in making the
determination.
Karl Marx, Capital, Vol. 1
He, who before was the money-owner, now
strides in front as capitalist; the possessor of
labour-power follows as his labourer. The one
with an air of importance, smirking, intent on
business; the other, timid and holding back, like
one who is bringing his own hide to market and
has nothing to expect but—a hiding.

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Contract’s Normative Theories
Autonomy Theory

Law should enforce moral obligations.

And individuals have a moral obligation to
keep their promises.
Why? Because a promisor invokes a social
convention that the other party expects will
be honored.
Enforcing promises thus honors the will of
the promisor and that of the promisee. It
preserves the autonomy of both parties.
Economic Theory
K Law should create incentives
that:
• lower transaction costs,
• lower uncertainty, and
• increase social welfare – or that
make "everybody better off.“
Economic theory thus cares
about the rules' future
consequences.

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Pluralism

• Promises should be
enforced as long as the
result of such
enforcement in a
particular case conforms
to notions of fairness
and substantial justice.