It's day three of Thanksgiving week, and we're taking a break
from our regular schedule to focus on review and catching up.
I want to begin today by inviting you into the mental
universe of contracts. This is the study of promise,
obligation, reliance, and expectation, things people do
because they intend to order their affairs through private
agreement rather than public decree.
Contracts is the law's way of making human cooperation
predictable. When two people sit at a table
or exchange words by phone, they are often shaping legal duties
without realizing it. The law steps in to reinforce
those commitments not because it enjoys meddling, but because
society functions when promises count for something.
Now let's explore the fundamental idea.
A contract is a legally enforceable agreement.
Not all promises are contracts. Promises to meet for lunch or
help with chores tomorrow create moral obligations, not legal
ones. The law of contracts
distinguishes between social courtesies and agreements
intended to have binding consequences.
This intention is not about subjective feeling.
It is about objective manifestations.
The law does not ask what was in someone's heart.
It asks what a reasonable person would understand from the
party's words and conduct. Let's shift into the
architecture of contract formation.
The classic common law model teaches that contract arise
through offer, acceptance, and consideration.
Although modern doctrine has become more flexible, especially
under the Uniform Commercial Code, the traditional building
blocks still shape our understanding.
And offer is a manifestation of willingness to enter a bargain,
inviting another person to accept and create a binding
contract. If someone says I might sell you
my car, that is not an offer. It is an invitation to
negotiate. If they say I will sell you my
car for $5000, you may accept by handing me that check.
We have something much closer to an offer.
Offers must be definite enough to allow a court to determine
with reasonable certainty what the parties agreed to price,
Subject matter and essential terms must be identifiable
unless a governing code supplies defaults.
Continuing on, let's discuss acceptance.
Acceptance is the expression of agreement to the terms of the
offer. It must be communicated, though
communication can occur through words or conduct.
If someone offers to buy your bicycle for $100 and you nod and
hand it over, your conduct is acceptance.
Under common law, the mirror image rule required acceptance
to match the offer exactly, any deviation counted as a counter
offer. Modern practice is more
forgiving, especially under the Uniform Commercial Code, which
governs the sale of goods. Under the Uniform Commercial
Codes Battle of the forms provision, parties exchanging
forms with varying terms may still form a contract if their
conduct shows agreement. Now that offer and acceptance
are in place, let's examine consideration.
Consideration is what each party gives or promises to give in
exchange for the others promise. It transforms a bear promise
into a binding obligation. The classic formula describes
consideration as a bargain for exchange involving legal
detriment or legal benefit. This does not mean detriment in
the sense of suffering. It simply means giving up a
legal right. Promising to pay money is a
legal detriment because you are surrendering something you are
entitled to keep. Promising to refrain from doing
something you have the right to do can also serve as
consideration. Courts do not inquire into
adequacy. A peppercorn, as the classic
metaphor goes, can be sufficient consideration if it was part of
the bargain. Now let's take a moment to
explore why the doctrine of consideration exists.
It acts as a filter. It helps separate casual
promises from intentional contractual commitments.
It ensures that courts enforce bargains, not intentions.
Although some modern scholars criticize consideration as
formalistic, it remains a core feature of American contract
law. Now let's shift our attention to
another mechanism for creating enforceable obligations,
promissory estoppel. Promissory estoppel applies when
a promise, even without consideration, has induced
reasonable and detrimental reliance.
If someone promises you a job, you reasonably rely by turning
down another position, and the promise is withdrawn, courts may
enforce it to prevent injustice. Promissory estoppel is not a
substitute for bargaining, but it prevents unfairness when
reliance is foreseeable and substantial.
Continuing on, let's turn to the Uniform Commercial Code,
specifically Article 2, which governs contracts for the sale
of goods. Goods are movable things at the
time of identification to the contract.
Article 2 relaxes some common law requirements reflecting the
realities of commercial life. For example, a contract may be
formed even if the exact moment of formation is uncertain.
One or more terms may be left open if the parties intended to
make a contract and there is a reasonably certain basis for
giving a remedy. Price may be determined later or
by reference to reasonable standards.
Now that we have covered formation, let's examine
defenses to contract enforcement.
Even a properly formed contract may be unenforceable for various
reasons. These defenses arise from the
defects in the bargaining process or from public policy
considerations. Let's explore incapacity.
Minors, persons lacking mental capacity, and intoxicated
individuals may avoid contracts because they cannot form legally
binding intent. The idea is not paternalistic,
it is protective. Society recognizes that certain
persons cannot fully appreciate the consequences of their
commitments. Next, let's take a look at
duress. Duress involves wrongful threats
that induce a person to enter a contract.
If someone says sign this or I will destroy your property, the
resulting agreement is voidable. Economic duress may arise when
one party exploits another's financial vulnerability through
wrongful means. Now let's examine undue
influence. Undue influence involves
excessive persuasion by someone holding a position of trust or
dominance. It arises in relationships
involving dependency, vulnerability, or confidential
status. Elderly persons pressured by
caretakers often seek relief under the stock train.
Continuing on, let's explore misrepresentation.
Misrepresentation occurs when a false statement of fact induces
a party to enter the contract. If the misrepresentation is
fraudulent intentional deception, the contract is
voidable and may support damages.
If the misrepresentation is innocent, rescission may still
be appropriate. Materiality and reliance remain
key components. Let's shift to mistake.
Mistake occurs when parties misunderstand facts existing at
the time of contracting. A mutual mistake about a basic
assumption may justify rescission if it materially
affects the exchange and the affected party did not assume
the risk. A classic example involves the
sale of a cow believed to be barren.
When the cow is later found fertile, the assumption
underlying the price collapses. Unilateral mistake is harder to
prove. It may support relief if the
mistake is substantial, enforcement would be
unconscionable and the other party knew or caused the
mistake. Now that we have covered
mistake, let's examine unconscionability.
Unconscionability addresses extreme unfairness in both
process and substance. It requires procedural
unfairness, such as hidden terms or unequal bargaining power, and
substantive unfairness, meaning oppressive or one sided
provisions. Courts may refuse to enforce the
contract, sever the offending terms, or modify them to prevent
injustice. Next, let's discuss the Statute
of Frauds, A doctrine requiring certain contracts to be in
writing. Contracts within the statute
include those involving real property contracts that cannot
be performed within a year, guarantees marriage settlements
and the sale of goods above a statutory threshold.
The writing need not be elaborate.
It must simply memorialize essential terms and be signed by
the party to be charged. The Statute of Frauds prevents
fraudulent claims and helps ensure reliable evidence of long
term commitments. Continuing on, let's turn to
parole evidence. The parole evidence rule governs
the admissibility of extrinsic evidence to modify or supplement
a written contract. If the writing is intended as a
final integration, prior or contemporary statements may not
contradict it. Fully integrated agreements
exclude even consistent additional terms.
Partially integrated writings allow supplementation but not
contradiction. The doctrine protects the
primacy of written agreements while allowing some flexibility
in interpreting ambiguous terms. Now that we have surveyed
formation and defenses, let's explore contract interpretation.
Courts interpret contracts to determine the party's intent.
They begin with the plain meaning of the language.
But if terms are ambiguous, courts consider extrinsic
evidence such as course of performance, course of dealing,
and usage of trade. These interpretive tools reflect
commercial reality. Parties often rely on industry,
customs, or prior patterns of behavior to give meaning to
their words. Let's shift to performance.
Performance refers to fulfilling contractual obligations.
Conditions play a critical role. A condition is an event that
must occur before a duty becomes enforceable.
Conditions may be express, implied, or constructive.
Failure of a condition typically excuses performance.
Courts dislike forfeitures and may interpret ambiguous terms as
promises rather than conditions, especially when harsh
consequences follow. Continuing on, let's examine
breach. A breach occurs when a party
fails to perform as promised. The severity of the breach
matters. A material breach discharges the
non breaching party's obligations and may support
damages. A minor breach or substantial
performance means the contract remains enforceable, though
damages may be awarded for deficiencies.
Substantial performance appears frequently in construction
cases. If a builder completes 95% of
the work in good faith, the owner must pay the contract
price minus the cost of correcting defects.
Now let's explore anticipatory repudiation.
Anticipatory repudiation occurs when a party unequivocally
declares that they will not perform.
The non breaching party may treat this as a present breach,
suspend performance, and seek damages.
Under the Uniform Commerce Code. A party may demand adequate
assurance if they have reasonable grounds for
insecurity. Failure to provide such
assurance may constitute repudiation.
Now that we've addressed breach, let's discuss remedies.
Remedies aim to protect the injured party's expectation,
interest, reliance interest, or restitution.
Interest expectation damages placed the injured party in the
position they would have been in had the contract been fully
performed. Expectation is the default
measure. This requires calculating the
benefit of the bargain, often measured as the difference
between the contract price and the value received, plus
incidental and consequential damages.
Reliance damages reimburse expenditures made in reliance on
the contract. This approach is useful when
expectation damages are too speculative or when enforcing
the expected benefit would create injustice.
Restitution prevents unjust enrichment by returning to the
injured party the value of conferred benefits.
Restitution may be available even when no enforceable
contract exists. Next, let's examine limitations
on damages. Foreseeability limits
consequential damages to those the breaching party could
reasonably anticipate at contract formation.
The doctrine arises from the famous case involving a Miller
who sought compensation for lost profits when a carrier delayed
delivery because the carrier lacked notice of the special
circumstances. Consequential damages were
denied. Certainty requires damages to be
proven with reasonable precision.
Mitigation requires the injured party to avoid unnecessary
losses when reasonably possible. Now let's shift into equitable
remedies. Specific performance may be
available when the subject matter is unique, such as real
property or rare goods. Injunctions may prevent, breach
or compel compliance. Equity considers fairness and
does not reward parties who act inequitably.
Continuing on, let's discuss third party rights.
Contracts may affect people who did not directly bargain.
Intended beneficiaries may enforce the contract if
recognition of a right is appropriate to effectuate the
agreeing party's intent. Assignment and delegation allow
parties to transfer contractual rights and duties.
Assignments transfer benefits. Delegations transfer duties,
though delegating does not ordinarily release the delegator
from liability. Now that we've explored much of
common law contracts, let's spend some time with the Uniform
Commercial Code's distinct approach to remedies.
The Uniform Commercial Code aims for flexibility and commercial
practicality for buyers. Remedies include cover, the
purchase of substitute goods, and recovery of the difference
between the cover price and the contract price.
Buyers may also recover incidental and consequential
damages for sellers. Remedies include resale action
for the price or damages for non acceptance or repudiation.
The Uniform Commercial Code encourages remedies that put
parties in as good a position as if the contract had been
performed. Let's shift now to warranties.
Express warranties arise from affirmations of fact,
descriptions or samples that form part of the basis of the
bargain. Implied warranties include the
warranty of merchantability. Goods must be fit for ordinary
purposes and the warranty of fitness for a particular
purpose. Warranty disclaimers must be
clear and conspicuous. Warranty law reflects the
Uniform Commercial Code's goal of protecting consumers and
ensuring a reliable commercial practices.
Continuing on, let's examine risk of loss.
Risk of loss rules determine which party bears the financial
burden when goods are damaged or destroyed.
Under the Uniform Commercial Code, the risk may shift upon
delivery to a carrier, upon tender of delivery, or according
to trade terms. These rules allow commerce to
proceed smoothly by identifying the moment responsibility
shifts. Now that we've covered much of
the doctrinal terrain, let's explore good faith.
Every contract carries an implied obligation of good faith
performance. Good faith requires honesty in
fact and observance of reasonable commercial standards.
It prohibits opportunistic behavior that undermines the
purpose of the agreement. Courts enforce good faith as a
way of ensuring that the law of contracts remains grounded in
fairness rather than purely technical compliance.
Next, let's shift to long term and relational contracts.
These agreements involve ongoing performance, shifting
circumstances, and collaborative expectations.
Examples include employment agreements, franchise
arrangements, and supply chains. Courts often interpret these
contracts with flexibility, recognizing that long term
cooperation requires adaptation. Next, let's shift into
modification. Under common law, modifying a
contract requires new consideration.
Under the Uniform Commercial Code, modifications need no
consideration if made in good faith.
This divergent shows how contract law balances stability
against commercial necessity. Now let's explore the doctrine
of impossibility and impracticability.
When unforeseen events destroy the subject matter or make
performance illegal, the duty may be discharged.
Impracticability addresses extreme difficulty or expense,
going beyond ordinary hardship. Frustration of purpose applies
when an event undermines the contract's principal purpose,
even if performance is still possible.
These doctrines respond to the reality that contracts exist in
a world full of uncertainty. Next, let's take a look at
public policy. Courts may refuse to enforce
contracts that violate laws, promote illegal conduct, or
offend societal values. Agreements involving criminal
acts, restraints on marriage, or unreasonable non compete clauses
may be invalid. Public policy doctrine reflects
the law's recognition that private agreements cannot
undermine public welfare. Now that we have walked through
the major doctrines, let's explore how Contracts supports
legal analysis. Contracts teaches you to think
in sequences. Formation leads to obligations.
Obligations lead to performance. Performance leads to breach.
Breach leads to remedies. Each step requires precision,
and each doctrine connects to others.
Contracts also teaches problem solving through hypotheticals.
You begin to ask, what happened? What was promised?
Did someone rely? Was the reliance justified?
What remedies would restore fairness?
Let's shift to how contracts appears on the bar exam.
You will see questions involving offer and acceptance, battle of
the forms, promissory, promostelpo, consideration, the
statute of frauds, parole, evidence, mistake,
misrepresentation, breach, anticipatory repudiation, and
remedies. The exam tests whether you can
spot issues quickly and move through doctrines with
controlled reasoning. Continuing on, let's consider
how contracts shapes litigation practice.
Contract disputes often arise in business contexts, leases,
employment, sales, partnerships, and services.
Understanding contract principles helps lawyers draft
better agreements. Negotiate terms and foresee
potential conflicts. Contract doctrine equips you for
transactional work as well. Mergers, intellectual property
licenses, construction deals, and technology agreements.
Now that we've surveyed contracts from formation to
practice, let's bring the lecture to its closing
reflection. Contracts is not just a
technical subject. It is a study of trust,
cooperation, and consequence. People enter agreements because
they believe promises matter. The law makes that belief
reliable. It reinforces stability,
encourages planning, and supports a market economy built
on dependable transactions. Learning contracts is therefore
learning how society organizes its private affairs through
voluntary commitment. Welcome to the deep dive.
Today we're doing something a little different, something
custom built for a very specific purpose.
High stakes exam review. That's right, we are going to
cut a fast path right through the forest that is contracts Law
A. Dance Forest.
It is. And this isn't just about, you
know, memorizing definitions. It's about building the
architecture in your mind, connecting the dots so you have
the structure to analyze any fact pattern.
Law school, final bar exam, whatever they throw at you.
And our mission here is really clarity.
And I think sequence Contracts at its heart is just the
framework that makes human cooperation predictable.
It turns a social promise into something a court can enforce.
Right. And that's really the core
nugget, isn't it? A contract is a legally
enforceable agreement. That's it.
That distinction, legally enforceable is where everyone
gets hung up at first. We make promises all the time,
you know, I'll be there for dinner.
But the law doesn't care about that.
No, it's not interested in moral obligations.
It wants to know what makes this promise serious enough for the
state to, you know, step in. And the answer really just comes
down to objective manifestation. Objective manifestation.
Not what I was thinking, but what I did.
Exactly. If the law does not care what
was secretly churning in your mind, it asks, what would a
reasonable person understand from your words, from your
conduct, from the whole context? If you act like you're making a
deal, the law will hold you to it, and you have to be ruthless
about spotting that on an exam. OK, so let's build this
structure. We start with the classic, the
Common Law Foundation offer acceptance and consideration.
So for an offer, what are the red flags we're looking for?
An offer is all about commitment.
It's a clear signal, a willingness to enter into a
bargain that invites the other person's acceptance.
And the key is definiteness, meaning it has to have the
essential terms price, subject matter, quantity.
Enough so that a court, if it had to, would know what it was
enforcing. So I might tell you my guitar is
not it. Not at all.
That's just talk, but. I will sell you my vintage 1957
Stratocaster for $15,000 cash, except by noon tomorrow, but
that is a definite concrete offer.
And once that offer is out there, the power shifts.
The other party can create a contract through acceptance, but
under common law, there's a big catch, right?
The mirror image rule. The notorious mirror image rule
Exactly. The acceptance must perfectly,
and I mean perfectly, match the terms of the offer.
No wiggle room. Zero.
If I offer the guitar for 15,000 and you say I accept but you
have to throw in a guitar strap, that's not acceptance.
That's a counter offer. It's a counter offer, it kills
the original offer and now you've become the offer.
The roles have completely flipped.
So what is it that seals the deal?
What turns this agreed exchange from just a promise into a real
binding contract? Consideration.
This is the magic ingredient. The thing everyone dreads on the
exam? It is, but it's simple.
At its core, it's a bargain for exchange involving a legal
detriment. You're giving up something you
have a right to do, or doing something you don't have to do.
All as part of the. Bargain.
And the crucial part, the part to remember for an exam, is that
courts do not care about the adequacy of the consideration.
They do not. Which brings us to.
The Peppercorn. The classic peppercorn.
If I promise you $1,000,000 for a single peppercorn and we
genuinely bargain for it, that is sufficient consideration.
The law isn't there to save you from a bad deal, it's just there
to make sure you actually bargained for a deal.
But what if there isn't that formal bargain?
What if fairness just screams that a promise should be
enforced? That's where the law has a kind
of safety valve. A modern safety valve, and one
you absolutely have to know. Promissory estoppel.
This is a big one. Huge.
It essentially acts as a substitute for consideration.
It kicks in when there's a clear promise.
The person making it should reasonably expect it to induce
action. And it does.
The other person suffers
detrimental reliance. They change their position
because of the promise. The classic example is, you
know, turning down another job offer because Company B promised
you a position. If they pull that offer,
injustice can only be avoided by enforcing it.
OK, so that's the common law world, but now we have to shift
gears into the commercial reality, the fast-paced world
of. The UCC Article 2 Sale of goods.
Sale of goods. Movable things.
And the UCC is just it's a different animal.
It's so much more flexible because it reflects how business
actually works. A contract can be formed even if
you don't know the exact moment it happened.
Even if terms are left open like price, even price, As long as
the parties intended to make a contract and there's a
reasonable basis for a remedy, you likely have a deal.
It's a massive departure from the common law's rigidity.
And this flexibility leads us right into the most famous or
infamous part of the UCC exam takers, the Battle of the Forms.
You have to be able to spot this.
The UCC basically throws the mirror image rule out the window
for merchants. So if a buyer sends a purchase
order. And the seller sends back an
acceptance form with slightly different terms.
You might still have a contract. You often do still have a
contract, and then you have to dive into the weeds of UCC 22O7
to figure out which of those new or different terms actually
become part of the final deal. That analysis could be an entire
essay question by itself. All right, so we formed a
contract, offer, acceptance, consideration, maybe under the
UCC, but even a perfectly formed contract can be well defeated.
It can have kryptonite. Contract kryptonite.
I like that we call them defenses to enforcement, and
they're all about protecting the integrity of consent or
upholding public policy. Where do we start?
We can start with incapacity, minors, people who lack mental
capacity. They can get out of contracts to
protective function. Then you move into coercion.
You have the really obvious kind duress.
You know, sign this or else. A wrongful threat?
A wrongful threat and then the more subtle version, undue
influence. This one is fascinating.
It's not about a threat, it's about a relationship.
Right, exactly. It's about excessive persuasion
from someone in a position of trust or dominance over someone
who's vulnerable. Think of a caretaker and an
elderly person. It's all about the context of
that relationship. Then you have things like
misrepresentation, a false statement of fact, but the
defense that I think really trips people up is mistake.
Oh absolutely. And the first thing you have to
do is separate unilateral mistake from mutual mistake.
Unilateral is very hard to prove, but mutual mistake that
can void the entire deal. What are the elements there?
So for mutual mistake, both parties have to be mistaken
about a basic assumption the contract was based on, and that
mistake has to have a material effect on the deal the.
Classic barren cow case. The barren cow.
Exactly. Both parties think they're
selling a cow that can't breed for a low price.
Turns out the cow is fertile and worth 10 times more.
The very subject of the deal was fundamentally different than
what they thought. The contract can be voided.
OK, so those are defects in a cent, but what about a defense?
That's just a formal rule, like the Statute of Frauds.
The statute of frauds. So this isn't about whether they
agreed. It's an evidentiary rule for
certain important types of contracts.
We demand proof. We want them in writing.
To prevent fraud, as the name implies.
To prevent people from just claiming a contract existed when
it didn't for the exam, you just need a mnemonic.
My legs is the classic one. My leg marriage contracts that
can't be performed in a year, interests in land, executor
promises, guarantees or surety ship and the sale of goods over
a certain amount, usually $500. So if you see a three-year
employment contract or a sale of a house.
Your brain should scream. Statute of frauds check.
For a writing signed by the person you're suing.
And what about the last resort, the ultimate fairness doctrine,
when a deal is just predatory? That's unconscionability, and
it's a high bar. You usually need to show two
things. First procedural.
Unconscionability, something wrong with the bargaining
process itself, hidden terms, massive inequality and power,
and 2nd substantive unconscionability.
The terms themselves are just shockingly, oppressively 1
sided. Think of an astronomical
interest rate hidden in the fine print of a consumer contract.
You need both working together. OK, so the contract is formed,
it's enforceable. Now we have to figure out what
it actually means. And this brings us to everyone's
favorite rule, the parole evidence rule.
The PER Yes, it's frustrating, but there's a simple way to
think about it. The rule is about whether we can
use evidence from outside the written contract thing said
before or at the same time to change or add to it.
You use the analogy of a box. Right.
Think of the final written agreement as a sealed box.
If a court decides that box is fully integrated, meaning it's
the complete and final deal, then you cannot bring anything
from the outside to contradict or even supplement it.
The box is sealed. But what if it's not fully
sealed? If it's only partially
integrated, so it's final on some things but not everything,
you can open the box a little, you can bring in evidence of
consistent additional terms, but you still can't bring in
anything that contradicts what's already in there.
But even with a sealed box, if the words inside are ambiguous,
you can use outside evidence to figure out what they mean,
right? Absolutely.
The rule doesn't bar evidence for interpretation.
Courts will look at the party's history, their course of
performance, their course of dealing and even the usage of
trade in that industry. OK, so we know the terms.
Now what about performance? It's often not an absolute duty.
It's dependent on a condition. Right.
A condition is just an event that has to happen before a duty
kicks in. If the condition fails like you
fail to get financing for a house.
Your duty to buy. The house is typically excused,
but if the duty is absolute and a party fails to perform, that's
a breach. And the severity of that breach
matters. A lot everything.
A minor breach means the other party still has to perform
though. They can sue for damages, but a
material breach is so significant that it discharges
the other party. They can walk away and sue for
the whole contract. Which is why we have the
doctrine of substantial performance, especially in
construction cases. The classic application A
builder finishes 95% of the house in good faith.
They've substantially performed. The owner can't just refuse to
pay, they have to pay the contract press minus the cost to
fix the minor problem. And what about the most dramatic
type of breach, the one that happens before performance is
even due? Anticipatory repudiation.
An unequivocal statement. I am not going to perform.
What can the other party do? They don't have to wait around.
They can treat it as an immediate material breach,
suspend their own performance, and sue for damages right now.
And the UCC has a tool for situations that aren't quite so
clear, right? A very useful one if you have
reasonable grounds for insecurity.
Maybe you hear rumors the other party's going bankrupt.
You can demand adequate assurance of performance and
writing. If they don't provide it, that
becomes the repudiation. So the contract has failed.
Now we get to the final stage remedies.
We're usually talking about money damages, and the default
is expectation damages. That's the goal.
Expectation damages aim to put the injured party in the
position they would have been in if the contract had been fully
performed. It protects their benefit of the
bargain. But if that's too speculative to
calculate. Then you might fall back on
reliance damages. We just reimburse you for the
money you spent in reliance on the promise.
Or you could get restitution, which is about preventing unjust
enrichment by making the breacher give back any benefit
you gave them. But damages aren't unlimited.
There are some critical limitations to spot on an exam,
the first being foreseeability. Yes, the old case of the broken
mill shaft you can only recover for consequential damages that
were reasonably foreseeable to the breaching party at the time
the contract was made. They're not on the hook for
surprise. Massive losses they couldn't
have anticipated. You also have to prove damages
with reasonable certainty, and you have a duty to mitigate.
You can't just sit back and let your losses pile up.
You have to take reasonable steps to minimize them.
And if money is just not enough? Then you look to equitable.
Remedies. The main one is specific
performance, where the court orders the person to actually do
what they promised. That's only for unique subject
matter, a specific piece of land, a one-of-a-kind piece of
art. And the UCC gives buyers a very
practical cover. Right.
If your seller flakes, you can go out in good faith, buy
substitute goods, and then sue the original seller for the
difference between your cover price and the contract price.
It keeps commerce moving. All right, let's wrap this up
with a few final key concepts for our exam takers.
Under the UCC, we have to talk about warranties.
You do you have express warranties, which are
affirmations of fact, like this car gets 30 miles to the gallon
and then two big implied ones. Merchantability.
A promise that the goods are fit for their ordinary purpose.
And that only comes from a merchant.
Only from a merchant and fitness for a particular purpose, which
is when a seller knows you're relying on their expertise for
some specific non ordinary use. We also have a huge difference
between common law and the UCC on modification.
Common law. You need new consideration to
modify a contract, the preexisting duty rule under the
UCC, you need no new consideration.
As long as the modification is sought in good faith, you're
good to go. And finally, a few ways
performance can be excused entirely by some later
unforeseen event. Right, you're looking for
impossibility or impracticability.
Some event makes performance either literally impossible or
so extremely difficult and expensive it's not fair to
require it. Or frustration of purpose where
the whole reason for the contract is wiped out.
And all of this, this entire body of law, is held together by
an implied obligation of good faith.
In every contract, a duty of honesty and fair dealing.
It stops parties from being opportunistic.
So when you're sitting down for that exam, what's the final take
away? The Analytable framework.
It's a five step checklist. You have to internalize it.
One was a contract formed 2 are there any defenses?
3 what are the terms and obligations?
4 Was there a breach? And five, what are the remedies?
If you walk through those five steps for every fact pattern,
you will not miss the issues. Formation, defenses,
obligations, breach remedies, That is the road map.
We've gone from the peppercorn to the parole evidence box.
It's really a system for structuring our private affairs.
It is, and if you take a step back, you realize this is all
about trust and consequences. I mean, think about it.
If the law didn't step in to make promises reliable, how
fundamentally unstable would our entire market economy be?
It makes you think about about drafting a contract not just as
a legal task, but as an act of planning for the future, for
every possible contingency. We hope this deep dive helps you
master that structure. Until next time, keep digging.
All right, let's talk contracts. Whether you're a 1L just trying
to survive your first final, or you're deep in the trenches of
bar prep, what you need is a solid framework, a mental attack
plan for any contracts question they can throw at you.
So let's build that right now. So here's our game plan.
We're going to walk through the whole life of a contract step by
step. We'll start with how a deal is
even made, look at how someone might get out of it, figure out
what happens when promises are broken, and then how we
calculate the damages. By the time we're done, you'll
have a clear, repeatable process for crushing any fact pattern.
First things first, before you can analyze anything else, you
have to answer the threshold question.
Was a legally enforceable agreement ever actually formed?
Because if you don't have formation, well then there's
nothing else to talk about. It's that simple.
Now listen up, because this is a point that trips up so many
people. Contract law doesn't care what
was secretly in someone's heart or head.
It's all about what a reasonable person would understand from
what the party said and did. It's an objective test, not a
subjective 1. So you've got to forget about
hidden intentions and focus only on the outward words and
actions. OK, your formation analysis
always, always, always starts with these three building blocks
for any fact pattern you need to hunt for them.
One, is there a valid offer? You know, something clear enough
for a court to enforce? 2 do we have a clear acceptance
of that offer? And three, and this is the big
one, is the whole deal supported by consideration, That bargain
for exchange. So what happens if consideration
fails? Is the promise just dead?
Not so fast. Your analysis isn't over.
You have to check for promissory estoppel.
Think of it as a substitute for consideration.
It's a crucial exception that can save a promise.
For your exam. You need to spot three things.
A promise was made, the person reasonably relied on it to their
detriment, and you know it would just be unfair not to enforce
it. The work you found a validly
formed contract, Great, but we're not done yet.
The next phase of your analysis is to screen for any potential
defenses. These are the escape hatches
that could make a perfectly good contract totally unenforceable.
This right here. This is your issue spotting
checklist for defenses on an exam.
You should mentally run through these every single time you see
a fact pattern with a 17 year old?
Boom, incapacity. Someone was threatened into
signing. That screams duress, a
fundamental misunderstanding about what's being sold.
You're looking at a possible mistake.
You get the idea. And here we have one of the
biggest defenses of all, the statute of frauds.
It's basically a rule that says for certain types of contracts,
sorry, an oral agreement isn't good enough, it's got to be in
writing. The classic acronym to remember
the categories is my legs. Marriage contracts that can't be
performed in a year, land executor promises goods over 500
bucks and surety ship. If your contract fits in there,
you need a writing. OK, so let's assume we have a
valid contract and there are no differences.
It's enforceable. Now the analysis shifts to what
the parties actually did. Did they keep their promises?
This is where we get into the whole world of performance and
breach. Now this is a distinction that
shows up on practically every contracts exam, so you have to
know it cold. A material breach is a really
big deal. It's a major failure that goes
to the heart of the contract. When that happens, the other
party, the non breaching party, can just walk away.
But with substantial performance, the breach is just
minor. The main point of the contract
was fulfilled. The other party still has to
perform their side of the deal, but they can sue for damages to
make up for the small difference.
This is another classic exam topic.
Let's say one party way before the performance date just flat
out says, look, I'm not going to do it.
They're not just hinting, they're clear and unequivocal.
Well, the other party doesn't have to just sit around and wait
for the inevitable. They can treat that statement as
an immediate breach and sue for damages right then and there.
So a breach has happened. What now?
The final crucial step in your analysis is figuring out the
remedy. How is the law going to try to
fix this mess and make the injured party whole?
Expectation damages are the default.
This is where you should almost always start your remedies
analysis. You're basically calculating the
benefit of the bargain. The goal is to give the non
breaching party enough money to put them in the exact same
financial spot they would have been in if the promise had been
kept perfectly. But what if those expectation
damages are just too speculative?
You know, too hard to prove with any certainty?
Well then your analysis should pivot to reliance damages.
Here, the goal is different. We're not trying to give them
the benefit of the bargain. We're trying to put them back
where they started before the contract was even made, by
paying them back for any money they spent and reliance on that
promise. And finally, you should consider
restitution. Now, this one's a little
different because it focuses on the breacher, not the victim.
The goal here is to prevent unjust enrichment.
We're going to force the party who broke the promise to give
back the value of any benefit they unfairly received.
It's about taking away their unfair gain.
So we've gone through this whole analytical framework, but
there's a crucial point that ties it all together, and it's
something you have to figure out right at the beginning.
You have to know which set of rules to apply in the 1st place.
This is probably the most frequently tested threshold
issue in all of contracts. So this is it.
This is the very first question you have to ask yourself when
you read a contracts problem. Is this a contract for the sale
of goods? You know, movable things?
If the answer is yes, you are in the world of the Uniform
Commercial Code, or UCC, which has its own special roles.
If it's a contract for services or real estate, you're going to
apply the common law. Getting this right is absolutely
critical because it can totally change the outcome of your
entire analysis. You know, when you get down to
it, remembering all these rules isn't just about passing a test.
It's really about understanding the legal DNA our society uses
to make promises reliable. It's the system that allows
people and businesses to actually trust each other, to
cooperate and to plan for the future with some level of
certainty. And that really brings us to the
fundamental question that's hiding behind all of contract
law, a question our legal system is always wrestling with.
So as you apply these rules, as you work through these problems,
never lose sight of that bigger picture.
What does it really mean for us as a society to decide that some
promises count and others just don't?