Study guide: Intermediate Business Contract Law

📋 Course Outline

1. Offer and Acceptance
2. Conduct Invalidating Assent
3. Consideration and Promissory Estoppel
4. Illegal Bargains
5. Contractual Capacity
6. Contracts in Writing
7. Performance, Breach, and Discharge
8. Contract Remedies

📖 1. Offer and Acceptance

🔑 Key Concepts & Definitions

• Objective standard: Judges assent by how it reasonably appears to a third party, not by what the parties privately thought.
• Offer: An offer requires communication to the offeree, intent to contract, and sufficiently definite terms; a court can fill in missing terms.

★ Must-know

• An offer may end through:
  • lapse of time
  • revocation
  • rejection
  • counteroffer
  • death or incompetency
  • destruction of the subject matter
  • subsequent illegality

Further detail

• Preliminary negotiations and advertisements are generally non-offers, while output and requirements contracts are identified as offers.

• An option contract can restrict revocation, acceptance is generally effective on dispatch unless the offer changes that rule, and silence can sometimes constitute acceptance.

💡 Memory Hook

Offer, then acceptance; acceptance is effective on dispatch.

📖 2. Conduct Invalidating Assent

🔑 Key Concepts & Definitions

• Fraud: Fraud requires a false representation of a material fact, knowledge of its falsity, intent to deceive, and justifiable reliance on the representation.

★ Must-know

📌 Physical compulsion makes assent void, whereas an improper threat makes the contract voidable.

📌 Fraud in the execution makes a contract void, whereas fraud in the inducement makes it voidable.

Further detail

📌 A mutual mistake makes a contract voidable.

• An opinion is distinguished from a factual representation by contrasting an expert with a salesperson.

💡 Memory Hook

Physical compulsion makes an agreement void; an improper threat makes it voidable.

📖 3. Consideration and Promissory Estoppel

🔑 Key Concepts & Definitions

• Consideration: Consideration is something of value exchanged as opposed to a gift and requires either a legal benefit to the promisor or a legal detriment to the promisee.
• Promissory estoppel: Promissory estoppel substitutes for consideration and can make gifts, including charitable donations, enforceable.

★ Must-know

📌 Doing what one is already legally obligated to do, including a preexisting public or contractual obligation, does not provide new consideration for a modification.

📌 Partial payment of an undisputed, liquidated debt is insufficient to discharge the debt, whereas partial payment of a disputed, unliquidated debt is sufficient.

Further detail

• Courts do not require consideration to be of equal value.

• Past consideration is not contemporaneous with a promise and is not enforceable consideration.

💡 Memory Hook

Consideration exchanges legal value; promissory estoppel can substitute for it.

📖 4. Illegal Bargains

★ Must-know

• Courts will not hear a case involving a violation of statutes or public policy.

• Public-policy grounds include: restraint of trade, restrictions on competition in the sale of a business or employment, exculpatory clauses, unconscionable contracts

Further detail

📌 A sale-of-business restraint may specify time and area, while employment restraints may concern competition during or after employment, customer lists, or trade secrets.

• Statutory violations include:
  • licensing statutes
  • gambling statutes
  • usury statutes limiting maximum interest
  • Sunday statutes prohibiting commercial business on Sunday

📖 5. Contractual Capacity

★ Must-know

📌 A contract made by a person under guardianship is void, a contract made by a person with mental illness or defect is voidable, and an intoxicated person's contract is voidable but may be ratified upon sobriety.

📌 A minor, defined as under the age of majority of 18 or 21 depending on the state, may disaffirm while a minor or within a reasonable time after reaching majority if the minor has not ratified the contract.

• The three groups are:
  • minors
  • incompetent persons
  • intoxicated persons

Further detail

📌 A minor who disaffirms must return received property, in whatever condition it is in, for a full refund; if the minor misrepresented age, the minor may disaffirm but is responsible for property damage.

📌 A minor cannot disaffirm a contract for necessaries actually furnished and used or consumed, but may have to pay their reasonable value if it is less than the contract price.

• Ratification may occur: expressly, by conduct such as using or selling the property, by failing to disaffirm within a reasonable time after reaching majority

💡 Memory Hook

A minor may disaffirm, while a person under guardianship makes a void contract.

📖 6. Contracts in Writing

🔑 Key Concepts & Definitions

• Statute of Frauds: The Statute of Frauds is an enforcement mechanism, not a prevention mechanism, and specifies contracts that must satisfy writing requirements.

★ Must-know

📌 A writing subject to the Statute of Frauds must specify the parties, the subject matter, and essential terms, and must be signed by the party to be charged, but need not be signed by both parties.

📌 The Parol Evidence Rule applies to all written contracts and excludes oral agreements that would change the terms of a written contract.

• Covered agreements include: suretyship promises to answer for another's debt, an executor's or administrator's promise to answer personally for a decedent, agreements in consideration of marriage, transfers of interests in land, agreements not performable within one year

Further detail

📌 The main-purpose doctrine is an exception to the suretyship rule.

• Courts attempt to interpret contracts in accordance with the parties' intent.

📖 7. Performance, Breach, and Discharge

★ Must-know

• Contract conditions include:

  • concurrent conditions, the most common
  • conditions precedent
  • conditions subsequent, the rarest

• A contract may be discharged by performance, material breach, prevention of performance, or non-material breach with substantial performance.

Further detail

• An express condition may depend on the satisfaction of a contracting party, which can be assessed subjectively or objectively.

• The parties may discharge a contract by mutual rescission or accord and satisfaction.

• Discharge by operation of law includes:

  • impossibility
  • destruction of the subject matter
  • subsequent illegality

• A closing in which a deed and payment are exchanged is an example of concurrent performance.

💡 Memory Hook

A contract may be discharged by performance, breach, agreement, or operation of law.

📖 8. Contract Remedies

🔑 Key Concepts & Definitions

• Compensatory damages: Compensatory damages place the injured party in the position they would have occupied had there been no breach.
• Liquidated damages: Liquidated damages are damages the parties agree to in advance in the contract.

★ Must-know

📌 Limits on damages include foreseeability, illustrated by Hadley v. Baxendale, and mitigation, which requires a person who has been fired to try to find another job.

• Equitable remedies include:
  • specific performance
  • injunctions
  • restitution

Further detail

📌 Punitive damages are rarely awarded in contract cases and punish malicious conduct rather than compensate the injured party.

• Monetary damages can include:
  • loss of value
  • incidental damages
  • consequential damages when applicable

💡 Memory Hook

Damages compensate for breach; equitable remedies require a different form of relief.