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Common Law
Contracts are primarily governed by state common law, with a clear presentation found in the
Restatements of the Law of Contracts, first promulgated on May 6, 1932. A revised edition — the
Restatement, Second, Contracts — was adopted and promulgated on May 17, 1979.
DEFINITION OF A CONTRACT
A contract is not a "thing," but a relationship between parties, which entails mutual rights and duties
contained in a set of promises that the courts will enforce. A contract, then, can be defined as:
"a promise or set of promises for the breach of which the law gives a remedy or the
performance of which the law in some way recognizes as a duty."
A breach is the failure to perform contractual promises properly.
It is important to note that while all contracts are promises, not all promises are contracts. Some
promises are unenforceable and, therefore, are not contracts. For a promise to be enforced, it must
include all essential requirements of a legal, binding contract.
REQUIREMENTS OF A CONTRACT
Mutual Assent — The parties must show by words or conduct that they have agreed to enter into a
contract. The usual method of showing mutual assent is by offer and acceptance.
Consideration — Each party to a contract must intentionally exchange a legal benefit or incur a legal
detriment as an inducement to the other party to make a return exchange.
Legality of Object — The purpose of a contract must not be criminal, tortious, or against public
policy.
Capacity — The parties must have contractual capacity. Some persons, such as adjudicated
incompetents (persons placed under guardianship by a court order), have no legal capacity to contract,
while others, such as minors, nonadjudicated incompetent persons, and intoxicated persons, have
limited capacity to contract.
In some instances a contract must be evidenced by a writing to be enforceable; but in most cases, an
oral contract is binding and enforceable.
CLASSIFICATION OF CONTRACTS
Chapter 9: Introduction To Contracts Page 2 of 4
PROMISSORY ESTOPPEL
As a general rule, promises are not enforceable if they do not meet all of the requirements of a
contract. One exception is promissory estoppel. Noncontractual promises are enforced under the
doctrine of promissory estoppel in order to avoid injustice, when the promise is made under
circumstances that should lead the promisor reasonably to expect that the promisee would take a
definite and substantial action or forbearance in reliance on the promise and the promisee takes such
action or forbearance.
CHAPTER SUMMARY
Law of Contracts Definition of Contract a binding agreement that the courts will enforce
Common Law most contracts are governed primarily by State common
law, including contracts involving employment, services, insurance,
real property (land and anything attached to it), patents, and copyrights
Uniform Commercial Code Article 2 of the UCC governs the sales of
goods
• Sale the transfer of title from seller to buyer
• Goods tangible personal property (personal property is all property
other than an interest in land)
Requirements of a Contract Mutual Assent the parties to a contract must manifest by words or
conduct that they have agreed to enter into a contract
Consideration each party to a contract must intentionally exchange a
legal benefit or incur a legal detriment as an inducement to the other
party to make a return exchange
Legality of Object the purpose of a contract must not be criminal,
tortious, or otherwise against public policy
Capacity the parties to a contract must have contractual capacity
Quasi Contracts Definition an obligation not based on contract that is imposed to avoid
injustice
Requirements a court will impose a quasi contract when (1) the
plaintiff confers a benefit upon the defendant, (2) the defendant knows
or appreciates the benefit, and (3) the defendant’s retention of the
benefit is inequitable
Remedy the plaintiff recovers the reasonable value of the benefit she
conferred upon the defendant