Contract Basics (with exceptions)

1. Definition:
A contract is a legally enforceable promise or set of promises between two or more parties that creates
mutual obligations.
2. Elements of a Valid Contract:
• Offer: A proposal to enter into an agreement.
• Exception: Advertisements are generally invitations to negotiate, not offers, unless they specify
clear and definite terms.
• Example: “$500 reward for the return of my lost dog” constitutes an offer because it is specific
and directed.
• Acceptance: Must match the offer’s terms exactly (Mirror Image Rule).
• Exception: Under the UCC for the sale of goods, an acceptance with additional terms can still
form a valid contract unless explicitly rejected.
• Consideration: A bargained-for exchange of value.
• Exception: Promissory estoppel can enforce a promise even without consideration if the
promisee reasonably relied on the promise to their detriment.
• Example: A landlord promises to delay eviction, and the tenant spends money relocating based
on this promise.
• Capacity: Parties must have the legal ability to enter into contracts.
• Exception: Contracts for necessaries (e.g., food, clothing, shelter) are enforceable against minors.
• Legality: The contract must have a lawful purpose.
• Exception: In some cases, restitution is available even for an illegal contract if one party
withdraws before performing the illegal act.

Formation of Contracts (with exceptions)

1. Types of Contracts:
• Express Contracts: Terms are explicitly stated.
• Implied Contracts: Terms are inferred from actions or conduct.
• Exception: Implied contracts cannot exist where an express contract covers the same subject
matter.
• Unilateral Contracts: A promise in exchange for performance.
• Example: “I’ll pay $500 if you find my dog.”
• Exception: Once performance begins, the offeror cannot revoke the offer.
2. Offer:
• Must be definite in terms, show intent to create legal obligations, and be communicated.
• Exception: If the offeror explicitly states that they are not bound until a formal agreement is
signed, no contract exists.
• Termination of Offers:
• Offers can be terminated by revocation, rejection, counteroffer, lapse of time, or death of the
offeror.
• Exception: An option contract (supported by consideration) keeps the offer open.
3. Acceptance:
• General Rule: Acceptance must mirror the terms of the offer.
• Exception: Under the UCC, acceptance with minor changes still forms a valid contract unless the
offeror objects.
• Mailbox Rule: Acceptance is effective when sent.
• Exception: If the offer specifies acceptance is only valid upon receipt, the mailbox rule does not
apply.
Defenses to Enforcement (with exceptions)

1. Lack of Capacity:
• General Rule: Minors, intoxicated persons, or mentally incapacitated individuals may avoid
contracts.
• Exception: Contracts for necessaries are enforceable.
2. Duress or Undue Influence:
• Duress Example: A party agrees under physical threat.
• Undue Influence Example: A caretaker manipulates an elderly person into signing over property.
• Exception: Mere persuasion or insistence does not amount to undue influence.
3. Mistake:
• Mutual Mistake: If both parties are mistaken about a material fact, the contract may be voidable.
• Example: Both parties believe they are selling an antique when it is a replica.
• Unilateral Mistake: Contracts are generally enforceable unless the non-mistaken party knew or
caused the mistake.
• Example: A bidder miscalculates costs but must honor the bid unless the other party was aware
of the error.
4. Misrepresentation or Fraud:
• Fraudulent contracts are voidable.
• Exception: If the misrepresentation is about an opinion rather than a fact (e.g., “This car is the
best on the market”), it may not be actionable.
5. Unconscionability:
• A contract is unenforceable if it is overly oppressive or unfair.
• Exception: Minor procedural unfairness, like a standard form contract (e.g., “click-wrap”
agreements), is typically enforceable.

IV. Contract Terms and Interpretation (with exceptions)

1. Parol Evidence Rule:

• Prevents the introduction of prior or contemporaneous agreements to alter a written contract.
• Exception: Parol evidence can be used to clarify ambiguities, prove fraud, or show that no valid
contract existed.
2. Conditions:
• Condition Precedent: An event must occur before performance is required.
• Example: A bank loan contingent on the borrower securing collateral.
• Exception: If a party prevents the condition from occurring in bad faith, the condition may be
excused.
• Condition Subsequent: An event terminates performance obligations.
3. Implied Terms:
• Contracts include implied obligations of good faith and fair dealing.
• Exception: Express terms that contradict implied terms may take precedence.

Breach and Remedies (with exceptions)

1. Types of Breach:
• Material Breach: A significant failure excusing the other party from performance.
• Exception: The breaching party may still recover for partial performance under quantum meruit
(reasonable value of services).
• Minor Breach: A small failure that does not excuse the non-breaching party.
2. Remedies:
• Damages:
• Compensatory: Covers direct losses.
• Example: A supplier’s failure to deliver goods forces a buyer to purchase replacements.
 • Consequential: Indirect but foreseeable losses.
• Example: A contractor’s delay causes a business to lose revenue.
• Exception: Consequential damages may be limited by contract terms (e.g., “limitation of liability”
clauses).
• Equitable Remedies:
• Specific Performance: Requires the breaching party to perform.
• Exception: Not available for personal service contracts (e.g., employment).
• Injunction: Stops a party from breaching.

Discharge of Contracts (with exceptions)

1. Performance: Complete performance discharges obligations.

• Exception: Substantial performance (minor deviations) may discharge obligations if the breaching
party compensates for defects.
2. Impossibility or Impracticability:
• Performance is discharged if unforeseen events make it impossible.
• Exception: Increased difficulty or cost does not excuse performance unless it is extreme and
unforeseen.
3. Frustration of Purpose:
• Discharges obligations when the contract’s main purpose is destroyed.
• Example: Renting a hall for a parade that is later canceled.
• Exception: The contract remains enforceable if the frustrating event was foreseeable.