Contract law is a fundamental subject for first-year law students. It governs legally enforceable agreements and affects many areas of life. This comprehensive guide will cover the key concepts you need to understand in a first-year Contract Law class. We will discuss the elements of a valid contract, types of contracts, major doctrines (like the Statute of Frauds and the Uniform Commercial Code), defenses, and remedies for breach. Along the way, we provide practical examples and study tips to help you master the material. By the end, you should have a thorough foundation in contracts, as well as actionable advice for exam success.

Introduction to Contract Law

A contract is generally defined as a voluntary agreement between two or more parties that creates mutual obligations enforceable by law. In other words, it is a promise or set of promises for which the law provides a remedy if breached. Contract law deals with the formation, terms, performance, and enforcement (including remedies) of these agreements. Understanding contract law is crucial because contracts underlie many everyday transactions – from buying groceries to signing a lease or employment agreement.

Key ideas in contract law include offer and acceptance (how one party’s proposal and another’s agreement create a contract), consideration (the “price” each party gives or promises), capacity and legality (who can form contracts and what deals are lawful), and remedies for breach. Contract law is mostly governed by common law (judge-made law) for services and real property, and by the Uniform Commercial Code (UCC) for sales of goods. In this guide, we will cover both the general contract rules (common law) and key UCC differences.

As you study contracts, use a structured approach in your notes or exam answers. A helpful method is the IRAC format: Issue, Rule, Application, Conclusion. Identify the legal issue (e.g., “Was there a valid offer?”), state the rule (the test or element), apply the facts to that rule, and conclude whether the requirement is met. Contract questions will typically require you to analyze each element of formation, potential defenses, and appropriate remedies if there is a breach.

What Is a Valid Contract?

At its core, a valid contract requires certain basic elements and conditions. Under common law, a standard checklist of a valid contract typically includes:

• Offer and Acceptance (Mutual Assent). A clear offer by one party and an unambiguous acceptance by the other, demonstrating a “meeting of the minds.” This reflects mutual agreement on the exact terms (the “objective theory” of consent).

• Consideration. Something of legal value that each party gives or promises as part of the bargain (a quid pro quo). Consideration distinguishes enforceable contracts from mere gratuitous promises.

• Capacity. The parties must have legal ability to contract (e.g., minors, mentally incapacitated persons, or intoxicated individuals may lack capacity).

• Legality. The contract’s purpose and terms must be lawful (contracts for illegal activities are void).

• Form. Depending on the situation, some contracts must meet specific formalities like being in writing (see the Statute of Frauds below).

If these elements and conditions are met, the contract is enforceable. If not, the contract may be void or voidable. A void contract is treated as if it never existed (illegal contracts are void). A voidable contract is valid and enforceable except that one party has the option to cancel (for instance, a contract made under duress or by a minor).

Example: Forming a Valid Contract

• Offer: Alice says to Bob, “I will sell you my car for $5,000.” This is a clear offer with price and subject. (Alice must intend to be bound if Bob accepts, and communicate that to Bob.)

• Acceptance: Bob says, “I agree to buy your car for $5,000.” This is a mirror acceptance matching Alice’s terms. Once Bob communicates acceptance (for example by saying it in person or writing it in a letter), a contract is formed.

• Consideration: Bob’s promise to pay $5,000 and Alice’s promise to transfer the car are each their “consideration.” They are exchanging something of value (money for car).

• Capacity: If both Alice and Bob are adults of sound mind, they have capacity.

• Legality: Buying and selling a car is legal.

• Form (if required): Most car sales for $5,000 or more often have a written contract (also many states require a written bill of sale), so if needed, the agreement is put in writing and signed.

In the example above, all elements are satisfied, so the contract is valid and enforceable. If Bob refused to pay after agreeing, Alice could sue for breach.

Offer and Acceptance: The Agreement

“The Agreement” is the heart of a contract—it consists of an offer by one party and an acceptance by another. The combination of offer and acceptance is also called “mutual assent” or a “meeting of the minds.” The law uses an objective test for assent: we ask whether a reasonable person in the position of the other party would have understood an offer and acceptance, not so much their secret intentions.

Offer: What Makes an Offer?

An offer is a manifestation of willingness by the offeror (the person making the offer) to enter into a bargain, so made that the other party (the offeree) understands that their assent (acceptance) will conclude the agreement. Key points:

• Definiteness. An offer must be reasonably definite in its terms so that the court can enforce it. Generally the essential terms are:

• parties, - subject matter, - price or method to determine price, - quantity (if applicable), - time of performance. For real estate or goods, quantity and price are critical. UCC Article 2 (sales of goods) can have more flexibility (e.g., open price provision).

• Intent. The offeror must intend to be bound. Advertisements and "invitations to negotiate" are usually not offers (unless very clear as in Carlill v. Carbolic Smoke Ball Co., 1893, a famous English case where a public ad promising a reward was held to be a unilateral offer to the public).

• Communication. The offer must be communicated to the offeree. A person cannot accept a previous offer if they never heard of it.

Example of a clear offer:

Alice sends a letter to Bob: “I promise to sell you my bike for $200; let me know by Saturday if you accept.”

This is a definite offer (bike, price, deadline) communicated to Bob.

Termination of an Offer

An offer doesn’t stay open forever. It can end by any of these events:

• Revocation by the offeror. The offeror can withdraw the offer any time before acceptance, even if they promised to keep it open (unless it’s an irrevocable option contract). Revocation must be communicated to the offeree (directly or by reliable indirect means) before acceptance.

• Rejection by the offeree. Outright refusal or a counter-offer kills the original offer. A counter-offer (offeree changes any term) is treated as a rejection plus a new offer.

• Lapse of time. If the offer specifies a time for acceptance, it expires after that time. Without a specified time, it expires after a reasonable time (what is “reasonable” depends on the type of deal and market conditions). If time passes, the offeree no longer can accept the original offer.

• Death or incapacity. If either party dies or becomes legally incapacitated before acceptance, the offer typically terminates unless it was irrevocable or an option.

• Illegality or destruction. If the subject matter becomes illegal or destroyed (like if Alice offers to sell a house and it burns down), the offer terminates.

Option Contracts and Firm Offers: If the offeror and offeree make a separate promise that the offer will remain open (called an “option contract”), then the offer is irrevocable for the agreed period once the offeree gives something (usually consideration) for that option. Under the UCC (for the sale of goods), a Merchant’s Firm Offer (a signed, written promise by a merchant to keep an offer open) is irrevocable for a limited time (maximum 3 months) even without separate consideration.

Acceptance: Saying “Yes”

Acceptance is the offeree’s assent to exactly the terms of the offer. For a contract to form, acceptance must be “unequivocal” and “communicated” to the offeror (unless otherwise provided).

• Mirror Image Rule (Common Law): At common law, acceptance must match the offer “mirror-like” – any change in terms is considered a counter-offer, not an acceptance. For example, if an offer states “$100 for X,” replying “I’ll buy X for $90” is not acceptance but a counter-offer.

• Mailbox Rule: Generally, an acceptance is effective when it is sent (dispatched), not when received, as long as it is an authorized means of communication. Maria sends a letter accepting Bob’s offer. The moment she mails it (and it’s properly addressed), a contract is formed, even if it gets lost and Bob never reads it. Note: Revocations are effective only when received, not when sent.

• Silence: Silence is not acceptance unless the parties have an agreement that silence equals acceptance or the offeree takes the benefit of offered services with a chance to reject them.

• Unilateral vs Bilateral Contracts:

• A bilateral contract is formed by a promise in return for a promise. Alice says she will sell the car for $5,000, Bob promises to pay. Once Bob promises, formation is complete (contract exists even before any car changes hands). - A unilateral contract is formed by a promise in return for performance. For example, Alice posts a reward sign: “$100 to anyone who returns my lost dog.” Jane finds the dog and returns it. The offer was accepted by performance (returning the dog). In unilateral contracts, acceptance is completed only by performing the requested acts. During the performance (e.g., while Jane is looking for the dog), Alice cannot revoke the offer, because Jane has begun performance.

Example: Amping up our earlier scenario:

• Alice offers to sell her car for $5,000 (offer). Bob immediately says, “Yes, I accept for $5,000” (acceptance), so contract forms at that moment. If Bob had said, “I accept, but only if you also throw in the stereo,” that would be a counter-offer, not acceptance.

• If Alice had instead made a unilateral offer (e.g. “I will pay $100 to whoever washes my car”), there’s no contract until someone finishes washing the car (performance).

Mutual Assent: Meeting of the Minds

Contracts require a “meeting of the minds,” meaning both parties agree to the same thing. This mutual assent is judged objectively. It does not require that both parties subjectively understood the contract the same way; rather, would a reasonable person in the position of the parties have interpreted conduct as mutual agreement?

Because misunderstandings can happen, contract law often disallows enforcement when both parties have fundamentally different interpretations (a latent ambiguity). Example: Party A says “barrel” referring to a container of oil; Party B believes “barrel” refers to whisky. If neither realizes the other’s meaning, there is no meeting of minds on the material term, and no contract forms.

Practical Tips for Offer and Acceptance

• Spot Offers: Look for language like “I promise” or “If you do X, I will do Y.” Check definiteness.

• Revocations & Timing: Ask, “When did acceptance happen vs. any revocation or death?”

• Unilateral Clues: Words like “to anyone who...” often indicate a unilateral reward style contract.

• UCC vs. Common Law: Remember some rules differ under UCC Article 2 (goods) for acceptance (see below).

Pseudocode for matching Offer and Acceptance logic

if offer_received and acceptance_received: if acceptance.matches(offer): # Mirror-image rule contract_formed = True else: contract_formed = False # counter-offer or no match

Consideration and Alternatives (Promissory Estoppel)

Consideration is the “price” each party pays to make the contract binding. In general, consideration means each side must give something of legal value, and there must be a bargained-for exchange. The law recognizes:

• Consideration can be a promise to do something, a promise to refrain from doing something, or performance of some act.

• It must be something the parties view as a benefit and detriment – commonly, money for goods or services, or some action for a party’s promise.

• Adequacy of consideration (how much something is worth) is usually not questioned by the court. Even a small or “peppercorn” benefit can count. The courts assume the parties know the value; so long as consideration exists, the contract stands.

• No barred practices: Gifts (only one-sided promise) typically have no consideration and are not enforceable as contracts (unless delivered and thereby an implied gift). Past performance (doing something before the promise is made) is not valid consideration because it wasn't given in exchange for the promise at the time it was made.

Examples:

• Valid consideration: Gary promises Hilary to paint her fence, and Hilary promises to pay $300. Gary’s painting is consideration, and Hilary’s $300 is consideration.

• No consideration: Gary painted Hilary’s fence last month. Today Hilary says, “Thank you, here’s $300.” That is a gift (past act) and not enforceable by promise.

• Adequacy: Hilary says she’ll sell a car worth $5000 for $100. Bob accepts. The contract is valid even though consideration is inadequate (unless there’s evidence of fraud or duress).

• Legal value: If Bob had an obligation to deliver a bicycle to Alice and Alice instead promises to pay $50 more if he delays shipping by a week, the extra $50 is generally a valid modification if not precluded by law (UCC vs. common law issues can apply here; see modifications below).

Bargained-For Exchange

For consideration, we require a bargained-for exchange. That means each party’s promise or performance induced the other’s. If one party simply does something out of moral duty or love (with no bargain), there is no consideration. For example:

• Past consideration: John says today, “I will pay you $200 for the concert tickets you bought last year.” Since the purchase happened in the past, Joe’s act wasn’t in exchange for John’s promise; this lacks consideration.

• Pre-existing duty rule: If a party is already contractually obligated to do something, doing exactly that cannot count as new consideration. For instance, Smith is already contractually bound to deliver coal to Brown. If Smith demands extra money to fulfill the existing contract, Brown’s promise of extra money is not supported by new consideration (Smith’s duty was already to deliver). Exceptions include when duties are owed to a third party or unforeseen difficulty (some jurisdictions allow modifications with fair adjustments, or when dealing with goods under UCC §2-209).

• Illusory promises: A promise that gives the other party complete discretion (e.g. "I will buy from you if I feel like it") provides no real commitment and thus no consideration.

Promissory Estoppel (Detrimental Reliance)

Sometimes, even without consideration, the law enforces a promise under the doctrine of promissory estoppel to avoid injustice. The elements typically are:

1. A promise,

2. The promisor should reasonably expect to induce action or forbearance (reliance),

3. The promisee does reasonably rely on the promise,

4. Injustice can be avoided only by enforcing the promise.

A classic example is a promise to donate in charity: If the recipient relies on it (e.g., starts construction on a project) and then the donor backs out, the courts may enforce the promise to prevent unfair harm. Another example: An employer promises a bonus to an employee, and the employee relies to their detriment; a court may enforce it even absent formal consideration.

Example: Maria tells Jerry, “I will give you my car when you graduate.” Jerry spends extra money and time preparing for college based on this promise. If Maria then refuses to give the car, Jerry may invoke promissory estoppel (depending on jurisdiction) to enforce the promise, because he relied on it and acted to his detriment.

Practical Advice: Consideration for Exams

• Always identify the consideration on both sides. If you see only one party giving something and the other not (like a gift), mention the problem.

• Be alert for promissory estoppel. Book examples often involve charity or wages and the promisee changing position.

• Note differences between routine modifications. Reminders:

• Under common law, contract modifications generally require new consideration (unless executed by a separate contract or meeting unforeseen circumstances with partial rescission/resettlement). - Under UCC (Article 2), a signed agreement is enforceable without new consideration (only good faith required).

• If an exam question involves a promise with no apparent exchange, ask: Was there reliance or some substitute doctrine?

Capacity and Legality

Even if an agreement has offer, acceptance, and consideration, it can still be invalid if either party lacks capacity or the subject matter is illegal.

Capacity to Contract

• Minors: Generally, a contract with a minor (under 18 in most jurisdictions) is voidable by the minor until they reach adulthood (or shortly after). The minor can disaffirm the contract and get back what they gave, subject to statutes (necessaries exceptions may require restitution value). Adults cannot disaffirm due to the minor’s age.

• Mental Incapacity: If a person lacks mental capacity (due to mental illness, developmental disability, or senility) such that they cannot understand the terms of the contract or the nature of the transaction, the contract is void or voidable. If the person can’t comprehend, it’s voidable by them. If a court has previously adjudicated someone incompetent, contracts after that are usually void.

• Intoxication: A contract is voidable if a party was so intoxicated (drunk or high) that they did not understand the contract or its consequences, and the other party knew. If they understood what they were doing, intoxication alone won’t void it.

Legality and Public Policy

A contract must have a legal purpose. Contracts that require parties to do something illegal (committing a crime) are void (no remedies are available). For example, a contract to sell illegal drugs or to fix races is unenforceable. Similarly, contracts that are sharply contrary to public policy (even if not criminal) may be void or voidable. Examples:

• Contracts that restrain trade unreasonably (like overbroad non-compete agreements).

• Contracts to procure a divorce (in some places).

• “Cabal or collusion” – if an agreement involves fraud on a third party or the government.

Sometimes statutes make certain contracts illegal (usury laws setting maximum interest, licensing requirements for certain professions, etc.). If a contract violates a statute, it may be unenforceable.

Unconscionability: A court may refuse to enforce a contract (or a clause within it) if it is grossly unfair or oppressive. There are two main kinds:

• Procedural unconscionability (surprise, hidden terms, high-pressure sales tactics).

• Substantive unconscionability (harsh, one-sided terms including exorbitant prices, etc).

Example: A tiny fine-print clause in a standard form contract that prevents any refund for physically impossible reasons might be unconscionable.

Example: Capacity and Legality Issues

• Teenager Carla buys a motorcycle. Later, Carla disaffirms the contract and returns the bike to the seller, getting her money back. (Carla had the status to void due to minority.)

• Bob and Sam agree to smuggle goods illegally. They fall out. Sam sues Bob for payment, but the court refuses to enforce the contract because its subject (smuggling) is illegal.

• Rachel, who signs a farm lease contract while heavily medicated and believed she was signing an art print agreement, may avoid the lease if she truly did not understand the nature of the contract.

Actionable Advice: Spotting Defenses

• In exam questions, if an age or capacity detail is given, immediately check if capacity is an issue.

• For any contract requiring special licenses or that looks shady, mention the possibility of illegality.

• Look at the contract terms: are they shockingly lopsided? Unconscionability might be argued, especially in consumer contracts or adhesion contracts.

Statute of Frauds: Writing Requirements

Generally, one may form an oral contract, but certain types of contracts must be in writing to be enforceable. This requirement is called the Statute of Frauds. The Statute of Frauds differs by jurisdiction, but commonly covers:

• Contracts involving land or real estate (sale, lease over one year, easement, etc).

• Contracts that cannot be performed within one year. If it’s impossible to fully perform within a year from the date of formation, it must be in writing. (If performance can complete in a year, but the parties intend a longer period, the writing requirement might not apply.)

• Sale of goods for $500 or more (Article 2 of UCC, threshold can be $1,000 under amended UCC).

• Surety contracts (promises to pay someone else’s debt, unless the main purpose is benefiting the promisor, which is an exception).

• Marriage contracts (like prenuptial agreements, where marriage is the consideration).

• Promise by an executor or administrator to pay estate debts from personal funds.

The writing must typically:

• Be signed by the party to be charged (the person against whom enforcement is sought).

• Contain the essential terms. For land: parties, price, description, etc. Goods: quantity and identification of seller/buyer.

• Some courts require name and some mark.

After an oral agreement is barred by the Statute, partial performance can remove the bar if that performance clearly refers to the disputed contract. For example, if someone orally agrees to sell land and the buyer pays part of the price and moves onto the land, a court may enforce the sale despite no writing (the buyer’s actions speak to the agreement).

Parol Evidence Rule

Related to the Statute of Frauds is the Parol Evidence Rule. If the parties have a written contract that they intend as the final, complete agreement (“fully integrated”), then neither party can introduce earlier (parol) statements to contradict, modify, or add to the written terms. Essentially, once the deal is written down, you rely on the writing itself.

Exceptions allowing extrinsic evidence even if a contract is written:

• Clarifying ambiguous terms.

• Showing fraud, duress, mistake, or illegality in obtaining the written contract.

• Evidence of a separate agreement (not included in the writing) or a condition precedent (i.e., the writing doesn’t take effect until some event occurs).

• Modifications made after the writing was signed.

Key point: If a writing covers the entire agreement clearly, outside evidence that contradicts it is barred by parol evidence rule.

Example: Statute of Frauds

• James and Karen orally agree that James will sell his land for $100,000. Before closing, James backs out. Karen sues. Without a signed writing, Karen’s claim likely fails under Statute of Frauds. However, if Karen already paid $50,000 and is living there (part performance), a court might enforce the sale.

• A carpenter orally promises to build a house over two years. That contract falls under the “one year” category (cannot be fully performed within a year; it’s over a year), so it needs to be in writing.

• UCC example: Bob orally agrees to buy 100 widgets for $10 each from Ursula. No writing exists. Since the price is $1000, if above the Statute threshold, Ursula may not enforce the oral deal. If Ursula ships 100 widgets anyway and Bob accepts some, a court may allow enforcement for the amount accepted (UCC will protect if part performance).

Practical Advice: Writing and Fraud Rule

• Always check if the agreement falls into a Statute-of-Frauds category. If yes, mention whether a writing exists and if any exception applies (like partial performance or promissory estoppel).

• Distinguish Statute of Frauds (need writing) from Parol Evidence (limits outside evidence for written contracts).

• Review any writing for integration: fully integrated vs. partially integrated. For a fully integrated written contract, avoid alleging an inconsistent or additional oral agreement except through an exception.

• In exam answers, if a complete written contract is given, note the parol evidence rule to bar additional terms not in writing.

Third-Party Rights: Assignment, Delegation, and Beneficiaries

Once parties have a contract, it can give rise to the ability of others to get involved, sometimes intentionally and sometimes not.

Assignment of Rights

Assignment is when one party (assignor) transfers their rights under the contract to a third party (assignee). The assignee can then enforce the contract rights that were assigned.

• Generally, contractual rights are assignable unless:

• The assignment would substantially change the obligor’s duty or risk, - The contract expressly prohibits assignment, - The assignment is for personal services or unique tasks.

• The assignor typically must have completed any consideration they promised. Often, notice of assignment should be given to the obligor.

• Once assigned, the obligor must pay the assignee.

• Exceptions: A promise to make a will is often legally a promise, but many jurisdictions say these are specifically enforceable and not considered intuitive assignments.

Delegation of Duty

Delegation is when one party (delegator) assigns their duty to perform to a third party (delegatee). Unlike assignment, delegations are limited when the performance is personal or unique, or if the contract forbids delegation.

• If delegation is valid, both delegator and delegatee are liable. The delegator is still obligated if the delegatee fails (until novation).

• Delegations cannot be used to completely evade liability, unless the other party releases the original obligor.

Third-Party Beneficiaries

A third-party beneficiary is someone who was not part of the original contract but stands to benefit from it. There are two types:

• Intended beneficiary: The contract intended to benefit this person, who may enforce the contract. For example, if Alice contracts with Bob to pay Carol $1000, Carol is an intended beneficiary and can sue if Bob doesn’t pay.

• Incidental beneficiary: A person who benefits by accident or as a side effect of the contract. They have no right to enforce the contract.

Whether someone is an intended beneficiary depends on if the original contract language shows intent to benefit the third party. Words like “to X’s benefit” or naming someone explicitly usually indicate an intended beneficiary.

Conditions and Performance

Contracts sometimes have conditions in them – events that affect obligations:

• Condition precedent: An event that must occur before a duty arises (e.g., “I will buy the car if it passes inspection” – passing inspection is a condition precedent).

• Condition subsequent: An event that, if it occurs, will end an existing duty (e.g., “You owe me $100, unless I win the lottery” – winning the lottery would terminate liability).

• Concurrent conditions: Each party’s duty to perform depends on the other performing at the same time (common in sales: the buyer pays upon delivery).

Distinguish between conditions (which can excuse or activate performance) and promises/covenants (which simply state a duty without conditioning it on an event). Breach of a condition can provide a different outcome (potentially no breach of contract at all if the condition wasn’t met) compared to breach of a promise.

Example: Third-Party Example

Alice contracts with Builder to renovate her kitchen. Alice tells Builder, “Pay Charlie to do the painting.” Charlie is an intended third-party beneficiary; if Builder fails to pay Charlie, Charlie can sue under contract law, even though Charlie was not a party to the Alice-Builder contract.

Practical Advice: Analyzing Third-Party Issues

• Check the contract terms: is there a clause about assignment or delegation? Some contracts say “no rights may be assigned without consent.”

• If a third party is involved in performance or payment, determine if they are intended beneficiaries.

• Use bullet lists or tables to organize rights and obligations if the facts get complex (assignment, delegation, third party roles, conditions). For example, list out who owes what to whom.

Contract Interpretation Principles

Contracts can be dense and contain boilerplate or technical terms. Some basic interpretation rules:

• The goal is to discern the parties’ intentions. Courts look at the contract’s words, context, negotiations, industry custom, and reasonableness.

• Plain Meaning Rule: If terms are clear and unambiguous, courts apply them as written. If there’s ambiguity, more evidence (like trade usage or earlier statements) can be allowed.

• Contra proferentem: Ambiguities are construed against the drafter (often used in insurance or consumer contracts).

• Extrinsic evidence is sometimes allowed (subject to Parol Evidence rule discussed earlier) when terms are unclear.

Performance and Breach

Once a contract is in place, performance obligations arise. As long as parties perform as promised, the contract ends upon full performance. Problems come when a party fails to do what they promised (a breach of contract). But not all failures are equal – the nature of the breach affects remedies.

Types of Breach

• Minor (or Partial) Breach: The breaching party fails to perform some minor or incidental part of the contract, but substantially performs the central part. The non-breaching party can sue for damages (loss due to imperfection) but still owes any remaining payments. For example, if a painter paints a house mostly but misses one coat on a small section, it's minor.

• Material Breach: A major failure, depriving the other party of the benefit of the contract, or a breach of a fundamental term. Material breach excuses the non-breaching party from performing and allows them to terminate and sue for full damages. For example, if a builder completely fails to build the house or builds only half of it.

• Anticipatory Repudiation: Before their performance is due, a party unequivocally indicates they will not perform (through words or actions). The non-breaching party can treat this as an immediate breach and seek remedies or wait to see if the repudiating party retracts.

• Impossibility, Impracticability, Frustration: Under certain conditions, performance may be excused. For instance, if the subject matter is destroyed (impossibility), an event occurs that was not foreseeable making performance unreasonably burdensome (impracticability), or the fundamental purpose of the contract is destroyed through no fault of either party (frustration of purpose).

Examples:

• If Anna contracts to deliver 100 gallons of paint by June 1, and she delivers only 90 gallons on June 2 with similar quality, this is a minor breach. Bharat (buyer) must still pay, minus maybe the cost to cover 10 gallons.

• If Anna fails to deliver at all by June 2, that's a material breach. Bharat can cancel the contract and sue for the cost difference of buying elsewhere.

• If weather suddenly destroys the paint warehouse on May 30, making delivery impossible, Anna may be excused under commercial impracticability.

Damages and Remedies

Contract law aims to put the innocent party in the position they would have been in had the contract been performed. The main remedies are:

• Expectation Damages (Benefit of the Bargain): The ordinary measure is (Value if performed) – (Amount already received) – (Cost to the injured party to substitute). Essentially, the non-breaching party gets what they expected from the deal. This covers direct losses and sometimes consequential losses.

• Example: Buyer pays $100 for a widget. Seller breaches. Buyer must cover by buying a similar widget for $150. Buyer can sue for $50 difference.

• Consequential (Special) Damages: Foreseeable indirect losses caused by the breach, beyond the contract itself, if they were within the contemplation of the parties. However, losing party is only liable for such damages if they had reason to foresee them (Hadley v. Baxendale rule). The non-breaching party must mitigate damages.

• Reliance Damages: If expectation damages are uncertain or unrecoverable, a party might get reliance damages (what they spent in reliance on the contract), putting them back to where they started. This is often a fallback to prevent unjust enrichment.

• Restitution: Restores any benefit conferred on the breaching party. If A partially performed and B breaches, A might recover the value of that partial performance. Conversely, if A breached, B can recover the value of anything B gave A.

• Specific Performance: Instead of money, the court orders the breaching party to perform exactly as promised. Usually only allowed when monetary damages are inadequate (e.g., contracts for unique items or real estate). Example: A signed a contract to sell his one-of-a-kind painting. B paid and A breaches by selling to someone else, the court might order A to transfer the painting (if possible).

• Injunctions: Rare in contracts, but sometimes to prevent a party from doing something (like breaching a confidentiality clause).

• Liquidated Damages: The contract may specify an agreed damage amount for breach. If it’s a reasonable estimate of potential loss, courts will enforce it. If it’s a penalty (way too high relative to actual harm), courts may strike it down.

• Quantum Meruit (Unjust Enrichment): Sometimes the remedy is expressed in quantum meruit (“as much as he deserved”) – the court awards the reasonable value of work done or services rendered when there is no contract or the contract is unenforceable.

• Cancellation and Rescission: The contract is cancelled and parties are returned to their original positions (with possible restitution). Usually occurs by mutual agreement or when a material breach/defense applies.

Mitigation: The non-breaching party has a duty to take reasonable steps to reduce damages (e.g., covering in sales, finding substitute employment). Failure to mitigate can reduce recoverable damages.

Example: Breach and Remedy

Suppose Joe promises to sell a rare baseball card to Felicia for $1,000. Felicia pays $1,000. Joe then sells the card to someone else for $1,200. Felicia can sue for breach. Because the card is unique, fine-tuning expectation damages by the market price might be difficult – but given the sale, we know $1,200 was paid. Felicia’s expectation damages might be measured as $200 (she lost the $200 market difference) or if the card was unique, a court might order specific performance requiring Joe to transfer the card (if the current buyer was involuntary or that sale can be undone). If specific performance isn’t available, Felicia at least gets back her $1,000 and the $200 difference.

Practical Tips: Lights and Evidence of Breach

• Identify if the breach is material or minor. The test often asks whether the injured party got the substantial benefit they reasonably expected.

• For damage calculations, set up Council's question: What was the expected profit or benefit? Then do math to show the difference.

• Always mention mitigation. If it’s a buyer’s breach, seller might cover or resell. If’s a seller’s breach, buyer might cover or find substitute.

• Use bullet lists for damages: e.g. “Lost profit on sale, costs incurred, other direct expenses, incidental damages (shipping, storage).”

• Remember consequences: The non-breaching party can still owe something if they accepted performance or partially performed.

Uniform Commercial Code (UCC) – Sale of Goods

Much contract law follows common law rules, but when the contract is for the sale of goods (tangible personal property) and the jurisdiction has adopted it, the UCC Article 2 governs many aspects. If your first-year class covers the UCC, here are key differences:

• Definition of Goods: Goods are movable things at the time of sale (not services, real property or intangible assets). Mixed contracts (goods and services) are evaluated by the "predominant purpose" test or divided accordingly.

• Formation: UCC is more flexible on offers and acceptances:

• Sale of goods can have open terms (price, delivery, quantity) if the parties intend a contract (Section 2-204). - Firm Offers (UCC 2-205): A merchant’s signed written offer promising to keep it open is irrevocable up to 3 months, even without consideration. - Battle of Forms (UCC 2-207): If businesses exchange form contracts with different terms, a contract can still form. Additional terms in acceptance become part of contract unless (a) original offer limited acceptance to its terms, (b) new terms would materially alter the deal, or (c) the offeror objects. - If both parties are merchants, additional terms often become part of contract by default. If not both merchants, then it’s a proposal that needs acceptance.

• Statute of Frauds (Sale of Goods):

• Contracts for goods priced $500 or more must be in writing (with quantity) and signed by the party to be charged, except: - Merchant’s confirmatory memo exception (if both are merchants and one sends a signed written confirmation to other which is not objected to in 10 days). - Specially manufactured goods for a buyer (if seller begins making them, that is an exception). - Admission in pleadings or court (party admits in court that a contract exists). - Performance by seller and by buyer (delivery and acceptance).

• Performance:

• Seller’s basic obligation: transfer conforming goods (right kind, quantity, quality) and tender them at the time/place promised. - Buyer’s obligation: accept and pay at contract price. - Perfect Tender Rule: If goods or delivery fail to meet contract terms, buyer can reject all, accept all, or accept any commercial unit and reject the rest (unless cure is allowed). - Cure: If delivery is rejected because non-conforming, seller may have a chance to fix the defect if notified and time still left. - Cover: If seller fails to deliver or goods are nonconforming, the buyer may buy substitute goods and recover the difference in cost.

• Risk of Loss: UCC governs when risk of loss passes from seller to buyer (depending on shipment contract vs destination contract, or if seller is a merchant, risk remains with seller until buyer receives timely).

• Warranties: There are implied warranties:

• Implied Warranty of Merchantability (goods fit for ordinary purposes) for merchants. - Implied Warranty of Fitness for a Particular Purpose (if buyer relies on seller’s skill). - These can be disclaimed in certain ways.

• Remedies:

• In addition to general contract remedies, UCC provides: - Buyers may reject nonconforming goods, seek cover, recover damages for non-delivery, and potentially get incidental/consequential damages. - Sellers may resell goods, recover contract price if buyer cancels or insolvent, or sue for lost profit if unable to resell (market price minus contract price). - Right to incidental damages (storage, transportation) and sometimes to storage costs, etc.

Example: UCC vs Common Law

• Under common law, Bob’s acceptance of an offer to buy goods that said “delivery by Sept 1” would become an acceptance only if he agreed to that exact term. Under UCC, if Bob’s acceptance form says “delivery by Sept 15” instead of Sept 1, it could still form a contract. The Sept 15 becomes a proposed term. If Bob is a merchant and this is a form acceptance, Sept 15 might automatically become the delivery date unless it materially alters the contract or Alice objects.

• If Alice says “I’ll sell you 100 widgets at $10 each” and Bob sends an email “I accept,” a contract is formed for 100 widgets at $10 each under UCC 2-204, even if “quantity” wasn’t in writing before.

Practical Tips: UCC Sales

• Identify if the contract is for goods or services. If it’s goods, expect UCC rules apply.

• Remember UCC is “gap-filler”: it tries to uphold agreements.

• For essays, always note “Under UCC” or “Under Common Law” where appropriate.

• Note the $500 threshold for goods. If below $500, oral is fine.

• Consider battle of forms: many exam fact patterns feature two merchants exchanging forms with conflicting terms.

• Use the acronym M.E.H.A.N for Statute of Frauds (Marriage, Executor, (land)Purchase, surety (aka suretyship), Goods over $500, UCC-defined contracts).

• Be ready to compare and contrast UCC vs common law treatment of modifications: UCC 2-209 (no new consideration needed for modifying a sales contract).

Common Contract Types

Several specialized contracts have their own rules or important cases:

• Real Estate Contracts: Must satisfy Statute of Frauds (usually writing) and conditions of land transfer (deed or writing). Specific performance is routinely available because every parcel of land is unique.

• Sales Contracts (UCC): See above.

• Service Contracts: Common law. Usually at-will if no term, or fixed term with termination clause. If indefinite, either party can end with reasonable notice unless otherwise provided.

• Installment Contracts: Divided into subperformances. Seller can final breach for any installment failure unless installment contract provides the right to demand cure for non-material failures.

• Option and Right-of-First-Refusal Contracts: Option contracts require their own consideration. Right-of-first-refusal can be seen as an option to contract for future deals.

• Conditional Contracts: Often in real estate (contingent on financing, inspection). If the condition fails, no liability if it was a true condition precedent.

• Bilateral vs Unilateral: Already discussed; special consider performance triggers for unilateral.

Your Toolbox: Study and Exam Tips

Contract law exams often involve complex fact patterns. Here’s how to tackle them:

• IRAC method: Break down the problem into issues (Offer? Acceptance? Breach? Defenses?), articulate the rule for each, apply facts, then conclude. Use headings or lists to organize.

• Language: Use precise terms like “promissory estoppel,” “mat. breach,” etc., demonstrating technical understanding.

• List elements clearly. For example, if asked if a contract exists: list Offer, Acceptance, Consideration, etc., and discuss each with facts.

• Issue Spotting: Read facts carefully. Underline or note any clues: words like “long-term,” “written contract,” “sued,” “fraud,” etc. These hint at which issues to discuss (e.g., Statute of Frauds, breach type, remedies).

• Key cases: While not mandatory in an outline, mentioning famous case names (e.g., Hadley v. Baxendale on foreseeability, Lucy v. Zehmer on intent, Mattei on satisfaction clause enforceability) can show depth. In a blog or practical guide, it’s optional, but keep them correct.

• Organize answers: Use bullet points or numbers for steps. E.g., “Steps to analyze a contract issue: 1. Identify parties and content; 2. Check formation; 3. Check defenses; 4. Check performance; 5. Determine breach; 6. Evaluate remedies.”

• Hypotheticals: Practice with sample questions. Write short IRAC answers or outlines for contract disputes.

• Make and use outlines: Summarize each topic (offer, consideration, etc.) in your own words. Flashcards for definitions (e.g., “consideration,” “parol evidence”) can help.

• Stay updated: Most contract law is stable, but note any local nuances or changes (like state law variations on unconscionability or electronic signatures laws).

Example pseudo-code to remember contract elements:

def is_valid_contract(offer, acceptance, consideration, capacity=True, legality=True, writing_required=False, written=None): if not offer or not acceptance or not consideration: return False if not capacity or not legality: return False if writing_required and not written: return False return True

Conclusion

Contract law provides the rules for making promises enforceable. As a first-year law student, build a strong foundation by mastering each element (offer, acceptance, consideration, etc.), understanding key doctrines (Statute of Frauds, parol evidence, UCC differences), and practicing issue analysis thoroughly. Use this guide as a roadmap and return to it when you need clarity. With diligent study and practical application of these concepts, you’ll gain confidence in contract law. Remember to practice with examples and apply IRAC on every problem—over time, the concepts will come together. Good luck!