Contract Law — Outline

Key Concepts

• Types of Contracts. Bilateral vs. unilateral, express vs. implied, and void vs. voidable vs. unenforceable.
• Capacity. Who can actually be bound — minors, mental incapacity, and severe intoxication.
• Meeting of the Minds (Mutual Assent). The objective theory of contracts — what a reasonable person would understand, not secret intent.
• Offer. A manifestation of willingness to be bound, with definite terms, communicated to the offeree.
• Acceptance & the Mailbox Rule. The offeree's assent — and the rule that decides exactly when it becomes legally effective.
• The Statute of Frauds. Certain deals need a signed writing to be enforceable — including goods worth $500+.
• Battle of the Forms (UCC § 2-207). What happens when a merchant's "acceptance" doesn't perfectly match the offer.

Key Terms

Bilateral Contract

A contract formed by an exchange of mutual promises — most contracts are this type.

Unilateral Contract

A contract accepted only by actually performing the requested act, not by promising to — e.g. a reward offer.

Quasi-Contract (Implied-in-Law)

Not a real contract — a legal fiction courts impose to prevent unjust enrichment even without actual mutual assent.

Voidable Contract

A contract that remains valid unless and until the disadvantaged party elects to avoid it — e.g. a minor's contract.

Capacity

The legal ability to be bound by a contract — commonly at issue for minors, those with mental incapacity, or severe intoxication.

Objective Theory of Contracts

Courts assess mutual assent by what a reasonable person would understand from a party's outward words and conduct, not their secret subjective intent.

Offer

A manifestation of willingness to enter a bargain, made so as to justify the other party in understanding that their assent will conclude the deal.

Acceptance

The offeree's manifestation of assent to the terms of the offer, given in the manner the offer invites.

Mirror Image Rule

The common-law rule that an acceptance must match the offer's terms exactly, or it operates as a counter-offer instead.

Mailbox Rule

Acceptance is effective the moment it's dispatched; revocation is effective only once received by the offeree.

Statute of Frauds

A rule requiring certain categories of contracts — including UCC goods sales of $500 or more — to be evidenced by a signed writing to be enforceable.

Part Performance

An exception that can take an oral deal outside the Statute of Frauds when the parties' actual conduct (e.g. payment plus delivery) substitutes for a writing.

UCC § 2-207

The rule that, between merchants, an acceptance with additional terms can still form a contract — avoiding the common-law trap of endless counter-offers over mismatched paperwork.

Material Alteration

A change significant enough (like a mandatory arbitration clause) that it does NOT automatically become part of the contract under § 2-207, even between merchants.

Key Concepts

• Integration & the Parol Evidence Rule. When outside evidence can and can't be used to change a written deal.
• Interpreting Ambiguous Terms. Plain meaning, contra proferentem, and the course of dealing / usage of trade hierarchy.
• Implied Terms & Gap-Filling. What courts and the UCC supply when the parties left something unaddressed.
• Conditions vs. Promises. Why the label on an obligation changes what happens when it isn't met.

Key Terms

Parol Evidence Rule

Bars evidence of prior or contemporaneous statements offered to contradict or add to a written, integrated agreement — but not evidence offered to resolve genuine ambiguity or prove fraud.

Integration / Merger Clause

A clause stating the writing is the complete and final expression of the parties' agreement, helping establish that the parol evidence rule applies.

Contra Proferentem

The rule that genuine ambiguity in a contract term is construed against the party who drafted it.

Course of Dealing

A consistent pattern of conduct between these same two parties in their prior contracts, used to interpret an ambiguous term.

Course of Performance

How the parties have actually acted under this very contract so far — even more directly on-point than course of dealing.

Usage of Trade

A practice or method so regularly observed in an industry that parties are assumed to expect it to apply, absent a contrary agreement.

Implied Covenant of Good Faith and Fair Dealing

An obligation read into every contract that neither party will act to deprive the other of the benefits of the agreement.

Condition Precedent

An event that must occur before a party's duty to perform arises — unlike an ordinary promise, a condition generally must be strictly satisfied.

Key Concepts

• Material vs. Minor Breach. Why the size of a breach changes what the other side can do about it.
• Anticipatory Repudiation. When a clear advance refusal lets you treat the deal as breached right now.
• Excuse: Impossibility, Impracticability & Frustration. When an unforeseen event can excuse performance entirely.
• Substantial Performance. Imperfect performance that's still close enough to earn most of the contract price.
• Mistake. When a wrong shared or one-sided assumption can undo a contract.
• Duress, Undue Influence & Misrepresentation. Defenses aimed at how a contract came about, not just what it says.

Key Terms

Material Breach

A failure to perform serious enough to excuse the other party's own performance and support a claim for total breach.

Minor Breach

A failure to perform that gives rise to a damages claim, but doesn't excuse the other party's own continuing performance.

Anticipatory Repudiation

A clear, unequivocal statement or act showing a party won't perform, made before performance is actually due.

Impossibility

Performance literally cannot happen — e.g. the unique subject matter of the contract has been destroyed.

Commercial Impracticability

Under UCC § 2-615, performance has become extremely and unreasonably difficult or costly due to an unforeseen event — not just less profitable.

Frustration of Purpose

Performance is still possible, but a supervening event has destroyed the entire point of the deal for one party.

Substantial Performance

Performance close enough to what was promised (common in construction contracts) that the performing party can recover the contract price minus damages for the defects, rather than being treated as in total breach.

Restatement § 241

The multi-factor test courts use to decide whether a breach is material, including how much benefit was lost and how likely a prompt cure is.

Mutual Mistake

Both parties were wrong about a basic assumption underlying the contract — can make the contract voidable by the adversely affected party if the mistake has a material effect and that party didn't bear the risk of it.

Unilateral Mistake

Only one party was mistaken — relief is harder to get, generally requiring that the other party knew or should have known, or that enforcement would be unconscionable.

Duress

An improper threat that leaves the victim no reasonable alternative but to agree — can be physical or purely economic.

Undue Influence

Unfair persuasion of a party under the domination of another, or by exploiting a relationship of trust and confidence.

Misrepresentation

A false assertion of fact that induces assent — fraudulent if made knowingly or recklessly, innocent/negligent otherwise, but either can support avoiding the contract if material.

Key Concepts

• Expectation Damages. The default remedy — the benefit of the bargain, in dollars.
• Reliance & Restitution. What to use when expectation damages are too speculative to prove.
• Mitigation & Consequential Damages. The duty to limit your own losses, and what counts as foreseeable.
• Specific Performance & Liquidated Damages. When a court orders the deal done instead of paying for it — and when a pre-set damages figure holds up.
• Rescission. Unwinding the deal entirely, rather than paying for what went wrong.
• No Punitive Damages. Why contract law compensates, and generally doesn't punish.

Key Terms

Expectation Damages

The default contract remedy — puts the injured party in the position they'd have been in had the contract been performed.

Reliance Damages

Puts the injured party back where they were before the contract, covering out-of-pocket costs — used when expectation is too speculative to prove.

Restitution

Prevents unjust enrichment by requiring return of any benefit conferred on the breaching party.

Duty to Mitigate

The injured party must take reasonable steps to limit their own losses — damages a reasonable mitigation effort would have avoided generally aren't recoverable.

Consequential Damages

Losses beyond the direct loss in value, recoverable only if they were reasonably foreseeable to the breaching party at the time of contracting.

Hadley v. Baxendale

The foundational English case establishing that consequential damages must have been foreseeable — either naturally, or because the breaching party had actual notice of special circumstances.

Specific Performance

A court order requiring actual performance of the contract, available when money damages are inadequate — classically for unique goods or land.

Liquidated Damages Clause

A pre-agreed damages figure, enforceable if it was a reasonable estimate of actual harm at the time of signing and actual damages were genuinely hard to predict — otherwise struck down as an unenforceable penalty.

Rescission

An equitable remedy unwinding the contract entirely, returning both parties to their pre-contract positions — the natural remedy for contracts affected by mistake, duress, undue influence, or misrepresentation.

Punitive (Penal) Damages

Damages meant to punish, not compensate — generally NOT available for breach of contract, unlike torts, unless the same conduct also constitutes an independent tort.

Key Concepts

• The Duty of Good Faith and Fair Dealing. An implied promise not to undermine the other side's benefit of the bargain.
• Third-Party Beneficiaries. When someone who never signed the contract can still enforce it.
• Assignment & Delegation. Transferring the right to receive performance vs. the duty to perform it.
• Novation. The one move that actually releases the original party — and the one most people get wrong.
• Risk Allocation. Warranties, indemnification, exculpatory clauses, and insurance — contracts deciding who bears what risk.

Key Terms

Duty of Good Faith and Fair Dealing

An obligation implied into every contract that neither party will act to destroy or injure the other's right to receive the benefits of the agreement.

Intended Beneficiary

A third party the contracting parties actually meant to benefit — can enforce the contract once their rights vest.

Incidental Beneficiary

A third party who merely happens to benefit from a contract without being an intended target of it — gets no enforceable rights.

Assignment

Transferring the right to receive contract performance to a third party (the assignee), who then steps into the assignor's shoes to receive it.

Delegation

Transferring the duty to perform to a third party — the delegating party generally remains liable as a backup unless released.

Novation

An agreement, with all parties' consent, substituting a new party for an original one AND fully releasing the original party from further liability — the defining feature delegation alone lacks.

Indemnification Clause

A clause where one party agrees to cover the other's losses arising from specified risks or third-party claims.

Exculpatory Clause

A clause attempting to limit or eliminate liability for certain harms — enforceability varies, and courts scrutinize these closely, especially for gross negligence or in consumer contexts.