What is a Contract and What Law Applies

What is a Contract
1. Contract: A contract is 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. It is simply a legally enforceable agreement
b. But keep in mind that just because two parties have an agreement doesn’t mean
that it’s legally enforceable. You have to have consideration or a substitute for
consideration
c. Exam tip: Look first for an agreement formed, then see if it’s legally enforceable
2. Types of Contracts
a. Express contracts are formed by language, oral or written
b. Implied contracts are formed by conduct
c. Quasi contracts are not contracts at all. Quasi contract is the name given when
an unenforceable contract results in unjust enrichment.
i. Courts permit P to bring an action in restitution to recover the amount of
the benefit conferred on D

3. Bilateral Contracts - Exchange of Mutual Promises: A bilateral contract is one

consisting of the exchange of mutual promises [a promise for a promise]
a. Each party is both a promisor and a promisee
b. A bilateral contract offer can be accepted in any reasonable way
 c. Most contracts are bilateral, which means that most offers are indifferent offers
that may be accepted by promising or beginning performance
d. Unless expressly indicated otherwise, assume any contract is a bilateral contract
4. Unilateral Contracts - Acceptance by Performance: A unilateral contract is one in
which the offeror requests performance rather than a promise
a. Here, the offeror-promisor promises to pay upon the completion of the requested
act by the promisee
b. Once the act is completed, a contract is formed
c. A unilateral contract which requires full performance, occurs in only 2 situations:
i. When the offeror clearly and unambiguously indicates that completion
of performance is the only manner of acceptance
ii. Where there is an offer to the public such as an award offer
d. Exam tip: Look for 3 magic words - “Offer only by” or a reward offer. Otherwise
assume the offer is for a bilateral contract
5. Validity of Contracts
a. Void Contract: A void contract is one that is totally without any legal effect
from the beginning. It cannot be enforced by either party
i. Example: An agreement to commit a crime
b. Voidable Contract: A voidable contract is one that one or both parties may elect
to avoid such as by raising a defense that makes it voidable, like infancy or mental
illness
c. Unenforceable Contract: An unenforceable contract is otherwise valid but isn’t
enforceable due to a defense, such as the statute of limitations or statute of frauds
d. Exam Tip: The distinction between void and voidable contracts is sometimes
important to an exam question. The key thing to remember is that void contracts
can never be enforced, but an aggrieved party may elect to enforce a voidable
contract
6. Common Law: Generally common law governs contracts unless it’s a sale of good
7. UCC: For contracts involving the sale of goods, Article 2 of the Uniform Commercial
Code applies
a. Goods are all things movable at the time they are identified as the items to be
sold under the contract
b. UCC applies to sales of most tangible things (including cars, horses, and
hamburgers) but doesn’t apply to the sale of real estate, services (such as a health
club membership or employment), or intangibles (such as a patent), or to
construction contracts
c. Merchants vs. Nonmerchants: A number of the rules in the UCC depend on
whether the seller and/or buyer are merchants
i. Merchant: One who regularly deals in goods of the kind sold or who
otherwise by their profession holds themselves out has having special
knowledge or skills as to the practices or goods involved
 ii. For UCC provisions dealing with general business practice (SoF,
confirmatory memoirs, firm offers, modification) almost anyone in
business can be deemed a merchant
1. But some UCC provisions [like the implied warranty of
merchantability] are narrower and require the person to be a
merchant with respect to goods of the kind involved in the
subject transaction
iii. Exam tip: Remember that a merchant must be acting in their mercantile
capacity (in a way that relates to their business) in order for the merchant
rules to apply. A party is not a merchant for purposes of sales that are
solely person (for example, sales related to a collecting hobby)
d. Contracts Involving Goods and Nongoods: If a sale involves both goods and
services, you will determine which aspect is dominant and apply the law
governing that aspect to the whole contract
i. But if the contract divides payment between goods and services, then the
UCC will apply to the sale portion and the common law will apply to the
services portion
e. Good faith and fair dealing: Every contract within the UCC imposes an
obligation of good faith in its performance and enforcement
i. Good faith is honesty in fact and the observance of reasonable
commercial standards
ii. Common law also imposes a duty of good faith and fair dealing
iii. A breach of this duty usually involves exercising discretion in a way that
deprives the other party of the fruits of the contract