Hawaii Law School 1L Study Guide for Contracts

I. Introduction to Contracts

A. Definition and Purpose

• Contract: A legally enforceable agreement between two or more parties that creates mutual obligations.
• Purpose: To provide a framework for individuals and entities to exchange resources, services, or promises with a guarantee of legal support to enforce the agreement.

B. Sources of Contract Law

• Common Law: The body of law developed from judicial decisions for most contracts.
• Uniform Commercial Code (UCC): A standardized collection of guidelines that govern the law of commercial transactions. In Hawaii, it is codified as Hawaii Revised Statutes (HRS), Title 27.
• Hawaii State-Specific Laws: Certain contract laws specific to Hawaii, including those related to the sale of goods, real property, and services.

II. Contract Formation

A. Offer

• Definition: A proposal by one party to enter into a legally binding agreement with another.
• Requirements: Must be definite, communicated to the offeree, and demonstrate the offeror’s intent to be bound.

B. Acceptance

• Definition: An expression of assent to the terms of an offer.
• Mirror Image Rule: Acceptance must be a mirror image of the offer without variations.

C. Consideration

• Definition: Something of value exchanged between the parties that induces them to enter into a contract. Can be a promise, an act, or forbearance.
• Adequacy of Consideration: The law does not typically concern itself with the comparative value of the consideration exchanged unless there is evidence of fraud, duress, or unconscionability.

D. Mutuality of Obligation

• Definition: Both parties must be bound to perform their respective obligations; otherwise, the arrangement may be deemed an illusory promise and not enforceable.

E. Capacity

• Definition: Parties must have the legal ability to enter into a contract. This includes being of the age of majority and having sound mind.

F. Legality

• Definition: The contract’s terms and purpose must not violate any laws or public policy.

G. Case Law

• Lucy v. Zehmer (1954): The case where the court held that the outward expression of agreement (written contract of sale) was binding, despite the defendants claiming they were not serious.
  • Issue: Whether the written agreement constituted a binding contract.
  • Rule: A contract exists if the parties’ outward expressions of agreement indicate an intent to be bound, regardless of internal belief.
  • Analysis: The court found that the defendants’ actions indicated a serious offer and acceptance.
  • Conclusion: The contract was enforceable.

III. Contract Interpretation

A. Plain Meaning Rule

• Definition: If language in a contract is clear and unambiguous, courts will interpret it according to its plain meaning.

B. Parol Evidence Rule

• Definition: When parties have a written contract, evidence of prior or contemporaneous agreements that contradict, modify, or vary the contractual terms is generally not admissible.

C. Interpretation against the Drafter

• Definition: Ambiguities in a contract will typically be construed against the party that drafted the document.

D. Hawaii Specific Considerations

• Hawaii Revised Statutes (HRS): Interpretation principles may be affected by specific statutes within the HRS.

IV. Defenses to Contract Enforceability

A. Mistake

• Mutual Mistake: Both parties have an incorrect belief about an essential fact at the time of contract formation.
• Unilateral Mistake: Only one party is mistaken about an essential fact.

B. Misrepresentation and Fraud

• Misrepresentation: False statement of fact that induces the other party to enter into the contract.
• Fraud: Intentional misrepresentation to deceive the other party.

C. Duress and Undue Influence

• Duress: Threats, violence, constraints, or other action brought to bear on someone to do something against their will or better judgment.
• Undue Influence: Taking advantage of another person through a position of trust.

D. Illegality and Public Policy

• Illegality: Contracts for illegal purposes are not enforceable.
• Public Policy: Contracts that violate public policy or are contrary to the welfare of the public may be void.

E. Unconscionability

• Definition: An unfair and oppressive contract, or clause within a contract, that courts refuse to enforce.

F. Statute of Frauds

• Definition: Certain types of contracts must be in writing to be enforceable. This includes contracts for the sale of land, contracts that cannot be performed within one year, and others specified by the statute.

V. Performance and Breach

A. Performance

• Complete Performance: All terms of the contract have been fully met.
• Substantial Performance: Performance of all essential elements of a contract, warranting payment minus damages for minor defects.

B. Breach of Contract

• Definition: A failure to perform any term of a contract without a legitimate legal excuse.
• Material Breach: A substantial failure of performance, which allows the non-breaching party to be discharged from the contract.
• Anticipatory Breach: A declaration by the promising party that they do not intend to live up to their obligations under the contract.

C. Remedies

• Damages: Monetary compensation for loss or injury.
• Specific Performance: Court order requiring the breaching party to fulfill the terms of the contract.
• Rescission: Termination of the contract and return of the parties to their pre-contractual position.

D. Case Law

• Hadley v. Baxendale (1854): Established the principle that damages are limited to those that the parties could reasonably foresee at the time of contract formation.
  • Issue: Extent of recoverable damages in a contract breach.
  • Rule: Damages are recoverable only to the extent that they are reasonably foreseeable at the time of the contract forming.
  • Analysis: The court found that the losses claimed were not foreseeable by the breaching party.
  • Conclusion: Damages were limited to those foreseeable at the time of contract formation.

VI. Third-Party Issues

A. Assignment and Delegation

• Assignment: Transfer of rights under a contract to a third party.
• Delegation: Transfer of contractual duties to a third party.

B. Third-Party Beneficiary

• Definition: A person who is not a party to the contract but stands to benefit from its performance.

VII. Conclusion

This study guide covers the foundational concepts of contract law that are relevant to a 1L Hawaii law student preparing for a final exam. It is crucial to understand not only the common law principles but also how Hawaii state laws might modify or supplement these rules. Remember to analyze the facts of each case using the IRAC method, and always check the latest Hawaii Revised Statutes for the most current state-specific legal norms.