Montana Law School 1L Study Guide for Contracts
I. Introduction to Contracts
A. Definitions and Basics
1. Contract: A legally enforceable agreement between two or more parties with mutual obligations.
2. Elements of a Contract: Offer, Acceptance, Consideration, Capacity, and Legality.
3. Types of Contracts: Bilateral vs. Unilateral, Express vs. Implied, Executed vs. Executory.
II. Formation of Contracts
A. Offer
1. Requirements: Intent to be bound, Definiteness, Communication to the offeree.
2. Termination: Revocation, Rejection, Counteroffer, Lapse of Time, Death or Incapacity, Illegality.
B. Acceptance
1. Mirror Image Rule: Acceptance must match the terms of the offer exactly.
2. Mailbox Rule: Acceptance is effective upon dispatch when using the mail, unless the offer specifically states otherwise.
C. Consideration
1. Definition: Something of value or a promise to do or not do something.
2. Adequacy: Generally not required that consideration be equal or fair.
3. Pre-existing Duty: Performing a duty you are already legally bound to do is not good consideration.
D. Capacity
1. Minors, intoxicated persons, and mentally incapacitated individuals may lack the capacity to contract.
E. Legality
1. The purpose and terms of the contract must not violate laws or public policy.
III. Theories of Contract Law
A. Objective Theory of Contracts
1. The intent to contract is judged by the outward, objective facts as interpreted by a reasonable person.
B. Subjective Theory of Contracts
1. Takes into account the actual intention of the parties.
IV. Defenses to Contract Enforceability
A. Mistake
1. Mutual Mistake: Both parties share a mistaken belief regarding a basic assumption on which the contract is made.
2. Unilateral Mistake: Only one party is mistaken about a basic assumption on which the contract is made.
B. Misrepresentation
1. False statement that induces the other party to enter into the contract.
C. Fraud
1. Intentional misrepresentation to deceive the other party.
D. Duress
1. One party is forced into the contract under a threat of harm.
E. Undue Influence
1. One party takes advantage of another’s mental, emotional, or physical weakness to unfairly influence contract terms.
V. Performance and Breach
A. Conditions
1. Precedent: Must occur before a duty to perform arises.
2. Subsequent: Relieves a party from a duty to perform.
3. Concurrent: Parties have a simultaneous duty to perform.
B. Breach of Contract
1. Material Breach: Significant failure to perform.
2. Anticipatory Repudiation: One party indicates in advance that they will not perform.
C. Remedies for Breach
1. Damages: Compensatory, Consequential, Punitive (rare), and Nominal.
2. Specific Performance: A court order to perform the contract as promised, typically in the sale of unique goods or property.
3. Rescission: Cancellation of the contract.
VI. Third-Party Rights and Obligations
A. Assignment and Delegation
1. Assignment: Transfer of rights under the contract.
2. Delegation: Transfer of duties under the contract.
B. Third-Party Beneficiaries
1. Intended Beneficiaries: Have rights and can sue for enforcement.
2. Incidental Beneficiaries: Do not have rights and cannot sue for enforcement.
VII. The Uniform Commercial Code (UCC) and Contracts for the Sale of Goods
A. UCC Article 2: Governs contracts for the sale of goods.
B. Goods: All things movable at the time of identification to the contract.
C. UCC vs. Common Law: UCC is more flexible with contract formation and terms.
VIII. Montana Specific Rules and Considerations
A. Montana Code Annotated (MCA)
1. Montana has adopted versions of the UCC which may have specific variations from the general UCC.
B. Governing Law
1. Contracts for the sale of goods in Montana are governed by Title 30, Chapter 2 of the MCA (Montana’s version of the UCC Article 2).
C. Case Law
1. Montana courts have their own body of case law interpreting and applying contract principles that must be considered alongside UCC provisions.
IX. Key Cases
A. Lucy v. Zehmer (1954) – Demonstrates the objective theory of contracts by holding that Zehmer’s outward expression constituted a binding contract, even if he was joking.
– IRAC:
– Issue: Whether Zehmer’s actions demonstrated an intention to enter into a contract.
– Rule: A contract exists if a reasonable person would judge the parties’ actions as showing intent to contract.
– Analysis: Zehmer discussed the sale with Lucy for several hours, and they drafted a written agreement. Despite Zehmer’s claim that he was joking, the court found that his actions showed serious intent.
– Conclusion: Zehmer was bound by the contract.
B. Hamer v. Sidway (1891) – Establishes the concept of forbearance as sufficient consideration for a contract.
- IRAC:
- Issue: Whether the nephew’s forbearance from drinking and gambling constituted valid consideration.
- Rule: Forbearance of a legal right is sufficient consideration for a contract.
- Analysis: The nephew gave up his legal right to drink and gamble until 21 in exchange for a promise from his uncle.
- Conclusion: The contract was enforceable because forbearance was valid consideration.
C. Sherwood v. Walker (1887) – Deals with mutual mistake regarding a material fact (the barrenness of a cow) affecting the contract's validity.
- IRAC:
- Issue: Whether a mutual mistake about the cow's fertility rendered the contract void.
- Rule: A mutual mistake about a material fact can render a contract void.
- Analysis: Both parties believed the cow was barren, which was a central assumption of their contract.
- Conclusion: The contract was void due to the mutual mistake.
D. Carbolic Smoke Ball Co. v. Carlill (1893) – An English case often studied for unilateral contract principles.
- IRAC:
- Issue: Whether an advertisement constituted an offer for a unilateral contract.
- Rule: An advertisement can be an offer if it is clear, definite, and explicit, and leaves nothing open for negotiation.
- Analysis: The company’s advertisement was a clear and definite offer to pay £100 to anyone who used the smoke ball as directed and contracted influenza.
- Conclusion: The contract was enforceable as Carlill had accepted the offer through performance.
This study guide provides a foundational overview for a 1L Contracts class focusing on Montana law. Specific case law, statutes, and variations in the MCA should be closely studied to understand how Montana courts may interpret and apply these principles differently from other jurisdictions.