New York Law School 1L Study Guide for Contracts
I. Introduction to Contracts
Contracts are agreements enforceable by law. They are fundamental to private transactions and are central to the practice of law in the United States, including New York.
- Definition and Elements: A contract is a promise or a set of promises for the breach of which the law gives a remedy. The elements of a contract are:
- Offer
- Acceptance
- Consideration
- Mutual Assent
- Capacity
- Legality
II. Offer
An offer is a promise to act or refrain from acting, which is made in exchange for a return promise or performance.
- Intent: The offeror must intend to be bound by the offer.
- Definiteness: The terms of the offer must be clear and definite.
- Communication: The offer must be communicated to the offeree.
III. Acceptance
Acceptance is an expression of assent to the terms of the offer.
- Mirror Image Rule: The acceptance must be an unequivocal assent to the terms of the offer.
- Mailbox Rule: Acceptance is generally effective upon dispatch if sent in a manner expressly or impliedly authorized by the offeror.
- New York Rule: Under New York law, the Mailbox Rule does not apply to an option contract until the acceptance is received by the offeror.
IV. Consideration
Consideration is the value (such as money, a service, or a promise) that induces a party to enter into the contract.
- Adequacy: The law typically does not concern itself with the adequacy of consideration as long as something of legal value is exchanged.
- Preexisting Duty Rule: Performing an existing legal duty is not sufficient consideration for a new promise, unless there is something new or different from the preexisting duty.
V. Mutual Assent
Mutual assent, or the “meeting of the minds,” ensures that both parties have agreed to the same terms.
- Objective Theory of Contracts: The intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties.
VI. Capacity
Capacity concerns the legal ability of a party to enter into a contract.
- Minors, Intoxication, Mental Incompetence: Contracts with minors, intoxicated persons, or mentally incompetent individuals may be voidable.
VII. Legality
A contract must be for a lawful purpose.
- Illegal Contracts: Contracts that involve illegal acts are void and unenforceable.
VIII. Defenses to Formation
Certain defenses can prevent the formation of a contract.
- Mistake: A mutual mistake of material fact can make a contract voidable.
- Duress: A contract entered under duress, where one party was forced to agree, may be voidable.
- Undue Influence: Contracts formed under undue influence, where one party has taken advantage of their power over the other, can be voidable.
- Misrepresentation: A contract may be voidable if one party entered it because of another’s misrepresentation.
IX. Parol Evidence Rule
The parol evidence rule governs the admissibility of evidence outside the written contract.
- Integration: If the written agreement is a final embodiment of the parties’ agreement, extrinsic evidence cannot contradict it.
- Exceptions: Extrinsic evidence can be used to show fraud, mistake, or to explain ambiguous terms.
X. Performance and Breach
Performance is the fulfillment of contract obligations. Breach occurs when a party fails to perform as promised.
- Substantial Performance: If a party has substantially performed, they may be entitled to payment minus the value of any defects.
- Material Breach: A breach that defeats the entire purpose of the agreement gives the non-breaching party the right to terminate the contract and sue for damages.
XI. Remedies
Remedies are the legal means to enforce a right or redress a breach.
- Damages: Compensatory, consequential, punitive, and nominal damages.
- Specific Performance: An equitable remedy that compels the breaching party to perform the contract.
- New York Specific: Under New York law, courts may award the cost of completion or the diminution in value, particularly in real estate transactions.
XII. Third-Party Rights
Third parties can have rights in a contract if they are intended beneficiaries.
- Assignment: The transfer of contractual rights to a third party.
- Delegation: The transfer of contractual duties to a third party.
- Intended Beneficiary: A third party who has rights under a contract because the contract was made for the third party’s benefit.
XIII. Statute of Frauds
Certain contracts must be in writing to be enforceable.
- New York’s General Obligations Law: In New York, the statute of frauds covers contracts that cannot be performed within one year, for the sale of goods $500 or more, and for real estate transactions, among others.
XIV. Case Law Overview
Here are a few landmark cases in contract law that you will study, summarized using the IRAC format:
- Lucy v. Zehmer (1954)
- Issue: Whether a contract was formed when the defendant claimed he was only joking about selling his farm.
- Rule: The objective theory of contracts applies.
- Analysis: The defendant’s actions and words indicated a serious intention to sell the farm, as perceived by a reasonable person.
- Conclusion: The court found a binding contract had been formed.
- Carlill v. Carbolic Smoke Ball Co. (1893)
- Issue: Whether an advertisement was a unilateral offer that could create a binding contract upon performance.
- Rule: Advertisements can be considered offers if they are clear, definite, and explicit in their terms.
- Analysis: The advertisement’s specific claim and the mention of a £100 deposit indicated a serious intention to be bound.
- Conclusion: The court ruled in favor of Carlill, establishing the contract upon her use of the product as instructed.
- Hampton v. McConville (New York, 1983)
- Issue: Is an agreement to sell goods for $500 or more enforceable without a written memorandum under the New York UCC?
- Rule: Under New York’s UCC, a contract for the sale of goods for $500 or more must be in writing.
- Analysis: The court found no enforceable written memorandum to substantiate the oral agreement.
- Conclusion: The contract was unenforceable due to the statute of frauds.
XV. Conclusion
This study guide provides an overview of key concepts, laws, and cases that you will encounter in your 1L Contracts class at New York Law School. It is important to further elaborate on these topics and review additional New York-specific statutes and case law for a comprehensive understanding of contract law in New York.