I. Overview of Contract Law
A contract is a legally binding agreement between two or more parties. In order for a contract to be binding, there must be an offer, acceptance, consideration, and a mutual intention to create a legal relationship.
- Offer and Acceptance: The offer is an indication of willingness to enter into a contract, while acceptance is an unqualified agreement to the terms of the offer.
Case: Lucy v. Zehmer (1954) – IRAC
Issue: Whether a contract was formed when an offer was made in jest?
Rule: A contract is formed if the parties have apparent intention to form a contract, despite actual intention.
Analysis: The fact that Zehmer was jesting when he offered to sell his farm does not negate the contract, as Lucy had an apparent intention to purchase.
Conclusion: A contract was formed. -
Consideration: This is the value that each party gives and receives in the contract.
Case: Hamer v. Sidway (1891) – IRAC
Issue: Whether forbearance can be a valid consideration?
Rule: Forbearance is a valid consideration if it is part of a bargain in which both parties get something.
Analysis: The uncle’s promise to pay the nephew if he abstained from drinking, smoking, etc. was a valid consideration.
Conclusion: Forbearance is a valid consideration.
II. Breach of Contract
A breach of contract occurs when one party does not fulfill their contractual obligations.
- Material Breach: This is when a party does not perform their contractual duties to such an extent that it deprives the other party of the expected benefits under the contract.
Case: Jacob & Youngs v. Kent (1921) – IRAC
Issue: When is a breach of contract material?
Rule: A breach is material when it goes to the heart of the contract.
Analysis: The use of a different brand of pipes than specified in the contract did not deny the homeowner the expected benefits from the contract.
Conclusion: This was not a material breach. -
Anticipatory Breach: This is when one party indicates that they will not fulfill their contractual obligations.
Case: Hochster v. De La Tour (1853) – IRAC
Issue: Can one sue for breach of contract before the performance is due?
Rule: Yes, one can sue for breach of contract before the performance is due if the other party has expressed their intention not to perform their obligations.
Analysis: De La Tour informed Hochster that he would not be requiring his services as a courier before the start of the agreed tour, hence anticipatory breach.
Conclusion: Anticipatory breach is a valid form of breach.
III. Remedies
The purpose of remedies is to place the aggrieved party in the position they would have been if the contract had been properly performed.
- Damages: This is the most common form of remedies paid out as compensation to the aggrieved party.
Case: Hadley v. Baxendale (1854) – IRAC
Issue: What types of damages are recoverable in a breach of contract case?
Rule: Damages are recoverable if they were foreseeable at the time the contract was formed.
Analysis: Hadley’s lost profits were not foreseeable by Baxendale at the time the contract was formed, hence not recoverable.
Conclusion: Only foreseeable damages are recoverable. -
Specific Performance: This is an order by the court to the breaching party to perform their contractual obligations.
Case: Laclede Gas Co. v. Amoco Oil Co. (1981) – IRAC
Issue: When may specific performance be granted?
Rule: Specific performance may be granted when damages would be inadequate.
Analysis: Laclede Gas Co. would be unable to replace the lost fuel supplies, hence damages would be inadequate.
Conclusion: Specific performance was granted.
Study well, and remember that understanding the principles is more important than memorizing cases. Good luck on your finals!