Introduction to Contracts

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Introduction to Contracts
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Contracts are agreements made up of big words
and little type. Sam Ewing, quoted in Saturday
Evening Post, May 1993
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Learning Objectives

• Nature of contracts
• Basic elements of a contract
• Basic contract types
• Non-contract obligations

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Contracts

• Not every promise is legally enforceable
• But when a set of promises has the status of
  contract, a person injured by a breach of that
  contract is entitled to call on the government
  (courts) to force the breaching party to honor
  the contract
• Contract law is ancient law, but has evolved to
  reflect social change

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Elements of a Contract

• (1) agreement (2) between competent parties (3)
  based on genuine assent of the parties that is
  (4) supported by consideration, (5) made for a
  lawful purpose, and (6) in the form required by
  law, if any
• See Figure 1, page 276

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Jackson v. Connecticut Lottery Corporation

• Facts
• Jackson bought a Connecticut Lotto Quick Pick
  ticket for the drawing of October 13, 1995 and
  won, but claimed his prize in person three days
  after the final day allowed to claim the prize
• Ticket back provided instructions for claiming
  the prize online and included warning that Prize
  must be claimed within one year from the drawing
  date.
• Connecticut Lottery Corporation (CLC) denied
  Jacksons claim because one-year had elapsed
• Jackson sued for breach of contract

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Jackson v. Connecticut Lottery Corporation

• Threshold Issue Is the lotto ticket a contract?
• Trial Court Ruling
• The parties did enter into a valid, unilateral
  contract through the purchase of a Lotto ticket
• CLC made a prize offer, Jackson accepted that
  offer
• Consideration () supported the contract
• The one-year presentment rule was incorporated
  into the contract regardless whether Jackson knew
  of it
• Public policy without the claim period the
  regulatory scheme of the lottery system would be
  compromised
• Motion for summary judgment granted

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Contract Concepts and Types

• Bilateral contracts two parties make promises to
  one another
• Unilateral contracts one party makes a promise
• Frequent buyer cards are offers for unilateral
  contracts gaining points on the cards accept the
  offer and create a contract

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Contract Concepts and Types

• Valid contract binding and enforceable agreement
• Voidable contract agreement otherwise binding,
  but due to circumstances surrounding execution or
  lack of capacity, may be rejected at option of
  one party
• Void contract agreement without legal effect
  because prohibited by law

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Contract Concepts and Types

• Express contract agreement of parties manifested
  by words, written or oral
• Implied contract agreement not shown by words,
  but by acts and conduct of parties
• Difference between express implied contracts
  relates to manner of proving the existence of the
  contract, not the effect one or the other arises

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Sources of Governing Law

• Two bodies of lawArticle 2 of the Uniform
  Commercial Code and the common law of
  contractsgovern contracts today
• The Uniform Commercial Code (UCC) is statutory
  law in every state, but the common law of
  contracts is evolving

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The Uniform Commercial Code

• The UCC contains nine articles
• Article 2 expressly applies to contracts for the
  sale of goods 2102 (numbers in brackets refer
  to specific Code sections)
• UCC 1105 goods are tangible, movable,
  personal property
• Does not apply to sale of services, intangible
  property (stocks, intellectual property), or real
  estate

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The UCC and Hybrid Contracts

• Many contracts involve goods and services
• The test that courts most frequently apply to
  decide whether Article 2 applies is to ask which
  element goods or services predominates in the
  contract
• See Pass v. Shelby Aviation

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International Contract Law

• The United Nations Convention on Contracts for
  the International Sale of Goods (CISG) is body of
  contract rules that harmonizes contract
  principles from many legal systems
• Sixty-five countries, including the United States
  and Canada, have adopted the CISG to date

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International Contract Law

• CISG automatically applies to a contract for the
  sale of goods between commercial parties from
  nations that agreed to the CISG unless the
  parties expressly opt out of the CISG in their
  contract

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Non-Contract Obligations

• Sometimes the law enforces an obligation to pay
  for certain losses or benefits even in the
  absence of mutual agreement and exchange of
  value
• Quasi-contract theory
• Promissory estoppel

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Quasi-Contract Theory

• Quasi-contract is an obligation imposed by law to
  prevent unjust enrichment of one party in certain
  circumstances
• E.g., work performed by painter thinking work
  justified by contract other party, who receives
  benefit of work, denies the work was justified
• E.g., if minor buys something but wrecks it,
  agreement is void by law, but the minor must pay
  the damages
• Plaintiff recovers reasonable value of benefit
  conferred on defendant (reasonable price) or
  value of labor (quantum meruit)

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Promissory Estoppel

• A court may apply doctrine of promissory estoppel
  when one party relies upon another partys
  promise to his or her detriment (detrimental
  reliance), but theres no contract
• Court will force promisor to fulfill promise or
  pay compensation
• Example Holt v. Home Depot, U.S.A., Inc.

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Holt v. Home Depot, U.S.A., Inc.

• Facts Procedural History
• Holt was a manager for Home Depot for four years
• Home Depot assured employees that an open-door
  policy allowed complaints to management about
  supervisors without penalty
• Home Depot moved Holt and family to Connecticut,
  but soon after Holt began to have difficulties
  with his immediate supervisor
• Holt told a senior manager about the problems and
  later called the Impact Line to begin a formal
  complaint
• Six days later, Home Depot fired Holt

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Holt v. Home Depot, U.S.A., Inc.

• Procedural History
• Holt sued Home Depot, claiming promissory
  estoppel
• Jury found for Holt, awarding 467,000 in damages
• Appellate Decision and Ruling
• The jury could reasonably find that Home Depots
  promise not to retaliate against employees was so
  clear and emphatic that Holt could reasonably
  believe it was inviolable and evidence indicated
  Holt was terminated because of the complaint
  about his supervisor

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