Alabama Law School 1L Study Guide for Contracts

Alabama Law School 1L Study Guide for Contracts

I. Introduction to Contracts
– Definition and Purpose: A contract is a legally enforceable agreement between two or more parties. The purpose of contracts is to create legal obligations that can be enforced in a court of law.
– Elements of a Contract: To have a valid contract, there must be (1) an offer, (2) acceptance of that offer, (3) consideration, (4) capacity, and (5) legality.

II. Offer and Acceptance
– Offer: An offer is a promise to do or refrain from doing something that is made with the intent that the promise becomes binding upon acceptance.
– Must be communicated, definite, and objective.
– Acceptance: An unequivocal assent to the terms of the offer.
– Mirror Image Rule: Acceptance must be an exact match to the offer.
– Mailbox Rule (Alabama-specific): Acceptance is effective when dispatched, not when received.

III. Consideration
– Definition: Something of legal value given in exchange for a promise.
– Preexisting Duty Rule: Doing what one is already legally obligated to do is not valid consideration.
– Past Consideration: Past actions that are not performed in exchange for the promise at the time it’s made are not valid consideration.

IV. Capacity
– Minors: In Alabama, a minor can disaffirm a contract before reaching the age of majority and for a reasonable time after.
– Intoxication: Contracts may be voidable if one party was so intoxicated at the time of formation that they could not understand the nature of the agreement.
– Mental Incompetence: Contracts are void if one party was legally incompetent at the time of formation.

V. Legality
– A contract must be for a lawful purpose. Contracts for illegal acts are void.

VI. Defenses to Contract Formation
– Duress: A contract is voidable if entered into under threat of harm.
– Undue Influence: A contract is voidable if one party unfairly influences the other.
– Misrepresentation: A contract is voidable if based on a material misrepresentation of fact.
– Fraud: Intentional misrepresentation to induce another to enter into the contract.
– Mistake: A mutual error concerning a basic assumption can make a contract voidable.

VII. Performance and Discharge
– Complete Performance: Full execution of contract obligations.
– Substantial Performance: Performance that, while not complete, does not vary greatly from what was promised.
– Impossibility: A party may be discharged from a contract if performance becomes impossible due to circumstances beyond their control.

VIII. Remedies
– Expectation Damages: Damages that put the plaintiff in the position they would have been in had the contract been performed.
– Reliance Damages: Damages to reimburse expenses resulting from reliance on the contract.
– Restitution: Returning the injured party to the position they were in before the contract.
– Specific Performance: A court order requiring performance of the contract, typically in the case of unique goods.

IX. Third-Party Rights
– Assignment: Transfer of rights under a contract to another party.
– Delegation: Transfer of duties under a contract to another party.
– Third-Party Beneficiary: A person who is not a party to the contract but stands to benefit from it.

X. Case Law

  1. Lucy v. Zehmer (1954) – An objective test for intent in contracts.
    • Facts: Zehmer appeared to sell his farm to Lucy for $50,000, but later claimed he was joking.
    • Issue: Was there a valid contract despite Zehmer’s claim that he was joking?
    • Rule: The test for an agreement is what a reasonable person would have believed.
    • Analysis: Even though Zehmer claimed he was not serious, his actions indicated a serious offer.
    • Conclusion: The court found a binding contract existed.
  2. Hamer v. Sidway (1891) – Examination of consideration.
    • Facts: Sidway promised his nephew $5,000 if he refrained from drinking, using tobacco, and playing cards or billiards for money until age 21.
    • Issue: Was forbearance sufficient consideration for Sidway’s promise?
    • Rule: Consideration exists if there is a bargained-for exchange.
    • Analysis: The nephew’s forbearance was a detriment incurred at Sidway’s request and thus valid consideration.
    • Conclusion: The court enforced the uncle’s promise.
  3. Raffles v. Wichelhaus (1864) – The Peerless case; mutual mistake.
    • Facts: The parties contracted for the sale of cotton on a ship named Peerless, but each party was referring to a different ship with that name.
    • Issue: Is the contract void due to mutual mistake?
    • Rule: A contract may be void if there is a mutual mistake about a basic assumption upon which the contract is made.
    • Analysis: Both parties had a different understanding of the essential term of the contract.
    • Conclusion: The contract was void for mutual mistake.

This study guide provides an overview of key concepts and case law relevant to a 1L Contracts course at an Alabama law school. For a final exam, students should explore each concept in detail and be prepared to apply these principles to hypothetical fact patterns using the IRAC method.

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