Arizona Law School 1L Study Guide for Contracts
I. Introduction to Contract Law
- Definition of a Contract: A contract is a legally enforceable agreement between two or more parties that creates mutual obligations. The basic elements of a contract include offer, acceptance, consideration, and mutual assent.
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Governing Law: In the United States, contract law is primarily state law, with the common law as the main source. In Arizona, the common law governs contracts, except when the Uniform Commercial Code (UCC) applies, which is for the sale of goods.
II. Offer
- Definition: An offer is a proposal made by one party (offeror) to another (offeree) indicating a willingness to enter into a contract.
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Requirements: For an offer to be valid, it must be communicated to the offeree, express a clear intent to be bound, and contain definite terms.
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Termination of Offer: An offer can be terminated through revocation, rejection, counteroffer, lapse of time, death/incapacity, or destruction of the subject matter.
III. Acceptance
- Definition: Acceptance is the manifestation of assent to the terms of the offer made by the offeree in the manner invited or required by the offer.
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Mirror Image Rule: In common law, the acceptance must be the mirror image of the offer. Any deviation constitutes a counteroffer.
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Mailbox Rule: Acceptance is effective upon dispatch when the parties contemplate that acceptance can be by mail, unless the offer stipulates that acceptance is not effective until received.
IV. Consideration
- Definition: Consideration is something of value exchanged between the parties that induces them to enter into the contract. It can be a benefit to the promisor or a detriment to the promisee.
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Adequacy of Consideration: The court typically does not weigh the adequacy of consideration unless there is evidence of fraud, duress, or unconscionability.
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Preexisting Duty Rule: A promise to do something that one is already legally obligated to do is not sufficient consideration for a new promise.
V. Mutual Assent and Defenses to Formation
- Mutual Assent: Also known as “meeting of the minds,” this is the parties’ agreement on the same terms of the contract.
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Mistake: A mutual mistake can make a contract voidable if it goes to a basic assumption of the contract and has a material effect on the agreed exchange.
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Misrepresentation and Fraud: Intentional or negligent misrepresentation and fraud can void a contract if they induce a party to enter the contract under false pretenses.
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Duress and Undue Influence: Contracts entered under duress or undue influence are voidable.
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Unconscionability: A contract or term that is so one-sided that it is oppressive or unfairly surprising, and is an overarching defense to enforcement.
VI. Statute of Frauds
- Purpose: The Statute of Frauds requires certain types of contracts to be in writing to be enforceable, including contracts for the sale of land, contracts that cannot be performed within one year, and suretyship agreements.
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Arizona Specific: Arizona has its own Statute of Frauds which may have specific provisions that differ from other jurisdictions.
VII. Performance and Breach
- Complete Performance: Discharge of contractual duties by fulfilling all terms of the contract.
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Substantial Performance: Performance that is slightly less than complete but which fulfills the essential purpose of the contract.
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Material Breach: A breach that is significant enough to excuse the non-breaching party from further performance and allows for a suit for damages.
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Anticipatory Repudiation: When a party unambiguously indicates they will not perform when performance is due, the other party may treat this as a breach and sue for damages.
VIII. Remedies
- Expectation Damages: Puts the injured party in the position they would have been in had the contract been performed.
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Reliance Damages: Reimburse the injured party for costs incurred in reliance on the contract.
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Restitution: Restores to the injured party benefits conferred on the other party.
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Specific Performance: Court order requiring the breaching party to perform the contract, typically used when damages are inadequate (e.g., unique goods or real estate).
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Liquidated Damages: Agreed upon damages specified in the contract that are enforceable if they are a reasonable forecast of actual harm.
IX. Third-Party Rights
- Assignment: Transfer of rights under a contract to a third party.
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Delegation: Transfer of duties under a contract to a third party.
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Third-Party Beneficiary: A third party that benefits from a contract made between two other parties. This party may have the right to enforce the contract under certain conditions.
X. UCC Article 2
- Scope: UCC Article 2 applies to contracts for the sale of goods.
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Goods: Moveable, tangible objects.
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Merchant Rules: Special rules apply when one or both parties are merchants.
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Battle of the Forms: UCC allows for the formation of a contract despite minor discrepancies in the offer and acceptance.
Case Law
Hamer v. Sidway (1891)
– Issue: Whether a promise to refrain from drinking and smoking until the age of 21 was enforceable without tangible consideration.
– Rule: Forbearance or giving up a legal right can be valid consideration.
– Analysis: The court found that the uncle’s promise was enforceable because the nephew’s abstention from legal rights was sufficient consideration.
– Conclusion: The nephew was entitled to the promised money.
Carlill v. Carbolic Smoke Ball Co. (1893)
– Issue: Whether an advertisement for a reward constituted a unilateral offer that could be accepted by anyone who performed its conditions.
– Rule: Advertisements can be considered offers if they are clear, definite, and explicit and leave nothing open for negotiation.
– Analysis: The court held that the advertisement was a unilateral offer that was accepted by Mrs. Carlill when she used the smoke ball and contracted influenza.
– Conclusion: Mrs. Carlill was entitled to the reward.
This study guide provides an overview of key concepts in contract law for a 1L class, with an emphasis on principles that apply in Arizona. It is crucial to review class notes, case briefs, and statutory material for a comprehensive understanding of the subject, along with the application of these principles to hypothetical scenarios, as would likely be required on a final exam.