California Law School 1L Study Guide for Contracts
I. Introduction to Contracts
Contracts are agreements enforceable by law. In California, as in other jurisdictions, contract law is a mix of common law principles, statutory law (such as the California Civil Code), and specific uniform acts adopted by the state (like the Uniform Commercial Code for sales of goods).
– Definition of a Contract: A contract is a legally enforceable agreement between parties to do or not do something.
– Elements of a Contract: Offer, Acceptance, Consideration, Mutual Assent, and Legality.
– Types of Contracts: Bilateral vs. Unilateral, Express vs. Implied, Executed vs. Executory.
– Governing Law: Common Law applies generally; the Uniform Commercial Code (UCC) applies to the sale of goods.
II. Formation of Contracts
The offer is a definite proposal made by one party (the offeror) to another (the offeree) indicating a willingness to enter into a contract.
– Izadi v. Machado (Gus) Ford, Inc. (1995): The court held that advertisements are generally not offers but invitations to negotiate unless they are clear, definite, and explicit and leave nothing open for negotiation.
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.
– Asante Technologies, Inc. v. PMC-Sierra, Inc. (2001): An acceptance must be unequivocal and comply with the terms of the offer to create a binding contract.
Consideration is something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.
– Harm v. Frasher (1960): The court held that a promise to perform a pre-existing legal duty is not valid consideration unless something new or additional is promised.
D. Mutual Assent (Meeting of the Minds)
Mutual assent is the parties’ agreement on the same terms of the contract. It requires that each party agree to the same thing in the same sense.
– Alexander v. Codemasters Group Limited (2018): The court found that mutual assent was not present due to a lack of clarity and specificity in the alleged contract’s terms.
The subject matter of the contract must be lawful at the time of execution.
– Illegal Contracts: Contracts for illegal purposes are void and unenforceable.
– Public Policy: Contracts that violate public policy may also be deemed unenforceable.
III. Defenses to Formation
Parties entering into a contract must have the legal capacity to do so.
– Doyle v. Giuliucci (1965): Minors generally lack the capacity to contract, and contracts entered into by minors are voidable at their option.
B. Duress, Undue Influence, and Misrepresentation
A contract may be voidable if one party has been subject to duress, undue influence, or misrepresentation.
– Odorizzi v. Bloomfield School District (1966): The court recognized undue influence when a party is under extreme pressure and has been targeted because of vulnerability.
A mutual or unilateral mistake may affect the validity of a contract.
– Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association (2013): The court held that evidence of a consistent oral agreement may be admissible to show that a written contract was induced by fraud.
IV. Contract Terms and Interpretation
A. Parol Evidence Rule
The parol evidence rule limits the extent to which parties to a written contract can introduce oral or extrinsic evidence to alter, contradict, or add to the terms of the written agreement.
– Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association (2013): This case clarified the parol evidence rule in California, stating that evidence of fraudulent inducement is not barred by the rule.
B. Interpretation of Contracts
The interpretation of contract terms aims to ascertain and give effect to the mutual intention of the parties.
– Plain Meaning Rule: If contract language is clear and explicit, it governs.
– Ambiguity: Ambiguous terms may be interpreted against the drafter (contra proferentem).
V. Performance and Breach
Performance is the fulfillment of a contractual duty, as promised.
B. Breach of Contract
Breach occurs when a party fails to perform an obligation without a legitimate legal excuse.
– Central Valley General Hospital v. Smith (2008): The court discussed material breach and the right to suspend performance or terminate the contract.
VI. Remedies for Breach of Contract
A. Legal Remedies (Damages)
– Compensatory Damages: Intended to put the injured party in the position they would have been in had the contract been performed.
– Punitive Damages: Generally not recoverable in contract law unless there is an independent tort.
– Liquidated Damages: Agreed-upon sums to be paid in case of breach, which must be a reasonable forecast of just compensation.
B. Equitable Remedies
– Specific Performance: Ordering the breaching party to perform the contract, usually in cases where the subject matter is unique.
– Injunction: A court order requiring a party to do or refrain from doing a particular act.
VII. Third-Party Issues
A. Assignment and Delegation
Assignment is the transfer of rights under a contract, whereas delegation is the transfer of duties.
– Rights that materially alter the obligor’s duty or risk cannot be assigned.
– Delegations of performance must maintain the obligor’s reasonable expectations.
B. Third-Party Beneficiaries
Third-party beneficiaries are persons not party to the contract but who may have rights under the contract if the contracting parties intended to benefit them.
– Lucas v. Hamm (1961): The court discussed the intended beneficiary principle, determining third-party rights based on the contracting parties’ intent.
This study guide has covered the basic concepts of contract law pertinent to California, as well as key cases that illustrate these principles. Understanding these foundational elements is crucial when preparing for a final semester exam in a California Law School 1L Contracts class. Students should also refer to the California Civil Code, relevant Restatements of the Law, and the Uniform Commercial Code as adopted in California for supplemental information and study.