Idaho Law School 1L Study Guide for Contracts

Idaho Law School 1L Study Guide for Contracts

I. Introduction to Contract Law

Contracts are agreements that create obligations enforceable by law. Understanding contract law is crucial for ensuring that agreements between parties are honored and disputes are fairly resolved.

A. Definition and Purpose of Contracts

• Contract: A legally enforceable agreement between two or more competent parties, made through offer and acceptance, which is intended to create legal obligations.

B. Sources of Contract Law

• Common Law: Governs most contracts, except where modified by statutory law.
• Uniform Commercial Code (UCC): Governs contracts for the sale of goods.
• Restatement (Second) of Contracts: Persuasive authority summarizing common law principles.

II. Formation of Contracts

To form a valid contract, there must be an offer, acceptance, consideration, and mutual assent.

A. Offer

• An offer is a definite proposal made by one party (the offeror) to another (the offeree) indicating a willingness to enter into a contract.
• Termination of Offers: An offer can be terminated by revocation, rejection, counteroffer, lapse of time, death or incapacity of the offeror, or destruction of the subject matter.

B. Acceptance

• Acceptance is the unconditional agreement to the precise terms of the offer.
• Mirror Image Rule: Under common law, acceptance must mirror the terms of the offer exactly.

C. Consideration

• Consideration is something of value given by both parties to a contract that induces them to enter into the agreement.
• Preexisting Duty Rule: Performing an existing legal duty is not sufficient consideration for a new promise.

D. Mutuality of Obligation (Meeting of the Minds)

• Both parties must agree to the same terms and understand the agreement in the same sense.

E. Defenses to Formation

• Lack of capacity, duress, undue influence, misrepresentation, mistake, illegality, and unconscionability can prevent contract formation.

III. The Statute of Frauds

Certain types of contracts must be in writing to be enforceable.
– Idaho’s Specific Requirements: Under Idaho Code § 9-505, contracts that cannot be performed within one year must be in writing, among others.

IV. Performance and Breach

A. Complete Performance

• The contract has been fulfilled exactly as agreed upon.

B. Substantial Performance

• Occurs when one party fulfills enough of its contract obligations to warrant payment.

C. Material Breach

• A breach that is serious enough to undermine the contract’s purpose.

V. Remedies for Breach of Contract

A. Damages

• Compensatory Damages: To put the non-breaching party in the position they would be in if the contract were performed.
• Consequential Damages: Foreseeable damages resulting from the breach.
• Punitive Damages: Rare in contract law; designed to punish the breacher.
• Liquidated Damages: Specified in the contract itself.

B. Equitable Remedies

• Specific Performance: Ordering the breaching party to perform the contract.
• Injunction: Ordering the breaching party to cease a certain action.
• Rescission: Canceling the contract.

VI. Third-Party Rights

A. Assignment and Delegation

• Assignment: Transfer of rights under a contract.
• Delegation: Transfer of duties under a contract.

B. Third-Party Beneficiary

• A person who was not a party to the contract but stands to benefit from it.

VII. Case Law Examples

In this section, we will analyze a few key contract law cases using the IRAC format—Issue, Rule, Analysis, Conclusion.

A. Hamer v. Sidway (1891)

• Issue: Whether a promise of forbearance can constitute consideration.
• Rule: Forbearance of a legal right can be valid consideration.
• Analysis: The uncle’s promise to pay his nephew if he refrained from drinking, smoking, and gambling, constituted valid consideration because the nephew forbore his legal right to engage in these activities.
• Conclusion: The court held that the nephew’s forbearance was sufficient consideration for the uncle’s promise, and thus, the contract was enforceable.

B. Hadley v. Baxendale (1854)

• Issue: The scope of recoverable consequential damages.
• Rule: Consequential damages are recoverable only if the breaching party had reasonable notice of the potential for such damages at the time of contracting.
• Analysis: Hadley’s mill was shut down due to a broken crankshaft, and Baxendale, the carrier, delayed in delivering the replacement part causing further losses. Baxendale was not aware of the specific circumstances.
• Conclusion: The court held that Baxendale could not be held liable for the lost profits because he was not reasonably informed of the special circumstances that led to the consequential damages.

C. Raffles v. Wichelhaus (1864) – “The Peerless Case”

• Issue: Whether a mutual mistake regarding a material fact (the identity of a ship named Peerless) can void a contract.
• Rule: A contract can be voided if there is a mutual mistake about a material fact at the time of agreement.
• Analysis: Both parties believed they were contracting about the same ship named Peerless, but in fact, there were two ships with that name, sailing at different times.
• Conclusion: The court ruled that there was no binding contract because there was no mutual assent to the same thing in the same sense.

VIII. Review Questions

1. What are the necessary elements for a contract to be enforceable?
2. How does the mirror image rule differ from the UCC’s approach to acceptance?
3. What is considered adequate consideration for a contract?
4. When is specific performance an appropriate remedy for breach of contract?
5. How does the Statute of Frauds apply to contracts in Idaho, and what contracts are affected by it?

IX. Conclusion

This study guide provides a fundamental overview of contract law principles and case law relevant to a 1L law student, particularly within the context of Idaho law. It is important to review each topic in detail, understand the nuances of how these principles apply in different situations, and always stay updated with the most recent case law and statutory changes.