Contracts Study Guide: Iowa Law School 1L Course
I. Introduction to Contracts
A contract is a legally enforceable agreement between two or more parties with mutual obligations. The foundation of contract law is to ensure that promises made between parties are enforceable and that there are remedies if a party fails to fulfill their obligations.
II. Elements of a Contract
An offer is a promise to act or refrain from acting, which is made in exchange for a return promise.
Case: Lucy v. Zehmer (1954) – Establishes that an offer is judged by an objective standard; what matters is not the subjective intent of the offeror but how a reasonable person in the position of the offeree would interpret the offer.
Acceptance is a manifestation of assent to the terms of the offer in the manner invited or required by the offer.
Case: Carlill v. Carbolic Smoke Ball Co. (1893) – Demonstrates acceptance by performance and the concept of a unilateral contract.
Consideration is the value given in return for a promise. It consists of either a benefit to the promisor or a detriment to the promisee.
Case: Hamer v. Sidway (1891) – Shows that forbearance (refraining from doing something) can be sufficient consideration.
D. Mutuality of Obligation
Both parties must be bound or neither is bound; each party must provide consideration.
Case: Wood v. Lucy, Lady Duff-Gordon (1917) – Illustrates implied-in-fact contracts and mutuality of obligation.
The parties must have the legal ability to enter into a contract.
Minors, intoxicated persons, and mentally incapacitated individuals typically lack capacity.
The purpose of the contract must be lawful.
Contracts for illegal activities are void and unenforceable.
The parties must intend to create a legal obligation.
Social agreements are typically not enforceable because the parties do not intend legal consequences.
III. Defenses to Formation
A mistake can be mutual or unilateral and may lead to a contract being voidable.
B. Misrepresentation and Fraud
False statements that induce the formation of a contract may lead to its invalidity.
C. Duress and Undue Influence
Contracts formed under pressure or manipulation may be voidable.
Unfair or oppressive terms that shock the conscience can render a contract unenforceable.
IV. Statute of Frauds
Certain types of contracts must be in writing to be enforceable, including those for the sale of land, contracts that cannot be performed within a year, and contracts for the sale of goods over a certain value (as per the Uniform Commercial Code (UCC) Article 2, which may be adopted with variations).
V. Performance and Discharge
A. Complete and Substantial Performance
Contracts may be discharged by complete performance or substantial performance with a right to cure.
B. Material Breach
A material breach excuses the non-breaching party from further performance.
C. Impossibility and Impracticability
Unforeseeable events that make performance impossible or impracticable can discharge a contract.
D. Frustration of Purpose
When the underlying reason for a contract no longer exists, it may be discharged.
A. Expectation Damages
Puts the injured party in the position they would have been in if the contract were performed.
B. Reliance Damages
Reimburse the injured party for costs incurred due to reliance on the contract.
Prevents unjust enrichment by returning the injured party to the position before the contract.
D. Specific Performance
A court order requiring the breaching party to perform the contract. Usually reserved for unique goods or property.
VII. Third-Party Rights
A. Assignment and Delegation
The transfer of rights (assignment) and duties (delegation) under a contract.
B. Third-Party Beneficiary
A person who may have the right to enforce a contract made between two other parties.
VIII. Parol Evidence Rule
When a written contract is intended to be the complete and final expression of the parties’ agreement, evidence of prior or contemporaneous agreements that contradict, modify, or vary contractual terms is inadmissible.
IX. UCC Article 2 – Sales
Applicable to contracts for the sale of goods. It modifies common law contract principles and includes specific provisions regarding offer, acceptance, and warranties.
X. Contract Interpretation
Courts interpret contracts with the goal of ascertaining the parties’ intentions and upholding the sanctity of contracts.
This study guide provides an overview of key concepts in contract law, with a focus on principles that are generally applicable throughout the United States, including Iowa. Remember to consult Iowa-specific statutes and case law where applicable, as state law can modify or complement these general principles.