Kentucky Law School 1L Study Guide for Contracts
A contract is a legally binding agreement between two or more parties that is enforceable by law. To understand contract law, it is essential to grasp its purposes, which include the enforcement of promises, the allocation of risks, and the establishment of a framework for social and commercial interactions.
I. Formation of Contracts
A. Offer and Acceptance
– Offer: A promise or commitment to do or refrain from doing some specified action in the future.
– Elements: Clear, definite, and communicated to the offeree.
– Revocation: Generally, can be revoked anytime before acceptance.
– Kentucky Rule: Mirror Image Rule (acceptance must be on precisely the same terms as the offer).
- Acceptance: A voluntary act by the offeree that shows assent to the terms of an offer.
- Elements: Unconditional and communicated to the offeror.
- Kentucky follows the Mailbox Rule: Acceptance is effective upon dispatch unless the offer specifies otherwise.
– Consideration: Something of value exchanged for a promise which is required for a contract to be enforceable.
– Kentucky recognizes both a benefit to the promisor and a detriment to the promisee as valid consideration.
C. Capacity and Legality
– Capacity: The legal ability to enter into a contract. Minors, intoxicated persons, and mentally incapacitated individuals may lack capacity.
– Disaffirmance: In Kentucky, minors can disaffirm contracts before reaching the age of majority and for a reasonable time after.
– Legality: The subject matter of the contract must be legal. Contracts for illegal purposes are not enforceable.
D. Statute of Frauds
– Certain contracts must be in writing to be enforceable, including contracts involving real estate, contracts that cannot be performed within one year, and surety agreements.
– Kentucky specifics: Includes contracts for the sale of goods over $500 (UCC).
II. Contract Interpretation
– Plain Meaning Rule: If a contract’s language is clear and unambiguous, it will be interpreted according to its plain meaning.
– Kentucky adheres to the Parol Evidence Rule, which prohibits the admission of extrinsic evidence to alter or contradict the terms of a written contract.
III. Performance and Breach
– Complete Performance: Fulfillment of all the contract’s terms.
– Substantial Performance: Completion of nearly all the terms, good faith effort to complete, and no willful departure from the terms.
– Kentucky allows for recovery under quasi-contract (quantum meruit) if a party has substantially performed.
B. Breach of Contract
– Material Breach: A failure to perform a contractual duty that is so critical that it allows the other party to terminate the contract and sue for damages.
– Minor Breach: A less severe failure that may entitle the non-breaching party to damages but does not allow for termination.
– Legal Remedies: Monetary damages such as compensatory, punitive, nominal, and liquidated damages.
– Equitable Remedies: Specific performance (compelling performance) and injunctions (preventing certain actions).
– Specific performance is more likely to be granted by Kentucky courts when the subject matter of the contract is unique, such as in real estate transactions.
IV. Defenses to Enforcement
– Duress, Undue Influence, Fraud, Misrepresentation, Mistake, and Unconscionability can be defenses against the enforcement of a contract.
V. Third-Party Rights and Obligations
– Third-Party Beneficiary: A person who was not a party to the contract but stands to benefit from it.
– Assignment and Delegation: The transfer of rights or duties under a contract to another party.
VI. Kentucky Specifics
– The Uniform Commercial Code (UCC) is adopted in Kentucky, with state-specific modifications, for the sale of goods.
– Kentucky has a “fairness standard” for unconscionability; a contract can be voided if the terms are excessively unfair or oppressive.
Case Law Using IRAC Format:
1. Hamer v. Sidway (New York Court of Appeals, 1891)
– Issue: Whether a promise to refrain from drinking and smoking until the age of 21 constituted valid consideration.
– Rule: A waiver of any legal right at the request of another party is sufficient consideration for a promise.
– Analysis: The court found that although the uncle received no material benefit, the nephew’s forbearance was legally sufficient consideration because it constituted a detriment to the nephew.
– Conclusion: The promise was enforceable, and the nephew was entitled to the promised payment.
- Hadley v. Baxendale (Court of Exchequer, 1854)
- Issue: The scope of recoverable damages for breach of contract.
- Rule: Damages are limited to those that the parties could reasonably foresee as a likely result of the breach at the time they made the contract.
- Analysis: The court held that the mill owner could not recover lost profits because the carrier was not informed that the mill was inoperable pending the replacement part’s delivery.
- Conclusion: Damages were limited to the additional transportation costs incurred by the mill owner.
- Carlill v. Carbolic Smoke Ball Company (Court of Appeal, 1892)
- Issue: Whether an advertisement constituted an offer that could be accepted by performance.
- Rule: An advertisement can be a unilateral offer if it demonstrates clear intent to be bound without further negotiations.
- Analysis: The court found that the company’s advertisement was an offer because it was a clear, definite promise in exchange for a specific act.
- Conclusion: The plaintiff’s use of the smoke ball constituted acceptance, and she was entitled to the reward.
In preparing for a final semester exam, students should thoroughly review these concepts, cases, and applicable laws, making sure to understand how they interrelate and apply to various factual scenarios. Additionally, they should practice analyzing hypotheticals using the IRAC format to enhance their ability to think critically and present coherent legal arguments.