Minnesota Law School 1L Study Guide for Contracts

Minnesota Law School 1L Study Guide for Contracts

I. Introduction to Contracts

• Definition and Purpose: A contract is a legally enforceable agreement between two or more parties that creates mutual obligations. Contracts are fundamental to the functioning of society and the economy, serving as the basis for exchanges of value, such as goods, services, and money.

• Sources of Contract Law: In the United States, contract law is primarily based on common law, with the exception of certain areas such as the sale of goods, which are governed by Article 2 of the Uniform Commercial Code (UCC).

II. Contract Formation

1. Offer: A proposal by one party (the offeror) to another (the offeree) indicating a willingness to enter a contract.
   • Elements:
     • Intent to be bound
     • Definiteness and certainty in terms
     • Communication to the offeree
2. Acceptance: An expression of assent by the offeree to the terms of the offer.
   • Elements:
     • Unconditional (mirror image rule)
     • Timely
     • Communicated to the offeror
3. Consideration: The bargained-for exchange of value or promises that legally binds the parties.
   • Elements:
     • Something of legal value must be given
     • There must be a bargained-for exchange
4. Capacity: The legal ability to enter into a contract.
   • Minors, mentally incapacitated individuals, and intoxicated persons may lack capacity.
5. Legality: The purpose of the contract must be legal.
   • Contracts for illegal purposes or against public policy are not enforceable.
6. Case Law:
   • Lucy v. Zehmer (1954): Demonstrates that an agreement can be binding if the parties outwardly demonstrate intent to contract, even if one party had a secret intention not to agree.

III. Defenses to Formation

1. Mistake: An erroneous belief about the facts of the contract at the time of the agreement.
   • Types: Mutual mistake (both parties) or unilateral mistake (one party)
2. Misrepresentation: False statement that induces the other party to enter into the contract.
   • Can be innocent, negligent, or fraudulent.
3. Duress: Wrongful threat that coerces a party to enter into a contract.

4. Undue Influence: Excessive pressure by a dominant party over a servient party.

5. Unconscionability: An unfair and oppressive contract or clause that is so one-sided that it shocks the conscience.

IV. Contract Terms and Interpretation

1. Express Terms: The specific provisions stated in the contract.

2. Implied Terms: Those not expressly stated but inferred from the conduct or nature of the agreement.

3. Parol Evidence Rule: Limits the use of external evidence to contradict, vary, or add to the terms of a written contract.

4. Case Law:

   • Raffles v. Wichelhaus (1864): Addresses the importance of mutual assent to the same terms in contract formation (the Peerless case).

V. Performance and Breach

1. Performance: Fulfillment of contractual obligations as agreed.
   • Perfect Tender Rule (UCC): Seller must deliver goods that exactly meet contractual specifications.
2. Substantial Performance: Performance that, despite deviations, does not vary greatly from the promised performance.

3. Anticipatory Repudiation: When a party indicates in advance that they will not perform their contractual obligations.

4. Breach of Contract: Failure to perform as specified in the contract without lawful excuse.

5. Case Law:

   • Hawkins v. McGee (1929): A case addressing the warranty of quality implicit in a contract for the sale of goods (the “Hairy Hand” case).

VI. Remedies for Breach of Contract

1. Damages:
   • Compensatory Damages: To put the non-breaching party in the position they would have been in had the contract been performed.
   • Consequential Damages: Foreseeable damages that result from the breach.
   • Liquidated Damages: Pre-agreed sum to be paid in case of breach.
   • Punitive Damages: Rare in contract law; intended to punish willful and malicious conduct.
2. Equitable Remedies:
   • Specific Performance: Court order requiring the breaching party to perform as promised.
   • Injunction: Court order preventing a party from doing something.
   • Rescission: Termination of the contract and return of the parties to their pre-contractual position.
3. Case Law:
   • Hadley v. Baxendale (1854): Established the principle that damages are limited to those that the parties could reasonably foresee at the time of contract formation.

VII. Third Party Rights

1. Assignment of Rights: Transfer of benefits in a contract to another party.

2. Delegation of Duties: Transfer of contractual obligations to another party.

3. Third-Party Beneficiaries: A third party may have rights under a contract if they are an intended beneficiary of the agreement.

VIII. Contract Interpretation Under Minnesota Law

• Minnesota courts interpret contracts with the goal of giving effect to the parties’ intent as expressed in the contract. Ambiguities are construed against the drafter.

• Case Law:

  • Turner v. Alpha Phi Sorority House (1983): Minnesota Supreme Court held that the terms of a contract should be given their plain and ordinary meaning, and the intent of the parties is ascertained from the document itself if it is clear and explicit.

IX. Statute of Frauds

• The Statute of Frauds requires certain contracts to be in writing to be enforceable, including those involving interests in land, contracts that cannot be performed within a year, and goods priced $500 or more under UCC Article 2.

• Case Law:

  • Greer v. Kooiker (1972): The Minnesota Supreme Court emphasized the need for a writing or sufficient memorandum of the contract for matters within the Statute of Frauds.

X. Review and Practice

• To prepare for the final exam, students should review notes, read and brief relevant cases, practice applying IRAC (Issue, Rule, Application, Conclusion) to hypothetical scenarios, and complete practice questions that address the key topics covered in this study guide.

This study guide provides a framework for the foundational concepts in contract law pertinent to a 1L class, including case law that illustrates these principles. Students should supplement this guide with readings from their textbook, class notes, and other materials provided by their professors to ensure a comprehensive understanding of contract law as it applies in Minnesota.