New Jersey Law School 1L Study Guide for Contracts

New Jersey Law School 1L Study Guide for Contracts

I. Introduction to Contract Law

  • Definition of a Contract: A contract is a legally enforceable agreement between two or more parties. It consists of an offer, acceptance, consideration, and mutual assent to exchange promises or performances.

  • Objective Theory of Contracts: The intent to enter into a contract is judged by outward, objective facts as interpreted by a reasonable person, rather than by the parties’ subjective intentions.

II. Formation of Contracts

  • Offer: A promise to do or refrain from doing something in the future that is made with the intention that it becomes binding upon acceptance.
    • Requirements: Definiteness, communication to the offeree, and intent to be bound.
  • Acceptance: An expression of agreement to the terms of an offer in the manner invited or required by the offer.
    • Mirror Image Rule: Acceptance must be an unequivocal assent to the terms of the offer.
    • New Jersey Variation: The New Jersey courts may apply the UCC’s “battle of the forms” (UCC 2-207) more flexibly in commercial cases.
  • Consideration: Something of legal value given in exchange for a promise.
    • Adequacy of Consideration: Courts generally do not weigh the adequacy unless there is evidence of fraud, duress, or unconscionability.
  • Mutual Assent (Meeting of the Minds): The parties must have a common understanding of the contract’s terms.

  • Promissory Estoppel: A doctrine that allows enforcement of a promise without consideration when the promisee reasonably relies on the promise to their detriment.

III. Defenses to Formation

  • Incapacity: A party lacks the legal ability to enter into a contract, typically due to age or mental condition.

  • Misrepresentation and Fraud: False statements that induce the other party to enter into the contract.

  • Duress: An improper threat that leaves the victim no reasonable alternative but to enter into the contract.

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

  • Unconscionability: A contract or term that is so one-sided that it is oppressive or shocks the conscience.

  • Mistake: A belief that is not in accord with the facts, where both parties share the same mistaken belief (mutual mistake).

  • Illegality: A contract that has an illegal purpose or object is void and unenforceable.

IV. Terms of the Contract

  • Express Terms: Terms that are explicitly stated in the contract.

  • Implied Terms: Terms that are not stated but are necessary to give effect to the parties’ intentions.

  • Parol Evidence Rule: A substantive contract rule that prevents the admission of extrinsic evidence to contradict, vary, or add to the terms of a written agreement that the parties intend to be a complete and final representation of their agreement.

V. Performance and Breach

  • Complete Performance: Fulfillment of all terms of the contract as agreed.

  • Substantial Performance: Performance of all important aspects of the contract, entitling the performer to payment less any damages caused by the failure to perform minor aspects.

  • Material Breach: A breach that goes to the essence of the contract and permits the non-breaching party to terminate the contract.

  • Anticipatory Repudiation: A statement or action by a party indicating they will not perform their contractual obligation, allowing the non-repudiating party to treat the contract as breached and seek remedies.

  • Condition Precedent: An event that must occur before a party is obligated to perform.

  • Condition Subsequent: An event that terminates an existing duty to perform.

VI. Remedies

  • Expectation Damages: Damages designed to put the plaintiff in the position they would have been had the contract been performed.

  • Reliance Damages: Damages designed to reimburse the plaintiff for loss caused by reliance on the contract.

  • Restitution: Damages designed to return any benefit conferred on the defendant.

  • Specific Performance: A remedy that orders the breaching party to perform the contract, typically used for unique goods or properties.

  • Liquidated Damages: Damages specified in the contract that are enforceable if they are a reasonable forecast of probable loss and not a penalty.

VII. Third-Party Rights

  • Assignment: The transfer of contractual rights to a third party.

  • Delegation: The transfer of contractual duties to a third party.

  • Third-Party Beneficiary: Someone who was not a party to the contract but stands to benefit from it.

VIII. Case Law

Lucy v. Zehmer (1954)
Issue: Was a valid contract formed when the agreement was made in jest?
Rule: A contract exists if the parties’ outward expressions of intent indicate an agreement, even if one party had a secret intention not to agree.
Analysis: Despite Zehmer’s assertion that the sale of the farm was a joke, the court held that Zehmer’s actions and words could reasonably be interpreted by Lucy as a serious business transaction.
Conclusion: The court concluded that a binding contract was formed between Lucy and Zehmer.

Hamer v. Sidway (1891)
Issue: Is a promise to refrain from drinking, smoking, and gambling until the age of 21 sufficient consideration?
Rule: Forbearance of a legal right at the request of another party is sufficient consideration for a promise.
Analysis: The nephew’s forbearance of legal rights at the uncle’s request was deemed sufficient consideration for the uncle’s promise to pay him $5,000.
Conclusion: The court concluded that the contract was valid, and the nephew was entitled to the promised amount.

Hadley v. Baxendale (1854)
Issue: What are the limits on the recovery of damages for breach of contract?
Rule: Damages are recoverable only for losses that (1) arise naturally from the breach or (2) were reasonably in the contemplation of both parties at the time they made the contract.
Analysis: The mill owner’s losses did not meet either condition for the carrier to have considered at the time of the contract.
Conclusion: The court limited the damages to what was foreseeable to both parties at the time of the contract.

This study guide provides an overview of fundamental concepts and case law that a 1L student in a New Jersey law school contracts class should master. Please note that local variations, specific statutes, and recent case law should also be consulted to ensure comprehensive exam preparation.

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