North Carolina Law School 1L Study Guide for Contracts
I. Introduction to Contracts
Contracts are agreements between two or more parties that create mutual obligations enforceable by law. The basic elements required for the agreement to constitute a contract are mutual assent, expressed by a valid offer and acceptance, adequate consideration, capacity, and legality.
II. Offer and Acceptance
A. Offer
An offer is a promise to act or refrain from acting, which is made in exchange for a return promise to do the same. An offer must be clear, definite, and explicit, and leave nothing open for negotiation.
Case Law: Lefkowitz v. Great Minneapolis Surplus Store (1957) – An advertisement can be considered an offer if it is clear, definite, and explicit, and leaves nothing open for negotiation.
B. Acceptance
Acceptance is a clear and unambiguous statement or act that manifests assent to the terms of an offer in a manner invited or required by the offer.
Case Law: Carlill v. Carbolic Smoke Ball Co (1893) – Acceptance must be made in the manner prescribed by the offer, and it may be inferred from conduct that clearly indicates assent to the terms.
III. Consideration
Consideration is the value promised in exchange for the other party’s performance or promise of performance. It can take the form of a benefit to the promisor, a detriment to the promisee, or a promise to do, or refrain from doing something.
Case Law: Hamer v. Sidway (1891) – Valuable consideration may consist of some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.
IV. The Pre-Existing Duty Rule
The pre-existing duty rule states that a promise to do something you are already legally obligated to do is not valid consideration.
Case Law: Stilk v. Myrick (1809) – A promise to pay additional money to complete an existing contract is not enforceable without new consideration.
V. Promissory Estoppel
Promissory estoppel is a doctrine that allows a party to recover on a promise, even though it was made without consideration, if the party relied on the promise to his or her detriment.
Case Law: Ricketts v. Scothorn (1898) – A grandfather’s promise to pay his granddaughter a sum of money so she could stop working, which she relied on to her detriment, was enforceable under promissory estoppel.
VI. The Statute of Frauds
The Statute of Frauds requires certain contracts to be in writing to be enforceable, including contracts for the sale of land, contracts that cannot be performed within one year, and suretyship agreements.
VII. Parol Evidence Rule
The parol evidence rule is a doctrine that prevents parties from presenting extrinsic evidence that contradicts or adds to the terms of a written contract that appears to be whole.
Case Law: Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co (1968) – Parol evidence may be considered to interpret the terms of a contract if those terms are ambiguous.
VIII. Performance and Breach
A. Complete Performance
Complete performance by a party discharges that party’s obligations under the contract.
B. Substantial Performance
Substantial performance is an alternative to complete performance and occurs when a party has performed enough of the contract to warrant payment, but may still be liable for damages.
Case Law: Jacob & Youngs v. Kent (1921) – A contractor’s failure to use a particular brand of pipe did not prevent substantial performance.
C. Anticipatory Repudiation
Anticipatory repudiation occurs when one party indicates that they will not perform their contractual obligations.
IX. Remedies
A. Compensatory Damages
Compensatory damages are intended to compensate the non-breaching party for the loss of the bargain.
B. Specific Performance
Specific performance is an equitable remedy that compels a party to perform their duties under the contract.
C. Liquidated Damages
Liquidated damages are a predetermined amount of money that must be paid as damages for failure to perform under a contract.
X. Third Party Rights
A. Assignment and Delegation
The rights and duties under a contract can be transferred to third parties through assignment and delegation.
B. Third Party Beneficiary
A third party beneficiary is a person who is not a party to the contract but is intended by the contracting parties to benefit from the contract.
North Carolina Specific Considerations
– North Carolina’s Uniform Commercial Code (UCC) applies to contracts for the sale of goods, and it may supersede the common law in certain instances.
– North Carolina adheres to the doctrine of consideration and maintains the pre-existing duty rule with the traditional exceptions.
– North Carolina’s Statute of Frauds includes specific provisions for contracts relating to the sale of goods over $500 and requires certain contracts to be in writing.
This study guide has provided a high-level overview of the key concepts and case law relevant to a 1L contracts law class focusing on North Carolina. Your preparation for the final semester exam should involve a deep dive into each of these topics, studying both North Carolina statutes and common law, as well as relevant case law, to fully understand the application and nuances of contract law in this jurisdiction.