I. Offer and Acceptance
In contract law, an offer is a proposal to enter into a binding agreement and acceptance is the manifestation of assent to the terms. A validly formed contract requires offer, acceptance, and consideration.
Case: Lucy v. Zehmer (1954)
Issue: Whether an apparent joke can be a valid offer.
Rule: An outward manifestation of intent that is interpreted as an offer by a reasonable person is a valid offer, regardless of the secret intentions of the offeror.
Analysis: The defendants intended their offer to sell their farm as a joke. However, the plaintiffs took their offer seriously and accepted it. The defendants were bound by their offer because a reasonable person in the plaintiff’s position would have interpreted their actions as a serious offer to sell.
Conclusion: A contract was formed when the plaintiffs accepted the defendants’ offer to sell their farm.
II. Consideration
Consideration is a legal detriment that an individual voluntarily undertakes in return for a promise from another party. It is required for a contract to be enforceable.
Case: Hamer v. Sidway (1891)
Issue: Whether forbearance can be valid consideration.
Rule: Any legal detriment undertaken as part of a bargain is valid consideration.
Analysis: The uncle promised his nephew a sum of money if the nephew refrained from drinking, smoking, swearing, and gambling until he turned 21. The nephew did so and demanded the money. The uncle’s estate argued that the nephew had not provided any consideration for the promise. The court found that the nephew’s forbearance from lawful activities was a detriment and therefore consideration.
Conclusion: There was a valid contract because the nephew provided consideration by forbearing from lawful activities.
III. Defenses to Formation
Defenses to formation include incapacity, duress, undue influence, misrepresentation, and impossibility.
Case: Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. (1983)
Issue: Whether impossibility is a valid defense to contract formation.
Rule: Impossibility is a valid defense if an unforeseen event makes performance of the contract objectively impossible.
Analysis: Totem contracted to transport goods for Alyeska. After the contract was formed, the government imposed new regulations that made it impossible to perform the contract. The court held that this unforeseen event excused Totem from performing the contract.
Conclusion: Impossibility was a valid defense because the government regulations made the contract impossible to perform.
IV. Remedies
Remedies in contract law include damages, specific performance, and restitution.
Case: Hadley v. Baxendale (1854)
Issue: How are consequential damages calculated?
Rule: Consequential damages can only be awarded if they were reasonably foreseeable at the time of the contract formation.
Analysis: Hadley’s mill was shut down due to a broken crankshaft. Baxendale, a delivery company, delayed the delivery of the new crankshaft. Hadley sued for the profits lost during the shutdown. The court held that Baxendale could not have foreseen the lost profits because Hadley did not inform them about the mill’s situation.
Conclusion: The foreseeable rule limited the amount of consequential damages that Hadley could recover.
This study guide covers some fundamental concepts in contract law under the common law and Pennsylvania law. Note that the Uniform Commercial Code (UCC) may apply to the sale of goods, and it should be studied separately. Additionally, understanding the application of these concepts and case law to hypothetical fact patterns is crucial for exam preparation.