I. INTRODUCTION TO CONTRACT LAW
1. Definition of a Contract
A contract is a voluntary arrangement between two or more parties that is enforceable by law as a binding legal agreement. It involves the exchange of promises, where one party promises to do something in return for a promise from the other party to do something else.
2. Elements of a Contract
For a contract to be valid, it must have four essential elements: agreement (offer and acceptance), consideration, capacity, and legality.
II. AGREEMENT: OFFER AND ACCEPTANCE
1. Offer
An offer is a promise to do or refrain from doing something, sufficiently defined, and made with the intention that it will become binding as soon as it is accepted by the person to whom it is directed.
Case: Lucy v. Zehmer (1954)
Issue: Whether a contract was formed when parties had a different understanding of the seriousness of the agreement.
Rule: If a party’s words or acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of the party’s mind.
Analysis: Even though Zehmer claimed he was joking, his actions and words led Lucy to reasonably believe that a contract was being made.
Conclusion: The court held that a contract was formed.
2. Acceptance
Acceptance is a final and unqualified expression of assent to the terms of an offer.
Case: Adams v. Lindsell (1818)
Issue: Whether a contract was formed when the acceptance was delayed in the mail.
Rule: A contract is formed when the acceptance is posted, not when it is received.
Analysis: The defendants had no control over the mail system and could not know when the plaintiffs would receive their letter of acceptance.
Conclusion: The court held that a contract was formed.
III. CONSIDERATION
Consideration is the inducement to a contract. It is the value that induces the parties to enter into the contract. The requirement of consideration distinguishes a contract from a gift.
Case: Hamer v. Sidway (1891)
Issue: Whether a nephew’s forbearance from drinking, smoking, swearing, and gambling was valid consideration for his uncle’s promise to pay him $5,000.
Rule: Consideration requires a legal detriment, not necessarily an economic detriment.
Analysis: The nephew restricted his legal right to drink, smoke, swear, and gamble, which constituted consideration.
Conclusion: The court held that the uncle’s promise was enforceable.
IV. CAPACITY
Capacity refers to a person’s ability to legally enter into a contract. Parties who lack capacity include minors, mentally incapacitated individuals, and intoxicated persons.
V. LEGALITY
Legality of a contract pertains to whether the contract’s subject matter is legal. Contracts involving illegal subject matter are not enforceable.
VI. DEFENSES TO ENFORCEMENT
Some common defenses to the enforcement of a contract include mistake, misrepresentation, duress, undue influence, unconscionability, and violation of public policy.
VII. THIRD PARTY RIGHTS
Third party rights emerge when a contract benefits a person who is not a party to that contract. This person is known as a third-party beneficiary.
VIII. PERFORMANCE AND BREACH
Performance refers to the parties doing what they have agreed to do in the contract. Breach of contract occurs when a party fails to fulfill his contractual obligations.
IX. REMEDIES
When a contract is breached, the non-breaching party is entitled to remedies. There are several types of remedies, including damages, specific performance, rescission, and restitution.
X. CONTRACTS UNDER TENNESSEE LAW
Under Tennessee law, the Statute of Frauds requires certain types of contracts to be in writing. These include contracts for the sale of land, contracts that cannot be performed within one year, and contracts to answer for the debt of another. Also, Tennessee law allows for the enforcement of oral contracts, except for those types of contracts that fall under the Statute of Frauds.
Case: Ogle v. Craig (Tennessee Court of Appeals, 2015)
Issue: Whether an oral agreement for the sale of land is enforceable under Tennessee law.
Rule: Under the Tennessee Statute of Frauds, contracts for the sale of land must be in writing.
Analysis: Although the parties had an oral agreement, it was unenforceable because it violated the Statute of Frauds.
Conclusion: The court held that the oral agreement was unenforceable.