I. OVERVIEW OF CONTRACT LAW
Contract law is designed to enforce promises that are legally binding.
- Agreement: A mutual understanding between parties about their rights and responsibilities. This includes an offer by one party and an acceptance by another.
Consideration: Something of value exchanged between the parties, which can be a benefit to the promisor or a detriment to the promisee.
Capacity: Parties must have the mental ability to understand the nature and effect of the contract.
Legality: The contract must not be for an illegal purpose.
II. BASIC CONTRACT FORMATION
– An offer is a promise conditioned on an act, return promise, or forbearance.
– Restatement (Second) of Contracts § 24: An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
– Acceptance is a manifestation of assent to the terms of the offer.
– Restatement (Second) of Contracts § 50: Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
In Utah, contracts must have consideration to be enforceable.
- Pre-existing duty rule: If a party is already legally obligated to perform a duty, the promise to perform that duty is not valid consideration.
Case Law: Stilk v. Myrick (1809): Sailors promised additional wages for extra work due to other sailors deserting. Court held that there was no valid consideration because sailors were already obligated to do all necessary work.
- Minors: In Utah, contracts entered into with minors are voidable at the minor’s discretion, with some exceptions for necessities and certain statutory contracts.
Mentally Incapacitated Persons: Contracts with mentally incapacitated persons are generally voidable.
V. ILLEGALITY AND PUBLIC POLICY
Contracts for illegal purposes are unenforceable. Contracts that violate public policy may also be unenforceable.
Case Law: Bovard v. American Horse Enterprises, Inc. (1988): Contract for the sale of a horse was unenforceable because it was made for an illegal purpose (to defraud creditors).
VI. DEFENSES TO CONTRACT ENFORCEABILITY
- Misrepresentation: If a party is induced to enter into a contract based on a misrepresentation of a material fact, the contract may be voidable.
Duress: If a party is coerced into entering a contract under threat of harm, the contract may be voidable.
Unconscionability: A contract or term may be unenforceable if it is so one-sided that it is unconscionable.
Case Law: Williams v. Walker-Thomas Furniture Co., (1965): Contract was found to be unconscionable due to a cross-collateral clause, allowing the company to repossess all items purchased if the purchaser defaulted on their most recent purchase.
VII. BREACH OF CONTRACT AND REMEDIES
- Breach: Failure without legal excuse to perform any promise that forms the whole or part of a contract.
Remedies: Include expectation damages (putting the injured party in the position they would have been in had the contract been performed), reliance damages (reimbursement for any loss caused by reliance on the contract), restitution (returning the injured party to the position before the contract), and specific performance (court orders the breaching party to perform the contract).
Case Law: Hawkins v. McGee (1929): Court awarded expectation damages for the breach of a contract promising a “100% good” hand.