Study Guide for Contracts – Vermont Law School 1L
I. Overview of Contract Law
Contract law governs the obligations established by agreement, whether expressed or implied, between private parties. There are various types of contracts including bilateral (promise for a promise), unilateral (promise for an act), express (terms are openly stated), and implied (terms are inferred by behavior or circumstance).
II. Formation of a Contract
A. Offer and Acceptance
An offer is a promise to do or refrain from doing something that is sufficiently definite and is communicated to an offeree. Acceptance is a manifestation of assent to the terms of the offer in a manner requested or authorized by the offeror.
Case: Lucy v. Zehmer (1954)
Issue: Whether a joke offer could be accepted and form a binding contract?
Rule: An agreement is binding if a reasonable person in the position of the offeree would believe the offer was serious.
Analysis: The Zehmers had sufficient awareness of the agreement, and Lucy believed the contract to be genuine.
Conclusion: A contract was formed.
B. Consideration
Consideration is something of value that is given in exchange for a promise. It can be a benefit to the promisor or a detriment to the promisee.
Case: Hamer v. Sidway (1891)
Issue: Whether abstaining from a legal right can count as valuable consideration?
Rule: The surrender of any legal right at the request of the promisor constitutes sufficient consideration.
Analysis: The nephew gave up his legal right to smoke, drink, and gamble until 21 at the request of his uncle.
Conclusion: There was valid consideration.
III. Defenses to Contract Formation
A. Capacity
Individuals must have the capacity to enter a contract. This includes understanding the nature and consequences of the contract. Minors, intoxicated persons, and persons under a mental disability have limited capacity.
B. Duress
Duress occurs when a party enters a contract due to unlawful pressure. This can be physical duress, economic duress or threats.
C. Unconscionability
A contract may be unenforceable if its terms are grossly unfair. This includes terms that are heavily one-sided or oppressive.
Case: Williams v. Walker-Thomas Furniture Co. (1965)
Issue: Can a contract be considered unconscionable and therefore unenforceable?
Rule: A contract is unconscionable if it is oppressive and the weaker party had no meaningful choice in accepting the terms.
Analysis: The contract was hidden and the terms were overly harsh.
Conclusion: The contract was unconscionable and unenforceable.
IV. Breach of Contract & Remedies
A contract breach is a failure to perform any term of a contract without a legitimate legal excuse.
There are three main types of remedies:
- Damages – Compensate for the harm caused by the breach.
- Specific Performance – Court orders the breaching party to perform the contract.
- Restitution – Return of the benefit unjustly retained.
Case: Hadley v. Baxendale (1854)
Issue: How are damages calculated in the case of a breach of contract?
Rule: Damages should be those reasonably foreseeable by both parties at the time they made the contract.
Analysis: The miller’s loss of profit was not foreseeable by the carrier at the time of the contract.
Conclusion: The carrier was not liable for the miller’s loss of profits.
V. Third Party Rights
A contract can also create rights for individuals not party to the contract, including third-party beneficiaries, assignees, and delegates.
VI. Contract Law in Vermont
In Vermont, certain contracts must be written to be enforceable, such as for the sale of land or goods over $500. This is known as the Statute of Frauds. Also, Vermont follows the “Mirror Image Rule”, which means that the acceptance must match the terms of the offer exactly. If not, it is a counteroffer.
Note: Always consult with a law professor or legal professional to ensure understanding of concepts and case law. This guide provides a general overview and not exhaustive information on contract law.