Overview of Contracts

Contract defined

1. A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

2. Sorting function: contract is about the coercive power of the state, which is used only on some occasions

   1. Selling exams: not enforceable, exam is the property of the school, violates honor code, unenforceable because of illegality

   2. Cutting off finger in exchange for tickets: no contract, power of state has restrictions, illegal

   3. Kidney exchanges: allowed as contract (exception to the rule above)

      1. Why is it legal?

         1. Safe life

         2. Prevent black market

      2. Damages for breach of kidney exchange (there is an incentive to back out if operation not done simultaneously): monetary damages probably not enough:

         1. That equates putting a price for kidney, purchase of kidney

         2. Difficult to enforce, esp. for poor people

      3. Possible other solution:

         1. social pressure (newspaper)

         2. a donor-patient pair makes a donation to someone waiting for a cadaver kidney, in return for the patient in the pair receiving high priority for a compatible cadaver kidney when one becomes available

3. Gap filling function: set default rules

   1. How many onions in the turkey burger? Decided by industry standard, or by what a reasonable person may expect.

   2. Custom: in the industry it’s normal to contract around consequential damages. Relevant fact?

   3. Default rule v. industry standard

4. Three kinds of contract (Bailey v. West):

   1. Express contract

   2. Implied in fact contract: an implied contract can be formed where it is clear that both parties consented to perform albeit without saying anything. It can be shown by a course of dealing or a general custom or pattern of commercial activity. There must be mutual intent by both parties in order to form a contract “implied in fact.” Both parties must be clear on with whom they are contracting with.

   3. Implied in law contract:

      1. A quasi contract is not a contract

      2. A quasi contract can recover if:

         1. a benefit is conferred by the P

         2. the benefit is appreciated and accepted by the D

         3. the retention of the benefit would unjustly enrich the defendant.

      3. not formed where performance rendered by one person is not requested by the other.

      4. Last clear chance: If D has the last clear chance to refuse P’s work, but does not refuse, there may be a quasi-contract. Rationale: the recipient of benefit, D is in the best position to prevent the mistake or error that led to the conferral of the benefit.

      5. Restitution view: replicate the result of the bargain that would have occurred absent the transaction cost (lack of information)

5. In exam, don’t spend too much time to decide if there is a contract, because usually there is.

6. Which law to apply: predominant purpose test

   1. UCC if the...

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