The last unit is a first look at four subjects that fill the first year of law school. Each uses the tools you have learned: elements, burdens of proof and case-by-case reasoning. We start with contracts, the law of enforceable promises, mostly state common law (and, for sales of goods, the Uniform Commercial Code).
Key idea
A contract is a promise the law will enforce. It generally needs an offer, an acceptance and consideration (a bargained-for exchange). When a contract is broken, remedies usually aim to give the injured party the benefit of the bargain: what they would have had if the promise had been kept.
Why it works
Why enforce some promises and not others? The law enforces bargains: each side gives or promises something in exchange for what the other gives. That exchange (consideration) marks a promise as a deal rather than a gift or a social plan. In Hamer v. Sidway (New York, 1891), an uncle promised his nephew \$5,000 if the nephew gave up drinking, smoking, swearing and gambling until age 21. The nephew did. The court held that giving up a legal right was consideration, even if it benefited the nephew, so the promise was enforceable. Contracts can still fail for defenses such as lack of capacity (a minor), duress, fraud, some mistakes, illegality or unconscionability.
| Remedy | Aim |
|---|---|
| Expectation damages | put the injured party where performance would have put them (the usual measure) |
| Reliance damages | repay what the injured party spent relying on the promise |
| Restitution | return a benefit the other party received |
| Specific performance | a court order to perform, used when money is not enough, as with a unique item or land |
Worked example: Is there a contract?
Kim says to Lee, "I'll sell you my bike for \$90." Lee says, "Deal." Later, Kim's friend offers \$120, and Kim tells Lee the deal is off. Is there a contract?
- Offer: Kim proposed definite terms (the bike, \$90).
- Acceptance: Lee agreed to those exact terms.
- Consideration: the bike in exchange for \$90, a bargain.
- A sale of goods under \$500 need not be written (see below), so the oral deal can be enforced.
Answer: Yes. Kim is bound; if she sells to the friend, Lee can recover his lost bargain.
Worked example: A gift promise
An aunt promises her niece \$1,000 for her birthday, asking nothing in return, and then changes her mind. Can the niece enforce the promise?
- Offer and acceptance in a loose sense, but no bargain: the niece gives nothing in exchange.
- A promise to make a gift lacks consideration.
- (Some courts enforce such promises if the niece reasonably relied on them to her detriment, a doctrine called promissory estoppel.)
Answer: Usually no: no consideration.
Common mistake
Thinking a contract must be written to be enforceable. Many oral contracts are enforceable. The statute of frauds (from an English statute of 1677) requires a signed writing only for certain kinds: sales of interests in land, contracts that cannot be performed within one year, promises to pay another person's debt, contracts in consideration of marriage, an executor's promise to pay estate debts personally, and (under the UCC) sales of goods for \$500 or more. Check: does the deal fall in one of those categories?
This is an educational course, not legal advice.