Contracts (JD Course)

# Contracts (JD Course) — Grounded Notes


## PART I: FORMATION

### Offer and Acceptance

**Offer must contain essential terms with sufficient definiteness.** Where an offer is made for the sale of goods, the agreement must specify material terms including price, quantity, and conditions of delivery. *Leonard C. Pratt Co., Inc. v. David S. Roseman*, 259 A.D. 534 (1940): The written memorandum must contain all essential terms; if essential terms are left for future negotiation, the agreement is unenforceable under the Statute of Frauds.

**Mirror-image rule and battle of forms.** Acceptance must match offer precisely; deviations constitute counteroffer. Under UCC § 2-207, acceptance with additional or different terms becomes effective unless acceptance is expressly conditioned on assent to new terms.

---

### Consideration

**Bargain theory requires exchange of value.** Consideration must consist of a bargain between parties where each gives something of value. Nominal consideration, though sometimes enforceable under common law, is distinguished from bargained-for exchange.

**Pre-existing duty rule.** A promise to perform an obligation already owed is not consideration. *Stilk v. Myrick* principle: promise to pay more for performance already contractually owed lacks consideration. However, modifications are enforceable under UCC § 2-209(1) where good faith is present.

---

### Statute of Frauds

**Writing requirement for land contracts and year-plus contracts.** *RHEA v. CRAIG*, 141 N.C. 602 (1906): "In consequence of the statute of frauds...no legal partition can be made between tenants in common without deed or writing, and the doctrine of part performance is not recognized as sufficient to prevent the operation of the statute." A parol (oral) partition agreement, even when followed by possession for 20 years, does not satisfy the statute of frauds for interests in land.

**Part performance doctrine limitations.** While some jurisdictions recognize part performance as equitable exception to statute of frauds, North Carolina and many states require strict compliance with writing requirement.

**UCC § 2-201: Sale of goods.** Contracts for goods over $500 (now $5,000 in many jurisdictions) require writing. *The American Agricultural Chemical Company v. Temple L. Gatewood*, 260 A.D. 861 (1940): Motion for summary judgment reversed because existence of custom to meet statute of frauds required factual development.

---

### Promissory Estoppel

**Detrimental reliance as alternative to consideration.** Restatement § 90: Promise reasonably expected to induce reliance is binding even without consideration if injustice can be avoided only by enforcement.

**Requirements: promise, reliance, detriment, and justice.** Promisor must make clear promise; promisee must rely on it; reliance must be detrimental; enforcement must be necessary to avoid injustice.

---

## PART II: DEFENSES TO FORMATION / ENFORCEABILITY

### Fraud and Misrepresentation

**Fraudulent inducement voids contract.** Misrepresentation of material fact intended to induce reliance, reasonably relied upon, causing injury.

**Non-disclosure as fraud in certain contexts.** Active concealment or duty-based non-disclosure can constitute fraud. *Gilles ROLLET v. Gwenaelle DE BIZEMONT*, 159 So. 3d 351 (2015): Where one party alleges fraudulent or undue influence assignment of contract without consent, such defenses must remain in answers against contingencies at trial.

---

### Mistake

**Mutual vs. unilateral mistake.** Mutual mistake of material fact allows rescission; unilateral mistake generally does not (with narrow exceptions for fraud or unconscionability).

**Reformation of written contract for mutual mistake of expression.** Where parties agree but written instrument fails to express agreement, court may reform to reflect true intent.

---

### Unconscionability

**Procedural and substantive components.** Unconscionable contracts are those no reasonable person would accept and no fair-dealing merchant would offer. UCC § 2-302 allows court to refuse enforcement or limit effect.

**Substantive unconscionability:** Unreasonably favorable terms to one party. **Procedural unconscionability:** Unfair bargaining process (lack of meaningful choice, hidden terms, disparity in bargaining power).

---

## PART III: CONTRACT TERMS AND INTERPRETATION

### Parol Evidence Rule

**Integration and exclusion of extrinsic evidence.** Where written instrument is complete, final, and unambiguous integration of parties' agreement, prior and contemporaneous oral negotiations are excluded.

**UCC § 2-202 exceptions.** Parol evidence may establish: (a) fraud, duress, illegality; (b) condition precedent; (c) course of dealing, course of performance, usage of trade; (d) interpretation of ambiguous terms.

---

### Contract Interpretation

**Plain meaning doctrine.** If contract language is unambiguous on its face, interpretation is matter of law for court; extrinsic evidence is excluded.

**Course of dealing, course of performance, usage of trade.** Under UCC § 1-303 and common law, these established practices inform meaning of ambiguous terms.

---

### Conditions

**Express, implied, and constructive conditions.** Express conditions explicitly stated; implied conditions derived from language and context; constructive conditions imposed by law to prevent forfeiture.

**Satisfaction clauses.** Where contract performance depends on satisfaction, payment obligor must have honest, good-faith satisfaction.

---

## PART IV: PERFORMANCE AND BREACH

### Material vs. Substantial Performance

**Substantial performance allows recovery minus deductions for defects.** When performance is substantially complete, breaching party may recover contract price less damages for non-performance, absent material breach.

**Material breach vs. minor breach.** Material breach defeats other party's performance obligation; minor breach does not, but allows damages claim.

---

### Anticipatory Repudiation

**Prospective non-performance as breach.** *Pauline L. Baron v. Nathan Schachter*, 284 A.D. 361 (1954): Plaintiff could not recover based on defendant's anticipated refusal to recognize right to repurchase stock, as "no actual tender was made by plaintiff to defendant by reason of the latter's anticipatory breach" — demonstrates anticipatory repudiation doctrine allowing recovery before actual performance due date.

**Retraction of repudiation.** Breaching party may retract repudiation if other party has not already relied by terminating contract.

---

### Good Faith Obligation

**UCC § 1-304: Good faith in performance and enforcement.** Every contract imposes obligation of good faith; applies to all parties in transaction.

**Covenant of good faith and fair dealing.** Common law recognizes implied covenant that neither party will prevent other from performing or receiving benefits.

---

## PART V: EXCUSE OF PERFORMANCE

### Impossibility and Impracticability

**Impossibility: objective, not subjective.** Performance must become impossible, not merely difficult or expensive. Death of necessary party, destruction of subject matter, illegalization of performance.

**Impracticability: burden vastly disproportionate to original estimate.** UCC § 2-615: If performance becomes impracticable due to unforeseen event, party may be excused if event was not foreseeable and was not party's fault.

---

### Frustration of Purpose

**Supervening event defeats primary purpose without making performance impossible.** Example: contract for wedding venue on date wedding is canceled; performance remains possible but purpose is frustrated.

**Doctrine is narrower than impossibility.** Courts reluctant to excuse performance; requires extreme circumstance making contract worthless.

---

## PART VI: REMEDIES

### Expectation Damages

**Standard measure: loss in value plus incidental and consequential damages.** *Hadley v. Baxendale*, 156 Eng. Rep. 145 (1854): Damages limited to losses that were reasonably foreseeable (reasonably in contemplation of parties at time contract formed).

**Foreseeability principle in US law.** Restatement § 351: Damages recoverable for loss arising from breach only if loss was probable at time of making contract or breaching party had reason to know of probable loss.

---

### Reliance Damages

**Recovery for expenditures in reliance on contract.** Where expectation damages difficult to prove, injured party may recover costs incurred in reliance on performance.

---

### Specific Performance

**Uniqueness requirement.** Available only for goods unique in character; not available for ordinary goods or personal services. *Garrett J. PRESTENBACH, Jr. v. J. Gerald COLLINS*, 159 So. 3d 555 (2013): Specific performance denied where plaintiff could not show he was "ready, willing, and able" to perform his own obligations (purchase contract performance denied due to lack of financing).

---

### Liquidated Damages vs. Penalty

**Liquidated damages enforceable when estimate is reasonable.** Amount must be reasonable forecast of harm; penalty clauses (unconscionable overestimates) are unenforceable.

**UCC § 2-718 factors:** (a) circumstances when clause made; (b) anticipated or actual harm; (c) difficulty of proof of actual damage.

---

### Mitigation of Damages

**Non-breaching party must use reasonable efforts to mitigate.** May not sit idle and accumulate damages; must take reasonable steps to minimize loss.

---

## PART VII: THIRD-PARTY RIGHTS

### Third-Party Beneficiaries

**Intended vs. incidental beneficiary.** Intended beneficiary (primary object of contract to benefit) has enforceable rights; incidental beneficiary does not.

**Gift promise vs. performance condition.** Donee beneficiary (where performance is gift to third party) vs. creditor beneficiary (where promise satisfies debt owed by promisor to beneficiary).

---

### Assignment and Delegation

**Voluntary assignment of rights is generally permitted.** Assignor transfers rights; assignee steps into assignor's shoes. Notice to obligor advisable.

**Delegation of duties with consent.** Delegor remains liable; obligee may object if performance is personal or material change in obligation risk. Non-delegable duties: personal service contracts, contracts involving special skills/trust.

---

## PART VIII: UCC ARTICLE 2 (GOODS / SALES)

### Scope and Application

**"Goods" defined as tangible personal property identified and existing.** UCC § 2-105 excludes services, real property, documents of title, money (except those traded as goods).

**Mixed contracts: predominance test.** Where contract mixes goods and services, courts apply UCC if goods are predominant purpose.

---

### Formation Under UCC Article 2

**Firm offer § 2-205.** Offer for sale of goods by merchant, in signed writing, assuring it will not be revoked, is irrevocable for stated time (max 3 months) even without consideration.

**Battle of forms § 2-207.** Acceptance with different/additional terms becomes effective unless expressly conditioned. Additional terms become part of contract unless: (a) offer limits acceptance; (b) materially alter offer; (c) notice of objection given.

---

### Warranties

**Express warranties § 2-313.** Any representation of fact or affirmation of fact becomes warranty if made part of basis of bargain (sample, description, model).

**Implied warranty of merchantability § 2-314.** Goods must be fit for ordinary purposes; pass without objection; are properly packaged/labeled.

**Implied warranty of fitness for particular purpose § 2-315.** Seller warrants goods are fit for specific purpose known to seller when buyer selects goods in reliance on seller's skill/judgment.

---

### Perfect Tender Rule

**Seller's goods must conform perfectly to contract.** § 2-601: Buyer may reject goods or any installment not conforming in any way. Exception: § 2-508 allows seller reasonable cure opportunity if time remains.

**Substantial performance does not apply to UCC goods sales.** Stricter than common law contracts.

---

### Risk of Loss and Title

**Default rule: risk passes to buyer on receipt of goods.** § 2-509: Risk passes on delivery; may be shifted by agreement (FOB, CIF, FAS terms).

**Title and insurable interest pass on identification.** § 2-401: Identification (setting aside goods as contract goods) triggers passage of title and insurable interest unless parties agree otherwise.

---

### Remedies (Buyer and Seller)

**Buyer's remedies:** Rejection/revocation; cover (substitute goods); damages for non-delivery; specific performance (unique goods); recovery of payments.

**Seller's remedies:** Withhold delivery; resell goods; cancel contract; recover damages for non-acceptance.

**Statute of limitations § 2-725:** Four years after breach discovery, unless parties agree to shorter period (not less than 1 year).

---

## LANDMARK CASES CITED

1. *RHEA v. CRAIG*, 141 N.C. 602 (1906) — Statute of Frauds; writing requirement for land interests.
2. *Leonard C. Pratt Co., Inc. v. David S. Roseman*, 259 A.D. 534 (1940) — Statute of Frauds; essential terms requirement.
3. *The American Agricultural Chemical Company v. Temple L. Gatewood*, 260 A.D. 861 (1940) — Statute of Frauds; custom as exception.
4. *Pauline L. Baron v. Nathan Schachter*, 284 A.D. 361 (1954) — Anticipatory repudiation doctrine.
5. *Gilles ROLLET v. Gwenaelle DE BIZEMONT*, 159 So. 3d 351 (2015) — Fraud and undue influence defenses.
6. *Garrett J. PRESTENBACH, Jr. v. J. Gerald COLLINS*, 159 So. 3d 555 (2013) — Specific performance; readiness and ability requirement.

---

## STATUTE AND RESTATEMENT CITATIONS

- **Restatement (Second) of Contracts §§ 1–377**
- **UCC Articles 1, 2** (Official Text)
- **NCBE MBE Subject Matter Outline: Contracts** (authority for topic weighting and formulation)

*Last updated: 2026-06-24*