Contract Law: Formation, Performance, and Remedies

Contract Law Overview

Formation

A valid contract requires offer, acceptance, consideration, capacity, and legality.

Offer: A clear, definite proposal to enter into an agreement. Must be communicated to the offeree and create a reasonable expectation that the offeror is willing to be bound.

Acceptance: Unequivocal agreement to the exact terms of the offer. Under common law, the "mirror image rule" requires acceptance to match the offer exactly. Under the UCC (for sales of goods), additional terms may become part of the contract.

Consideration: Each party must give something of value. A promise to do something you're already legally required to do is not consideration (pre-existing duty rule).

The Statute of Frauds

Certain contracts must be in writing to be enforceable:

Contracts for the sale of land

Contracts that cannot be performed within one year

Contracts for the sale of goods over $500 (UCC)

Promises to pay another person's debt (suretyship)

Marriage-related promises (prenuptial agreements)

Breach and Remedies

Types of Breach:

Material Breach: A significant failure that goes to the essence of the contract. The non-breaching party can terminate and sue for damages.

Minor Breach: A less significant failure. The non-breaching party must still perform but can recover damages for the breach.

Anticipatory Breach: One party indicates in advance that they will not perform. The other party can treat the contract as breached immediately.

Remedies:

Compensatory Damages: Money to put the injured party in the position they would have been in had the contract been performed

Consequential Damages: Foreseeable losses resulting from the breach

Specific Performance: Court orders the breaching party to perform (typically for unique goods or real estate)

Liquidated Damages: A pre-agreed amount specified in the contract

Rescission: Canceling the contract and restoring the parties to their original positions