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🎧 EPISODE SUMMARY
A contract is a legally enforceable promise or set of promises. Contract law determines which commitments create legal obligations and what consequences follow when those obligations are not performed.
A complete contract problem commonly moves through preliminary negotiations, offer, acceptance, consideration or another enforcement basis, determination of terms, performance, changed circumstances, breach, and remedy.
The principal sources of contract law include common law, Uniform Commercial Code Article 2, Restatement principles, statutes, international law in appropriate transactions, and judicial decisions.
Common law generally governs services, employment, real property, construction, insurance, intellectual-property licenses, and professional services. Article 2 generally governs transactions in movable, tangible goods.
Mixed transactions may be analyzed under the predominant-purpose test, which considers contract language, the supplier’s business, relative costs, and the parties’ reason for contracting. Some jurisdictions use a gravamen approach focusing on the part of the transaction that produced the dispute.
Contract formation ordinarily depends on objective manifestations rather than undisclosed intentions. The question is what a reasonable person would understand from the parties’ words and conduct in context.
Mutual assent is generally analyzed through offer and acceptance. Common law traditionally requires greater certainty and closer matching. Article 2 permits greater flexibility when the parties intended to contract and a court has a reasonably certain basis for a remedy.
Preliminary negotiations include requests for information, price quotations, advertisements, estimates, expressions of future intent, and some letters of intent. The central question is whether the speaker expressed a present willingness to be bound upon acceptance without further approval.
Advertisements are generally invitations for customers to make offers. An advertisement may itself be an offer when it is clear, definite, explicit, limited in quantity or recipients, and leaves nothing open for negotiation.
An agreement must be sufficiently definite for a court to identify the parties’ obligations and provide a remedy. Article 2 can fill some open terms, but quantity generally remains essential, subject to requirements and output arrangements.
An agreement to agree may be unenforceable when essential matters remain unresolved. A preliminary arrangement may nevertheless create enforceable obligations concerning good-faith negotiation, exclusivity, an option, confidentiality, or fixed preliminary terms.
Contract law generally respects freedom of contract, but autonomy is limited by capacity, fraud, duress, undue influence, unconscionability, illegality, public policy, consumer law, employment law, antidiscrimination rules, and good-faith obligations.
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