Contract Law For Dummies

According to the rule of the expectancy, a non-breaching party is entitled to damages that put the non-breaching party in the position it would’ve been in had the contract been fully performed. To use the rule of the expectancy to calculate damages for breach of contract, take the following steps: Describe what the non-breaching party would’ve had if the contract had been performed.

In contract law, a condition is an event that must occur before some performance is due. Parties may claim that they aren’t in breach of contract because the condition that had to occur before they had to perform hasn’t occurred. A condition can be express or implied: Express: An express condition, which usually uses words like if, is stated in the contract.

To be successful in contract law, you need to know the rules and be able to analyze fact situations in the light of those rules. This Cheat Sheet introduces some of the most important concepts in contract law — such as contract formation, promises enforceable because of reliance and restitution, the statute of frauds, the parol evidence rule, and damages for breach of contract — and boils them down for easy reference.

To determine whether a transaction is within the statute of frauds and therefore must be evidenced by a writing, check whether the transaction is any of the following: An agreement concerning real estate An agreement to rent real property for longer than a year An agreement that by its terms can’t be performed within a year from the making An agreement to answer for the duty of another An agreement for the sale of goods for $500 or more If an agreement is within the statute, look for evidence of a writing signed by the person against whom enforcement is sought.

A contract is a legally enforceable exchange of promises. Contract formation requires the following three essential ingredients: Offer: The offeror promises the offeree something in exchange for the offeree’s promise to do or not to do something. Acceptance: The offeree gives the offeror whatever was requested, such as a promise to do or not to do something.

When an unforeseen event makes performance of a contract obligation impracticable (impossible or unrealistic), the seller may claim that its nonperformance is excused. To analyze a claim of impracticability, determine whether all of the following apply: The event occurred after the contract was made. Performance became impracticable because of the event.

Parol evidence is evidence of terms or understandings extrinsic to (not included in) a written contract. Courts follow the parol evidence rule to determine whether the evidence is admissible. Here’s the rule itself: Once the parties have reduced their agreement to a writing that they intend to contain the final and complete statement of their agreement, then evidence of terms that would supplement or contradict it are not admissible.

Parties frequently modify (change the terms of) the contract after they make it. Technically, a contract modification is a new contract requiring consideration. When one party promises to give something up and the other doesn’t, courts sometimes invoke the pre-existing duty rule to determine whether the modification is enforceable.

If you’re faced with the question of contract formation in your legal dealings, take the following three steps to find the obligation in the parties’ interaction: Look for a bargained-for contract — an exchange that has the three essential elements of offer, acceptance, and consideration. Look for a claim based on reliance (also known as promissory estoppel), meaning that one party reasonably changed his position due to the other party’s promise and lost something as a result.

A third party is a person who’s not a party to the contract. Common law recognizes three significant third parties: Third-party beneficiary: If the parties to the contract intend a third party to be able to sue for enforcement of a promise made in the contract, then that that person is a third-party beneficiary.

The plaintiff in a breach of contract case faces an uphill battle in proving the case. Any damages the court awards are limited by the following considerations: Causation: The plaintiff must prove that the breach caused the loss. Certainty: The plaintiff must prove the amount of damages to a reasonable certainty.

Every contract is incomplete, and the courts find that some contract terms are implied even if the parties do not express them. These implied terms include the following: Terms supplied by course of performance, course of dealing, and trade usage The obligation of good faith A standard of quality, ca

A contract defense is any legal challenge to a contract’s enforceability. Following are common contract defenses: Illegality: The agreement itself is illegal or violates public policy. Unconscionability: The agreement is so one-sided that it shocks the conscience of the court. Mental incapacity or incompetence: One of the parties had a mental illness or incapacity at the time of contract formation.