Contract Law Fundamentals – Formation, Enforceability, and Performance

This lecture provides a comprehensive overview of contract law, a core subject in both law school and bar exam preparation. It examines how legally enforceable agreements are formed, what makes them valid or voidable, how obligations are performed or breached, and what remedies are available.

Formation

Contract formation requires:

Offer: A clear and definite promise showing willingness to enter into an agreement.

Acceptance: Unequivocal assent to the terms of the offer, typically governed by the mirror image rule in common law and more flexibly under the Uniform Commercial Code.

Consideration: A bargained-for exchange of value between the parties.

Mutual Assent: Both parties must agree to the same terms under the objective theory of contract.

Capacity and Legality: Parties must have the legal ability to contract, and the subject matter must be lawful.

Defenses to Formation

Even where the above elements are present, certain defenses may render a contract unenforceable:

Misrepresentation (fraudulent or innocent)

Duress and Undue Influence

Mistake (mutual or unilateral)

Unconscionability

Lack of genuine assent

The Statute of Frauds requires certain contracts—like those involving real estate, suretyship, or long-term performance—to be in writing and signed.

Performance and Breach

Under common law, parties must substantially perform their obligations unless there is a material breach.

Under the UCC, the perfect tender rule applies, allowing buyers to reject goods that do not conform exactly to the contract.

Remedies

When breach occurs, the law aims to protect the expectation interest:

Compensatory damages to put the non-breaching party in the position they expected.

Consequential damages for foreseeable losses stemming from the breach.

Liquidated damages if contractually specified and reasonable.

Specific performance as an equitable remedy when monetary damages are inadequate.

Restitution to prevent unjust enrichment.

Third-Party Rights

Intended beneficiaries may enforce contracts made for their benefit.

Assignments and delegations allow parties to transfer rights and duties, with some limitations.

A novation can relieve the original party of liability if the obligee agrees to substitute a new obligor.

Policy Considerations

Contract law balances freedom of contract with fairness, predictability, and market efficiency. The law adapts through judicial doctrines, statutory frameworks like the UCC, and evolving commercial practices, especially in digital transactions and standard form contracts.