Lecture 3- Chapter 6 - Contract Law Sept 30 2009

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September 30th 2009 (Week 3)
Chapter 6: Contract Law
- Performance is delayed after agreement (?)
- Bargain theory of contracts t promise is enforceable if it is part of the contract
- Contract formation:
1) offer/promise t for the future
2) acceptance
3) consideration (giving something of value (e.g. money/promise)
- Why the three criteria are important?
o Evidence of a bargain
o Payment = evidence
o Mutuality t appear that the 2/more parties made an agreement
o If contract t may be performed or BREACH of contract (failure to perform)
- Bargain theory t law; discuss enforceability t analyze the process of contract formation and how
enforceable the contract is
- IF BREACH, breaching party usually has an excuse (2 types: Formation t ZÁ]v[ooÇZÀ
}v[t the way it was formed, Performance t Z/](}ulZ[v}}]oÁÇ}
(}u[t misunderstandings t e.g. terms of contract - reasonableness)
[impossibility t e.g. burned theatre t sue for money, frustration t no way of fulfilling contract, mutual
mistake of fact t both parties made a mistake (no meeting of the minds/no actual
agreement),unconscionability t }v]}µv(]U][Z}l]vPVZ]PZP}(µv(]v
- What does the non-breaching party get?
- 3 categories:
1) Recission t looks to the past; returns parties to position before the contract was established
t give back consideration; unwinding
2) Damages t }uv]}vVu}vÇÁ~Z]µ]}v[ t e.g. breaching made profit, give
profit to non-Z]vPUZo]v[ t e.g. non-breaching spent money on advertising,
breaching owes non-Z]vPZÀ]]vP}UZÆ]}v[ puts party in position
they would have been in t forward looking t making the non-breaching party whole)
3) Specific Performance t ZÇ}µ}u]}(}uU}(}u[
- Expectations, specific performance = gives the non-breaching party the benefit of the bargain
- Recission =/= give non-breaching party the benefit of the bargain
Economic Approach
- Efficiency Goals:
o Efficient contracting t encourage parties to enter into contracts where they will get joint
benefits (parties expect pareto improvements)
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