Chapter 8:

8.1 Rules relating to consideration.

• Consideration must move from the promisee.
• Consideration must be legal.
• Consideration must be something of value.
• Consideration must be sufficient but need not be equivalent.
• Consideration may be executed or executory, i.e., present or future, but it cannot
be in the past.

8.2 Pre-existing duty rule

• The performance of a legal duty that is already owed is generally insufficient for
consideration. In other words, a promise to perform an obligation that the promisor
is already legally required to perform cannot support a new, binding agreement.
(Can’t use existing duty to form a new contract)

•Whenever the parties to a contract agree to vary its terms, there needs to be fresh
consideration for the variation to be legally binding

8.3 Promissory estoppel

• The doctrine of promissory estoppel may permit enforcement of a promise made
by a promisor to a promisee, without consideration, if the promisor reasonably
expects or should reasonably expect the promisee to rely on the promise; the
promisee in fact relies on the promise; and as a result, the promisee suffers a
substantial detriment. The court will provide a limited remedy for a breach by the
promisor to prevent injustice.

8.4 Implied consideration

• A court may imply a contract, even if the parties never entered one, if one party
provides another with valuable services, property, or money; the recipient has
reason to know of this; the circumstances reasonably indicate the services, property,
or money was provided with the expectation of compensation; and the recipient
manifests assent, as by knowingly using or retaining the benefit of the services,
property, or money or failing to object under circumstances in which silence would
suffice as acceptance of an offer.

8.5 Deed of Gift

Chapter 9:
9.1 Exception of Pre-existing rule
• Alteration of Duties
• A modification to an existing contract is enforceable if both parties alter their
duties. For instance, a borrower paying down a loan in installments may agree
to pay some portion of the outstanding principal ahead of schedule in exchange
for a discharge of the remainder

• Unforeseen Circumstances
• A modification to an existing contract is enforceable if the modification is fair
and equitable in light of circumstances that were unforeseen by the parties at
the time of the contract.

9.2 Review- Promissory estopple

• Promisor’s Reasonable Expectation of Reliance by Promisee - Promissory
estoppel requires that the promisor reasonably expect the promise to induce an
act or forbearance from the promisee.
• Promisee’s Reasonable Reliance on the Promise - The promisee must reasonably
rely on the promise by performing a definite and substantial act or forbearance.
• Promisee’s Substantial Detriment in Reliance on the Promise - The promisee
must suffer a substantial detriment in reliance on the promise for promissory
estoppel to apply. Any benefit received by the promisee is irrelevant.
• Remedy Limited to Extent of Detriment - The promisee’s remedy in a case of
promissory estoppel is generally limited to actual loss suffered in reliance on the
promise. Thus, the remedy may not encompass the full value of the promise.

9.3 Invalid Contract

• A contract may be invalid if there is no true consent to its formation.
• True consent means free will. Both parties must have entered the
contract freely and willingly and without having been misled as to its
terms or its consequences

• Factors that invalidate a contract:

• Lack of capacity
• Duress
• Undue influence
• Misrepresentation
• Violation of laws and public policy
9.31 Consequence
• Void - If a contract is declared void, then in fact there is no contract. Neither party
can sue to enforce the contract or claim damages for breach of contract. No rights of
ownership can pass and any goods which have changed hands can be recovered.

• Voidable - If a contract is voidable, it is valid and enforceable, and rights of

ownership may pass. However, the innocent party has the right to avoid the contract
if he so chooses. But, if prior to his exercising this right the ownership of property has
passed to a third party, he will not be able to recover that property.

9.32 Minor
• In contract law, a person under the age of 18 years is described as a minor or an
infant.
• A minor has the capacity to enter into contracts and to enforce his rights against
adults, but adults are restricted in enforcing contracts against minors.
• Exception: A contract is enforceable against a minor if the contract between the
minor and an adult is for necessary goods.
• Necessaries are defined as goods suitable for the minor’s condition in life and to his
requirements at the time of sale and delivery. If the minor is already adequately
supplied, the goods will not be classed as necessaries.

9.33 Mental Disability

• A person who at the time of making a contract is suffering from a mental disability,
whether caused by illness, drugs, or alcohol, will be able to avoid his liabilities, if he
can show that the did not understand what the contract was about and the other
person was aware of his disability.
• A person suffering from a mental disability is bound by his contracts for necessary
goods and is bound to pay a reasonable price for such goods.

9.34 Duress
• Where a person is threatened or subjected to violence and forced into forming a
contract, or his family is subjected to such abuse, the court may hold that the
contract is voidable at common law on the grounds of duress.
9.35 Undue Influence
• The law of equity recognizes undue influence as a factor which justifies “setting a
contract aside”. The courts will only uphold a contract which has been formed freely
and willingly and to which the parties have consented.
• Undue influence arises where the parties to a contract have unequal
bargaining power. The stronger party will be able to dominate the
weaker party and may insist on the inclusion of terms which are very
unfair.

9.36 Misrepresentation
• A statement which constitutes a representation if:
• 1) it is a statement of fact, and
• 2) it induces a person to enter into a contract.
• A misrepresentation is an untrue statement of fact.

9.37 Fraudulent Misrepresentation

• A representation which is untrue or constitutes a half-truth is described as a
misrepresentation.
• Where the person making a misrepresentation knows that what he has said is false,
or he is reckless and does not care whether it is true or false, he will be liable for
fraudulent misrepresentation.
• The injured party has to prove that the representation was made with the intention
to deceive, and this can be a difficult task.
• If a fraudulent misrepresentation is proved, the injured party may rescind the
contract and may also sue for damages
Chapter 10:
10.1 Duty to inform
• Saying nothing at all does not constitute a representation unless a person is under
a duty to disclose certain information and he fails to do so. However, a person who is
silent may make a representation by his conduct.
• If a person does not say or do anything and he does not have the duty to disclose
information, he does not impose on the other side with his advantage of information.

10.2 Negligent misrepresentation

• Where the person making a misrepresentation has no reasonable grounds for
believing that what he said is true, he will be liable for negligent misrepresentation.
• It is easier to establish a negligent misrepresentation than a fraudulent
misrepresentation because:
• 1, negligence does not require proving an intention to deceive, and
• 2, the burden of proving that the statement is a negligent misrepresentation
lies with the person who made the statement.

10.3 Innocent misrepresentation

• Where the person making a misrepresentation has reasonable grounds to believe
that it was true both when the statement was made and when the contract was
entered into, he will be liable for innocent misrepresentation.

10.4 Violation of laws and public policy

• The courts will not uphold a contract which is illegal or contrary to public policy. A
contract may be declared unenforceable by a particular statutory provision.
• A contract may be illegal for two reasons:
• 1, It is contrary to the law to form such a contract.
• 2, One or both of the parties intend to contravene the law in
performing the contract.

10.5 Contracts contrary to public policy

• If a contract involves conduct which is not actually illegal but is undesirable, it will
be described as contrary to public policy.
• Such contracts are void.
• contracts to oust the jurisdiction of the courts
• contracts prejudicial to the status of marriage
• contracts in restrain of trade
10.6 Interpretation
• Ambiguities
• Sometimes it is difficult to determine what the parties to a contract have agreed
because the words used are unclear.
• A term is ambiguous if it is susceptible to more than one reasonable interpretation.
• The context of a word in a contract needs to be taken into consider.

10.7 Customs and usage

• A relevant custom, usage, or regularly observed trade practice is often evidence of
the contract’s meaning, provided
• (1) the parties know of or assent to the custom, usage, or trade practice;
• (2) the custom, usage, or trade practice is so generally known or accepted that
the parties can be presumed to know about it; or
• (3) the parties are engaged in the industry in which the custom, usage, or
trade is observed.

10.8 Good Faith

• In every contract, the law implies an obligation on both parties of good faith and
fair dealing. Generally, a party breaches this obligation through conduct that, though
not contrary to the letter of the contract, violates the spirit of the contract by
• (1) unfairly, unjustly, or opportunistically defeating the other party’s
contractual expectations or
• (2) unfairly failing to cooperate to enable the other party to perform under the
contract.
Chapter 11
11.1 Mutual mistake
• The parties to a contract are both mistaken about the same material fact within
their contract
•A mistake is mutual if both parties enter into the contract based on the same
mistake.

11.2 Unilateral mistake

• Only one party to a contract is mistaken as to the terms or subject- matter
contained in a contract.

11.3 Basic assumption

• The mistake must relate to a basic assumption upon which the contract was made

11.4 Material effect

•The mistake must have a material effect on the exchange of performances.
• The resulting imbalance must be so severe that the adversely impacted party
cannot be fairly required to perform

11.5 Bearing the risk

• A mistake will not excuse a party’s performance if that party bears the risk of the
mistake.
• A party may bear the risk of the mistake if:
• (1) the terms of the contract expressly allocate the risk to the party,
• (2) the court allocates the risk to the party upon finding that it is reasonable
under the circumstances to do so, or
• (3) the party proceeds with the contract despite conscious ignorance of the
relevant facts

11.6 Mistake in Common Law

• Mistake as to the subject-matter of the contract
• If both parties are mistaken as to the subject-matter of the contract, then the
parties are at “cross-purposes”. The contracting parties have “no meeting of their
minds” and their contract is considered void for mistake. This is a common mistake or
a mutual mistake.
• The loss lies where it falls.
Chapter 12
12.1 Changed circumstances
• A breaching party’s performance is excused if the circumstances since the contract
have changed. The performance is impossible or impracticable, or the principal
purpose of the contract is substantially frustrated.

• Three requirements
•It involves the subject of the contract.
• It’s not the party’s fault.
•The party is not responsible for the risk.

12.2 Impossibility
• Under the doctrine of impossibility, a party may avoid performance if it becomes
impossible to perform due to changed circumstances. A performance has become
impossible if it objectively cannot be performed by anyone, not just the specific party
to the contract.

12.3 Impracticability
• Performance is impracticable if it will cause extreme and
unreasonable difficulty, expense, injury, or loss to one of the parties,
even if performance is still objectively possible.

12.4 Frustration
• Frustration occurs when a contractual promise has become incapable of being
performed.
• A party’s principal purpose is substantially frustrated if the other party’s
performance has become virtually worthless, regardless of whether the performance
is possible or practicable.
• Problems come up after the contract has been formed and no party is at fault. The
courts may call the contract off. However, in some situations, when the risk was or
should have been understood, the courts will still enforce the contract as written.

12.5 Two major types of remedies

• Damages (What could the victim have got, if the contract breaker had performed
the contract?)
• Specific performance (to prevent unjust enrichment
12.6 Damages
• The common law remedy for breach of a contractual promise is damages.
• Damages are designed to compensate the innocent party for the damage, loss, or
injury he has suffered through the breach.
• In the business world, it is quite common for the parties to include in their contract
provisions which state the amount payable as damages in the event of a breach of
contract. Sometimes there is no such prior agreement

12.7 Expectation damages

• Expectation damages are intended to place the injured party in the position that
she would have been in had the contract been fully performed.
• This form of damages recognizes that the injured party is entitled to the benefit of
her bargain.

12.8 Remoteness of damage

• In order to establish a right to damages, the innocent person must show that the
loss he has suffered was caused by the breach.
• The defendant may not, however, be liable for all the loss; certain losses may be
too remote.

12.9 Incidental Damages

•Damages are recoverable when (Incidental damages):
• they may fairly and reasonably be considered as arising naturally
(according to the usual course of things) from the breach, and
• they may reasonably be supposed to have been in the contemplation
of both parties when the contract was made.

12.10 Reliance damages

• This form of damages often serves as an alternative to expectation
damages if
• (1) the injured party’s expectation damages are too speculative to measure or
prove with reasonable certainty or
• (2) the injured party would not have profited at all from the contract
12.11 Liquidated damages
• Where the parties to a contract establish at the outset the financial consequences
of failing to perform their promises and they have made a genuine attempt to
estimate the likely loss, the courts will accept the relevant figure as the damages
payable, even if the actual loss is more or less than that estimate.
• If their estimate is not a genuine attempt to establish the likely loss, it is described
as a penalty and will not be enforced.

12.12 Nominal damages

• When a breach did not cause any loss, or when the loss is not provable, the court
will award a small sum as nominal damages.
• Dan does not cause any actual loss when he quits Peter’s play, then Peter may only
receive a nominal amount of damages, such as $50.

12.13 Mitigate loss

• The injured party may not recover damages for loss that was avoidable without
undue risk, burden, or humiliation.
• Note that the injured party is not precluded from recovery if she makes reasonable
efforts to avoid loss, even if those efforts are unsuccessful.

12.14 Specific performance

• Specific performance is an equitable remedy in which a court orders the breaching
party to perform the party’s contractual duty, rather than to pay damages.
• This type of order is usually appropriate only if the contract involves a unique
performance for which a substitute performance cannot feasibly be procured, such
that monetary damages are inadequate.

12.15 Equitable remedies

• If a contract is for the sale of a unique item which cannot be replaced, such as land,
an antique, or rare goods, and the seller fails to perform, no sum of money can
compensate the buyer and specific performance may be granted.

12.16 Injunction
• An injunction, by contrast, forbids a party from breaching a contract.
• An injunction may be ordered if
• (1) the contractual duty is solely to forbear from taking some action,
• (2) specific performance would not be ordered solely due to practical
considerations.