Ch6. Contract Law in Depth — Formation, Breach, Torts, and Inheritance

Contract Law Essentials

Contract Formation:
Offer + Acceptance → Contract
Freedom of contract principle (subject matter, parties, terms)

Mutual Obligation (Consideration):
Both parties must give something of value
Failure of consideration → voidable contract

Risk of Loss:
Shifts on delivery under UCC; on tender under common law
Seller bears risk until buyer takes possession (UCC default)
Buyer's breach may shift risk earlier

Rescission:
Material breach, anticipatory repudiation, or agreed rescission
Effect: parties restored to pre-contract positions

Major Contract Types

Sale of Goods (UCC Article 2):
Seller: transfer title + warranty of merchantability
Buyer: pay the price

Barter / Exchange:
Transfer of property other than money between parties

Lease (Real Property):
Lessor grants possession; lessee pays rent
Lessee owes duty of reasonable care

Construction / Service Contract:
Contractor completes work; owner pays contract price
Warranty of workmanship: 1 year (general) to 10 years (structural)

Agency / Professional Services:
Principal delegates tasks to agent
Agent owes fiduciary duty of care

Tort Liability

Negligence Elements:
Duty of care
Breach
Causation (actual + proximate)
Damages

Damages:
Compensatory (economic + non-economic) + punitive (where allowed)
Contributory or comparative negligence may reduce recovery
Statute of limitations: discovery rule (varies; commonly 2–3 years)

Special Tort Doctrines:
Respondeat superior (employer liability for employee acts)
Premises liability (owner/occupier liability)
Strict liability for abnormally dangerous activities or animals

Joint and Several Liability:
Multiple tortfeasors → each fully liable (modified in many states)

Inheritance and Estate Law

Intestate Succession Order:
1st priority: Spouse + issue (children/descendants)
2nd priority: Parents
3rd priority: Siblings
4th priority: Extended family (cousins, etc.)

Spousal Share:
Surviving spouse typically takes 1/3 to 1/2 depending on state and
whether there are surviving children

Disclaimer of Inheritance:
File written disclaimer within 9 months of decedent's death
(IRC § 2518 for federal tax purposes; state law varies)

Elective / Forced Share:
Surviving spouse may elect against the will
Typically 1/3 to 1/2 of the augmented estate
Children have no forced share under US law (unlike many civil-law systems)

Key Concept Cards

Rescission = Retroactive Unwinding + Restitution ★★★★★ : Contract treated as if it never existed; parties restored to status quo. Memory hook: rescission = retroactive

Tort Limitations = Discovery Rule ★★★★★ : Clock starts when plaintiff knew or should have known of harm. Memory hook: tort SOL = discovery

Disclaimer Deadline = 9 Months ★★★★☆ : Qualified disclaimer under IRC § 2518 must be made within 9 months. Memory hook: disclaimer = 9 months

Practice Quiz

Q. How does a contractor’s warranty vary by type of work?

Structural defects in a building: implied warranty commonly extends 10 years (varies by state). General workmanship: 1 year. If the contractor conceals a known defect, limitations may be tolled. The owner must give notice and an opportunity to cure before filing suit.

Q. Who can bring an elective-share claim, and against whom?

Only the surviving spouse may elect against the will. The election applies against the probate estate and, in many states, non-probate assets transferred during marriage. The spouse must file within the statutory period (commonly 6 months after appointment of personal representative). Children have no elective-share right under US law.