A contract is a legally enforceable agreement between two or more parties with mutual obligations. Contracts can be in writing, orally or verbally agreed upon(parol contracts) or created through the actings of the parties. The remedy at law(1) for breach of contract is usually “damages” or monetary compensation. In equity(2), the remedy can be specific performance(3) of the contract or an injunction(4). The importance of contract stability is emphasized by Article Ⅰ, §10 of the U.S. Constitution, which provides that “No State shall ... pass any ... Law impairing the Obligation of Contracts.”
At common law, the elements of a contract are mutual assent and consideration(5).
1. Mutual Assent：Offer and Acceptance
At common law, mutual assent is typically reached through offer and acceptance. that is, when an offer is met with an acceptance that does not vary the offer's terms. The requirement is known as the “mirror image” rule. If a purported acceptance does vary the terms of an offer, it is not an acceptance but a counteroffer and, therefore, simultaneously a rejection of the original offer.
Offer and acceptance does not always need to be expressed orally or in writing. An implied contract is one in which some of the terms are not expressed in words. The implied contract is in two kinds of forms.
(1) Contract Implied in Fact. A contract which is implied in fact is one in which the circumstances imply that parties have reached an agreement even though they have not done so expressly. For example, by going to a doctor for a checkup, a patient agrees that he will pay a fair price for the service. If one refuses to pay after being examined, the patient has breached a contract implied in fact.
(2) Contract Implied in Law. A contract which is implied in law is also called a quasicontract, because it is not in fact a contract; rather, the obligation is created by law in absence of agreement between the parties for reasons of justice and fairness. It is a means for the courts to remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other.(6)
For example, a plumber accidentally installs a sprinkler system in the lawn of the wrong house. The owner of the house had learned the previous day that his neighbor was getting new sprinklers. That morning, he sees the plumber installing them in his lawn. Pleased at the mistake, he says nothing, and then refuses to pay when the plumber delivers the bill.
Will the man be held liable for payment? Yes, if it could be proven that the man knew that the sprinklers were being installed mistakenly, the court would make him pay because of a quasicontract. If that knowledge could not be proven, he would not be liable. Such a claim is also referred to as “quantum meruit”(7).
2. Consideration: Sufficient and Insufficient
Consideration is something of value given by a promissor to a promisee in exchange for something of value given by a promisee to a promissor. Typically, the thing of value is an act, such as making a payment, or a forbearance to act when one is privileged to do so, such as an adult refraining from smoking.
Consideration must be sufficient, but courts will not weight the adequacy of consideration. For instance, agreeing to sell a car for a penny may constitute a binding contract. All that must be shown is that the seller actually wanted the penny. This is known as the peppercorn rule(8). Otherwise, the penny would constitute nominal consideration, which is insufficient. Parties may do this for tax purposes, attempting to disguise gift transactions as contracts.
Past consideration(9) is not sufficient. Indeed, it is an oxymoron. For instance, the guardian(10) of a young girl obtained a loan to educate the girl and to improve her marriage prospects. After her marriage, her husband promised to pay off the loan. It was held that the guardian could not enforce the promise because taking out the loan to raise and educate the girl was past consideration—it was completed before the husband promised to repay it.
The insufficiency of past consideration is related to the preexisting duty rule(11). For instance, a captain's promise to divide the wages of two deserters among the remaining crew if they would sail home from the Baltic shorthanded, was found unenforceable on the grounds that the crew were already contracted to sail the ship through all perils of the sea.
3. Classification of Contract
(1) Express contract and implied contract. An express contract is one in which the terms are stated by the parties; it may be either an oral or written contract. An implied contract is one that is inferred from the conduct of the parties.
(2) Bilateral contract and unilateral contract. A bilateral contract is one in which the parties exchange promises to do some future act. For example, you agree with the car dealer that you will pay for your car when you take delivery next week. Each of you has promised to do something in the future：the dealer to deliver the car and you to pay for it. In contrast, a unilateral contract is one in which one party acts immediately in response to the offer.
(3) Executory contract and executed contract. An executory contract is one in which some or all of the terms are uncompleted—the car deal in above paragraph, for example. An executed contract, then, is one which all terms have been completed. For instance, you have eaten your meal and paid your bill at the restaurant.
(4) Void, voidable and unenforceable contract. The terms “void, voidable and unenforceable” are relevant in situations where there is a breach of contract or when one party fails to comply with the terms of the agreement.
A void contract is a nullity from its beginning, and damages do not result. A voidable contract is one that is binding until it is disaffirmed or canceled by the party with the authority to do so. In many ways, marriage is a contract that either party may rescind by obtaining a divorce. Unenforceable contracts are those that meet the basic common law elements for contracts but lack some other additional legal requirements such as being signed in front of a notary public(12).
There are two common theories that attempt to explain consideration. The first is the “benefit-detriment theory”(13), in which a contract must be either to the benefit of the promisor or to the detriment of the promisee to constitute consideration(though detriment to the promisee is the essential and invariable test of the existence of a consideration rather than it can be constituted by benefit to the promisor). The second is the “bargain theory”(14), in which the parties subjectively view the contract to be the product of an exchange or bargain. The bargain theory has largely replaced the benefitdetriment theory in modern contract theory, but judges often cite both and unknowingly confuse the two models in their decisions. These theories usually overlap; in standard contracts, such as a contract to buy a car, there will be both an objective benefit and detriment(the buyer experiences a benefit by acquiring the car; the seller experienced a detriment by losing a car) and the subjective experience of entering into a bargain. However, there are certain contracts which satisfy one but not the other. For instance, a deal in which the promisee feels subjectively relieved, but has not actually gained any legal rights, might satisfy the bargain theory but not the benefitdetriment theory. Alternatively, a deal in which an actor takes detrimental(15) actions possibly in reaction to an offer, without having viewed the deal as a bargain, would not be viewed as a contract under the law.
The main purpose of the shift from benefitdetriment to bargain theory is to avoid inquiries into whether consideration is adequate. For example, if a person promised you their car for ＄1.00 because they needed to get rid of it, then the ＄1.00 might seem adequate. However, if it were your birthday and your friend wrote down “I give you my car in consideration of one dollar,” this same consideration would not seem adequate. Thus whether ＄1.00 is consideration does not depend on the benefit received but whether the ＄1.00 had actually been bargained for.
In some jurisdictions, contracts calling for such nominal or “peppercorn” consideration(16) will be upheld unless a particular contract is deemed unconscionable. However, in other jurisdictions, the court will reject “consideration” that had not been truly bargained for. Occasionally the courts in these jurisdictions may refer to “adequate” or “valuable” consideration, but in reality the court is not examining the adequacy of consideration, but whether it had been bargained for. The traditional notion that courts would not look into the adequacy of consideration, an ancient notion in the English common law, does not square with the benefitdetriment theory(in which courts are implicitly analyzing if the parties are receiving a sufficient benefit) but does square with the bargain theory(in which only the subjective intentions of the parties are considered).
There are three main purposes cited for the consideration requirement. The first is the cautionary requirement: parties are more likely to look before they leap when making a bargain than when making an off-the-cuff(17) promise of a gift. The second is the evidentiary requirement: parties are more likely to commemorate, or at least remember, a promise made due to a bargaining process. The third is the channeling requirement: parties are more likely to coherently stipulate their specific desires when they are forced to bargain for them. Each of these rationales(18) ensures that contracts are made by serious parties and are not made in error.
Ⅳ. EXERCISES Ⅳ．练习
1. Answer the following questions.
（1）What are the key elements to form a contract?
（2）Please list the terms of various kinds of contracts.
（3）What are the conditions for the acceptance?
（4）Please list the types of implied contract.
（5）What is your understanding of consideration?
2. Translate the following terms into English.
（1）双务合同
（2）单务合同
（3）待履行的合同
（4）已履行的合同
（5）无效合同
（6）可撤销合同
（7）不可强制执行的合同
3. Translate the following terms into Chinese.
（1）specific performance
（2）consensus ad idem
（3）quantum meruit
（4）preexisting duty rule
（5）peppercorn rule
（6）contract implied in fact
（7）contract implied in law
4. Match the given terms with the proper explanation.
A. specific performance
B. fraud
C. voidable contract
D. contract
E. consideration
（1）It is defined as an intentional misrepresentation of a material fact made for the purpose of inducing another person to rely upon that fact to do something that would not otherwise have been done.
（2）It is a legally enforceable agreement between two or more parties with mutual obligations.
（3）It is something of value given by a promissor to a promisee in exchange for something of value given by a promisee to a promissor.
（4）It is one of contracts in which one of the parties has a right to elect to avoid or disaffirm his or her obligation, e.g., a contract entered into by a minor.
（5）It is an order of a court which requires a party to perform a specific act, usually what is stated in a contract.
5. Choose the suitable words from the box and fill in the blanks.
Duress and undue influence comprise a category of acts that allows one party to a contract to (1) the contract. Duress is any action that causes individuals to do something that they would not otherwise have done or to (2) from doing something that they would otherwise do. Undue influence is taking advantage of a difference in the (3) capacity of parties that results from a special position that is occupied by one of the parties. Undue influence exists where there is a special obligation on the part of the (4) party to protect the interests of the weaker party. This obligation is referred to under law as a (5) obligation. It exists in relationships such as attorney-client, doctorpatient, executor-beneficiary (under a will), and (6) beneficiary(in a trust arrangement).
6. Translate the following sentences into Chinese.
（1）Damages are computed by taking into consideration what the individual, who is not guilty of the breach, has lost from the other individual's actions, including wages, and such.
（2）A contract entered into between two individuals specifying that a third individual is to receive certain rights is called a third party beneficiary contract.
（3）Despite the presence of an offer and an acceptance, freely given by both parties, and consideration, the law recognizes that contracts are entered into by certain persons shall be voidable by those persons.
（4）A gratuitous promise(19) is usually not enforceable as a contract. For example, if I promise to give you ＄500 and you say you will take it, a contract is not formed. A gratuitous promise does not create a meeting of the minds.
（5）A contract that is voidable is one in which one of the parties has a right to elect to avoid or disaffirm his or her obligation, e.g., a contract entered into by a minor. A void contract is a nullity from its inception.
（6）Breach of contract is a legal cause of action in which a binding agreement or bargained exchange is not honored by one or more of the parties to the contract by nonperformance or interference with the other party's performance.
(3) specific performance：实际履行。亦作“specific relief”。The rendering, as nearly as practicable, of a promised performance through a judgment or decree; a courtordered remedy that requires precise fulfillment of a legal or contractual obligation when monetary damages are inappropriate or inadequate, as when the sale of real estate or a rare article is involved. Specific performance is an equitable remedy that lies within the court's discretion to award whenever the Common-law remedy is insufficient, either because damages would be inadequate or because the damages could not possibly be established.
(4) injunction：禁令、禁制令。亦作“writ of injunction”。法院签发的要求当事人做某事或某行为或者禁止其做某事或某行为的命令。A court orders commanding or preventing an action. To get an injunction, the complainant must show that there is no plain, adequate, and complete remedy at law and that an irreparable injury will result unless the relief is granted.
(5) consideration：对价。Something(such as an act, a forbearance, or a return promise) bargained for and received by a promisor from a promisee; that which motivates a person to do something,
(7) quantum meruit：（1）合理服务费请求权。A claim or right of action for the reasonable value of services rendered.合理金额，应得额。（2）服务的合理价格，以及在准合同（如不当得利）中计算赔偿额的合理价格。The reasonable value of services; damages awarded in an amount considered reasonable to compensate a person who has rendered services in a quasicontractual relationship.（3）在普通法上，计算违约赔偿数额的一个标准。At common law, a count in an assumpsit action to recover payment for services rendered to another person.该术语作为衡平救济的一种方式，现仍用于返还不当得利之诉中。Quantum meruit is still used today as an equitable remedy to provide restitution for unjust enrichment. It is often pleaded as an alternative claim in a breachofcontract case so that the plaintiff can recover even if the contract is unenforceable.
(10) guardian：监护人。亦作“custodian”。One who has the legal authority and duty to care for another's person or property, especially because of the other's infancy, incapacity, or disability. A guardian may be appointed either for all purposes or for a specific purpose.
(11) preexisting duty rule：既有义务规则。亦作“preexistinglegalduty rule”。合同法上的一项规则，指如果一方当事人履行或允诺履行其本应履行的义务，该当事人并未因此而遭受损害。其中本应履行的义务，既可以是作为的义务，也可以是不作为的义务。The rule that if a party does or promises to do what the party is already legally obligated to do—or refrains or promises to refrain from doing what the party is already legally obligated to refrain from doing—the party has not incurred detriment. This rule's result is that the promise does not constitute adequate consideration for contractual purposes. For example, if a builder agrees to construct a building for a specified price but later threatens to walk off the job unless the owner promises to pay an additional sum, the owner's new promise is not enforceable because, under the preexistingduty rule, there is no consideration for that promise.
(12) notary public：公证人。可以简称为“notary”。A person authorized by a state to administer oaths, certify documents, attest to the authenticity of signatures, and perform official acts in commercial matters, such as protesting negotiable instruments.
(13) benefit-detriment theory：利益决定理论。Under the benefit-detriment theory of consideration, consideration was a detriment incurred by the promisee in return for the promisor's promise.
(14) bargain theory：议价理论。This theory states that a promise or performance that is bargained in exchange for a promise is a consideration for the promise.
(15) detrimental：有害的。
(16) nominal or “peppercorn” consideration：名义对价，或者“胡椒子”对价。A peppercorn in legal parlance is a metaphor for a very small payment, a nominal consideration, used to satisfy the requirements for the creation of a legal consideration.
(17) off-the-cuff：即兴地，临时地。
(18) rationale：原理。the fundamental reason or reasons serving to account for something.
(19) gratuitous：无偿的，自愿的。gratuitous, not involving a return benefit, compensation, or consideration.