Contract Law

Step 1: Common Law or UCC?

Step 3: Interpretation - preference given to written or typed provisions using the ordinary meanings of words, and construed against the drafter if there is ambiguity. Refers to whether the parties intended the written contract to be the final discussion as to the specific terms

Step 2: Formation (note: do not perform this step if fact pattern explicitly states that a valid contract was formed.

Step 4: Performance

Step 5: Remedies

Third Parties come into play in three ways

Does the contract involve a transaction in goods?

No

Yes

Common law governs

UCC Art. 2 governs

real estate contracts

service contracts

Describe transaction in goods: it is the sale of tangible, personal property?

apply facts

conclude UCC applies

If the contract is a mixture of services and sale of goods, determine which part is the most predominant part of the contract and apply it.

If sale of goods predominate: Apply UCC

If services predominant: Apply common law

Step 2: Is one of the parties a merchant (one who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge or skills as to the practices or goods involved.

acceptance; mutual assent is determined when both offer and acceptance present

consideration: a bargained-for exchange. The promise must induce the detriment, and the detriment must induce the promise.

offer

No defense to enforcement

bilateral contract: both parties promises something

Unilateral contract: one promising party. For there to be a contract, the offeree must complete the performance enumerated

Exists when there was intent to enter a contract through a promise or undertaking

  1. Terms of the Deal must be definite and certain
  1. the offer must be communicated to the offeree, giving them actual knowledge of the offer

Termination strips the offeree of the power of acceptance and can be initiated by the offeror or the offeree

By offeree

rejection

By offeror: revocation

counter-offer: generally terminates the offer and creates a new offer

Conditional acceptance terminates offer; if language does match up, there is no acceptance. Known as mirror-image rule. DOES NOT APPLY IN UCC

Conditional acceptance under the UCC can constitute a legitimate contract. Occurs whena buyer places an order and the seller's acceptance is different or addresses terms not in the order. Called Battle of the Forms.

If buyer is consumer: additional terms treated as proposals

If both parties are merchants, additional terms become part of the contract unless

offeror objects in a reasonable time

additional terms would materially alter contract.

offer expressly limits acceptance to its terms

in the event the terms are different, the knockout rule applies and omits both the offeror's original provision AND the offeree's differing provision from the resulting contract.

Offeror can control method of acceptance by stating conditions. If contract is silent on method, offeree may indicate acceptance through starting performance.

If offeree accepts by letter, then changes their mind, whichever letter arrives first (rejection or acceptance) determines the contract.

UCC: new consideration is not required to modify sale of goods contract. Instead, a change is allowed if it passes the Good Faith test.

Common law: pre-existing contractual or statutory duty cannot act as consideration for a new promise: a new consideration is required

Detriment and benefit must have legal vallue

an act of forbearance by the promissee is sufficient if it gives the promisor a benefit

Promissory estoppel/detrimental reliance can be used as a substitute for consideration. Requires:

Reliance that is reasonable, detrimental, and foreseeable

enforcement necessary to avoid injustice

Promise

nondisclosure

duress

misrespresentation

unconscionability

Illegality

mistake of fact: occurs when both parties to a contract are mistaken about a material facts, making it voidable by the adversely affected party.

statute of frauds: requires a writing signed by the parties to be bound concerning:

mutual or unilateral

lack of capacity

mental incompetency

intoxication

Minors

service contract not capable of being performed within a year from the time of the contract

Real estate contracts

promise in consideration of marriage

Sales of goods for $500 or more

Promise to pay the debts of another (suretyship)

Only the party claiming a contract exists must show a writing signed by the defendant where the material terms of the contract are included.

UCC requirement does not look at the material terms, but rather if the contract states it is a contract for the sale of goods and contains the quantity of goods.

If only one party is mistaken, the mistake does not prevent enforcement of the contract

If the non-mistaken party knew or had reason to know abou tthe mistake by the other party, the contract is voidable by the mistaken party.

gap-filling provisions

parol evidence rule: governs whether the meaning of a document can be determined by the negotiations of the parties prior to the written contract. Admissibility depends on

Contract law supplies terms that govern where areas are silent, but can be overridden by being explicit in the agreement

UCC provides default terms for gaps in the contract

Warranties

implied warranty of merchantability: included in every sale of goods, because the goods sold must be fit for their ordinary purpose

implied warranty of fitness for a particular purpose: generally accompanied by strange fact patterns. There must be a DIRECT representation by the seller or a representative of the seller that the product fits what the buyer wants.

express warranty: created by the seller. these become a party of the agreement if they are the basis of the bargin. Can be altered by explicit exclusionary or modifying language mentioning merchantability.

If contract includes expression such "as is" or "with faults" then that language is sufficient to draw buyer's attention to exclusion of the warranties

Course of dealing, course of performance, or usage of trade may also indicate a warranty is modified or excluded

If in writing, it must be conspicuous

UCC provides for missing terms such as price, time, and place of delivery. Does not provide for QUANTITY

Both the Common Law and the UCC terms include obligation of good faith and fair dealing

  1. What is the purpose for which the evidence is being introduced
  1. Does the evidence relate to a term or contract that is integrate

Merger clause: states that the writing is complete and the entire agreement of the parties

parol evidence is admissible if the purpose of the introduction of extrinsic evidence is to explain or interpret the terms of a written contract.

Parol evidence is admissible to supplement the terms of the written contract UNLESS the contract is completely integrated. Also admissible to contradict terms of the agreement unless fully integrated

Discharges the duty to perform by tender of performance and by a completed condition subsequent

Conditions in a contract can be

impossible

impracticable

frustrated

rescinded

also discharged if illegal

express

implied

constructive: can be

concurrent

subsequent

precedent

Breach: occurs after failure to honor duty to perform

in existence if both performances can be performed simultaneously

present if one's performance will take longer than the other

read into the contract by a court

Failure to fulfill a condition does not necessarily have to be breach, but it may relieve other party of performance

If breach is material, non-breaching party relieved of performance and is entitled to all available remedies

UCC

if breach is minor, offfended party entitled to damages

Buyers cannot reject after already accepting by inspecting and indicating goods do conform or by failure to inspect

Acceptance may be revoked if the goods are so defective that their value is substantially impaired.

If goods or their delivery fail to conform in any way with the contract, buyer may reject, accept, or selectively accept the goods.

pre-existing duty is abolished under UCC and is instead substituted by the good faith test

Equitable remedies

Monetary remedies

reliance damages

restitution

expectation damages

liquidated damages

restitution

unjust enrichment

specific performance: extraordinary, only available when monetary award would be inadequate to grant relief to the aggrieved party.

negative injunctive relief

Laches: When considering an equitable remedy, courts will consider whether the aggrieved party has clean hands or whether the party waited too long to seek recovery.

not usually available for

available for

real property

Unique objects

personal services contracts

contracts requiring ongoing cooperation between parties

through an assignment: a transfer of a right to receive a performance under a contract.

through delegation of the obligation

as a beneficiary

Do they have standing to sue the promisor?

Incidental beneficiary: one who benefits from a promisor's performance, but was not intended to be the one who benefits

Intended beneficiary: One who was intended to benefit from promisor's performance. May enforce the contract against a breaching promisor but have no rights against a breaching promisee in the event that performance doesn't happen

partial assignments are valid

Assignee may then enforce the contract again obligor

the owner of the right must maniest an intention to make a present transfer of the right

Non-assignable rights

those that are for future rights to arise under a future contract

illegal things

those that substantially change the contract's risks/duties

Delegation occurs when a 3rd party agrees to satisfy a performance obligation owed by one of the parties to a contract.

Does not relieve Delegator of obligation to the contract, remains liable for the performance unless there has been a novation

Novation: occurs when the obligee agrees to release the delegator in return for the liability of the delegatee

Non-delegable duties

Contracts that prohibit delegation

Personal perforamnce contracts where the recipient relies on the qualities of the party who is to render the performance