Contracts I

I. Preliminaries
Sources of Contract Law
Common Law.
Restatement.
UCC (sales of goods).
Defnitions (UCC)
Goods means all things (including specially manufactured goods)
which are movable at the time of identifcation to the contract for sale
other than the money in which the prices is to be paid, investment
securities (rticle !), and things in action. "lso includes# unborn young
of animals, growing crops, and things attached to realty per $ection %&
'().* UCC %&'(+.
!erc"ant means a person who deal in goods of the ,ind or
otherwise by his occupation holds himself out as having ,nowledge or
s,ill peculiar to the practices or goods involved in the transaction or to
whom such ,nowledge or s,ill may be attributed by his employment of
an agent or bro,er or other intermediary who by his occupation holds
himself out as having such ,nowledge or s,ill. UCC %&'(-.
#ut"orit$ and #genc$
%&'ress uthority principle gives specifc instructions to act.
Im'lied uthority principle gives general instructions to act.
#''arent uthority agent assumes power through actions.
(o #ut"orit$ becomes binding if principle accepts.
)$'es of Contracts (Common Law)
*ilateral Contracts .promise for a promise./
Unilateral Contracts .promise for an action./
#d"esion Contract .ta,e it or leave it./
Im'lied+in+Law Contract .the silent contract./
%
!utual #ssent (Common Law)
0eeting of minds not re1uired a''arent intent determines
commitment.
ctual intent determines enforcea,ilit$.
2nforceability presumed for# ,usiness dealings.
but not for# social or domestic dealings.
Unless otherwise prevented (i.e. $tature of 3rauds) manifestations of
intent will hold even if written contract is contemplated. Restatement
%).
II. -.er and #cce'tance
-.ers (Common Law)
.4illingness to enter into a bargain./
Not an ofer: /o0es, ad1ertisements, ,ids, auctions.
56eror is the .master of o6er/ sets time limit
(if none, then .reasonable/ time limit).
Ofer terminated by (Restatement 36): re/ection (unless otherwise
stated7 Restatement 8!), counter+o.er (Restatement 89), la'se,
re1ocation (e6ective when received, but can be indirect7 Restatement
-8), deat" or inca'acit$ of eit"er 'art$.
2e/ection supersedes acceptance only when mailed before acceptance
and received before acceptance.
-.er !ade Irre1oca,le ,$ Performance or 2eliance
Unilateral Contracts: 56er temporarily irrevocable once
'erformance starts, provided it continues. Restatement -+.
Bilateral Contracts: 56er temporarily irrevocable once 're'arations
,egin, if /ustice re3uires (pre&acceptance reliance, sub&contractors,
etc.). Restatement !).
8
-'tion Contracts (Common Law)
t common law re3uired consideration.
Restatement re1uires only signed writing that recites 'a$ment, even
if consideration is never paid.
#cce'ted when recei1ed by o6eror. Restatement :8.
2%S)#)%!%() 45
(') n o6er is binding as an option contract if it
(a) is in writing and signed by the o6eror, recites a
purported consideration for the ma,ing of the
o6er, and proposes an e;change on fair
terms within a reasonable time7 or
(b) is made irrevocable by statute.
(%) n o6er which the o6eror should reasonably e;pect to
induce action or forbearance of a substantial character on the
part of the o6eree before acceptance and which does induce
such action or forbearance is binding as an option contract to
the e;tent necessary to avoid in<ustice.
6irm -.ers (UCC)
UCC 7+789
n o6er by a merchant to buy or sell goods in a signed
writing which by its terms gives assurance that it will be held
open is not revocable, for lac, of consideration, during the time
stated or if no time is stated for a reasonable time, but in no
event may such period of irrevocability e;ceed three months7
but any such term of assurance on a form supplied by the
o6eree must be separately signed by the o6eror.
-
#cce'tance
5nly by person intended to recei1e o6er.
5nly valid if acceptor ,nows of o6er 'rior to act.
=ossible by any reasona,le met"od if none specifed
(promise or performance).
26ective when properly dispatched (!ail,o& 2ule).
2;ecuted by full 'erformance of act in a unilateral contract
(acceptor must notif$ o6eror after performance).
>o acceptance by willful shipping of non+conforming goods.
>o acceptance by silence (unless by prior agreement, merchant
contacts, Restatement :9).
cceptance by recei1ing and 0ee'ing goods, ,nowing they must be
paid for.
:ualifed acce'tance is a counter&o6er. Restatement +9.
III. Consideration !a0ing a Contract Stic0
*argained+for %&c"ange
Contract re1uires a ,argain with mutual assent. Restatement ').
=romise to ma,e a gift bargain.
#ltruistic 'leasure bargain.
Detriment
Conditions detriment.
S"am, nominal consideration detriment.
Partial consideration = consideration.
Past consideration consideration.
Pre+e&isting dut$ consideration (at common law, UCC abolishes).
!odifcations governed by UCC %&%(9 need no consideration.
+
I;. Dis'utes
6actors
=ublic?@ndustry Good (Common Law).
Prior Conduct (Common Law).
Court may dump contract that is unconsciona,le. UCC %&8(%.
#cce'tance ;ariance !irror Image (Common Law)
cceptance valid only when it mirrors o6er, otherwise, it is a counter&
o6er, i.e. last s"ot.
#cce'tance ;ariance *attle of )"e 6orms (UCC)
Last s"ot is an acceptance, with additional terms added unless they
materiall$ alter the bargain or have been ot"erwise ,arred.
UCC 7+785
(') defnite and seasonable e;pression of acceptance or a
written confrmation which is sent within a reasonable time
operates as an acceptance even though it states terms
additional to or di6erent from those o6ered or agreed upon,
unless acceptance is e;pressly made conditional on assent to
the additional or di6erent terms.
(%) Ahe additional terms are to be construed as proposals for
addition to the contract. Between merchants such terms
become part of the contract unless#
(a) the o6er e;pressly limits acceptance to the terms of the
o6er.
(b) they materially alter it7 or
(c)notifcation of ob<ection to them has already been given
or is given within a reasonable time after notice of them
is received.
(8) Conduct by both parties which recogniCes the e;istence of a
contract is suDcient to establish a contract for sale although
the writings of the parties do not otherwise establish a
contract. @n such case the terms of the particular contract
consist of those terms on which the writings of the parties
agree, together with any supplementary terms incorporated
under any other provisions of this ct.
:
Statute of 6rauds (Common Law< UCC)
lmost always includes wills, suret$s"i' (answering the de,t of
another), marriage, land contracts, contracts that cannot be
performed within one $ear of formation.
Under UCC, contracts for sale of goods priced at =988 or more.
UCC 7+78>
(') 2;cept as otherwise provided in this section a contract for
sale of goods for the price of E+(( or more is not enforceable
by way of action or defense unless there is some writing
suDcient to indicate that a contract for sale has been made
between the parties and signed by the party against whom
enforcement is sought or by his authoriCed agent or bro,er.
writing is not insuDcient because it omits or incorrectly states
a term agreed upon but the contract is not enforceable under
this paragraph beyond the 1uantity of goods shown in such
writing.
(%) Between merchants if within a reasonable time a writing in
confrmation of the contract and suDcient against the sender is
received and the party receiving it has reason to ,now its
contents, it satisfes the re1uirements of subsection (') against
such party unless written notice of ob<ection to its contents is
given within '( days after it is received.
(8) contract which does not satisfy the re1uirements of
subsection (') but which is valid in other respects is
enforceable
(a) if the goods are to be specially manufactured for the
buyer and are not suitable for sale to others in the
ordinary course of the sellerFs business and the
seller, before notice of repudiation is
received and under circumstances which reasonably
indicate that the goods are for the buyer,
has made either a substantial beginning of their
manufacture or commitments for their
procurement7 or
(b) if the party against whom enforcement is sought admits
in his pleading, testimony or otherwise in court that a contract
for sale was made, but the contract is not enforceable
under this provision beyond the 1uantity of
goods admitted7 or
(c)with respect to goods for which payment has been made
and accepted or which have been received and
accepted ($ec %& :(:).
)
Inter'retation
@mportance of 'rimar$ 'ur'ose.
ll terms interpreted so as to be reasona,le, lawful, and e.ecti1e.
Aerms will be construed against the drafter.
>egotiated terms su'ersede standard terms.
UCC ga'+fller provisions may apply.
Parol %1idence 2ule (Common Law< UCC 7+787)
Getermination mostly made by /udge.
Awo schools of thought#
'. 6our Corners (4illiston)# nswer found in document alone,
especially if merger clause e;ists.
%. 3le;ible (Cor,in) test# ll available evidence.
2%S)#)%!%() 7>8
(') completely integrated agreement is an integrated
agreement adopted by the parties as a complete and e;clusive
statement of the terms of the agreement.
(%) partially integrated agreement is an integrated
agreement other than a completely integrated agreement.
(8) 4hether an agreement is completely or partially integrated
is to be determined by the court as a 1uestion preliminary to
the determination of a 1uestion of interpretation or to
application of the parol evidence rule.
Giscussions or writings prior to signed agreement are generally
inadmissible#
'. Partial integration? >o contradictory evidence may be
admissible.
%. Com'lete ()otal) Integration? >o supplemental evidence
admissible.
Inapplicable to:
greements made after the e;ecution of the writing.
2vidence o6ered to show that e6ectiveness of the agreement was
sub<ect to an oral condition precedent.
2vidence o6ered to show that the agreement is invalid for any reason,
such as fraud, duress, undue in@uence, inca'acit$, mista0e, or
illegalit$.
2vidence o6ered to establish a right to an e3uita,le remed$, such
as .reformation/ of the contract.
2vidence o6ered to establish a collateral agreement between the
parities.
!
UCC %&%(% is more @e&i,le than the common law approach7 it states
that .consistent additional terms/ should be e;cluded only where, in the
courtFs view, they .certainly would have been included/ in the document.
UCC 7+787
Aerms with respect to which the confrmatory memoranda of
the parties agree or which are otherwise set forth in a writing
intended by the parties as a fnal e;pression of their agreement
with respect to such terms as are included therein may not be
contradicted by evidence of any prior agreement or of a
contemporaneous oral agreement but may be e;plained or
supplemented
(a) by course of dealing or usage of trade ($ection '&%(+) or by
course of performance ($ection %&%(!)7 and
(b) by evidence of consistent additional terms unless the court
fnds the writing to have been intended also as a complete
and e;clusive statement of the terms of the agreement.
9
;. -,ligations A"ere (o Contract %&ists
Generall$ need no consideration (but may fall under Statute of
6rauds)#
Suret$s"i's ($tatute of 3rauds applies).
!odifcations.
=romises to pay unenforcea,le de,ts (Restatement !%, !8).
2estitution Un/ust %nric"ment (Common Law)
I( G%(%2#L (B-C( A. A#D%< #2)ICL%< DEC< P. >FG.)
5ne who, without intent to act gratuitously, confers a
measurable beneft upon another, is entitled to restitution, if he
a6ords the other an opportunity to decline the beneft or else
has a reasonable e;cuse for failing to do so. @f the other
refuses to receive the beneft, he is not re1uired to ma,e
restitution unless the actor <ustifably performs for the other a
duty imposed upon him by law.
2%SCU% -6 P%2S-(S (2%S). -6 2%S)I)U)I-( >>G< DEC< P.
>F7.)
person who has supplied things or services to another,
although acting without the otherFs ,nowledge or consent, is
entitled to restitution therefor from the other if
(a) he acted unoDciously and with intent to charge
therefor, and
(b) the things or services were necessary to prevent the
other from su6ering serious bodily harm or pain, and
(c)the person supplying them had no reason to ,now that
the other would not consent to receiving them, if
mentally competent7 and
(d) it was impossible for the other to give consent or,
because of e;treme youth or mental
impairment, the otherFs consent would have
been immaterial.
'(
P2%S%2;#)I-( -6 P2-P%2)H (2S). >>5< DEC< P. >FF.)
(') person who, although acting without the otherFs
,nowledge or consent, has preserved things belonging to
another from damage or destruction, is entitled to restitution
for services rendered or e;penditures incurred therein, if
(a) he was in lawful possession or custody of the things or if he
lawfully too, possession thereof, and the services or e;penses
were not made necessary by his breach of duty to the other,
and
(b) it was reasonably necessary that the services should be
rendered or the e;penditures incurred before it was possible to
communicate with the owner by reasonable means, and
(c) he had no reason to believe that the owner did not desire
him so to act, and
(d) he intended to charge for such services or to retain the
things as his own if the identity of the owner were not
discovered or if the owner should disclaim, and
(e) the things have been accepted by the owner. . . .
Promissor$ 2estitution Promise to 'a$ for ,enefts recei1ed
(Common Law)
2%S)#)%!%() 4G
(') promise made in recognition of a beneft previously
received by the promisor from the promisee is binding to the
e;tent necessary to prevent in<ustice.
(%) promise is not binding under $ubsection (')
(a) if the promisee conferred the beneft as a gift or for
other reasons the promisor has not been un<ustly
enriched7 or
(b) to the e;tent that its value is disproportionate to the
beneft.
''
Promissor$ %sto''el Protection of Un,argained+for 2eliance
(Common Law)
Ahree elements#
(a) Promise.
(b) Detrimental reliance.
(c) In/ustice to be avoided.
Reliance must be foreseea,le.
2%S)#)%!%() I8
(') promise which the promisor should reasonably e;pect to
induce action or forbearance on the part of the promisee or a
third person and which does induce such action or forbearance
is binding if in<ustice can be avoided only be enforcement of
the promise. Ahe remedy granted for breach may be limited as
<ustice re1uires.
(%) charitable subscription or a marriage settlement is
binding under $ubsection (') without proof that the promise
induced action or forbearance.