THE LAW OF CONTRACTS ● COMMON LAW ● ● UCC ● Services, Real Estate, Sales of Goods & Leases of Goods Governing Law Insurance, Employment, (Common Law subordinate to UCC; UCC Other not governed by statute subordinate to terms specified in contract) Elements of a Contract AGREEMENT: OFFERS; ACCEPTANCE OR TERMINATION DETERMINATION OF TYPE OF CONTRACT & PARTIES AGREEMENT Sale of Goods Lease of Goods OFFER MADE Consumers UCC Art. 2; CISG (Int’l) UCC Art. 2A Offer : Acceptance : YES : Serious intent Unequivocal ● Timely (mailbox rule) Offer is Detrimental Reliance: Clear & definite terms Silence : knowing accept. / prior dealing Merchants either : (1) Deal Finance Lease: Consumer Lease req: Irrevocable? - Promissory Estoppel Communicated to offeree Communication (if bilateral) in type of goods involved in lessor buys from (1) Lessor who regularly - Partial Performance transaction, (2) Represents supplier & leases to engages in leasing/ YES : CONSIDERATION CAPACITY self as knowledgeable, or lessee; obligations selling; (2) Personal/ Option & No (3) Employs a merchant as irrevocable for family lessee; (3) Total RE Option Legally sufficient value Minors Intoxication a broker lessee payments < $25K Contracts Offer Revoked Promise to do sth one has no prior Contract voidable Voidable if commitment to do (“disaffirmance”) person could not Offer Terminated by Law : Performance of an action one is not Except: marriage, comprehend Death of Party / Destruction of Prop. AGREEMENT: OFFER, TERMS, ACCEPTANCE obligated to undertake necessaries , age legal conseq. Forbearance (refrain from an action that misrepresentation May disaffirm or Offer Rejected No one has a legal right to do) May ratify upon ratify w/in reas. reach age of maj. time after sober Offer (formal or informal) Irrevocable? Offer Terminated by Law : Lapse of Time Bargained-for Exchange Mental Incompetence Results of Terms Left Open Offer Revoked Must be an exchange, not a gift Void if prev ruled incomp by court Offer Terminated by Law : NO: past consid., illusory promises Reasonable price fixed by Voidable if incomp @ time formed Price YES. UCC: merchant’s Supervening Illegality parties (or by court) Valid if comp @ time contract formed written & signed firm Exceptions to Consideration Req. offer; CISG: any offer Offer Accepted Detrimental reliance / P. Estop. LEGALITY Price (unfixed by Other pty. sets reasonable fault of party) price, or voidable reasonably relied on. Counter-offer Prom. to pay debt barred by S of L By unauthorized By authorized Charitable contribution Proper form required for formal contracts mirror-image Due at time & place buyer Terminated means means Payment rule applies rec’s goods by law Consideration in Settlements Contrary to Statute Contrary to Pub. Pol. Pickup @ seller’s business / Accord & Satis. (if amt is disputed) Illegal : crimes, Torts, restraint of Delivery/ home; reasonable time Rejected Release (contract to avoid a claim) usury; trade, exculpatory, timeframe allocated for performance. CONSIDERATION, LEGALITY, CAPACITY Covenant Not to Sue (substitutes a Restricted : unconscionable FRAUD, CONSENT & MISTAKES contract for some other claim; does not gambling, licensing, (proced. / subst.), Until either party cancels Contract term Requirements met for bar future collection if breached) Sundays discriminatory w/ reasonable notification Counter Offer No Consideration, Legality, Materially diff. or Seller deterines and Capacity? Shipment conditional (no Categories of Contracts arrangements Yes mirror-image rule) Assortment of Buyer discretion BILATERAL : EXPRESS : goods Offer Accepted Legally Mistakes YES : A promise for a promise Formed by words Usually impossible to any reasonable means Prohibited of Material YES : Bilateral Unilateral UNILATERAL : IMPLIED IN FACT : Quantity determine unless output or Contracts Fact? A promise for an act; irrevocable once Formed at least in part by parties’ conduct requirements contract By shipment of performance has begun non-conforming Minors and goods Intoxicated No FORMAL : Req’s for Implied in Fact: Parties Requires special form P furnished property/service to D; By beginning With non-material changes; By shipment of (ex: Cs under seal; letters of credit) P expected payment & D knew or should performance no objection w/in 10 days conforming goods Fraud, Duress, INFORMAL : have known payment was expected; Voidable contract is No Undue Influence, or No special form D had opportunity to reject and did not avoided by innocent party? Unconscionability? Enforceability CONSIDERATION, LEGALITY, CAPACITY, FRAUD, CONSENT, Yes See Common Law Processes Yes MISTAKES, E-TRANSACTIONS No Valid Contracts Void Contracts Contract is void TIME OF IDENTIFICATION OF GOODS Enforceable Voidable Unenforceable Valid, (all required (optionally avoidable Unenforceable ID at time shipped, Voidable contract is (legal defense) Other Future goods Yes Enforceable elements) by a party) (no contract) marked, or designated avoided by innocent party? Contract ID at time of conception Animals Statute of Frauds (must be in/evidenced by writing or else unenforceable): ID at time planted; if 12+ months, time crops begin to grow Crops Interests in Land : RE transactions, options, leases, mortgages, things permanently attached APPLICABLE LAW FOR ELECTRONIC Electronic One Year Rule : Performance is objectively impossible, or not contemplated by the parties, to ID at time of separation & Goods part of TRANSACTIONS: UETA (1999) E-SIGN ACT (2000) transaction? Non-fungible be completed within one year of the day after contract signing designation a larger mass Collateral/Secondary Promises : exception if “primary purpose” is for benefit of guarantor Fungible Yes State has enacted unmodified UETA? Yes Marriage : voluntary promises of marriage, pre/post-nups (usually consideration is required) Goods are in ID on contract formation UCC : Under UCC, sales contracts $500+ / leases $1000+ must state at least the quantity existence Mods consistent E-SIGN rules Goods Identified No No No term. UCC exceptions: specially-manufactured goods; admissions; partial performance. w/ E-SIGN? govern Yes Interpretation E-contract follows state law PASSAGE OF TITLE / LEASEHOLD; Other Rules (when meaning in the document isn’t clear) Seller’s title Plain Meaning Rule TRANSFER OF RISK Contract is interpreted as a whole Seller holds title? Yes was properly Contract is enforced No Negotiated terms > standardized terms obtained? PERFORMANCE & DISCHARGE according to what it says Specific language > general ● W ritten terms > pre-printed Good faith purchaser? No Conditions precedent/ (“face of the instrument”) Contract is canceled No Ambiguity punishes author ● T rade usage/prior dealing subsequent are met? Title (or leasehold) can Void title Yes Third Party Rights pass to buyer (or lessor) Dmgs for diff. b/t Substantial Complete Shipment actual & contracted Performance or Yes Performance Rights can be assigned unless: Duties can be delegated unless: contract (default) performance minor breach Prohib. by statute or (generally) the contract Personal services / special trust involved Title documentation No movement Destination Mutual rescission Personal services ● Assignment significantly Performance will vary materially Novation required? of goods contract changes risks/duties of obligor Prohibited by contract Substitute Title passes Accord & upon delivery Agreement Satisfaction Discharge by Intended Beneficiaries have enforceable legal rights upon vesting. Vesting occurs (unless No Yes Title passes unless otherwise Operation of Law contract specifies otherwise) when (1) 3rd party changes position in justifiable reliance; (2) 3rd when seller agreed party sues on the promise made; (3) 3rd party gives consent on the promise. tenders Title passes on ID Title passes Incidental Beneficiaries do not have enforceable legal rights. goods at of goods (or on upon delivery BREACH & REMEDIES designated Risk transfer on Material Breach occurs contract formation) of documents Mistakes & Fraud location delivery to carrier Fraudulent Misrepresentation Undue Influence Seller / lessor is a Risk transfer Risk transfer on tender Misrepresentation of material fact Clear & convincing evidence that the merchant? on delivery of at specified loc. Damages Waiver of Breach Equitable Remedies Intent to deceive transaction “induced domination” of a documents Justifiable reliance by other party weaker party If injury is proven, damages = represented Presumed in relationships of trust & Compensatory Construction Yes Risk transfer on receipt value less price paid (+ punitive damages) confidence & must be rebutted Owner Breach Duress Mistakes: Contract remains enforceable No Risk transfer on tender of deliv. Sale of Sale of Threatened by wrongful/illegal act unless mistake is Bilateral (both parties Land Goods Before Economic duress if party exacting the made mistake) & mistake of material fact; During construction price also created the need OR gross/obvious math error. construction UCC RIGHTS & DUTIES Buyer begins Breach Unconscionability (often: fine print or adhesion contracts): Parties have substantially unequal Duties & Rights of Seller / Lessor Duties & Rights of Specific Buyer / Lessee Profits + costs bargaining positions, and enforcement of the term would be manifestly unfair/oppressive. Conforming Goods ● Tender of Deliv. performance; if Profits incurred Shipment Contract: Facilitate deliv. with carrier; provide Payment at land is already Lost buyer nec. docs to get possession; notification of designated