Contract Law

Jody Blanke Professor of Computer Information Systems and Law

Contract Law As Private Law

Willing parties can agree to do most anything Freedom of contract Meeting of the minds

Private Law

Contract between Major League Baseball and the Players Association Collective Bargaining Agreement (241 page
free agent salary cap luxury tax

NHL (a league that used to play ice hockey in Canada and the U.S.)

Uniform Commercial Code

Poster child of uniform laws Adopted in 49 states Very successful Facilitates the ease of doing business First place to look for the law
then, other state statutes then, state case (common) law safety net

Basic Requirements
An agreement between the parties Consideration Capacity Legality

Agreement The Offer

Offeror must have intention to be bound by offer
e.g., kick the tire

Terms must be reasonably definite and certain

can be written, oral or implied can come from prior dealings or usage of trade

Offer must be communicated to offeree

e.g., reward for lost dog

Figurative Death of an Offer

Natural causes lapse of time Suicide revocation Murder rejection
Counteroffer = rejection + offer

Execution by operation of law

change in law terminates offer

Literal Death of An Offer

The offeror dies The offeree dies Destruction of subject matter

Acceptance
At common law mirror image rule UCC more relaxed (and reasonable)
battle of the forms

Generally effective upon receipt

exception mailbox rule

Bilateral and Unilateral Contracts

Bilateral a promise for a promise
e.g., Joe promises to paint Bills house and Bill promises to pay Joe $1000

Unilateral a promise for an act

e.g., Susan promises to pay $500 to the first person who scales the outside of the Business and Education Building performance of the act is acceptance

Consideration
Each party must provide something of value
Money, property, services, forebearance e.g., Hamer v. Sidway the rich uncle case e.g., Jennings v. KSCS

Courts will not examine the adequacy of the consideration

Capacity
Age law protects minors
Voidable contract Exception for necessaries

Mental competency
Void contract Voidable contract

Intoxication

Legality
Contracts must have a legal purpose
cannot take out a contract for that noisy neighbor cannot purchase a gram of cocaine gambling?
e.g., Durado Beach Hotel v. Jernigan

Genuiness of Assent
Duress gun to the head Undue Influence Fraud Mistake
Unilateral generally does not excuse performance exception if nonmistaken party knew of the mistake Mutual generally does excuse performance no meeting of the minds

Third-Party Rights
Each party receives certain rights or benefits in a contract Each party undertakes certain duties or obligations Generally, rights can be assigned to third parties Generally, duties can be delegated to third parties
exception when performance depends upon personal skills

Statute of Frauds
An oral contract is as legally valid as a written contract unless the law requires it to be in writing as good as
if executed before 100 clergy people of all faiths willing to come to court and testify

Must Be In Writing
Contract to transfer an interest in real property Contract that cannot be performed within 1 year Contract to pay the debts of another Contract made in contemplation of marriage
dowry agreement prenuptial agreement

Contract for the sale of goods greater than $500

UCC drafters recommend increase to $5,000

Parol Evidence Rule

Court will not permit evidence of prior or contemporaneous oral statements if there is a complete written agreement
exception ambiguities

Morals of the story

read the contract

get it in writing

Integration Clause
I have read the above agreement and understand that it represents the entire agreement between the parties. Morals of the story
read the contract

get it in writing

Standard Form Contracts

Read them Modify them
and get written approval from authorized representative

Use attachments if necessary

e.g., letters, memos, specifications

Ambiguities interpreted against the drafter

Discharge of Contract
Discharge by performance Discharge by agreement Discharge by impossibility

Discharge by Agreement
Mutual rescission
key word mutual

Novation
new contract

Accord and satisfaction

Discharge by Impossibility
Objective impossibility
e.g., the car got hit by a meteorite

Subjective impossibility
Its impossible for me to go through with that contract Performance may be discharged by commercial impracticability e.g., school district milk case key was event reasonably foreseeable?

Remedies Money Damages

Compensatory damages
makes one whole under the contract provides the benefit of the bargain measure of damages is usually the difference between the value of the contract and the market value of what was actually received

Remedies Money Damages

Consequential damages
must be reasonably foreseeable e.g., Hadley v. Baxendale often disclaimed by contract

Punitive damages
rarely awarded for breach of contract

Nominal damages
e.g. Carol Burnett v. The Enquirer

Mitigation of Damages
Nonbreaching party has duty to lessen the amount of damages
e.g., wrongful discharge

Anticipatory repudiation
Duty to cover

Liquidated Damages
Actual amount of damages must be difficult to estimate Amount specified must be a reasonable estimate of those damages Must not be a penalty

Equitable Remedies
Injunction Quasi-Contract (Quantum Meruit) Specific Performance
generally available for unique goods or property not appropriate for personal services

Choice of Law/Forum
Written contracts often contain choice of law and choice of forum clauses These will generally be enforced as long as there is a connection to the state Some states may also require that the choices be fair

Promissory Estoppel
Last ditch remedy Four requirements (Restatement of Contracts 90)
A promise Justifiable reliance Foreseeability Injustice

e.g., Hoffman v. Red Owl Stores

Unconscionability
UCC remedy
The court would not be able to sleep at night The court can ignore or fix an unconscionable contract

Consumer remedy
e.g., Frostifresh v. Reynoso e.g., PEPCO v. Westinghouse

Covenants Not to Compete

May be related to sale of business
e.g., Joe the Baker

May be related to employment contract

California will not enforce such an agreement as an illegal restraint of trade Georgia will not blue pencil an agreement

Brenda Woods agrees not to work as an on-air news anchor in the Atlanta/Athens television market for 6 months

Covenants Not to Compete

Scope
agreement must specify what activity is to be limited

Geography
be careful of terms like Atlanta

Duration
e.g., 6 months, 1 year, 2 years

U.C.C. Article 2
Applies to sales of goods
Goods as opposed to services
Predominant factors test E.g., Sears washing machine

Sales as opposed to leases

Economic reality test Judicial extension of Article 2

U.C.C. Articles 2A and 2B

Article 2A
Applies to leases of goods

Article 2B
Was to have applied to licenses Became UCITA (Uniform Computer Information Transactions Act Adopted in only two states (Va. And Md.)