CONTRACTS I
Chapter I
SOURCES & DEFINITIONS of CONTRACT LAW
I. What is a Contract?
A. Promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty.
B. Elements of a K
1. Mutual Assent (Offer & Acceptance)
2. Consideration: Bargained for exchange
3. Capacity
II. 2 Main Questions to ask.
1. Does the UCC apply?
2. Is there a K?
III. Sources of Contract Law
A. Common Law
1. Based on case law and stare decisis (precedent).
2. Applies when the UCC does not apply, or there is a gap in the UCC.
B. Restatement
1. Persuasive legal authority written by American Law Institute.
2. No legal authority unless it has been used and cited in an opinion.
C. Uniform Commercial Code
1. Governs the transactions for the Sale of Goods.
2. When there is a conflict between common law and UCC, UCC will replace common law.
IV. UCC Definitions
A. Goods
1. A “good” is any tangible thing that is moveable. In addition to manufactured products, “goods” include:
· growing crops or timber, unborn young of animals and other identified things attached to land (other than minerals or the like or structures), regardless of who severs them from the land provided that they can be removed without causing material harm to the land.
· currency exchanged as a commodity (as opposed to the medium of payment for a good).
· minerals or the like or a structure or its materials to be removed from realty that are to be severed by the seller.
2. “Goods” do not encompass:
· intangible rights such as intellectual property
· investment securities
· money which is the medium of payment for goods
· minerals or the like or a structure or its materials to be removed from realty that are to be severed by the buyer
B. Sale
1. Transfer of title for a price
2. Contracts that involve both goods and services must be evaluated to see which constitutes the primary purpose of the contract, with the secondary purpose being treated as incidental.
3. Predominant Factor Test (Common Law)
a. In the predominant factor approach, the whole transaction is looked at to determine whether its predominant purpose was the sale of goods or the provision of service. In looking at the transaction, the following are examined:
i. The language of the parties’ K
ii. Nature of the business of the supplier of the goods & services
iii. The reason the parties entered into the K, and
iv. The respective amounts charged under the K for goods and for services
C. Merchant
1. A “merchant” is one “who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill particular to the practices or goods involved in the transaction” or who employs an agent or broker in such occupation.
D. Good Faith
1. Every contract for the sale of goods imposes an obligation of good faith dealing on all parties in its performance and enforcement.
2. “Good faith” is defined as “honesty in fact in the conduct or transaction concerned.”
3. Merchants are subject to an additional good faith standard, which requires “honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.”
E. Reasonableness
1. Depends on the nature, purpose and circumstances of the action.
F. Seasonably
1. Taken at or within the time agreed, or if no limit is agreed, at or within a reasonable time.
G. Signed
1. Includes any symbol executed or adopted with present intention to adopt or accept a writing.
H. Writing
1. Included printing, typewriting, or any other intentional reduction to tangible form.
V. UCC Gap Fillers
1. Price
2. Quantity
3. Delivery
4. Time
Chapter 2
CONTRACT FORMATION
I. Mutual Assent
A. Manifestation of Mutual Assent
1. Contract formation requires mutual assent to the same terms by the parties, generally manifested by an offer and acceptance.
2. Current law favors an objective standard for determining a party’s intent to be contractually bound.
3. Meeting of the minds: Facts are undisputed
B. Conduct as Manifestation of Assent
1. May be made wholly or partly by written or spoken words or by other acts or by failure to act.
2. The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
3. The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake or other invalidating cause.
· Lucy v. Zehmer
· Rule: You must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts.
· Reasoning: All that matters is whether or not Zehmer’s words or actions could make a reasonable person, such as Lucy, think he was serious. Mr. Lucy thought that Zehmer was serious and he acted on it.
C. Duty to Read
· James v. McDonald
· Rule: A party that had the opportunity to read the contract, but did not, is bound by the contract terms.
