Contracts Outline

CONTRACTS

Professor Santarosa

Winter 2014

OVERVIEW (CONTRACTS FROM 5000 FEET):

*From this point on Contract = K*

Q1: Does a K exist? (Must also consider what law applies as a preliminary question)

Q1.1: Is there a mainfestation of mutual assent?

Q1.1.1: Was there an offer?

Q1.1.2: Was the offer accepted before any revocation?

Q1.1.3: Do the terms of both match?

Q1.2: Is there consideration or a substitute for consideration?

If there is no K, does P have a claim based on an alternative theory of obligation?

· Quasi-contract (QK) or unjust-enrichment?

· Promissory Estoppel?

· Pre-Contractual Obligation?

Q2: If yes, does D have a defense to formation?

Q2.1: Was there a unilateral or mutual mistake?

Q2.2: Was there misrepresentation/failure to disclose?

Q2.3: Does the contract violate the Statute of Frauds (SoF)?

Q2.4: Was the contract formed under Duress?

Q2.5: Is the contract unconscionable?

Q2.6: Is the contract void for indefiniteness?

Q3: If no, did D adequately perform the K?

Q3.1: How should the K be interpreted? [Parol Evidence Rule (PER), gap fillers, modifications)

Q4: If no, was there a condition that limited D’s obligation?

Q4.1: If yes, was the condition waived?

Q5: If no condition (or if condition waived), does D have a defense for non-performance?

Q5.1: Was performance impossible/impracticable?

Q5.2: Was there frustration of purpose?

Q6: If not, what is the appropriate amount and type of remedy?

Q6.1: Damages?

Q6.1.1: Expectation Damages?

Q6.1.2: Reliance Damages?

Q6.1.3: Restitution?

Q6.2: Specific Performance?

Q6.3: Any defenses to damages? (Duty to Mitigate, Reasonable Certainty, Foreseeability)

I. FORMATION OF A CONTRACT

A. General Principles

What is a K?

K = Mutual Assent + Consideration (or Substitute)

Contracts is unique among areas of law because it is the law of chosen obligations, rather than societally imposed obligations. One is not bound to a contract unless one chooses to be at formation.

· K = private law between the parties, can be very informal

· A K is nothing more than “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 as a duty.” R§1

Although there are some moral overtones in some aspects of contract law, “promise” is not meant in the moral sense of the word:

R§2: “A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.”

· Comment B: “The phrase manifestation of intention adopts an external or objective standard for interpreting conduct; it means the external expression of intention as opposed to an undisclosed intention. A promisor manifests an intention if he believes or has reason to believe that the promisee will infer that intention.” (Generally reasonable person, unless should know promisee special)

· Comment E: Words of promise which make performance by the promisor entirely optional no matter what may happen, or whatever course of conduct he may choose, are not a promise (Illusory promises).

R§4: “A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.”

Need not be an oral statement, nor use any special words. K = the promise, not the writing.

Sources of K law

Classic CL (CCL): Developed by courts over time, has roots in CL of England, the usual. Generally much more strictly rule-based, gives great weight to small errors, etc. Has been heavily influenced by other states, ALI restatements, so not in force in most jurisdictions.

Restatement (Second): Restatement is modern CL, this is where the old common law has developed to. Usually somewhat normative, especially this one. Original Restatement in 1932, Second in 1981.

Uniform Commercial Code (UCC): UCC applies ONLY to the sale of goods. Much more liberal than CCL or R, but has influenced them in some ways. Adopted in 49 states, but no state has adopted the 2003 amendments. First put out in 1958. Notable for (1) distinguishing merchant/non-merchant at times; (2) more open to custom of trades, (3) broader language.

Important UCC definitions:

(1) “Merchant” (UCC § 2-104): “a person 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 to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skills.”

(2) “Between Merchants” (UCC §2-104): “in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants.”

(3) “Goods” (UCC § 2-105): “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities and things in action. ‘Goods’ also includes the unborn young of animals and growing crops and other identified things attached to reality as described in the section on goods to be severed from reality.”

a. Must be both existing and identified, future goods = contract to sell (§2-105(2))

Default v. Mandatory Rules

Because K law is private law between the parties, most of the black letter law in this area is not mandatory. IF the parties contract around them, they have no effect; but this is not the case with all black letter contract law. Distinguish between:

Default Rules: a gap-filling measure applying only where the K has not spoken (i.e. UCC §2-206(1) allowing acceptance by any reasonable medium)

AND

Mandatory Rules: rules which cannot be contracted around for policy/statutory reasons (i.e. capacity or SoF)

Most rules in K are default rules, not mandatory rules.

Policy: Default Rules are more in line with freedom of contract ideals, Mandatory Rules are more in line with an ethical view of contracts (incentivize ethics, unconscionability, paternalism)