Select Page

Contracts
University of North Carolina School of Law
Weidemaier, W. Mark C.

Weidemaier, Contracts, Fall 2016

STEP ONE: UCC OR CL?

Rule: The ______ K is for _______ [goods/services], therefore it is governed by [the UCC/common law].

UCC is generally more friendly to buyers than sellers.
Goods (UCC 2-105) – all things movable at the time they are identified as the goods to be sold under the contract; most tangible things, does not apply real estate, services, or intangibles (patent)
Merchant (UCC 2-104) – one who regularly deals in goods of the kind sold or who otherwise by his profession holds himself out as having special knowledge of skills as to practices or goods involved (almost anyone in a business)

Common law – applies to all other contracts

Supplements UCC unless they conflict, then UCC displaces common law

Mixed contracts – (goods + services)

It’s either all UCC or all common law1`43
Test for which law to apply:

What is the nature of the contract? (Roberts, Sally “dominant factor test”)

What is the primary goal of the K? even if it has both

Is it really to sell goods or provide services?

What part of deal is more valuable?
How much time will be spent on services vs. goods?
How sophisticated is the service?
Does K contain typical sales language?
Can you use the goods without the services?
Think about the context of the K
Think about the industry the K was made in
What % of the K is for goods vs. for services?

Aka look at how work is allocated under K

Does the service have “independent value?”

If not, the K is for goods

If clear: test done

If ambiguous: What is the nature of the dispute? (Roberts)

What are the parties fighting over?
Case Summary: in Roberts, the nature of the dispute led court to think they were disputing a service, so common law applies.

STEP TWO: HAS A K BEEN MADE?

Rule: A contract is 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 (Rest. 1). An enforceable contract requires a manifestation of mutual assent and consideration (Rest. 17).

3 ways to categorize K’s:

Express v. Implied (in law and in fact)

Express – promise made explicitly in words
Implied in fact – promise made by conduct (Shaheen)

No words
handled the same way legally as an express contract

Implied in law –

No real promise (words or conduct)
Imposes a duty to pay for value of a benefit conferred on the D by the P
Created under the law of restitution to prevent an unjust enrichment

Void, voidable, and unenforceable promises

Voidable promise – can be enforced or voided at the party’s discretion (ex. a promise made under duress can be voided if the injured party chooses to raise that defense)
Void promise – a promise that is inherently automatically void and cannot be enforced by anyone (ex. promise to rob a bank)
Unenforceable promise – a promise that would otherwise be enforceable but is not due to something like statute of frauds

Bilateral/unilateral promises

Bilateral – exchange of mutual promises

Most are this type
You can start by performing or by mutual promise

Unilateral

Complete performance is the only manner of acceptance
Offeror promises to something in exchange for completion of the act

Was there a manifestation of assent?

Rule: Manifestation of assent is typically, but not always, satisfied by an offer an acceptance, and it does not matter whether the exact moment of formation can be determined (R22). Assent can also be satisfied by mutual promises, or by conduct if each party begins or completes performance (R18). Conduct may manifest assent despite a the party not actually wanting to assent, if a reasonable person would objectively interpret the party’s words or conduct as manifesting assent to the agreement, and the party knows his conduct may be viewed as assent (Hawkins, Lucy, R19).

The inquiry, then, is would a reasonable person in the promisee’s position believe based on the other party’s words and conduct that the other party intended to be bound (regardless of their subjective intent), and if so, did the promisee so believe?

2 Cases:

LUCY

Lucy v. Zehmer – D offered to sell his farm to P and signed a paper saying he would; this led P to secure the funds to buy the property and hire a lawyer to handle the transaction, but then D claimed it was just a joke

Doesn’t matter whether a party actually consents – the fact that P reasonably believed there was a contract based on D’s conduct is enough
OBJECTIVE THEORY OF ASSENT – would a reasonable person interpret the words or conduct as manifesting to an agreement?

HAWKINS

Hawkins v. McGee – doctor led patient to believe he was guaranteeing a successful outcome in surgery; even if he did not mean to make commitment, the fact that his conduct reasonably led P to believe he did was enough

Was there a valid offer?

Rule: An offer is promise made by one party to another to act or refrain from

psico)

Note: subjective intent does not matter (Lucy)

Was formal offer language used?

RULE: Formal language is not required, but will make it more likely that an offer will be viewed as assent. Without formal language, an communication may be treated instead as an invitation to negotiate (Harsh).

Did the parties intend not to be bound until there was a final writing memorializing the agreement?

Rule: If parties intended the writing to serve as a formal memorial of their prior agreement, they can be bound before the writing is signed. On the other hand, if it is understood between the parties that no obligation shall exist until the agreement has been reduced to a signed writing, then neither party is bound until the writing is signed (R27).

ANALYZE TEXACO FACTORS!!!

Was there explicit language that only a final written agreement would be binding?

If so, persuasive but not conclusive.

Was there any partial performance?

Partial performance signals agreement to contract terms
Did parties act as if it was binding? (like press release in Texaco)

Had all essential elements been agreed upon?

How significant were the missing terms? As great as Empro?
What portion of the deal had not yet been agreed on?
Would parties testify they wouldn’t have made deal without additional terms being agreed on (although this might be self serving)?

Was the agreement of such a magnitude that a written agreement would be expected?

3 Ways a court could interpret current agreement when later written memorial contemplated:

No agreement – unenforceable

Like in Empro, too many key terms missing for a reasonable person to think there was an agreement

Agreement – binding

Like Texaco, you agreed on the fundamental terms and the remaining smaller terms can be filled in using default rules

Agreement – but unenforceable

Missing key terms

Party may still get reliance damages through PE

Could be seen as a promise to finish negotiating in good faith (failed Empro argument)