I. Legal meaning of “contract”
A. Definition of a contract
1. A promise or a 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. 2d § 1 (pg. 1)
B. Elements of a contract
A legally recognized contract MUST have (all elements)
1. An oral or written agreement between two or more persons
a. MUST be voluntary, consensual relationship
i. A contract is created ONLY because the parties, acting with free will and intent to be bound, reach agreement on the essential terms of their relationship
b. Does NOT have to be written UNLESS statute of frauds applies
i. MOST contracts are NOT covered by statute of frauds
c. Objective (NOT subject) test used to determine if agreement exists
i. Mutual agreement is tested by the parties’ apparent intent as shown by their overt acts and words
2. An exchange relationship
a. Very essence of contract is a reciprocal relationship in which each party gives up something to get something
i. Bargain has been reached leading to a reciprocal exchange for the betterment (real or perceived) of both parties
3. At least one promise
a. Promise MUST be (all elements)
i. Undertaking to act or refrain from acting in a specified way
ii. At some future time
iii. Express or implied (inferred from conduct or from circumstances of transaction)
iv. Can be one-sided (if one party exchanges instantaneous performance)
1. If at instance of contracting, both sides have outstanding promises = bilateral
2. If one of parties as fully performed at instant of contracting = unilateral
b. Difference between instantaneous exchange (executed exchange) and contract
i. Ex: Rocky sells kayak to Eddy as-is; Eddy hands Rocky $400 cash and takes away kayak
1. NO promises
2. Would have been contract if (at least one)
a. Check instead of cash (promise that back will pay Rocky)
b. Rocky had assured Eddy of kayak’s good condition (promise of future commitment should the kayak NOT be in that condition)
4. Legal recognition of enforceability
a. Contracting = private lawmaking by which persons create a personalized “statute” to govern their relationship
b. A contract has the attribute of any law if it is (all elements)
i. Recognized and enforced
ii. Through the compulsive power of the state
iii. Acting through its courts
1. Court MUST be competent
a. The court MUST be in a good position to make the determination about the enforceability of the contract
i. Ex: A court does NOT need to enforce a promise of anonymity between the press and a news source because the press has an interest in keeping such promises or their sources will run out
1. Cohen v. Cowles Media Co. (pg. 19; reporter promises to keep a source’s name anonymous and does NOT)
2. Contract law MUST be proper branch of law
a. MUST be the proper tool to remedy the dispute in question as opposed to tort law, legislature, etc.
c. Remedies available for breach of contract
i. Specific enforcement of promise
1. Used ONLY in exceptional situations
ii. Compensatory damages
1. If breaching party CANNOT pay à execution of assets
II. Fundamental policies and values of contract law
A. Freedom of contract
1. Power to enter contracts and to formulate the terms of the contractual relationship is regarded in our legal system as an exercise of individual autonomy—integral part of personal liberty
a. NO ONE may be bound in contract in the absence of that person’s assent
2. Guaranteed by Constitution
a. Due Process Clause—U.S. Const. amends. V and XIV
b. Contracts Clause—U.S. Const. art. 1 § 10
3. Contracts involve exchange of property—economic values in form on tangible or intangible property rights
a. Have power to use or dispose of them
4. Where contracts involve services, the right to perform or NOT to perform is protected by prohibition on involuntary servitude in Constitution
a. U.S. Const. amend. XIII
5. Pragmatic consideration
a. Economic intercourse is MOST efficient when its participants desire it and are free to bargain with each other
6. Freedom on contract is delimited by corresponding rights held by other persons and by the state’s legitimate interests in appropriate regulation
B. Morality of promise
1. An ethical and legal obligation to keep one’s contractual promises
a. The court may NOT be the appropriate place to enforce merely a moral obligation Cohen v. Cowles Media Co.
2. Contracts should be honored NOT ONLY because reliability is necessary to foster economic interaction, BUT simply because it is morally wrong to break them
C. Accountability for conduct and reliance
1. Objective appearance of assent is important due to evidentiary considerations
2. People should be held accountable for reasonably manifesting intent to contract
a. Other party should be entitled to rely on that manifestation of assent
3. Protecting reasonable reliance
a. Specific in that a person has a right to rely on undertakings that have been given
b. General in that contracts can be relied on in society
i. This “security of contracts” or “security of transactions” is indispensible to economic interaction
D. Social justice and the protection of the underdog
1. Modern law is sensitive to coercion, dishonesty, and lack of meaningful choice resulting from power imbalance
E. Fairness
1. In the contact of societal standards and expectations, the doctrines of good faith and unconscionability address issues of fairness
2. Judges and juries are sensitive to the equities of parties
a. Where mechanical a
for emotional disturbance will be EXCLUDED UNLESS breach also caused bodily harm or the contract or the breach is of such kind that serious emotional disturbance was a particularly likely result” Rest. 2d § 353 (pg. 23)
b. Rationale
i. If applied here, P made contract for safety; emotional harm = particularly likely result; court could decide contract was made for specific purpose of preventing emotional harm and allow damages
ii. As in Cohen, police should be self-regulating since if they do NOT keep a promise, sources will stop giving info
iii. Another remedy available à tort law has category for purely emotional distress harms
iv. Dissent: “When emotional security is the very object of the promised confidentiality” and there is a breach, the injured party should prevail on a claim when the concern was known to both parties”
SALES OF GOODS AND ARTICLE 2 OF THE UCC
IV. Overview of Article 2 of UCC
A. UCC overview
1. Hierarchy
a. Statutes (UCC if adopted) > common law > Rest.
2. Style
a. Legal realism
b. Law is means of achieving societal ends; therefore, it reflects how people actually act and gives effect to their reasonable expectations
c. Law should operate to facilitate transactions regarding sale of goods UCC § 1-102(1)
3. Purpose
a. Erase variation in commercial law among states which cause confusion and uncertainty in interstate commerce UCC § 1-102
B. Application of UCC
1. UCC Article 2 covers all transaction for the sale of goods other than securities (Article 9) and leases (Article 2A)
2. Applies to ANY party
3. NOT limited to merchants, although individual provisions may be
4. Comments NOT part of law
C. “Goods” defined
1. A “good” is ANY tangible thing that is movable UCC § 2-105, 106
a. In addition to manufactured products, goods include:
i. 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;
ii. 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 remov
