A. Sovereign – Should federal or state law apply?
B. Geographic – Which state’s laws should apply?
C. Subject Matter – Common Law or UCC?
1. Article II of the Uniform Commercial Code (UCC): A statute that governs the sale of goods.
i. Goal: The goal of the UCC is to codify, clarify, reform, modernize, and unify the laws of commercial transactions.
ii. A Good: Something that is tangible and movable.
iii. All or Nothing Test: Determine which part of the contract is more important, and then proceed to apply that law to the entire contract.
2. Common Law
i. For anything else that does not fall under the sale of goods category. Common law is based on case law.
3. Restatement 2d of Contracts
i. The Restatement is not law, no state legislature has enacted the Restatement, no judge has adopted in opinion the entire Restatement.
ii. The work of a bunch of well intended private citizens who have no official status.
iii. Prior to the Restatement, individual transactions involving contracts were separately governed. The theme of the Restatement was to purpose a single body of law governing all manner of contracts.
iv. There are still general categories of contracts that are identifiable:
a. contracts for the sale of goods,
b. real estate transactions,
c. construction contracts,
d. employment agreements,
e. family contracts.
v. The Restatement 2d of Contracts does two different things:
a. Sometimes simply restates the law.
b. In other instances, the restatement of contracts is not telling you what the law now is, but what the people at the ALR think the law should be.
II. Contract Formation
1. A promise is an unequivocal assertion that something will or will not be done.
2. A performance is an act or omission, as distinguished from an assurance or assertion that something will or will not be done.
3. 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 a duty. Restatement 2d §1
i. Bilateral Contracts: A promise given in exchange for promise of performance.
a. Contract is formed when a return promise is made by the promisee.
b. Creates conditions. When a promisor asks for a promise in return, at some point, the promisor will want the promise performed.
1. Offeror gets a commitment in advance of performance.
2. Offeree is responsible to perform for any deficiencies in performance. Once the offeree accepts and makes that commitment, the offeror can bind himself to others on the basis of the offeree’s commitment to him.
1. In bilateral contract, the offeror is bound upon the offeree’s making a promise before he gets the performance sought.
ii. Unilateral Contracts: A promise given in exchange for a performance in return.
a. Contract is formed when the performance is fully performed.
1. The offeror is not bound by his promise (no contract formed) until acceptance, namely FULL performance.
1. The offeree is not bound to perform. Might begin performance then quit without liability, as no contract is formed.
i. This leaves matters up in the air for the offeror, who takes risks on committing himself to others based on the prospect of the offeree’s full performance.
4. Void v. Voidable Contracts
i. A void contract is one that produces no duty to perform (lacks consideration), such that it wasn’t really a contract in the first place. Neither party is bound.
ii. A voidable contract is a valid contract where one or more of the parties can ratify or avoid. At least one party is bound.
5. Disaffirmance is where, upon breach, the victim may either sue on the contract for expectation or reliance damages, or may elect to act as if no contract exists, and to sue for restitution under a theory of unjust enrichment. Disaffirmance is the plaintiff’s formal abandonment of contract in order to to recover under restitution.
B. Mutual Assent
1. Underlying Theories Courts use an objective approach, not a subjective approach. However, courts may consider the subjective intent of the parties. Only mutual assent to the essential terms is required. Not all of the terms.
i. The Subjective and Ob
hether or not an agreement is sufficiently definite, a court may piece together terms from other sources, such as preliminary negotiations, prior communications, and external sources.
2. A contract may be indefinite at the time of formation, but will be enforceable provided that the terms are sufficiently definite at the time that performance is due.
3. If the parties intend to conclude a contract for the sale of goods where the price is not settled, the price is a reasonable price at the time of delivery if the price is to be fixed in terms of an agreed standard set by a third person or agency and is not so set.
b. Policy: If all prices were considered acceptable offers than there could be no bargaining. In order for a court to determine whether or not a contract has been broken, it must first know with some certainty what the terms of the contract are, provides a basis for determining breach. The promisee’s expectation interest is to be protected, in order to give an appropriate remedy.
i. Varney v. Ditmars
v. Context of the Communication
a. Price Lists
1. General Rule: Price lists are generally not offers.
2. Policy: If all prices were considered acceptable offers than there could be no bargaining. Sellers would be unable to test the market to determine the price they might seek.
i. Thus, language like “lowest price,” “not less than,” or “would not consider less than” are NOT offers to sell at that price.
3. Exception: The language of the price list specifically indicates “for immediate acceptance.”
i. Vendor quotes prices to a vendee with a specific quantity, the vendor has offered to fill the order and is obligated to fill the order upon receipt within a reasonable time of vendor’s acceptance (Fairmont Glass Works v. Crunden-Martin Woodware Co.)