Common Law Contract for Civil Lawyers
Fall 2010 Professor Marston
No federal common law, each state develops its own common law of contract.
By whom made common law? Judge.
How made? By deciding individual cases (applying law to particular facts).
I. Source of contract law:
UNIFORM COMMERCIAL CODE
Every state except Louisiana has adopted UCC.
(a) RESTATEMENT (SECOND) OF CONTRACTS (Modern)
Decide “what the law is”, i.e. “what the law should be” (the task is to reduce the mass of case law to a body of readily accessible rules in the form of a Restatement of the Law)
(b) COMMON LAW OF THE VARIOUS STATES (Older)
UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS (not yet widely accepted in US)
The first question in every situation to ask is what law should be applied in the contract.
Article 1 is General Provision and Article 2 is Sales
1-201 general definition applies to the all UCC including Article 2, and a lot of definitions are defined in a different way from “common sense”, e.g. (27) “person”; (37) “signed” includes any symbol executed or adopted by a party with present intention to authenticate a writing.
If the code is silent, then go to the common law.
Code applies to sales of goods.
1. Goods: different from “service”
U.C.C. § 2-105(1) GOODS
“Goods” means all things 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 [claims].”
Is computer software goods? Yes, under this definition. Electricity: measurable? Yes. It is held as goods. Downloaded music: ?
2. Sale: passing of titles
U.C.C. §2-106(1) – “Sale”
“A sale consists in the passing of title from the seller to the buyer for a price.”
Title: defined by ordinary property law, a right of ownership that the law enforces.
3. U.C.C.§1-103: How does U.C.C. interact with the Common Law?
“Supplementary General Principles of Law Applicable”
“Unless displaced by the particular principles of this Act, the principles of law and equity [i.e. the common law] . . . shall supplement its [i.e. the U.C.C.’s] provisions.”
B. Chart of source of contract law
State Statute Common law
UCC Restatement sections – adopted section by section by courts in each state
Sale of goods, UCC apply, not sale of goods, not apply.
UCC does not have any provision about “fraud”, you have to go to common law.
C. Mixture of Goods & Service: Quality Guaranteed Roofing v. Hoffmann – (Bulk 3)
Facts: Contractor sued owner to recover the due payment under contract for goods and services rendered in connection with installation of roof.
Rule of law:
1) Whether UCC governs a mixed goods and service contract depends on which aspect, sales or services, predominates the contract. As for contract that was predominately for services rather than sales of good, UCC is inapplicable.
2) In determining the predominant nature of a mixed contract, it is helpful to look at the language, compensation structure, purposes, relation between good and services.
3) In this case, for three reasons that it is a contract for services
a) The parties are described as “owner” and “contractor” and the contract s “Construction Agreement”.
b) The price is paid on a schedule basis as the installation work progressed.
c) The dominant purpose of the contract is to install the roof and the purchase of roofing material is incidental to such purpose. [Buying roof not roof material] UCC 2-607: opportunity to cure the defect [In this case, no notice of any kind was given to the plaintiff of the alleged defects, nor was the plaintiff given any opportunity whatsoever to cure any such defects.]
II. What is a contract?
i. Restatement, Section 1:
“A contract is 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.”
ii. U.C.C. Section 1-201(3): [2000 version] “Agreement” means the bargain of the parties in fact as found in their language or by implication from other circumstances…Whether an agreement has legal consequences is determined by the provisions of this Act, if applicable; otherwise by the law of contract.
iii. U.C.C. Section 1-201(11) – Better
“Contract” means the total legal obligation which results from the parties’ agreement as affected by this Act and any other applicable rules of law.
B. Contract ≠ Promise ≠ Agreement
1) Contract & agreement: all contracts are agreement but only those agreements which have legal effect are contract.
2) Contract & promise: all contracts are promises but only those enforceable promises are contract.
C. Requirement for a contract: Four Elements – The Big Four
1) Mutual assent: Judge from §1-201 (3)
b) other circumstance → conduct
The usual method of showing mutual assent is by Offer and Acceptance
Look at what you did, not what you said.
2) Consideration: price paid for the promise → exchange
3) Legality of object: e.g you can not sell your sister
4) Capacity: minors; mental insane people, prisoner, drunks, etc. are not in full capacity
What is the age to contract? In most states, it is 21.
D. Classification of Contract
a) The Nature of the Promises
i. Bilateral/Unilateral Contracts, modern trend: if not clear, the court tends to construe it as a bilateral since it has less unclearness.
ii. Express/ Implied Contracts
ii. Void “ab initio” = not exist
iii. Voidable = have a chance to exit it out within a reasonable time after the grieved party finds out
Ratification, you cannot ratify the contract by action AND word??
iv. Unenforceable, reasons may cause unenforceable (1) a late litigation (2) ?
c) State of Performance: a snapshot of the contract
i. Executory: at least one party has not fully performed
ii. Executed: all parties have fully performed
2) unilateral contract & bilateral contract
a) bilateral contract:
a promise made by return for a promise of other party→ exchange of promises
• Promise 1: I promise to pay you $10 if you bring me lunch from ABP
Offeror (me) ——-$10———–® Offeree (you)
• Promise 2: You promise to get me lunch from ABP if I pay you $10
Offeror (you) ——- LUNCH——-®Offeree (me)
b) unilateral contract:
a promise made by return for performance →only one party made a promise
e.g. reward contract – I will give anyone who returns my dog 100 dollars – a promise made by return for performance, rather than for a promise of a specific person
No contract until return the dog, and after return, you should give the reward.
3) expressed contract & implied contract
a) Express contract: parties manifest their agreement by oral or written language.
b) Implied contract: contract is inferred by from the parties’ conduct. [find
e action or forbearance on the part of the promissee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.”
– Nothing to do with intention of party, it is societal standard.
e.g. if you fly down, I will give you the job => unilateral agreement. If you fly down, no job => breach of contract; but you don’t fly down but sell the house => estoppel
b) Quantum Meriut (For as much as he deserves): what the plaintiff gives
there is no contract but the party who rendered service was conferred with a reasonable expectation of payment. The court will provide a reasonable compensation to the party who has rendered the service.
Requirement: Plaintiff conferred a benefit of goods or services with reasonable expectation of payment. [Look at what the plaintiff gave] e.g: I asked you to do some research for me since I will apply for the scholarship. You did a lot of work and expected to be paid. But as a result, I said “I never promise to pay you for the information.” →Quantum Meriut.
c) Unjust Enrichment: what the defendant get
i. Plaintiff conferred a benefit upon defendant
ii. Defendant knew of and appreciated the benefit
iii. Defendant retained or accepted the benefit under circumstances in which it would be unjust or inequitable for defendant to retain the benefit without paying for it.
Unjust enrichment looks to what the defendant received.
Cases are highly fact intensive, you have to the know the very fact so that you can decide
The court will decide whether it is unjust.
Difference between b) and c): always allege both, if another claim your work worthless, then Quantum Meriut; under the unjust enrichment, you have to prove the existence of benefit and recognition of the benefit.
Question: usually it’s easy to measure how much is the damage while hard for how much has been given => different measures.
Step 1: what law applies
Step 2: does it fall into S/F?
Step 3: does it have big-four?
Prime Directive of Contracts:
Contracts do NOT have to be in writing to be enforceable, as long as the Big 4 are satisfied, oral contracts are equally enforceable as written ones
EXCEPT….CONTRACTS WHICH FALL WITHIN THE STATUTE OF FRAUDS
I. Statute of frauds:
Oral contracts are always recognized except the contracts which fall within the statue of frauds.
a) Definition: S/F requires certain contracts that can not be proved by merely saying must be evidenced by writing. Note: it is evidenced rather than “must be in writing”
b) The requirement of writing evidence(!):
Restatement 131 General Requisites of a Memorandum (summary below)
A contract within the Statute of Fraud is enforceable if
Evidenced by writing, signed by or on behalf of the party