I. Introduction to Contracts
a. Sources of Contract Law
i. Primary Authority à “the law” containing prior judicial decisions (common law)
ii. Secondary Authority àanything else that could appropriately influence a court (Restatements)
b. UCC à Commercial law
· UCC governs transactions in goods (movables) and applies in every state except Louisiana.
· State codifications of the UCC vary only slightly if at all.
· If the agreement concerns a transaction in goods, apply the UCC rules; where the UCC is silent, apply the common law.
i. Title explains what they are: descriptive not aspirational
ii. Modern restatements tend to aspirational as well.
d. Legal Commentary
e. International Commercial law (CISG) à body of law applies to certain contracts where one party is from a foreign country.
II. Mutual Assent
a. Rest. 17 – a formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
b. Offer à manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
c. Bargain resulting in mutual assent is traditional
d. Bargaining process
i. The offer is the point when preliminary negotiations end and bargaining begins
ii. The offer is what gives the offeree the power of acceptance
iii. The offer defines the terms of the contract unless the terms change during the bargaining process.
e. “meeting of the minds” à “subjective” in that actual intention of a party, rather than conduct determines the party’s legal obligations.
f. Requiring a manifestation of mutual assent à “objective” in that it looks at the conduct of the parties form the perspective of a reasonable person rather than actual subjective intentions.
i. Ray v. William G. Eurice &Bros., Inc.
g. Bilateral Contracts à exchange of reciprocal commitments
i. Lonergan v. Scolnick
ii. Izadi v. Machado (Gus) Ford, Inc.
iii. Normile v. Miller
1. How does one “accept” an offer?
1. Accept an offer however the offeror says you will accept it
2. What if the offer requires acceptance in writing no later than —? Must answer by that time.
3. What if the offer requires acceptance by any means? Means must be met for acceptance
2. Options other than accepting
1. Ignore the offer
2. Reject the offer
4. Ask for another offer
3. Effects of Not Accepting
1. Ignoring: risk lapse due to time, revocation by the offeror, risk death or incapacity of offeror
2. Rejecting: terminate power of acceptance put an end to the bargaining process (back to preliminary negotiations)
3. Conteroffering: reject and terminate your own power of acceptance, move to second period of bargaining process; keeps process alive
4. Asking for another offer: risk rejection, risk effects of ignoring offer
h. Unilateral Contracts à exchange of a promise for future performance
i. Pettesron v. Pattberg
ii. Cook v. Coldwell Banker/ Frank Laiben Realty Co.
1. Alternative Approach to Changing Bad Law
1. Legislate! (statutes)
i. UCC – “uniform act” promulgated by the national conference of commissioners on Uniform State Law
ii. Much of UCC – including Art. 2 (sale of goods) adopted in most if not all states
iii. When UCC adopted it is incorporated into the general compilation of state statutes (so it doesn’t “look” like it does in our supplement)
2. Application of UCC – Article 2 and the CISG
1. Applies to Transactions in Goods
1. Applies to contracts of sale of goods if parties are from different contracting “states” Art. 1
2. Applies to whether the contracting parties are consumers, merchants, or both
2. Doesn’t apply to the sale of goods for personal family or household use
3. Applies no matter how large the transaction
3. Does not apply to enumerated kinds of sales Art. 2
i. Other methods of reaching Mutual Assent
i. UCC deals with GOODS
ii. Article 2 applies to (1) consumer merchant; (2) consumer consumer; (3) merchant merchant
iii. Harlow&Jones, Inc. v. Advance Steel Co.
1. Differences between Common Law and UCC
1. UCC favors contract formation: compare 2-204 with common law offer acceptance paradigm
2. UCC does not require the parties to agree as to everything, while at common law disagreement means rejection and counteroffer
3. UCC employs gap fillers to flesh out an agreement, common law does also, but to a more limited extent.
a. Either something valuable given in return or forebearance to do something you may do (benefit/detriment test for consideration)
i. Hamer v. Sidway
1. Benefit Detriment test
1. Either 1) something valuable given in return 2) forbearance to do something you may do
10. Terms that are different contradict the original terms rather than merely adding to them and here there is a split of authority.
ii. Princess Cruise, Inc. v. General Electric Co.
1. To determine whether a mixed contract is a UCC transaction ask what is the purpose
2. Supplier’s business
3. Value of materials
iii. Brown Machine, Inc. v. Hercules, Inc.
1. Breakdown of 2-207
1. A varying acceptance forms a contract unless:
i. The reported accepatance varies so much it is not “a definite and seasonable expression of acceptance.”
ii. Acceptance is “expressly made conditional on assent to its different or additional terms”
2. If neither exception applies, the contract is formed. Its terms include:
i. The terms of the offer
ii. In some circumstances, terms of the acceptance
iii. Applicable UCC gap fillers
iv. Walker v. Keith
v. Quake Construction, Inc. v. American Airlines, Inc.
d. Electronic Contracting
i. Shrinkwrap à purchaser receives a product wrapped in plastic and use of product constitutes purchaser’s agreement with terms.
ii. Clickwarp à purchaser must scroll through the seller’s terms of sale and click and “I agree” button.
iii. Browsewrap à terms are somewhere in site. It is purchaser’s job to find and read them.
iv. Brower v. Gateway 2000, Inc.
v. Register.com, Inc. v. Verio, Inc.