Contract Law

1
Contract Law

• Jody Blanke
• Professor of Computer Information Systems and Law

2
Contract Law As Private Law

• Willing parties can agree to do most anything
• Freedom of contract
• Meeting of the minds

3
Private Law

• Contract between Major League Baseball and the
  Players Association - Collective Bargaining
  Agreement (241 page PDF file)
• free agent
• salary cap
• luxury tax
• NHL (a league that used to play ice hockey in
  Canada and the U.S.)

4
Uniform Commercial Code

• Poster child of uniform laws
• Adopted in 49½ states
• Very successful
• Facilitates the ease of doing business
• First place to look for the law
• then, other state statutes
• then, state case (common) law safety net

5
Basic Requirements

• An agreement between the parties
• Consideration
• Capacity
• Legality

6
Agreement The Offer

• Offeror must have intention to be bound by offer
• e.g., kick the tire
• Terms must be reasonably definite and certain
• can be written, oral or implied
• can come from prior dealings or usage of trade
• Offer must be communicated to offeree
• e.g., reward for lost dog

7
Figurative Death of an Offer

• Natural causes lapse of time
• Suicide revocation
• Murder rejection
• Counteroffer rejection offer
• Execution by operation of law
• change in law terminates offer

8
Literal Death of An Offer

• The offeror dies
• The offeree dies
• Destruction of subject matter

9
Acceptance

• At common law mirror image rule
• UCC more relaxed (and reasonable)
• battle of the forms
• Generally effective upon receipt
• exception mailbox rule

10
Bilateral and Unilateral Contracts

• Bilateral a promise for a promise
• e.g., Joe promises to paint Bills house and Bill
  promises to pay Joe 1000
• Unilateral a promise for an act
• e.g., Susan promises to pay 500 to the first
  person who scales the outside of the Business and
  Education Building
• performance of the act is acceptance

11
Consideration

• Each party must provide something of value
• Money, property, services, forebearance
• e.g., Hamer v. Sidway the rich uncle case
• e.g., Jennings v. KSCS
• Courts will not examine the adequacy of the
  consideration

12
Capacity

• Age law protects minors
• Voidable contract
• Exception for necessaries
• Mental competency
• Void contract
• Voidable contract
• Intoxication

13
Legality

• Contracts must have a legal purpose
• cannot take out a contract for that noisy
  neighbor
• cannot purchase a gram of cocaine
• gambling?
• e.g., Durado Beach Hotel v. Jernigan

14
Genuiness of Assent

• Duress gun to the head
• Undue Influence
• Fraud
• Mistake
• Unilateral generally does not excuse
  performance
• exception if nonmistaken party knew of the
  mistake
• Mutual generally does excuse performance
• no meeting of the minds

15
Third-Party Rights

• Each party receives certain rights or benefits in
  a contract
• Each party undertakes certain duties or
  obligations
• Generally, rights can be assigned to third
  parties
• Generally, duties can be delegated to third
  parties
• exception when performance depends upon
  personal skills

16
Statute of Frauds

• An oral contract is as legally valid as a
  written contract unless the law requires it to be
  in writing
• as good as
• if executed before 100 clergy people of all
  faiths willing to come to court and testify

17
Must Be In Writing

• Contract to transfer an interest in real property
• Contract that cannot be performed within 1 year
• Contract to pay the debts of another
• Contract made in contemplation of marriage
• dowry agreement
• prenuptial agreement
• Contract for the sale of goods greater than 500
• UCC drafters recommend increase to 5,000

18
Parol Evidence Rule

• Court will not permit evidence of prior or
  contemporaneous oral statements if there is a
  complete written agreement
• exception ambiguities
• Morals of the story
• read the contract
• get it in writing

19
Integration Clause

• I have read the above agreement and understand
  that it represents the entire agreement between
  the parties.
• Morals of the story
• read the contract
• get it in writing

20
Standard Form Contracts

• Read them
• Modify them
• and get written approval from authorized
  representative
• Use attachments if necessary
• e.g., letters, memos, specifications
• Ambiguities interpreted against the drafter

21
Discharge of Contract

• Discharge by performance
• Discharge by agreement
• Discharge by impossibility

22
Discharge by Agreement

• Mutual rescission
• key word mutual
• Novation
• new contract
• Accord and satisfaction

23
Discharge by Impossibility

• Objective impossibility
• e.g., the car got hit by a meteorite
• Subjective impossibility
• Its impossible for me to go through with that
  contract
• Performance may be discharged by commercial
  impracticability
• e.g., school district milk case
• key was event reasonably foreseeable?

24
Remedies Money Damages

• Compensatory damages
• makes one whole under the contract
• provides the benefit of the bargain
• measure of damages is usually the difference
  between the value of the contract and the market
  value of what was actually received

25
Remedies Money Damages

• Consequential damages
• must be reasonably foreseeable
• e.g., Hadley v. Baxendale
• often disclaimed by contract
• Punitive damages
• rarely awarded for breach of contract
• Nominal damages
• e.g. Carol Burnett v. The Enquirer

26
Mitigation of Damages

• Nonbreaching party has duty to lessen the amount
  of damages
• e.g., wrongful discharge
• Anticipatory repudiation
• Duty to cover

27
Liquidated Damages

• Actual amount of damages must be difficult to
  estimate
• Amount specified must be a reasonable estimate of
  those damages
• Must not be a penalty

28
Equitable Remedies

• Injunction
• Quasi-Contract (Quantum Meruit)
• Specific Performance
• generally available for unique goods or property
• not appropriate for personal services

29
Choice of Law/Forum

• Written contracts often contain choice of law and
  choice of forum clauses
• These will generally be enforced as long as there
  is a connection to the state
• Some states may also require that the choices be
  fair

30
Promissory Estoppel

• Last ditch remedy
• Four requirements (Restatement of Contracts 90)
• A promise
• Justifiable reliance
• Foreseeability
• Injustice
• e.g., Hoffman v. Red Owl Stores

31
Unconscionability

• UCC remedy
• The court would not be able to sleep at night
• The court can ignore or fix an unconscionable
  contract
• Consumer remedy
• e.g., Frostifresh v. Reynoso
• e.g., PEPCO v. Westinghouse

32
Covenants Not to Compete

• May be related to sale of business
• e.g., Joe the Baker
• May be related to employment contract
• California will not enforce such an agreement as
  an illegal restraint of trade
• Georgia will not blue pencil an agreement
• Brenda Woods agrees not to work as an on-air news
  anchor in the Atlanta/Athens television market
  for 6 months

33
Covenants Not to Compete

• Scope
• agreement must specify what activity is to be
  limited
• Geography
• be careful of terms like Atlanta
• Duration
• e.g., 6 months, 1 year, 2 years

34
U.C.C. Article 2

• Applies to sales of goods
• Goods as opposed to services
• Predominant factors test
• E.g., Sears washing machine
• Sales as opposed to leases
• Economic reality test
• Judicial extension of Article 2

35
U.C.C. Articles 2A and 2B

• Article 2A
• Applies to leases of goods
• Article 2B
• Was to have applied to licenses
• Became UCITA (Uniform Computer Information
  Transactions Act
• Adopted in only two states (Va. And Md.)