Does the UCC apply?
UCC 2-106: a) Article 2 of the UCC governs all cases involving the sale of goods
(1) This rule applies REGARDLESS of whether either party is a merchant.
(2) However, some UCC rules require one or both parties to be a merchant.
UCC 2-105 (definition of "goods")
a) 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.
UCC 2-104 (definition of "merchant")
a) A person who
(1) deals in the goods of the kind or
(2) otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or
(3) to whom such knowledge or skill may be attributed by
Common law/Restatement
1. Applies to all other (non-UCC) types of contracts (e.g., services)
2. Restatement is not enacted law itself, but "common law 'persuasive authority' with a high degree of persuasion.
Definition of a Contract
1. A contract is a promise or set of promises for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
2. It requires an offer, acceptance, and consideration.
Offer (Common Law definition)
a) A promise, undertaking, or commitment to enter into a contract, definite in its terms, and communicated to the offeree.
(1) The manifestation of a present contractual intent that is certain as to the time, price, subject matter, and parties and communi
Offer: UCC 2-204 (Formation in general)
a) Requirements for a contract are relaxed under UCC
b) Court will imply reasonable terms if terms are missing.
(1) Generally need at least price and quantity.
Termination of Offer/Power of Acceptance
Lapse
Revocation
Option Contracts
Offeror's Death/Incapacity
Rejection
Lapse
(1) After some period of time, an offer lapses. If no period is specified in the offer, it lapses after a reasonable time.
(a) Analyze from standpoint of reasonable person in position of offeree
(2) Generally, an offer made to another in a face to face co
Revocation
(a) An offeree's power of acceptance is terminated when (1) the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract OR (2) the offeror takes definite action inconsistent with an intention to enter into
Revocation of General Offers to Public
(a) when offer is made by general notification to public (e.g., advertisements) or to a number of persons whose identities are unknown to the offeror, offeror can revoke by notice of termination given publicity by a method equal to that given to the offer
Option Contracts
A promise which meets the requirements for the formation of a contract (offer, acceptance, consideration) and limits the promisor's power to revoke an offer. (Restatement 25)
5 ways to make an option K
(i) Giving consideration
(ii) Reciting consideration in a signed writing (Restatement 87(1)(a))
(iii) By statute such as UCC 2-205 (Restatement 87(1)(b))
(iv) Substantial reliance by an offeree (Restatement 87(2))
(v) Tendering or beginning performance of
Offeror's Death/Incapacity
(1) An offeree's power of acceptance is terminated when the offeror dies or is deprived of legal capacity to enter into the proposed contract (Restatement 48).
(2) Does not terminate the offeree's power of acceptance under option K.
Rejection
Rejection of an offer by the offeree terminates the power of acceptance so that the offeree cannot accept the offer. (Restatement 38 (Rejection)). It is effective upon receipt.
Rejection: Counter-offer
A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer. (Restatement 39). It constitutes a rejection of the ori
Rejection: Mirror image rule
(a) Acceptance must be unequivocal; anything less is a rejection and a counteroffer.
(b) Ways around mirror image rule
(i) Court may decide what appears to be an additional or different term is really implied in the offer.
(ii) Court may say the additiona
Rejection: Rejection of an irrevocable offer
Rejection, revocation, death do not terminate power of acceptance under an option contract (Restatement 37)
Acceptance
Voluntary, unequivocal assent to the terms of the offer, and communicated to the offeror. The offeror has full power to determine the acts that are to constitute acceptance. Generally valid upon receipt, except for mailbox rule and offeror dispensing with
Who can accept?
a) An offer can be accepted only by a person whom it invites to furnish the consideration.
b) Unless the offeror manifests a contrary intention, an offeree who learns of an offer after he has rendered part of the performance requested by the offer may acc
Notification of Acceptance
a) where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification.
b) If an offeree who accepts by rendering performance has reason to
Mailbox Rule (Restatement 63)
Unless the offer provides otherwise,
1) An acceptance made in a manner and by a medium invited by an offer, and by a means that is as fast or faster than the offer, is operative upon dispatch.
2) An acceptance under an option contract is not operative unt
When is an acceptance effective?
c) If rejection mailed and then acceptance mailed:
1) Mailbox rule doesn't apply and whichever one received first is effective.
d) If acceptance mailed and then rejection mailed :
1) Mailbox rule applies and acceptance is effective, unless offeror receive
UCC 2-206
1) Unless otherwise unambiguously indicated by the language or circumstances
(a) An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
(b) An order or other offer to buy good
UCC 2-207 (1)
A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is ex
UCC 2-207 (2)
The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
(a) The offer expressly limits acceptance to the terms of the offer;
(b) They materially alter it; or
(c)
UCC 2-207 (3)
Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of th
Silence as Acceptance
a) Generally, silence is not an acceptance unless,
(1) Because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept.
(2) Where the offeror has stated or given the offeree reason to
Manner of Acceptance
...
Unilateral offer/contract
Offeror requests complete performance in order to accept the offer. (Promise for act)
Bilateral offer/contract
Offeror requests a return promise in order to accept the offer. (Promise for promise)
General Rules (Manner of acceptance)
(1) The offeror is the master of the offer and determines how the offeree may accept.
(2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.
(3) In
Rewards (Manner of acceptance)
A reward offer may be accepted by anyone who performs the service called for when the acceptor knows that it has been made and acts in performance of it, but not otherwise.
Consideration
A bargained-exchange which causes a detriment to the promisee.
(1) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. (Restatement 71)
(2)
Resolution of a disputed claim
a) Forbearance to assert or the surrender of a claim or defense which proves to be valid is consideration.
b) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration UNLESS the forbearing or surrenderin
Past consideration
Generally is not valid consideration because it is not bargained for nor given in exchange.
Moral obligations
a) Generally, at common law, moral obligations arising out of a benefit previously received were not enforceable because it couldn't be said to have been given in exchange for the promise.
b) Exceptions to the traditional CL rules are:
(1) Promise to pay
Illusory promises (Definition)
(1) A promise is not consideration if the promisor reserves a choice of the alternative performances unless each of the alternative performances would have been consideration if it alone would have been bargained for. (Restatement 77)
(2) A promise where
Illusory promises - Satisfaction Clauses
(1) Where the condition calls for the satisfaction as to commercial value or quality, operative fitness, or mechanical utility, dissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously, and the standard of a reasonable person is used i
Illusory promises - Requirement/Output contracts
(Only applies to UCC)
(1) Sale of goods contracts where the quantity is measured by either the requirements of the buyer or the output of the seller.
(2) Early cases said these types of contracts were illusory, but modernly they are valid.
(3) Carry obligation of good faith (U
Illusory promises - Termination clauses
(1) If a termination clause is read as giving a party the power to terminate at any time at will, without more, that party's promise will be held to be illusory.
(2) If, however, a termination clause is read as requiring that notice be given some period o
Illusory promises - Pre-Existing duty rule
a) A promise to perform a duty which the promisor is already legally obligated to perform is not consideration.
b) Exceptions:
(1) Any change in performance will constitute consideration
(2) Promise to perform a voidable obligation
(3) Pre-existing duty o
Illusory promises - Reliance as a basis for enforcement
(Restatement 90 - Promissory Estoppel)
a) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promi
DEFENSES
Statute of frauds (SOF), Infancy, Mental incapacity/intoxication, Duress/coercion/undue influence, Misrepresentation and Concealment, Adhesion/unconscionability, Illegal contracts, Mistake
Statute of Frauds (SOF)
Generally requires certain types of contracts to be in writing in order to be enforceable. Those are: Suretyship promises, Interests in Land, Performances not within one year, and contracts for the sale of goods for the price of $500 OR more (UCC 2-201).
SOF - Suretyship promises
[Suretyship promise is someone guaranteeing someone else's payment]
(1) For writing to be required:
(a) must be a collateral promise (and not primary promise)
(i) Collateral = give him the goods and if he does not pay, I will
(ii) Primary = give him the g
SOF - Interests in Land
(1) Sale of real property
(2) Leases for more than one year
(3) Mortgages
(4) Exception: Part performance [only applies if K required to be in writing]
(a) If seller fully performs (i.e., conveys), seller can enforce buyer's oral promise to pay
(b) Conduc
SOF - Performances not within one year
(1) A promise that BY ITS TERMS cannot be performed within a year is subject to SOF and must be in writing
(2) A K that is possible to complete within a year is not within SOF even though actual performance may extend beyond the one year (e.g., building a
SOF - UCC 2-201
(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 OR more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made betwe
Writing Requirements for SOF
a) must contain essential terms and be signed by the party to be charged
b) UCC = quantity, signature of party to be charged, writing sufficient to indicate that a K was formed
Promissory Estoppel (Restatement 139)
Promissory estoppel still applies even though a K that would normally be required to be in writing is not.
Infancy
General Rules:
a) K between adult and minor is VOIDABLE by MINOR, but binding on adult
b) Minor may disaffirm during minority or upon reaching age of majority
c) Minor may affirm K upon reaching age of majority
(1) Affirms either expressly or by conduct (
Mental Incapacity/Intoxication
1) Incapable of understanding the nature and significance of a K.
2) Voidable.
3) May disaffirm or affirm during lucid period.
4) Exception for necessities.
Duress/Coercion/Undue Influence
1) Voidable by victim, unless affirmed
2) Denied to one who yields too easily
3) Threat of lawful action is not wrongful, unless there is no basis for the underlying claim.
Misrepresentation and Concealment
1) Misrepresentation or concealment of a material fact with intent that other party rely, and justifiable reliance
2) Generally, misrepresentation MUST BE OF FACT and not opinion, unless:
a) Fiduciary relationship, trick, parties do not in general deal at
Adhesion
a) Definition: Standardized contract which is imposed and drafted by a party of superior bargaining strength and relegates to the subscribing party only the opportunity to adhere to the contract or reject it
b) contract is in pre-packaged terms; can't neg
Unconscionability
a) Definition: An absence of a meaningful choice by one of the parties, together with contract terms which are unreasonably favorable to the other party
b) Three-pronged test (DOESN'T APPLY TO UCC)
1) must be adhesive (but these alone are permissible)
2)
Illegal Contracts
1) If purpose, consideration, or subject matter is illegal, this is a defense to enforcement.
2) Generally K is void.
3) Timing
a) If the subject matter or consideration is illegal at time of offer, then no valid offer.
b) If became illegal after offer bu
Mistake
1) Unilateral
a) General rule
(1) Voidable by mistaken party if non-mistaken party knew or should've known of the other party's mistake
(2) If non-mistaken party unaware, then K is binding
b) Modern trend
(1) If mistaken party notifies other party before
What are the terms?
...
Parol Evidence Rule - Definition
a) Absent fraud, accident or mistake, prior or contemporaneous extrinsic evidence is not allowed to vary, contradict, or add to a fully integrated, written agreement.
(1) Step 1: Has the writing been adopted by the parties as a final expression of one or
Parole Evidence Rule -
UCC 2-202 Final Written Expression
a) Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be con
Parol Evidence Rule -
Fully integrated agreement
a) Is the writing intended as a final expression?
(1) Both parties must have intended the writing to be a full and final expression of the terms of their agreement
b) If final, is the writing a complete or partial integration?
(1) How do you determine?
(a
Objective Interpretations and its limits
General rule:
a) K should be given objective interpretation
b) Where there is latent ambiguity, and each party's interpretation is equally reasonable, then no K
c) Where patent ambiguity, court will resolve by objective interpretation
d) Where party A kno
Supplementing the Agreement -
UCC Gap Fillers
a) UCC 2-305
(1) If parties do not agree on a price the price will be deemed to be a reasonable price
Supplementing the Agreement -
Implied Warranty of Merchantability (UCC 2-314)
a) Unless excluded or modified (UCC 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to the goods of that kind.
b) To be merchantable, goods must be at least be:
(1) F
Supplementing the Agreement -
Implied Warranty of Fitness for Particular Purpose (UCC 2-315)
Where the SELLER at the TIME OF CONTRACTING has REASON TO KNOW any PARTICULAR PURPOSE for which the goods are required and that the BUYER IS RELYING ON THE SELLER'S SKILL OR JUDGMENT to select or furnish suitable goods, there is UNLESS EXCLUDED OR MODIFIE
Supplementing the Agreement -
Modifying/Excluding Implied warranties (UCC 2-316)
a) to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous.
b) To exclude or modify any implied warranty of fitness the exclusion must be by a wr
Supplementing the Agreement -
Express warranties
Just another contract term.
Supplementing the Agreement -
Good faith obligations
a) All K required good faith and fair dealing
b) Implied in all K and can't agree otherwise