Intro To Contracts


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Board overview of the common law of contract given to students in the University of Onsabrück's foreign law program.

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  • The most important attribute of a contract is that it is a voluntary and consensual relationship. As opposed to other relationships created by law (obligation to compensate for negligence, pay taxes, etc.) What constitutes legally sufficient agreement can sometimes be a difficult question. Subjective or objective intent? Objective Thus, the law does not demand an inquiry into the minds of the K makers. Volition – does it have to be totally voluntary? Clearly, some degree of compulsion brought about by need, desire, etc, is okay. We will talk about oral or written later. ORAL or WRITTEN Agreement generally oral agreements are OK EXCEPTION – Statute of Frauds Strictly, the document that is ofter referred to as a “contract” is merely a memorandum setting out the terms upon which the parties agreed. The writing itself is only important when required.
  • NOTE – by entering into a K, the parties bind themselves to each other for the COMMON purpose of the contract. Relationships can vary in time K for haircut involves quick performance by barber followed by fulfillment of customer's payment obligation. Length of K was very short. Long-term employment of lease contracts could last years, decades. Essential purpose is an exchange Contracts go hand-in-hand with trade. There must be something traded. Essence of contract is reciprocal relationship in which each gives up something to get something. what is given up clearly will vary. EXAMPLE - You pay me to cut your grass, I cut your grass. Services for money. You agree to take notes in this class if your friend agrees to take notes in another FFA class. Service for service. Gerhard Schroeder's barber agrees not to talk to the press about whether he uses hair coloring, and Herr Schroeder agrees to pay the barber EURO 10,000 Sometimes involve tangible things, other times intangible rights. Yet basic formula is same—bargain reached leading to exchange for betterment of both parties.
  • For a contract to exist, there must be a promise— some commitment for the future . If neither party make a commitment, there is really nothing for the law to enforce. Promise undertaking to act or refrain from acting in a specified way at some future time. This can be expressed or implied (from conduct).
  • As the definition indicates, only one promise needs to be made for a contract to exist. But what about “ reciprocal relationship ”? Unilateral = at instant of contracting, one party completes performance & all that remains is promise of the other. Bilateral = both promises are outstanding when contract is formed.
  • Rocky agrees to buy kayak on the spot “as is”. Eddy accepts and the exchange is done instantaneously—no future commitment.
  • Rocky offers to buy kayak provided it is watertight. Eddy says it's watertight, and Rocky gives Eddy check. Both promises remain. Check still needs to clear, kayak still needs to be watertight.
  • Rocky offers to buy kayak. Gives Eddy a check. Eddy agrees to sell the kayak “as is” (no warranties) making it clear that there are no promises concerning condition.
  • For a contract to exist, there must be at least one outstanding promise upon execution of the contract. The promise can be expressed or implied. A Truly Instantaneous Exchange is Rare Usually takes place under casual circumstances EXAMPLE - You cut my grass and I pay you $10 on the spot. No K because all parties have performed. Nothing to enforce! What about when I sold my cars in St. Louis? Sold the car “as is” I received cash on the spot. Under Common Law this is an instantaneous exchange, thus there is nothing left to enforce so there is no contract. HOWEVER, there may be statutes that protect the buyer in such circumstances. These statutes may create IMPLIED WARRANTIES (promises) that bind me as the seller. Lemon Laws Under such circumstances, there are arguably outstanding promises (the warranties) and thus there may be a contract to enforce.
  • Goal of contract law is to ensure the promise is upheld. Act of Private Lawmaking – parties create personalized “statutes” to govern their relationship. But this can only be true if there is a legal recognition of enforceability . There must be a compulsive power of the state via the courts! ROLE OF THE COURTS: Initially, court's role is to determine whether there is a contract. Then the court must resolve any disputes over the terms and their breach. Finally, the court will enforce the promise by giving a remedy.
  • What is the Remedy? Specific Performance? One would assume that a court would order Eddy to hand over the kayak as promised. However, under Common Law, the primary remedy is NOT specific performance. Rather, a judgment awarding compensatory damages would be awarded. Thus, Rocky would have show that he suffered a financial loss because of the breach. Say Rocky had to pay $450 for a similar kayak. Damages = $50
  • Formation You will be introduced to Consideration in the next lecture. The rules for offer and acceptance are basically similar to German law. Next semester we will spend time looking at some of the differences and problem areas in common law offer and acceptance. Formal Requirements Statue of Frauds Resolving problems with incomplete or indefinite written agreements The Parole Evidence Rule
  • Formation Players One person called the offeror makes an offer to another person called the offeree to enter into K on specified terms. Offer creates power of acceptance in the offeree so that she can bring K into existence by signifying acceptance. The offeree could reject the offer either by express words or inaction. The offeree can express interest by making a counteroffer , which effectively terminates the original offer.
  • Interpretation Formation issues – modified reasonable person standard Terms Plain Meaning Rule Past Practice Trade Custom
  • Performance – includes what amounts to breach Order of performance Conditions – events not certain to occur that must occur before: 1) contract become valid OR 2) performance is due Duty – results from a promise and breach results in damages
  • Defenses Mistake Changed Circumstances Impossibility – something happened making it no longer possible to perform Impracticability – performance not impossible, but extremely burdensome Frustration of Purpose – change in circumstance makes performance worthless Reformation – allows court ability to modify K to deal with changed circumstances. Lack of Capacity : age, mental Duress, Undue Influence Misrepresentation Unconscionable Illegal
  • Formation Defenses Some states have incorporated common law defenses into their UCC. The Model UCC only discusses expressly the Statute of Frauds and Unconscionability.
  • Intro To Contracts

    1. 1. Common Law of Contract An Introduction to Common Law Of Contract
    2. 2. Contract Elements The essential elements of a contract are: <ul><li>An oral or written agreement
    3. 3. The involvement of two or more persons
    4. 4. An exchange relationship
    5. 5. At least one promise
    6. 6. Enforceability </li></ul>
    7. 7. An Oral or Written Agreement <ul><li>Voluntary and consensual relationship. </li><ul><li>As opposed to other relationships created by law </li></ul><li>What is a legally sufficient Agreement? </li><ul><li>Object test </li></ul><li>Volition – does it have to be totally voluntary? </li></ul>
    8. 8. An Exchange Relationship <ul><li>Relationships can vary in length of time
    9. 9. Essential purpose is an exchange
    10. 10. Reciprocal relationship
    11. 11. Tangible things and/or intangible rights.
    12. 12. basic formula = bargain reached leading to exchange for betterment of both parties. </li></ul>
    13. 13. Promise <ul><li>Must have at least one outstanding promise.
    14. 14. No promises = nothing to enforce = no K
    15. 15. Promise = undertaking to act or refrain from acting in a specified way at some future time. </li><ul><li>This can be expressed or implied </li></ul></ul>
    16. 16. Bilateral vs. Unilateral <ul><li>Only need one promise for K to exist. </li><ul><li>But what about “reciprocal relationship”? </li></ul><li>Unilateral = at instant of contracting, one party completes performance & all that remains is promise of the other.
    17. 17. Bilateral = both parties have outstanding promises when contract is formed. </li></ul>
    18. 18. Instantaneous Exchange <ul><li>No Contract! </li></ul>
    19. 19. Promissory Exchange: Bilateral Contract
    20. 20. Unilateral Contract
    21. 21. To Sum Up <ul><li>Valid K must have at least one outstanding promise.
    22. 22. The promise can be expressed or implied.
    23. 23. NOTE – today a truly instantaneous exchange is rare. </li><ul><li>What about when I sold my cars in St. Louis? </li></ul></ul>
    24. 24. Legal Recognition of Enforceability <ul><li>Goal of contract law is to ensure the promise is upheld.
    25. 25. Contracts are an act of private law making.
    26. 26. Role of the Court: </li><ul><li>Determine whether there is a contract.
    27. 27. Resolve disputes over the terms/breach.
    28. 28. Enforce the promise by giving a remedy. </li></ul></ul>
    29. 29. Enforceability Example <ul><li>Eddy's promises to give Rocky the kayak tomorrow in exchange for $400.
    30. 30. The next day Rocky arrives with $400 but Eddy has changed his mind. He won't hand over the kayak.
    31. 31. If Rocky sued Eddy, what is the remedy? </li></ul>
    32. 32. Analyzing Contracts <ul><li>Formation
    33. 33. Interpretation
    34. 34. Performance
    35. 35. Defenses
    36. 36. Remedies </li></ul>
    37. 37. Formation <ul><li>Three Requirements </li><ul><li>Offer
    38. 38. Acceptance
    39. 39. Consideration </li></ul><li>NOTE – writing can be a formal requirement, but only if required by statute.
    40. 40. Questions concerning whether something is an offer or acceptance are dealt with using an objective test. </li></ul>
    41. 41. The Basic Model without revocation Contract formed on terms of offer No Contract K on terms of counteroffer No Contract and so on = rejection + new offer
    42. 42. Interpretation <ul><li>Formation issues – objective test
    43. 43. Meaning of terms or missing terms </li><ul><li>Plain Meaning Rule
    44. 44. Trade Practices
    45. 45. Trade Custom </li></ul></ul>
    46. 46. Performance and Breach <ul><li>Main Issue </li><ul><li>Conditions
    47. 47. Order of performance
    48. 48. What amounts to breach </li></ul></ul>
    49. 49. Defenses <ul><li>Mistake </li><ul><li>Mutual, Unilateral </li></ul><li>Changed Circumstances </li><ul><li>Impossibility, Impracticability, Frustration of Purpose, Reformation </li></ul><li>Lack of Capacity: age, mental
    50. 50. Duress, Undue Influence
    51. 51. Misrepresentation </li><ul><li>Fraudulent, Negligent, Innocent </li></ul><li>Unconscionability
    52. 52. Illegality </li></ul>
    53. 53. Remedies <ul><li>Damages
    54. 54. Equitable Relief </li><ul><li>Injunctions, Specific Performance, Restitution, Rescission </li></ul></ul>
    55. 55. U.S. Contract Law An Overview of Common Law & UCC Principles
    56. 56. Sources of Law <ul><li>Common Law </li><ul><li>origin of contract law is judge made law. </li></ul></ul><ul><li>Uniform Commercial Code </li><ul><li>every state has adopted some form of the UCC
    57. 57. applies to “commercial contracts” such as the sale of goods. </li></ul></ul><ul><li>Consumer Protection Laws </li><ul><li>regulates transactions with consumers and places additional requirements on contracts </li></ul></ul>
    58. 58. When to Use UCC? <ul><li>Article 2 applies to the Sale of Goods </li><ul><li>Not services
    59. 59. Not real property
    60. 60. If mixture, Court will look to see what the “predominate purpose” is. </li></ul><li>Distinguishes between “merchants” and “consumers” </li><ul><li>Merchant = business professional
    61. 61. Consumer = casual or inexperienced seller or buyer </li></ul></ul>
    62. 62. What does the UCC Cover? <ul><li>Formation
    63. 63. Interpretation & Obligations
    64. 64. Performance
    65. 65. Breach, Repudiation and Excuses
    66. 66. Remedies </li></ul>
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