Jody Blanke Professor of Computer Information Systems and Law Contract Law Jody Blanke Professor of Computer Information Systems and Law

Contract Law As Private Law Willing parties can agree to do most anything Freedom of contract “Meeting of the minds”

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.)

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

Basic Requirements An agreement between the parties Consideration Capacity Legality

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

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

Literal Death of An Offer The offeror dies The offeree dies Destruction of subject matter

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

Bilateral and Unilateral Contracts Bilateral – a promise for a promise e.g., Joe promises to paint Bill’s 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

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

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

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

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

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

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

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

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

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

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

Discharge of Contract Discharge by performance Discharge by agreement Discharge by impossibility

Discharge by Agreement Mutual rescission key word – “mutual” Novation new contract Accord and satisfaction

Discharge by Impossibility Objective impossibility e.g., the car got hit by a meteorite Subjective impossibility “It’s 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?”

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

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

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

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

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

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

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

Unconscionability UCC remedy Consumer 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

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

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

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

U.C.C. Articles 2A and “2B” Article 2A Article “2B” 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.)