1. Jody Blanke Professor of Computer Information Systems and Law
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 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

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 Mental competency Intoxication
Voidable contract
Exception for necessaries
Mental competency
Void 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
“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?”

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 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

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 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.)