Transcript Litigation - Mercer University

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
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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
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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
 Voidable contract
 Exception for necessaries
 Mental competency
 Void contract
 Voidable 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
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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)
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A promise
Justifiable reliance
Foreseeability
Injustice
 e.g., Hoffman v. Red Owl Stores
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
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 onair 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
 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.)