Private Law - uni
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Private Law
Contracts
Contracts: sources of law
common law case law
state law harmonized by UCC
UCC
International contracts:
Vienna (UN) Convention on the International
Sale of Goods (CISG), 1980
UNIDROIT principles
new developments to incorporate software
contracts and internet contracts
consumer protection legislation
The Uniform Commercial Code
American Law Institute (ALI) restatement
1906 Uniform Sales Act
1942 Uniform Commercial Code
National Conference of Commissioners on
Uniform State Laws (NCCUSL)
Art. 1 UCC: General provisions
Art. 2 UCC: Sale of goods (revision)
Art. 2A UCC: leases
Art. 9 UCC: Secured transactions
Contract formation: overview
offer and acceptance
consideration
formality and the Statute of Frauds
defences
void/voidable contracts
offer: offeror
offeror: expression of present intent
to enter into contract
intent to be legally bound?
objective intent?
reasonable manifestation of intent?
The „reasonable“ standard is used unless
one party has specific knowledge.
offer: offeree
offeree: actual knowledge
communication of the offer by the offeror
to the offeree
When the offer has become known to the
offeree, he has the power of acceptance.
offer vs. non-offer
advertising invitation to receive
offers
specific advertisement (price and
quantity, e.g. real estate) may be
an offer
offer: duration
if stated in offer: measured from date
of receipt of offer
if firm offer (no time limit stated):
reasonable time (max. 3 months)
offer: termination by offeror
revocation
prior to acceptance
effective upon receipt (in possession of
offeree or authorized person, or
deposited in authorized location)
express communication: revocation in
the same manner as offer
conduct: offeree learns from reliable
source – reasonable understanding that
offer is no longer open
offer: termination by offeree
rejection
express
counteroffer: new offer with the offeree
as new offeror (may keep old offer
„under advisement“: original offer still
open) – effective upon receipt
no revival of offer except by offeror
exceptions: counter-inquiry, comment on
the terms, request for modification,
future acceptance (subcontracting)
offer: termination by law
death or insanity of offeror
death occurs after offer and before
acceptance
destruction of subject matter
supervening law making contract
illegal
acceptance
must mirror terms of offer
new terms = counteroffer
bilateral contract: acceptance in the
way required by the offer
unilateral contract: acceptance by
performance
the „mailbox rule“
for offers and acceptances made by
mail: mailbox rule = acceptance
effective at the time of posting
acceptance is valid when sent
before receipt of revocation
when out of offeree‘s possession
(reasonable medium) seasonably
dispatched, received within normal
timeframe
the „mailbox rule“
acceptance effective even if lost or
delayed
mailbox rule only for acceptance!
exceptions: offer stipulates that
acceptance has to be received; option
contract: receipt necessary before
end of option term
dual responses
„crossing“ of acceptance (A) and
rejection (R)
A) R sent, A sent; R received, A received
contract (-)
B) R sent, A sent; A received, R received
contract (+)
dual responses
C) A sent, R sent; R received, A received
(„overtaking rejection“) contract (+)
under 2nd restatement; if offeror relies
on R, offeree is estopped from
enforcement
D) A sent, R sent; A received, R received
contract (+)
dual responses
rationale:
rejection of offer effective upon receipt
acceptance effective upon posting
(mailbox rule)
silence
silence is not acceptance
exceptions
intent to accept (implied-in-fact
contract): manifestation by conduct
trade practice: buyer-seller history
offeree takes benefit, expectation that
compensation is presumed
differing offer and acceptance
no contract formed
goods nevertheless delivered and
accepted contract (+)
contractual terms: terms of the last
communication („last word“ rule)
„battle of the forms“ problem
consideration
promise binding only if
„consideration“ received in return
without consideration, the contractual
promise is unenforceable
the consideration doctrine
„bargain“
performance and counter-performance
are subject of an intentional bargain
contracts are exchange relationships
mutual promises: both parties are
bound by contract or neither is bound
consideration: traditional view
consideration must induce detriment
of the promisee and benefit of the
promisor of the original offer as result
of promised performance
bilateral contract: (counter)promise
unilateral contract: promisee‘s
conduct
example
promisor: „I will pay you
(offer/promise) if you mow my lawn
(detriment to promisee, benefit to
promisor)“
promisee: mows lawn (not legally
obliged to perform, performs with
intent to accept offer)
the mowing of the lawn is the
consideration; a contract is formed
consideration: modern Approaches
modification of bargain concept
anything actually sought by one party
in exchange for his promise
constitutes consideration
lack of consideration
without consideration, the contract is
viewed as „illusory“ (not obligating
either party)
economic equivalence is not required:
a „peppercorn“ is enough (provided it
is what the promisor wants in
exchange)
moral obligation is not enough for
consideration (legal value needed)
lack of consideration
„past consideration“ (past
performance/forbearance) cannot be
consideration (no bargain)
„pre-existing duty rule“: promise to
discharge existing legal/contractual
duty lacks consideration (no
detriment to promisee)
limits of consideration doctrine
state law of some states: writing is
substitute for consideration
promissory estoppel
problem: promise is unenforceable
without consideration
protection of promisee:
promissory estoppel may substitute
consideration for gratuitous promises
(e.g. gifts; intra-family promises)
only used in special cases
promissory estoppel
„estoppel“ from equity jurisprudence
„estopped“ means somebody loses
their right to invoke a particular
defense
„promissory estoppel“: promisor is
not allowed to invoke the lack of
consideration as his defense not to
fulfill his promise
promissory estoppel
conditions:
promise has been given
promisee acted in reliance on it
promisor knew/should reasonably
anticipate this reliance action
injustice can be avoided only by promise
enforcement (in full or in part)
modification of contracts
traditional view: modification of
existing contract requires additional
consideration (unless unforeseen
event, or UCC § 2-209(1))
modern trend: modification is binding
even if no further consideration is
given
formality
Statute of Frauds: (limited) writing
required for some contracts
contract modification: nature of
future contract determines form
requirement
Statute of Frauds
promises in consideration of marriage
promises to answer for debt/duty of
another person (guarantees)
real property contracts
contracts that will not be performed within
one year
contracts not to be performed within
promisor‘s lifetime
UCC 2-201: sale of movables over $500
Statute of Frauds
requirement: defendant has signed
something that is evidence of
existence of contract
aim: proving the existence of the
contract
no need for contract contents or
terms in writing
Statute of Frauds
non-fulfilment of form requirements
some states: voidable contract
some states: contract considered void
and cannot be invoked (e.g. Alabama)
Statute of Frauds: exceptions
performance of contract according to
its terms cures non-compliance with
Statute
conveyance of real property rights:
when seller has conveyed rights to
buyer, non-compliance with Statute is
cured (however, full payment by
buyer is not enough on its own)
Statute of Frauds: exceptions
sale of goods: UCC § 2-201 (3):
(a) specially ordered goods: Statute
cannot be invoked after production starts
(b) acknowledgment in litigation that
contract was concluded
(c) partial performance promise
enforceable to the value of rendered
performance
Void and voidable contracts
„void“ means the contract is
considered non-existent
„voidable“ means that a party can
ask in litigation for the contract to be
set aside („power of avoidance“)
lack of capacity
minors (under age 18 in most states)
mentally handicapped persons
intoxicated persons if condition was
known to other party/apparent
some states: capacity following
marriage (e.g. Iowa)
incapacity contract is voidable by
the person lacking capacity
lack of capacity
when reaching age of capacity, minor
can ratify contract (expressly/by
implication)
contracts for necessities (items
purchased for requirements of daily
living) are binding upon minors
Illegality
contracts are void if concluded for
illegal ends
fraud and duress
promises given under force/duress
voidable
undue influence: particular power of one
party over the other voidable
misrepresentation causing error of one
party
misrepresentation causing contract formation
void
misrepresentation of content voidable
mistake of fact
error or miscomprehension
concerning facts (not judgments)
both parties mistaken about essential
part of contract voidable
fairness
courts can deny enforcement of valid
contracts for reasons of equity
only in exceptional cases
element of surprise
truly harsh and inequitable results
relevant for consumer contracts,
disclaimer clauses