private law contracts. contracts: sources of law common law case law state law harmonized by ucc...
TRANSCRIPT
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 provisionsArt. 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