common law contracts overview
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Common Law of Contract
An Introduction toCommon Law
OfContract
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Analyzing Contracts
➲ Formation● Offer, Acceptance, and Consideration
➲ Interpretation● usually done using an objective standard, several
interpretation tools and a few rules.➲ Performance
● the main focus here is whether there has been a breach.
➲ Defenses● usually dealt with as formation deficiencies.
➲ Remedies – Almost always damages.
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Formation
➲ Three Requirements● Offer● Acceptance● Consideration
➲ NOTE – writing can be a formal requirement, but only if required by statute.
➲ Questions concerning whether something is an offer or acceptance are dealt with using an objective test.
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What is an Offer?
Carbolic Smoke Ball CaseCarbolic Smoke Ball CaseRevisitedRevisited
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The Basic Modelwithout revocation
Offer
Acceptance Rejection Counteroffer
OfferorAccepts
OfferorRejects
offerormakes c-offer
Contract formedon terms of offer
No Contract
K on terms ofcounteroffer
No Contract
and so on
= rejection+ new offer
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Interpretation
➲ Formation issues – objective test➲ Meaning of terms or missing terms
● Plain Meaning Rule● Course of Dealings● Trade Practices● Trade Usage
➲ Parol Evidence Rule – when written contracts can be modified by prior or contemporaneous oral or written agreements.
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Performance and Breach:Main Issues
➲ Conditions● When does a contract go into effect● Order of performance
➲ What amounts to breach● Material - failure to perform that permits the other
party to the contract to either compel performance, or collect damages because of the breach
● Total or Fundamental- permits the aggrieved party to terminate performance and sue for damages
● Substantial Performance – when breaching party has standing to sue to compel performance from non-breaching party.
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Formation Defenses
➲ Operate to nullify a contractual relationship because of some defect in the contract formation process.
➲ Equitable remedy of restitution is available to place parties in position they were in prior to contract formation.
➲ Must distinguish between void and voidable contracts.
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Common Defenses
➲ Illegality➲ Lack of Writing (Statute of Frauds)
● also viewed as formation formality➲ Lack of Capacity➲ Mistake➲ Fraud ➲ Duress➲ Undue Influence➲ Unconscionability
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Illegality
➲ Courts' concern is protection of the public interest.
➲ Two kinds: Illegal and Contrary to Public Policy● Either the object or consideration is illegal.
vs.
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Effect of Illegality
➲ General Rule – not enforceable● parties share guilt, so court will simply not
enforce.➲ Exceptions:
● Illegal portion is not “essence of bargain” = severance● If a party repents and repudiates = restitution ● Where one party is not guilty of serious moral turpitude =
restitution
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Lack of Capacity
➲ Two Kinds of Capacity Issues:● Minority● Mental
➲ Court is concerned with protecting against exploitation.
➲ These contracts are generally voidable by the person lacking capacity.
➲ Restitution is available, but limited in cases dealing with minors.
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Mistake Generally
➲ Erroneous belief at the time of contracting that certain facts are true or false.
➲ Defect in assent – party or parties would not have made K if mistake was known.
➲ We are dealing with misinformation, not fraud or deception.
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Elements of Mutual Mistake
1.When K was made, parties shared erroneous belief concerning a fact.
2.This fact was basic assumption of the K➔ Neither party would have entered into the K had
they known the truth.3.Mistake has material effect on exchange of
performances.4.Adversely effected party did not bear the risk.
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Misrepresentation
➲ Assertion not in accord with the facts.● Fraudulent – deliberate lie, made with knowledge
that fact is false.● Negligent – misinformation results from party's
failure to check facts that he had a duty to ascertain.
● Innocent – genuine, albeit erroneous, belief by party making the assertion.
➲ Consequences of misrepresentation depend on state of mind of party making assertion.
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Duress
➲ Nature of Duress● Traditionally, actual force or an unlawful threat of
death or bodily harm.● Today, economic duress can also make a K
voidable.➲ Determined by usual objective standard.
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Elements of Duress
➲ One of the parties must make a threat➲ The threat must be improper➲ The threat must induce the apparent assent,
in that it leaves the victim no reasonable alternative but to agree.
➲ A contract entered into under duress is voidable.
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Undue Influence
➲ Elements – victim must establish:● he had a relationship of dependency and trust
with the other party, believing that other party would not act contrary to victim's interest.
● Dominant party improperly abused this position by unfairly persuading victim to enter into K adverse to his interests.
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In Need of a General Doctrine
➲ Cannot claim duress without threat.● even when result of K is unfair.
➲ Cannot claim undue influence without showing of relationship of trust.
➲ Cannot claim fraud unless the misrepresentation and inducement are serious enough to satisfy elements
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Unconscionability
➲ UCC & Restatement 2nd simply acknowledge court's ability to adjust
Elements:
UNFAIR BARGAINING Leading to UNFAIR K TERMS
Proceduralunconscionability
Substantiveunconscionability
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Remedies
➲ Damages➲ Equitable Relief
● Injunctions, Specific Performance, Restitution, Rescission
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U.S. Contract Law
An Overview of Common LawAn Overview of Common Law&&
UCC PrinciplesUCC Principles
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Sources of Law
➲ Common Law● origin of contract law is judge made law.
➲ Uniform Commercial Code● every state has adopted some form of the UCC● applies to “commercial contracts” such as the sale
of goods.
➲ Consumer Protection Laws● regulates transactions with consumers and places
additional requirements on contracts
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When to Use UCC?
➲ Article 2 applies to the Sale of Goods● Not services● Not real property● If mixture, Court will look to see what the
“predominate purpose” is.➲ Distinguishes between “merchants” and
“consumers”● Merchant = business professional● Consumer = casual or inexperienced seller or
buyer
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What does the UCC Cover?
➲ Formation➲ Interpretation & Obligations➲ Performance➲ Breach, Repudiation and Excuses➲ Remedies