Common Law Contract U.C.C. Sales

2 CONTRACTS (Common Law Rules) 1.Is there a contract? (Elements) a.Agreement? (1)Offer?(Parties, subject matter, specificity, intent) (2)Acceptance? (intent, communication timing) b.Consideration from both sides? c.Capacity d.Legal purpose? e.Genuine consent (mutual mistake, fraud, duress, undue influence) f.Form – must contract be in writing? 2.Common Law rules require all elements exist before a contract is found to exist

3 3.Basic contract-law concerns and issues a.Does a contract exist? »Degree and amount of specificity varies »Common Law requires ____________ »U.C.C. requires ____________ »Would a judge have enough information to determine »What the parties intended? »What it would take to _____________________________? b.When did contract come into existence? »When was acceptance effective? »____________________ rule »Offerors receipt rule c.What amount of flexibility is there in performance requirements? »Reasonable standard (_____________________) »Satisfaction standard (__________________________) »Express conditions in contract

4 4.Remedies a.Law remedies = money (1)__________________ damages (2)__________________ damages (3)________________ damages (4)____________________ damages (5)Punitive damages (very rare, requires intentional tort) b.Equity remedies (1)All require proof that _____________________________ exists (2)Specific performance = court order to perform »Unique performance »Unusual in Common Law system »Standard remedy in ______________________ (3)Substantial performance »Remedy for party who has breached contract (4)Quasi-contract, quantum meruit »No contract, but court will treat situation as if a contract existed

I. UCC – GENERAL IDEAS A. Specific Features of UCC 1. Internal definitions »UCC definitions may be broader or narrower than standard 2. Drafted with normal methods of doing business in mind »E.G., what does a factory purchaser do when she needs some parts fast? 3. Uses a number of vague terms that allow courts to consider what really happens in any particular type of trade »Reasonable, commercially reasonable, _______________, _______________, generally accepted practice » Terms are not so vague when limited to a specific situation »Generally, an adoption of terms developed in Common Law contract cases over past 400+ years A ________ is a generic item of tangible personal property.

B. Commercial Level Transactions 1. Necessary to think / understand in the context of commercial- level transactions a. There are specific provisions dealing with consumer transactions, otherwise assume commercial transaction b. Drafters were thinking of (E.G.) manufacturers purchase of parts, wholesalers/retailers purchase of inventory, etc. 2. In terms of $ value, most commercial-level transactions are ______________________ a.Legal rules do not give extra favor to a commercial buyer b.Contract provisions that might be held improper in a consumer-buyer setting are accepted in commercial cases. »A commercial buyer must be _______________ than a consumer

II. ARTICLES 2 & 2A – Contracts for the sale/lease of goods. A. Art. 2 of UCC governs only contracts for the sale of goods 1. Sale = _______________________________________ 2. Goods = ______________________________ [see personal property] [ for when see definition of identification ] 3. Some specific provisions for transition situations (real property to personal property, reverse) 4. Includes only a portion of all business contracts a. All other types covered by __________________________ b. Some UCC-covered contracts also covered by ______________ c. Some contracts cover both goods and services »Which controls? UCC or Common Law? Practice advice = _____________________________________________ (even if in same document, etc.)

B. Merchant (much broader than normal use) 1. Defined to include person or company that: a. ____________________________________________ b. Holds out as having expertise in commerce re __________ _____________________________ c. Employs agent, etc., __________________________ 2.Usually a merchant as to some things, not others 3. Can be merchant __________________________ a type of goods (e.g. bakery is merchant re flour contract but not when selling used ovens) C. Consumer (can only be a purchaser / buyer) 1. Buyer who purchases item for _________________________ use 2. A few special rules for sales to consumers and by non-merchants »UCC is not consumer protection law

D.UCC vs. Common Law contracts 1.Before a Common Law contract is declared to exist requires all of the elements be proven to exist [not flexible]: »Agreement (offer & acceptance) »Consideration »Contractual Capacity »Legality (of performance) »Genuineness of assent »Form (which must be in writing, Statute of Frauds) 2.Before a UCC contract is declared to exist, the facts must show that ___________________________________ [flexible] a.All factors relevant to C.L. contract are relevant to UCC, but are not absolutely necessary b.UCC does not have specific rules on some things because it assumes they are covered by general law, e.g.: »Contractual capacity »Rules against enforcement of contracts for illegal acts, based on fraud, etc.

3.UCC has default (a/k/a gap-filling) provisions that provide contract terms where the parties made no agreement: »_________________terms »Time for performance (shipment, payment, etc.) »___________________ terms a.The assumed terms are what would generally be expected by persons involved in that trade, market prices/conditions b.Can make an agreement ________________________ terms will apply where no specific agreement by parties c.If there is any wish to_________________________________ must specifically agree to those different terms. 4.UCC is more like other countries code law contracts a.CISG very close to UCC and many European codes b.Some codes have very specific provisions for different types of contract »May be almost impossible to use different terms

III. SOME SPECIFIC ISSUES A. Battle of the Forms 1. Results from convergence of two trends (maybe one) a. Form contracts carefully drafted by lawyers to cover all situations for a business b. Regular use of forms without examination 2. Forms cannot address particularity of each contract (neither can business), therefore rather general » Forms (and businesses) essentially ignore the existence and terms of form/contract used by other party 3. UCC did not solve the problem, just changed forms terms 4. Best legal solution (?) = ignore unagreed terms, apply UCC rules NOTE: All but a very small minority of contracts are completed without problems. The cost of individually reviewing each contract far out-weighs cost of a few messy deals.

B. Offer and Acceptance 1. Rigid nature of Common Law contract-formation rules 2. Fairly rigid code law rules re contract-formation (big variety) 3. Minimal UCC requirements a. Look at ______________________ to determine intent b. Is there a reasonably certain basis for the court to grant an appropriate remedy? » Include ______________ provisions when deciding c. General minimum requirements = Court must be able to find (1) Identity of parties (easy) (2) The goods (fairly precise) to be sold (_____________) (3) The ______ to be sold [unless requirements or output contracts] (4) The price to be paid or the ____________________ d. The fewer terms that are agreed, the less a court is likely to decide that intent to contract was present

C. Other Contract Issues 1. Good faith is used throughout the UCC as an affirmative, non- negotiable, requirement. a. For non-merchants = __________________ b. For merchants = honesty in fact and ________________ __________________________________________________

D. Statute of Frauds (i.e. what contracts must be written) 1. All UCC sales contracts with_______________________ 2. If writing required: a. Necessary details can be taken from different writings if relationship between writings is established b. Signature required is of the person who contends there is no contract or who denies breaching contract c. Special rule re ______________________________: (1) Memorandum sufficient against sender (2) Transmitted to the other party (3) No objection within 10 days of receipt (4) Writing good against both NOTE: Outside C.L. there is nothing called statute of frauds. In most codes, any contract can be oral (general rule). In some, all contracts between businesses must be in writing (e.g. former USSR republics).

E. Evidence, Interpretation in all contract situations 1. Parole (oral) evidence cannot contradict written contract terms » Can explain, add, define contract terms 2. Types of evidence in order of strength/preference: a. Course of _____________ = what the parties did during any pre-dispute performance of the contested contract b. Course of ____________ = what the parties did in dealings with each other prior to the contested contract c. _______________ = understanding and practice of persons who are active in, knowledgeable about, the trade involved in the contract (1) Mostly applied to persons / parties who are merchants (2) If a disagreement is about a common business practice, rule applied to all business persons even if not a merchant in a particular transaction 3. Types of evidence, etc., are generally the same in non-UCC cases but UCC gives MUCH more weight to performance, usage