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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.

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Contract Law

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Contract law l.jpg

Contract Law

Jody Blanke

Professor of Computer Information Systems and Law

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Contract Law As Private Law

  • Willing parties can agree to do most anything

  • Freedom of contract

  • “Meeting of the minds”

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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.)

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Uniform Commercial Code

  • 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

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Basic Requirements

  • An agreement between the parties

  • Consideration

  • Capacity

  • Legality

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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

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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

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Literal Death of An Offer

  • The offeror dies

  • The offeree dies

  • Destruction of subject matter

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  • At common law – “mirror image rule”

  • UCC – more relaxed (and reasonable)

    • “battle of the forms”

  • Generally effective upon receipt

    • exception – “mailbox rule”

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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

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  • 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

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  • Age – law protects minors

    • Voidable contract

    • Exception for necessaries

  • Mental competency

    • Void contract

    • Voidable contract

  • Intoxication

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  • 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

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Genuiness of Assent

  • 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

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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

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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

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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

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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

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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

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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

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Discharge of Contract

  • Discharge by performance

  • Discharge by agreement

  • Discharge by impossibility

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Discharge by Agreement

  • Mutual rescission

    • key word – “mutual”

  • Novation

    • new contract

  • Accord and satisfaction

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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?”

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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

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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

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Mitigation of Damages

  • Nonbreaching party has duty to lessen the amount of damages

    • e.g., wrongful discharge

  • Anticipatory repudiation

    • Duty to “cover”

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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

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Equitable Remedies

  • Injunction

  • Quasi-Contract (Quantum Meruit)

  • Specific Performance

    • generally available for unique goods or property

    • not appropriate for personal services

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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

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Promissory Estoppel

  • “Last ditch” remedy

  • Four requirements (Restatement of Contracts § 90)

    • A promise

    • Justifiable reliance

    • Foreseeability

    • Injustice

  • e.g., Hoffman v. Red Owl Stores

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  • 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

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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 on-air news anchor in the Atlanta/Athens television market for 6 months

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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

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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

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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.)

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