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Contract Law

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  1. Contract Law Jody Blanke Professor of Computer Information Systems and Law

  2. Contract Law As Private Law • Willing parties can agree to do most anything • Freedom of contract • “Meeting of the minds”

  3. 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.)

  4. 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

  5. Basic Requirements • An agreement between the parties • Consideration • Capacity • Legality


  6. 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

  7. 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

  8. Literal Death of An Offer • The offeror dies • The offeree dies • Destruction of subject matter

  9. Acceptance • At common law – “mirror image rule” • UCC – more relaxed (and reasonable) • “battle of the forms” • Generally effective upon receipt • exception – “mailbox rule”

  10. Consideration • 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

  11. Capacity • Age – law protects minors • Voidable contract • Exception for necessaries • Mental competency • Void contract • Voidable contract • Intoxication

  12. Legality • 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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