I. Governing Law for Contracts
A. General Rule
- Common law governs all contracts
- Exception: Sales of goods are governed by the Uniform Commercial Code (UCC)
B. Key Definitions
1. Agreement vs. Contract
- Agreement: Not necessarily a contract
- Contract: An enforceable agreement
2. Agreement (Restatement Second of Contracts)
- A manifestation of mutual assent
- Sufficiently definite to conclude a bargain
- Parties need only agree on essential terms, not all terms
3. Contract Defined
- Restatement Second § 1: A contract is a set of promises (at least two) that the law will enforce
- A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law recognizes as a duty
4. Simple Definition of Contract
- Offer + Acceptance + Consideration + Lack of Defenses
- This comprehensive definition helps ensure all issues are spotted on exams
II. Mutual Assent and Objective Theory of Contract
A. Mutual Assent
- Parties must reach an agreement
- Required for contract formation
B. Objective Theory of Contract
- Courts focus on outward manifestation of parties’ intent
- What parties thought in their minds is irrelevant
- Test: What would a reasonable person in the eyes of the opposing party conclude?
C. Key Case: Lucy v. Zehmer
- Prime example of objective theory
- Outward manifestation controls over internal thoughts
- Court looks at what parties said and did, not what they were thinking
- Even drinking/joking may not negate contract if objective manifestations show intent
D. Intent - Most Important Aspect
- Intent is the most important element in contract law (like in criminal law)
- Did parties intend to be serious or joking?
III. UCC - Sales of Goods
A. Definition of “Sale” (UCC § 2-106(1))
- A sale is a contract in which title to goods passes
- From the seller to the buyer
- For a price
B. Definition of “Goods” (UCC § 2-105(1))
- All things movable at the time they are identified as the goods to be sold under the contract
- Must be tangible and movable
C. Goods Associated with Real Estate
1. Growing Crops and Timber (UCC § 2-107(1))
- Growing crops - always considered goods (UCC applies)
- Timber to be cut - always considered goods (UCC applies)
- No matter who cuts them
2. Fixtures (UCC § 2-107(2))
- Rule: If removed without material harm to the land AND severed by the seller, UCC applies
- General principle: Anything affixed to land is part of the land
- Even if attached by one pipe or one screw
- Once affixed = not goods until properly severed
3. Important Note
- Light bulbs screwed into sockets connected to land = part of land
- Cannot be removed when selling home
- Barbecue affixed to land/wall = part of land, not goods
IV. Mixed/Hybrid Contracts
A. Severability Test
- Contracts are severable if promises are:
- Independent AND
- Apportionable
1. Independent
- Promises are independent if parties’ intent evidences they would have contracted for the promises separately
- Example: Hire painter for 800 to paint dining room by March 15
- Focuses on whether obligations are separate
2. Apportionable
- The consideration can be split proportionally for partial performance
- Example: Pool cleaning for $50/month for whole year - can sever into individual months
- Focuses on whether consideration can be divided
B. When Not Severable
- Apply predominant purpose test
- Example: Domino’s pizza delivery - cannot separate price for delivery vs. pizza
- Apply law governing the predominant purpose of the contract
V. Types of Contracts - Formation
A. Express Contracts
- A contract in which the offer, acceptance, AND consideration are ALL expressly stated by the parties
- Can be stated orally OR in writing
- Common mistake: Express does NOT mean written
- Example: Lucy v. Zehmer - everything said and wrote was expressed
B. Implied-in-Fact Contracts
- A contract in which the offer, acceptance, OR consideration is evidenced by the parties’ actions rather than words
C. Implied-in-Law Contracts (Quasi-Contracts)
1. Key Point: NOT A CONTRACT
- First rule: An implied-in-law contract is NOT a contract
- It is an equitable remedy created by the courts
2. Three Elements Required:
- The moving party (plaintiff) had an expectation of receiving a benefit in return for performance
- Expectation must be reasonable (objective standard)
- The moving party had, in fact, conferred a benefit
- It would be unjust to allow the other party to retain that benefit without compensation
- Called unjust enrichment
3. Important Notes
- Equitable remedy, not legal remedy
- Contract formation defenses do not apply (because it’s not a contract)
- Statute of Frauds is NOT a defense to quasi-contract
- Application: Family law - innocent spouse treated as having quasi community property rights
VI. Offer
A. Definition
- An offer is an intent to be bound by certain definite terms which are communicated to the offeree
B. Three Key Elements
1. Intent
- Present intent to be bound (not future intent)
- “Here and now” - not “I will at some point”
- Judged by objective standard of contract law
- Most important element - offer literally “is an intent”
2. Certain Definite Terms
a. Common Law
- Material terms are required
- Material terms = those terms necessary for the court to:
- Determine if there was a breach, AND
- Create a remedy if breach occurred
b. UCC
- Only two requirements:
- Intent to be bound
- Quantity
- Everything else supplied by UCC gap fillers
3. Communicated to Offeree
- The offeree must receive and understand the offer
VII. UCC Gap Filler Provisions
A. General Rule
- Gap fillers apply when there is both intent and quantity
- UCC is pro-contract enforcement
- Designed to make it easier for parties to form valid contracts
B. Price (UCC § 2-305)
1. General Rule (§ 2-305(1))
- Parties can conclude contract even though price is not settled
- Price = reasonable price at time of delivery
2. Three Scenarios for Reasonable Price
- (A) Nothing is said about price
- (B) Price left to be agreed by parties, and they fail to agree
- (C) Price fixed in terms of agreed market/standard or set by third party/agency
- Example: Crude oil at market price at time of delivery
3. Good Faith Requirement (§ 2-305(2))
- Price fixed by seller or buyer means price fixed in good faith
- Every agreement requires good faith and fair dealing
- Cannot hide known defects or material information
4. No Fault Provision (§ 2-305(3))
- When price left to be fixed fails through fault of no party
- Other party may:
- Treat contract as canceled, OR
- Fix a reasonable price
5. Conditional Intent (§ 2-305(4))
- TESTED PROVISION
- If parties intend NOT to be bound unless price is fixed or agreed
- And price is not fixed or agreed
- Result: There is NO contract
- “Agreement to agree” is not enforceable
- The word “unless” is key
C. Place of Delivery (UCC § 2-308)
1. General Rule (§ 2-308(a))
- Unless otherwise agreed, place of delivery = seller’s place of business
- If no place of business, then seller’s residence
2. Identified Goods (§ 2-308(b))
- For identified goods which parties know are at another location at time of contracting
- That location is the place of delivery
- Example: Yacht in Florida - delivery must occur in Florida, not seller’s residence
D. Time of Delivery (UCC § 2-309)
1. General Rule (§ 2-309(1))
- Time for shipment, delivery, or other action if not agreed = reasonable time
- Example: Goods from US = perhaps 30 days reasonable
- Example: Goods from China through customs = perhaps 3 months reasonable
2. Successive Performances (§ 2-309(2))
- Contract for successive performances but indefinite in duration
- Valid for reasonable time
- May be terminated at any time by either party
- Example: Monthly water delivery with no end date
E. Time of Payment (UCC § 2-310)
- Unless otherwise agreed, payment due at time and place buyer receives goods
- Even if place of shipment is place of delivery
- Simple rule: Get the goods = pay at that time
VIII. Types of Contracts - Acceptance
A. Bilateral Contracts
- Mutual promises are exchanged
- Promise to promise
- A promises to B, B promises to A
- Example: “I promise to sell you my Mustang for 30,000”
- Contract formed upon exchange of promises
B. Unilateral Contracts
1. Definition
- Traditional unilateral contract = offeror requests performance rather than a promise
- Offeror promises to pay upon completion of requested act
- “I don’t want your promise, I want your performance”
2. Key Rule
- Contract formed ONLY upon completion of performance
- NOT before completion
- No contract exists until act is fully completed
- Example: “I will pay you $10 if you walk across Brooklyn Bridge Saturday at noon”
- Saying “I promise to walk” = no contract
- Walking halfway = no contract
- Arriving at 12:02pm = no contract (too late)
- Completing walk at proper time = contract formed
3. Timing Issues
- Master of offer sets terms
- Must complete performance exactly as specified
- Once completed, contract exists and offeror owes payment
IX. Exam Tips
A. Issue Spotting
- Issue spotting = approximately 25-30% of grade
- Analysis = 50-60% of grade
- Conclusion = minimal importance
B. Definitions
- Never get definitions wrong
- Especially problematic on take-home exams
- Wrong definition = entire analysis will be wrong
- Use commercial outlines and class notes
C. Formatting Tips
- Underline and bold key phrases
- Intent, certain definite terms, communicated, etc.
- Helps bar graders see important points
- Makes key elements stand out
D. UCC Code Sections
- Do NOT memorize UCC section numbers
- Never put wrong number on exam - graders will penalize
- Exception: UCC § 2-207 (Battle of Forms) commonly referenced
- Better to describe provision than risk wrong number
E. Study Approach
- Understand concepts, don’t just memorize
- Make your own outlines starting now
- Read assigned cases before each session
- Be prepared to brief cases when called upon
X. Important Reminders
A. Case Reading
- Read all assigned cases through end of each session
- Be ready to brief cases at any time
- Lucy v. Zehmer is critical - will definitely appear on final
B. Bar Preparation
- Start building study habits now
- Practice is essential
- Commercial outlines helpful but make your own
- Time management crucial on bar exam (approximately 1 hour per essay)
C. Study Tips
- Intent of parties = most important aspect
- Objective theory applies throughout
- Court enforces parties’ intent when clear
- Gap fillers only apply when terms are missing