UCSD—Contract Law
Jack Friery
Attorney at Law
© 2007
Jack Friery, Esq.
1
Course Overview
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Objective
◦ Practical knowledge of contract elements
◦ Recognition of contract issues
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Approach
◦ Analyze contract law principles
◦ Examine the elements of a contract
◦ Do team and individual practical exercises
© 2007
Jack Friery, Esq.
2
Contract Overview
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“Contract” defined
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Risk allocation?
Express?
Implied?
Enforceable?
Void or voidable?
© 2007
Jack Friery, Esq.
3
Overview (con’t)
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Elements of valid contract
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Offer
Acceptance
Consideration
Lawful purpose
Competent parties
© 2007
Jack Friery, Esq.
4
Overview (con’t)
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Contract types
◦ Unilateral vs. bilateral
Express or implied?
 Written or oral?
 “Quasi-contracts”
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© 2007
Jack Friery, Esq.
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Offer
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Defined
◦ Offeror proposes
◦ Offeree disposes
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Elements
◦ Intent/jokes
◦ Communication
◦ Definiteness
© 2007
Jack Friery, Esq.
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Offer (con’t)
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Essential terms:
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Price
Subject matter
Parties
Time of performance
© 2007
Jack Friery, Esq.
7
Offer (con’t)
Status of ads
 Revocation of offers
 Expiration of offers
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© 2007
Jack Friery, Esq.
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Acceptance
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Defined
◦ Legal manifestation of assent
◦ Saying “yes” the right way
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Mirror image rule
◦ Common law rule
◦ Clarifications
© 2007
Jack Friery, Esq.
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Acceptance (con’t)
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Counteroffers
◦ Common law
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Identity of offeree
◦ Offers to a group
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Bilateral or unilateral contract?
◦ Act or promise?
◦ Who decides?
◦ Significance: when contract arises
© 2007
Jack Friery, Esq.
10
Acceptance (con’t)
How to accept
 Mailbox rule
 Silence as acceptance
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◦ Common law
© 2007
Jack Friery, Esq.
11
Consideration
Contracts vs. gifts
 Mutuality
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◦ Benefit?
◦ Detriment?
© 2007
Jack Friery, Esq.
12
Consideration (con’t)
Past consideration
 Moral consideration
 Illusory promises
 Preexisting duties
 Is the consideration sufficient?
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◦ the peppercorn
© 2007
Jack Friery, Esq.
13
Consideration (con’t)
Contract modifications
 Accord & satisfaction
 Guarantees
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© 2007
Jack Friery, Esq.
14
Legality & Capacity
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Capacity
◦ Age
 Necessity defense
◦ Mental capacity
 Temporary
 Declared incompetence
◦ Intoxication
◦ Does other party have to be aware?
© 2007
Jack Friery, Esq.
15
Legality & Capacity (con’t)
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Legality:
◦ Malum in se: inherently illegal
◦ Malum prohibitum: technically illegal
◦ Severance (add a clause?)
Voidability
 Statute of Frauds
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© 2007
Jack Friery, Esq.
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Contractual Intent
Intent defined: subjectivity
 Mistake
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◦ Unilateral
 Examples
 Remedy? (limited)
◦ Bilateral (mutual)
 Rescission
 Reformation
© 2007
Jack Friery, Esq.
17
Contractual Intent (con’t)
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Fraud & misrepresentation
◦ Negligent misrepresentation
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Duress
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Physical
Economic
Psychological/mental
Form contracts
© 2007
Jack Friery, Esq.
18
Writings
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Statute of Frauds
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Real property
Goods >$500
Marriage
One-year rule
 Lifetime contract?
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Part performance—the panacea
© 2007
Jack Friery, Esq.
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Writings (con’t)
What’s a “writing”?
 Parol evidence rule
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© 2007
Jack Friery, Esq.
20
Third Parties
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Assignment
◦ Rights
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Delegation
◦ Duties
Contract novation
 Third party beneficiaries
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◦ Creditor
◦ Donee
© 2007
Jack Friery, Esq.
21
Contract Provisions (con’t)
Covenants vs. conditions
 Covenant=promise
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◦ Every contract have a covenant?
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Conditions
◦ Examples: insurance policy; alimony agreement
© 2007
Jack Friery, Esq.
22
Contract Provisions (con’t)
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Conditions
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Precedent
Subsequent
Concurrent
Implied in fact
Implied in law
© 2007
Jack Friery, Esq.
23
Performance & Discharge of Obligations
Effect of performance
 Performance/breach
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◦ Material breach
◦ Minor breach
◦ “Punch list” items
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Rescission
© 2007
Jack Friery, Esq.
24
Discharge of Obligations (con’t)
Conditions: met or missed
 Failure to cooperate
 Anticipatory repudiation
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◦ Test: unequivocal
© 2007
Jack Friery, Esq.
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Discharge of Obligations (con’t)
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Insolvency
◦ Bankruptcy
 Executory contracts
 Executed contracts
© 2007
Jack Friery, Esq.
26
Discharge of Obligations (con’t)
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Impossibility
◦ Objective impossibility
◦ Commercial impracticability
◦ Role of Force Majeure
Death of party
 Destruction of subject matter
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◦ Failure of consideration
© 2007
Jack Friery, Esq.
27
Breach, Damages & Remedies
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Compensatory damages
◦ “make whole”
◦ Buyer
◦ Seller
Incidental damages
 Consequential damages
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◦ Test: foreseeabilty
© 2007
Jack Friery, Esq.
28
Remedies (con’t)
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Liquidated damages
◦ Rules for imposing
◦ Penal?
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Caps on damages
◦ Limitation of damages
◦ Third-party liability
Specific performance
 Punitive damages?
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© 2007
Jack Friery, Esq.
29
E-Contracts
Electronic formation
 Electronic signatures
 Federal E-SIGN Act
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© 2007
Jack Friery, Esq.
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UCC
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Article 2
◦ Applicability
◦ What are “goods”?
◦ CISG distinguished
Article 2A
 CISG
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© 2007
Jack Friery, Esq.
31
UCC (con’t)
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General principles
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Merchant or non-merchant?
Good faith & fair dealing
Course of dealing
Trade usage & custom
© 2007
Jack Friery, Esq.
32
UCC (con’t)
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Offer/acceptance/consideration
◦ Relaxed rules/commercial reality
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Battle of the forms
◦ Merchants
◦ Non-merchants
© 2007
Jack Friery, Esq.
33
UCC (con’t)
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Writing requirement
◦ Rule
◦ Exceptions
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Effect of missing terms
© 2007
Jack Friery, Esq.
34
UCC (con’t)
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Warranties
◦ Express
 Samples/models/catalog
◦ Implied
 Merchantability (Hong v. Marriott)
 Fitness for a particular purpose
© 2007
Jack Friery, Esq.
35
UCC (con’t)
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Shipment terms
◦ Risk of loss
◦ Role of insurance
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Written request for adequate assurances
© 2007
Jack Friery, Esq.
36
UCC (con’t)
Performance
 Breach
 Damages
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◦ Buyer
◦ Seller
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Statute of limitations
© 2007
Jack Friery, Esq.
37
Conclusion
© 2007
Jack Friery, Esq.
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