Private Law
Contracts
Contracts: sources of law
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common law  case law
state law  harmonized by UCC
UCC
International contracts:
 Vienna (UN) Convention on the International
Sale of Goods (CISG), 1980
 UNIDROIT principles
 new developments to incorporate software
contracts and internet contracts
 consumer protection legislation
The Uniform Commercial Code
 American Law Institute (ALI) restatement
 1906 Uniform Sales Act
 1942 Uniform Commercial Code
 National Conference of Commissioners on
Uniform State Laws (NCCUSL)
Art. 1 UCC: General provisions
Art. 2 UCC: Sale of goods (revision)
Art. 2A UCC: leases
Art. 9 UCC: Secured transactions
Contract formation: overview
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offer and acceptance
consideration
formality and the Statute of Frauds
defences
void/voidable contracts
offer: offeror
 offeror: expression of present intent
to enter into contract
 intent to be legally bound?
 objective intent?
 reasonable manifestation of intent?
The „reasonable“ standard is used unless
one party has specific knowledge.
offer: offeree
 offeree: actual knowledge
 communication of the offer by the offeror
to the offeree
When the offer has become known to the
offeree, he has the power of acceptance.
offer vs. non-offer
 advertising  invitation to receive
offers
 specific advertisement (price and
quantity, e.g. real estate)  may be
an offer
offer: duration
 if stated in offer: measured from date
of receipt of offer
 if firm offer (no time limit stated):
reasonable time (max. 3 months)
offer: termination by offeror
 revocation
 prior to acceptance
 effective upon receipt (in possession of
offeree or authorized person, or
deposited in authorized location)
 express communication: revocation in
the same manner as offer
 conduct: offeree learns from reliable
source – reasonable understanding that
offer is no longer open
offer: termination by offeree
 rejection
 express
 counteroffer: new offer with the offeree
as new offeror (may keep old offer
„under advisement“: original offer still
open) – effective upon receipt
 no revival of offer except by offeror
 exceptions: counter-inquiry, comment on
the terms, request for modification,
future acceptance (subcontracting)
offer: termination by law
 death or insanity of offeror
 death occurs after offer and before
acceptance
 destruction of subject matter
 supervening law making contract
illegal
acceptance
 must mirror terms of offer
 new terms = counteroffer
 bilateral contract: acceptance in the
way required by the offer
 unilateral contract: acceptance by
performance
the „mailbox rule“
 for offers and acceptances made by
mail: mailbox rule = acceptance
effective at the time of posting
 acceptance is valid when sent
 before receipt of revocation
 when out of offeree‘s possession
(reasonable medium)  seasonably
dispatched, received within normal
timeframe
the „mailbox rule“
 acceptance effective even if lost or
delayed
 mailbox rule only for acceptance!
 exceptions: offer stipulates that
acceptance has to be received; option
contract: receipt necessary before
end of option term
dual responses
 „crossing“ of acceptance (A) and
rejection (R)
 A) R sent, A sent; R received, A received
 contract (-)
 B) R sent, A sent; A received, R received
 contract (+)
dual responses
 C) A sent, R sent; R received, A received
(„overtaking rejection“)  contract (+)
under 2nd restatement; if offeror relies
on R, offeree is estopped from
enforcement
 D) A sent, R sent; A received, R received
 contract (+)
dual responses
 rationale:
 rejection of offer effective upon receipt
 acceptance effective upon posting
(mailbox rule)
silence
 silence is not acceptance
 exceptions
 intent to accept (implied-in-fact
contract): manifestation by conduct
 trade practice: buyer-seller history
 offeree takes benefit, expectation that
compensation is presumed
differing offer and acceptance
 no contract formed
 goods nevertheless delivered and
accepted  contract (+)
 contractual terms: terms of the last
communication („last word“ rule)
 „battle of the forms“ problem
consideration
 promise binding only if
„consideration“ received in return
 without consideration, the contractual
promise is unenforceable
the consideration doctrine
 „bargain“
 performance and counter-performance
are subject of an intentional bargain
 contracts are exchange relationships
 mutual promises: both parties are
bound by contract or neither is bound
consideration: traditional view
 consideration must induce detriment
of the promisee and benefit of the
promisor of the original offer as result
of promised performance
 bilateral contract: (counter)promise
 unilateral contract: promisee‘s
conduct
example
 promisor: „I will pay you
(offer/promise) if you mow my lawn
(detriment to promisee, benefit to
promisor)“
 promisee: mows lawn (not legally
obliged to perform, performs with
intent to accept offer)
  the mowing of the lawn is the
consideration; a contract is formed
consideration: modern Approaches
 modification of bargain concept
 anything actually sought by one party
in exchange for his promise
constitutes consideration
lack of consideration
 without consideration, the contract is
viewed as „illusory“ (not obligating
either party)
 economic equivalence is not required:
a „peppercorn“ is enough (provided it
is what the promisor wants in
exchange)
 moral obligation is not enough for
consideration (legal value needed)
lack of consideration
 „past consideration“ (past
performance/forbearance) cannot be
consideration (no bargain)
 „pre-existing duty rule“: promise to
discharge existing legal/contractual
duty lacks consideration (no
detriment to promisee)
limits of consideration doctrine
 state law of some states: writing is
substitute for consideration
promissory estoppel
 problem: promise is unenforceable
without consideration
 protection of promisee:
 promissory estoppel may substitute
consideration for gratuitous promises
(e.g. gifts; intra-family promises)
 only used in special cases
promissory estoppel
 „estoppel“ from equity jurisprudence
 „estopped“ means somebody loses
their right to invoke a particular
defense
 „promissory estoppel“: promisor is
not allowed to invoke the lack of
consideration as his defense not to
fulfill his promise
promissory estoppel
 conditions:
 promise has been given
 promisee acted in reliance on it
 promisor knew/should reasonably
anticipate this reliance action
 injustice can be avoided only by promise
enforcement (in full or in part)
modification of contracts
 traditional view: modification of
existing contract requires additional
consideration (unless unforeseen
event, or UCC § 2-209(1))
 modern trend: modification is binding
even if no further consideration is
given
formality
 Statute of Frauds: (limited) writing
required for some contracts
 contract modification: nature of
future contract determines form
requirement
Statute of Frauds
 promises in consideration of marriage
 promises to answer for debt/duty of
another person (guarantees)
 real property contracts
 contracts that will not be performed within
one year
 contracts not to be performed within
promisor‘s lifetime
 UCC 2-201: sale of movables over $500
Statute of Frauds
 requirement: defendant has signed
something that is evidence of
existence of contract
 aim: proving the existence of the
contract
 no need for contract contents or
terms in writing
Statute of Frauds
 non-fulfilment of form requirements
 some states: voidable contract
 some states: contract considered void
and cannot be invoked (e.g. Alabama)
Statute of Frauds: exceptions
 performance of contract according to
its terms cures non-compliance with
Statute
 conveyance of real property rights:
when seller has conveyed rights to
buyer, non-compliance with Statute is
cured (however, full payment by
buyer is not enough on its own)
Statute of Frauds: exceptions
 sale of goods: UCC § 2-201 (3):
 (a) specially ordered goods: Statute
cannot be invoked after production starts
 (b) acknowledgment in litigation that
contract was concluded
 (c) partial performance  promise
enforceable to the value of rendered
performance
Void and voidable contracts
 „void“ means the contract is
considered non-existent
 „voidable“ means that a party can
ask in litigation for the contract to be
set aside („power of avoidance“)
lack of capacity
 minors (under age 18 in most states)
 mentally handicapped persons
 intoxicated persons if condition was
known to other party/apparent
 some states: capacity following
marriage (e.g. Iowa)
incapacity  contract is voidable by
the person lacking capacity
lack of capacity
 when reaching age of capacity, minor
can ratify contract (expressly/by
implication)
 contracts for necessities (items
purchased for requirements of daily
living) are binding upon minors
Illegality
 contracts are void if concluded for
illegal ends
fraud and duress
 promises given under force/duress 
voidable
 undue influence: particular power of one
party over the other  voidable
 misrepresentation causing error of one
party
 misrepresentation causing contract formation 
void
 misrepresentation of content  voidable
mistake of fact
 error or miscomprehension
concerning facts (not judgments)
 both parties mistaken about essential
part of contract  voidable
fairness
 courts can deny enforcement of valid
contracts for reasons of equity
 only in exceptional cases
 element of surprise
 truly harsh and inequitable results
 relevant for consumer contracts,
disclaimer clauses