Contract law (United States)

In United States law, Contract Law is a field of law that deals with the formation and effects of contracts. There is no uniform private law in the United States, as the competence for this lies with the individual states. Nevertheless, there is great agreement in contract law , based on the legacy of English common law , the introduction of the Uniform Commercial Code and the restatement (second) of contracts .

Legal sources

The US contract law is structurally largely based on law and is in the tradition of common law. However, each state has its own common law and thus its own contract law. It is true that there is a uniform act in the form of the Uniform Commercial Code UCC , that is, the attempt to harmonize the various federal laws through model laws; however, the states have adopted the UCC to very different degrees.

Art. 2 UCC only applies to the sale of goods. Goods are all movable things, i. H. Fahrnis. Furthermore, some regulations of the UCC only apply to merchants ; the most important of these regulations are:

• P. 2-201 (2) UCC as an exception to the Statute of Frauds if both sides are merchants;
• s. 2-205 UCC for a binding offer if one of the applicants is a businessman;
• s. 2-207 (2) UCC for the effect of a Modifying Acceptance if both sides are merchants;
• s. 2-314 (1) UCC for the implied warranty of merchantability when both sides are merchants;
• s. 3-403 (2) UCC for purchase in good faith, which is only possible by a merchant who trades in such goods.

The common law continues to regulate all other types of contracts, such as B. the purchase of land or service contracts.

Conclusion of contract

According to American law, five conditions must be met for a contract to be created: 1. offer and acceptance 2. consideration 3. intention to create legal relations 4. legal capacity 5. formalities (formal requirements).

Offer and acceptance

According to both Common Law and UCC, an offer and acceptance are necessary for the creation of a contract . An offer is fundamentally freely revocable. The following exceptions exist to this principle:

1. The option agreement: this application the recipient must (offeree) the offeror (offeror) consideration promised that he considers the offer open until at some point.
2. The application of a merchant according to UCC: The following requirements are necessary:
   1. the applicant is a businessman
   2. the applicant offers the purchase or sale of goods signed in writing
   3. the applicant promises to keep the offer open. If the letter does not specify a specific date, a reasonable time applies . However, the offer cannot remain open for more than three months.
3. detrimental reliance: the offer remains open even if the offeror could see that the offeree relies on the offer to his own disadvantage. If this is the case, the offer acts like an option contract.
4. The beginning of the contract in a unilateral contract offer: power of the offeror an offer of a unilateral contract is the offer from the time for a reasonable period of time (reasonable time) no longer revocable (revocable), once someone has started to fulfill the contract. However, the acceptance only takes place with the fulfillment of the contract, but can be terminated at any time before. The beginning of the fulfillment is to be distinguished from mere preparatory actions.

Consideration (~ counter-sacrifice)

→ Main article : Consideration (United States)

According to English common law , mutual promises are only legally enforceable if they are borne by consideration (~ counter-sacrifice). In the theoretical dispute about the exact requirements of consideration , England and the USA have developed in different directions. The majority of the US courts and § 71 Restatement 2nd require consideration that the respective promise must be "bargained for" . A promise is “bargained for” if it was given in exchange for another promise.

The promise or the performance because of a promise in return for an already existing duty of the other party is not legally binding (so-called pre-existing duty ). The prerequisite for consideration also applies in particular to subsequent changes to the contract. In principle, a contract can therefore only be changed if the respective opposite party receives new consideration in return for the contract change .

The more recent Common Law doctrine allows some exceptions to this. According to § 89 Restatement (2nd) , a promise to change the contract can be enforced without consideration if it is "fair and equitable in view of circumstanes not anticipated" .

An even more extensive exception can be found for the purchase of goods according to the UCC. According to UCC § 2-209, changes are already possible if they are made "in good faith" . G ood faith regularly requires legitimate business interests beyond the control of the party seeking the amendment.

Capacity and duress

A lack of capacity (~ legal capacity ) is a defense against an alleged contractual obligation. The following people lack capacity :

• Minors,

• Mental retardation (mental incapacity) and

• intoxication (intoxication).

Further contracts are voidable (voidable), when under duress (duress) or undue influence have been executed.

Statute of Frauds

Based on an English law, the rules on formal requirements are still referred to as the Statute of Frauds . The written form can therefore be a requirement for the following types of contracts:

1. Contracts that cannot be fully fulfilled within one year of the conclusion of the contract,
2. Wedding,
3. Land contracts,
4. Contracts with executors and administrators of estates (~ executors, z. B. executor, etc.),
5. Contracts for the purchase of goods worth at least $ 500,
6. Surety contracts (suretyship) .

A $ 500 contract for the purchase of goods need not meet the requirements of the Statute of Frauds , if

1. the other party in the main proceedings (trial) admits the existence of the contract.
2. the goods have been received and accepted and the buyer has paid the purchase price;
3. the goods are unsuitable for resale in the seller's regular course of business (UCC 2-201 (3)).

The Statute of Frauds does not apply to a land purchase contract if conveyance is present or two of three of the following conditions are met (part performance doctrine):

1. a (down) payment on the purchase price,
2. Ownership of the land and / or,
3. the buyer has made improvements to the land.

Courts can ultimately refuse to force a contract if they consider it unconscionable .

Overview of the differences between Common Law and Uniform Commercial Code (UCC)

	Common law	UCC
adoption	mirror image rule	Acceptance may differ from the offer ( battle of forms )
adoption	bilateral: only through promise, unilateral: through fulfillment	Always by sending the goods or promising to send them
Contract amendment	consideration generally required	good faith sufficient
Breach of contract	material breach	perfect tender rule

Content of the contract, merger clause and the Parol Evidence Rule

As integration of US law called the fixation of a contract in writing with the intention that it full and final contents of bargains reflects (~ business negotiation). If a contract is integrated, any (extrinsic) evidence other than the contract document itself to prove the content of the contract is excluded. This is known as the parol evidence rule (IPA: ˈpæɹ.əl ).

A contract can be fully integrated and partially integrated . In the case of partial integration , additional evidence is only permitted if it is consistent with the content of the contract. The parties usually want to ensure full integration through a so-called merger clause . This is the express provision that this contract document reflects the full and conclusive content of the contract.

Contract Interpretation and Plain Meaning Rule

Numerous US states have adopted the so-called plain meaning rule from English common law . According to this rule, contracts without extrinsic aids are to be interpreted as they are used in ordinary speech. The state of New York is considered to be the most important exponent of this rule. The state of California rejects the rule based on the vote by Roger J. Traynor in Pacific Gas & Elec. Co. v. GW Thomas Drayage, on the other hand, leans towards contextualism.

Breach of contract

A contract is broken (breach), if the promisor (promissor) has an obligation to fulfill the contract and he does not fulfill this obligation. The promise recipient can only sue against the breach of contract if he is willing and able to fulfill the contract himself. Breach regimes differ significantly between UCC and common law. According to common law, a distinction is made between minor (minor) and major (material) breaches of contract. According to this, the promise recipient cannot sue if he essentially receives what he is entitled to under the contract (doctrine of substantial performance).

For the purchase of goods according to the UCC, however, the perfect tender rule applies . Any deviation from the contractual promise is considered a breach of contract. The consequence of a breach of contract is that the buyer can reject a delivery of goods in whole or in part (right to reject). If a delivery date has been agreed for the delivery and the seller delivers before this time, he is exceptionally entitled to make a new delivery offer to the buyer after reasonable notice (right to cure) .

As an exception, the seller is also entitled to a right to cure, even in the case of delivery after the agreed delivery time, if he could reasonably assume that the delivery would be acceptable with or without money allowance (UCC § 2-508). Whether he can expect this depends 1. on previous deals (prior dealings) or trade practices or 2. his ability to know about the defect of the goods despite customary care.

With a duration supply contract which is considered perfect tender rule limited: Here, the buyer the goods can only reject (reject), their value is significantly impaired. Likewise, only the entire contract is considered broken if this affects the value of the entire contract.

Legal remedies for breach of contract (remedies)

The US law does not in the tradition of the common law for breach of contract principle only monetary compensation, so-called. Damages to. The fulfillment of the contract by providing the consideration is not intended and cannot be enforced by a court. There are some exceptions to this principle. The most important is the specific performance . This is an equity remedy . The court can order specific performance if the remedy in law is not sufficient. The most important example in practice is the purchase of land. Specific performance is never permitted in service contracts.

Another exception to the principle of monetary damages is the injunction (also injunctive relief ). Through this, a court can prohibit a certain action from a party before an actual civil litigation . In the event that a contract for services is breached, the party in compliance with the contract can forbid the party in breach of contract to provide its services to a competitor. It is therefore a kind of temporary legal protection. However, since this is also an appeal in equity and not in law , no jury can judge such an application.

Against the specific performance special following are defenses are:

1. laughs : the plaintiff delayed the lawsuit unnecessarily and therebyharmedthe defendant ;
2. unclean hands : the plaintiff has behaved improperly in any way;
3. Sale to a bona fide purchaser : The purchased item has meanwhile been sold to a third party for value and in good faith .

Three person relationships

Non-parties can also have contractual rights and obligations under US law. Three-person relationships occur in the following constellations:

• The contract in favor of third parties ,
• Assignment (assignment) , debt assumption and novation and
• The transfer of the title (formal position comparable to ownership) to a buyer.

The buyer of a requirement contract can only assign to a third party if the assignee guarantees in good faith not to change the previous delivery quantities (UCC §2-306).

literature

Textbooks

• Arthur Corbin: Corbin on Contracts . 2019 ed., Edited by John E. Murray, Jr. and Timothy Murray. West Publishing, Rochester 2019.
• E. Allan Farnsworth: Contracts . 4th edition. Aspen Publishers, New York 2004, ISBN 978-0-7355-2642-6 .
• E. Allan Farnsworth: Cases and Materials on Contracts . 7th edition. Foundation Press, New York 2008, ISBN 978-1-59941-030-2 .
• Howard O. Hunter: Modern Law of Contracts . 2 vols. Thomson Reuters Westlaw, 2014.
• John E. Murray, Jr .: Murray on Contracts , 5th ed. LexisNexis, 2011.
• Joseph M. Perillo: Contracts , 7th ed. West Academic, St. Paul (Minn.) 2014.
• Robert E. Scott, Jody S. Kraus: Contract Law and Theory , 5th ed. LexisNexis, 2013.
• Samuel Williston: Williston on Contracts , 4th ed., Edited. v. Richard A. Ford. 31 vols. West Publishing, Rochester 1990-2004 (revised 2007-2019).

Short textbooks

• Brian A. Blum: Examples & Explanations for Contracts , 7th ed. Wolters Kluwer, New York 2017.
• John D. Calamari, Joseph M. Perillo: Black Letter Outline on Contracts , 5th ed. West Publishing, Rochester 2010.
• Melvin A. Eisenberg: Gilbert Law Summaries on Contracts , 14th ed. BarBri Group, 2007.
• Steven L. Emanuel: Emanuel Law Outline: Contracts , 11th ed. Wolters Kluwer, New York 2015.
• Jeffrey Ferriell: Understanding Contracts , 4th ed. Carolina Academic Press, 2018.
• Robert A. Hillman: Principles of Contract Law , 4th ed. West Academic, St. Paul (Minn.) 2018.
• Eric A. Posner: Contract Law and Theory , 2nd ed. Wolters Kluwer, New York 2015.