Site Loader

There are two sources of contract law: common law, which is based on case rulings, and statutory law, which is based on federal and state statutes. Contract law uses both common law and a set of statutory rules known as the Uniform Commercial Code.

Contract Law in General

Contract law controls most agreements between parties, whether oral or written, that involve goods, services, money, employment contracts and real estate deals. Let’s use an example to put contract law into motion.

Best services for writing your paper according to Trustpilot

Premium Partner
From $18.00 per page
4,8 / 5
4,80
Writers Experience
4,80
Delivery
4,90
Support
4,70
Price
Recommended Service
From $13.90 per page
4,6 / 5
4,70
Writers Experience
4,70
Delivery
4,60
Support
4,60
Price
From $20.00 per page
4,5 / 5
4,80
Writers Experience
4,50
Delivery
4,40
Support
4,10
Price
* All Partners were chosen among 50+ writing services by our Customer Satisfaction Team

Maurice wanted to sell his vintage car, so he placed a classified ad on a popular website offering the car for a whopping $35,000. Kendall noticed the ad and quickly emailed Maurice requesting a test drive. After zipping around town, Kendall accepted Maurice’s offer of $35,000 without a single negotiation. The parties have offer and acceptance.Once this is done, they drafted a contract for the sale of the car. When Kendall coughed up the $35,000 cash, and Maurice handed over the keys, there was an exchange of something of value to both parties and the element of consideration was met. As long as the remaining elements are satisfied, the deal is as good as done!The law recognizes this as a contract, meaning a legal document containing signatures of two or more parties that is binding and enforceable.

Of course, there are certain other elements that must be present, like:

  • Mutuality or meeting of the minds, meaning both parties understand and agree with the terms of the contract
  • Capacity, meaning both parties are free of mental illness or intoxication and neither is a minor
  • Legally accepted terms

However, even when all elements are met, this does not always mean that both parties will commit to the promises made in the contract. For this, the set of laws or rules were developed that govern how contracts are written and executed. In short, they ensure that both parties to a contract adhere to their promises. The law sets some ground rules everyone has to follow, so that neither party loses out on a promise made to him.The umbrella of contract law is divided into two areas:

  • Common law
  • Uniform Commercial Code (UCC)

Both areas of contract law work in similar ways, but the difference lies in the type of contract. And, both require that certain elements of a contract be present.

The most significant difference is in acceptance, an important element to any contract.

Common Law and Acceptance

Common law contracts require strict adherence to the mirror image rule, while the UCC allows for minor changes to a contract that do not significantly impact its terms. We will focus on the element of acceptance. Common law is like a precedent set by prior court rulings. In other words, no set-in-stone law applies to common law decisions.

And, decisions may vary by court or state.Next, common law contracts also use the mirror image rule, meaning acceptance must be for the exact same terms and conditions presented in the offer. Nothing is permitted to change or the offer is no longer valid. To make this a bit clearer, let’s revisit Maurice and Kendall. We know that Maurice and Kendall were in the midst of working out a deal for the sale of his sports car.Suppose when Maurice presented Kendall with the contract for $35,000, Kendall slashed through the $35,000 and returned the signed contract with a price reduction of $2,500 written in pen.

Mirror image rule would say that there is no longer a valid contract. Acceptance of the original offer of $35,000 stands. Even though Kendall signed the contract, the price was changed. The element of acceptance has no longer been met and no contract exists. The Uniform Commercial Code is a bit less restrictive.

Uniform Commercial Code

Unlike common law, the Uniform Commercial Code deals specifically with commercial contracts.

It is actually a set of laws that governs transactions between states and in business transactions. It was designed to create a uniform set of standards that regulate fairness in commercial transactions. The Uniform Commercial Code is a comprehensive set of nine articles or laws and rules. For our purposes, we will focus on Article 2 – Sales.Article 2 was written so that transactions between businesses would be more elastic than, say, the mirror image rule, to allow flexibility making contract formation easier to facilitate.

This is because acceptance and consideration work a bit differently. In common law, for a contract to be binding, one party offers, the other party accepts and something of value is exchanged.The terms of offer, acceptance and consideration – amongst other elements – are written or expressed orally in a very specific way. The Uniform Commercial Code does require that whatever promises each party makes must be fulfilled but not in such strict terms.Let’s say you were a jalapeño farmer. Pico’s Tacos buys most of its peppers from your farm. They do this by emailing your sales department with their order on a weekly basis.

Since you have been selling jalape;os to Pico’s for years at the price of $50 a case, there is an assumption that the peppers will remain $50 a case.When the peppers arrive, Pico notices that you raised the price to $60 a case. Pico can either accept the peppers at the higher price, or he can refuse the shipment and send the pepper truck driver packing. Pico accepted the peppers at the higher price. The important nuance: Acceptance came after the delivery and the price change.In common law, the price cannot be changed after an agreement has been made and a contract signed.

By accepting the higher-priced peppers, Pico accepted a change in the terms of the contract. This type of flexibility makes for smoother and faster commerce. Suppose Pico recommended you to his friend, Carlos. Carlos calls you and asks if he can pick up 100 pounds of peppers by tomorrow. You say yes, and tell him the peppers are $1.

00 a pound.When Carlos arrives to pick up his peppers and pays you, a contract now exists. Prior to the transaction, nothing was written or agreed upon. Carlos inquired whether peppers were available.

You, in turn, stated yes and for a certain price. Simple performance created the basis of the contract. A few other important things to consider are:

  • Terms do not have to be written or expressed, like delivery date or location
  • Payment terms do not have to specifically be written in an agreement

In fact, in many cases, a contract does not even have to be written if under a certain dollar value. The exception falls under the statute of frauds, which states that a contract for the sale of goods over $500 is not enforceable unless it is written.

Simple performance is not enough. The statute of frauds also says that if goods were specifically manufactured for the buyer and cannot be used by another buyer, a contract must be written.Both common law and Uniform Commercial Code serve to protect contract parties. Common law offers a higher level of protection in that is has certain requirements that create a binding agreement. The Uniform Commercial Code is more flexible, which allows commerce to move more swiftly.

Lesson Summary

To sum things up, a contract is a legal document containing signatures of two or more parties that is binding and enforceable. For a contract to be enforceable, it must contain the elements of offer, acceptance and consideration, as well as mutuality, capacity and legally accepted terms. Contract law controls most agreements between parties, whether oral or written, that involve goods, services, money, employment contracts and real estate deals.There are two areas of contract law:

  • Common law
  • Uniform Commercial Code (UCC)

Common law is like a precedent set by prior court rulings. This area of contract law relies on the mirror image rule, meaning acceptance must be for the exact same terms, and conditions presented in the offer must also be followed. The Uniform Commercial Code deals specifically with commercial transactions. It is actually a set of laws that governs transactions between states and business transactions.

It is more flexible in that it does not require mirror image and, in many cases, a written or oral agreement. Simple performance of the contract terms is enough to bind parties. A few more differences also exist:

  • Terms do not have to be written or expressed, like delivery date or location
  • Payment terms do not have to specifically be written in the agreement

However, the statute of frauds states that a contract for the sale of goods over $500 is not enforceable unless it is written. Simple performance is not enough. The statute of frauds also says that if the goods were specifically manufactured for the buyer and cannot be used by another buyer, a contract must be written.

Learning Outcomes

After this lesson, you’ll have the ability to:

  • Identify the elements required for a contract and the two areas of contract law
  • Distinguish between common law and the Uniform Commercial Code in terms of the element of acceptance
  • Explain how the statute of frauds applies to contract law

Post Author: admin

x

Hi!
I'm Eric!

Would you like to get a custom essay? How about receiving a customized one?

Check it out