Are you an international student with thoughts about studying law in the United States?

On the message board one student asked about whether she should study law in South Korea or in the United States.  I have some thoughts on this which I'll be posting but if you have a perspective, why not join the message board and let her know what your opinion is?  You'll need to register and there will be a brief delay before you can post but I would be interested in getting more than just my opinion on this topic.  The message board is here if you want to register and offer a response.

 

Follow the link to the post.

http://uslaw.activeboard.com/f610421/studying-us-law/

 

How does the UCC change the mirror image rule?

I received a few questions about counter-offers and the UCC.  Let's go slowly, this post will be a little longer than most:

MIRROR IMAGE RULE

The traditional, common-law contract rule is that to form a contract the terms of the acceptance must be the same as the offer.  This is known as the "mirror image" rule.  If Alan offers to sell Barry a car for $5,000, payment by Tuesday, Barry would only be able to accept the contract on those precise terms.  If Barry says he "accepts" the offer but payment by Wednesday, our traditional rule is that there is no contract.  Why?  Because the acceptance and the offer are not the same  - - the payment date is different.

Traditional contract rule says that Barry actually rejected Alan's offer (even though he thinks he might have accepted it) and made a counter-offer to Alan.  The counter-offer is to buy the car for $5,000 payment by Wednesday.  Now Alan has a choice.  Alan can accept the offer or reject it.

This can create a problem.  Barry might think he can buy the car on Wednesday but Alan, under our traditional rules, could refuse to sell the car.  Alan could correctly say there was never a contract because Barry's acceptance did not mirror the terms of Alan's offer.

Mirror image rule video

 

 

THE UCC REJECTS THE MIRROR IMAGE RULE

The Uniform Commercial Code replaces the mirror image rule in contracts for the sale of goods.  In practice, the UCC usually becomes a factor where parties are not orally negotiating but sending written forms back and forth.  It might help to imagine Alan and Barry sending written purchase and sale forms back and forth in which Barry's terms in his purchase order are different from Alan's terms.

 Pursuant to the UCC, if Barry writes that he accepts Alan's offer but with payment on Wednesday,  this is not always a rejection.

The rule under the UCC depends on a few factors.  

First, did Barry tell Alan that there would be no contract unless Alan accepts payment on Wednesday?  

Second, are Alan and Barry "merchants"?  Merchants means they professionally deal with the goods in question - - in this case, cars.

 Third, do Barry's terms "materially" change the contract?  Material here means significantly.

ADDITIONAL TERMS ARE PROPOSALS

The UCC tells us that if one party adds additional terms to an offer, this not a rejection unless the party insists that a contract will depend on acceptance of these additional terms.   If Barry says he accepts Alan's offer and we don't think he is really insisting on payment by Wednesday, we have a contract.  Barry's terms are considered additional proposals to the contract.  That is, Barry is making a proposal for a different payment date.  

THE PROPOSALS CAN BECOME PART OF THE CONTRACT

The UCC provides that the additional terms can become part of the contract if the parties are merchants.  That is, Barry's proposal for payment by Wedensday can automatically become part of the contract if both he and Alan professionally deal in cars, unless an exception applies. 

WHEN DO PROPOSALS NOT BECOME PART OF THE CONTRACT?

Proposals do not become part of the contract if the parties are not merchants, if the additional terms materially change the contract, or the other party rejects the proposed terms.

Let's assume that Alan and Barry are merchants. Barry's terms would not become part of the contract if payment by Wednesday would be considered a material change to the contract.  Furthermore, if Alan tells Barry in a reasonable amount of time that he rejects Barry's proposal to pay by Wednesday, the proposed terms would not become part of the contract.

What if a minor misrepresents his age when he enters into a contract?

Generally speaking in the United States minors are allowed to disaffirm contracts (there are some exceptions).  

But what if the minor tricks the other party by misrepresenting himself to be an adult?  Is it fair to allow the minor to walk away from the contract?  

Different states take different approaches. Some states provide that a minor who deceives the other party is obligated under the contract.  However, some of these states require that the other party reasonably believed that the minor was an adult at the time.   In those states if the other party knows or should know that the minor is trying to trick him, then the minor will be allowed to disaffirm the contract. 

Can a contract case ever go to federal court?

Someone asked:

"is it possible that contract law is in the decision of judge in Federal? Is there any case in Federal court?"

 

The person asking the question is correctly noting that contract cases in the United States are almost always decided under state law (there are some exceptions).  If that's true, can a contract case ever go to federal court?

Of course!  Remember, a state law claim can go to federal court if we have diversity subject matter jurisdiction.  If the parties are citizens of different states and the amount in controversy is greater than $75,000, then a state law contract claim, state law tort claim, etc. can go before a federal court.  The federal court applies state law to the case, although the parties are in federal court.  There are other possibilities where a state law claim can be decided in federal court but diversity jurisdiction is, I think, the most likely scenario.  

Below is a short video on diversity subject matter jurisdiction:

 

Are there any special rules governing oral contracts?

Yes.  Generally speaking, oral contracts are enforceable contracts, just the same as written contracts, but there are important exceptions.  Here are some of the major exceptions where parties will not be bound by oral contracts:

1. Contracts that can't be performed in one year must be in writing.  For example, if Mr. A hires Mr. B to work at his company for two years, the employment contract must be in writing.   

2. Contracts for the sale of real property.  If Mr. A wants to sell his house to Mr. B, the contract must be in writing.

3. The Uniform Commercial Code provides that contracts for the sale of goods for over $500 must be in writing.

What if there is a promise without consideration?

A few students asked a variation of the following question: what if someone makes a promise but there is no consideration - - is this ever a contract?  No, it is not a contract.  But in some circumstances a party can sue based on a theory of promissory estoppel. Instead of consideration, we have reliance and an injury.

There is some variation from state to state but to recover based on promissory estoppel the plaintiff must prove that he reasonably relied on a promise made by the defendant and that an injury resulted from the plaintiff breaking his promise.  The defendant should reasonably have expected the plaintiff to rely on the promise.  Especially where a serious injustice occurred because the defendant broke his promise, a court is more likely to allow a plaintiff to sue based on promissory estoppel.  Below is a video discussing promissory estoppel.

 

 

 

Contract Law Videos

I started a contract law playlist on my YouTube page.  Please stop by and let me know what you think.  More coming soon to that playlist and others.  

 

http://www.youtube.com/playlist?list=PLRXyknBDMNN1Rbc5L7PRUhfLtJPrjGcp8

Legally Insufficient Consideration: Past Performance

A student wrote: "I don't understand about the 'past performance is not consideration.'"

Every contract needs consideration.  Generally speaking in a  bilateral contract each party must promise to do something that he was not already required to do, or to agree to not do something he was allowed to do.  For example, A promises to pay B $100 if B agrees to clean A's car.  B agrees.  Now we have legal  consideration.  Both parties are promising to do something they otherwise would not be required to do.  

But something a person already did - - an act prior to negotiating the contract - - is not considered consideration.  This is called "past performance" or "past consideration".  If A cleans B's car and B says, "Great job!  I'll pay you $50" there probably is not a contract.  B doesn't have a contractual obligation to pay A. Why?  

Because A's act occurred in the past.  A & B never agreed that that A should clean B's car.  B might be grateful and might feel a moral obligation towards A but there is no contract.  To have legal consideration the parties must reach an agreement as to what each party will give and each party will get.      

Why is consideration sometimes called bargained for detriment?

We know that a contract requires an offer, acceptance, and consideration.  Loosely speaking, consideration is where one party gives something in exchange for getting something from the other party.  Sometimes consideration is called "bargained for detriment."  

Here is one way to think about why we call consideration "bargained for detriment":

By "bargain" we mean two people agree on something.  "Detriment" here means a party agreeing to do something he doesn't have to do or agreeing to not do something he is allowed to do.

By way of example, normally I don't have to clean your car.  Let's say you promise to pay me and I agree to clean your car.  Cleaning your car is "detriment" because that is not something the law normally requires me to do.  But I agreed to something that I don't have to do in exchange for your promise to pay me.

 So we bargained for (negotiated) my agreement to do something that I normally don't have to do (detriment).  Now we have consideration.  

On the other hand, let's say you promise to buy me dinner because I was a nice person last week.  In this case, I haven't agreed to do or not do anything.  There is no bargained for detriment and you do not have a contractual obligation to buy me dinner.