12 16 2011 Chapter 20 Requirement of privity parties Privity of contract the existence of a direct contractual relation between 2 Disclaimers Remedy Limitations The old rule If you were injured by a defective product you may only sue somebody with whom you ve had a direct contract with o You may only sue the seller not the manufacturer The new rule you DON T need privity of contract to sue under tort theory The requirement of privity of contract has been abolished o Ex you are at your friend s house and the microwave injures you You may still sue the manufacturer o However you still need a reasonable foresee ability test in most cases Disclaimer a clause in the sales contract whereby the seller tries to eliminate liability under 1 or more of the different theories of recovery o If the disclaimer is affective than the injured consumer cannot recover against the seller Remedy Limitation a clause in a sales agreement whereby the seller tries to set certain limits on damages that the plaintiff can retrieve from the seller o A consumer suing a business under negligence or strict liability theory the limitation will probably not be enforced o Courts will likely enforce the limitation if a business is suing another o If somebody is suing under a warranty theory the UCC deals with the business situation directly Why would buyers enter into these o If print is so small it cannot be easily seen o If the buyer has no say in the matter under the UCC a seller may have a Implied Warranty Disclaimers disclaimer to either of the 2 types of implied warranties merchantability and fitness for a particular purpose if these conditions are met o the disclaimer must be conspicuous easily read o if there is a statement such as I m selling this as is o Merchant ability specifically needs the use of the word merchantability but it can be oral o Fitness specifically needs it to be written Express Warranty Disclaimers very difficult for the seller to get out of an express warranty like an exculpatory statement Disclaimer of tort liability are very rarely enforced by the courts it is o Is more likely to be enforced if it is one business suing another business rather than a consumer suing a business Ch 9 liability Will be 90 of the Final exam the other 10 will be antitrust product Contracts deal with enforcement of promises Not every promise is legally enforceable The Evolution of Contract Law contracts didn t become very important until 19th century The theory was freedom of contract contracts should be enforced by court because contracts were the product of the free will of people that went into them The 20th century saw a significant increase in government regulation of contracts Methods of Contracting 2 general rules o An enforceable contract can be EITHER oral or written o Certain contracts have to be written in order to be enforceable contracts to Land We will later discuss what types must be written Basic Elements of a Contract 4 basic elements There must be o A voluntary agreement which includes An offer AND an acceptance of the offer o Consideration to support each parties promise Something of benefit given by each party of the contract to every other party of the contract o The parties must have capacity to contract The legal ability to enter into a contract People who do not have capacity include minors the mentally impaired drunk people o The objective end performance of the contract must be legal Basic Contract Contracts Types Classifications there will be 2 questions about the types Bilateral vs unilateral contracts o Bilateral contracts everybody makes a promise the contract is formed as soon as the promises are exchanged Ex A salary contract o Unilateral contracts only one party makes a contract Ex Frequent flyer programs Validity o Valid enforceable in court o un enforceable contract meets all of the requirements for a binding contract and therefore is meets all of the basic requirements of a valid contract but is un enforceable for some other reason ex if it is one of those contracts that needs to be in writing but it isnt ex if you have a valid contract and someone else breaches it but you wait 10 years to sue When 1 or more parties has the legal right to cancel their legal obligations under the agreement Ex Justin Bieber a minor may void any contract at his option Ex if you a defrauded into entering a contract you may void o Voidable o Void A contract that creates no legal obligations and for which if you want to sue for breach the court will do nothing for you Ex a contract to kill somebody Express or implied o Express contract the parties have directly stated the terms of their contract orally or in writing at the time the contract was formed o Implied contract when the surrounding facts and circumstances indicate that an agreement has in fact been reached Ex you go to the doctor for a diagnosis he is expected to use reasonable care to treat you the implied warranty is that you will pay him Executed vs Executory o Executed all of the parties have fully performed their contractual duties o Executory contract until all the duties of the contract have been fulfilled the contract will remain executory The types of categories under which a contract applies can determine which remedies will be relevant Sources of Law Governing Contracts 2 sources 1 The Uniform Commercial Code o The UCC deals with commercial transactions and is divided into 9 articles o Article 2 deals with the sales of goods which is defined as tangible movable personal property Doesn t deal with sale of real property Doesn t cover the sale of intangibles stocks bonds Doesn t deal with service contracts 2 Common Law o Covers all of the areas that the UCC doesn t cover The differences between the UCC Common Law include The UCC is more flexible than the common law with the result being that if the UCC does apply its more likely for a court to find that a contract does exist o The UCC is less concerned with meeting all of the formal requirements of a contract The UCC reads into every contract what is called a covenant of good faith and fair dealing where as the common law doesn t always do this o covenant means that the parties will act in good faith towards each other The UCC distinguishes between merchants non merchants o Merchants are held to a higher standard in certain situations o Merchants anybody who regularly deals in the kind of goods that are the subject of the contract The Restatement 2 an attempt to codify and
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