Contracts 1.2 – The Challenges of Federalism, the UCC, and R2K
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Challenges of Federalism & UCC & R2K

So one way that contract law is unique from the other courses you're going to study, is this idea that it is the public enforcement of a private agreement. It's not about the norms or values that are established by the legislature. It's not solely about what courts have said over time as to what's right, and what's wrong. Although obviously that's part of it, but it's this idea that private parties are agreeing to do things. And there is a strong undercurrent that those parties should be left alone to do what they have to do or not do what they have to do and not get the court involved. That the court will only get involved in certain circumstances when it's absolutely necessary. And we'll talk about what those parameters are later in the course.

Pattern of Class

Essentially, there are four questions that we are going to attempt to answer in this class. The first question is, has an agreement between two parties risen to the level, or have sufficient seriousness or specificity that the agreement can be called an enforceable contract? Is there a thing we can point to with particularity that we can identify as a contract? That's the threshold. That's the beginning question.

Second question we're going to attempt to answer. It's like, well, based on everything we just talked about given the fact that this is a unique area of law and courts are going to be understandably reluctant to intrude in a private commercial arrangement, are all such agreements that rise to the level of contract going to be enforced by a court? And the answer to that is no. So the second question we're going to answer is like, well, if something can be identified as a contract, will it in fact be enforced as such by the courts?

The third question that we're going to answer is, okay, assuming that the agreement between the parties is considered a contract and assuming for sake of argument, that it is the kind of contract that is of sufficient, serious merit and weight, that it will be enforced as a contract, are there any arguments available that suggest it would be unfair to enforce that contract, to make the allegedly breaching party do what he said he was going to do in the first place?

Fourth question that we are going to attempt to answer in this class is, okay, well, assuming that we in fact have an agreement that rises to the level of a contract and that contract is of the kind in nature that will in fact be enforced by a court and assuming as well as there is no argument and fairness that suggests the non-performance or breach of a party should be excused, how will the court enforce it? And this is the question of damages or remedies that might be imposed against the breaching party.

So that is the effective four part organization of this class. And we will address each of those individually as the course goes on. One of the ways that we're going to do that, and one of the other ways that contract law is I believe particular in addition to this idea of being a public enforcement of private commercial agreements, is that contract law is a function of state law. There is some federal law about certain kinds of contracts, which you will study while you're in law school. But your run of the mill contract is governed by state law.

Federalism Challenges

Difference in contract law made compliance prohibitively expensive

Now, you also know at this point that property law and tort law are also governed by state law. Criminal law in most respects, or in many respects as a function of state law. The reason why it's more difficult, this state driven contract law, is that while a tort might happen in one state and it could certainly pass through state lines, you'll learn about that in your civil procedure class, and while property generally exists, so long not entirely, exists only in one state.

Contracts, particularly in our sophisticated economy, cross state lines all the time. And so if you're a company in one state and you're doing business in 49 other States, in order to understand what the rules are for your business transactions, you could conceivably have to know the law in 50 States. You can see how that is incredibly burdensome and when anything is incredibly burdensome in business, it's also incredibly expensive.

So recognizing that even though contract law is a function of the individual state's laws learned judges and academics and lawyers have tried for years since the first part of the 20th century, to create a consistent body of law across the States. And this is very hard to do. The first thing that they did, this organization is called the American law Institute, is that they created something called the restatement of contracts.

The restatement of contracts is essentially an encyclopedia. It is a collection of all of the ways that various States have treated different questions of commercial law. It's an encyclopedia. It's a guide. And they try to show consistencies or alternatives, and at very least just an organization of options in treating particular questions of contract law. And it's helpful. It certainly cuts down the cost of knowing what the law is likely to be from state, to state, to state. But that restatement of contract law, that's essentially what it is. We are restating the law of contracts across all 50 jurisdictions. It's not law. It's not law. It's not binding on anyone.

The only time the restatement of contracts is binding as if a Supreme court of a state says, "Oh, you know what they said on the restatement, that's a really smart way of doing it. We haven't treated it thus far in our courts. We're going to do that." But unless that rare occurrence happens, the restatement, that encyclopedia is not law.

Uniform Commercial Code

Brought consistency in law across states

And so while it helped it did not solve the problem of this 50 state hodgepodge of commercial, of contract law. So the same organization said, "Well, here's what we're gonna do. We're gonna take that restatement and we're gonna repackage it. And we are going to create a uniform code of commercial law. We're going to call it,..." wait for it, "...the Uniform Commercial Code." Which I will refer to here as the UCC. "And we are going to package it as a set of laws and make it available to all of the legislatures across the country, all of the state legislatures across the country. As a recommendation, now we've done the work for you. Here is a straightforward way to make the commercial law of all the States relatively consistent so that we can take the burdens and costs of interstate commerce away from our economy."

Now, uniform laws have been promulgated in all kinds of areas of law, criminal law, et cetera, et cetera. The one area that it has been extraordinarily successful is with regard to commercial law, because of the value inherent in adopting a consistent law amongst the States.

Now, in this course, we're going to be primarily focusing on just one article of the Uniform Commercial Code and that's article two, which is the part of the Uniform Commercial Code that deals with contracts for sales of goods. 49 States have adopted the Uniform Commercial Code version of article two. The only state that has not adopted it is Louisiana.

But here's one thing that's very important to keep in mind. While I just said that 49 States have adopted article two of the Uniform Commercial Code. Don't be fooled. You cannot in your practice life, get a copy of the American law Institute version of the UCC, article two, and rely on that when you're advising your clients. Because even though 49 state jurisdictions have adopted the Uniform Commercial Code, article two, they have not adopted it verbatim. There are subtle and sometimes not so subtle variations from state to state. So when you go out into your practice life, be sure to always know the version of the UCC article that has been adopted by the relevant jurisdiction. There can very well be differences.

So when we talk about contract law, in our study of contract law, it's going to be a combination of what did the common law say about contract law, before the Uniform Commercial Code was adopted? What does the Uniform Commercial Code say about the particular issue we're discussing? And then what have courts said in interpreting the Uniform Commercial Code? This is another way that the study of contract law is different than the other courses you will be studying during your first year in law school. It provides an opportunity for you to learn the history of a particular rule, recognize how that rule has been adopted in legislation, and then understand how that legislation has been interpreted and applied in the modern era.

So be wary of this. It's one of the reasons why first year law students often find contract law one of the most perplexing areas of law to study in the first year. When you study torts or you study property, you will read a lot of cases, addressing particular problems and property or tort. And you'll work toward deducing general rules about whether or not something is a tort or not a tort. Is actionable in a property claim, not actionable in a property claim.

When you study contract law, you've got a lot more moving pieces. You've got old law, you've got the UCC or restatement understanding or interpretation of that old law. And then you will have courts interpreting the Uniform Commercial Code and related statutes. So it's less about deducing, a rule from a set of cases and straightforward common law fashion, and more about understanding the development of the law, the attempts to make that walk consistent, and the problems over time with those attempts. I will be addressing all of that over time.

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