§ 1.01 What is a Contract?

A contract is formed in any transaction in which one or both parties make a legally enforceable promise. A promise is a commitment or undertaking that a given event will or will not occur in the future and may be express or implied from conduct or language and conduct. A promise is legally enforceable where it:

• was made as part of a bargain for valid consideration;
• reasonably induced the promisee to rely on the promise to his detriment; or
• is deemed enforceable by a statute despite the lack of consideration.

§ 1.02 Types of Contracts

Contract may be of the following types:

1) Express – an agreement manifested by words
2) Implied-in-fact – an agreement manifested by conduct
3) Implied-in-law ("quasi-contract") – not a true contract but an obligation imposed by a court despite the absence of a promise in order to avoid an injustice

§ 1.03 Sources of Contract Law

1) Common Law – in most jurisdictions, contract law is not codified, and thus the primary source of general contract law is caselaw.

2) Restatement – written by the American Law Institute to provide guidance to the bench and bar, the Restatement of Contracts (currently in the second edition) has no legal force but nevertheless provides highly persuasive authority.

3) Uniform Commercial Code (UCC) – created under the auspices of the American Law Institute and the National Conference of Commissioners on Uniform State Laws, has been adopted by every state except Louisiana . Proposed revisions to Article 2, governing contracts for the sale of goods, have been finalized and presented to the states for enactment.

4) United Nations Convention on Contracts for the International Sale of Goods (CISG) – ratified by many of the leading trading nations including the United States and China (but not the United Kingdom and Japan), it governs many transactions for the sale of goods between parties with places of business in different nations.

5) UNIDROIT Principles of International Commercial Contracts – non-binding authoritative text similar to the Restatement.

6) Uniform Computer Transactions Act (UCITA) – addresses issues arising out of computer licensing but has only been enacted in Virginia and Maryland .

7) Uniform Electronic Transactions Act (UETA) – adopted by most states, this act does not affect basic contract doctrine but governs the use of electronic communications. It applies to "transactions," defined as "the conduct of business, commercial or governmental affairs." Thus, it does not govern contracts such as those between family members or with non-profit institutions.

8) Electronic Signatures in Global and National Commerce Act (E-Sign) – this federal law allows states to preempt it by enacting the UETA.

§ 1.04 Contracts for the Sale of Goods

[1] Application of UCC

Article 2 of the Uniform Commercial Code covers all transactions for the sale of goods other than securities (article 9) and leases (article 2A). It applies to any party; it is not limited to merchants although individual provisions may be.

[2] "Goods" Defined

Under the UCC, a "good" is any tangible thing that is moveable. [UCC § 2-105(1)] In addition to manufactured products, "goods" include:

• growing crops or timber, unborn young of animals and other identified things attached to land (other than minerals or the like or structures), regardless of who severs them from the land provided that they can be removed without causing material harm to the land
• currency exchanged as a commodity (as opposed to the medium of payment for a good)
• minerals or the like or a structure or its materials to be removed from realty that are to be severed by the seller

The term "goods" does not encompass:

• intangible rights such as intellectual property
• investment securities
• money which is the medium of payment for goods
• minerals or the like or a structure or its materials to be removed from realty that are to be severed by the buyer

[3] " Sale" Defined

UCC § 2-106(1) defines "sale" as the transfer of title for a price. Contracts that involve both goods and services must be evaluated to see which constitutes the primary purpose of the contract, with the secondary purpose being treated as incidental. If the primary function of the contract is to provide a service, the UCC does not apply, even if an incidental sale of goods occurs.

[4] "Merchant" Defined

A "merchant" is one "who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill particular to the practices or goods involved in the transaction" or who employs an agent or broker in such occupation. [UCC § 2-104(1)]

[5] "Good Faith" Defined

Every contract for the sale of goods imposes an obligation of good faith dealing on all parties in its performance and enforcement. [UCC § 1-203] All parties, including non-merchants, are subject to UCC § 1-201(19) which defines "good faith" as "honesty in fact in the conduct or transaction concerned." Merchants are subject to an additional good faith standard, set forth in UCC § 2-103(1)(b), which requires "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade."

[6] "Record" Defined

The proposed revision of Article 2 reflects the contemporary use of electronic communications by substituting all prior references to "writing" with "record," defined in proposed UCC § 1-201(33a) as "either a writing or a retrievable information in a computer's memory, a computer disk, or the like."