Notes on Selected Source Materials
The editors discuss the history of contract law from common law origins to statutes to the Uniform Commercial Code.
The editors talk about the development of the first and second Restatements of Contracts. The idea of the Restatements was to write down in a clear way the “black letter law” of a given subject.
Not everyone thought the Restatements were so great; some thought they were either too obvious or too vague to be useful.
The Uniform Commercial Code was written to supplement and supplant common law so that the laws governing commercial transactions would be uniform across jurisdictions and stable over time.
The editors describe the structure of the UCC, including the “Official Comments” that are provided for each section.
Article 1 is the introduction and it provides important and precise definitions that are used in the subsequent Articles. Article 2 deals with sales, and has been adopted by a majority of state legislatures.
The UCC is changing all the time, so we ought to focus our study how learning how to use it rather than memorizing it.
The editors also discuss the CISG, which is sort of an international equivalent of the UCC. The CISG tackles even bigger problems of widely diverging laws between countries. It governs the international sale of goods, which is becoming more and more common in an increasingly globalized world. The CISG has been ratified by the U.S. Senate. The CISG doesn’t match up with the UCC on every point, and at times proposes interesting alternatives.
Restatement of Contracts §344
This is a summary of the “three interests”:
1. Expectation interest — This is a promisee’s interest in getting the value he/she expected when the contract was made but breached.
2. Reliance interest – This is a promisee’s interest in getting back what he/she lost out on by relying on the promise. This is sort of like the opportunity cost, I think.
3. Restitution interest – This is just the promisee’s interest in getting the stuff back that he/she already gave to the promisor when the promisor broke the promise.
a. Expectation interest is the most common interest protected when a contract is broken. Reliance interest is usually smaller because it excluded the promisee’s lost profit. Restitution interest is even smaller because it doesn’t include lost profit and also excludes the costs he/she incurred while assuming the contract was going to be good.
b. Things are different in principle than in practice. In theory, the expectation interest depends on the individual and what they value. In practice, there are limitations on this. You can’t collect on unforeseeable or uncertain losses, and you can’t collect on losses where there was a suitable substitute available on the market. You judge the value of the contract by what it would have been worth when it was supposed to be performed rather than by what it was worth when it was signed.