Notes on Selected
Source Materials
Editors’ Introduction
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.
Comment
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.