It has been a good year and you have decided to put an addition on the side of your house. You hire Bob the Builder to do the job and have a signed contract. You review the plans, make a sizable down payment, and Bob starts demolition. But then after a week, Bob seems to disappear. Several weeks go by, construction has not continued, and Bob cannot be found. The rules governing contracts traditionally came from common law, meaning the law that is produced on an ad hoc basis by courts.
When the courts came up against a novel problem, they look at what they have done with somewhat similar issues in the past and craft a new rule for the new problem. From then on, when the same set of circumstance arises the court will follow its precedent. Because different courts and jurisdictions evolved in various directions, different states handle the exact same issue in various ways. This can lead to confusion for people who do business with ? rms in other states. To avoid this confusion, policy makers in the U. S. decided to create a set of common rules for commercial law.
The result was the Uniform Commercial Code (UCC). (13na) Contracts are usually governed and enforced by the laws of the state where the agreement was made. Depending upon the subject matter of the agreement (i. e. sale of goods, property lease), a contract may be governed by one of two types of state law. The majority of contracts (i. e. employment agreements, leases, general business agreements) are controlled by the state’s common law — a tradition-based but constantly evolving set of laws that is mostly judge-made, from court decisions over the years.
The common law does not control contracts that are primarily for the sale of goods, however. Such contracts are instead governed by the Uniform Commercial Code (UCC), a standardized collection of guidelines governing the law of commerce. Most states have adopted the UCC in whole or in part, making the UCC’s provisions part of the state’s codified laws pertaining to the sale of goods. (FindLaw, 2013) Contract is defined as an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law.
For purposes of this chapter, we are concerned with agreements to buy and sell some type of agricultural product. Contracts 101 You should be concerned about contract law because it determines how parties to the contract will need to keep the promises they make. Although very few contracts ever end up in court, if the parties to a contract disagree on something and are unable to resolve the disagreement, they may have to resort to the judicial process. This means that as the parties negotiate a contract, they need to consider how a judge might ultimately interpret it.
For a contract to be enforceable, it must involve: 1. Competent parties. A court will not uphold a contract entered into by parties the law does not believe have the capacity to take on such a legal responsibility, such as minors or people who are mentally incapacitated. 2. A legal subject matter. A court will not uphold a contract requiring anyone to do something illegal. 3. An offer. An offer occurs when a party communicates the intention of doing something if the other party does another speci? c thing. Either the buyer or seller can initiate an offer so it could occur when you approach a cranberry cooperative with an offer to sell your cranberries for a certain price, or if they approach you with a form contract to sign.
4. Acceptance. Acceptance occurs when a party communicates a willingness to be bound by the proposed agreement. When dealing with a written contract, this usually means when the offeree signs the contract. 5. Consideration. Each party to the contract must provide consideration for the contract to be binding. Consideration is something of value or a promise to do, or not to do, a certain act in the future. In a contract between a producer and an LLC that processes and sells honey, the producer’s consideration could be the promise to deliver a certain amount of honey while the LLC’s consideration could be the promise to pay a certain amount per pound. In the business world, disputes can arise over contracts, and one party (or both) may accuse the other of breaking his or her obligations under the agreement. In legal terms, a party’s failure to fulfill an end of the bargain under a contract is known as “breaching” the contract.
When a breach of contract happens (or at least when a breach is alleged) one or both of the parties may wish to have the contract “enforced” on its terms, or may try to recover for any financial harm caused by the alleged breach. With Bob not finishing the work that he had promised to do in the contract that we had both agreed upon, and signed, it would have been considered that Bob had breached his contract and could get in trouble for it. In order to claim any damages which you are right to do since you had pre-paid Bob a large down payment, you would have to take Bob to civil court and sue him for the money you had already paid to him.
The so-called duty to mitigate damages, which is often referred to as a general contractual duty is a principle of ancient vintage. Referring to mitigation of damages-or as it is called in tort law “avoidable consequences “in terms of a “duty” is somewhat misleading, because a plaintiff incurs no liability for failing to act. Rather, the amount of loss that could reasonably have been avoided by stopping performance or making substitute arrangements is simply subtracted from the amount that would otherwise have been recoverable as damages.
Phrased differently, the duty to mitigate damages “forbids the victim of a breach of contract, which might well be involuntary, to allow his damages to balloon (when he could easily prevent that from happening), as he might be tempted to do in order to force a lucrative settlement. ” “The victim of the breach must “exercise reasonable diligence and ordinary care in attempting to minimize the damages after injury has been inflicted. ’ “And while he must act with “reasonable dispatch,” the injured party is not required to take steps that involve “undue risk or burden. But there are instances where the victim of the breach might be lulled by the breaching party into inaction because of assurances that all will be well. “To put this differently, the [breaching party] may not insist on mitigation when by its words or deeds it has led the [non-breaching party] to believe that it has assumed what would otherwise be the buyer’s burden of mitigation. ” While that is going on, the duty to mitigate is suspended. ”