Business entities and individuals are always getting in binding agreements to ensure that all parties to a contract fulfill their end of the bargain. Contract law is vital because there is a possibility that either party may breach the agreement resulting in significant losses (Miletsky). Individuals and agencies who enter into sales contracts have the option of using the Uniform Commercial Code (UCC) or state common laws depending on the nature of the business or its jurisdiction (Lumen). Before choosing an appropriate direction, one needs to understand the benefits and limitations of both of these options to reduces the likelihood of lawsuits resulting from breaches.
Benefits and Problems Associated with UCC and State Common Laws on Contracts
Uniform Commercial Code and common law govern contract law in the US to enforce individual and group agreements. UCC, in particular, governs transactions involving the purchase of tangible objects and goods, while common law applies to services, real estate, employment, and other intangible assets (Nisar Law Group, P.C). Both UCC and common law have various provisions beneficial to the contractual processes and agreements. UCC § 28:1-301(a). This provision is of particular importance since it eases the contractual agreement process and paves the way for a mutual understanding. The common law, on the other hand, provides clarity in that parties are in a better position to understand the agreement terms.
Delegate your assignment to our experts and they will do the rest.
Offer and Acceptance
Common law and UCC are associated with the concepts of acceptance and offers, which are basic to all contractual agreements. Common law, which relies on the ‘mirror image reigns,’ establishes that if the acceptance is different from the offer, then the contract is null and void (Lumen). This provision presents certain limitations in that there is a greater likelihood for the offer to be rejected or the involved parties to ask for a counteroffer. However, in the case of the UCC § 2-205, only the changes that have significant impacts on the contract can make it null and void. In particular, if the changes to the contract are minor, the additional terms therein do not occasion a conflict; thus, the contract cannot be nullified. Essentially, the UCC focuses only on the quantity indicated in the contract instead of the common law that focuses on quantity, performance time, price, and other issues.
Common law differs from the UCC in that it is more definite, meaning that a contract that does not specify the price will always fail. This provision is important as it safeguards the parties to the contract from obscure terms, which may be an avenue for malicious business practices. On the other hand, under the UCC, a contract based on open terms means that the parties should adhere to the terms. Section 2-204(3) of the UCC allows for agreements based on open terms to enable price-fixing. In particular, the provision indicates that either party to the contract can fix the price but do so in good faith (Jenkins, 251). This section suggests that such a sale agreement cannot be nullified based on being indefinite, as in common law. The provision establishes that the court has the mandate of finding a reasonable basis to ensure that an open terms contract is remedied to make it legally binding.
Revocation of Offer
Contract law provides for revocation of offers that do not meet legal thresholds outlined by both the common law and UCC. Both laws establish that an offer may not be necessarily accepted, primarily if the offeror does not provide the offeree with a viable option. The UCC has a provision that indicates that an offer may be revoked before it is ever accepted if the merchant has not considered the client(s) contract guidelines. UCC 2-205 indicates that any signed offer that a merchant enters into to buy or sell goods is an assurance that it will remain open, meaning it may not be revoked. This provision is beneficial to the merchant as it cushions him from incurring losses for three months when the offer may be revoked and nullified. Common law, on the other hand, establishes if the offer is not explicit on the amount of time it would remain open, then offerors' acceptance power expires at a reasonable time ( Caldwell v. Cline, 156 S.E. 55 (W. Va. 1930 ). It is important to note that this provision highlights that a reasonable amount of time on an offer is dependent on the prevailing circumstances (Jenkins, 266).
Reality of Consent
Common law and UCC have similar stances regarding misrepresentation, duress, mistake, and undue influence in terms of contractual agreements. In international sales contracts, the UCC does not require the parties to consider modifying the terms if they portray good faith. UCC section 2-209(1) indicates that there is no need for consideration in instances where a party to the contract is ready to forgive a breach by the other party. At this point, the aggrieved party has a right to write, sign and deliver a renunciation or a waiver. This is, however, not the case with the common law, where parties are required to modify contracts as well as discharge the party that is in breach of the initial terms of engagement (Jenkins, 267). Under the Limitation Act 1980 (LA 1980), the aggrieved party must file for a breach of contract claim within six years. Gould v Johnson focuses on the cause of action accrued, which refers to the exact time that the contract was breached as opposed to the damage that was suffered as a result.
Writing Requirement
The common law and UCC have provisions that require the parties that engage in a contractual agreement to use written documents which are a way of enforcing contracts. This provision does not apply to all sale contracts but only those involving goods that are $500 or more, although there are exceptions. Uniform Commercial Code, Section 2-201 or the Statute of Frauds subsection 2 indicates that the writing should be done within a reasonable time to ensure that the receiver ascertains its contents to enhance its authenticity (Martin, Marks and Barnes). This provision is beneficial to both the merchant and the receiver of goods as it allows a 10-day period within which a written objection to the contents therein can be submitted. On the other hand, the common law with the statute of Fraud indicates that some contracts should be in written form and executed formally to enhance enforceability (Martin, Marks and Barnes). However, common law provides that parties can still enter into a binding agreement without necessarily signing formal documents. Lucy v. Zehmer , a case that the Virginia Supreme Court, determined that an agreement on a napkin would be considered valid if the parties showed mutual consent or were sane.
Complications of a Service Contracts
Individuals and agencies keen on hiring service providers need to understand the downsides associated with service contracts. For this reason, there is a need for a party that is hiring services to establish where liability would fail in case of injuries involving third-party contractors, property, and employees. One of the complications revolving around liability has to do with the fact that contractors fail to limit their responsibilities. The failure to do so means that the individual or agency hiring the contractor would be forced to bear all obligations arising from negligence. (Griffo et al. 23). Apart from a failure to accept liability, service contacts pave the way for inadequate insurance on the contractor's part to cover damages. Most of the time, individuals or agencies that hire service providers fail to inform contractors that they need insurance cover for their contract period. This oversight may be costly as the agency would be forced to pay for damages out-of-pocket, an option that would be too costly.
Service contracts are quite complex, considering that there is a possibility of having the contractor bring on board several service providers who may increase liabilities. For instance, a contractor may hire subcontractors but fail to assume liability for damages and injuries that they cause. In such cases, the individual or agency which hired the contractor in the first place would be forced to bear the responsibility, which may be expensive. The other implication of service contracts is the failure of the contractor to comply with state laws that regulate workman's coverage (Griffo et al. 25). Essentially, contractors need to provide evidence that the people that work for them are insured against injuries, with the failure to do so resulting in costly lawsuits. For this reason, there is a need for individuals and agencies to go through all elements of service contracts to eliminate loopholes that would force them to bear an excess of liabilities. Overall, the contracts should highlight each of the parties' liabilities and responsibilities threshold to allow for legally binding and enforceable contractual agreements.
Works Cited
Griffo, Cristine, et al. "Service contract modeling in enterprise architecture: An ontology-based approach." Information Systems , vol. 12, no. 3, (2019), pp. 15-32.
Jenkins, Sarah H. “Contrract Resurrected: Contract Formation: Common Law - UCC – CISG.” North Carolina Journal of International Law and Commercial Regulation, vol. , no. 2 (2015): 246-291.
Lumen. “Common Law and Uniform Commercial Code Contracts.” Lumen Learning . 2017. courses.lumenlearning.com/workwithinthelaw/chapter/formation-and-types-of-contracts/. Accessed 25 Apr. 2021.
Martin, Jennifer S., Colin P. Marks and Wayne Barnes. The Uniform Commercial Code Survey . American Bar Association, 2017.
Miletsky, Robert J. “Are Your Goods and Services UCC Worthy?” International Risk Management Institute, Inc. (IRMI) . Sept. 2017. www.irmi.com/articles/expert-commentary/are-your-goods-and-services-ucc-worthy. Accessed 25 Apr. 2021.
Nisar Law Group, P.C. “UCC or Common Law: Which Applies to My Contract?” NLG. 16 December 2014. www.nisarlaw.com/blog/2014/december/ucc-or-common-law-which-applies-to-my-contract-/. Accessed 25 Apr. 2021.
