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Contracts

1.3 Sources of Contract Law

3 min readLast Updated on July 22, 2024

Contract law stems from various sources, each shaping how agreements are formed and enforced. Common law, derived from court decisions, evolves over time. The Uniform Commercial Code (UCC) standardizes rules for commercial transactions, while the Restatement of Contracts offers scholarly guidance.

Case law and precedent play crucial roles in contract interpretation. Courts follow prior decisions to ensure consistency and fairness. The UCC specifically governs sales of goods, providing default rules for formation, performance, and remedies. Common law and UCC approaches differ in contract formation, writing requirements, and available remedies.

Sources of Contract Law

Sources of contract law

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  • Common law
    • Derived from court decisions and judicial precedents over time
    • Evolves as new cases are decided and legal principles are established
  • Uniform Commercial Code (UCC)
    • Standardized set of rules governing commercial transactions
    • Adopted by most states with minor variations to promote uniformity
    • Primarily applies to contracts for the sale of goods (tangible, movable items)
  • Restatement (Second) of Contracts
    • Scholarly work summarizing and clarifying common law principles of contracts
    • Serves as persuasive authority for courts but is not legally binding
    • Provides guidance and promotes uniformity in interpreting contract law

Role of case law and precedent

  • Case law
    • Decisions made by courts in specific cases that establish legal principles
    • Shapes contract law through judicial reasoning and interpretation of statutes
  • Precedent
    • Principle of following prior court decisions in similar cases (stare decisis)
    • Ensures consistency and predictability in legal outcomes across jurisdictions
    • Lower courts bound by decisions of higher courts within the same jurisdiction
  • Stare decisis
    • Latin term meaning "to stand by things decided" and adhere to precedents
    • Courts follow precedents set by previous decisions to promote stability
    • Ensures fairness by treating similar cases alike under the legal system

Scope of UCC in sales contracts

  • Scope of the UCC
    • Applies to transactions involving the sale of goods (tangible, movable items)
    • Does not cover real estate, services, or intangible assets like intellectual property
  • Applicability of the UCC
    • Governs formation, performance, and remedies for contracts involving goods
    • Provides default rules that parties can modify or override by agreement
    • Adopted with minor variations in most states to facilitate interstate commerce
  • Key provisions of the UCC
    • Article 2: Sales
      • Governs formation, performance, breach of contracts for the sale of goods
      • Includes rules on offer, acceptance, modification, warranties (express, implied)
    • Article 2A: Leases
      • Governs contracts for the lease of goods similar to Article 2
      • Includes provisions specific to leasing arrangements (term, renewal, default)

Common law vs UCC in contracts

  • Formation of contracts
    • Common law requires offer, acceptance, consideration to form a valid contract
    • UCC allows more flexible formation through conduct of the parties (shipping goods)
  • Statute of Frauds
    • Common law requires certain contracts be in writing to be enforceable
    • UCC has a more relaxed writing requirement for contracts involving goods
  • Parol evidence rule
    • Common law prohibits evidence of prior agreements that contradict a written contract
    • UCC allows evidence of course of dealing, usage of trade to explain a written contract
  • Remedies for breach
    • Common law primarily awards monetary damages to compensate the non-breaching party
    • UCC provides additional remedies (specific performance, right to cure defective goods)

Term 1 of 27

Acceptance
See definition

Acceptance is the unequivocal agreement to the terms of an offer, signifying the final step in creating a binding contract. It must correspond exactly to the terms proposed in the offer and can occur through various methods, including verbal communication, written confirmation, or through actions that indicate agreement.

Key Terms to Review (27)

Term 1 of 27

Acceptance
See definition

Acceptance is the unequivocal agreement to the terms of an offer, signifying the final step in creating a binding contract. It must correspond exactly to the terms proposed in the offer and can occur through various methods, including verbal communication, written confirmation, or through actions that indicate agreement.

© 2025 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.

Term 1 of 27

Acceptance
See definition

Acceptance is the unequivocal agreement to the terms of an offer, signifying the final step in creating a binding contract. It must correspond exactly to the terms proposed in the offer and can occur through various methods, including verbal communication, written confirmation, or through actions that indicate agreement.



© 2025 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.

© 2025 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.