Sources of Contract Law

Before the American Revolution, the American states were British colonies. English law, including English contract law, applied in each of the thirteen colonies. The Revolutionary War freed the colonies from the British crown, but each of the new states continued to apply primarily English contract law. The federal government came into existence in the 1780s as a government of limited powers. Various attempts have since been made to promulgate a federal contract law, but none have as yet succeeded.

That means that states control contract law. Contract law is fashioned by state courts and state legislatures. The English law of contracts was created one case at a time in England's courts, and our states have generally carried on that tradition. Court-created law is usually called "common law."1

State legislatures also get in the act by passing statutes that codify or change the common law. Law promulgated by legislatures is called "statutory" law as opposed to "common law.” Most of the law we study will be common or statutory law, adopted or promulgated by state courts or state legislatures. Here and there a federal statute or regulation will intrude.

In the last hundred years, two groups of lawyers have somewhat successfully influenced the process of contract-law-making in America. The first is the National Conference of Commissioners on Uniform State Laws (NCCUSL). The Conference includes 50 state-appointed commissioners who draft and recommend legislation to state legislatures. 

The second group is the American Law Institute (ALI). The ALI is an organization of lawyers, judges, and legal academics dedicated to clarifying, simplifying, and reforming law. The ALI's primary vehicle for accomplishing its mission is to "restate" the common law; that is, to boil down all the common law from court opinions into black letter rules that lawyers can better understand.

Sometimes the ALI merely restates the common law. The first Restatement of Contracts, published in 1932, tried to do that. The first Restatement of Contracts.2 The Restatement (Second) of Contracts was published in 1981.3 But often the ALI “restates” law what isn’t yet law, in the hope that courts will adopt the ALI position. The Restatement (Second) (affectionately referred to as “R2K”) proposed more of this reforming than did the first Restatement. But courts have drawn (and will draw) on the wisdom of both documents.

The Restatement and Restatement (Second) are not law but only commentary, unless something in them has been adopted by courts. And they often have been ratified by courts. The common law comes from decided cases, as it always has. Sections and comments of the R2K are sometimes referred to in bold in this book. When you find a reference in bold (for examples, see pages listed with a R2K section in the Table of Contents), please find the materials referred to in the statutory supplement recommended by your teacher and study them as if they were written out in this book itself. Where possible, I have tried to include sections as part of this book. Make sure also to read the comments and illustrations, which are often... illustrative.

Between 1940 and 1952, NCCUSL and the ALI teamed up to draft the Uniform Commercial Code (UCC), which they then proposed to state legislatures. This statute has been wildly successful: eventually all fifty state legislatures passed it, with only some local variation (though Louisiana did not pass Article Two). The result is that for most commercial transactions, the law of all fifty states approaches uniformity (there are non-uniform amendments). The UCC governs such things as sales of goods (Article 2), negotiable instruments (Article 3), and secured transactions (Article 9). Excerpts from the UCC are included in these materials, but I highly recommend taking the Commercial Law course offered at Howard by Professors Mtima or myself. It combines “Sales” (Article 2) and “Secured Transactions” (Article 9).

The rest of contract law is unspoken. It exists in the practices, morals, prejudices, theories, and goals of the lawyers, judges, litigants, and facts involved in its making and application. In this course you will study not only the rules themselves, which make up the body of contract law proper, but also the culture in which contract law exists, is applied, and is a part.