Keith Mack
Contract law is a product of common law and is not usually codified in statute. However, jurisdictions may codify laws on specific topics, and many states in the US have adopted portions of the Uniform Commercial Code (UCC) that deal with certain types of contracts. The UCC is divided into several articles, with Article 2: Sales being the section most relevant to contract law. The diversity in the interpretation of contracts depends on the extent to which a state has codified its common law of contracts. Contract law is primarily governed by state statutory and common law, and private law (agreements between parties). While some countries have a written constitution based on specific codes, others have a common law system that is less prescriptive and more flexible.
| Characteristics | Values |
|---|---|
| Development | Product of common law |
| Codification | Not generally codified in statute |
| Exceptions | Jurisdictions may codify laws on specific topics |
| Examples | Many states have adopted portions of the Uniform Commercial Code (UCC) |
| Model UCC | Divided into several articles |
| Most relevant section | Article 2: Sales |
| Modifications | States modified provisions of the model act upon adoption |
| Location | Consult your state's annotated code |
| Federal regulations | Consult the index to the Code of Federal Regulations |
| State law | Governed by state common law |
| State-specific differences | Variations in specific court interpretations |
| Private law | Includes terms of the agreement between parties |
| Overriding state law | Private law may override rules established by state law |
| Statutory law | Statute of Frauds requires signatures for enforceability |
| Written contract | Not always necessary |
| Modern concerns | Increasing use of "contracts of adhesion" |
| Common law | Less prescriptive than civil law |
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![California Public Contract Code [2025 Edition]](https://m.media-amazon.com/images/I/518XH9vxSjL._AC_UY218_.jpg)
What You'll Learn
Contract law is generally not codified in statute
Private law includes the terms of the agreement between the parties who are exchanging promises. This private law may override many of the rules otherwise established by state law. For example, in the case of Lucy v. Zehmer, the Virginia Supreme Court held that an agreement made on a napkin could be considered a valid contract, as the parties were both sane and showed mutual assent and consideration.
Contract law varies between jurisdictions, and while it is generally not codified in statute, a jurisdiction may have codified laws on a particular topic. For example, in 2021, Mainland China adopted the Civil Code of the People's Republic of China, which codifies its contract law in Book Three. Similarly, jurisdictions whose system of contract law is derived from the Napoleonic Code, such as the Civil Code of Lower Canada or the Egyptian Civil Code, divide contracts into their negotium (substantive content) and instrumentum (formal significance).
In the United States, contract law is governed by state statutory and common law, and while general overall contract law is common throughout the country, specific court interpretations of a particular element of a contract may vary between states. Many states have adopted portions of the Uniform Commercial Code (UCC) that deal with certain types of contracts. The main articles that deal with the law of contracts are Article 1 (General Provisions) and Article 2 (Sales).
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The Uniform Commercial Code
Contract law in the United States is generally a product of common law and is not usually codified in statute form. However, many states have adopted portions of the Uniform Commercial Code (UCC) that deal with specific types of contracts. The UCC is the longest and most elaborate of the uniform acts, and it was developed as a joint project of the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI).
The UCC has achieved substantial uniformity in commercial laws across states, while also allowing for flexibility to meet local circumstances through modifications to its text as enacted in each state. This flexibility is important given the prevalence of commercial transactions that extend beyond a single state. For example, goods may be manufactured in one state, warehoused in another, sold from a third state, and delivered in a fourth state.
The UCC deals primarily with transactions involving personal property (movable property) rather than real property (immovable property). It also seeks to modernise contract law and allow for exceptions from the common law in contracts between merchants. The overriding philosophy of the UCC is to allow people to make the contracts they want while filling in any missing provisions. It also aims to impose uniformity and streamline routine transactions, such as the processing of checks and notes.
The UCC is divided into several consecutively numbered articles, with Article 2 on Sales being the section most often relevant to contract law. Other articles may also be applicable depending on the type of contract involved. For example, Article 8 of the UCC governs the ownership of securities, while Article 9 deals with transactions where personal property is used as security for a loan or extension of credit. It's important to note that states can modify the UCC's provisions upon adoption, so it's recommended to consult the specific state's annotated code for the applicable version of the UCC.
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State statutory and common law
Contract law in the United States is primarily governed by a combination of common law and statutory law within the states where they are applied. Contracts are mainly governed by state statutory and common (judge-made) law, as well as private law. Private law includes the terms of the agreement between the parties exchanging promises and may override many rules established by state law.
While contract law is generally governed by state common law, there are variations in specific court interpretations of particular elements of a contract between states. For instance, the law governing transactions involving the sale of goods has become highly standardized nationwide through the widespread adoption of the Uniform Commercial Code (UCC). The UCC is divided into several articles, with Article 2: Sales being the most relevant to contract law. However, other articles of the UCC may apply depending on the type of contract involved.
Additionally, many states have adopted portions of the UCC that deal with specific types of contracts. For example, Sections of Article 9 (Secured Transactions) govern contracts assigning rights to payment in security interest agreements. Contracts related to particular activities or business sectors may be highly regulated by state and/or federal law. As such, the extent of codification of common law or adoption of portions of the Restatement (Second) of Contracts may vary from state to state.
While there is a substantial degree of consistency in contract law across the United States, certain aspects may differ between states. This variation highlights the dynamic nature of contract law and the importance of understanding the specific laws and interpretations in each state.
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Civil law systems
Civil contracts differ from common law contracts in formation, terminology, and enforcement focus. They rely on codified rules and emphasise intent and equity, while common law contracts depend on precedent and detailed clauses to define obligations. Civil contracts are typically more streamlined, and less importance is generally placed on setting out all the terms governing the relationship between the parties in the contract itself. Inadequacies or ambiguities in civil law contracts can be remedied or resolved by operation of law. Civil law systems often have extensive default rules under the civil code that apply in the absence of specific contractual provisions.
In civil law jurisdictions, unless the contract specifies that the parties have agreed to arbitration, the contract will be enforced by the administrative courts. In many civil law countries, a separate administrative law governs PPP arrangements. In some civil law systems, such as Germany, the writings of legal scholars have significant influence on the courts.
In 2021, Mainland China adopted the Civil Code of the People's Republic of China, which codifies its contract law. There are four distinct systems of contract law in China, with three in force in different regions administered by the People's Republic of China and one in force in Taiwan. Hong Kong, a common law jurisdiction, has contract law largely identical to pre-1997 English and Welsh law, while Macau operates under a framework modelled after Portuguese civil law.
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Contract of adhesion
Contract law is generally a product of common law and is not typically codified in statute form. However, jurisdictions may have codified laws on specific topics, and many states in the US have adopted provisions of the Uniform Commercial Code (UCC) that relate to certain types of contracts.
A contract of adhesion, or adhesion contract, is a type of contract where the parties involved have disproportionately unequal bargaining power. The party with the weaker bargaining position has no ability to negotiate the terms of the contract and must either accept or reject the contract as it is. Adhesion contracts are typically in the form of a standardised contract form that is entirely prepared and offered by the party with superior bargaining power.
Adhesion contracts are commonly used in matters involving insurance, leases, deeds, mortgages, automobile purchases, and other forms of consumer credit. They are prevalent in electronic commerce, with three types of electronic adhesion contracts: browse-wrap, click-wrap, and sign-in-wrap. Browse-wrap contracts are generally not enforced by courts due to procedural unconscionability, as consumers must click through multiple links to find and agree to the terms. On the other hand, click-wrap and sign-in-wrap contracts are usually enforced, as they require consumers to explicitly click "I agree" to the terms.
Courts may scrutinise adhesion contracts due to the potential for unequal bargaining power, unfairness, and unconscionability. The doctrine of reasonable expectations may be used to determine whether to strike down an adhesion contract, assessing whether the terms match what the weaker party would reasonably expect. Courts may also consider the doctrine of unconscionability, which includes procedural unconscionability (examining the bargaining process and potential issues like duress or fraud) and substantive unconscionability (evaluating the content of the contract for oppressive terms like inflated prices or unfair disclaimers).
While adhesion contracts can be beneficial for efficiency and convenience, it is crucial for consumers to understand the terms and exercise their right to reject such contracts if they find them unacceptable.
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Frequently asked questions
Contract law is generally a product of common law and is not codified in statute form. However, some jurisdictions may have codified laws on specific topics.
Common law is a less prescriptive system where there is extensive freedom of contract. Few provisions are implied by law, and anything not expressly prohibited is typically permitted.
Many states in the US have adopted portions of the Uniform Commercial Code (UCC) that deal with certain types of contracts, particularly the sale of goods.
The UCC is a model code that has been adopted with modifications by most states. The section most relevant to contract law is Article 2: Sales, though other articles may be applicable depending on the type of contract.
