Last Revised 03/03/04
2
CONSUMER CONTRACTS IN
MAINE
§ 2. 1.
Introduction
This consumer rights chapter describes the basic contract laws that apply when you make a
consumer purchase. It contains the following sections:
§ 2. 2.
When Is A Consumer Contract Binding?
§ 2. 3.
Certain Contracts Are Required By Law To Be
In Writing
§ 2. 4.
Contracts That Are Unenforceable
§ 2. 5.
Who Are The Parties To A Contract?
§ 2. 6.
The Difference Between Express And Implied
Warranties
§ 2. 7.
When Is A Contract Breached?
§ 2. 8.
How Do Courts Interpret Contracts?
§ 2. 9.
Remedies For Breach Of Contract
§ 2. 10.
Accord And Satisfaction
§ 2. 11.
Contract Release
§ 2. 12.
Negotiating A Contract
§ 2. 13.
Questions To Ask When Analyzing A
Consumer Contract
§ 2. 2.
When Is A Consumer Contract
Binding?
A contract is a legally enforceable promise between you and the seller. It describes the
responsibility buyers and sellers have to each other when goods or services are exchanged. Contracts
can be written, oral, or even implied.
A binding contact can be a lease on an apartment or a purchase order for a new car. It can be a
written agreement to buy a set of encyclopedias from a door to door salesperson or an oral promise to
pay a baby sitter $1.50 per hour for taking care of your child. Even the purchase of a can of soup from
a supermarket is a contract.
From time out of mind, the “common law” (judge-made law as opposed to statutes passed by the
Legislature) has required that legally enforceable contracts must have these four elements:
2 - 2
MAINE CONSUMER LAW GUIDE
A. An offer to perform an act;
B. An acceptance of the offer;
C. The act to be performed must be of some value (“consideration”) to both parties.
D. There must be mutual understanding by both parties as to the basic obligations of the
contract.
1
If even one of these four elements is missing, the contract might not be enforced by a court.
§ 2. 3.
Certain Contracts Are Required
By Law To Be In Writing
The Maine Uniform Commercial Code (U.C.C.) sets forth contract law regulating the sale of goods
by a merchant to consumers.
2
The U.C.C. and other statutory provisions, principally the Statute of
Frauds
3
require certain contracts to be in writing before a court will enforce them. Examples of such
contracts are:
A. Contracts for the sale of goods costing $500 or more;
4
B. Contracts for the sale of land;
5
C. Contracts which cannot be performed within one year; for example, if you agree today
to move into a new apartment the first of next month and rent for a year, your rental
agreement must be in writing because the terms of the contract cannot be completed
within one year of the date on which you agreed;
6
D. Contracts in which you guarantee to pay the debt of another person;
7
E. Contracts to pay debts legally discharged in a bankruptcy proceeding.
8
The U.C.C. sets forth three exceptions to the requirement of a written contract for goods costing
$500 or more. These contracts are enforceable without a written contract:
A. You ordered custom-made items such as a tailored suit or drapes;
9
B. You have already paid for goods or services or they have already been delivered and
accepted;
10
C. You admit in court that, in fact, you did have a contract.
11
1
In cases where both parties make a mistake and enter into a contract that does not express their mutual interests, courts
may order that the contract be “rescinded” (voided, as if it had never been entered into). See Miller v. Lentine, 495 A.2d
1229, 1231 (Me. 1985); Roy v. Davis, 553 A.2d 663, 664 (Me. 1989) (a legally binding contract must have the express or
implied mutual assent of the parties and must be definite enough that a court can fix exactly the legal liabilities of the
parties).
2
See generally 11 M.R.S.A. §§2-101 to 2-725.
3
33 M.R.S.A. §§ 51-53. The purpose of the Statute of Frauds is to “prevent perjury and fraud.” However, a defendant in a
contract enforcement action may waive the statute’s protection, allow verbal evidence of the contract, and become bound
by it. Dehahn v. Innes, 356 A.2d 711, 717-18 (Me. 1976).
4
11 M.R.S.A. § 2-201(1).
5
33 M.R.S.A. § 51(4).
6
33 M.R.S.A. § 51(5).
7
33 M.R.S.A. § 51(2).
8
33 M.R.S.A. § 51(6).
9
11 M.R.S.A. § 2-201(3)(a).
10
11 M.R.S.A. § 2-201(3)(c).
11
11 M.R.S.A. § 2-201(3)(b).
MAINE CONSUMER LAW GUIDE
2 -3
§ 2. 4.
Contracts That Are Unenforceable
Courts have often refused to enforce contracts that are significantly unfair and lacking in good
faith
12
. Usually they are unconscionable
13
contracts in which one of the four elements of the contract
(see § 2.2) is explicitly or implicitly missing. Here are some of the more common kinds of
unenforceable contracts:
A. You are incapable of understanding the contract because you are insane, senile or
otherwise mentally deficient.
14
B. You are too young to enter into a legally binding agreement. If you enter into a
contract when you are a minor (younger than 18) and still living with your parents,
the contract is not enforceable unless you agree to the terms of the contract in writing
when you turn 18 or unless a legal guardian also signs the contract. You can cancel
the contract and receive back the entire purchase price. The exceptions to this rule
are when the contract is for real estate, or higher education, or for an actual
“necessity” such as needed food, shelter, or educational or medical expenses.
15
This
law can lead to such results as a minor purchasing a car, wrecking it, and then not
being required to pay for it. See Gillis v. Whitley’s Discount Sales, Inc., 319 S.E.2d
661 (N.C. 1984). Merchants sell to minors at their own risk. When a minor joins a
record, CD or video club ( e.g., a negative option contract), the minor has not entered
into an enforceable contract. Once the minor becomes an adult, the minor can “ratify”
the contract (e.g., keep ordering new records) and the contract then becomes binding.
Some states hold that the merchant can charge the minor for depreciation of the item
or an equivalent “rental” fee, but this does not appear to be the case in the state of
Maine. Maine seems to follow the rule that strictly protects minors. See Utterstrom
v. Kidder, 124 Me. 10,13 (1924) (the court refused to make any allowance for
depreciation in an action by a minor to disaffirm the purchase of a truck and recover
payments made, even though it appeared that the truck had been allowed to stay out
in the weather until it was seriously damaged).
C. The performance of the contract calls for an illegal act. For instance, a contract with
an unlicensed electrician to rewire your home is unenforceable. Electricians are
required by law to be licensed. If an unlicensed electrician were to rewire your
home, he would be breaking the law.
16
D. You are tricked into signing. Deceit-intentional or unintentional- which misleads you
into signing the contract renders the contract unenforceable. Such deceit can include
the failure to disclose a material fact (a fact that is known to the seller and which
would change your decision to purchase the item at the agreed price).
17
Such
contracts are unenforceable even if they have a so-called “merger” clause, which
12
See 33 M.R.S.A. § 1-203; Restatement (Second) Of Contracts § 205 (1979).
13
See 11 M.R.S.A. § 2-302 of the Uniform Commercial Code, which states that courts may refuse to enforce
unconscionable contracts.
14
Restatement (Second) of Contracts, § 178(1)(1981).
15
33 M.R.S.A. § 52. See Spaulding v. New England Furniture, 147 A.2d 916 (Me. 1959) (minor who was married and
living with his wife and child liable for value of “necessaries” purchased for his household). See also Restatement
(Second) Of Contracts § 12(2)(b), § 12, comment f (1981).
16
Restatement (Second) of Contracts, § 178 (1)(1981).
17
Id. at §164(1). See Southwest Sunsets, Inc. v. Federal Trade Commission, 785 F.2d 1431 (9th Cir. 1986), cert. denied,
107 S.Ct. 109 (1986). In this case, the appellate court upheld the F.T.C. decision that a developer’s representation and
omissions in connection with the sale of rural land were deceptive. This decision applied the deception standard
contained in the F.T.C. Policy Statement on Deceptive Acts and Practices. See also V.S.H. Realty, Inc. v. Texaco, Inc.,
757 F.2d 411 (1st Cir. 1985).
2 - 4
MAINE CONSUMER LAW GUIDE
states the written contract comprises the entire agreement, no matter what promises
the salesperson might have made.
E. You are forced to sign the contract. For example, a contract is not valid if you sign it
against your will or under threat of physical harm.
18
F. You sign under undue influence. A parent, child, doctor, someone upon whom you
are financially dependent or anyone else who uses your special relationship to
pressure you to sign a contract is exercising undue influence. If you can prove undue
influence, you can have the contract voided.
19
G. Both parties to the contract make the same mistake. If one party makes a mistake
either in making an offer or in accepting one, the contract is binding and enforceable.
For instance, if you thought the record collection you agreed to sell consisted of 20
records and you discover later that it consisted of 25, you still have a binding
contract. However, if both you and your friend who made the offer thought the
collection was made up of 20 records, the contract may not be binding.
20
H. The contract’s terms are unconscionable (shocking to the conscience) (11 M.R.S.A. §
2-302). Some courts have ruled contracts unconscionable because the consumer was
charged an extremely high price or because unfair terms were not subject to
bargaining between the parties (a contract of adhesion).
21
I. The contract contains misleading terms - usually in small print - buried in a
paragraph having little or nothing to do with the overall agreement. The contract may
be “unconscionable” and unenforceable.
J. A merchant’s sales technique was so deceptive or the contract was so unfair as to be
in violation of the Maine Unfair Trade Practices Act (5 M.R.S.A. § 205-A - 214) (see
Chapter 3, Unfair Trade Practices In Maine).
§ 2. 5.
Who Are The Parties To A
Contract?
In most contract negotiations, a consumer will deal with an agent (employee) and not the principal
(employer). As long as the agent does not exceed his authority and does not intentionally mislead you,
the principal will be responsible for the agent’s actions. For example, in § 20.4 of Chapter 20,
Consumer Rights When You Buy A Home, we discuss when a real estate agent might be responsible
for negligent or intentional misrepresentations.
18
Id. at § 12(a), 174.
19
Id. at § 177.
20
Id. at § 152.
21
See Kugler v. Romain, 279 A.2d 640 (N.J. 1971) (encyclopedia sold door-to-door at unfairly high price was fraudulent
sale): Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965). Even if a party signs a form contract
and even if the party had an opportunity to read the contract, an unexpected or particularly oppressive provision in the
agreement may be unenforceable for lack of agreement. The Restatement (Second) of Contracts § 211 (3) (1981)
indicates that a provision in a form contract that a party uses regularly in its dealings with others is invalid if the parties
should reasonably know that the other contracting party ( i.e., the consumer) would not agree to the contract if the
provision were known. Id. at § 211(3). These form contracts are sometimes referred to as “contracts of adhesion.” Such
“adhesion” contracts might also violate the U.C.C. unconscionability provision
(11 M.R.S.A. § 2-302)
or the Maine
Unfair Trade Practices Act (5 M.R.S.A. § 207). See Dairy Farm Leasing Co., Inv. v. Hartley, 395 A.2d 1135, 1139
(Me. 1978) (in a footnote the Law Court suggested that a standard-form printed contract submitted to the other party on
a “take it or leave it” basis could be found to be an unconscionable contract (a contract of adhesion) in violation of the
Uniform Commercial Code,
11 M.R.S.A. § 2-302).
MAINE CONSUMER LAW GUIDE
2 -5
Further, principals can ratify an agent’s action even if it is outside the scope of the agent’s
responsibility. Suppose a door-to-door salesman of vacuum cleaners promises in writing a more
generous warranty than is normally offered by the manufacturer. The salesman’s company will be
bound by the promise if it later reviews the consumer’s contract and accepts it.
In many contract disputes your first step in determining the duties of the different parties should be
to chart the lines of contractual responsibilities. For example suppose you have hired a general
contractor to build an addition to your house. The general contractor then hires a subcontractor to
install the required plumbing and the plumber’s work turns out to be defective. Is the plumber liable to
you? No. Your contract is with the general contractor and he remains responsible. The general
contractor (the delegant) has only delegated his duties to the plumber (the delegate). If you cannot
resolve the plumbing dispute and the court orders the general contractor to pay you damages (your
costs to repair the plumbing), the general contractor can in turn look to the plumber for relief.
22
The terms of many “form” contracts are not negotiated. Before signing, make sure you understand
your obligations when you purchase such items as cell phones, credit cards, satellite dishes.
§ 2. 6.
The Difference Between Express
And Implied Warranties
The warranty is the part of your contract which assures you of the quality and dependability of the
goods or services you buy. Warranties can be express (an oral or written statement of the seller) or
implied (created by statute or by court decision).
Express warranties are oral or written promises the seller or manufacturer specifically makes about
a product or service. Sometimes both the seller and the manufacturer give express warranties. Express
warranties are not required by law, but they usually accompany most quality products.
23
In addition to express warranties, under Maine law whenever you purchase a new or used
consumer good or service (except used cars) you automatically receive an implied warranty. This is
true even when the seller or manufacturer does not make an express warranty. When you do have an
express warranty, the implied warranty may provide you with additional coverage and remain in effect
even after your written warranty expires. As a Maine consumer you have probably seen written
warranties that say you have no implied warranties. You have probably also seen the following
statement:
Some states do not allow limitations on how long an implied warranty
lasts, so the above limitation may not apply to you.
Maine is one of those states. Under Maine law when purchasing consumer goods, your implied
warranty rights cannot be modified or limited in any way. (11 M.R.S.A. § 2 316(5)(a)). So, as long as
you buy in Maine, you can ignore the warranty language that attempts to limit your implied warranty
rights.
22
You may also be able to sue the plumber directly, under the theory that you are a “third party beneficiary” of the contract
between the general contractor and the plumber. See Restatement (Second) of Contracts § 302(e)(1981).
23
In addition to express warranties consumers are sometimes asked to purchase a “service contract.” As the name implies,
service contracts are new contracts and not warranties that are provided with the item. Though some sellers refer to them
as “extended warranties,” they are not warranties. Warranties come with products at no extra cost. A service contract is
a promise of service in exchange for fee. If you have a good warranty you probably will not need to buy the extra
protection a service contract offers. In fact, you may be buying coverage you already have under your express or
implied warranty. As with any other contract, read all the provisions and weigh the terms carefully before you buy. See
Chapter 6 of this Guide at §§ 6.5 and 6.10.
2 - 6
MAINE CONSUMER LAW GUIDE
There are two types of implied warranties:
A. The warranty of merchantability promises that the product you buy is at least of
average quality and fit for ordinary use.
24
That is, a lawn mower must mow; a food
processor, process; a wood splitter must split.
B. The warranty of fitness for a particular purpose, as its name implies, promises that
the product you buy will be suitable for a specific use.
25
When you buy a product
based on the seller’s advice that it can be used for a particular purpose, the advice
creates an implied warranty of fitness for a particular purpose. For instance, if you
rely on a seller’s expertise to help you choose paint for your car, the seller is creating
an implied warranty that the paint is fit for the particular purpose of painting your
car. If you apply the paint appropriately, and it flakes off a few weeks later, you have
recourse against the seller under Maine’s implied warranty law. For a more thorough
discussion of implied warranty rights, see Chapter 4 of this Guide.
§ 2. 7.
When Is A Contract Breached?
If one party does not perform according to the terms of the agreement, the contract has been
“breached.” If a carpenter fails to finish the job or a home buyer could not make the entire payment for
a new home, a breach of contract has occurred The remedies for the victim of a breach of contract
depend on whether there are major or minor losses (damages). If you are on the receiving end of a
minor breach, the contract will most likely remain intact, though you will probably be entitled to
receive payment for losses you suffered. If the breach is major, you can often go one step further.
You can cancel the contract, and still recoup your losses from the other party.
In determining whether the breach is major or minor, the judge will inquire into whether there has
been substantial performance under the contract. In a home construction contract, for instance, did the
contractor omit only the shutters? Or did he forget the roof?
Home construction is one area in which disputes frequently occur over work performance. In these
disputes, homeowners often say “shoddy and incomplete” work is their reason for breaking the
contract and withholding payment. Contractors, on the other hand, will often reply that the
homeowner is too “picky,” and that the basic terms of the contract have been met.
The Surety Development Corp. used this substantial compliance argument in a 1963 Delaware
lawsuit against a customer who refused to pay $16,385 for a prefabricated home. By the contract
completion date the contractor had not yet installed a blacktop driveway and walkway. Nevertheless,
the court
26
ruled in favor of the contractors. The court concluded that Surety Development had
constructed a minimally livable house and that this constituted substantial performance under the
contract. The judge wrote: “When is a house a home? In our context, a house is a home when it can be
lived in.” Defendant Grevas was ordered to pay the $16,385 for the house, and Surety Development
was ordered to finish the work.
Missing a contract completion date, however, can be a major breach even if there has been
substantial performance. This is often the case when a second contract depends on the timely
completion of the first contract.
24
11 M.R.S.A. § 2-314(c).
25
11 M.R.S.A. § 2-315.
26
Surety Development Corp. v. Grevas, 192 N.E.2d 145 (Del. 1963)
.
MAINE CONSUMER LAW GUIDE
2 -7
Suppose Grevas had arranged to sell his new home immediately after the completion date
designated in the contract, in this case, 4 P.M. on September 27, 1961. Imagine that Grevas had drafted
the contract to read:
Grevas promises to pay Surety Development $16,385 on the condition the
home is completely constructed no later than 4 P.M., September 27, 1961.
It is expressly agreed that time is of the essence.
If this were the contract, then Surety Development’s failure to completely finish the house could be
viewed as a major breach. The courts could well find that meeting the 4 P.M. deadline was a
prerequisite to payment. Such disputes are why the Legislature in 1989 enacted the Home Construction
Contract Law (10 M.R.S.A. §§ 1486-90), which requires detailed written contracts for home
construction or repairs costing more than $1,400. See Chapter17 and Chapter 18 in this Guide.
What happens if a home contractor goes out of business before the work is done? Certainly, this
would be a major breach of any contract. However, the homeowner would not be able to keep the
improvements made on the property without making any payment at all. The homeowner is not entitled
to “unjust enrichment.” In other words, the homeowner must pay for the services already performed by
the contractor, less any damages the homeowner has suffered. Such damages might include the cost of
hiring a new contractor to finish the work.
A dispute between a homeowner and a contractor is a breach of a “service contract.” For
“consumer goods” contracts, the standard for deciding whether a breach is major is less stringent.
Services cannot be taken back easily; manufactured goods are more easily returned or replaced.
However, a major contract breach may still occur in a goods contract even though substantial
performance has been made. Suppose you sign a contract with an automobile dealer to purchase a new
Maserati. In the contract, you specify that you want the car to be red. The contract will be breached if
the dealer delivers a black Maserati. If the dealer could not quickly obtain a suitable replacement, you
could demand your money back.
§ 2. 8.
How Do Courts Interpret
Contracts?
A warning to consumers: make sure all-important promises are included in the contract you sign. If
you leave a vital piece of information out, you may be vulnerable and defenseless if a contract dispute
arises later.
Traditionally, courts base their decisions on the evidence before them. In many cases, the written
contract is all the evidence the judge needs. When this happens, the written contract is considered a
“total integration” of the party’s intentions. Judges will then abide by the “parol evidence” rule, which
prevents either party from introducing evidence not part of the written contract.
27
Fortunately for consumers, there are exceptions to the parol evidence rule. When a contract is
based on illegal acts, duress, obvious mistakes, or misrepresentations of facts, a judge will probably
look beyond the “four corners” of the written contract to make a decision.
This happened in the 1974 Delaware case of Knisley v. Ed Fine Automobile.
28
Car buyer Knisley,
concerned that a high-powered Oldsmobile had been used for racing, was assured by the car salesman
that it had never come near a racetrack. However, that assurance was somehow omitted from the
written contract. Knisley began experiencing mechanical problems with the car and later discovered
27
See e.g., Everett v. Rand, 131 A.2d 205 (Me. 1957).
28
319 A.2d 33 (Del. 1974).
2 - 8
MAINE CONSUMER LAW GUIDE
the car had indeed been used for racing. He sued the dealer. The judge ruled against Ed Fine
Automobile’s request that the parol evidence rule be applied to exclude any oral evidence, and ordered
that the dealer give back Knisley’s money in exchange for the defective car.
In general, courts are willing to consider evidence not written into a contract if it is consistent with
the intent of the parties and will help clarify ambiguous terms.
29
This is true even if the consumer has
signed a form contract with a “boiler plate” section, often written in fine print at the bottom of the
page, that states that the writing represents all the terms of the contract (see “contracts of adhesion,” §
2.4 (H) and § 3.4).
Again, consumers can avoid these disputes by simply including all pertinent information and
promises in the contract.
§ 2. 9.
Remedies For Breach Of Contract
Laws are designed to protect you from unjust suffering as a result of a breach (violation) of
contract. Courts generally give injured parties the “benefit of the bargain.” In other words, you should
be placed in the economic position you would have occupied had the contract not been breached. You
should be reimbursed.
30
Courts will require you to make a reasonable effort to minimize your damages
when asking for reimbursement from the other party.
When a contract for services is breached you should be reimbursed for your remaining rights to
performance, not on the total contract price paid by the injured party.
31
You should also be reimbursed
for incurred expenses.
32
If a garage mechanic fails to properly repair your car and you must have it
towed to another garage, your damages would include the towing cost as well as the cost of the second
round of repairs. But you would have to prove the faulty workmanship of the first garage and show
that the costs and the second repair job were both reasonable. Businesses injured by a breach of
contract can seek reimbursement not only for expenses but also for lost profits.
When consumers purchase defective goods they are protected by laws such as the Uniform
Commercial Code (U.C.C.), which establishes rules for express and implied warranties (see Chapter 4,
Consumer Goods and the Maine Express And Implied Warranty Law). When there is a serious breach
of express or implied warranty, the buyer may be able to sue to dissolve the contract (rescission) and
recover the entire price (restitution). Or the consumer may sue on the breach of express warranty and
receive free repairs or damages.
The measure of damages for breach of contract is the difference between the actual value of the
product the consumer received and the value of the product as it was warranted to the consumer.
33
The
Maine U.C.C. also says consumers should not only get their money back for defective products but
also be reimbursed for “incidental” and “consequential” damages (expenses related to a contract
29
Fitzgerald v. Gamester, 658 A.2d 1065 (Me.1995) (trial court properly allowed evidence that clarified ambiguous terms
in a real estate contract). In some instances courts will read implied terms into a contract, See 3 Corbin on Contracts
§561 (1994 Supp.) (a court can adopt implied terms which reflect the good faith of the parties)
.
30
This is called the “expectation” measure of damages. When the evidence is not sufficient to judge “expectation”
damages, two other measures of damages that may be used are “reliance” damages and “restitution” damages. Reliance
damages are awarded to restore the injured party to the position the party would have been in if there were no contract.
Restitution damages are used to release the parties from their contractual obligations and to return any money the
injured party gave to the breaching party. See E. Allen Farnsworth, Contracts §§ 12.8, 12.16 (1992) (reliance damages)
and §§ 12.19, 12.20 (restitution damages).
31
Restatement (Second) of Contracts § 243(4)
.
32
See Anusyewski v. Jurevic, 566 A.2d 742 (Me. 1989). In this case the court decided that homeowners suing a builder for
breach of a construction contract were entitled to recover actual costs to fix any defective construction work, including a
general contractor’s mark-up for overhead and profit, provided that the jury concluded that it would be reasonable for
the homeowners to hire such contractor to provide repairs and to complete the work.
33
Phillips v. Ripley Fletcher Co., 541 A.2d 946, 950 (Me. 1988).
MAINE CONSUMER LAW GUIDE
2 -9
breach).
34
For instance, suppose John purchased a seriously defective washing machine. John could
take the machine back to the store and get his money back. In addition, John may be able to get the
cost of shipping the machine back to the manufacturer (incidental damages) as well as the cost of
washing the clothes at a laundromat until a new machine is purchased (consequential damages). If the
seller breaches the contract, the consumer may deduct reasonable damages from any contract payments
still due (11 M.R.S.A. § 2-717).
Normally, the courts resolve contract disputes by awarding damages. The breaching party is
ordered to pay for the damages incurred by the victim of the contract breach. Yet there are times when
damages do not provide adequate relief to the injured party. In such cases, the court may find the only
solution is “specific performance rule.” For example, when a merchant sells a defective item in breach
of warranty, the court might order the merchant to repair the item so that it meets warranty standards.
Ordering repairs is a form of specific performance.
The specific performance rule requires that the services outlined in the contract be performed by
the party who committed the contract breach. This specific performance remedy is often granted in
disputes over real estate sales. Individual pieces of property are considered unique and sometimes
monetary awards are not enough to completely cover the damages. If someone signs a contract to sell
you a house, then attempts to sell it to someone else for a higher price, you might be able to stop this
action with a lawsuit. You would claim the real estate was unique and then ask the court to order
performance of your original agreement. Conversely, specific performance is not often ordered if the
sale item possesses no unique characteristics, for example, an ordinary automobile.
If a consumer breaches a contract, it is likely that the consumer will have to pay the consequences.
Consider the 1964 Massachusetts case of Ludwig, Inc.v. Tobey.
35
Ms. Tobey purchased a “petite” size
mink jacket from merchant Ludwig. The price was $2,200. She signed a sales slip and requested that
the jacket be altered to be even smaller, so that it would fit her properly. After the alteration was
completed Tobey refused to pay, saying the stole was now too little and fragile. Ludwig then sought to
sell the stole to other customers but to no avail. Finally, he sued Tobey for breach of contract. At the
time of the trial the stole’s value was estimated at only $1,000. Nevertheless, Tobey was required to
pay as damages the full purchase price of $2,200, with interest, and was forced to accept the stole.
Normally, under the Uniform Commercial Code (U.C.C.), the seller would resell the rejected item and
the damages owed by the buyer would be the difference between the sale price and the original price.
But if an item simply will not sell—such as a mink stole too small for any other buyer—the merchant
can hold the item for the buyer and sue for the original selling price. If it were the seller who breached
the contract, then the buyer may deduct damages resulting from the breach from any part of the price
still due under the contract.
36
Specific performance, however, is rarely ordered in “personal services” contracts, which are
usually employment contracts. An opera singer cannot be forced to sing. A baseball player cannot be
required to swing a bat.
37
If a personal service contract is broken by the employee, the employee will
most likely have to pay back the employer for any reasonable damages.
Normally, the courts will not order extra punishment for someone who breaks a contract. Awards
of “punitive” damages are not common in contract law. But there are occasions when the courts award
such extra damages when a contract breach was committed with malice and fraudulent deceit.
38
Of
34
11 M.R.S.A. §§ 2-714, 2-715 (1964).
35
5 U.C.C. Reporting Service 832 (Mass. App. Feb. 28, 1964).
36
11 MRSA §2-717; See Adamatic v. Progressive Baking Co., Inc., 667 A.2d 871, 874 (Me.1995).
37
See Restatement (Second) of Contracts § 367 comment b, illustration 1 (1981)
.
38
In Maine, the injured party must show “malice.” See Tuttle v. Raymond, 494 A.2d 1353, 1361 (Me. 1985). See also
Hibschman Pontiac, Inc. v. Batchelor, 340 N.E.2d 377, 385 (Ind. Ct. App. 1976) (Garrad, J., concurring). In this case,
2 - 10
MAINE CONSUMER LAW GUIDE
course, if you pay for goods or services with a check you know will not be honored (i.e., a check that
you know will “bounce”), you can be charged with the crime of Negotiating A Worthless Instrument
(17-A M.R.S.A.§ 708).
For instance, in the 1972 Arizona case of Fousel v. Ted Walker Mobile Homes, Inc.,
39
the Fousels
purchased a mobile home based on an impressive model home shown to them. What they actually
received was a run-down home, completely different from the showroom model. The Fousels not only
got their money back; they received $10,000 in punitive damages.
The general rule is that attorney fees are not recoverable from a lawsuit over a contract dispute.
Exceptions to the rule arise when the contract specifies that attorney fees be paid in case of a breach or
when a specific state or federal statute authorizes the court to award these fees. The Maine Unfair
Trade Practices Act, 5 M.R.S.A. § 213(2), awards attorney fees to consumers who can prove they have
been the victims of an unfair trade practice. See Chapter 3 of this Guide.
§ 2. 10.
Accord And Satisfaction
An “Accord and Satisfaction” agreement allows parties who believe their contract has been
breached to enter into a new agreement that settles their dispute. Accord and satisfaction occurs when
both parties want to quickly resolve a contract dispute by entering into a new agreement, usually with
one party accepting the other party’s contract revision.
Accord and satisfaction agreements are often reached in consumer transactions when a dissatisfied
consumer sends the seller a check for less than the contract amount and writes on the check “payment
in full.” If the merchant cashes the check, then accord and satisfaction is complete and the dispute is
considered legally resolved. Some judges allow the creditor to cross out the “payment in full”
language and then cash the check. Other judges do not allow it. For instance, in 1985, a Utah court
ruled that Marton Remodeling accepted a consumer’s payment of $5,000, even though Marton
Remodeling’s final bill was $6,538.12.
40
The home repair customer, who thought the final bill was
excessive, sent Marton Remodeling a $5,000 check. On the back of the check, the customer wrote that
cashing the check “constitutes full and final satisfaction of any and all claims.”
41
Marton Remodeling
wrote “not a full payment” on the check before cashing it. Nonetheless, the court found that Marton
Remodeling had entered into an accord and satisfaction agreement simply by cashing the check.
A consumer seeking to enter into an accord and satisfaction agreement can write on any check sent
to the seller the following language:
Payment in full. By cashing this check (creditor’s name) agrees that
(consumer’s name) does not owe any more money. If this check is
returned or destroyed this means (creditor’s name) has rejected these
conditions.
While there is no guarantee that Maine courts will accept this approach,
42
it can be an effective way
to resolve bona fide disputes over the amount a consumer owes.
the court found that the inability or refusal of the dealer to repair the buyer’s automobile would support an action for
breach of warranty but was not so malicious as to also justify punitive damages.
39
602 P.2d 507 (Ariz. App. 1979).
40
Marton Remodeling v. Jensen, 706 P.2d 607 (Utah 1985).
41
Id. at 608.
42
See E.S.Herrick v. Maine Wild Blueberry Co., 670 A.2d 944, 946 (Me.1995) (“We have consistently concluded that a
check bearing language that states ‘full and final payment’ or ‘in satisfaction of all claims’ creates an accord and
satisfaction when cashed or deposited by the payee.”).
MAINE CONSUMER LAW GUIDE
2 -11
§ 2. 11.
Contract Release
After a breach of contract dispute has been settled the parties will sometimes agree to enter into a
formal “release” of all contract obligations. If the parties so desire, this release could be notarized by
both parties. A simple consumer dispute release might look like this:
CONSUMER DISPUTE RELEASE
1. I, (name of person signing release), Purchaser, sign
this release so that the Business’s liabilities and obligations are eliminated as described below
in paragraph two.
2. Purchaser hereby releases (name of Business or
person being released), from all known and unknown claims that have or can arise from
(describe the date and nature of the disputed contract):
3. In exchange for granting this release Purchaser has received or will receive from the Business
the following (describe money or action or something else of value the person signing the
release has received or will receive from the other party):
4. If the Business fails to accomplish the requirements of paragraph 3 by
(a specific date), then this Release is void.
5. This Release was entered into on , 20
at (city and state).
Purchaser’s signature
2 - 12
MAINE CONSUMER LAW GUIDE
§ 2. 12.
Negotiating A Contract
There are some consumer contracts you should not enter into without the assistance of a lawyer.
For instance, never purchase a house or property without having a lawyer examine the quality of the
title. However, there are many contracts that you can easily negotiate yourself. In succeeding chapters,
we describe many such contracts (leases, home repair contracts, etc.).
As we mentioned earlier (see § 2.3), the Statute of Frauds requires certain contracts be in writing.
Other contracts should be in writing because of their complexity. When entering into a written
contract, here are some basic rules to keep in mind:
A. A Contract Is A Bargain
Remember that a contract is a bargain in which rights and obligations are allocated. As Justic
e
Holmes said, “every contract is the acceptance of some inequality.”
43
The lesson is clear: negotiate!
Do not be reluctant to suggest terms that are important to you or reject terms that disturb you. If
a
provision in a preprinted form contract is unfair, cross it out. If there is a provision governing damages
for breach (a “liquidated damages clause”), read it carefully. If it is too onerous, cross it out or adjus
t
the damages amount (see Chapter 5 of this Guide, § 5.10). All parties to a printed contract shoul
d
initial any hand written changes.
B. Contracts Should Be In “Plain English”
There are no magic phrases that transform everyday words into legally binding language.
Remember to include these basics in any contract: the offer and its acceptance, each party’s
obligations, and the money to be paid or act to be performed.
C. Read The Contract
Of course, you should always take the time to read the contract very carefully. Keep in mind the
Latin phrase caveat emptor, which means, “let the buyer beware.” Read the fine print of any
document. If you do not, you may be unpleasantly surprised. For instance, automobile contracts are
usually quite detailed, causing many consumers to skip over the fine print. Unfortunately, many car
buyers later discover that they purchased, without realizing it, credit life insurance or an expensive
service contract.
§ 2.13.
Questions To Ask When Analyzing
A Consumer Contract
A. Is There An Enforceable Contract?
A binding contract must always consist of an offer, an acceptance, consideration (value) flowing
between both parties, and mutual agreement. See § 2.2.
Contracts for goods worth more than $500 must be in writing to be enforceable, except when the
goods are being specially made for the buyer or have already been accepted and paid for. Contracts
for the sale of land must also be in writing. See § 2.3.
Minors still living with their parents cannot enter into enforceable contracts except for necessities
(e.g., food, clothing, real estate) See § 2.4.
43
Power Manufacturing Co. v. Saunders, 274 U.S. 490, 498 (1972).
MAINE CONSUMER LAW GUIDE
2 -13
B. Is The Contract Between A Merchant And A Consumer?
If the contract is between a merchant and a consumer and the merchant seems to have breached the
terms of the contract, then you should ask:
(1) Have the terms of the contract been significantly breached, including breach of any
express warranty?
(2) Has the Maine Uniform Commercial Code (U.C.C.) been violated? Is the contract
unconscionable Have any implied warranties of merchantability or warranties of fitness
for a particular purpose been breached? If so, damages, including consequential
damages (caused by the breach) and incidental damages (cost of enforcing rights) may be
recoverable. Remember, except for used cars, all consumer goods sold in Maine come
with an implied warranty of merchantability.
(3) Does the contract violate the Maine Unfair Trade Practices Act? If so the following
remedies may be available: damages, an injunction, restitution (money back), attorney
fees (if a private suit under 5 M.R.S.A. § 213). See Chapter 3 in this Guide, Maine
Unfair Trade Practices Act.
(4) When there is a serious breach of an express or implied warranty, which cannot be fixed,
the buyer may sue for rescission and recover the purchase price; or he may sue on the
warranty and recover damages sufficient to repair the defect. See §§ 2.6-2.9 of this
Guide.
C. Is The Contract A Casual Sale Between Consumers?
If the contract is not a merchant-to-consumer transaction but rather a casual sale between two
persons, you should ask whether any express contact terms have been breached, including any express
warranties. If so, damages may be appropriate (putting the injured party in the position he or she
would have occupied if the contract had been properly performed). Casual sales do not have the
protection of such laws as the Maine Uniform Commercial Code or the Maine Unfair Trade Practices
Act. However, if you do enter into casual sales, you can hold the other party responsible for breach of
promises or for serious misrepresentations that you relied upon.
D. Should You Sign The Contract?
Some contracts are not enforceable unless all parties sign.
44
Each person signing should also date
his or her signature. Cross out any blank spaces to avoid troublesome additions after signing. All
parties should receive a copy of the contract as soon as it has been signed.
E. Are All Promises In Writing?
If your decision to enter into a contract was based in part on oral promises, make sure these
promises are included in the written contract. The parol evidence rule may prohibit you from
introducing oral evidence in a later contract dispute. All too often, mere oral promises are not
admissible evidence. If there is not room on a form contract to insert additional terms, write the
promises out on a separate page. Number the pages and refer to this separate page at the end of the
form contract. All parties should sign and date this additional page. All contract pages should be
fastened together.
44
For example, contracts resulting from a door-to-door solicitation must be signed by both parties. See 9-A M.R.S.A. §3-
503 and Chapter 13 of this Guide.
2 - 14
MAINE CONSUMER LAW GUIDE
F. Have You Reduced To Writing All Contract Changes?
A common theme in homeowner-versus-contractor disputes relates to contract changes. “We
agreed to one price,” thunders the homeowner. “But you insisted on adding the orange Jacuzzi,”
retorts the contractor. Both parties should sign and date any change order. Maine law requires all
home construction or remodeling contracts for more than $3,000 to be in writing. Any Change Orders
must also be in writing. See Chapter 17 of this Guide.
G.
Did You Guarantee (“Co-Sign”) A Contract Debt Only After Careful
Thought?
Contemplate all the possible pitfalls before co-signing a contract as a guarantor. Certainly, don’t
rush into it, even if the co-signer is a family member or a friend. Guarantors take only the liabilities
and receive no benefits.
H. Should I Consult A Lawyer?
If a contract confuses you, consult a lawyer. A brief visit with a lawyer is relatively inexpensive
and an experienced lawyer will quickly spot any major flaws.
