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Chapter 8: Contracts Agreement in Traditional and E-Contracts1

Chapter 1: Legal Ethics1Learning ObjectivesWhat elements are necessary for an effective offer? What are some examples of nonoffers?In what circumstances will an offer be irrevocable? What are the elements that are necessary for an effective acceptance?2 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.2Learning ObjectivesWhat is consideration? What is required for consideration to be legally sufficient?In what circumstances might a promise be enforced despite a lack of consideration?3 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.3AgreementAn essential element for contract formation is agreement. The parties must mutually assent to the same bargain. An agreement has two components: an offer and an acceptance.4 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.4AgreementRequirements of the Offer.An offer is a promise to do or not do something in the future.The common law requires three elements for an effective offer:Offerors serious intention. Reasonably certain terms. Communication to offeree.

5 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.5AgreementRequirements of the Offer.Offerors serious, objective intention.A contract is judged by what a reasonable person in the offerees position would conclude about the offer.CASE 8.1 Lucy v. Zehmer (1954). Do you think the Zehmers had a serious intention?

6 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6AgreementRequirements of the Offer.Offerors serious, objective intention.Expressions of Opinion: not offers.Statements of Future Intent: not offers.Preliminary Negotiations, or Invitations to Negotiate: not offers. Advertisements: not offers (invitations to negotiate).

7 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.7AgreementRequirements of the Offer.Offerors serious, objective intention.Auctions: when the auctioneer accepts a higher bid, she rejects all previous offers.Auctions with and Without Reserve. Agreements to Agree: can be enforceable if parties intended to be bound.

8 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.8AgreementRequirements of the Offer.Definiteness of Terms.Identification of the parties.Object or subject matter of the contract.Consideration to be paid.Payment, delivery, or performance.

9 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.9AgreementRequirements of the Offer.Definiteness of Terms.An offer can require specific terms so that a court can determine whether a breach has occurred:Identification of the parties.Identification of the subject matter or object.Consideration to be paid.Time of payment, delivery, or performance.10 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.10AgreementRequirements of the Offer.Communication to Offeree.Directly by the Offeror, orUse of Agents.CASE 8.2 Alexander v. Lafayette Crime Stoppers, Inc. (2010). Why did the appeals court grant summary judgment to the defendants?11 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.11AgreementTermination of the Offer.An offer may be terminated prior to acceptance by either:Action of the Parties or by Operation of Law.

12 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.12AgreementTermination by Action of the Parties.Revocation of the Offer by the Offeror:Offer can be withdrawn anytime before Offeree accepts the offer.Effective when the offeree or offerees agent receives it. 13 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.13AgreementTermination by Action of the Parties.Irrevocable Offers: courts are unwilling to allow an offer to be revoked when the offeree has changed a legal position based on justifiable reliance.Option Contract: offeror promises to hold an offer open in return for consideration.

14 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.14AgreementTermination by Action of the Parties.Rejection of the Offer by Offeree.When rejected, by words or conduct, by the offeree.Counteroffer by the offeree is a termination of the original offer.Mirror-Image rule applies.15 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.15AgreementTermination by Operation of Law.Lapse of Time.Offer terminates by law when the period of time specified in the offer has passed.If no time period for acceptance is specified, the offer terminates at the end of a reasonable period of time.

16 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.16AgreementTermination by Operation of Law.Destruction of the Subject Matter: before acceptance of offer, terminates the offer.Death or Incompetence of the Offeror or Offeree: automatically terminates unless irrevocable offer.Supervening Illegality of the Proposed Contract: by court or legislation.

17 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.17AgreementAcceptance.A voluntary act (expressed or implied) by the Offeree that shows assent (agreement), to the terms of an offer.Unequivocal Acceptance: the Mirror Image Rule..

18 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.18AgreementAcceptance. Silence as Acceptance.General Rule: offeree should not be legally obligated to affirmatively reject an offer. When Offeree Has Duty to Speak:He takes benefit of services with opportunity to reject. Prior dealings with Offeror. 19 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.19AgreementCommunication of Acceptance.Bilateral Contract: communication of acceptance is necessary because there is a mutual exchange of promises.Unilateral Contract: acceptance is evident, notification not necessary.CASE 8.3 Powerhouse Custom Homes, Inc. v. 84 Lumber Co. (2011).

20 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.20AgreementCommunication of Acceptance.Mode and Timeliness of Acceptance.General Rule: in bilateral contracts, acceptance is timely if done before offer is terminated. The Mailbox Rule: acceptance is effective when offeree uses authorized means of acceptance.

21 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.21AgreementCommunication of Acceptance.Mode and Timeliness of Acceptance.The Mail Box Rule.If U.S. Mail, acceptance is effective upon dispatch. If no means specified, acceptance can be by any reasonable means.22 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.22AgreementCommunication of Acceptance.Exceptions to the Mail Box Rule.If Offeror specifies that acceptance will not be effective until it is received.If acceptance is sent after rejection, whichever is received first is given effect.

23 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.23AgreementCommunication of Acceptance.Mode and Timeliness of Acceptance.Authorized Means of Communication: an acceptance not authorized by the offeror is not effective until it is received by the offeror. 24 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.24AgreementCommunication of Acceptance.Mode and Timeliness of Acceptance.Substitute Method of Acceptance.Effective if the substitute serves the same purpose (Fed-Ex vs. UPS).Not effective on dispatch.Effective when received by the Offeror. 25 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.25Agreement in E-Contracts26Online Offers.Displaying the Offer. Sellers website should include hyperlink to page with full contract.Provisions to Include. 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.26Agreement in E-Contracts27Online Offers.Provisions to Include:Acceptance of Terms: what constitutes an acceptance.Payment: how payment is made.Return Policy. 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.27Agreement in E-Contracts28Online Offers.Provisions to Include:Disclaimer: of liability for certain uses of the goods.Limitations on Remedies: if goods defective or contract is breached.Privacy Policy. Dispute resolution. 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.28Agreement in E-ContractsOnline Offers.Dispute Settlement Provisions: usually arbitration or forum-selection clauses.Forum-selection clause.29 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.29Agreement in E-ContractsOnline Acceptances.Click-On Agreements. Courts have concluded a binding contract can be formed by clicking on a box indicating I Accept or I Agree. Contract can be formed via website or software. Law does not require parties read all the terms. 30 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.30Agreement in E-ContractsOnline Acceptances.Shrink-Wrap Agreements. Contract terms are inside the box.Party opening box agrees to terms by keeping merchandise.Enforceable vs. Unenforceable Terms. 31 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.31Agreement in E-ContractsOnline Acceptances.Browse-Wrap Terms. Like click-on agreements, browse-wrap terms can occur in transactions over internet.Unlike click-on agreements, browse-wrap terms do not require assent and are usually unenforceable.32 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.32Agreement in E-ContractsE-Signature Technologies.E-Signature: electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.Digitized Signature: graphical image of a handwritten signature.

33 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.33Agreement in E-ContractsFederal Law on E-Signatures and E-Documents.E-SIGN (2000) gives e-signatures and e-documents legal force.For an e-signature to be enforceable, the contracting parties must have agreed to use electronic signatures. Partnering Agreements.

34 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.34The Uniform Electronic Transactions Act35Purpose is to remove barriers to forming electronic commerce.E-Signature is electronic sound, symbol or processassociated with a record and adopted by a person with intent to sign the record. 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.35The Uniform Electronic Transactions Act36A record is information that is inscribed on a tangible medium or stored in electronic or other medium that is retrievable in visual form. 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.36The Uniform Electronic Transactions ActThe Federal E-SIGN and the UETA.E-SIGN provides that if a state passes UETA, it is not preempted by the E-SIGN act (state law will govern).E-SIGN allows states to enact alternative e-record and e-signature statutes.

37 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.37The Uniform Electronic Transactions ActHighlights of the UETA.Agreement: UETA only applies to transactions if both parties have agreed, but may be implied by conduct.Even if a party has previously agreed, he may withdraw consent (opt out).

38 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.38The Uniform Electronic Transactions ActHighlights of the UETA.UETA does not create new rules, but rather enforces real world rules on electronic contracts.Only applies to e-records and e-signatures relating to a transaction (interactions between two people relating to business, commercial, or governmental activities).

39 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.39The Uniform ElectronicTransactions ActHighlights of the UETA.UETA does not apply to wills or testamentary trusts.Does not apply unless each party has previously agreed to conduct electronic transactions. Can be implied by conduct and prior dealings.40 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.40The Uniform Electronic Transactions Act41

2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.41The Uniform Electronic Transactions ActAttribution. If electronic record or signature is act of a particular person, the record or signature is attributed to that person.However, state law governs issues of agency, authority, forgery, contract formation.42 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.42The Uniform Electronic Transactions ActHighlights of the UETA.The Effect of Errors: UETA encourages use of security and encryption methods. Parties must notify each other promptly.43 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.43The Uniform Electronic Transactions ActHighlights of the UETA.Timing: once record leaves control of sender, UETA deems it sent. The record is received when it enters recipients system in readable form even if no individual is aware of its receipt.44 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.44