Chapter 8: Contracts – Agreement in Traditional and E-Contracts

1. Chapter 8: Contracts – Agreement in Traditional and E-Contracts

2. Learning Objectives • What 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?

3. Learning Objectives • What is consideration? What is required for consideration to be legally sufficient? • In what circumstances might a promise be enforced despite a lack of consideration?

4. Agreement • An 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.

5. Agreement • Requirements 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: • Offeror’s serious intention.  • Reasonably certain terms.  • Communication to offeree. 

6. Agreement • Requirements of the Offer. • Offeror’s serious, objective intention. • A contract is judged by what a reasonable person in the offeree’s position would conclude about the offer. • CASE 8.1 Lucy v. Zehmer (1954). Do you think the Zehmers had a serious intention?

7. Agreement • Requirements of the Offer. • Offeror’s 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). 

8. Agreement • Requirements of the Offer. • Offeror’s 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.

9. Agreement • Requirements 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.

10. Agreement • Requirements 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.

11. Agreement • Requirements of the Offer. • Communication to Offeree. • Directly by the Offeror, or • Use of Agents. • CASE 8.2 Alexander v. Lafayette Crime Stoppers, Inc. (2010). Why did the appeals court grant summary judgment to the defendants?

12. Agreement • Termination of the Offer. • An offer may be terminated prior to acceptance by either: • Action of the Parties  or by • Operation of Law. 

13. Agreement • Termination 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 offeree’s agent receives it. 

14. Agreement • Termination 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.

15. Agreement • Termination 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.

16. Agreement • Termination 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. 

17. Agreement • Termination 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.

18. Agreement • Acceptance. • 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..

19. Agreement • Acceptance. • 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.

20. Agreement • Communication 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).

21. Agreement • Communication 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. 

22. Agreement • Communication 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.

23. Agreement • Communication 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.

24. Agreement • Communication 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.

25. Agreement • Communication 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.

26. Agreement in E-Contracts • Online Offers. • Displaying the Offer. Seller’s website should include hyperlink to page with full contract. • Provisions to Include. 

27. Agreement in E-Contracts • Online Offers. • Provisions to Include: • Acceptance of Terms: what constitutes an acceptance. • Payment: how payment is made. • Return Policy.

28. Agreement in E-Contracts • Online 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.

29. Agreement in E-Contracts • Online Offers. • Dispute –Settlement Provisions: usually arbitration or forum-selection clauses. • Forum-selection clause.

30. Agreement in E-Contracts • Online 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.

31. Agreement in E-Contracts • Online Acceptances. • Shrink-Wrap Agreements. • Contract terms are inside the box. • Party opening box agrees to terms by keeping merchandise. • Enforceable vs. Unenforceable Terms.

32. Agreement in E-Contracts • Online 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.

33. Agreement in E-Contracts • E-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.

34. Agreement in E-Contracts • Federal 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.

35. The Uniform Electronic Transactions Act • Purpose is to remove barriers to forming electronic commerce. • E-Signature is “electronic sound, symbol or process…associated with a record and… adopted by a person with intent to sign the record.” 

36. The Uniform Electronic Transactions Act • A record is information that is inscribed on a tangible medium or stored in electronic or other medium that is retrievable in visual form.

37. The Uniform Electronic Transactions Act • The 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.

38. The Uniform Electronic Transactions Act • Highlights 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).

39. The Uniform Electronic Transactions Act • Highlights 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).

40. The Uniform ElectronicTransactions Act • Highlights 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.

41. The Uniform Electronic Transactions Act

42. The Uniform Electronic Transactions Act • Attribution. • 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.

43. The Uniform Electronic Transactions Act • Highlights of the UETA. • The Effect of Errors: UETA encourages use of security and encryption methods. Parties must notify each other promptly.

44. The Uniform Electronic Transactions Act • Highlights 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.