Fundamentals Of Business Law - Chapter 8

Front 1

Agreement

Back 1

An essential element for contract formation. The parties must agree on the terms of the contract.

Evidenced by two events: an OFFER and an ACCEPTANCE

Front 2

Requirements of an Offer

Back 2

Offer - a promise or commitment to perform or refrain from performing some specified act in the future.

1. serious, objective intention
2. terms of the offer must be reasonably certain
3. must be communicated to the offeree

Front 3

Intention

Back 3

Determined by what a reasonable person in the offeree's position would conclude the offeror's words and actions meant

Front 4

Expressions of Opinion

Back 4

not an offer! It does not demonstrate an intention to enter into a binding agreement

Front 5

Statement of Future Intent

Back 5

statements of intention to do something in the future is NOT an offer

Front 6

Preliminary Negotiations

Back 6

a request or invitation to negotiate is not an offer, i; it only expresses a willingness to discuss the possibility of entering into a contract

Front 7

Advertisements, Catalogues, and Circulars

Back 7

treated as invitations to negotiate, not as offers to form a contract

Front 8

Auctions

Back 8

where a seller "offers" goods for sale through an auctioneer. This is NOT an offer to form a contract. Rather it is an invitation asking bidders to submit offers

Front 9

Auctions without Reserve

Back 9

the seller (through the auctioneer) may withdraw the goods at any time before the auctioneer closes the sale by announcement or by the fall of the hammer.

In an auction without reserve, the goods cannot be withdrawn by the seller and must be sold to the highest bidder.

Front 10

Agreements to Agree

Back 10

Agreements to agree to the material termes of a contract at some future date.

May be enforceable agreements (contracts) if it is clear that the parties intend to be bound by the agreements

Front 11

Definiteness

Back 11

Must include the following terms:
1. The identification of the parties
2. The identification of the object or subject matter of the contract, including the work to be performed, with specific identification of such items as goods, services, and land
3. The consideration to be paid
4. The time of payment, delivery, or performance

Front 12

Communication

Back 12

The third party requirement for an effective offer. The offer must be communicated to the offeree by the offeror or an agent

Front 13

Termination of an Offer

Back 13

Offers can be terminated through the action of the parties or by operation of law

Front 14

Termination by Action of the Parties

Back 14

can be terminated by action of the parties in any of three ways: revocation, rejection, or by counteroffer

Front 15

Revocation of Offer

Back 15

Revocation - the offeror's act of withdrawing an offer

The offeror usually can revoke the offer as long as the revocation is communicated to the offeree before the offeree accepts.

The general rule followed by most states is that a revocation becomes effective when the offeree or the offeree's agent actually receives it.

Front 16

Irrevocable Offers

Back 16

Courts refuse to allow an offeror to revoke an offer when the offeree has changed position because of justifiable reliance on the offer

Option Contract - (form of irrevocable offer) is created when an offeror promises to hold an offer open for a specified period of time in return for a payment (consideration) given by the offeree

Front 17

Rejection of the Offer by the Offeree

Back 17

If the offeree rejects the offer - by words or by conduct - the offer is terminated

Front 18

Counteroffer by the Offeree

Back 18

A rejection of the original offer and the simultaneous making of a new offer

Front 19

Termination by Operation of Law

Back 19

1. Lapse of time
2. Destruction of the specific subject matter of the offer
3. Death or incompetence of the offeror or the offeree
4. Supervening illegality of the proposed contract

Front 20

Lapse of Time

Back 20

An offer terminates automatically by law when the period of time specified in the offer has passed.

Front 21

Destruction of the Subject Matter

Back 21

An offer is automatically terminated if the specific subject matter of the offer is destroyed before the offer is accepted

Front 22

Death or Incompetence of the Offeror or Offeree

Back 22

An offeree's power of acceptance is terminated when the offeror or offeree dies or is deprived of legal capacity to enter into the proposed contract (unless the offer is irrevocable)

Front 23

Supervening Illegality of the Proposed Contract

Back 23

A statement or court decision that makes an offer illegal automatically terminates the offer

Front 24

Acceptance

Back 24

A voluntary act by the offeree that shows assent, or agreement, to the terms of an offer.
- may consist of words of conduct
- must be unequivocal
- must be communicated to the offeror

Front 25

Unequivocal Acceptance

Back 25

("The Mirror Image Rule")
To exercise the power of acceptance effectively, offeree must accept unequivocally.

Front 26

Silence as Acceptance

Back 26

This general rule applies because an offeree should not ne put under a burden of liability to act affirmatively in order to reject an offer.

In some instances, the offer does have a duty to speak. Takes the benefit of offered services even though he or she has an opportunity to reject them.

Silence can also operate as an acceptance when the offeree has had prior dealings with the offeror

Front 27

Communication of Acceptance

Back 27

In a Bilateral Contract: communication of acceptance is necessary because acceptance is in the form of a promise (not performance), and the contract is formed when the promise is made (rather than when the act is performed)

In a Unilateral Contract: acceptance is usually evident, and notification is unnecessary

Front 28

Mode and Timeliness of Acceptance

Back 28

The general rule is that acceptance in a bilateral contract is timely and is made before the offer is terminated

Front 29

The Mailbox Rule

Back 29

Acceptance takes effect, thus completing formation of the contract, at the time the offeree sense or delivers the communication via the mode expressly or impliedly authorized by the offeror,

An acceptance becomes valid when it is dispatched - not when it is received by the offeror

Front 30

Authorized Means of Communication

Back 30

An acceptance sent by means not expressly or impliedly authorized normally is not effective until it is received by the offeror

Front 31

Substitute Method of Acceptance

Back 31

The acceptance may still be effective if the substituted method serves the same purpose.

It is not effective on dispatch, no contract will be formed until the acceptance is received by the offeror

Front 32

Online Offers

Back 32

Sellers doing business via the Internet can protect themselves against contract disputes and legal liability by creating offers that clearly spell out the terms that will govern their transactions if the offers are accepted.

Front 33

Displaying the Offer

Back 33

The seller's Website should include a hypertext link to a page containing the full contract

Front 34

Provisions to Include

Back 34

1. Acceptance of Terms - what constitutes the buyer's agreement to the terms of the offer
2. Payment - how payment must be made
3. Return Policy
4. Disclaimer - liability for certain uses of the goods
5. Limitation on Remedies - if the goods are found to be defective or if the contract is otherwise breached
6. Privacy Policy
7. Dispute Resolution

Front 35

Dispute-Settlement Provisions

Back 35

-Arbitration clause
-Forum-Selection Clause: indicating the forum (or location) for the resolution

Front 36

Click-On Agreements

Back 36

The courts have used these provisions to conclude that a binding contract can be created by conduct, including the act of clicking on a box indicating "I accept" or "I agree" to accept an online offer.

The law does not require that the parties have read all of the terms in a contract for it to be effective.

Front 37

Shrink-Wrap Agreements

Back 37

Terms are expressed inside a box in which the goods are packaged. Usually, the party who opens the box is told that she or he agrees to the terms by keeping whatever is in the box

Front 38

Shrink-Wrap Agreements and Enforceable Contract Terms

Back 38

In some cases, the courts have enforced the terms of shrink-wrap agreements in the same way as the terms of other contracts. These courts have reasoned that by including the terms with the product, the seller proposed a contract that the buyer could accept by using the product after having an opportunity to read the terms

Front 39

Browse-Wrap Terms

Back 39

Like the terms of a click-on agreement, browse-wrap terms can occur in a transaction conducted over the Internet.

Do not require an Internet user to assent to the terms.

Browse-wrap terms are often unenforceable because they do not satisfy the agreement requirement of contract formation

Front 40

E-Signature Technologies

Back 40

An 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.

Two categories: digitalized handwritten signatures and digital signatures based on a public-key infrastructure

Front 41

Federal Law on E-Signatures and E-Documents

Back 41

Electronic Signatures in Global and National Commerce Act (E-SIGN Act) - 2000

An electronic signature is a s valid as a signature on paper, and an e-document can be as enforceable as a paper one

Front 42

Partnering Agreements

Back 42

a seller and a buyer who frequently do business with each other agree in advance on the terms and conditions that will apply to all transactions subsequently conducted electronically.

Front 43

The Uniform Electronic Transactions Act

Back 43

Primary purpose of the UETA is to remove barriers to e-commerce by giving the same legal effect to electronic records and signatures as is given to paper documents and signatures.

Record - information that is inscribed on a tangible medium that is stored in an electronic or other medium and is retrievable in perceivable (visual) form

Front 44

The Federal E-SIGN Act and the UETA

Back 44

The E-SIGN Act refers explicitly to the UETA and provides that if a state has enacted the uniform version of the UETA, it is not preempted by the E-SIGN Act.

Front 45

UETA - Agreement

Back 45

The UETA will not apply to a transaction unless each of the parties has previously agreed to conduct transactions by electronic means.

May be implied by conduct.

Parties can opt out of all or some of the terms of the UETA

Front 46

UETA - Attribution

Back 46

If an electronic record or signature is the act of a particular person, the record or signature is the act of a particular person, the record or signature may be attributed to that person.

Other state laws control if any issues relating to agency, authority, forgery, or contract formation arise.

Front 47

UETA - The Effect of Errors

Back 47

UETA encourages, but does not require, the use of security procedures (such as encryption)

Front 48

UETA - Timing

Back 48

Once the electronic record leaves the control of the sender or comes under the control fo the recipient the UETA deems it to have been sent.

An electronic record is considered received when it enters the recipient's processing system in a readable form-even if no individual is aware of its receipt