Chapter 11 Agreement

Agreement Chapter 11 Chapter Outline • 11-1 Offer • 11-2 Acceptance • 11-3 E-Contracts • 11-4 The Uniform Electronic Transacations Act Learning Objectives 1. What elements are necessary for an effective offer? 2. What are the elements that are necessary for an effective acceptance? 3. How do click-on and shrink-wrap agreements differ? 4. What is the primary purpose of the Uniform Electronic Transactions Act? 11-1 Offer • An offer is a promise or commitment to perform or refrain from performing some specified act in the future. There are 3 elements needed for it to be effective: 1. There must be a serious, objective intention by the offeror. 2. The terms of the offer must be reasonably certain, or definite, so that the parties and the court can ascertain the terms of the contract. 3. The offer must be communicated to the offeree. Classic Case 11.1 • Lucy v. Zehmer (1954) • Classic case in contract law because it clearly illustrates the objective theory of contracts with respect to determining whether an offer was intended. 11–1a Intention of the Offer (slide 1 of 2) • Intention is determined by what a reasonable person in the offeree’s position would conclude that the offeror’s words and actions meant. • When Intent May Be Lacking 1. Expressions of opinion 2. Statements of future intent 3. Preliminary negotiations 4. Invitations to bid 5. Advertisements and price lists 6. Live and online auctions 11–1a Intention of the Offer (slide 2 of 2) • Agreements to Agree • May be enforceable if it is clear that the parties intended to be bound by the agreements. • Case Example 11.2 Six Flags, Inc. v. Steadfast Insurance Co. (2007) • Preliminary Agreements • Increasingly, the courts are holding that a preliminary agreement constitutes a binding contract if the parties have agreed on all essential terms and no disputed issues remain to be resolved. Spotlight on Amazon.com: Case 11.2 • Basis Technology Corp. v. Amazon.com, Inc. (2008) • Assume that, instead of exchanging emails, the attorneys for both sides had had a phone conversation that included all of the terms to which they actually agreed in their e-mail exchanges. Would the court have ruled differently? Why or why not? 11–1b Definiteness of the Offer • Definiteness • Generally, the contract must include: 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. • 11–1c Communication of the Offer • The offer must be communicated to the offeree. 11-1d Termination of the Offer (slide 1 of 5) • Termination by Action of the Parties • An offer can be terminated by action of the parties by revocation, by rejection, or by counteroffer. • Revocation: The withdrawal of a contract offer by the offeror. Revocation may be accomplished by either of the following: 1. Express repudiation of the offer 2. Performance of acts that are inconsistent with the existence of the offer and are made known to the offeree 11-1d Termination of the Offer (slide 2 of 5) • Termination by Action of the Parties • Irrevocable Offers: Some offers can be made irrevocable. • Option Contract: A contract under which the offeror cannot revoke the offer for a stipulated time period (because the offeree has given consideration for the offer to remain open). • Termination by Action of the Offeree • If the offeree rejects the offer, the offer is terminated. 11-1d Termination of the Offer (slide 3 of 5) • Termination by Action of the Offeree • Rejection: A rejection is effective only when it is actually received by the offeror or the offeror’s agent. • Counteroffers: A rejection of the original offer and the simultaneous making of a new offer. • At common law, the mirror image rule requires that the offeree’s acceptance match the offeror’s offer exactly. 11-1d Termination of the Offer (slide 4 of 5) • Termination by Operation of Law 1. Lapse of time: An offer terminates automatically by law when the period of time specified in the offer has passed. 2. Destruction of specific subject matter: An offer is automatically terminated if the specific subject matter of the offer is destroyed before the offer is accepted. 11-1d Termination of the Offer (slide 5 of 5) • Termination by Operation of Law 3. Death or incompetence: An offeree’s power of acceptance is terminated when the offeror or offeree dies or becomes legally incapacitated, unless the offer is irrevocable. 4. Lapse of time: An offer terminates Supervening illegality: A statute or court decision that makes an offer illegal automatically terminates the offer. 11-2 Acceptance (slide 1 of 5) • An acceptance is a voluntary act by the offeree that shows assent, or agreement, to the terms of an offer by words or conduct. • The acceptance must be unequivocal and must be communicated to the offeror. • Generally, only the person to whom the offer is made or that person’s agent can accept the offer and create a binding contract. 11-2 Acceptance (slide 2 of 5) • 11–2a Unequivocal Acceptance • The offeree must accept unequivocally to exercise the power of acceptance effectively. An acceptance may be unequivocal even though the offeree expresses dissatisfaction with the contract. • An acceptance cannot impose new conditions or change the terms of the original offer. • Case Example 11.11 Brown v. Lagrange Development Corp. (2015) 11-2 Acceptance (slide 3 of 5) • 11–2b Silence as Acceptance • Ordinarily, silence cannot constitute acceptance, even if the offeror states this as part of the offer. • However, silence or inaction will operate as an acceptance in some instances if the offeree has a duty to speak. • Silence can also operate as an acceptance when the offeree has had prior dealings with the offeror. 11-2 Acceptance (slide 4 of 5) • 11–2c Communication of Acceptance • Unilateral contracts: Full performance of some act is called for, acceptance is usually evident, and notification is unnecessary (unless required by law or offeror asks for it). • Bilateral contracts: Communication of acceptance is necessary, because acceptance is in the form of a promise. • Case Example 11.13 Powerhouse Custom Homes, Inc. v. 84 Lumber Co. (2011) 11-2 Acceptance (slide 5 of 5) • 11–2d Mode and Timeliness of Acceptance • The Mailbox Rule: Acceptance is valid when it is dispatched through the mail. • Authorized Means of Communication: When an offeror specifies how acceptance should be made, the contract is not formed unless the offeree uses that mode of acceptance. • Substitute Method of Acceptance: The acceptance of an offer by a substitute method may still be effective if that method serves the same purpose as the authorized means. 11-3 E-Contracts • Electronic contracts, or e-contracts, must meet the same basic requirements (agreement, consideration, contractual capacity, and legality) as paper contracts. • Online contracts may be formed not only for the sale of goods and services, but also for licensing. 11-3a Online Offers • Displaying the Offer (slide 1 of 3) • The contract generally must be displayed online in a readable format and all provisions should be reasonably clear. • Provisions to Include 1. 2. 3. 4. 5. 6. 7. Acceptance of terms Payment Return policy Disclaimer Limitation on remedies Privacy policy Dispute resolution 11-3a Online Offers (slide 2 of 3) • Dispute-Settlement Provisions • Online offers frequently include provisions relating to dispute settlement. • Case Example 11.19 Rosendahl v. Bridgepoint Education, Inc. (2012) • Forum-Selection Clause • A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract. • Case Example 11.22 Zaltz v. JDATE (2013) 11-3a Online Offers • Dispute-Settlement Provisions (slide 3 of 3) • Choice-of Law Clause: A clause that specifies that any dispute arising out of the contract will be settled in accordance with the law of a particular jurisdiction. 11-3b Online Acceptances (slide 1 of 2) • Click-On Agreements • An agreement that arises when an online buyer clicks on “I agree.” • Case Example 11.22 Kai Peng v. Uber Technologies, Inc., 237 F.Supp.3d 36 (E.D.N.Y. 2017). • Shrink-Wrap Agreements • Agreement terms are located inside a packaged box of goods. 11-3b Online Acceptances (slide 2 of 2) • Shrink-Wrap Agreements • Shrink-Wrap Agreements and Enforceable Contract Terms: A buyer’s failure to object to terms contained within a shrinkwrapped package may constitute an acceptance of the terms by conduct. • Shrink-Wrap Terms That May Not Be Enforced: Some courts have refused to enforce certain terms because the buyer did not expressly consent to them. • Browse-Wrap Terms • A term or condition of use that is presented when an online buyer downloads a product but to which the buyer does not have to agree before installing or using the product. 11-3c Federal Law on ESignatures and E-Documents • E-Signature: An electronic sound, symbol, or process attached to or logically associated with a record and adopted by a person with the intent to sign the record. • The E-SIGN Act provides that no contract, record, or signature may be “denied legal effect” solely because it is in electronic form. • The act does not apply to court papers, divorce decrees, evictions, foreclosures, health-insurance terminations, prenuptial agreements, and wills. 11-3d Partnering Agreements • Partnering agreement: Agreement between buyer and seller who regularly do business together on terms that will apply to all transactions. • A partnering agreement reduces the likelihood of contract disputes because the buyer and the seller have agreed in advance to the terms and conditions that will accompany each sale. 11-4 The Uniform Electronic Transactions Act (slide 1 of 4) • 11-4a The Scope and Applicability of the UETA • The act removes barriers to e-commerce by giving the same legal effect to electronic records and signatures as is given to paper versions. • 11-4b The Federal E-SIGN Act and the UETA • If a state has enacted the UETA without modification, state law will govern. • The E-SIGN Act explicitly allows states to enact alternative requirements for the use of electronic records or electronic signatures. 11-4 The Uniform Electronic Transactions Act (slide 2 of 4) • 11-4c Highlights of the UETA • Attribution • If an electronic record or signature is the act of a particular person, the record or signature may be attributed to that person. • The Effect of Errors • The UETA encourages the use of security procedures to verify changes to electronic documents and to correct errors. 11-4 The Uniform Electronic Transactions Act (slide 3 of 4) • 11-4c Highlights of the UETA • Timing • An electronic record is considered sent when it is properly directed to the intended recipient in a form readable by the recipient’s computer system. • 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. 11-4 The Uniform Electronic Transactions Act (slide 4 of 4)