BLAW Unit 3

Chapter 10 Formation of Traditional and E-Contracts

Contracts

Formed by 2+ parties that promises to do or not do something, enforceable

Different from moral obligation

Sources of Contract Law - common law governs contracts except with it’s changed by statutes or agency regulation

Objective Theory of Contracts - person’s intention to enter contract is judged by the objective facts interpreted by a “reasonable person”, not by secret intentions

Requirements for a Contract

1. Agreement - agreement to form contract includes offer and acceptance

2. Consideration - something of value being exchanged

3. Contractual Capacity - parties have to have the capcity to enter contract

4. Legality - contract’s purpose must accomplish a legal goal and not against public policy

Defenses to Enforceable Contract: voluntary consent with both parties and form (contract has to be in form law requires)

Types of Contracts

Contract formation: Bilateral vs Unilateral, Formal vs Informal, Express vs Implied

Bilateral - promise for promise, both do something; work for money

Unilateral - promise for performance, paying if someone finds something

Formal - law specifies specific form

Informal - doesn’t require specific form

Express Contract - terms of agreement are stated in words, oral or written

Implied Contract - formed in whole or in part from conduct of parties

Contract Performance: Executed vs Executory

Executed - contract is fully performed by both parties

Executory - contract hasn’t been fully performed yet

Contract Enforceablility:

Valid - both sides meet all legal requirements, can be enforced

Voidable Contract - contract can be legally avoided by one or both parties

Unenforceable Contracts: valid contract made unenforceable by some law

Void: contract that has no legal force or binding effect

Agreement

Mutual meeting of minds

Offer: promise or commitment to do something

Requirements of offer: serious, objective intention by offeror, terms of offer must be reasonably certain or definite, offer must be communicated to offeree

Intention: determined by reasonable person in offeree’s place would conclude what offeror meant

When intent is lacking: expressions of opinion, statement of future intent, preliminary negotiations, invitations to bid, advertisements and price lists, live and online auctions

Agreements to Agree and Preliminary Agreements: used to be nonenforceable, now just have to show intent and with preliminary, most of major terms are taken care of

Contract must have: identification of parties, idenitification of object or subject matter of contract, consideration to be paid, time of payment, delivery, or performance

Communication - must be communicated to offree, not third party

Terminating Offer

Revocation: withdrawing offer by offeror

Irrevocable Offers: some offers can’t be revoked (Opinion contract - offeror can’t revoke offer for specific amount of time because offeree has given consideration for offer to stay open)

Rejection: effective when it is actually received by offeror or offeror’s agent

Counteroffer: reject original offer and make new offer

Mirror Image Rule - requires offeree’s acceptance match offeror’s offer exactly

Terminated by Law: lapse of time (contracts offer time end or something happens to thing in offer), destruction death incompetence, supervening illegality (changing of laws)

Acceptance

Voluntary act by offeree that shows agreement to terms of offer by words or conduct

Unequivocal Acceptance - offeree must accept unequivocally to exercise power of ecceptance effectively, acceptance can’t impose new condiitons or change terms of original offer

Silence as acceptance - usually not acceptance, but will be acceptance if offeree has duty to speak (like when terms of contract changes) or when offeree has had prior dealings with offeror

In Unilateral - offeree’s performance is the acceptance

In Bilateral - through proper means of communications

Communicating Acceptance: mail box rule - acceptance is valid through mail, authorized means of acceptance (contract has specific forms to acceptance and is accepted when you send it), substute method (if you do another mean, is valid when offeror receives it, not when you send it)

Consideration

The value given in return for promise

Parts of Consideration: legally sufficient value is exchanged for promise, there must be bargained-for exchange

To be legally sufficient, must be one of these: promise to do something that one has no prior legal duty to do, performance of action that one is otherwise not obligated to undertake, refraining from an action that one has legal right to undertake (forbearance); usually you lose something and gain something

Bargained for exchange - must provide basis for bargain struck between contracting partiesitem of value must be given or promised by offeror for offeree’s promise or performance

Agreements that Lack Consideration: preexisting duty (if you already have a legal duty to do it), unforeseen difficulties (new information comes out that changes things), recission and New Contract (2 parties can mutally agree to rescind contract, to the extent that it is exeuctory (still to be carried out), past consideration (something takes place before contract is made and that can’t be consideration for the contract, illusory promises (when promise has uncertainty)

Contractual Capaicity

Both sides need to have legal ability to enter contract

Minor - can enter contracts unless law prohibits, minor can disaffirm (legal avoidance, or setting aside, or contractual obligation) contract, minor has right to void contract until age of majority, adult can’t enforce but minor can; if its a necessity, then minor is responsible for completing contract

Intoxicated People - did person have intent, if they were intoxicated enough to lack mental capacity, contract can be voided, but if they understood legal consequences, contract is enforceable; other party can’t enforce if they were drunk enough but intoxicated person can

Mentally Incompetent - validity depends on mental capcity of person when contract formed, if person was mentally incompetent at the start, its void; if they become competent after contract, it’s voidable; also depends on mental condition too like they were still able to understand the contract

Legality of Contract/Legality of Subject Matter

Must be legal, otherwise it is illegal, void, unenforceable

Contract wasn’t illegal at start but becomes illegal later on: contracts are discharged, and unenforceable,

Usery Contract: charge illegal rate on interest, court makes them lower to max, not get interest on principle, or rescind contract

Gambling

Licensing Statutes - licenses in jobs, if person has job without license, then court will look at purpose of statute, if statute and license was to protect people from unlicensed people, then contract is unenforceable, if purpose was to raise revenue, contract may still be somewhat enforceable

Contracts against Public Policy

Contract not to compete - promise to not do certain business during specific time in specific area, has to not be burden on either side otherwise it is against public policy, have to compensate

Not competing in Employment contract -

Enforceing: reformation (court ordered correction of written contract to reflect true intentions of parties)

Unconscionable Contract/Clause - one side has more bargaining power than the other and use it, forced other party to accept

Exculpatory Clause (know when rejected and enforced) - one side limit liability on injuries even because of negligence, for contracts on leasing property or renting equipment, courts don’t enforce; only enforce when person engages in activity

E-Contracts

E-contracts must meet basic requirements of paper contracts

Includes sale of goods, services, and licensing

Must be readable and clear

Dispute resolution - could give jurisdiction anywhere because online, company has to be clear where to take them to court or arbitration

Online Acceptances - Click on agreements (shows Terms of Services and press agree)

Shrink Wrap Agreement - has terms on small piece of paper, is enforced because you bought and still used it unless you weren’t aware before buying product

Browse wrap term - agreeing to terms by using product

Law for E Signatures

Uniform Electronic Transaction Act (all states follow) and Federal E-Signature Act (federal law that covers areas of UETA), makes electronic signatures more prevalent and enforceable

Can’t have e signatures for certain things like divorce papers, court papers, wills, deeds

UETA - removes barriers to e-commerce

Jurisdiction: if state does UETA with no modifications, state law governs, E sign act lets states do alternative requirements for e signature; if there are modifications, state law applies if state procedure and requirements follow e-sign act, doesn’t give priority to one type of technology, or state law was enacted after e-sign act and refers to it, otherwise e-sign act governs if modifications are inconsistent with e-sign act