MGT 330- Chapter 10

The Formation of Traditional and E-Contracts

Contract

A promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

Objective Theory of Contracts

A theory under which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the parties' own subjective intentions.

Statute of Frauds

A state statute under which certain types of contracts must be in writing to be enforceable.

Bilateral

Promise for a promise.

Unilateral

Promise for an act.

Express Contract

The terms of the agreement are fully and explicitly stated in words, oral, or written.

Implied Contract

Parties create and define the terms of the contract and can arise from:

1. The plaintiff furnished some service or property

2. the plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected.

3. The defendant had a chance to reject the service or property and did not.

Executed

Both parties have fully performed their sides of the contract.

Executory

Only one party has fully performed their duties in the contract, but the other has not.

Valid

Contracts that have the necessary elements to entitle at least one of the parties to enforce it in court. Meets: Agreement, Consideration, Capacity, and Legality.

Unenforceable

A contract that cannot be enforced because of certain legal defenses against it.

Void

Contract is not a contract at all. None of the parties have any legal obligations if a contract is void.

Agreement

Parties must agree on the terms of the contract and manifest to each other their mutual assent (agreement) to the same bargain. Evidenced by two events: an offer and an acceptance.

Offer

A promise or commitment to do or refrain from doing some specified action in the future. Three elements necessary:

1. The offeror must have a serious intention to become bound by the offer.

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.

Revocation

The withdrawal of a contract offer by the offeror. Unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability.

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.

Counteroffer

Rejection of the original offer and the simultaneous making of a new offer.

Mirror Image Rule

A common law rule that requires the terms of the offeree's acceptance to exactly match the terms of the offeror's offer for a valid contract to be formed.

Termination by Operation of Law

Can be terminated through the occurrence of any of these events:

1. Lapse of time

2. destruction of the specific subject matter of the offer

3. death or incompetence of the offeror or offeree

4. supervening illegality of the proposed contract.

Acceptance

A voluntary act by the offeree that shows consent to the terms of the offer. Must be unequivocal and communicated to the offeror.

Mailbox Rule

If the authorized mode of communication is the mail, then an acceptance becomes valid when it is posted, properly addressed, and stamped.

Consideration

Usually defined at the value (such as cash) given in return for a promise (bilateral K) or in return for a performance (in a unilateral K). MUST be BARGAINED for.

“If you, then I’ll”

Legally sufficient Consideration Must consist of

1. A promise to do something that one has no prior legal duty to do

2. the performance of an action that one is otherwise not obligated to undertake.

3. The refraining from an action that one has a legal right to undertake (Forbearance)

Promissory Estoppel

The legal principle that a promise is enforceable by law.

Rescission

A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made.

Past Consideration

Something given or some act done in the past, which cannot ordinarily be considered for a later bargain.

Capacity

The legal ability to enter into Contracts. The threshold mental capacity required by law for a party who enters into a contract to be bound by that K.

Minors

Can enter a contract, but can also void it once they turn 18 if they choose to.

Disaffirmance

The legal avoidance, or setting aside, of a contractual obligation.

Intoxication

Condition in which a person's normal capacity to act or think is inhibited by alcohol or other drugs.

Statute of Limitations

Law that sets a time limit within each legal proceeding that can be initiated after an event occurs. Ex- in NC SoL for Assault is 2 years.

Legality

For a K to be valid and enforceable, it must be formed for a legal purpose.

Contracts Contrary to Statute

Contracts to Commit a Crime Usury- charging an illegal rate of interest Gambling Licensing Statutes.

Contracts Contrary to Public Policy

Some contracts are not enforceable because of the negative impact they would have on society.

Reformation

A court-ordered correction of a written K so that it reflects the true intentions of the parties.

Exculpatory Clause

A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.

E-Contract

A contract that is formed electronically- also may be for the purpose of licensing.

Shrink-Wrap Agreements

An agreement whose terms are expressed in a document located inside a box in which goods (usually software) are packaged.

Click-On Agreements

An agreement that arises when an online buyer clicks 'I agree' or otherwise indicates assent to be bound by the terms of the offer.

E-Signature

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.

E-SIGN Act

The Electronics Signature in Global and National Commerce Act provides that no contract, record, or signature may be 'denied legal effect' solely because it is in an electronic form.

Firm Offer

An offer (by a merchant) that is irrevocable without consideration for a period of time (no longer than 3 months).

CIGS

Contracts for International Sales of Goods - settles disputes between parties.

Merchant

A person or company involved in trade often.

Non-Merchant

Someone who does not sell items as their job. Ex- someone selling a bike at a yard sale.

Ordinary Purpose

Goods that are fit for the general purposes for which they are sold.