BSN 107

1. ESSENTIALS OF THE LEGAL
ENVIRONMENT TODAY, 5E
ROGER LEROY MILLER
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2. CHAPTER 12
THE FORMATION OF TRADITIONAL
AND E-CONTRACTS
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3. LEARNING OBJECTIVES
1. What are the four basic elements
necessary to the formation of a valid
contract?
2. What is the difference between
express and implied contracts?
3. What are the elements necessary for
an effective acceptance?
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4. LEARNING OBJECTIVES (CONT’D)
4. How do shrink-wrap and click-on
agreements differ from other
contracts? How have traditional laws
been applied to these agreements?
5. Under what circumstances will a
covenant not to compete be
enforced? When will such covenants
not be enforced?
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5. INTRODUCTION
• Contract law reflects our social values,
interests, and expectations at a given
point in time.
• Distinguishes between “moral” promises
which are not legally binding, and
promises that are legally binding.
• Common law governs all contracts (such
as services, real estate, employment)
except when modified by statutory law
such as the UCC.
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6. AN OVERVIEW OF CONTRACT LAW
• A contract is “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.”
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7. AN OVERVIEW OF CONTRACT LAW
• Sources of Contract Law
• Common law governs all contracts except
when it has been modified or replaced by
statutory law, such as the UCC or by
administrative agency regulations.
• The Objective Theory of Contracts
• Determines intent in contract law
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8. AN OVERVIEW OF CONTRACT LAW
• Elements of a Valid Contract
• A valid, enforceable contract includes the
following four elements:
• Agreement (Offer and Acceptance)
• Consideration
• Capacity
• Legality
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9. AN OVERVIEW OF CONTRACT LAW
• Defenses to the Enforceability of a
Contract
• However even if all four elements are
present, a contract may be
unenforceable based on a defense.
• Voluntary consent
• Form
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10. TYPES OF CONTRACTS
• Contract Formation
• Bilateral contracts
• Every contract has at least two parties: the offeror
(promisor) and the offeree (promisee).
• The contract is formed when the offeror and offeree
exchange promises to each other.
• Unilateral contracts
• The offeror is ‘bargaining’ for performance in exchange for
his promise. Contract is formed when the offeree performs.
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11. TYPES OF CONTRACTS
• Express vs. implied contracts
• Express: terms of agreement are set forth either in writing
or orally.
• Implied: based on conduct
• Plaintiff furnished service or property
• Plaintiff expected to be compensated and defendant knew
or should have known that payment was expected
• Defendant had a chance to reject and did not
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12. TYPES OF CONTRACTS
• Contract Performance
• Executed vs. executory contracts
• Executed: fully performed by both sides
• Executory: at least one of the parties has not performed
• Contract Enforceability
• Voidable contracts
• Unenforceable contracts
• Void contracts
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13. EXHIBIT 12.1
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14. AGREEMENT
• A mutual understanding or meeting of the
minds between two or more individuals
regarding the terms of a contract.
• Requirements of the Offer
• The offeror must have a serious intention to
become bound by the offer.
• 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.
• The offer must be communicated to the
offeree.
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15. AGREEMENT
• Intention
• Definiteness of terms
• Identification of the parties
• Identification of the object or subject matter
• Consideration to be paid
• Time of payment, delivery, or performance
• Communication
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16. AGREEMENT
• Termination of the Offer
• Termination by action of the parties
• Revocation
• Rejection
• Counteroffer
• Termination by operation of law
• Lapse of time
• Destruction of the specific subject matter of the offer
• Death or incompetence of the offeror or offeree
• Supervening illegality of proposed contract
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17. AGREEMENT
• Acceptance
• Shows agreement to the terms of an offer
• Unequivocal acceptance
• Communication of acceptance
• Mode and timeliness of acceptance
• The mailbox rule
• Authorized means of acceptance
• Substitute method of acceptance
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18. E-CONTRACTS
• A contract that is formed
electronically
• Online Offers
• Provisions to include
1. Acceptance of terms
2. Payment
3. Return policy
4. Disclaimer
5. Limitation on remedies
6. Privacy policy
7. Dispute resolution
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19. E-CONTRACTS
• Dispute-settlement provisions
• Forum-selection clause – location in which contract
disputes will be resolved
• Choice-of-law clause – specifies any dispute will be
settled according to the law of a particular jurisdiction
• Online Acceptances
• Click-on agreements
• Shrink-wrap agreements
• Browse-wrap terms
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20. EXHIBIT 12.2
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21. E-CONTRACTS
• E-Signature Technologies
• Federal Law on E-Signatures and E-
Documents
• Electronic Signatures in Global and
National Commerce Act (E-SIGN Act)
• The Uniform Electronic Transactions Avt
(UETA)
• Scope and applicability
• Signatures on electronic records
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22. CONSIDERATION
• Elements of Consideration
• Legally sufficient value
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
• Bargained-for exchange
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23. CONSIDERATION
• Agreements That Lack Consideration
• Preexisting duty – meant to prevent
extortion and the so-called holdup game
• Past consideration – an act that has
already taken place at the time a
contract is made and that ordinarily, by
itself, cannot be consideration for a later
promise to pay for the act
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24. CONTRACTUAL CAPACITY
• Legal ability to enter into a contractual
relationship
• Minors – age of majority for
contractual purposes = 18 years
• Intoxication – contract entered into by
intoxicated person can be voidable or
valid
• Mental Incompetence – contracts can
be void, voidable, or valid
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25. LEGALITY
• Contracts Contrary to Statute
• Gambling
• Licensing statutes
• Contracts Contrary to Public Policy
• Contracts in restraint of trade
• Covenants not to compete and the sale of an ongoing
business
• Covenants not to compete in employment contracts
• Enforcement problems
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26. LEGALITY
• Unconscionable contracts or clauses
• A contract or clause that is void on the basis of pubic
policy because one party was forced to accept terms
that are unfairly burdensome and that unfairly benefit
the stronger party.
• Exculpatory clauses
• A clause that releases a contractual party from liability in
the event of monetary or physical injury, no matter who is
at fault.
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27. FORM
• A contract that is otherwise valid may
be unenforceable if it is not in the
proper form.
• Statute of Frauds – a state statute
under which certain types of contracts
must be in writing or in an electronic
record to be enforceable
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.