Presentation Transcript

1. Chapter 7 Agreement and Consideration in Contracts
2. Learning Objectives What is a contract? What is the objective theory of contracts? What are the four basic elements necessary to the formation of a valid contract? 
3. Learning Objectives What elements are necessary for an effective offer? What are some examples of nonoffers? How do shrink-wrap and click-on agreements differ from other contracts? How have traditional laws been applied to these agreements? 
4. Learning Objectives What is consideration? What is required for consideration to be legally sufficient?
5. Overview of Contract Law Sources of Contract Law. Common Law for all contracts except sales and leases. Sale and lease contracts - Uniform Commercial Code (UCC). The Function of Contracts. Provides stability and predictability for commerce.
6. Overview of Contract Law Definition of a Contract. Promise or set of promises, For breach of which, The law provides a remedy, or The performance of which the law in some way recognizes as a duty.
7. Overview of Contract Law Objective Theory of Contacts. Circumstances to determine intent of parties. Objective Facts include: What a party said when entering into the contract, How the party acted or appeared (intent may be inferred), and Circumstances surrounding the transaction.
8. Overview of Contract Law Requirements of a Valid Contract. Agreement (Offer and Acceptance). Consideration: bargained-for-exchange. Contractual Capacity. Legality: purpose of contract must be legal at the time of execution.
9. Overview of Contract Law Defenses to Enforceability of a Contract. Voluntary Consent. Form: some types of contracts must be in writing.
10. Exhibit 7.1 Classification
11. Types of Contracts Contract Formation. Bilateral - Offeree must only promise to perform (“promise for a promise”). Unilateral - Offeree can accept the offer only by completing the contract performance (“a promise for an act”).
12. Types of Contracts Contract Formation. Formal: must be in writing to be enforceable. Informal Contracts: all other contracts.
13. Types of Contracts Contract Formation. Express: Words (oral or written). Implied: Conduct creates and defines the terms of the contract. Requirements: PL furnished good or service PL expected to be paid DEF had chance to reject and did not.
14. Types of Contracts Contract Performance. Executed - A contract that has been fully performed on both sides. Executory - A contract that has not been fully performed on either side.
15. Types of Contracts Contract Enforceability. Valid: agreement, consideration, contractual capacity, and legality. Void: no contract. Voidable (unenforceable). Valid contract can be avoided or rescinded based on certain legal defenses.
16. Exhibit 7.2
17. Types of Contracts Quasi Contracts are implied in law. Equitable remedy created by courts, and imposed on parties in the interest of fairness and justice. Quantum Meruit: extent of compensation. 
18. Types of Contracts Quasi Contracts. CASE 7.1 Seawest Services Association v. Copenhaver (2012). What key fact made the defendants liable for breach of quasi contract? 
19. Types of Contracts Quasi Contracts. Limitations on Quasi-Contractual Remedy: enriched party is not liable when benefit is conferred unnecessarily, negligently or by misconduct.
20. Types of Contracts Quasi Contracts. When an Actual Contract Exists. Ordinarily quasi-contract is a remedy used when no express contract exists. The key is whether a party was unjustly enriched because the other fails to perform.
21. Agreement Requirements of the Offer: Offeror’s Serious Intention.  Definiteness of Terms.  Communication to Offeree. 
22. Agreement Intention. Contract is judged by what a reasonable person in the offeree’s position would conclude about the offer.
23. Agreement Intention. Expressions of Opinion: not offers. Statements of Future Intent: not offers. Preliminary Negotiations, or Invitations to Negotiate: not offers. Advertisements: not offers (invitations to negotiate).
24. Agreement Intention. Agreements to Agree: modern view, can be enforceable if parties intended to be bound. Preliminary Agreements: can be a binding contract IF the parties have agreed upon all the essential terms.
25. Agreement Intention. Preliminary Agreements. CASE 7.2 Basis Technology Corp. v. Amazon (2008). Why were the email exchanges considered a valid, enforceable contract?
26. Agreement Definiteness. Terms (Expressed or Implied). Identification of the parties. Object or subject matter of the contract. Consideration to be paid. Time of payment, Delivery, or Performance. 
27. Agreement Definiteness. An offer can require specific terms to make the contract definite. A court can supply missing terms if the parties intend to form a contract.
28. Agreement Communication. The offer must be communicated to the offeree. Offeree’s knowledge of the offer can be: Directly by the offeror, or Use of agents.
29. Agreement Termination of the Offer. An offer may be terminated prior to acceptance by either: Action of the Parties  or by Operation of Law. 
30. Agreement Termination by Action of the Offeror. Revocation of the offer by the offeror: Offer can be withdrawn anytime before offeree accepts the offer, unless offer is irrevocable. Effective when the offeree or offeree’s agent receives it. 
31. Agreement Termination by Action of the Offeree. Rejection of the Offer by the Offeree: Rejection by the Offeree (expressed or implied) terminates the offer. Effective only when it is received by the Offeror or Offeror’s agent.
32. Agreement Termination by Action of the Offeree. Counteroffer by the Offeree. Rejection of original offer and the simultaneous making of a new offer. Mirror Image Rule: At common law, any change in terms automatically terminates the offer and substitutes the counteroffer.
33. Agreement Termination by Operation of Law. Lapse of Time. Offer terminates by law when the period of time specified in the offer has passed. If no time period for acceptance is specified, the offer terminates at the end of a reasonable period of time. 
34. Agreement Termination by Operation of Law. Destruction or Death: before acceptance of offer, terminates the offer. Death or incompetence of the offeror or offeree automatically terminates unless irrevocable offer.
35. Agreement Termination by Operation of Law. Supervening Illegality of the Proposed Contract: legislation or court decision automatically terminates offer or renders contract unenforceable.
36. Agreement Irrevocable Offers. Courts are unwilling to allow a revocation based on promissory estoppel (Chapter 11).
37. Agreement Acceptance is a: Voluntary act (expressed or implied), by the Offeree that, shows assent (agreement), to the terms of an offer. Unequivocal: The “Mirror Image” Rule.
38. Agreement Acceptance. Silence as Acceptance. General Rule: offeree should not be legally obligated to affirmatively reject an offer. When Offeree Has Duty to Speak: He takes benefit of services with opportunity to reject. Prior dealings with Offeror.
39. Agreement Acceptance. Communication of Acceptance. Bilateral Contract: Communication of acceptance is necessary because of mutual exchange of promises. Unilateral Contract: acceptance is evident, notification not necessary. 
40. Agreement Acceptance. Communication of Acceptance. CASE 7.3 Powerhouse Custom Homes, Inc. v. 84 Lumber Co. (2011). Why did the court rule in favor of 84 Lumber? 
41. Agreement Acceptance. Mode and Timeliness of Acceptance. General Rule: in bilateral contracts, acceptance is timely if made before offer is terminated. 
42. Agreement Acceptance. Mailbox Rule: acceptance is effective when offeree uses authorized means of acceptance. If by U.S. Mail, acceptance is effective upon dispatch. NOTE: Does not apply to instantaneous communications. 
43. Agreement Acceptance. Exceptions to Mailbox Rule: Acceptance is not properly dispatched by the offeree. Offeror specifies that acceptance will not be effective until it is received. If acceptance is sent after rejection, whichever is received first is given effect.
44. Agreement Acceptance. Authorized Means of Acceptance. Offer specifies (expressly or impliedly) how acceptance should be made. No acceptance if authorized means is not used.
45. Agreement Acceptance. Substitute Method of Acceptance. Effective if the substitute serves the same purpose (Fed-Ex vs. UPS). Not effective on dispatch. Effective when received by the Offeror.
46. E-Contracts Online Offers. Displaying the Offer. Seller’s website should include hyperlink to page with full contract. Provisions to Include. Acceptance of Terms: what constitutes an acceptance. Payment: how payment is made.
47. E-Contracts Online Offers. Provisions to Include. Return Policy. Disclaimer: of liability for certain uses of the goods. Limitations on Remedies: if goods defective or contract is breached. Privacy Policy.
48. E-Contracts Online Offers. Dispute-Settlement Provisions. Forum-Selection Clause: location or jurisdiction where disputes will be resolved. Choice-of-Law Clause: disputes will be settled in accordance with law of particular jurisdiction.
49. E-Contracts Online Acceptances. Click-On Agreements. Courts have concluded a binding contract can be formed by clicking on a box indicating “I Accept” or “I Agree.” Contract can be formed via website or software. Law does not require parties read all the terms. 
50. E-Contracts Online Acceptances. Shrink-Wrap Agreements. Contract terms are inside the box. Party opening box agrees to terms by keeping merchandise. Enforceable vs. Unenforceable Terms.
51. E-Contracts Online Acceptances. Browse-Wrap Terms. Like click-on agreements, browse-wrap terms can occur in transactions over internet. Unlike click-on agreements, browse-wrap terms do not require assent and are usually unenforceable.
52. E-Contracts Federal Law on E-Signatures and E-Documents. E-SIGN (2000) gives e-signatures and e-documents legal force. For an e-signature to be enforceable, the contracting parties must have agreed to use electronic signatures. 
53. E-Contracts Federal Law on E-Signatures and E-Documents. E-SIGN does not apply to all documents. Examples: court documents, divorce decrees, pre-nuptials, and wills.
54. UETA Purpose is to remove barriers to forming electronic commerce. E-Signature is “electronic sound, symbol or process…associated with a record and… adopted by a person with intent to sign the record.” 
55. UETA A record is information that is inscribed on a tangible medium or stored in electronic or other medium that is retrievable in visual form.
56. UETA Scope and Applicability of UETA. UETA does not create new rules, but rather enforces ‘real world’ rules on electronic contracts. Only applies to e-records and e-signatures relating to a “transaction” (interactions between two people relating to business, commercial, or governmental activities).
57. UETA Scope and Applicability of UETA. UETA does not apply to wills or testamentary trusts. Does not apply unless each party has previously agreed to conduct electronic transactions. Can be implied by conduct and prior dealings.
58. UETA Federal E-SIGN Act and UETA. E-SIGN explicitly refers to UETA and provides that E-SIGN is pre-empted by state passing of UETA. But state law must conform to minimum E-SIGN procedures.
59. Consideration Generally, consideration must have: “Legally Sufficient Value”  and a “Bargained-for-Exchange.” 
60. Consideration Legal Sufficient Value can mean: Promise, Performance, or Forbearance. Landmark in the Law: Hamer v. Sidway (1891). Is giving up drinking, smoking, swearing and playing cards legal value?
61. Consideration Bargained-For-Exchange. Must provide basis for the bargain. Something of legal value (a promise, or a performance) must be exchanged between the parties. The promise must be either: Legally detrimental to the promisee, or Legally beneficial to the promisor.
62. Consideration Adequacy of Consideration. Courts Typically Will Not Consider Adequacy of Consideration. Law does not protect a person from entering into an unwise contract. Cases of “shockingly inadequate consideration” may raise a red flags, and be rules unconscionable .
63. Consideration Agreements that Lack Consideration. Preexisting Duty: promise to do what one already has a legal duty to do does not constitute legally sufficient consideration. Exceptions: Unforeseen Difficulties., and Recession and New Contract.
64. Consideration Agreements that Lack Consideration. Past Consideration is no consideration because the bargained-for exchange element is missing.
65. Consideration Agreements that Lack Consideration. Illusory Promises. Promisor has not definitely promised to do anything (no promise at all). Option-to-Cancel Clauses.
66. Consideration Settlement of Claims. Accord and Satisfaction: debtor offers to pay a lesser amount than the creditor purports to be owed. Liquidated Debt: amount has been ascertained, fixed, and agreed on. Unliquidated Debt: Parties give up legal right to contest the amount in dispute.
67. Consideration Settlement of Claims. Release bars any further recovery beyond the terms in the release. Covenant not to Sue: agreement to substitute contractual obligation for some other type of legal action based on a valid claim.
68. Promissory Estoppel Plaintiff must show he reasonably and substantially relied on promise of another can obtain recovery. Requirements. 
69. Promissory Estoppel Requirements. Must be definite promise. Promisee must justifiably rely on the promise. Reliance is substantial. Justice will be served by enforcing promise.
70. Promissory Estoppel Application of Promissory Estoppel. Courts apply estoppel to hardship or inequitable cases.