Power Point Slides to Accompany BUSINESS LAW ECommerce

Power. Point Slides to Accompany BUSINESS LAW E-Commerce and Digital Law International Law and Ethics 5 th Edition by Henry R. Cheeseman Chapter 10 Agreement Slides developed by Les Wiletzky and Associates, Puyallup, WA Copyright © 2004 by Prentice-Hall. All rights reserved.

Introduction u Contracts are voluntary agreements between the parties. u One party makes an offer that is accepted by the other party. u Without mutual assent, there is no contract. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 2

Agreement u The manifestation by two or more persons of the substance of a contract Parties Offeror n Person who makes an offer u Offeree n Person to whom an offer has been made u Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 3

Offer u “The manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. ” [Section 24 of the Restatement (Second) of Contracts] Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 4

Requirements of an Offer For an offer to be effective: u The offeror must objectively intend to be bound by the offer. u The terms of the offer must be definite or reasonably certain. u The offer must be communicated to the offeree. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 5

Objective Theory of Contracts u. A theory that says the intent to contract is judged by the reasonable person standard and not by the subjective intent of the parties. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 6

Objective Theory of Contracts (continued) u No valid contract results from: Preliminary negotiations n Offers that are made in jest, anger, or undue excitement n Offers that are an expression of opinion n Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 7

Definiteness of Terms u The terms of an offer must be clear enough to the offeree to be able to decide whether to accept or reject the terms of the offer. u If the terms are indefinite, the courts cannot enforce the contract or determine an appropriate remedy for its breach. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 8

Definiteness of Terms (continued) u An offer (and contract) must contain the following terms: Identification of the parties n Identification of the subject matter and quantity n Consideration to be paid n Time of performance n Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 9

Definiteness of Terms (continued) Implied Terms u The court can supply a missing term if a reasonable term can be implied. u Terms that are supplied in this way are called implied terms. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 10

Communication An offer cannot be accepted if it is not communicated to the offeree by the offeror or a representative or agent of the offeror. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 11

Special Offer Situations Advertisements Rewards Auctions Copyright © 2004 by Prentice-Hall. All rights reserved.

Advertisements u. A general advertisement is an invitation to make an offer. u. A

Rewards u u An offer to pay a reward is an offer to form a unilateral contract. To collect a reward, the offeree must: 1. Have knowledge of the reward offer prior to completing the requested act 2. Perform the requested act Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 14

Auctions Auction with reserve Auction without reserve u Unless expressly stated u An auction in which the otherwise, an auction is seller expressly gives an auction with reserve, up his or her right to i. e. , the seller retains withdraw the goods the right to refuse the from sale and must highest bid and accept the highest bid withdraw the goods from auction Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 15

Termination of an Offer by Action of the Parties u Revocation Withdrawal of an offer by the offeror terminates the offer. n An offeror can revoke an offer at any time prior to its acceptance by the offeree. n u Rejection Express words or conduct by the offeree that rejects an offer. n Rejection terminates the offer. n Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 16

Termination of an Offer by Action of the Parties (continued) u Counteroffer A response by an offeree that contains terms and conditions different from or in addition to those of the offer. n A counteroffer terminates an offer. n Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 17

Termination of the Offer by Operation of Law u Destruction n of the subject matter The offer terminates if the subject matter of the offer is destroyed through no fault of either party prior to its acceptance. u Death or incompetency of the offeror or offeree n The death or incompetency of either party terminates the offer. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 18

Termination of the Offer by Operation of Law (continued) u Supervening illegality The enactment of a statute, regulation, or court decision that makes the object of an offer illegal. n This action terminates the offer. n u Lapse n of time An offer terminates when a stated time period expires. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 19

Acceptance u Acceptance A manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contracts. [Section 50 of the Restatement (Second) of Contracts] Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 20

Acceptance (continued) u Only the offeree can legally accept an offer and create a contract. u The offeree’s acceptance must be unequivocal. n Mirror image rule requires the offeree to accept the offeror’s terms. u Silence is not considered acceptance even if the offeror states that it is. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 21

Time and Mode of Acceptance u Contract law establishes the following rules concerning the time and mode of acceptance: Mailbox Rule n Proper Dispatch Rule n Mode of Acceptance « Express Authorization « Implied Authorization n Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 22

Time and Mode of Acceptance (continued) u Mailbox Rule A rule that states that an acceptance is effective when it is dispatched, even if it is lost in transmission. n Also called the acceptance-upon-dispatch rule. n If an offeree first dispatches a rejection and then sends an acceptance, the mailbox rule does not apply to the acceptance. n Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 23

Time and Mode of Acceptance (continued) u Proper Dispatch Rule The acceptance must be properly dispatched. n The acceptance must be properly addressed, packaged, and posted to fall within the mailbox rule. n Under common law, if an acceptance is not properly dispatched, it is not effective until it is actually received by the offeror. n Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 24

Mode of Acceptance Express Authorization Implied Authorization u A stipulation in the offer u Mode of acceptance that says the that is implied from acceptance must be by what is customary in a specified means of similar transactions, communication. usage of trade, or prior u Use of an unauthorized dealings between the means of parties. communication makes acceptance not effective. Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 25

Offer and Acceptance: Summary (1 of 2) Communication by Offeror Effective When Offer Received by offeree Revocation of offer Received by offeree Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 26

Offer and Acceptance: Summary (2 of 2) Communication by Offeree Effective When Rejection of offer Received by offeror Counteroffer Received by offeror Acceptance of offer Sent by offeree Acceptance after previous rejection of offer Received by offeror Copyright © 2004 by Prentice-Hall. All rights reserved. 10 - 27