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Chapter 12

COB 218 Chapter Notes - Chapter 12: Shrink Wrap, Arbitration Clause, Electronic Signatures In Global And National Commerce Act


Department
College of Business
Course Code
COB 218
Professor
David Parker
Chapter
12

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Chapter 12: The Formation of Traditional and E-Contracts
I. An Overview of Contract Law
a. Sources of Contract Law
i. Promise: A declaration by a person (promisor) to do or not to do a certain
act
ii. Contract: A set of promises constituting an agreement between parties,
giving each a legal duty to the other and the right to seek a remedy for
the breach of promises or duties
iii. Common law governs all contracts except when it has been
modified/replaced by statutory law, or administrative agency regulations
1. Ex: Uniform Commercial Code (UCC)
b. The Objective Theory of Contracts: The view that contracting parties shall only
be bound by terms that can objectively be inferred from promises made (not by
intent or belief of a party)
i. Judged by objective facts, such as:
1. What the party said when entering the contract
2. How the party acted or appeared (intent may be manifested by
conduct as well as by oral or written words)
3. The circumstances surrounding the transaction
c. Elements of a Valid Contract
i. 4 requirements must be met before valid contract exists. If any are
missing, contract is not formed.
1. Agreement
a. Includes an offer and an acceptance of terms
2. Consideration
a. Something of value received or promised, such as money,
to convince a person to make a deal
3. Contractual Capacity
a. Law must recognize parties as possessing characteristics
that qualify them as competent parties
4. Legality
a. Legal and not against public policy
d. Defenses to the Enforceability of a Contract
i. Voluntary Consent
ii. Form
1. Contract must be in whatever form the law requires (writing, etc.)
II. Types of Contracts
a. Contract Formation
i. Bilateral v. Unilateral Contracts
1. Bilateral Contract: A type of contract that arises when a promise
is given in exchange for a return promise
a. poise fo a poise
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b. contract is formed at moment when promises are
exchanged
2. Unilateral Contract: A contract that results when an offer can be
aepted ol  the offeee’s pefoae
a. poise fo a at
b. contract is formed at moment when contract is performed
c. e: If ou die  a fo NY to LA, I’ll gie ou $
i. bringing the car is acceptance, not accepting offer
has no legal consequences
3. Revocation of Offers for Unilateral Contracts
a. Once performance has been substantially undertaken, the
offeror cannot revoke the offer
ii. Express v. Implied Contracts
1. Express Contract: A contract in which the terms of agreement are
states in words, oral or written
2. Implied Contract: A contract formed in whole or in part from the
conduct of the parties
a. AKA: implied-in-fact contract
b. Requirements to be met for formation:
i. The plaintiff furnished some service or property
ii. The plaintiff expected to be paid for that service or
property, and the defendant knew or should have
known that payment was expected
iii. The defendant had a chance to reject the services
or property and did not.
b. Contract Performance
1. Executed Contract: A contract that has been fully performed by
both parties
2. Executory Contract: A contract that has not yet been fully
performed
c. Contract Enforceability
i. Illustrated:
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1. Valid Contract: A contract that has the elements necessary for
contract formation
ii. Voidable Contract: A contract that may be legally avoided at the option
of one or both parties
1. Voidable contract exists
a. Party having option can elect to avoid any duty to perform
i. If contract is avoided, both parties are released
b. Party having option can elect to ratify (make valid)
contract
i. If contract is ratified, both parties must perform
legal obligations
2. Ex: contracts made by minors
iii. Unenforceable Contract: A valid contract rendered unenforceable by
some statute or law
1. Ex: some contracts must be in writing, if they are not, they will not
be enforceable
iv. Void Contract: A contract having no legal force or binding effect
1. No parties have any legal obligations.
2. Void contract is no contract at all.
3. Ex: contract void b/c purpose of contract was illegal
III. Agreement: A mutual understanding or meeting of the minds between two or more
individuals regarding the terms of a contract
1. Both parties must manifest their assent, or voluntary consent, to
the same bargain.
2. Once agreement is reached, if other elements of contract are
present (consideration, capacity, legality), valid contract is formed
3. Contract creates enforceable rights and duties between parties
b. Requirement of the Offer- Offer: A promise or commitment to perform or
refrain from performing some specified act in the future. Acceptance of offer
creates a legally binding contract.
i. Necessary Elements of Offer:
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
ii. Intention
1. Serious intent is determined by what a reasonable person in the
offeee’s positio ould olude that the offeo’s ods and
actions meant
2. Expressions of opinion & of future intent do not qualify as offers
3. Advertisements are not offers, but merely invitations to negotiate
iii. Definiteness of Terms Contract must include following:
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