Law Mid 5

Limitation of liability

Software vendor and website owners can limit their liability and the remedies to a plaintiff under the UCC by contract.

Capacity

The contracting parties must have the capacity to enter the contract. Minor or infant, person under age 18. Mentally incapacitated person.

UCC governs contractual transaction with

goods, secured transaction, and negotiable instruments.

Restatement (Second) of Contracts

is a legal treaty that seeks to inform judges and lawyers about general principles of contract common law.

Enforceability essentially depends

on whether the visitor to the website had actual or constructive knowledge of a site's terms and conditions prior to using the site. Cases: - Forrest v. Verizon Communications, Inc. - Major v. McCallister - Specht v. Netscape - Hines v. Overstock.com, Inc

Include in the contract a clause that

1. provides a specific, exclusive, limited remedy, such as repair. 2. limits the total liability of the vendor to a specific amount 3. limits the buyers to only direct damage

A gift promise

A is promised to give B something, say, $10,000, without any requirement attached.

The exchange of past consideration

A promised to give B something, because an action that has been done by B.

Two common e-contracts in use today are clickwrap agreement and browsewrap agreement.

Clickwrap and browsewrap agreements are also known as End User License Agreement (EULA) or Terms of use Agreement (TOA) .

One of the party was already legally obligated to do so.

A police can't claim the reward for capturing a wanted suspect, because it is his legal obligation. Case: karvaly v. eBay, Inc

Common law and UCC are the two bodies in the U.S. that governs contracts.

Common law: also known as the "case law", it is the body of law that is developed by judges, courts, and similar tribunals, stated in decisions that nominally decide individual cases but that in addition have precedential effect on future cases. UCC adoption: https://en.wikipedia.org/wiki/Uniform_Commercial_Code_adopti on

Under the statute of frauds, certain types of contracts must be in writing and signed to be enforceable.

Contracts in consideration of marriage. Contracts that cannot be performed within one year. Contracts for the transfer of an interest in land. Contracts for the sale of goods totaling $500.00 or more. Contracts by the executor of a will to pay a debt of the estate with his own money. Contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation. - Cases: Sigg v. Coltrane Leist v. Tugendhaft

Contract entered by a minor is voidable

Minors lack the capacity to make a contract, thus a minor can either honor or void the contract. However, in most states, a minor can void a contract only before he/she turns into majority.

Recognition of "acceptance"

The common law follows the "Mirror Image Rule," requiring an acceptance to be an exact mirror image of the terms of the offer for it to be a legally recognized acceptance. If any changes are made to the offer, there can be no acceptance because the offer has been changed. It then becomes a rejection and a counteroffer. Under the UCC, only changes that affect the contract "materially" have an impact. If the changes are only minor, with little impact, and the additional terms do not create a conflict in terms, the offer is not voided. E.g., battle of forms.

Consideration is usually either the result of:

a promise to do something you're not legally obligated to do, or a promise not to do something you have the right to do (often, this means a promise not to file a lawsuit).

Use of a liquidated damage provision.

contracts that involve the exchange of money or the promise of performance usually a liquidated damages provision. The purpose is to establish a predetermined sum that must be paid if a party fails to perform as promised.

Under UCC, the software vender is able to limit their liabilities with warranty disclaimer.

warranty disclaimer is a statement or written document that informs a buyer that the seller is not bound by any warranty guarantees or promises regarding the product. See an example in the next slide.

Contract:

"an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law" --(Black's Law Dictionary)

Merger

- A merger clause is a contractual provision stating that the contract represents the parties' complete and final agreement and supersedes all informal understandings and oral agreements. - Also called integration clause or entire-agreement clause.

Severability

- A severability clause is a provision that keeps the remaining provisions of a contract in force if any portion of that contract is judicially declared void, unenforceable, or unconstitutional. - It is also called a saving clause or separability clause. - Severability clause from eBay user agreements

Uniform Electronic Transactions Act

- Addresses the need to retain paper copies and validity of electronic documents and signatures. - Has been adopted by 47 states (excluding Illinois, New York and Washington), District of Columbia, Puerto Rico and the U.S. Virgin Islands.

Legal purpose

- An illegal contract is not enforceable. A court will not enforce a contract with an inherent purpose to violate the law. - For instance, contract for selling illegal drugs is void. - Case: Smith v. Saulsbury

United Nations Convention on Contracts for the International Sale of Goods

- An international treaty that establishes uniform rules to govern international commercial contracts in order to remove legal barriers and promote the development of international trade. - U.S. entered into CISG in 1986, which was enforced in 1988. - U.S. courts are required to apply the treaty wherever appropriate to settle international disputes, instead of using UCC.

Arbitration

- Arbitration is an alternative dispute resolution (ADR) that involve one or more neutral third parties - The decision of arbitration is binding. - It is cheaper and faster, which is in favor by companies. - While most EULA includes a arbitration clause, it may not be enforceable. Harris v. Blockbuster, Inc Bragg v. Linden Research, Inc Specht v. Netscape Communications

In U.S., the principal source of contract law are the

- Common law, - Uniform Commercial Code (UCC), - Restatement (Second) of Contracts, and - United Nations Convention on Contracts for the International Sale of Goods (CISG).

Indemnity

- Contractual indemnity is where two parties agree that one party will reimburse the other party for liability resulting from the formers' work. - An indemnity clause is also called hold-harmless agreement.

Forum selection and/or choice-of-law

- Has been covered in Chapter 1. - It is not uncommon to see courts not enforce such provisions.

Common law governs contractual transactions

with real estate, services, insurance, intangible assets and employment.

Warranties

- Most major software include express warranties and disclaimers of the warranties in the EULA. - It is sometimes under argument whether software is a good, or a service. Where software is construed as goods, UCC provisions regarding goods' warranty apply. Case: Rottner v. AVG Technologies

Basic requirements

- Mutual assent - Consideration - Capacity - Legal purpose

Electronic Signatures in Global and National Commerce Act (E-SIGN)

- Signed by President Clinton and passed at congress level in 2000. - Makes electronic and paper-and-ink transactions both and equally enforceable for interstate and foreign contracts. - Together with EUTA, it legitimized the ability of parties to form contracts electronically both at the federal level and state level.

Mutual assent

- The contracting parties must intend to be bounded by the proposed agreement, and must agree on the essential terms. - Often refereed as "meeting of minds". - For online contracts and end user license agreements, acceptance often takes place when the "I agree" button is clicked.

E-contract is any type of contract formed in the course of e-commerce by

- The interaction of two of more individuals using electronic means, e.g., email. - The interaction of an individual with an electronic agent, such as a computer program - The interaction of at least two electronic agents that are programmed to recognize the existence of a contract.

Consideration

- To be enforceable, a contract must be supported by consideration. - Consideration: the benefit each party gets or expects to get from the contractual deal. A buy a car from B by $50,000, the consideration of A is to get the car, while the consideration of B is to get the 50,000 money.

Clauses that can be commonly found in online and software contracts include:

- Warranty - Limitation of liability - Arbitration - Indemnity - Severability - Merger - Forum selection/choice-of-law

Software licensing agreements and commercial transactions conducted via the Internet are also governed by

- the Uniform Electronic Transactions Act (UETA), - the Electronic Signatures in Global and National Commerce Act (E-Sign Act), - federal intellectual property laws.

It has no legal force

but provides highly persuasive legal authority with respect to contracts.