Legal Test 3

a party who has conferred a benefit on someone else unnecessarily or as a result of misconduct or negligence cannot invoke

e doctrine of quasi contract.

Quasi contracts

e fictional contracts that courts can impose on the parties "as if" the parties had entered into an actual contract.

Minority status may also be terminated by a minor's

emancipation, which occurs when a child's parent or legal guardian relinquishes the legal right to exercise control over the child.

When a statute protects a certain class of people, a member of that class can

enforce an illegal contract even though the other party cannot.

Contract law assures the parties to private agreements that the promises they make will be

enforceable

Liquidated damages provisions normally are

enforceable

t agreements to agree may be

enforceable agreements (contracts) if it is clear that the parties intended to be bound by the agreements. emphasis on intent

If the purpose is merely to raise government revenues, a contract with an unlicensed person may be

enforced (and the unlicensed practitioner fined)

A clause excluding liability for negligence may be

enforced in certain situations

Typically, businesspersons put their contracts in writing to

ensure that there is some proof of a contract's existence

In construction - s the costs incurred in partially constructing the building. If the owner breaches after the construction has been completed, the contractor can recover the

entire contract price, plus interest.

In a unilateral contract, the full performance of some act is called for. Acceptance is usually

evident, and notification is therefore unnecessary (unless the law requires it or the offeror asks for it).

An acceptance sent by means not expressly or impliedly authorized normally is not effective until

it is received by the offeror.

If a court has not previously judged a person to be mentally incompetent, but the person was incompetent at the time the contract was formed, the contract may be

voidable - at the option of the mentally incompetent person

An electronic record is considered received when

t enters the recipient's processing system in a readable form—even if no individual is aware of its receipt

Contracts entered into under legally defined duress or undue influence are

voidable

bidder is the

offeror, and the auctioneer is the offeree

once performance has been substantially undertaken, the offeror cannot

revoke the offer.

The laws governing the enforceability of covenants not to compete

vary significantly from state to state

e-signature

"an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.

Adequacy of consideration involves

"how much" consideration is given. - concerns the fairness of the bargain - a large disparity in the amount or value of the consideration exchanged may raise a red flag, causing a court to look more closely at the bargain.

valid contract has the four elements necessary

(1) an agreement (offer and acceptance) (2) supported by legally sufficient consideration (3) for a legal purpose, and (4) made by parties who have the legal capacity to enter into the contract

Releases will generally be binding if they are

(1) given in good faith, (2) stated in a signed writing (required by many states), and (3) accompanied by consideration

*Objective Theory of Contracts* Objective facts

(1) what the party said when entering into the contract (2) how the party acted or appeared, (3) the circumstances surrounding the transaction.

Uniform Electronic Transactions Act

(UETA)

The E-SIGN Act20 refers explicitly to the UETA and provides that if a state has enacted the uniform version of the UETA

, it is not preempted by the E-SIGN Act. In other words, if the state has enacted the UETA without modification, state law will govern.

For an electronic document to be valid

, it must be in a form that can be retained and accurately reproduced.

Lapse of Time

- An offer terminates automatically by law when the period of time specified in the offer has passed - If the offer states that it will be left open for a number of days, this time period normally begins to run when the offer is actually received by the offeree, not when it is formed or sent - If the offer does not specify a time for acceptance, the offer terminates at the end of a reasonable period of time. A reasonable period of time is determined by the subject matter of the contract, business and market conditions, and other relevant circumstances.

record

- UETA information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable [visual] form

mailbox rule,

- also called the deposited acceptance rule, which the majority of courts follow. - e, if the authorized mode of communication is the mail, then an acceptance becomes valid when it is dispatched (placed in the control of the U.S. Postal Service)—not when it is received by the offeror

mirror image rul

- common law requires that the offeree's acceptance match the offeror's offer exactly. In other words, the terms of the acceptance must "mirror" those of the offer.

option contract

- irrevocable offer - when an offeror promises to hold an offer open for a specified period of time in return for a payment (consideration) given by the offeree. An option contract takes away the offeror's power to revoke the offer for the period of time specified in the option

A court normally will not

- make or remake a contract - interpret the language according to what the parties claim their intent was when they made the contract

Unequivocal Acceptance

- mirror image rule - acceptance is subject to new conditions or if the terms of the acceptance materially change the original offer, the acceptance may be deemed a counteroffer that implicitly rejects the original offer.

an online offer should include the following provisions:

1. Acceptance of terms. A clause that clearly indicates what constitutes the buyer's agreement to the terms of the offer, such as a box containing the words "I accept" that the buyer can click on to indicate acceptance. (Mechanisms for accepting online offers will be discussed later in this chapter.) 2. Payment. A provision specifying how payment for the goods (including any applicable taxes) must be made. 3. Return policy. A statement of the seller's refund and return policies. 4. Disclaimer. Disclaimers of liability for certain uses of the goods. For example, an online seller of business forms may add a disclaimer that the seller does not accept responsibility for the buyer's reliance on the forms rather than on an attorney's advice. 5. Limitation on remedies. A provision specifying the remedies available to the buyer if the goods are found to be defective or if the contract is otherwise breached. Any limitation of remedies should be clearly spelled out. 6. Privacy policy. A statement indicating how the seller will use the information gathered about the buyer. 7. Dispute resolution. Provisions relating to dispute settlement, such as an arbittration clause.

Elements of a Contract

1. Agreement. An agreement to form a contract includes an offer and an acceptance. One party must offer to enter into a legal agreement, and another party must accept the terms of the offer (see Chapter 9). 2. Consideration. Any promises made by the parties must be supported by legally sufficient and bargained-for consideration (something of value received or promised to convince a person to make a deal) (see Chapter 10). 3. Contractual capacity. Both parties entering into the contract must have the contractual capacity to do so, meaning that the law must recognize them as possessing characteristics that qualify them as competent parties (see Chapter 10). 4. Legality. The contract's purpose must be to accomplish some goal that is legal and not against public policy (see Chapter 10).

To determine whether a particular provision is for liquidated damages or a penalty, the court must answer two questions:

1. At the time the contract was formed, was it apparent that damages would be difficult to estimate in the event of a breach? 2. Was the amount set as damages a reasonable estimate and not excessive?

There are basically four broad categories of damages:

1. Compensatory (to cover direct losses and costs). 2. Consequential (to cover indirect and foreseeable losses). 3. Punitive (to punish and deter wrongdoing). 4. Nominal (to recognize wrongdoing when no monetary loss is shown).

Revocation may be accomplished by either of the following:

1. Express repudiation of the offer, such as "I withdraw my previous offer of October 17." 2. Performance of acts that are inconsistent with the existence of the offer and are made known to the offeree (for instance, selling the offered property to another person in the presence of the offeree).

courts use the following rules in interpreting contractual terms:

1. Insofar as possible, a reasonable, lawful, and effective meaning will be given to all of a contract's terms. 2. A contract will be interpreted as a whole. Individual, specific clauses will be considered subordinate to the contract's general intent. All writings that are a part of the same transaction will be interpreted together. 3. Terms that were the subject of separate negotiation will be given greater consideration than standardized terms and terms that were not negotiated separately. 4. A word will be given its ordinary, commonly accepted meaning, and a technical word or term will be given its technical meaning, unless the parties clearly intended something else. 5. Specific and exact wording will be given greater consideration than general language. 6. Written or typewritten terms prevail over preprinted terms. 7. Because a contract should be drafted in clear and unambiguous language, a party that uses ambiguous expressions is held to be responsible for the ambiguities. Thus,when the language has more than one meaning, it will be interpreted against the party that drafted the contract. 8. Evidence of trade usage, prior dealing, and course of performance may be admitted to clarify the meaning of an ambiguously worded contract. What each of the parties does pursuant to the contract will be interpreted as consistent with what the other does and with any relevant usage of trade and course of dealing or performance.

Termination by Operation of Law through the occurrence of any of the following events:

1. Lapse of time. 2. Destruction of the specific subject matter of the offer. 3. Death or incompetence of the offeror or the offeree. 4. Supervening illegality of the proposed contract.

There are some exceptions to the rule that only promises supported by consideration are enforceable. The following types of promises may be enforced despite the lack of consideration

1. Promises that induce detrimental reliance, under the doctrine of promissory estoppel. 2. Promises to pay debts that are barred by a statute of limitations. 3. Promises to make charitable contributions.

two parts of consideration

1. Something of legally sufficient value must be given in exchange for the promise. 2. There must be a bargained-for exchange.

a contract must include the following terms for Definiteness of Terms

1. The identification of the parties. 2. The identification of the object or subject matter of the contract (also the quantity, when appropriate), including the work to be performed, with specific identification of such items as goods, services, and land. 3. The consideration to be paid. 4. The time of payment, delivery, or performance.

Requirements for Implied Contract

1. The plaintiff furnished some service or property. 2. The plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected (based on the objective theory of contracts discussed earlier). 3. The defendant had a chance to reject the services or property and did not.

For the doctrine of promissory estoppel to be applied, the following elements are required:

1. There must be a clear and definite promise. 2. The promisor should have expected that the promisee would rely on the promise 3. The promisee reasonably relied on the promise by acting or refraining from some act. 4. The promisee's reliance was definite and resulted in substantial detriment. 5. Enforcement of the promise is necessary to avoid injustice. - the promisor (the offeror) will be estopped (barred or prevented) from asserting lack of consideration as a defense.

Three elements are necessary for an offer to be effective

1. There must be a serious, objective intention by the offeror. 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.

court will consider a contract to be ambiguous in the following situations:

1. When the intent of the parties cannot be determined from its language. 2. When it lacks a provision on a disputed issue. 3. When a term is susceptible to more than one interpretation. 4. When there is uncertainty about a provision.

unconscionable contract or clause

A contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome and that unfairly benefit the stronger party. - o unscrupulous or grossly unfair as to be "void of conscience."

executed contract

A contract that has been completely performed by both parties.

executory contract

A contract that has not been fully performed on either side

promisee

A person to whom a promise is made.

offeree

A person to whom an offer is made.

promisor

A person who makes a promise.

offeror

A person who makes an offer.

adhesion contract

A standard-form contract in which the stronger party dictates the terms. and the adhering party has no opportunity to negotiate the terms of the contract

click-on agreement

An agreement that arises when an online buyer clicks on "I agree," or otherwise indicates her or his assent to be bound by the terms of an offer.

Termination by Action of the Parties

An offer can be terminated by action of the parties in any of three ways: by revocation, by rejection, or by counteroffer

Compensatory Damages

Damages that compensate the nonbreaching party for the loss of the bargain - only for damages actually sustained and proved to have arisen directly from the loss of the bargain caused by the breach of contract - simply replace what was lost because of the wrong or damage.

the minor need only return the goods (or other consideration) subject to the contract, provided the goods are in the minor's possession or control.

Even if the minor returns damaged goods, the minor often is entitled to disaffirm the contract and obtain a refund of the purchase price

Restitution offers several advantages over traditional damages.

First, restitution may be available in situations when damages cannot be proved or are difficult to prove. Second, 8. Restatement (Second) of Contracts, Section 370. restitution can be used to recover specific property. Third, restitution sometimes results in a greater overall award

court papers, divorce decrees, evictions, foreclosures, healthinsurance terminations, prenuptial agreements, and wills.

are exempt from E-SIGN Act

Rejection

If the offeree rejects the offer—by words or by conduct—the offer is terminated

Illusory Promises

If the terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything, the promise is said to be illusory—without consideration and unenforceable

unliquidated debt

The amount of the debt is not settled, fixed, agreed on, ascertained, or determined, and reasonable persons may differ over the amount owed - acceptance of payment of the lesser sum operates as a satisfaction, or discharge, of the debt because there is valid consideration—the parties give up a legal right to contest the amount in dispute

Voluntary consent

The apparent consent of both parties must be voluntary.

Form

The contract must be in whatever form the law requires. Some contracts must be in writing to be enforceable.

Bargained-for Exchange

The item of value must be given or promised by the promisor (offeror) in return for the promisee's promise, performance, or promise of performance.

Rescission and New Contract

The law recognizes that two parties can mutually agree to rescind, or cancel, their contract, at least to the extent that it is executory—that is, not yet performed by both parties.

t many states have enacted nonuniform (modified) versions of the

UETA

if all of the elements of a valid contract are present, a contract may be unenforceable if the following requirements are not met.

Voluntary consent. The apparent consent of both parties must be voluntary. For instance, if a contract was formed as a result of fraud, mistake, or duress (coercion), the contract may not be enforceable. 2. Form. The contract must be in whatever form the law requires. Some contracts must be in writing to be enforceable.

plain meaning rule

When a contract's language is clear and unequivocal, a court will enforce the contract according to its obvious terms from the written document alone to determine the intent of the parties at the time that they entered into the contract

promise

a declaration by a person (the promisor) to do or not to do a certain act.

restitution involves the recapture of a

a benefit conferred on the defendant that has unjustly enriched her or him

liquidated damages provision in a contract specifies that

a certain dollar amount is to be paid in the event of a future default or breach of contract.

Intoxication

a condition in which a person's normal capacity to act or think is inhibited by alcohol or some other drug.

release

a contract in which one party forfeits the right to pursue a legal claim against the other party - bars any further recovery beyond the terms stated in the release.

If the acceptance materially changes or adds to the terms of the original offer, it will be considered

a counteroffer - offeror can chose to accept or not

In an accord and satisfaction,

a debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed

objective theory of contracts

a party's intention to enter into a contract is judged by outward, objective facts as interpreted by a reasonable person, rather than by the party's secret, subjective intentions.

Promissory Estoppel

a person who has reasonably and substantially relied on the promise of another can obtain some measure of recovery.

if the parties agree on certain major terms but leave other terms open for further negotiation,

a preliminary agreement is binding only in the sense that the parties have committed themselves to negotiate the undecided terms in good faith

counteroffer

a rejection of the original offer and the simultaneous making of a new offer.

partnering agreement

a seller and a buyer who frequently do business with each other agree in advance on the terms and conditions that will apply to all transactions subsequently conducted electronically - s can prevent disputes over signatures in their e-contracts, as well as disputes over the terms and conditions of those contracts - can also establish special access and identification codes to be used by the parties when transacting business electronically

silence cannot constitute

acceptance

In a bilateral contract, in contrast, communication of

acceptance is necessary, because acceptance is in the form of a promise.

a buyer's failure to object to terms contained within a shrink-wrapped software package may constitute an

acceptance of the terms by conduct.

In contract law, offers are normally revocable (capable of being taken back, or canceled) until

accepted

In auctions with reserve, the seller may reserve the right to confirm or reject the sale even

after "the hammer has fallen." but the seller is obligated to notify of this rule

Agreements to Agree

agreements to agree to the material terms of a contract at some future date

n, a covenant not to compete is created when a seller

agrees not to open a new store in a certain geographic area surrounding the old store

common law governs all

all contracts

e E-SIGN Act explicitly allows the states to enac

alternative requirements for the use of electronic records or electronic signatures.

A penalty specifies a certain

amount to be paid in the event of a default or breach of contract and is designed to penalize the breaching party.

Punitive, or exemplary, damages, generally are not awarded in

an action for breach of contract. - Such damages have no legitimate place in contract law because they are, in essence, penalties, and a breach of contract is not unlawful in a criminal sense - A contract is simply a civil relationship between the parties

e doctrine of quasi contract generally cannot be used when

an actual contract covers the area in controversy.

For the nonbreaching party to recover consequential damages, the breaching party must know (or have reason to know) that special circumstances will cause the nonbreaching party to suffer

an additional loss

contract

an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future

a contract can be a mixture of

an express contract and an implied contract. In other words, a contract may contain some express terms, while others are implied.

An expression of opinion is not

an offer. It does not demonstrate an intention to enter into a binding agreement

Silence may be an acceptance when

an offeree takes the benefit of offered services even though he or she had an opportunity to reject them and knew that they were offered with the expectation of compensation.

t with quasi contract, no promise was made at all. In contrast, with promissory estoppe

an unenforceable promise was made and relied on, but not performed.

E contracts must meet the same

basic requirements (agreement, consideration, contractual capacity, and legality) as paper contracts.

To disaffirm, a minor must express, through words or conduct, his or her intent not to

be bound to the contract - r must disaffirm the entire contract - What constitutes a "reasonable" time for disaffirmance may vary

Sellers doing business via the Internet can protect themselves against contract disputes and legal liability by creating offers that

clearly spell out the terms that will govern their transactions if the offers are accepted

"promise for a promise"

bilateral contract

If the offeree can accept simply by promising to perform, the contract is a

bilateral contract contract comes into existence at the moment the promises are exchanged.

a preliminary agreement constitutes a

binding contract if the parties have agreed on all essential terms and no disputed issues remain to be resolved.5

browse-wrap terms

browse-wrap terms do not require the buyer or user to assent to the terms before, say, downloading or using certain software - often unenforceable because they do not satisfy the agreement requirement of contract formation.13

unenforceable contract

cannot be enforced because of certain legal defenses against it

If a debt is liquidated, accord and satisfaction

cannot take place

, courts refuse to allow an offeror to revoke an offer when the offeree has

changed position because of justifiable reliance on the offer

he UETA encourages, but does not require, the use of security procedures (such as encryption) to verify

changes to electronic documents and to correct errors

Although usurious contracts are illegal, most states simply limit the interest that the lender may

collect to the lawful maximum rate in that state. - BUT states have special statutes allowing much higher interest rates on small loans to help borrowers who need funds and could not otherwise obtain loans

Contracts relating to services, real estate, employment, and insurance, for example, generally are governed by

common law of contracts.

communication—the offer must be

communicated to the offeree

Unless an offer is irrevocable, the offeror usually can revoke the offer, as long as the revocation is

communicated to the offeree before the offeree accepts.

damages are designed to

compensate the nonbreaching party for the loss of the bargain. - Often, courts say that innocent parties are to be placed in the position they would have occupied had the contract been fully performed.

implied contract

conduct of the parties, rather than their words, creates and defines at least some of the terms of the contract certain requirements must be m

he UETA will not apply to a transaction unless each of the parties has previously agreed to

conduct transactions by conduct transactions by electronic means. The agreement need not be explicit, however. It may be implied by the conduct of the parties and the surrounding circumstances

Option contracts are frequently used in

conjunction with the sale or lease of real estate.

When a seller fails to deliver goods, knowing that the buyer is planning to use or resell those goods immediately, a court may award

consequential damages (in addition to compensatory damages) for the loss of profits from the planned use or resale

Foreseeable damages that result from a party's breach of contract are called

consequential damages, or special damages.

When the contract is clear and unambiguous, a court cannot

consider evidence outside the contract.

Certain terms included in an acceptance will not change the offer sufficiently to

constitute rejection

Disputes concerning e-contracts, however, tend to center on

contract terms and whether the parties voluntarily agreed to those terms.

contrary to public policy

contracts that are not enforceable because of the negative impact they would have on society

Substantive unconscionability occurs when

contracts, or portions of contracts, are oppressive or overly harsh.

Although courts view exculpatory clauses with disfavor, they do enforce such clauses when they do no

contravene public policy, are not ambiguous, and do not claim to protect parties from liability for intentional misconduct - Businesses such as health clubs, racetracks, amusement parks, skiing facilities, horse-rental operations, golf-cart concessions, and skydiving organizations frequently use exculpatory clauses to limit their liability for patrons' injuries

An offeree's power of acceptance is also terminated when the offeror or offeree

e dies or becomes legally incapacitated, unless the offer is irrevocable.

Claims are commonly settled through an accord and satisfaction, in which a

debtor offers to pay a lesser amount than the creditor says is owed. - Claims may also be settled by the signing of a release or a covenant not to sue

On some occasions, courts have construed advertisements to be offers because the ads contained

definite terms that invited acceptance (such as an ad offering a reward for the return of a lost dog).

y, contracts entered into under fraudulent conditions are voidable at the option of the

defrauded party.

An offer must have reasonably definite terms so that a court can

determine if a breach has occurred and give an appropriate remedy.6

d a minor responsible for damage, ordinary wear and tear, and depreciation of goods that the minor used prior to

disaffirmance

A contract that is severable, or divisible, consists of

distinct parts that can be performed separately, with separate consideration provided for each part

a covenant not to sue

does not always prevent further recovery - The parties simply substitute a contractual obligation for some other type of legal action based on a valid claim. - Kara agrees with Raoul not to sue for damages in a tort action if he will pay for the damage to her car. If Raoul fails to pay, Kara can bring an action for breach of contract.

Provisions stating that no damages can be recovered are called

exculpatory clauses

performed on either side is called an executory contract. If one party has fully performed but the other has not, the contract is said to be

executed on the one side and executory on the other, but the contract is still classified as executory

y, a court will interpret the language to give effect to the parties' intent a

expressed in their contract.

If a contract term is ambiguous, a court may consider

extrinsic evidence (outside evidence and may include the testimony of the parties, additional agreements or communications, or other information relevant to determining the parties' intent.), or it may interpret the ambiguity against the party who drafted the contract term.

Consideration in bilateral contracts normally consists of

f a promise in return for a promise.

Agreement is required to

form a contract, regardless of whether it is formed in the traditional way by exchanging paper documents or created online by exchanging electronic messages or documents, as many contracts are formed today.

In a live auction, a seller "offers" goods for sale through an auctioneer, but this is not an offer to

form a contract. Rather, it is an invitation asking bidders to submit offers

Many online contracts also contain a forum-selection clause indicating the

forum, or location for the resolution of any dispute arising under the contract. - l help to avert future jurisdictional problems and also help to ensure that the seller will not be required to appear in court in a distant state.

Courts order reformation most often when

fraud or mutual mistake is present.

The seller's Web site should include a hypertext link to a page containing

g the full contract so that potential buyers are made aware of the terms to which they are assenting

Promissory estoppel was originally applied to situations involving

gifts (I promise to pay you $1,000 a week so that you will not have to work) and donations to charities (I promise to contribute $50,000 a year to the All Saints orphanage).

Contracts for the sale and lease of goods, however, are

governed by UCC (stauatory law)

Once the electronic record leaves the control of the sender or comes under the control of the recipient, the UETA deems it to

have been sent

Whether extrinsic evidence is considered can significantly affect

how a court interprets ambiguous contractual provisions and thus can affect the outcome of litigation

Courts often find that gambling contracts are .

illegal

A means of communicating acceptance can be expressly authorized by the offeror or

impliedly authorized by the facts and circumstances of the situation.

advertisements, catalogues, price lists, and circular letters (meant for the general public) are treated as

invitations to negotiate, not as offers to form a contract

pari delicto.

in equal fault

In most illegal contracts, both parties are considered to be

in pari delicto - If the contract is executory (not yet fulfilled), neither party can enforce it. If it has been executed, neither party can recover damages.

a court will not award an equitable remedy unless the remedy at law is

inadequate

specific performance will not be granted unless the party's legal remedy (monetary damages) is

inadequate - contracts for the sale of goods rarely qualify for specific performance (because substantially identical goods can be bought or sold in the market.) - Only if the goods are unique will a court grant specific performance.

Expenses that are directly incurred because of a breach of contract—such as those incurred to obtain performance from another source—are

incidental damages.

Informal contracts

include all other contracts that arent formal contracts. No special form is required.

Necessaries

include whatever is reasonably needed to maintain the minor's standard of living - l, food, clothing, shelter, and medical services are necessaries.

Procedural unconscionability often involves

inconspicuous print, unintelligible language ("legalese"), or adhesion contract, or the lack of an opportunity to read the contract or ask questions about its meaning.

doctrine of unjust enrichment is based on the theory that

individuals should not be allowed to profit or enrich themselves inequitably at the expense of others

Price lists are another form of

invitation to negotiate or trade A seller's price list is not an offer to sell at that price. It merely invites the buyer to offer to buy at that price.

offer

is a promise or commitment to perform or refrain from performing some specified act in the future

Acceptance

is a voluntary act by the offeree that shows assent, or agreement, to the terms of an offer. - may consist of words or conduct - must be unequivocal and must be communicated to the offeror - only the person to whom the offer is made or that person's agent can accept the offer and create a binding contract.

shrink-wrap agreement

is an agreement whose terms are expressed inside a box in which goods are packaged - the party who opens the box is told that she or he agrees to the terms by keeping whatever is in the box. Similarly, when the purchaser opens a software package, he or she agrees to abide by the terms of the limited license agreement

An offer is automatically terminated if the specific subject matter of the offer

is destroyed before the offer is accepted

past consideration

is no consideration.

liquidated debt

is one whose amount has been ascertained, fixed, agreed on, settled, or exactly determined

accord

is the agreement under which one of the parties promises to give or perform, and the other to accept, something other than that on which the parties originally agreed

offeree

is the party to whom the offer is made.

Rescission

is the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made

e common law governs all contracts except when

it has been modified or replaced by statutory law, such as the Uniform Commercial Code (UCC), or by administrative agency regulations.

Like a revocation, a rejection of an offer is effective only when

it is actually received by the offeror or the offeror's agent.

Intent is not determined by the subjective intentions, beliefs, or assumptions of the offeror. Rather

it is determined by what a reasonable person in the offeree's position would conclude the offeror's words and actions meant.

liquidated Damages in Construction Contracts Liquidated damages provisions are frequently used in construction contracts because

it is difficult to estimate the amount of damages that would be caused by a delay in completing the work

A court will also reform a contract when two parties enter into a binding oral contract bu

later make an error when they attempt to put the terms into writing.

Some states require a landlord to use reasonable means to find a new tenant if a tenant abandons the premises and fails to pay rent. If an acceptable tenant becomes available, the landlord is required to

lease the premises to this tenant to mitigate the damages recoverable from the former tenant. The former tenant is still liable for the difference between the amount of the rent under the original lease and the rent received from the new tenant

Under the Uniform Electronic Transactions Act, e-mail is considered sent when it either

leaves the sender's control or is received by the recipient - takes the place of the mailbox rule if the parties have agreed to conduct transactions electronically

disaffirmance

legal avoidance, or setting aside, of a contractual obligation

For a contract to be valid and enforceable, it must be formed for a

legal purpose.

Once an effective offer has been made, the offeree's acceptance of that offer creates a

legally binding contract

minors—or infants, as they are commonly referred to in the law—usually are not

legally bound

Under most circumstances, a promise to do what one already has a legal duty to do does not constitute

legally sufficient consideration - if a party is already bound by contract to perform a certain duty, that duty cannot serve as consideration for a second contract - BUT, extraordinary difficulties arise that were totally unforeseen at the time the contract was formed, a court may allow an exception to the rule

Online contracts may be formed not only for the sale of goods and services but also for

licensing

Provisions that affect the availability of certain remedies are called

limitation-of-liability clauses.

e. If the contractor finishes late, the measure of damages is the

loss of use.

contracts made by minors are voidable at the option of the

minor

e, parents are not liable for the contracts made by

minor children acting on their own, except contracts for necessaries, which the parents are legally required to provide

a person whose employment has been wrongfully terminated has a duty to

mitigate damages incurred because of the employer's breach of the employment contract - a terminated employee is under no duty to take a job that is not of the same type and rank.

remedy at law is normally

monetary damages

Satisfaction

n is the performance (usually payment), which takes place after the accord is executed.

A breach of contract occurs when

n one party fails to perform part or all of the required duties under a contract.

, courts usually resort to contract reformation only when

necessary to prevent undue burdens or hardships

void contract

no contract at all examples: one of the parties was previously determined by a court to be legally insane and thus lacked the legal capacity to enter into a contract. Or, a contract can be void because the purpose of the contract was illegal, such as contracting to rob a bank or burn down a building (arson).

When no actual damage or financial loss results from a breach of contract and only a technical injury is involved, the court may award

nominal damages to the innocent party - are often small - brought as a matter of principle

A statement of an intention to do something in the future is

not an offer

A request or invitation to negotiate is

not an offer. only expresses a willingness to discuss the possibility of entering into a contract.

a provision excluding liability for fraudulent or intentional injury will

not be enforced

a clause excluding liability for illegal acts or violations of law will

not be enforced.

Online offers frequently include provisions relating to

o dispute settlement

Quantum meruit essentially describes the extent

of compensation owed under a quasi contract.

Personal-service contracts require

one party to work personally for another party. - Courts normally refuse to grant specific performance (because ordering a party to perform personal services against his or her will amounts to a type of involuntary servitude)

contract law reflects

our social values, interests, and expectations at a given point in time

plain language laws have helped to avoid

parties agree that a contract has been formed but disagree on its meaning or legal effect. One reason that this may happen is that one of the parties is not familiar with the legal terminology used in the contract.

Reformation is an equitable remedy used when the

parties have imperfectly expressed their agreement in writing - Reformation allows a court to rewrite the contract to reflect the parties' true intentions.

Liquidated damages differ from

penalties

equitable remedy of specific performance calls for the

performance of the act promised in the contract - attractive to a nonbreaching party because it provides the exact bargain promised in the contract - avoids some of the problems inherent in a suit for monetary damages, such as collecting a judgment and arranging another contract.

Silence can also operate as an acceptance when the offeree has had

prior dealings with the offeror

Subscriptions to religious, educational, and charitable institutions are

promises to make gifts. - e promises were unenforceable because they are not supported by legally sufficient consideration - exceptions to the general rule is the doctrine of promissory estoppe

An electronic record is considered sent when it is

properly directed to the intended recipient in a form readable by the recipient's computer system

In 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act (E-SIGN Act),15 which

provides that no contract, record, or signature may be "denied legal effect" solely because it is in electronic form.

, when a person's actions cause both a breach of contract and a tort,

punitive damages may be available

When the court imposes a quasi contract, a plaintiff may recover in

quantum meruit,4 a Latin phrase meaning "as much as he or she deserves

courts presume that a contract that is executed (fully performed by both parties) was

ratified - . A contract that is still executory is normally considered to be disaffirmed.

The party having the option can elect either to avoid any duty to perform or to

ratify (make valid) the contract

a minor who enters into a contract for necessaries may disaffirm the contract but remains liable for

reasonable value of the goods

The use of a substitute method of acceptance is not effective on dispatch, though, and no contract will be formed until the acceptance is

received by the offeror.

s, a revocation becomes effective when the offeree or the offeree's agent (a person acting on behalf of the offeree) actually

receives it

UETA rather establishes that

records, signatures, and contracts may not be denied enforceability solely due to their electronic form.

When one of the parties to a contract is relatively innocent (has no reason to know that the contract is illegal), that party can often

recover any benefits conferred in a partially executed contract. - A court may sometimes permit an innocent party who has fully performed under a contract to enforce the contract against the guilty party.

When a party has been induced to enter into an illegal bargain through fraud, duress, or undue influence on the part of the other party to the agreement, the first party will be allowed to

recover for the performance or its value.

the original lease and the rent received from the new tenant. If the landlord has not taken reasonable steps to find a new tenant, a court will likely

reduce any award by the amount of rent the landlord could have received had he or she done so.

Merely inquiring about an offer does not constitute

rejection.

Exculpatory Clauses

release a party from liability in the event of monetary or physical injury, no matter who is at fault. - courts sometimes refuse to enforce such clauses because they deem them to be unconscionable. - Exculpatory clauses found in rental agreements for commercial property are frequently held to be contrary to public policy, and such clauses are almost always unenforceable in residential property leases. Exculpatory clauses in the employment context may be deemed unconscionable when they attempt to remove the employer's potential liability for injuries to employees

A remedy is the

relief provided to an innocent party when the other party has breached the contract.

The primary purpose of the UETA is to

remove barriers to e-commerce by giving the same legal effect to electronic records and signatures as is given to paper documents and signatures

Statutes of limitations

require a creditor to sue within a specified period to recover a debt. - If the creditor fails to sue in time, recovery of the debt is barred by the statute of limitations. A debtor who promises to pay a previous debt even though recovery is barred by the statute of limitations makes an enforceable promise. The promise needs no consideration.

Formal contracts

require a special form or method of creation (formation) to be enforceable.

Offers made in obvious anger, jest, or undue excitement do not meet

requirement of a serious, objective intent.

The failure of one party to perform under a contract entitles the other party to

rescind the contract. The rescinding party must give prompt notice to the breaching party.

Equitable remedies include

rescission and restitution, specific performance, and reformation, all of which we examine later in the chapter.

All auctions are assumed to be auctions with

reserve unless the terms of the auction are explicitly stated to be without reserve.

The offeror's act of withdrawing (revoking) an offer is known as

revocation

Before the fall of the hammer, a bidder may

revoke (take back) her or his bid, or the auctioneer may reject that bid or all bids

Sometimes, agreements not to compete are included in employment contracts

s commonly agree not to work for competitors or start competing businesses for a specified period of time after termination of employment - legal in most states so long as the specified period of time is not excessive and the geographical restriction is reasonable

transaction

s defined as an interaction between two or more parties relating to business, commercial, or governmental activities.18

n a contract involving an unlicensed practitioner generally is

s illegal and unenforceable

The Uniform Commercial Code (UCC) provides that remedies can be limited in a contract for the

sale of goods

A court may grant specific performance to a buyer in an action for a breach of contract involving the

sale of land. - Only when specific performance is unavailable (for example, when the seller has sold the property to someone else) will damages be awarded instead.

The first requirement for an effective offer is a

serious, objective intention on the part of the offeror

the remedy for a seller's breach of a contract for a sale of real estate is

specific performance—that is, the buyer is awarded the parcel of property for which he or she bargained - When this remedy is unavailable (because the property has been sold, for example) or when the buyer is the party in breach, the measure of damages is typically the difference between the contract price and the market price of the land

An offer may invite an acceptance to be worded in such

specific terms that the contract is made definite.

Choice-of-Law Clause

specifying that any dispute arising out of the contract will be settled in accordance with the law of a particular jurisdiction, such as a state or country. - common in international contracts, but they may also appear in e-contracts to specify which state's laws will govern

Contract law is designed to provide

stability and predictability for both buyers and sellers in the marketplace.

The UETA does not contain any express provisions about what constitutes fraud

state laws control if any issues relating to agency, authority, forgery, or contract formation arise.

If the contractual promise is not fulfilled, the party who made it is

subject to the sanctions of a court may be required to pay monetary damages for failing to perform the contractual promise may be required to perform the promised act

The invitation to submit bids is not

t an offer, and a contractor does not bind the government or private firm by submitting a bid.

business electronically. A partnering agreement reduces the likelihood that

t disputes will arise under the contract because the buyer and the seller have agreed in advance to the terms and conditions of each sale

A statute or court decision that makes an offer illegal automatically

terminates the offer

express contract

terms of the agreement are fully and explicitly stated in words, oral or written.

blue sky laws

that regulate the offering and sale of securities for the protection of the public

most familiar type of auction today takes place on

the Internet.

government or private firm can bind the contractor by accepting

the bid

If the contract is formed at that time and the seller does not mention terms such as an arbitration clause or forumselection clause,

the buyer has not expressly agreed to these terms - t, a court may conclude that those terms were only proposals for additional terms, and not part of the original contract

When an offeror specifies how acceptance should be made,

the contract is not formed unless the offeree uses that mode of acceptance - e. Both the offeror and the offeree are bound in contract the moment the specified means of acceptance is employed. - If the offeror does not expressly authorize a certain mode of acceptance, then acceptance can be made by any reasonable means - Courts look at the prevailing business usages and the surrounding circumstances to determine whether the mode of acceptance used was reasonable. Usually, the offeror's choice of a particular means in making the offer implies that the offeree can use the same or a faster means for acceptance. I

In a contract for the sale of goods, the usual measure of compensatory damages is the difference between

the contract price and the market price

For an e-signature to be enforceable

the contracting parties must have agreed to use electronic signatures.

In construction - If the owner breaches during performance, the contractor can recover the profits, plus

the costs incurred in partially constructing the building

A contract entered into by a mentally incompetent person (whom a court has not previously declared incompetent) may be valid if

the person had capacity at the time the contract was formed - Some people who are incompetent due to age or illness have lucid intervals—temporary periods of sufficient intelligence, judgment, and will—during which they will be considered to have legal capacity to enter into contracts.

In an auction without reserve

the goods cannot be withdrawn by the seller and must be sold to the highest bidder

express ratification

the individual, on reaching the age of majority, states orally or in writing that she or he intends to be bound by the contract.

Contractual capacity

the legal ability to enter into a contractual relationship

If a contract is divisible into legal and illegal portions, a court may enforce

the legal portion but not the illegal one, so long as the illegal portion does not affect the essence of the bargain.

s, a shrink-wrap agreement is not between a retailer and a buyer, but between

the manufacturer and the ultimate buyer-user

Implied ratification

the minor, on reaching the age of majority, behaves in a manner inconsistent with disaffirmance.

, the law of contracts generally adheres to

the objective theory of contracts a party's words and conduct are held to mean whatever a reasonable person in the offeree's position would think they meant.

Whether the contract is classified as bilateral or unilateral depends on what

the offeree must do to accept the offer and bind the offeror to a contract

With an indivisible contract,

the parties intended that complete performance by each party would be essential, even if the contract contains a number of seemingly separate provisions

agreement

the parties must agree on the terms of the contract - an offer and an acceptance

Offeror

the party making the offer ralways promises to do or not to do something and thus is also a promisor

In construction - If the owner breaches before performance has begun, the contractor can recover only

the profits that would have been made on the contract—that is, the total contract price less the cost of materials and labor.

If an insurance company violates a statute when selling insurance

the purchaser can nevertheless enforce the policy and recover from the insurer.

Under the UETA, if an electronic record or signature is the act of a particular person

the record or signature may be attributed to that person

In an auction with reserve,

the seller (through the auctioneer) may withdraw the goods at any time before the auctioneer closes the sale by announcement or by the fall of the hammer

When the buyer breaches and the seller has not yet produced the goods, compensatory damages normally equal

the seller's lost profits on the sale, rather than the difference between the contract price and the market price.

If the offeror authorizes a particular method of acceptance, but the offeree accepts by a different means, the acceptance may still be effective if

the substituted method serves the same purpose as the authorized mean

quasi contracts are imposed to avoid

the unjust enrichment of one party at the expense of another

Foreseeable damages differ from compensatory damages in that

they are caused by special circumstances beyond the contract itself and flow from the consequences, or results, of a breach

Acceptance in bilateral contracts must be

timely - if it is made before the offer is terminated.

This is the primary purpose of the rules of interpretation

to determine the parties' intent from the language used in their agreement and to give effect to that intent

d If a court has previously determined that a person is mentally incompetent and has appointed a guardian to represent the person, any contract made by that person is

void

Restitution may be required when a contract is rescinded, but the right to restitution is not limited

to rescission cases - Because an award of restitution basically gives back, or returns, something to its rightful owner, a party can seek restitution in actions for breach of contract, tort actions, and other types of action

Whether a limitation-of-liability clause in a contract will be enforced depends on the

type of breach that is excused by the provision

To be legally sufficient, consideration must be something of

value in the eyes of the law. The "something of legally sufficient value" may consist of any of the following: 1. A promise to do something that one has no prior legal duty to do (to pay on receipt of certain goods, for example). 2. The performance of an action that one is otherwise not obligated to undertake (such as providing accounting services). 3. The refraining from an action that one has a legal right to undertake (called a forbearance).

rescission is essentially an action to

undo, or cancel, a contract—to return nonbreaching parties to the positions that they occupied prior to the transaction.6 - When fraud, mistake, duress, undue influence, lack of capacity, or failure of consideration is present, rescission is available. Rescission may also be available by statute

Any contract to commit a crime is contrary to statute and

unenforceable

Promises made in return for actions or events that have already taken place are

unenforceable

contracts in restraint of trade (anticompetitive agreements) generally are

unenforceable because they are contrary to public policy - n exception is recognized when the restraint is reasonable and is an integral part of the contract. Many such exceptions involve a type of restraint called a covenant not to compete. Such restraints often are included in contracts for the sale of an ongoing business and employment contracts

To exercise the power of acceptance effectively, the offeree must accept

unequivocally

Contests, lotteries, and other competitions offering prizes are also examples of offers for

unilateral contract

promise for an act

unilateral contract formed not at the moment when promises are exchanged but rather when the contract is performed.

If the offer is phrased so that the offeree can accept only by completing the contract performance

unilateral contract.

y, depending on the jurisdiction, courts will reform covenants not to compete. If a covenant is found to be

unreasonable in time or geographic area, the court may convert the terms into reasonable ones and then enforce the reformed covenant

When an exculpatory clause for negligence is contained in a contract made between parties who have roughly equal bargaining positions, the clause

usually will be enforced.

A lender who charges an interest rate above the lawful maximum commits

usury

voidable contract

valid contract but one that can be avoided at the option of one or both of the parties.

Consideration

value given in return for a promise.

the standard measure of compensatory damages is the difference between the

value of the breaching party's promised performance under the contract and the value of her or his actual performance. This amount is reduced by any loss that the injured party has avoided.

A contract entered into by an intoxicated person can be either

voidable or valid - If the person was sufficiently intoxicated to lack mental capacity, then the transaction may be voidable at the option of the intoxicated person even if the intoxication was purely voluntary

Express terms (terms expressly stated in the contract) are given the greatest _________ followed by

weight, course of performance, course of dealing, and custom and usage of trade

mitigation of damages

when a breach of contract occurs, the injured party is held to a duty to mitigate, or reduce, the damages that he or she suffers. - depends on the nature of the situation.

The mailbox rule does not apply to instantaneous forms of communication, such as

when the parties are dealing face to face, by phone, by fax, and usually by e-mail.

Sometimes, parties rescind a contract and make a new contract at the same time. When this occurs, it is often difficult to determine

whether there was consideration for the new contract or whether the parties had a preexisting duty under the previous contract.

if a court finds that a provision calls for a penalty, the agreement as to the amount

will not be enforced, and recovery will be limited to actual damages.4

UETA does not apply to

wills or testamentary trusts or to transactions governed by the UCC

If the illegal part of a bargain has not yet been performed, the party rendering performance can

withdraw from the contract and recover the performance or its value

The UETA does not apply to all writings and signatures. It covers only

y electronic records and electronic signatures relating to a transaction

To rescind a contract, both parties generally must make restitution to each other by

y returning goods, property, or funds previously conveyed.

Restatement (Second) of Contracts

—a compilation of common law contract principles—states that parties may agree to a contract "by written or spoken words or by other action or by failure to act."1

When the contractor breaches the construction contract— either by failing to begin construction or by stopping work

—the measure of damages is the cost of completion, which includes reasonable compensation for any delay in performance