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List four ways an offer can be terminated by operation of law.
(1) Lapse of time; (2) destruction of the subject matter of the offer; (3) death or incompetence of the offeror or the offeree; or (4) supervening illegality of the proposed contract.
List the requirements for an offer.
(1) The offeror must have a serious intention to become bound by the offer; (2) the terms of the offer must be reasonable, certain, or definite, so that the parties and the court can ascertain the terms of the contract; and (3) the offer must be communicated by the offeror to the offeree, resulting in the offeree's knowledge of the offer.
Define what a forum selection clause is and discuss how such clauses may be unfair to online purchasers.
A forum-selection clause, is one that specifies the forum (such as the court or jurisdiction) in which the dispute will be resolved. Significant jurisdictional issues may arise when parties are at a great distance, as they often are when they form contracts via the Internet. A forum-selection clause will 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.
Define a shrink-wrap agreement and discuss its significance as well as discuss whether its terms are enforceable.
A shrink-wrap agreement is an agreement whose terms are expressed inside a box in which the goods are packaged. (The term shrink-wrap refers to the plastic that covers the box.) Usually, 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. A shrink-wrap agreement is not between a retailer and a buyer, but between the manufacturer of the hardware or software and the ultimate buyer-user of the product. The terms generally concern warranties, remedies, and other issues associated with the use of the product. Shrink-Wrap Agreements and Enforceable Contract Terms. The 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." The Uniform Commercial Code (UCC) - the law governing sales contracts - has a similar provision. Section 2-204 of the UCC states that any contract for the sale of goods "may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." The courts have used these provisions to conclude that a binding contract can be created by conduct, including conduct accepting the terms in either a shrink-wrap agreement or a click-on agreement. Thus, a buyer's failure to object to terms contained within a shrink-wrapped software package (or an online offer) may constitute an acceptance of the terms by conduct. In many cases, the courts have enforced the terms of shrink-wrap agreements, reasoning that shrink-wrap terms should be treated the same as the terms of other contracts. Some courts have concluded that by including the terms with the product, the seller proposes a contract that the buyer can accept by using the product after having an opportunity to read the terms. Additionally, it seems practical from a business's point of view to enclose a full statement of the legal terms of a sale with the product rather than to read the statement over the phone, for example, when a buyer calls in an order for the product. Shrink-Wrap Terms That May Not Be Enforced. Courts do not enforce all of the terms included in shrink-wrap agreements. An important consideration is whether the parties form their contract before or after the seller communicates the terms of the shrink-wrap agreement to the buyer. If a court finds that the buyer learned of the shrink-wrap terms after the parties entered into a contract, the court may conclude that those terms were proposals for additional terms and were not part of the contract unless the buyer expressly agreed to them.
Are advertisements offers? Explain.
An advertisement can constitute an offer if it makes a promise so definite in character that it is apparent that the offeror is binding himself or herself to the conditions stated. Limiting the quantity involved might constitute such a definite promise.
Explain how an agreement relates to a contract, what is necessary for an agreement to exist, and how the element of mutual assent is associated with the objective theory of contracts.
An agreement is an essential element of a contract. An agreement does not have to be in writing. What is necessary for an agreement to exist is that both contracting parties must manifest their assent to the same bargain. The objective theory of contracts is the benchmark by which the courts determine whether the parties have mutual assent - the words and conduct of the offeror will be construed as a reasonable person in the offeree's position would have interpreted them.
Discuss what an e-signature is and its applicable technologies and forms.
An e-signature has been defined as "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." In 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act (E-SIGN Act). The E-SIGN Act provides that no contract, record, or signature may be "denied legal effect" solely because it is in electronic form. In other words, under this law, an electronic signature is as valid as a signature on paper, and an e-document can be as enforceable as a paper one. For an e-signature to be enforceable, however, the contracting parties must have agreed to use electronic signatures. For an electronic document to be valid, it must be in a form that can be retained and accurately reproduced. E-signature Technologies - Electronic documents can be signed in a number of ways. E-signature technologies include encrypted digital signatures, names intended as signatures at the end of e-mail messages, and clicks on a webpage if the clicks include some means of identification. Note that although courts do not question that documents can be signed electronically under the E-SIGN Act, some courts will question the validity of the signatures themselves. For instance, a court might find that a typed name at the bottom of e-mail is not admissible as the person's signature. For this reason, many businesses use special software, such as DocuSign or EchoSign, that is designed to create an e-signature that looks similar to a person's handwritten signature. Exclusions - The E-SIGN Act does not apply to all types of documents. Documents that are exempt include court papers, divorce decrees, evictions, foreclosures, health-insurance terminations, prenuptial agreements, and wills. Also, the only agreements governed by the UCC that fall under this law are those covered by Articles 2 and 2A (sales and lease contracts) and UCC 1-107 and 1-206. Despite these limitations, the E-SIGN Act has significantly expanded online contracting.
Discuss whether the E-SIGN Act has preempted the UETA as adopted by the states.
Earlier, we discussed the provisions of the federal E-SIGN Act. Congress passed the E-SIGN Act in 2000, a year after the UETA was presented to the states for adoption. Thus, a significant issue was to what extent the federal E-SIGN Act preempted the UETA as adopted by the states. The E-SIGN Act explicitly provides that if a state has enacted the uniform version of the UETA, that law is not preempted by the E-SIGN Act. In other words, if the state has enacted the UETA without modification, state law will govern. The problem is that many states have enacted non-uniform (modified) versions of the UETA, usually to exclude other areas of state law from the UETA's terms. The E-SIGN Act specifies that those exclusions will be preempted to the extent that they are inconsistent with the E-SIGN Act's provisions. The E-SIGN Act explicitly allows the states to enact alternative requirements for the use of electronic records or electronic signatures. Generally, however, the requirements must be consistent with the provisions of the E-SIGN Act, and the state must not give greater legal status or effect to one specific type of technology. Additionally, state laws that include alternative requirements, if enacted after the adoption of the E-SIGN Act, must specifically refer to the E-SIGN Act.
Give four examples of expressions that are not offers and explain why they fail to constitute offers.
Expressions of opinion are not offers because they do not evidence an intention to enter into a binding agreement. Statements of intention ("I plan to do something") likewise fail to constitute offers because the offeror is merely planning or thinking about doing something rather than manifesting the serious intention or promise to do something. Preliminary negotiations are not offers because they merely express a willingness to discuss the possibility of entering into a contract. Generally, advertisements, catalogues, price lists and circulars are not offers but only invitations to negotiate or soliciting offers to buy. The policy reason why advertisements are generally not offers is because the offeror cannot generally anticipate how many offerees would accept the offer which would result in numerous breaches of contracts.
How can a revocation occur and when is it effective?
Generally (excepting irrevocable offers) a revocation can be effective providing it is communicated any time prior to acceptance and is effective upon the offeree's receipt. Revocation can occur by express repudiation or by the performance of acts inconsistent with the existence of the offer, which are made known to the offeree.
Identify UETA and explain the state laws that govern e-signatures.
In 1999 the National Conference of Commissioners on Uniform State Laws and the American Law Institute promulgated the Uniform Electronic Transactions Act (UETA). To date, the UETA has been adopted, at least in part, by forty-eight states. Among other things, the UETA declares that a signature may not be denied legal effect or enforceability solely because it is in electronic form. 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 currently given to paper documents and signatures. The UETA broadly defines an e-signature as "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." (UETA 102(8)) E-signatures include encrypted digital signatures, names (intended as signatures) at the ends of e-mail messages, and "clicks" on a webpage if the click includes the identification of the person. A record is "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."
Will lack of definite terms always cause a communication to fail to constitute an offer? Explain why or why not.
Lack of definite terms will not always cause a communication to fail to constitute an offer. Courts are sometimes willing to supply a missing term in a contract when the parties have clearly manifested their intent to form a contract. However, if the parties' expression of intent is too vague or uncertain to be given any precise meaning, the court will not supply a "reasonable" term.
Compare and contrast a click-on agreement from browse-wrap terms as well as discuss criticisms concerning the enforceability of browse-wrap terms.
Like the terms of a click-on agreement, browse-wrap terms can occur in a transaction conducted over the Internet. Unlike a click-on agreement, however, browse-wrap terms do not require an Internet user to assent to the terms before, say, downloading or using certain software. In other words, a person can install the software without clicking "I agree" to the terms of a license. Browse-wrap terms are often unenforceable because they do not satisfy the agreement requirement of contract formation.
Explain whether e-contracts must meet the same basic requirements as paper contracts.
Numerous contracts are formed online. Electronic contracts, or e-contracts, must meet the same basic requirements (agreement, consideration, contractual capacity, and legality) as paper contracts. Disputes concerning e-contracts, however, tend to center on contract terms and whether the parties voluntarily agreed to those terms. Online contracts may be formed not only for the sale of goods and services but also for licensing.
List the minimum requirements for an online offer.
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. All important terms should be conspicuous and easy to view. An important rule to keep in mind is that the offeror (the seller) controls the offer and thus the resulting contract. The seller should therefore anticipate the terms he or she wants to include in a contract and provide for them in the offer. In some instances, a standardized contract form may suffice. At a minimum, an online offer should include the following provisions: ■ A provision specifying the remedies available to the buyer if the goods turn out to be defective or if the contract is otherwise breached. Any limitation of remedies should be clearly spelled out. ■ A clause that clearly indicates what will constitute the buyer's agreement to the terms of the offer. ■ A provision specifying how payment for the goods or services and for any applicable taxes must be made. ■ A statement of the seller's refund and return policies. ■ 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. ■ A statement explaining how the information gathered about the buyer will be used by the seller.
Compare and contrast what documents UETA does and does not apply to.
The UETA does not create new rules for electronic contracts but rather establishes that records, signatures, and contracts may not be denied enforceability solely due to their electronic form. The UETA does not apply to all writings and signatures but only to electronic records and electronic signatures relating to a transaction. A transaction is defined as an interaction between two or more people relating to business, commercial, or governmental activities. The act specifically does not apply to laws governing wills or testamentary trusts, the UCC (other than Articles 2 and 2A), or the Uniform Computer Information Transactions Act. In addition, the provisions of the UETA allow the states to exclude its application to other areas of law.
What do the principle of detrimental reliance and an option contract have in common and why?
The common concept is that both can constitute an irrevocable offer. An option contract is a separate contract which is created when the offeror promises to hold an offer open for a specified period of time in exchange for consideration. Detrimental reliance can make an offer irrevocable because the offeree has justifiably and detrimentally relied upon the offer in some reasonable manner.
Define a click-on agreement, identify its language and discuss its significance.
The courts have concluded that the act of clicking on a box labeled "I accept" or "I agree" can indicate acceptance of an online offer. The agreement resulting from such an acceptance is often called a click-on agreement (sometimes referred to as a click-on license or click-wrap agreement). To accept the offer, the user simply scrolls down the page and clicks on the "Accept and Install" button, as below: Generally, the law does not require that the parties have read all of the terms in a contract for it to be effective. Therefore, clicking on a box that states "I agree" to certain terms can be enough. The terms may be contained on a website through which the buyer is obtaining goods or services. They may also appear on a screen when software is downloaded from the Internet.
Differentiate the mailbox rule from the rule when a revocation is effective.
The distinction is that the mailbox rule provides that an acceptance is effective upon dispatch (put in the mail). The rule for a revocation is different because a revocation is not effective until received by the offeree. Therefore, if a potential acceptor sends a revocation first and then changes her mind and sends an acceptance, whether an offer has been accepted or rejected (contract formed) depends upon whether the rejection of acceptance is received first and relied upon by the offeror.
Discuss the general highlights of UETA.
The general highlights of UETA are: ■ The Parties Must Agree to Conduct Transactions Electronically - The UETA will not apply to a transaction unless each of the parties has agreed to conduct transactions by electronic means. The agreement need not be explicit, however, and it may be implied by the conduct of the parties and the surrounding circumstances. A person who has previously agreed to an electronic transaction can also withdraw his or her consent and refuse to conduct further business electronically. Additionally, the act expressly gives parties the power to vary the UETA's provisions by contract. In other words, parties can opt out of all or some of the terms of the UETA. If the parties do not opt out of the terms of the UETA, however, the UETA will govern their electronic transactions. ■ Attribution - Under the UETA, if an electronic record or signature was the act of a particular person, the record or signature may be attributed to that person. If a person types her or his name at the bottom of an e-mail purchase order, that name will qualify as a "signature" and be attributed to the person whose name appears. Just as in paper contracts, one may use any relevant evidence to prove that the record or signature is or is not the act of the person. UETA states that the effect of the record is to be determined from the context and surrounding circumstances. In other words, a record may have legal effect even if no one has signed it. For instance, a fax that contains a letterhead identifying the sender may, depending on the circumstances, be attributed to that sender. The UETA does not contain any express provisions about what constitutes fraud or whether an agent is authorized to enter into a contract. Under the UETA, other state laws control if any issues relating to agency, authority, forgery, or contract formation arise. If existing state law requires a document to be notarized, the UETA provides that this requirement is satisfied by the electronic signature of a notary public or other person authorized to verify signatures. ■ The Effect of Errors - The UETA encourages, but does not require, the use of security procedures (such as encryption) to verify changes to electronic documents and to correct errors. The parties themselves may agree to use a security procedure. If they do, and if one party does not follow the procedure and thus fails to detect an error, the party that followed procedure can legally avoid the effect of the error. When the parties have not agreed to use a security procedure, then other state laws (including contract law governing mistakes) will determine the effect of the error. To avoid the effect of errors, a party must promptly notify the other party of the error and of her or his intent not to be bound by the error. In addition, the party must take reasonable steps to return any benefit received. Parties cannot avoid a transaction if they have benefited. ■ Timing - 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. 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. An electronic record is considered received when it enters the recipient's processing system in a readable form—even if no individual is aware of its receipt.
How does the mailbox rule affect when an acceptance can occur?
The general rule for a bilateral contract is that acceptance is timely if it is made before an offer is terminated. The key point then becomes when does acceptance take effect. The general rule is that acceptance takes effect when the acceptance is sent via the mode expressly or impliedly authorized by the offeror. Under the mailbox rule, a majority of courts declare that if the authorized mode of communicating the acceptance is the mail, then an acceptance becomes valid when it is put in the mail, even if it is never received.
Explain the significance of the mirror image rule and how it facilitates the creation of a counteroffer.
The mirror image rule is significant because it requires the offeree's acceptance to exactly match the offeror's offer. An acceptance with any material change in, or addition to, the terms of the original offer automatically terminated the original offer and constituted a counteroffer.
Define the general rule regarding the requirement that an offer have definite or certain terms.
The rule is that an offer must have reasonably definite terms so that a court can determine if a breach has occurred and can provide an appropriate remedy.
Can an agreement to agree ever constitute an enforceable contract? Explain why or why not.
Under the modern (recent cases) view, an agreement to agree can be enforceable if it reflects the parties' clear intent that they intended to be bound by such an agreement. Courts adopting the modern view subscribe to the notion that such agreements serve valid commercial purposes.
