BA 200 1st Edition Exam 3 Study Guide Chapter 12 Contracts and Sales Introduction and Formation Contract is a promise or set of promises for breach of which the law gives a remedy Sources of Contract Law o Common Law Based on English common law Summarized in Restatement Second of Contracts Applies to contracts with subject matters of land or services Examples Mortgage lease or medical services o Uniform Commercial Code UCC Drafted by ALI and National Conference of Commissioners on Uniform State Laws Common law is not uniform from state to state First appeared in 1940s Adopted in part or whole in all states o Article 2 governs contracts for the sale of goods more liberal than common law o Uniform Commercial Code UCC Article 2A leases New addendum to UCC Covers leases of goods long term leases such as car leases Adopted in about ten states E Commerce and Contracts o Uniform Electronic Transactions Act UETA Contracts formed on the internet Law in 48 states and D C o Electronic Signatures in Global and National Commerce Act of 2000 E sign Federal law Requires parity for electronic signatures o Uniform Computer Information Transaction Act UCITA Bilateral vs Unilateral o Bilateral First party offeror makes a promise in exchange for the second party s offeree s promise Example You promise to pay back money with interest and the bank promises to loan you the money o Unilateral First party offeror makes a promise in exchange for offeree s performance Example Drive my car across the country and I ll pay you 500 plus expenses Express vs Implied o Express Contracts are Written or Oral Agreements o Implied in fact Contracts are Non spoken Non written Understandings Example When you go into a doctor s office you have an implied contract to pay her for her services even though you may not sit down and organize the details Quasi Contracts o Implied in Law Fictional Contract created by a court Elements One party confers a benefit on another Both are aware of the benefit and Retention of the benefit without compensation would be unfair and unjust Void or Voidable Contracts o Void Contracts are Ones to Do Something Illegal or Against Public Policy Neither Side Can Enforce Example Contract to buy drugs Void Contracts are illegal and do not exist at law o Voidable Contracts are Contracts in Which One Party has the Right to End the Contract Example Contracts of minors are voidable Executed vs Executory o Executed Contract is One in Which the Promises Under the Contract Have Been Performed o Executory Contract is One That Has Been Entered Into But Not Yet Performed o Contracts Can Be Partially Executory Executed if One Side Has Performed Formation Offer o Offer is the First Part of the Contract Parties Offeror person who makes offer Offeree person who receives offer Must have language that indicates intent to contract Not just inquiry More than negotiation Courts use an objective not a subjective standard Essential Terms o Under Common Law Offer Must Contain Essential Terms Of The Contract Parties Subject matter of the contract Price and Payment Terms Delivery Terms Performance Times o Under UCC Article 2 Offer Need Only Contain Parties Subject matter Quantity Courts can consider industry custom and course of dealing in determining whether terms are sufficient Offer o Communication to Offeree Offeree cannot accept offer that never arrives Ads are generally considered invitations for offers not offer Offer Termination o Revocation Offer Can be Revoked any Time Prior to Acceptance Exception is option Offeror is paid to hold offer open It is a separate contract for time UCC merchant s firm offer UCC 2 205 Offer by merchant signed in writing states it will be kept open irrevocable for period stated maximum of three months o Termination of an Offer by Rejection Offeree indicates no Rejection by changes in terms counteroffer o Termination UCC Termination by Counteroffer UCC 2 207 Non merchants addition of terms in acceptance does not equal a counteroffer Acceptance results but additional terms are not part of contract Termination by Counteroffer UCC 2 207 Merchants battle of the forms Acceptance with additional terms contract Additional terms are part of contract unless o Material price warranties immaterial shipment or payment terms o Offer limited This offer is limited to these terms o Objection to new terms Checklist for Peliminary Contracts o Do your contract homework Do background checks check references complaints at state and private agencies court dockets Learn the nature of the business and industry custom learn to use the language o Negotiate details Agree on terms that held you accomplish your purpose apple powder for bakery equipment not just apple powder Make sure your written agreement is complete Checklist for Drafting Contracts o Identify both parties clearly Be certain corporate names are correct Make sure the parties have the proper authority to enter into the transaction Are copies of board resolutions approving the contract available o Define the terms used in the contract including industry terms o List all terms price subject matter quantity delivery payment terms o Answer what if questions What if payment is not made What if deliveries are late Formation Acceptance o Acceptance Offeree s Response Offeree s positive response Must be communicated to offeror Using proper means of acceptance Only offeree has power to accept o Acceptance Offeree s Response The Mailbox Rule Timing rule in contract acceptances that provides that acceptance is effective upon mailing if properly done Acceptance by stipulated means Mailbox rule applies If offeree does not use means stipulated then counteroffer and or rejection o Acceptance With No Stipulated Means Mailbox rule if same means or stipulated means used Arrival if different slower method used If non stipulated means used it is a counteroffer and a rejection o E Contracts E Commerce and Contract Formation Formation by Clickon Clickthrough or Clickwrap agreements Offeree agrees to terms contained in an online agreement Offeree accepts by clicking the I Agree button o Consideration Distinguishes Gifts From Contracts The Bargained For Exchange What each party is willing to give up for the other parties promise Courts are not concerned with the adequacy of consideration only the legal sufficiency of consideration Unique Consideration Issues Charitable subscriptions are enforceable even though detriment is one sided Reliance promissory estoppel provides