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 serviceso 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 stateso Article 2 governs contracts for the sale of goods; more liberal than common lawo 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 Contractso 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 signatureso Uniform Computer Information Transaction Act (UCITA)- Bilateral vs Unilateralo 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 moneyo 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 Impliedo Express Contracts are Written or Oral Agreementso 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 Contractso 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 Performedo Executory Contract is One That Has Been Entered Into But Not Yet Performedo 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 Termso Under Common Law Offer Must Contain Essential Terms Of The Contract: Parties, Subject matter of the contract, Price and Payment Terms, Delivery Terms, Performance Timeso 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- Offero 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—counteroffero 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 paymentterms)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 languageo Negotiate details Agree on terms that held you accomplish your purpose (“apple powder forbakery 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 accepto 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 rejectiono 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 rejectiono 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