Chapter 7 Agreement and Consideration in Contracts Contract A promise that is actionable upon breach The COMMON LAW governs all contracts except when it has been modified or replaced by STATUTORY LAW such as o UCC Uniform Commercial Code o Administrative Agency Regulations Contracts relating to services real estate employment and insurance are generally governed by COMMON LAW Contracts for the sale and lease of goods are governed by the UCC to the extent that the UCC has modified general contract law Article 1 Section 8 UCC Uniform Commercial Code Promise A declaration that binds the person who makes it the promisor to do or not to do a certain act Promisor A person who MAKES a promise Promisee A person to whom a promise is MADE Contract law is necessary to ensure compliance with a promise or to entitle the innocent party to some form of relief Objective Theory of Contracts The view that contracting parties are bound only by terms that can be objectively inferred from promises made Judged by outward objective facts as interpreted by a reasonable person rather than by the party s secret subjective intentions Objective facts include 1 What the party said when entering into the contract 2 How the party acted or appeared 3 The circumstances surrounding the transaction Requirements of a Valid Contract 1 Agreement offer acceptance 2 Consideration 3 Contractual Capacity 4 Legality Defenses to the Enforceability of a Contract 1 Voluntary consent 2 Form Contracts are categorized based on legal distinctions as to their formation performance and enforceability Offeror A person who MAKES the offer Offeree A person to whom an offer is MADE Bilateral Contract A promise is exchanged for a promise EXHIBIT 7 1 PAGE 196 Unilateral Contract A contract that results when an offer can be accepted only by an offeree s performance Substantial Compliance Formal Contract An agreement that by law requires a specific form for its validity Informal Contract A contract that does not require a specific form or method of creation to be valid Express Contract A contract in which the terms of the agreements are stated in words Spoken or written Implied Contract A contract formed in whole or in part from the conduct of the parties Requirements for implied contracts 1 The plaintiff furnish some service or property 2 The plaintiff expected to be paid for the service or property and the defendant knew or should have known that payment was expected 3 The defendant had a chance to reject the service or property and did not Executed Contract A contract that has been fully performed by both parties Executory Contract A contract that has not yet been fully performed Valid Contract A contract that results when the elements necessary for contract formation agreement consideration legal purpose and contractual capacity are present Voidable Contract A contract that may be legally avoided at the option of one or both of the parties EXHIBIT 7 2 PAGE 200 Unenforceable Contract A valid contract rendered unenforceable by some stature or law Void Contract A contract having no legal force or binding effect Quasi Contract An obligation or contract imposed by law a court in the absence of an agreement to prevent the unjust enrichment of one party Agreement A mutual understanding or meeting of the minds between two or more individuals regarding the terms of a contract Offer A promise or commitment to perform or refrain from performing some specified act in the future An offer has 3 elements 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 offerree Expressions of Opinions Statements of future Intent Preliminary Negotiations Advertisements Catalogues and Circulars are not offers A contract must include the following 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 good services and land 3 The consideration to be paid 4 The time of payment delivery or performance Requirements for offer Intention Definiteness Communication Revocation The withdrawal of a contract offer by the offeror Unless an offer is irrevocable it can be revoked at any time prior to acceptance without liability Counteroffer An offeree s response to an offer in which the offeree rejects the original offer and at the same time makes a new offer Mirror Image Rule A common law that requires that the terms of the offeree s acceptance adhere exactly to the terms of the offeror s offer for a valid contract to be formed Termination by Operation of Law The power of the offeree to transform the offer into a binding legal obligation can be terminated by operation of law through the occurrence of any of the following events Lapse of time 1 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 A statute or court decision that makes an offer illegal automatically terminates the offer Option Contract A contract under which the offeror cannot revoke the offer for a stipulated time period because the offeree has given consideration for the offer to remain open Acceptance The act of voluntarily agreeing through words or conduct to the terms of an offer thereby creating a contract Mailbox Rule A common law rule that acceptance takes effect and this completes formation of the contract at the time the offeree sends or delivers the acceptance via the communication mode expressly or impliedly authorized by the offeror E Contract A contract that is formed electronically At a minimum an online offer should include the following provisions 1 Acceptance of terms 2 Payment 3 Return Policy Limitation on remedies 4 Disclaimer 5 6 Privacy policy 7 Dispute Resolution Forum Selection Clause A provision in a contract designating the court jurisdiction or tribunal that will decide any disputes arising under the contract Click On Agreement An agreement that arises when an online buyer clicked on I agree or otherwise indicates her or his assent to the bound by the terms of an offer Shrink Wrap Agreement An agreement whose terms are expressed in a document located inside a box in which goods usually software are packaged
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