Agreement in Traditional and E-Contracts
Agreement in Traditional and E-Contracts
Section 1: Agreement
Agreement:
- Parties must agree on the terms of the contract
- Manifest to each other their mutual assent (agreement) to the same bargain
- Agreement has
- An offer
- One parties offers a certain bargain to another party
- An acceptance
- The other party accepts the that bargain
- Does not necessarily have to be in written
- Both parties must manifest their assent, or voluntary consent, to the same bargain
- Once these two and the other elements of a contract is evident
- A valid is formed, creating enforceable rights and duties between the parties
- Objective theory of contracts
- A party’s words and conducts are held to mean whatever a reasonable person in the offeree’s position would think they meant
- An offer
Requirements of the Offer:
- An offer - is a promise or commitment to do or refrain from doing some specified action in the future
- Under the common law, three elements are necessary for an offer to be effective
- The offeror must have a serious intention to become bound by the offer
- The terms of the offer must be reasonably certain, or definite, so that the parties and the courts can ascertain the terms of the contract
- The offer must be communicated to the offeree
- Once these an effective offer have been made, the acceptance creates a legally binding contract
- Intention
- The first requirement is a serious intent on the part of the offeror
- Intent is determined by what a reasonable person in the offeree’s position would conclude the offeror’s words and actions meant
- Offers made in obvious anger, jest, or undue excitement do not meet the serious-and objective-intent test
- A reasonable person would realize that a serious offer was not being made
- Expression of Opinion
- Is not an offer
- Does not indicate the intention to enter a binding agreement
- Statement of Future Intent
- Is to say that a future action will be performed
- Does not qualify as an offer
- Preliminary Negotiations
- A request or invitation to negotiate is not an offer
- Only expresses a willingness to discuss the possibility of entering into a contract
- Advertisements
- (including representation made in mail order catalogues, price lists and circulars)
- Are not treated as offers to contract
- Only as an invitation to negotiate
- Auctions
- Is an invitation asking bidders to submit offers
- Bidder- offeror, auctioneer is offeree
- Offer is accepted when the auctioneer strikes the hammer
- Before the fall of the hammer, the offeror may revoke their bid or auctioneer to reject the bid
- When an auctioneer accepts a higher bid, all previous bids are rejected
- Auctions with and without Reserve
- With reserve
- The seller (through the auctioneer) may withdraw the goods at anytime before the auctioneer closes the sale
- All auctions are assumed to be with reserved unless stated otherwise
- The seller may reserve the right to confirm or reject the sale even after the hammer have fallen
- Without reserve
- Goods cannot be withdrawn by the seller and must be sold to the highest bidder
- Agreements to Agree
- To the material terms of a contract at some future date
- Were not considered to be a binding contract
- Modern views- is that agreements to agree may be enforceable contracts if it is clear that the parties intended to be bound by the agreements
- To the material terms of a contract at some future date
- Definiteness of Terms
- The second requirement for an effective offer
- An offer must have reasonably definite terms so that a court can determine if a breach has occurred and give appropriate remedy
- Generally a contract must include
- With reserve
- A request or invitation to negotiate is not an offer
- Offers made in obvious anger, jest, or undue excitement do not meet the serious-and objective-intent test
- The identification of parties
- 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
- The consideration to be paid
- The time of payment, delivery, or performance
- Communication
- The third requirement for an effective offer
- Offer must be communicated to the offeree
Termination of the Offer:
- Communication of effective offer give an offeree power to transform the offer into a binding legal obligation by acceptance
- Offer can be terminated through the action of the parties or by operation of law
- Termination by Action of the Parties
- Revocations
- Rejection
- Counteroffer
- Revocations of the offer by the offeror
- The offeror’s act of withdrawing an offer
- Unless the offer is irrevocable, the offeror can revoke
- Can usually revoke (even if they promised to keep it open)
- As long as it is communicated to the offeree before acceptance
- May be accomplished by express repudiation of the offer
- Or by performance of acts that are inconsistent with the existence of the offer and are made known to the offeree
- General rule is that revocation is effective if the offeree or their agent receive it
- Offers made to the general public must be revoked in the exact that which the offer was communicated
- Irrevocable offers
- Courts have been refusing to allow offeror to revoke an offer when the offeree has changed positions because of justifiable reliance on the offer
- This is under the doctrine of detrimental reliance or promissory estoppel
- Option contract
- Another form of irrevocable offer
- It is created when an offeror promises to hold an offer open for a specified period of time in return for payment (consideration) given by the offeree.
- It takes about the power of the offeror to revoke the offer within the specified time period
- Typically use in the sale of lease of real estate
- Rejection of the offer by the offeree
- The offeree rejects the offer by words or conduct
- But if they want to accept again.
- It counts as a new offer and the offeror becomes the new offeree, so they have power of acceptance
- Counteroffer by the Offeree
- Counteroffer
- A rejection of the original offer and the simultaneous making of a new offer
- In common law the Mirror image rule
- Requires the offeree’s acceptance to match the offeror’s offer exactly
- Any change in, or addition to, the terms of the original offer automatically terminates the offer and substitutes the counteroffer
- Termination by Operation of Law
- Counteroffer
- But if they want to accept again.
- The offeree rejects the offer by words or conduct
- Courts have been refusing to allow offeror to revoke an offer when the offeree has changed positions because of justifiable reliance on the offer
- Lapse of time
- Destruction of the specific subject matter of the offer
- Death or incompetence of the offeror or offeree
- Supervening illegality of the proposed contract
- Lapse of Time
- If an offer states that it will be left open until a particular date then it is open until midnight of that day
- If it states a certain number of days then the clock begins when the offeree receive the offer
- If it does not mandate a time then it is terminated after a reasonable period of time
- Destruction of the Subject Matter
- An offer is automatically terminated if the specified subject matter is destroyed before the offer is accepted
- Death or Incompetence of the Offeror or Offeree
- An offeree’s power of acceptance is terminated when the offeror or offeree dies or is deprived of legal capacity to enter into the proposed contract
- Unless the offer is irrevocable
- A revocable offer is personal to both parties and cannot pass to heirs, guardians or estate of either
- This applies whether or not the other party has a notice of death or incompetence
- Supervening Illegality of the Proposed Contract
- A statute or court decision that makes an offer illegal automatically terminates the offer
- An offeree’s power of acceptance is terminated when the offeror or offeree dies or is deprived of legal capacity to enter into the proposed contract
- Lapse of Time
Acceptance:
- Is a voluntary act by the offeree that show assent to the terms of an offer
- Act may consist of words or conduct
- Acceptance must be unequivocal and must be communicated to the offeror
- Unequivocal Acceptance
- To exercise the power of acceptance effectively
- Offeree must accept unequivocally
- Mirror image rule
- If the acceptance is subject to new conditions or if the terms of acceptance change, the original offer
- The acceptance may be deemed a counter offer that implicitly rejects the original offer
- An acceptance may be unequivocal even though the offeree expresses dissatisfaction with the contract
- To exercise the power of acceptance effectively
- Silence as Acceptance
- Usually silence cannot constitute acceptance even if the offeror states it
- The general rule is because an offeree should not be obligated to act affirmatively to reject an offer when no consideration has passed to the offeree to impose such a duty
- Silence may be taken as acceptance
- When an offeree takes the benefit of offered services even though they had an opportunity to reject it and knew they were offered with the expectation of compensation
- When offeree has prior dealings with offeror
- Communication of Acceptance
- In a bilateral contract, communication is necessary
- Acceptance is in the form of a promise, and the contract is formed when the promise is made
- Unilateral contract calls for full performance of some act
- Acceptance usually evident and notification is therefore unnecessary
- Except when offeror request notice of acceptance or has no way to determining whether the act have been performed
- Mode and Timeliness of Acceptance
- In a bilateral contracts, acceptance must be made timely
- The general rule for that is if it is made before the offer is terminated
- Mailbox Rule
- Acceptance takes effects, thus the formation of the contract is complete
- The offeree sends or delivers the communication via the mode expressly or impliedly authorized by the offeror
- If the mode is by mail then the acceptance become valid when it is dispatched not when it is received by the offeror
- Rules does not apply to instantaneous communication
- Such as when the parties are dealing face-to-face, telephone or by fax
- Email fall under the UNiform Electronic Transaction Act (UETA) regulations
- Email is considered sent when it either leaves the control of the sender or is received by the recipient
- Authorized Means of Acceptance
- Means of communicating acceptance can be expressly authorized by the offeror or impliedly authorized by the facts and circumstances surrounding the situation or the law
- Acceptance sent by non-authorized mode is not effective until received by offeror
- When an offeror specifies how acceptance should be made
- Express authorization exists
- Contract is not form unless offeree uses that specified mode of acceptance
- Both parties are bound into contract once the 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 mode of acceptance used was reasonable
- Substitute Method of Acceptance
- When the offeror authorize one mode and the offeree uses another
- Acceptance may still be effective if the substituted method serves the same purpose as the authorized one
- When the offeror authorize one mode and the offeree uses another
- Means of communicating acceptance can be expressly authorized by the offeror or impliedly authorized by the facts and circumstances surrounding the situation or the law
- In a bilateral contracts, acceptance must be made timely
- In a bilateral contract, communication is necessary
Section 2: Agreement in E-Contracts
- E-contracts
- Must meet the same requirements (agreement, consideration, contractual capacity and legality) as paper contracts
- Are formed for the sale of goods and services but for licensing or a right to use a software
- Licensor
- Licensee
Online Offers:
- Sellers can save themselves from contract disputes and legal liability
- By creating offers that clearly spell out the terms that will govern their transaction
- All important terms should be conspicuous and easy to view
- Displaying the Offer
- Should include a hypertext link to a page containing the full contract
- buyers are made aware of the terms to which they are assenting
- Should be displayed in a readable format
- All provisions should be reasonably clear
- Provisions to Include
- The offeror controls the offer and the resulting contract
- Should include a hypertext link to a page containing the full contract
- Acceptance of Terms
- A clause that clearly indicates what constitutes the buyer’s agreement to the terms of the offer
- Payment
- A provision specifying how payment for the goods (including taxes) must be made
- Return policy
- A statement of the seller’s refund and return policies
- Disclaimer
- Disclaimers of liability for certain uses of the goods
- 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
- Privacy Policy
- A statement indicating how the seller will use the information gathered about the buyer
- Dispute Resolution
- Provisions relating to dispute settlement such as an arbitration clause or a forum-selection clause
- Dispute-Settlement Provisions
- Forum selection clause - indicating the forum or location (such as a court or jurisdiction) in which contract disputes will be resolved
- Choice-of-law clause
- Parties specify that any disputer arising out of the contract will be settled in accordance with the law of a particular jurisdiction
Online Acceptances:
- The restatement (second) of contracts
- Compilation of common law contract principles
- States that parties may agree to a contract by written or spoken word or by other action or by failure to act
- UCC has a similar provision
- Any contract for the sales 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
- Click on Agreements
- Used the restatement and UCC provisions to conclude that a binding contract can be created by conduct, including the act of clicking on the box indicating
- Click-on agreement
- (click-on licence pr click-wrap agreement)
- Clicking on a box indicating “I accept” or “I agree” to accept online offer
- Law does not require the parties to read all the terms in a contract for it to be effective
- Shrink-Wrap Agreements
- Shrink-wrap license
- The terms are expressed inside the box in which the goods are packaged
- Usually are not between retailer and a buyer
- Between the manufacturer of hardware or software and the ultimate buyer-user of the product
- Generally concern warranties, remedies, and other issues
- Shrink-Wrap Agreements and Enforceable Contract Terms
- Courts have enforced shrink-wrap agreements like other contracts
- Reasoned that by including the terms with the product, the seller proposed a contract
- The buyer accept this contract by using the product after having an opportunity to read the terms
- Buyer’s failure to object the term of service in the package is acceptance of the terms by conduct
- Shrink-Wrap terms that may not be Enforced
- Courts have chosen to not enforce because the buyer did not expressly consent to them
- One factor they consider is that whether or not the seller communicated the terms before or after to the buyer
- If the buyer ordered a product over the TV
- May not be informed of an arbitration clause or a forum-selection clause at that time
- If the buyer clearly has not expressly agreed to these terms
- If the buyer discovers the clauses after the parties entered into their contract, a court may conclude that those terms were proposals for additional terms
- Browse-Wrap Terms
- Can occur in transaction conducted over the internet
- Do not require internet users to assent to the terms before downloading or using a certain software
- User may agree to use the software and and agree to the terms after downloading
- Can occur in transaction conducted over the internet
- Courts have chosen to not enforce because the buyer did not expressly consent to them
- Any contract for the sales of goods may be made in any manner sufficient to show agreement
E-Signature Technologies:
- Define 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”
- Encrypted digital signatures, names (intended as signature) at the end of emails and clicks on a web page.
- Technologies for creating e-signatures fall into two categories
- Digitized handwritten signatures
- Is a graphical image of a handwritten signature
- Strokes of a person’s signatures can be measured by software to authenticate the identity of the person
- Signature dynamics
- Public key infrastructure-based digital signatures
- Such as an asymmetric cryptosystem
- Two mathematically linked but different keys are generated- private signing key and a public validation key
- cybernotary - or legally recognized certification authority, issues the key pair, identifies the owner of the keys and certifies validity of the public key
- Serve as a repository for the public keys
- Digitized handwritten signatures
State Laws Governing E-Signatures:
- States laws are not uniform
- California prohibits many types of documents from being signed with e-signatures
- Some states only recognize only digital signature as valid
- Others permit additional types of signatures
- To make some uniformity, National conference of Commissioners on Uniform State Laws and the American Law Institute
- Created the Uniform Electronic Transaction Act
- Adopted by 48 states
- Declares that a signature may not be denied legal effect or enforceability solely because it is in electronic form
- Created the Uniform Electronic Transaction Act
Federal Law on E-Signatures and E-Documents:
- 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act (E-SIGN Act)
- No contract, record, or signature may be “denied legal effect” solely because it is in electronic form
- E-signature is as valid and enforceable as a paper one
- Does not apply to all documents
- Court papers, divorce papers, evictions, foreclosures, health-insurance terminations, prenuptial agreements, and wills
- Fact and Accurate Credit Transaction (FACT) passed to combat identity theft
- One provision talks about how credit card receipts should be handled
Partnering Agreements:
- 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
- Reduces the likelihood that disputes will arise under the contract
- Buyer and seller have agreed in advance
- Court will refer to the partnering agreement when determining parties’ intent
- Reduces the likelihood that disputes will arise under the contract
Section 3: The Uniform Electronic Transactions Act
- Primary purpose is to remove barriers to e-commerce by giving the same legal effect to electronic records and signatures as paper ones
- Record - information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form
The Scope and Applicability of the UETA:
- Does not create new rules for electronic contracts but rather establishes that records, signatures, and contracts may not be denied enforceability because they are electronic
- It covers only electronic records and e-signatures
- Relating to a transaction
- Transaction
- Is an interaction between two or more people relating to business, commercial, or governmental activities
- Does not apply to a transaction unless each of the parties has previously agreed to conduct transactions
- Agreement does not need to be explicit
- It can be implied by the conduct of the parties and circumstances
The Federal E-Sign and the UETA:
- Refers explicitly to the UETA and provides that if a state has enacted the uniform version of the UETA
- If the state adopted UETA without mod then the state law governs
- Allows states to enact alternative requirements for use of electronic records or electronic signatures
- State must give greater legal status or effect to one specific type of technology
Attributing Electronic Signatures:
- E-sign and record and signature may be attributed to that person
- Signature at the end of the email may be taken back to the person who sent it
The Effect of Errors:
- UETA encourages the use of security procedures
- Such as encryption to verify changes to electronic documents
- To correct errors
- If two parties agree to to security measures and one does not follow, the other one can legally avoid effect of change or error
- Some state laws state that the law governing mistakes will determine the effect
- parties must promptly notify the other party of the error and their intent to be bound by the error
Timing:
- Section 15 of UETA
- Electronic record is considered “sent” when it is properly directed to the intended recipient
- In a readable format for the recipient’s computer system
- It leaves the control of the send and is under the care of the receiver, it is sent
- The record is considered received
- It enters the recipient's processing system in a readable form
- Even if no individual is aware of its receipt
- Unless agreed, the e-record is to be sent from or received at the party’s principal place of business
- If they have none, it can be send to their residence
- If they have multiple, then it should be sent to the one that has the closest relationship to the underlying transaction
- If they have none, it can be send to their residence
- It enters the recipient's processing system in a readable form
- Electronic record is considered “sent” when it is properly directed to the intended recipient
Section 4: International Treaties Affecting E-Contracts
International Treaties:
- National Convention on the Use of Electronic Communications in International Contracts
- 2005
- Goal to improve commercial certainty by determining an internet user’s location for legal purposes
- Established standards for creating functional equivalence between electronic communications and paper documents
- Esignatures = paper signatures