AGREEMENT (1 of 9)

 Agreement: The parties must agree on the terms of the contract

and manifest to each other their mutual assent (agreement) to the
same bargain. Normally, two events must occur with an
agreement: offer and acceptance.

 Requirements of the Offer: The promise or commitment of the

offeror (party making an offer) to perform—or refrain from
performing—some specified act presently or in the future.

 The offeror must have a serious intention to be bound

by the offer.

 The offer’s terms must be reasonably certain, or

definite, so that the parties and the court can ascertain
the terms of the contract.

 The offer must be communicated to the offeree (party

to whom the offer is made).

 Intention: Serious intent is not determined by the

subjective intentions, beliefs, and assumptions of the
offeror but by what a reasonable person in the offeree’s
position would conclude that the offeror’s words and
actions meant.

Chapter 12 pg. 1
 AGREEMENT (2 of 9)
 Situations in Which Intent May Be Lacking:

 Expressions of Opinion. An expression of opinion is

not an offer nor does it indicate an intention to enter
into a binding agreement.

 Statements of Future Intent. A statement of an

intention to do something in the future is not an offer.

 Preliminary Negotiations. A request or invitation to

negotiate is not an offer but an expression of
willingness to discuss the possibility of entering into a
contract.

 Invitations to Bid. The invitation for contractors to

submit bids is not an offer but the bids that contractors
submit are offers.

 Advertisements and Price Lists. In general,

representations made in advertisements and price lists
are treated as invitations to negotiate.

 Live and Online Auctions. Sellers “offer” goods for

sale through an auctioneer or online auction Web site.
This is not an offer to form a contract but an invitation
asking bidders to submit offers (live auction) or to
negotiate (online auctions).

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 AGREEMENT (3 of 9)
 Agreements to agree may be enforceable agreements
(contracts) if it is clear that the parties intended to be
bound by the agreements.

 Preliminary Agreements. Increasingly, the courts are

holding that a preliminary agreement constitutes a
binding contract if the parties have agreed on all
essential terms and no disputed issues remain to be
resolved.

 Definiteness of Terms: Generally, an offer must express

the following terms, or they must be reasonably inferred
from it:

(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 goods, services, and
land.

(3) The consideration to be paid.

(4) The time of payment, delivery, or performance.

 Communication: The offer must be communicated to

the offeree. Ordinarily, one cannot agree to a bargain
without knowing that it exists.

Chapter 12 pg. 1
 AGREEMENT (4 of 9)

 Termination of the Offer: An offer can be terminated either by

action of the parties or by operation of law.

 Termination by Action of the Parties: An offer can be

terminated by action of the parties by revocation, by
rejection, or by counteroffer.

 Revocation: The offeror’s act of revoking, or

withdrawing, an offer. Unless an offer is irrevocable,
the offeror usually can revoke the offer, as long as the
revocation is communicated to the offeree before
his/her acceptance. Revocation may be accomplished
by

(1) Express repudiation of the offer.

(2) Performance of acts that are inconsistent with the

existence of the offer and are made known to the
offeree.

 In most states, a revocation becomes effective when

the offeree or the offeree’s agent (a person acting on
behalf of the offeree) actually receives it.

Chapter 12 pg. 1
 AGREEMENT (5 of 9)
 An irrevocable offer cannot be revoked.

 Option contract: A contract in which an offeror

promises to hold an offer open for a specified
period of time in return for a payment
(consideration) given by the offeree. An option
contract takes away the offeror’s power to revoke
the offer for the period of time specified in the
option.

 Rejection: If offeree rejects the offer by words or

conduct, the offer is terminated when the offeror
receives notice of the rejection. Inquiry from the
offeree about the “firmness” of an offer does not
constitute rejection.

 Counteroffer: A rejection of the original offer and the

simultaneous making of a new offer.

 “Mirror Image” Rule: An offeree’s acceptance

must match the offeror’s offer exactly. Any
change in—or in addition to—the terms of the
original offer automatically terminates that offer
and substitutes the counteroffer.

Chapter 12 pg. 1
 AGREEMENT (6 of 9)

 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: An offer terminates automatically

when the time period specified in the offer expires.

 If no time period is stated in the terms of the

offer, then the offer will terminate after a
reasonable period of time has expired.

 Destruction of Subject Matter: An offer terminates

automatically if the subject matter of the contract (i.e.,
goods, property) is destroyed prior to acceptance.

 Death or Incompetence: An offeree’s power to

accept is terminated when the offeree or the offeror
dies or becomes legally incapacitated unless the offer
is irrevocable. In that case, only the offeree’s death or
incompetence will terminate the offer.

 Supervening Illegality: A statute or court action that

makes a previously valid offer illegal will
automatically terminate the offer.

Chapter 12 pg. 1
 AGREEMENT (7 of 9)

 Acceptance: A voluntary statement or act from the offeree

that indicates his/her assent (agreement) to the terms of the
offer.

 Unequivocal Acceptance: An acceptance must be

unequivocal and cannot impose new conditions on—
or change the terms of—the original offer.

 Generally, only the person to whom the offer is made

—or that person’s agent—can accept the offer and
create a binding contract.

 Silence as Acceptance: Generally, silence (or

inaction) cannot constitute acceptance—even when
the offeror indicates that silence or inaction will be
taken as acceptance. There are exceptions:

 Prior Dealings: If the offeror and offeree have

prior dealings, pursuant to certain standard terms
and conditions, the offeree has the duty to reject
or risk being bound by his silence.

 Acts Consistent with Acceptance: If the offeree

has an opportunity to reject offered goods or
services but does not, it is implied that he has
accepted the goods or services and agreed to
compensate the offeror according to the terms of
the offer.

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 AGREEMENT (8 of 9)

 Communication of Acceptance: Whether the offeror

must be notified of the acceptance depends on the
nature of the contract.

 Unilateral Contract: Because a unilateral

contract requires acceptance by some action on
the part of the offeree, acceptance is usually
evidenced by the action; therefore, notification is
unnecessary—unless the offeror has specifically
requested notification or has no means to
determine whether the requested act has been
performed.

 Mode and Timeliness of Acceptance: In bilateral

contracts, acceptance must be timely (made before the
offer is terminated).

Chapter 12 pg. 1
 AGREEMENT (9 of 9)

 The “Mailbox Rule” (or deposited acceptance

rule): Unlike a rejection or counteroffer, which
takes effect when the offeror receives it, an
acceptance generally takes effect when the
offeree properly dispatches it to the offeror.

 by any means the offer expressly authorizes;

or by any means that is as fast as or faster
than the slowest method the offer expressly
authorizes or by U.S. Mail, unless the
offer’s terms expressly prohibit the offeree
from accepting using a particular means.

 Authorized Means of Acceptance:

 When an offeror specifies how acceptance

should be made, express authorization
exists. The contract is not formed unless the
offeree uses that specified mode of
acceptance.

 If the offeror does not expressly authorize a

certain mode of acceptance, then acceptance
can be made by any reasonable means. If
the offeree accepts the offer by a different
means (a substitute means of acceptance)
than the authorized means, the acceptance
may still be effective if the substituted

Chapter 12 pg. 1
 method serves the same purpose as the
authorized means.

Chapter 12 pg. 1
 AGREEMENT IN E-CONTRACTS (1 of 6)

 A contract formed electronically (e-contract) must meet the

same requirements (except as to form) as a traditional contract.

 Online Offers:

 Displaying the Offer: The seller’s Web site should include

a hypertext link to the full contract so that potential buyers
are made aware of the terms to which they are assenting.

 Provisions to Include: The offeror (the seller) controls the

offer and should anticipate the terms he or she wants to
include in a contract and provide for them in the offer. An
online offer should include the following provisions:

(1) Acceptance of Terms. A clause that clearly indicates

what constitutes the buyer’s agreement to the terms of
the offer.

(2) Payment. A provision specifying how payment for the

goods (including any applicable taxes) must be made.

(3) Return Policy. A statement of the seller’s refund and

return policies.

(4) Disclaimer. Disclaimers of liability for certain uses of

the goods.

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 AGREEMENT IN E-CONTRACTS (2 of 6)

(5) 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.
Any limitation of remedies should be clearly spelled
out.

(6) Privacy Policy. A statement indicating how the seller

will use the information gathered about the buyer.

(7) Dispute Resolution. Provisions relating to dispute

settlement, which we examine more closely in the
following section.

 Forum-Selection and Choice-of-Law Clauses:

Designate the jurisdiction (court or country) where
any dispute arising under the contract will be litigated
and which jurisdiction’s law will be applied.

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 AGREEMENT IN E-CONTRACTS (3 of 6)

 Online Acceptances: The courts have used provisions from the

Restatement (Second) of Contracts and the Uniform Commercial
Code (UCC) to determine what constitutes an online acceptance.

 Click-On Agreement (or License): An agreement that

arises when a buyer/lessee/licensee completing a
transaction online indicates her assent to be bound by the
terms of an offer by clicking on a button or checking a box
that says, e.g., “I accept” or “I agree.” The terms of the
agreement may appear on the screen or on a related Web
page or site.

 Shrink-Wrap Agreement: An agreement whose terms are

expressed inside the box containing the goods. Usually, the
party who opens the box is told that she/he agrees to the
terms by keeping whatever is in the box or by abiding by
the terms of a license agreement.

 Typically, shrink-wrap agreements indicate that the

offeree must return the goods if she does not consent
to be bound by the contract/license terms inside the
box.

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 AGREEMENT IN E-CONTRACTS (4 of 6)
 Shrink-Wrap Agreements and Enforceable
Contract Terms: In some cases, the courts have
enforced the terms of shrink-wrap agreements by
reasoning that the seller proposed a contract by
including the terms with the product. The buyer
could accept this contract by using the product
after having an opportunity to read the terms.

 Shrink-Wrap Terms That May Not Be

Enforced: Some courts have refused to enforce
certain terms included in shrink-wrap agreements
because the buyer did not expressly consent to
them. An important factor is when the parties
formed their contract. If the buyer discovers the
terms after the parties have entered into a
contract, a court may conclude that these were
proposals for additional terms and were not part
of the contract.

 Browse-Wrap Agreement: Terms and conditions of

use presented to an Internet user at the time she is
using or downloading a product that do not require an
active assent before product use.

 Browse-wrap terms are often unenforceable

because they do not satisfy the agreement
requirement of contract formation.

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 AGREEMENT IN E-CONTRACTS (5 of 6)

 Federal Law on E-Signatures and E-Documents:

 In many instances, a contract is unenforceable unless there

is some writing, signed by the party against whom
enforcement is sought, evidencing the contract.

 Electronic Signatures in Global and

National Commerce Act (E-SIGN): Federal statute
recognizing the validity of electronic contracts,
records, and signatures.

 E-Signature Technologies: An electronic sound, symbol,

or process attached to or logically associated with an
electronic record and executed or adopted by a person with
the intent to sign the electronic record.

 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.

 Exclusions: Some documents are exempt from the E-SIGN

Act including court papers, divorce decrees, evictions,
foreclosures, health insurance terminations, prenuptial
agreements, and wills.

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 AGREEMENT IN E-CONTRACTS (6 of 6)

 Partnering Agreement: An agreement between a seller and a

buyer who frequently do business with each other on the terms
and conditions that will apply to all subsequently formed
electronic contracts.

 The partnering agreement can also establish special access

and identification codes to reduce the risk of fraud or other
unauthorized activity.

Chapter 12 pg. 1
 THE UNIFORM ELECTRONIC
TRANSACTIONS ACT (1 of 3)

 Uniform Electronic Transactions Act (UETA): A model state

law—enacted by forty-eight states and D.C.—that recognizes
the validity of electronic contracts, records, signatures, and
notarization.

 Scope and Applicability:

 The UETA only applies to electronic records and

electronic signatures relating to a transaction.

 The act specifically does not apply to wills or

testamentary trusts, or to transactions governed by the
UCC (other than those covered by Articles 2 and 2A).

 The Federal E-SIGN Act and the UETA: The E-SIGN

Act explicitly provides that if a state has enacted the UETA
without modification, state law will govern.

 The E-SIGN Act explicitly allows the states to enact

alternative requirements for the use of electronic
records or electronic signatures. The requirements
must generally 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.

Chapter 12 pg. 1
 THE UNIFORM ELECTRONIC
TRANSACTIONS ACT (2 of 3)

 Highlights of the UETA:

 The UETA only applies if all parties to a transaction

have explicitly or impliedly agreed to conduct the
transaction using electronic means.

 Attribution of Signatures Under the UETA: If an

electronic record or signature is the act of a particular
person, the record or signature may be attributed to
that person.

 The Effect of Errors: The UETA does not require the

use of security procedures to verify changes to
electronic documents and to correct errors.

 If the parties agree to use a security method and

one party does not follow the procedure—and
fails to detect an error—the party that followed
the procedure can legally avoid the effect of the
error.

 Timing: An electronic record is considered sent when

it is properly directed to the intended recipient in a
form that is readable by the recipient’s computer. 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.

Chapter 12 pg. 1
 THE UNIFORM ELECTRONIC
TRANSACTIONS ACT (3 of 3)

 International Treaties Affecting E-Contracts:

 Though U.S. law has been preeminent in global

e-commerce, several international organizations have
now created their own regulations for global Internet
transactions.

 The United Nations Convention on the Use of

Electronic Communications in International Contracts
improves commercial certainty by determining an
Internet user’s location for legal purposes; establishing
standards for creating functional equivalence between
electronic communications and paper documents; and
providing that e-signatures will be treated as the
equivalent of signatures on paper documents.

 The Hague Convention on the Choice of Court

Agreements does not specifically mention e-
commerce but it does provide more certainty
regarding jurisdiction and recognition of judgments by
other nations’ courts—facilitating both offline and
online transactions.

Chapter 12 pg. 1