David P. Twomey - Boston College Marianne M. Jennings - Arizona State University © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. David P. Twomey - Boston College Marianne M. Jennings - Arizona State University © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Chapter 12 Nature and Classes of Contracts: Contracting on the Internet Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

A. Nature Of Contracts 1. Definition of a Contract 2. Elements of a Contract 3. Subject Matter of Contracts 4. Parties to a Contract 5. How a Contract Arises 6. Intent to Make a Binding Agreement 7. Freedom of Contract Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

A. Nature of Contracts [LO.1-LO.2] Definition of a Contract: Legally binding agreement that creates an obligation. Elements of a Contract: (1) Agreement (2) between competent parties, (3) based on genuine assent, (4) supported by consideration, (5) made for a lawful objective, (6) in the form required by law. 3. Subject Matter of Contracts: May relate to personal service performance or the transfer of property ownership. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

A. Nature of Contracts Parties to a Contract: Promisor is the person who makes a promise. If binding, called the obligor. Promisee is the person to whom the promise is made, the obligee. Parties to a contract stand in privity with each other in a privity of contract relationship. Parties may be referred to by name or given special names to better identify them. A party to a contract may be an individual, partnership, limited liability company, corporation or government. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Parties to a Transportation Contract 4. Parties to a Contract Parties may be: individuals, partnerships, corporations, governments Promisor (Obligor) Promisee (Obligee) General: Examples: Insurer Insured Parties to an Insurance Policy Shipper Carrier Parties to a Transportation Contract Landlord (Lessor) Tenant (Lessee) Parties Agreeing Upon Occupation of a Building for Money (a Lease) Vendor Vendee Parties to a Sales Contract Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

A. Nature of Contracts How a Contract Arises: Agreement arises when the offeror makes an offer and the offeree accepts. Intent to Make a Binding Agreement: Not all agreements produce contracts. There there must be an intent to make the agreement binding. Freedom of Contract: Parties may make contracts as they choose. No requirement that they are fair, kind, reasonable or equitable. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

B. Classes Of Contracts 8. Formal and Informal Contracts 9. Express and Implied Contracts 10. Valid and Voidable Contracts and Void Agreements 11. Executed and Executory Contracts 12. Bilateral and Unilateral Contracts 13. Quasi Contracts Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

B. Classes Of Contracts [LO.3-LO.4] 8. Formal and Informal Contracts: A. FORMAL CONTRACTS Contract under seal, Contracts of record, (recognizance) and Negotiable instruments B. INFORMAL or SIMPLE CONTRACTS All other contracts OR Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

B. Classes of Contracts 9. Express and Implied Contracts: OR A. EXPRESS CONTRACTS Spoken or written words B. IMPLIED CONTRACTS Created based on acts or conduct of parties OR Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

B. Classes of Contracts 10. Valid, Voidable, and Void Agreements: OR A. VALID Binding and enforceable B. VOIDABLE Circumstances surrounding execution or lack of capacity allow rejection by one of the parties C. VOID Without legal effect OR OR Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Something remains to be done by one or both parties B. Classes of Contracts 11. Executed and Executory Contracts: A. EXECUTED Completely performed B. EXECUTORY Something remains to be done by one or both parties OR Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

perform after the other party does an act B. Classes of Contracts Bilateral and Unilateral Contracts: A. BILATERAL One promise given in exchange for another B. UNILATERAL One party promises to perform after the other party does an act OR Aon Risk Services, Inc. v. Meadors: Memo was sufficiently definite to constitute an offer (a unilateral contract) and Meadors was entitled to the bonus. Option and Refusal Contracts: Option contract gives one party the right to enter into a contract at a later date. Right of first refusal imposes the duty to make the first offer to the party having that right. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

} Contract Example 1 2 3 4 A.J. Armstrong A.J. Armstrong 5 Parties This contract is executed between the Lookout Alarm system, herein called System, of 276 West Jackson Street, Phoenix, Arizona, and A.J. Armstrong, herein called Homeowner, of 737 Inwood Drive, Phoenix, Arizona Installation System agrees to install a burglar alarm system at the above address of the homeowner, in accordance with the specifications that are attached hereto. Payment Homeowner agrees to pay System for the above installation the sum of $4,863.00, $663.00 being paid upon execution of this contract and the balance of $4,200.00 being paid within 90 days following satisfactory completion of the work by System. Lookout Alarm System by S.J. McRory S.J. McRory, President July 1, 2001 Date A.J. Armstrong A.J. Armstrong July 1, 2013 Date } 2 3 4 5 Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

B. Classes of Contracts Quasi Contracts: Prevention of Unjust Enrichment. Court may impose an obligation to pay for the reasonable value of benefits received even when no contract existed. Claim of unjust enrichment requires: (1) benefit conferred on defendant, (2) defendant’s knowledge of benefit, (3) finding that it would be unjust to retain the benefit without payment. An action in quantum meruit is for the value of services when no purchase price was set. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

B. Classes of Contracts Quasi Contracts: (A) Prevention of Unjust Enrichment (cont’d.): PIC Realty Corp. v. Southfield Farms: Southfield was entitled to reasonable value of benefit conferred on PIC to prevent unjust enrichment. Preclusion by an Express Contract: Sununu v. Philippine Airlines, Inc.: Sununu and Frank conferred a benefit on PAL but there can be no claim for unjust enrichment when an express contract exists between two parties. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

B. Classes of Contracts Quasi Contracts: Extent of Recovery. When allowed, plaintiff recovers the reasonable value of the benefit conferred upon the defendant, or fair value of the work performed depending on circumstances. In construction cases, damages are usually actual job costs, plus allowance for overhead and profit, minus amounts paid. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

C. Contracting on the Internet Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

C. Contracting on the Internet [LO.5] Doing business online is very similar to catalog or phone purchases. Intellectual property principles, contractual principles, law of sales, and privacy laws all apply to e-commerce transactions. Generally Web site terms become the contract and are legally enforceable. “Brick-and-mortar” laws regarding false advertising apply to Internet sites. Internet contracts involve the same issues addressed in offline contracts with some technology related nuances. E-Sign and UETA mandate parity between paper and electronic contracts. Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed. © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.