Comprehensive Volume, 18 th Edition Chapter 12: Nature and Classes of Contracts: Contracting on the Internet

Definition of Contract A contract is a binding agreement between two or more parties. A contract arises when an offer is accepted with contractual intent (the intent to make a binding agreement) and the acceptance is communicated properly. Offer Acceptance CONTRACT

Contract Example 1 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, $ being paid upon execution of this contract and the balance of $4, 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 July 1, 2001 Date } 2 } } 1. Name and Address of both parties 2. Promise of the seller3. Promise of the buyer4. Signatures of both parties5. Date

Parties to a Contract Parties may be: individuals, partnerships, corporations, governments ShipperCarrier Parties to a Transportation Contract InsurerInsured Parties to an Insurance Policy Landlord (Lessor) Tenant (Lessee) Parties Agreeing Upon Occupation of a Building for Money (a Lease) VendorVendee Parties to a Sales Contract Promisor (Obligor) Promisee (Obligee) General: Examples:

Classes of Contracts FORMAL contract under seal, contracts of record, negotiable instruments INFORMAL all other contracts OR EXPRESS spoken or written words IMPLIED created by law based on acts or conduct of parties OR

Classes of Contracts OR VALID binding and enforceable VOID without legal effect VOIDABLE circumstances surrounding execution or lack of capacity allows rejection at option of one party

Classes of Contracts OR EXECUTED completely performed EXECUTORY something remains to be done OR BILATERAL one promise given in exchange for another UNILATERAL one party promises to perform after the other party does some designated act

Other Types of Contracts OPTION CONTRACT: gives one party the right to enter into a second contract at a later time. RIGHT OF FIRST REFUSAL: obligates the offeror to make the offer to the person holding this right first.

Quasi Contracts In certain situations, the law regards it as unjust for a person to receive a benefit and not pay for it. In such a case, the law of quasi contracts allows the performing person to recover the reasonable value of the benefit conferred on the benefited person even though no contract between them requires any payment.

Contractual Liability Communication Intent Acceptance Communication Offer Intent Contract ExpressFormalExecutoryBilateral ImpliedInformalExecutedUnilateral Option First Refusal Unjust Enrichment No Contract Avoided Contract Void Agreement Quasi Contract