1. NATURE OF TRADITIONAL AND
CHAPTER 9
NATURE OF TRADITIONAL AND
E-CONTRACTS
© 2010 Pearson Education, Inc., publishing as Prentice-Hall

2. A contract is an agreement that is enforceable by a court of law or equity.

3. Introduction Basis of many daily activities.
Means for individuals and businesses to sell and otherwise transfer property, services, and other rights.
Without enforceable contracts, commerce would collapse.

4. Introduction (continued)
Contracts are voluntarily entered into by parties.
Terms of the contract become private law between the parties.

5. Legally Enforceable Contract
If one party fails to perform as promised, the other party can sue to enforce the contract and recover damages.

6. Parties to a Contract Every contract involves at least two parties.
Offeror – the party who makes an offer to enter into a contract.
Offeree – the party to whom an offer is made.

7. Parties to a Contract Offeror Offeree Offer Acceptance
Offeror makes an
offer to the offeree.
Offeree has the power
to accept the offer
and create a contract.

8. To be enforceable, four basic requirements:
Agreement
Consideration
Elements of a Contract
Contractual Capacity
Lawful Object 3

9. Elements of a Contract (continued)
Agreement
Offer by offeror and acceptance by offeree.
Mutual assent.

10. Elements of a Contract (continued)
Consideration
The promise must be supported by bargained-for consideration that is legally sufficient.
E.g., money, services

11. Elements of a Contract (continued)
Contractual Capacity
Parties must have capacity.
Certain parties, such as minors or persons adjudged to be insane, do not have contractual capacity.

12. Elements of a Contract (continued)
Lawful Object
The object of the contract must be lawful.
E.g., contracts to commit a crime have an illegal object.
Contracts to accomplish illegal objects or contracts that are against public policy are void.

13. Defenses to Enforcement
Genuineness of Assent
Lacking if consent is obtained by:
Duress
Undue influence
Fraud

14. Defenses to Enforcement (continued)
Writing and Form
Law requires that certain contracts be in writing or in a certain form.

15. Evolution of Contract Law
Form contracts
Government regulation
Parties dealing at a distance, unequal bargaining power
Freedom of contract
Little government regulation
Parties dealing face-to-face, equal bargaining power

16. Sources of Contract Law
Common Law
Contract law developed primarily by state courts.
Uniform Commercial Code (UCC)
Comprehensive statutory scheme that includes laws that cover aspects of commercial transactions.

17. Sources of Contract Law (continued)
Restatement of the Law of Contracts
Compilation of model contract law principles drafted by legal scholars.
Not legally binding.
Lawyers and judges often refer to it for guidance in contract disputes.

18. Objective Theory of Contracts
Would reasonable person believe that the parties intended to create a contract?
Words and conduct
Surrounding circumstances
Subjective intent irrelevant.

19. E-Contracts Courts apply traditional contract rules
State and federal statutes also apply
E.g., Uniform Computer Information Transactions Act

20. Classification of Contracts
Bilateral Contract
“A promise for a promise.”
E.g., “I promise to pay you $1,000 if you promise to paint my store.”
Most common.
Unilateral Contract
“A promise for an act.”
E.g., “I promise to pay you $1,000 if you paint my store.”

21. Classification of Contracts (continued)
Formal Contracts
Require a special form or method of creation.
Contracts Under Seal
Recognizances
Negotiable Instruments
Letters of Credit
Informal Contracts
No special form or method is required.
Most contracts
Leases
Sales Contracts
Service Contracts

22. Classification of Contracts (continued)
Valid Contract
Contract that meets all of the essential elements to establish a contract.
Enforceable by at least one of the parties.
Void Contract
Contract that has no legal effect.
Neither party is obligated to perform.
Neither party can enforce the contract.

23. Classification of Contracts (continued)
Voidable Contract
One or both parties can avoid contractual obligations.
If a contract is avoided, both parties are released from their contractual obligations.
Unenforceable Contract
Legal defense to the enforcement of the contract.
Parties may voluntarily perform.

24. Classification of Contracts (continued)
Executed Contract
Fully performed on both sides.
A completed contract.
Executory Contract
Not fully performed by either or both sides.

25. Classification of Contracts (continued)
Express Contract
Expressed in writing or verbally.
Implied-in-fact Contract
Agreement inferred by parties’ conduct.
Implied-in-law contract
No actual contract
Court imposes agreement to avoid unjust enrichment.

26. Equity
Doctrine that permits judges to make decisions based on fairness, equality, moral rights, and natural law.
Sometimes applied in contract cases.