PowerPoint Slides to Accompany
BUSINESS LAW
E-Commerce and Digital Law
International Law and Ethics
5th Edition
by Henry R. Cheeseman
Chapter 9
Nature of Traditional and
E-Commerce Contracts
Slides developed by
Les Wiletzky
Wiletzky and Associates, Puyallup, WA
Copyright © 2004 by Prentice-Hall. All rights reserved.
A contract is an
agreement that is
enforceable by a
court of law or
equity.
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9-2
Introduction
Contracts are the basis of many daily
activities.
 They provide the means for individuals and
businesses to sell and otherwise transfer
property, services, and other rights.
 Without enforceable contracts, commerce
would collapse.

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9-3
Introduction (continued)

Contracts are voluntarily entered into by
parties.

The terms of the contract become private law
between the parties.
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9-4
Legally Enforceable Contract

If one party fails to perform as promised, the
other party can use the court system to
enforce the contract and recover damages or
other property.
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9-5
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 to enter
into a contract is made.

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9-6
Parties to a Contract
Offer
Offeror
Offeree
Acceptance
Offeror makes an
offer to the offeree
Offeree has the power
to accept the offer
and create a contract
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9-7
To be an enforceable contract, four basic
requirements must be met:
Agreement
Lawful Object
Consideration
Elements
of a
Contract
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Contractual
Capacity
9-8
Elements of a Contract (continued)

Agreement
There must be agreement between the
parties.
 This requires an offer by the offeror and an
acceptance of the offer by the offeree.
 There must be mutual assent by the parties.

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9-9
Elements of a Contract (continued)

Consideration
The promise must be supported by a
bargained-for consideration that is legally
sufficient.
 Gift promises and moral obligations are not
considered supported by valid consideration.

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9 - 10
Elements of a Contract (continued)

Contractual Capacity
The parties to a contract must have
contractual capacity.
 Certain parties, such as persons adjudged to
be insane, do not have contractual capacity.

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9 - 11
Elements of a Contract (continued)

Lawful Object
The object of the contract must be lawful.
 Contracts to accomplish illegal objects or
contracts that are against public policy are
void.

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9 - 12
Defenses to the Enforcement of a
Contract

Genuineness of Assent
The consent of the parties to create a
contract must be genuine.
 There is no real consent if the consent is
obtained by:
 Duress
 Undue influence
 Fraud

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9 - 13
Defenses to the Enforcement of a
Contract (continued)

Writing and Form
The law requires that certain contracts be in
writing or in a certain form.
 Failure of these contracts to be in writing or
be in proper form may be raised against the
enforcement of the contract.

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9 - 14
Sources of Contract Law

The Common Law of Contracts


Contract law developed primarily by state
courts.
The Uniform Commercial Code (UCC)

Comprehensive statutory scheme that
includes laws that cover aspects of
commercial transactions.
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9 - 15
Sources of Contract Law (continued)

The Restatement of the Law of Contracts
Compilation of model contract law principles
drafted by legal scholars.
 The Restatement is not law.
 However, lawyers and judges often refer to it
for guidance in contract disputes.
 Currently in its second edition.

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9 - 16
Classifications of Contracts
Bilateral Contract
 A contract entered into
by way of exchange of
promises of the parties.
 “A promise for a
promise.”
Unilateral Contract
 A contract in which the
offeror’s offer can be
accepted only by the
performance of an act
by the offeree.
 “A promise for an act.”
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9 - 17
Classifications of Contracts (continued)
Express Contract
 An agreement that is
expressed in written or
oral words.
Implied-in-fact Contract
 A contract where
agreement between
parties has been
inferred from their
conduct.
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9 - 18
Classifications of Contracts (continued)
Objective Theory of Contracts
 The intent to enter into an express or
implied-in-fact contract is judged by the
reasonable person standard.
 The subjective intent of a party to enter into a
contract is irrelevant.
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9 - 19
Classifications of Contracts (continued)
Quasi-Contracts (Implied-in-Law Contracts)
 Allows a court to award monetary damages
to a plaintiff for providing work or services to
a defendant even though no actual contract
existed between the parties.
 Intended to prevent unjust enrichment and
unjust detriment.
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9 - 20
Classifications of Contracts (continued)
Formal Contracts
 Contracts that 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 for
their creation.
 Fully enforceable and
may be sued upon if
breached.



Leases
Sales Contracts
Service Contracts
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9 - 21
Classifications 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
 A contract that has no
legal effect.
 Neither party is
obligated to perform.
 Neither party can
enforce the contract.
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9 - 22
Classifications of Contracts (continued)
Voidable Contract
 Contract where one or
both parties have the
option to avoid their
contractual obligations.
 If a contract is avoided,
both parties are
released from their
contractual obligations.
Unenforceable Contract
 A contract where the
essential elements to
create a valid contract
are not met.
 However, there is some
legal defense to the
enforcement of the
contract.
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9 - 23
Classifications of Contracts (continued)
Executed Contract
 A contract that has
been fully performed
on both sides.
 A completed contract.
Executory Contract
 A contract that has not
been fully performed by
either or both sides.
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9 - 24
Equity
A doctrine that permits judges to
make decisions based on fairness,
equality, moral rights, and natural
law.
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9 - 25