E- Contract- a contract that is entered into in cyberspace and is evidenced
only by electronic impulses (such as those that make up a
computer's memory), rather than, for example, a typewritten
Contract law forms the basis for most commercial activity. This is as
true for business in computer industry, and in cyberspace in particular, as it is
for business in general. E –commerce is a growing part of this commercial
activity, with business –to- business (B2B) transactions estimated to soon
exceed to a trillion dollars annually.
Principles of Contract Law:
1. The law governing the contracts- although aspects of contract law vary
from state to state, much of it is based on the common law. In 1932, the
American law Institute complied the Restatement of the Law of Contracts.
This work is nonstatutory, authoritative exposition of the present law on the
subject of contracts. UCC (Uniform Commercial Code) which governs sales
contract (contracts for the sale of goods), occasionally departs from common
law contract rules.
Sales Contract- a contract for the sale of goods under which the
ownership of goods is transferred from a seller to a buyer for a
2. Contract Formation- According to the Restatement of contracts, a contract
is" a promise or set of promises for the breach of which the law gives
remedy of the performance of which the law in some way recognizes
as a duty". A promise is an assurance that one will or will not do
something in the future. Simply put, a contract is any agreement
( based on a promise or an exchange of promises) that can be
enforced in court.
Contract- An agreement that can be enforced in court; formed by two or
more parties, each of whom agrees to perform or to refrain from
performing some act now or in the future.
Promise- a declaration that something either will or will not happen in
the future.
Agreement- A meeting of two or more minds in regards to the terms of
contract; usually broken down into two events-an offer by one
party to form a contract, and an acceptance of the offer by the
person to whom the offer is made.
Offer – A promise or commitment to perform or refrain from performing
some specified act in the future.
Offeror- A person who makes an offer.
Offeree- A person to whom as offer is made.
THREE Elements are necessary for an offer to be effective:
a) The offeror (the party making the offer) must have a serious
intention to become bound by the offer.
b) The terms of the offer must be reasonably certain, or definite, so
that the parties and the court can ascertain the terms of contract.
(Note that in contracts for a sale of goods, the UCC relaxes the
requirement of definiteness somewhat by stating that a contract
can still arise even if certain terms, such as price and delivery
terms are left"open", or unspecified.)
c) The offer must be communicated by the offeror to the offeree (the
party to whom the offer is made), resulting in the offeree's
knowledge of the offer.
Acceptance- an offer results in a legally binding contract.
Mailbox rule- a rule providing that an acceptance of an offer becomes
effective on dispatch (on being placed in a mailbox), if mail is,
expressly or impliedly, an authorized means of communication
of acceptance the offeror.
Click-on Agreement- This occurs when a buyer, completing a
transaction on a computer, is required to indicate his or her
assent to be bound by the terns of an offer by clicking on a
button that says, for example, "I agree' sometimes referred to as
click-on license or a click-wrap agreement.
Consideration- another requirement for a valid contract is consideration.
Defined as the value (such as money) given in return for a
promise (such as the promise to sell a stamp collection on
receipt of payment). No promise is enforceable without
Consideration is broken down into two parts:
1. Something of legal value must be given in exchange for the promise.
2. There must be a bargained for exchange.
The something of legal value may consist of a return promise that is bargained
for. It may also consists of performance, which may be an act, a forbearance
(refraining from action), or the creation, modification, or destruction of a legal
Promissory Estoppel- A doctrine that applies when a promisor makes a
clear and definite promise on which the promisee justifiably
relies; such a promise is binding if justice will be better
served by the enforcement of the promise.
The following elements required:
1. There must be a clear and definite promise.
2. The promise must justifiably rely on the promise.
3. The reliance normally must be of a substantial and definite character.
4. Justice will be better served by enforcement of the promise.
If these requirements are met, a promise may be enforced even though it
is not supported by consideration. In essence, the promisor will be estopped
(prevented) from asserting the lack of consideration as a defense. For example,
suppose that your uncle tells you, "I II pays you $150 a week so you won’t
have to work anymore. In reliance on your uncle's promise, you quit your job,
but your uncle refuses to pay you. Under the doctrine of promissory estoppel,
you may be able to enforce such a promise?
Legality - a contract to do something that is prohibited by federal or state
statutory law is illegal and such, void from the outset and thus
unenforceable. For example, all states require that members of
certain professions or occupations- including physicians, lawyers,
real estate brokers, architects, electricians , and stockbrokers-obtain
licenses allowing them to practice.
3. Defenses to contract Enforceability
A contract has been entered into by two parties with full legal capacity
and for a legal purpose. The contract is supported by consideration. The
contract thus meets the four requirements for a valid contract. Nonetheless, the
contract may be unenforceable if the parties have not genuinely assented to its
terms or if the contract is not in the proper form- such as in writing, if the law
require it to be in writing.
Genuineness of assent – Knowing and voluntary assent to terms of a contract,
if a contract is formed as a result of a mistake, misrepresentation,
undue influence, or duress, genuineness of assent is lacking, and
the contract will be voidable.
Fraudulent Misrepresentation
When an innocent party is fraudulently induced to enter into a contract,
the contract usually can be avoided because that party has not voluntarily
consented to its terms. Normally, the innocent party can either rescind the
contract and be restored to his or her original position or enforce the contract
and seek damages for any injuries resulting from the fraud.