David P. Twomey - Boston College
Marianne M. Jennings - Arizona State University
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© 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
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for
certain
product or service or otherwise on a password-protected website for classroom use.
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, 21st Ed.
© 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.
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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, 21st Ed.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
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A. Nature of Contracts
1. Definition of Contract : Legally binding
agreement which creates legal duties and rights
between the parties to the contract.
2. Elements of a Contract: (i) agreement, (ii)
between competent parties, (iii) based on
genuine assent, (iv) supported by consideration,
(v) for lawful purpose, (vi) in legal form.
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
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A. Nature of Contracts
3. Subject Matter of a Contract: May include
goods, services, or property.
4. Parties to a Contract. 
– Promisor (Offeror) = makes the initial
promise (offer) to the Promisee (Offeree). If
the offer is accepted, a contract is formed.
Privity of contract. [LO.1]
– Contract imposes duties on the obligor
(promisor) to the benefit of the obligee
(promisee).
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
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4. Parties to a Contract
General:
Promisor
(Obligor)
Promisee
(Obligee)
Parties may be:
individuals, partnerships,
corporations, governments
Examples:
Insurer
Parties to an Insurance Policy
Landlord
(Lessor)
Carrier
Insured
Shipper
Parties to a Transportation Contract
Tenant
(Lessee)
Parties Agreeing Upon Occupation
of a Building for Money (a Lease)
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
Vendor
Vendee
Parties to a Sales Contract
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A. Nature of Contracts
5. How a Contract Arises.
–
Offeror and Offeree (could be more than
two parties). [LO.2]
6. Intent to Make a Binding Agreement.
–
Intent is determined by objective
reasonable standards, not subjective
impression.
7. Freedom of Contract.
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
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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, 21st Ed.
© 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.
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B. Classes of Contracts
8. Formal and Informal Contracts.
FORMAL
contract under seal,
contracts of record,
negotiable
instruments
INFORMAL
OR
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
all other contracts
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B. Classes of Contracts
9. Express and Implied Contracts.
A. EXPRESS
spoken or written
words
B. IMPLIED
OR
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
created by law
based on acts or
conduct of parties
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B. Classes of Contracts
10. Valid, Voidable, and Void Agreements.
A. VALID
B. VOIDABLE
C. VOID
binding and
enforceable
circumstances
allows
cancellation at
option of one
party
without legal
effect
OR
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
OR
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B. Classes of Contracts
11. Executed and Executory Contracts.
A. EXECUTED
completely performed
B. EXECUTORY
OR
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
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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
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B. Classes of Contracts
12.Bilateral and Unilateral Contracts. [LO.3]
A. BILATERAL
B. UNILATERAL
one promise
given in exchange
for another
one party promises to
perform after the other
party does some
designated act
OR
Aon Risk Services case: memo was a unilateral offer that was
accepted by Meadows; the bonus was due and payable.
(C)Option and Refusal Contracts. Option contract gives
one party the right to enter into a contract at a later
date. Right of first refusal only gives the right to
make an offer.
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
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Contract Example
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.
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2
3
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Lookout Alarm System
by S.J. McRory
A.J. Armstrong
A.J. Armstrong
S.J. McRory, President
July 1, 2001
Date
July 1, 2001
Date
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
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B. Classes of Contracts
13. Quasi Contracts. [LO.4]
(A) Prevention of Unjust Enrichment. In certain
situations, the law regards it as unjust for a
person to receive a benefit and not pay for
it –regardless of whether a contract existed.
‒ Claim of unjust enrichment requires: (i)
benefit conferred, (ii) defendant’s
knowledge of benefit, (iii) finding that it is
unjust to retain benefit without payment.
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
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B. Classes of Contracts
13. Quasi Contracts.
(A) Prevention of Unjust Enrichment. (cont’d)
• Quantum Meruit. Sometimes a contract may be
unenforceable but the remedy is restitution
damages for work performed.
PIC Realty Corp case: Southfield was entitled to
reasonable value of benefit conferred on PIC.
Who pays when there is a Mistake of Benefit?
See the Partipilo case: party with true benefit
must pay for benefit.
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
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B. Classes of Contracts
13. Quasi Contracts.
(B) Extent of Recovery. Plaintiff recovers the
reasonable value of the benefit conferred
upon the defendant, or fair value of the
work performed.
– 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, 21st Ed.
© 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.
17
C. Contracting on the Internet
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
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C. Contracting on the Internet
‒
‒
‒
‒
‒
Forming electronic contracts involves the same
principles as “real space” contracts. [LO.5]
Online contracting involves statutes of fraud
issues.
B2B contracts (Business to Business).
B2C contracts (Business to Consumers).
E-Sign and UETA help enforce electronic
signatures.
Twomey-Jennings, Anderson’s Business Law and the Legal Environment, 21st Ed.
© 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.
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