Chapter 1: Legal Ethics
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Learning Objectives
1. What elements are necessary for an
effective offer? What are some
examples of nonoffers?
2. In what circumstances will an offer
be irrevocable?
3. What are the elements that are
necessary for an effective
acceptance?
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Learning Objectives
4. What is consideration? What is
required for consideration to be
legally sufficient?
5. In what circumstances might a
promise be enforced despite a lack
of consideration?
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Agreement
 An essential element for contract
formation is agreement.
 The parties must mutually assent to
the same bargain.
 An agreement has two components: an
offer and an acceptance.
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Agreement
 Requirements of the Offer.
–An offer is a promise to do or not do
something in the future.
–The common law requires three
elements for an effective offer:
• Offeror’s serious intention. 
• Reasonably certain terms. 
• Communication to offeree. 
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Agreement
 Requirements of the Offer.
–Offeror’s serious, objective intention.
• A contract is judged by what a reasonable
person in the offeree’s position would
conclude about the offer.
• CASE 8.1 LUCY V. ZEHMER (1954). Do
you think the Zehmers had a serious
intention?
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Agreement
 Requirements of the Offer.
–Offeror’s serious, objective intention.
• Expressions of Opinion: not offers.
• Statements of Future Intent: not offers.
• Preliminary Negotiations, or Invitations to
Negotiate: not offers.
• Advertisements: not offers (invitations to
negotiate). 
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Agreement
 Requirements of the Offer.
–Offeror’s serious, objective intention.
• Auctions: when the auctioneer accepts a
higher bid, she rejects all previous offers.
• Auctions with and Without Reserve.
• Agreements to Agree: can be
enforceable if parties intended to be
bound.
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Agreement
 Requirements of the Offer.
–Definiteness of Terms.
• Identification of the parties.
• Object or subject matter of the contract.
• Consideration to be paid.
• Payment, delivery, or performance.
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Agreement
 Requirements of the Offer.
–Definiteness of Terms.
• An offer can require specific terms so that
a court can determine whether a breach
has occurred:
– Identification of the parties.
– Identification of the subject matter or object.
– Consideration to be paid.
– Time of payment, delivery, or performance.
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Agreement
 Requirements of the Offer.
–Communication to Offeree.
• Directly by the Offeror, or
• Use of Agents.
• CASE 8.2 ALEXANDER V. LAFAYETTE CRIME
STOPPERS, INC. (2010). Why did the
appeals court grant summary judgment to
the defendants?
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Agreement
 Termination of the Offer.
–An offer may be terminated prior to
acceptance by either:
• Action of the Parties 
or by
• Operation of Law. 
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Agreement
 Termination by Action of the Parties.
–Revocation of the Offer by the Offeror:
• Offer can be withdrawn anytime before
Offeree accepts the offer.
• Effective when the offeree or offeree’s
agent receives it. 
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Agreement
 Termination by Action of the Parties.
–Irrevocable Offers: courts are unwilling
to allow an offer to be revoked when
the offeree has changed a legal
position based on justifiable reliance.
–Option Contract: offeror promises to
hold an offer open in return for
consideration.
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Agreement
 Termination by Action of the Parties.
–Rejection of the Offer by Offeree.
• When rejected, by words or conduct, by
the offeree.
• Counteroffer by the offeree is a
termination of the original offer.
• “Mirror-Image rule” applies.
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Agreement
 Termination by Operation of Law.
–Lapse of Time.
• Offer terminates by law when the period
of time specified in the offer has passed.
• If no time period for acceptance is
specified, the offer terminates at the end
of a reasonable period of time. 
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Agreement
 Termination by Operation of Law.
– Destruction of the Subject Matter: before
acceptance of offer, terminates the offer.
– Death or Incompetence of the Offeror or
Offeree: automatically terminates unless
irrevocable offer.
– Supervening Illegality of the Proposed
Contract: by court or legislation.
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Agreement
 Acceptance.
–A voluntary act (expressed or implied)
by the Offeree that shows assent
(agreement), to the terms of an offer.
–Unequivocal Acceptance: the “Mirror
Image” Rule..
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Agreement
 Acceptance.
– Silence as Acceptance.
• General Rule: offeree should not be
legally obligated to affirmatively reject an
offer.
• When Offeree Has Duty to Speak:
• He takes benefit of services with opportunity
to reject.
• Prior dealings with Offeror.
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Agreement
 Communication of Acceptance.
–Bilateral Contract: communication of
acceptance is necessary because there is a
mutual exchange of promises.
–Unilateral Contract: acceptance is evident,
notification not necessary.
–CASE 8.3 POWERHOUSE CUSTOM HOMES,
INC. V. 84 LUMBER CO. (2011).
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Agreement
 Communication of Acceptance.
–Mode and Timeliness of Acceptance.
• General Rule: in bilateral contracts,
acceptance is timely if done before offer is
terminated.
• The Mailbox Rule: acceptance is effective
when offeree uses authorized means of
acceptance. 
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Agreement
 Communication of Acceptance.
–Mode and Timeliness of Acceptance.
• The Mail Box Rule.
–If U.S. Mail, acceptance is effective upon
dispatch.
–If no means specified, acceptance can be by
any reasonable means.
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Agreement
 Communication of Acceptance.
–Exceptions to the Mail Box Rule.
• If Offeror specifies that acceptance will
not be effective until it is received.
• If acceptance is sent after rejection,
whichever is received first is given effect.
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Agreement
 Communication of Acceptance.
–Mode and Timeliness of Acceptance.
• Authorized Means of Communication: an
acceptance not authorized by the offeror
is not effective until it is received by the
offeror.
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Agreement
 Communication of Acceptance.
–Mode and Timeliness of Acceptance.
• Substitute Method of Acceptance.
–Effective if the substitute serves the
same purpose (Fed-Ex vs. UPS).
–Not effective on dispatch.
–Effective when received by the Offeror.
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Agreement in E-Contracts
 Online Offers.
–Displaying the Offer. Seller’s website
should include hyperlink to page with
full contract.
–Provisions to Include. 
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Agreement in E-Contracts
 Online Offers.
–Provisions to Include:
• Acceptance of Terms: what constitutes an
acceptance.
• Payment: how payment is made.
• Return Policy.
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Agreement in E-Contracts
 Online Offers.
–Provisions to Include:
• Disclaimer: of liability for certain uses of
the goods.
• Limitations on Remedies: if goods
defective or contract is breached.
• Privacy Policy.
• Dispute resolution.
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Agreement in E-Contracts
 Online Offers.
–Dispute –Settlement Provisions: usually
arbitration or forum-selection clauses.
• Forum-selection clause.
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Agreement in E-Contracts
 Online Acceptances.
–Click-On Agreements.
• Courts have concluded a binding contract
can be formed by clicking on a box
indicating “I Accept” or “I Agree.” Contract
can be formed via website or software.
• Law does not require parties read all the
terms.
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Agreement in E-Contracts
 Online Acceptances.
–Shrink-Wrap Agreements.
• Contract terms are inside the box.
• Party opening box agrees to terms by
keeping merchandise.
• Enforceable vs. Unenforceable Terms.
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Agreement in E-Contracts
 Online Acceptances.
–Browse-Wrap Terms.
• Like click-on agreements, browse-wrap
terms can occur in transactions over
internet.
• Unlike click-on agreements, browse-wrap
terms do not require assent and are
usually unenforceable.
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Agreement in E-Contracts
 E-Signature Technologies.
–E-Signature: electronic sound, symbol,
or process attached to or logically
associated with a record and executed
or adopted by a person with the intent
to sign the record.
–Digitized Signature: graphical image of
a handwritten signature.
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Agreement in E-Contracts
 Federal Law on E-Signatures and EDocuments.
–E-SIGN (2000) gives e-signatures and edocuments legal force.
• For an e-signature to be enforceable, the
contracting parties must have agreed to
use electronic signatures.
 Partnering Agreements.
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The Uniform Electronic
Transactions Act
 Purpose is to remove barriers to
forming electronic commerce.
 E-Signature is “electronic sound,
symbol or process…associated with a
record and… adopted by a person
with intent to sign the record.” 
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The Uniform Electronic
Transactions Act
 A record is information that is
inscribed on a tangible medium or
stored in electronic or other medium
that is retrievable in visual form.
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The Uniform Electronic
Transactions Act
 The Federal E-SIGN and the UETA.
–E-SIGN provides that if a state passes
UETA, it is not preempted by the E-SIGN
act (state law will govern).
–E-SIGN allows states to enact
alternative e-record and e-signature
statutes.
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The Uniform Electronic
Transactions Act
 Highlights of the UETA.
–Agreement: UETA only applies to
transactions if both parties have
agreed, but may be implied by conduct.
–Even if a party has previously agreed, he
may withdraw consent (opt out).
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The Uniform Electronic
Transactions Act
 Highlights of the UETA.
–UETA does not create new rules, but
rather enforces ‘real world’ rules on
electronic contracts.
• Only applies to e-records and e-signatures
relating to a “transaction” (interactions
between two people relating to business,
commercial, or governmental activities).
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The Uniform Electronic
Transactions Act
 Highlights of the UETA.
–UETA does not apply to wills or
testamentary trusts.
–Does not apply unless each party has
previously agreed to conduct electronic
transactions. Can be implied by
conduct and prior dealings.
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40
The Uniform Electronic
Transactions Act
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The Uniform Electronic
Transactions Act
 Attribution.
–If electronic record or signature is act
of a particular person, the record or
signature is attributed to that person.
–However, state law governs issues of
agency, authority, forgery, contract
formation.
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The Uniform Electronic
Transactions Act
 Highlights of the UETA.
–The Effect of Errors: UETA encourages
use of security and encryption methods.
Parties must notify each other
promptly.
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The Uniform Electronic
Transactions Act
 Highlights of the UETA.
–Timing: once record leaves control of
sender, UETA deems it “sent.” The
record is “received” when it enters
recipients system in readable form –
even if no individual is aware of its
receipt.
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