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Chapter 12Nature and Classes

of Contracts: ContractingOn the Internet

Chapter 12Nature and Classes

of Contracts: ContractingOn the Internet

2© 2004 West Legal Studies in BusinessA Division of Thomson Learning


Definition of ContractDefinition of ContractDefinition of ContractDefinition of Contract

• A contract is a binding agreement between two or more parties.

• A contract arises when an offer is accepted with contractual intent (the intent to make a binding agreement) and the acceptance is communicated properly.

• A contract is a binding agreement between two or more parties.

• A contract arises when an offer is accepted with contractual intent (the intent to make a binding agreement) and the acceptance is communicated properly.

Offer

AcceptanceCONTRACT==



Parties to a ContractParties to a ContractParties to a ContractParties to a ContractParties may be: individuals, partnerships, corporations, governments

ShipperCarrier

Parties to a Transportation Contract

Insurer Insured

Parties to an Insurance Policy

Landlord(Lessor)

Tenant(Lessee)

Parties Agreeing Upon Occupationof a Building for Money (a Lease)

Vendor Vendee

Parties to a Sales Contract

Promisor (Obligor)

Promisee (Obligee)General:

Examples:



Classes of ContractsClasses of ContractsClasses of ContractsClasses of Contracts

FORMAL

contract under seal,contracts of record,negotiable instruments

INFORMAL

all other contractsOR

EXPRESS

spoken or written words

IMPLIED

created by law based on acts or conduct of parties

OR




OR OR

VALIDbinding and enforceable

VOIDwithout legal

effect

VOIDABLEcircumstances

allows cancellation at option of one

party




OREXECUTE

Dcompletely performed

EXECUTORYsomething

remains to be done

OR

BILATERALone promisegiven in exchangefor another

UNILATERALone party promises to

perform after the other party does some designated act



Contract ExampleContract ExampleContract ExampleContract Example

1Parties 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.

Lookout Alarm Systemby S.J. McRory S.J. McRory, President

July 1, 2001 Date

A.J. ArmstrongA.J. Armstrong

July 1, 2001Date

}2

}3

4

5

}



Other Types of Other Types of ContractsContracts

Other Types of Other Types of ContractsContracts

• OPTION CONTRACT: gives one party the right to enter into a second contract at a later time.

• RIGHT OF FIRST REFUSAL: obligates the offeror to make the offer to the person holding this right first.

• OPTION CONTRACT: gives one party the right to enter into a second contract at a later time.

• RIGHT OF FIRST REFUSAL: obligates the offeror to make the offer to the person holding this right first.



Quasi ContractsQuasi ContractsQuasi ContractsQuasi Contracts

• In certain situations, the law regards it as unjust for a person to receive a benefit and not pay for it.

• In such a case, the law of quasi contracts allows the performing person to recover the reasonable value of the benefit conferred on the benefited person even though no contract between them requires any payment.

• In certain situations, the law regards it as unjust for a person to receive a benefit and not pay for it.

• In such a case, the law of quasi contracts allows the performing person to recover the reasonable value of the benefit conferred on the benefited person even though no contract between them requires any payment.



Contracting on the Contracting on the InternetInternet

Contracting on the Contracting on the InternetInternet

• Forming electronic contracts involves the same principles as “real space” contracts.

• 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.

• Forming electronic contracts involves the same principles as “real space” contracts.

• 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.



Contracts ReviewContracts ReviewContracts ReviewContracts Review

Communication

IntentAcceptance

CommunicationOffer

Intent

ContractExpress Formal Executory Bilateral

Implied Informal Executed Unilateral

Option

First Refusal

Unjust EnrichmentNo Contract

Avoided ContractVoid Agreement

Quasi Contract

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