Deck 8: Agreement in Traditional and E-Contracts

Question 1

What are the elements that are necessary for an effective acceptance?

Answer 1

An acceptance is an act by the offeree showing his/her consent to the terms of the offer. The elements that meet the requirements of an effective acceptance are:
a) There must be voluntary acceptance by the offeree.
b) The offeree is required to communicate the acceptance to the offeror. However, if silence is considered as acceptance, communication is not necessary.
c) The acceptance should be communicated timely before the termination of the offer, and using the authorized mode as specified in the offer.

Question 2

Powerhouse Custom Homes, Inc. v. 84 Lumber Co.
Court of Appeals of Georgia, 307 Ga.App. 605, 705 S.E.2d 704 (2011).
FACTS Powerhouse Custom Homes, Inc., entered into a credit agreement to obtain building materials from 84 Lumber Company. Eventually, Powerhouse owed 84 Lumber a balance of $95,260.42 under the agreement. When Powerhouse failed to pay, 84 Lumber filed a suit in a Georgia state court to collect. Before the trial, 84 Lumber filed a discovery request for admissions with respect to the debt. (A request for admissions is a written request that a party admit certain facts-in this case, facts concerning the existence and amount of the debt.) Powerhouse did not respond to the request, which meant that the facts included in the request were deemed admitted. Later, while taking part in court-ordered mediation, the parties agreed to a deadline for objections to any agreements they might reach during mediation. Powerhouse then proposed to pay a sum less than the amount owed, but 84 Lumber did not respond to this proposal before the deadline. Afterward, 84 Lumber filed a motion for summary judgment with the trial court. The court granted summary judgment in 84 Lumber's favor for the entire debt. Powerhouse appealed, arguing that 84 Lumber had accepted its proposal to pay a lesser amount by not objecting to it before the agreed-on deadline had elapsed.
ISSUE Did 84 Lumber, by its failure to object to Powerhouse's proposal to settle the debt for less than what was owed, unequivocally accept the offer?
DECISION No. A state intermediate appellate court affirmed the lower court's judgment. For a contract to be formed, an offer must be accepted unequivocally. Without such an acceptance, there is no enforceable contract.
REASON Powerhouse made an offer of a proposed settlement, but 84 Lumber did not communicate its acceptance. Thus, the court reasoned that the parties did not reach an agreement. Because 84 Lumber had not agreed to Powerhouse's proposal, the ten-day deadline did not apply. Meanwhile, Powerhouse had not responded to 84 Lumber's request for admission, so its facts were deemed admitted. Powerhouse was liable for the entire debt,
plus interest, attorneys' fees, and costs.
FOR CRITICAL ANALYSIS-Economic Consideration Why do judgments often include awards of interest, attorneys' fees, and costs?

Answer 2

Bilateral Contract is formed when promises are exchanged between the parties to contract and obligation to perform the contract is still outstanding on part of either party to contract.
For example, M promises to teach R a C.A student from next months and R promises to pay $500 per month to M. In this contract the obligation of both the parties are not performed yet.
Thus under a bilateral contract, the communication of acceptance of offer is necessary as it is promise for a promise rather than performance.
Judgments include costs, attorney fees and awards of interest as these legal fees is the paid as compensation for the legal services performed on the behalf of the clients. When any case is filed in the court, there is a bilateral contract between the individual taking legal services and court.

Question 3

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
What are the elements that are necessary for an effective acceptance?

Answer 3

Acceptance:
An agreement has two sides, one offer and another acceptance. An acceptance is said to be made when the offeree gives his consent to the offeror on the offer made by that offeror.
To constitute a valid contract or agreement the acceptance made must be effective. To make an acceptance effective it requires fulfilling certain conditions. These conditions are described below:
• Acceptance given must be absolute in nature and should not accompany a condition.
• Acceptance must be given by the person to whom offer was made.
• Acceptance must be communicated to the offeror.
• Acceptance must be given in a reasonable time.
• Acceptance must be given before the offer made is revoked.
• Silence must not be considered as acceptance.
Hence, it can be concluded that aforementioned are the requirements to make an effective acceptance.

Question 4

Online Acceptance Anne is a reporter for Daily Business Journal, a print publication consulted by investors and other businesspersons. She often uses the Internet to perform research for the articles that she writes for the publication. While visiting the Web site of Cyberspace Investments Corp., Anne reads a pop-up window that states, "Our business newsletter, E-Commerce Weekly, is available at a one-year subscription rate of $5 per issue. To subscribe, enter your e-mail address below and click 'SUBSCRIBE.' By subscribing, you agree to the terms of the subscriber's agreement. To read this agreement, click 'AGREEMENT.'" Anne enters her e-mail address, but does not click on "AGREEMENT" to read the terms. Has Anne entered into an enforceable contract to pay for E-Commerce Weekly? Explain.

Question 5

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
How do shrink-wrap and click-on agreements differ from other contracts? How have traditional laws been applied to these agreements?

Question 6

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
How do shrink-wrap and click-on agreements differ from other contracts? How have traditional laws been applied to these agreements?

Question 7

Revocation. On Thursday, Dennis mailed a letter to Tanya's office offering to sell his car to her for $3,000. On Saturday, having changed his mind, Dennis sent a fax to Tanya's office revoking his offer. Tanya did not go to her office over the weekend and thus did not learn about the revocation until Monday morning, just a few minutes after she had mailed a letter of acceptance to Dennis. When Tanya demanded that Dennis sell his car to her as promised, Dennis claimed that no contract existed because he had revoked his offer prior to Tanya's acceptance. Is Dennis correct? Explain.

Question 8

What is the Uniform Electronic Transactions Act? What are some of the major provisions of this act?

Question 9

Joe advertises in the New York Times that he will pay $5,000 to anyone giving him information as to the whereabouts of Elaine. Max sees a copy of the ad in a Tokyo newspaper, in Japanese, and sends Joe the requested information. Does Max get the reward? Why or why not?

Question 10

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
What is the Uniform Electronic Transactions Act? What are some of the major provisions of this act?

Question 11

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text.
What elements are necessary for an effective offer? What are some examples of nonoffers?

Question 12

Online Acceptance. Internet Archive (IA) is devoted to preserving a record of resources on the Internet for future generations. IA uses the "Wayback Machine" to automatically browse Web sites and reproduce their contents in an archive. IA does not ask the owners' permission before copying their material but will remove it on request. Suzanne Shell, a resident of Colorado, owns www.profane-justice.org, which is dedicated to providing information to individuals accused of child abuse or neglect. The site warns, "IF YOU COPY OR DISTRIBUTE ANYTHING ON THIS SITE YOU ARE ENTERING INTO A CONTRACT." The terms, which can be accessed only by clicking on a link, include, among other charges, a fee of $5,000 for each page copied "in advance of printing." Neither the warning nor the terms require a user to indicate assent. When Shell discovered that the Wayback Machine had copied the contents of her site-approximately eighty-seven times between May 1999 and October 2004-she asked IA to remove the copies from its archive and pay her $100,000. IA removed the copies and filed a suit in a federal district court against Shell, who responded, in part, with a counterclaim for breach of contract. IA filed a motion to dismiss this claim. Did IA contract with Shell? Explain. [ Internet Archive v. Shell, 505 F.Supp.2d 755 (D.Colo. 2007)]

Question 13

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
What elements are necessary for an effective offer? What are some examples of nonoffers?

Question 14

Case Problem with Sample Answer Evelyn Kowalchuk, an eighty-eight-year-old widow, and her son, Peter, put their savings into accounts managed by Matthew Stroup. Later, they initiated an arbitration proceeding before the National Association of Securities Dealers (NASD), asserting that Stroup fraudulently or negligently handled their accounts. They asked for an award of $832,000. After the hearing, but before a decision was rendered, Stroup offered to pay the Kowalchuks $285,000, and they e-mailed their acceptance. Stroup signed a settlement agreement and faxed it to the Kowalchuks for their signatures. Meanwhile, the NASD issued an award in the Kowalchuks' favor for $88,788. Stroup immediately told them that he was withdrawing his settlement "offer." When Stroup did not pay according to its terms, the Kowalchuks filed a suit in a New York state court against him for breach of contract. Did these parties have a contract? Why or why not? [ Kowalchuk v. Stroup, 873 N.Y.S.2d 43 (N.Y.A.D. 1 Dept. 2009)]

Question 15

Requirements of the Offer. Ball writes to Sullivan and inquires how much Sullivan is asking for a specific forty-acre tract of land Sullivan owns. Ball then receives a letter from Sullivan stating, "I will not take less than $60,000 for the forty-acre tract as specified." Ball immediately sends Sullivan a fax stating, "I accept your offer for $60,000 for the forty-acre tract as specified." Discuss whether Ball can hold Sullivan to a contract for sale of the land. (See Agreement.)

Question 16

Offer and Acceptance. In 1996, Troy Blackford was gambling at Prairie Meadows Casino when he destroyed a slot machine. After pleading guilty to criminal mischief, Blackford was banned from the casino. In 1998, Blackford was found in the casino, escorted out, and charged with trespass. In 2006, he gambled at the casino again and won $9,387. When Blackford went to collect his winnings, casino employees learned who he was and refused to pay. He sued for breach of contract, contending that he and the casino had an enforceable contract because he had accepted its offer to gamble. The casino argued that it had not made an offer and in fact had banned Blackford from the premises. The trial court held in favor of the casino. The appellate court reversed and ordered a new trial. The casino appealed to the Iowa high court for review. Did the casino make a valid offer to Blackford to gamble and thus create an enforceable contract between them? Explain your answer. [ Blackford v. Prairie Meadows Racetrack and Casino, 778 N.W.2d 184 (Iowa 2010)]

Question 17

Ted and Betty Hyatt live in California, a state that has extensive statutory protection for consumers. The Hyatts decided to buy a computer so that they could use e-mail to stay in touch with their grandchildren, who live in another state. Over the phone, they ordered a computer from CompuEdge, Inc. When the box arrived, it was sealed with a brightly colored sticker warning that the terms enclosed within the box would govern the sale unless the customer returned the computer within thirty days. Among those terms was a clause that required any disputes to be resolved in Tennessee state courts. The Hyatts then signed up for Internet service through CyberTool, an Internet service provider. They downloaded CyberTool's software and clicked on the "quick install" box, which allowed them to bypass CyberTool's "Terms of Service" page. It was possible to read this page by scrolling to the next screen, but the Hyatts did not realize this. The terms included a clause stating that all disputes were to be submitted to a Virginia state court. As soon as the Hyatts attempted to e-mail their grandchildren, they experienced problems using CyberTool's e-mail service, which continually stated that the network was busy. They also were unable to receive the photos sent by their grandchildren. Using the information presented in the chapter, answer the following questions.
1. Did the Hyatts accept the list of contract terms included in the computer box? Why or why not? What is this type of e-contract called?
2. What type of agreement did the Hyatts form with CyberTool?
3. Suppose that the Hyatts experienced trouble with the computer's components after they had used the computer for two months. What factors will a court consider in deciding whether to enforce the forum-selection clause? Would a court be likely to enforce the clause in this contract? Why or why not?
4. Are the Hyatts bound by the contract terms specified on CyberTool's "Terms of Service" page, which they did not read? Which of the required elements for contract formation might the Hyatts claim were lacking? How might a court rule on this issue?
DEBATE THIS The terms and conditions in click-on agreements are so long and detailed that no one ever reads the agreements. Therefore, the act of clicking on "Yes, I agree" is not really an acceptance.

Question 18

Acceptance. In August, Kathy Wright entered into a written agreement with a real estate agent, Jennifer Crilow, to sell certain real estate in Ohio. The agreement ran until February 28. A "protection period" provision in the agreement stated that if the property sold within six months after the agreement expired to a party who had been shown the property during the term of the agreement, Crilow would be paid a commission. In January, Crilow switched agencies and asked Wright to sign a new contract. They orally agreed on the terms, which included an expiration date of April 30. Crilow sent Wright a written copy of the agreement. Wright crossed out the protection period provision and signed and returned the copy. Crilow filed it without reviewing it. Before April 30, Crilow showed Wright's property to Michael Ballway. Less than six months later-after the agreement had expired but within the protection period-Ballway bought the property. Crilow filed a suit against Wright in an Ohio state court seeking a commission on the sale. Did the parties' contract include the protection period provision? Does Wright owe Crilow a commission? Explain. [ Crilow v. Wright , __ N.E.2d __ (Ohio App. 5 Dist. 2011)]

Question 19

Applied Products, Inc., does business with Beltway Distributors, Inc., online. Under the Uniform Electronic Transactions Act, what determines the effect of the electronic documents evidencing the parties' deal? Is a party's "signature" necessary? Explain. (See The Uniform Electronic Transactions Act.)

Question 20

A Question of Ethics In 2000 and 2001, Dewayne Hubbert, Elden Craft, Chris Grout, and Rhonda Byington bought computers from Dell Corp. through its Web site. Before buying, Hubbert and the others configured their own computers. To make a purchase, each buyer completed forms on five Web pages. On each page, Dell's "Terms and Conditions of Sale" were accessible by clicking on a blue hyperlink. A statement on three of the pages reads, "All sales are subject to Dell's Term[s] and Conditions of Sale," but a buyer was not required to click an assent to the terms to complete a purchase. The terms were also printed on the backs of the invoices and on separate documents contained in the shipping boxes with the computers. Among those terms was a "Binding Arbitration" clause. The computers contained Pentium 4 microprocessors, which Dell advertised as the fastest, most powerful Intel Pentium processors available. In 2002, Hubbert and the others filed a suit in an Illinois state court against Dell, alleging that this marketing was false, misleading, and deceptive. The plaintiffs claimed that the Pentium 4 microprocessor was slower and less powerful, and provided less performance, than either a Pentium III or an AMD Athlon, and at a greater cost. Dell asked the court to compel arbitration. [ Hubbert v. Dell Corp., 359 Ill.App.3d 976, 835
N.E.2d 113, 296 Ill.Dec. 258 (5 Dist. 2005)]
1 Should the court enforce the arbitration clause in this case? If you were the judge, how would you rule on this issue?
2 In your opinion, do shrink-wrap, click-on, and browse wrap terms impose too great a burden on purchasers? Why or why not?
3 An ongoing complaint about shrink-wrap, click-on, and browse-wrap terms is that sellers (often large corporations) draft them and buyers (typically individual consumers) do not read them. Should purchasers be bound in contract by terms that they have not even read? Why or why not?

Question 21

In what circumstances will an offer be irrevocable?

Question 22

Video Question To watch this chapter's video, Jack's Restaurant, Scene 2, go to www.cengagebrain.com. Register the access code that came with your new book or log in to your account. Select the link for the "Business Law Digital Video Library Online Access" or "Business Law CourseMate." Click on "Complete Video List," view Video 77, and then answer the following questions:
1 In regard to the sale of Jack's Restaurant, Jack (the seller) says that he is going to retain the rights to the restaurant's frozen food line. The buyers, however, thought that their sales agreement included the rights to all of the restaurant's signature dishes-whether fresh or frozen. Did the parties have an "agreement to agree" on the terms of the sale of the restaurant? Why or why not?
2 Suppose that Jack previously offered to sell the restaurant to these particular buyers and they had all agreed on the price and date for delivery. Would such an offer meet the definiteness requirement, even if no terms pertained to the frozen food line? Explain.

Question 23

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions:
In what circumstances will an offer be irrevocable?

Question 24

FACTS W. O. Lucy and A. H. Zehmer had known each other for many years. For some time, Lucy had been wanting to buy Zehmer's farm. Zehmer had always told Lucy that he was not interested in selling. One night, Lucy stopped in to visit with the Zehmers at a restaurant they operated. Lucy said to Zehmer, "I bet you wouldn't take $50,000 for that place." Zehmer replied, "Yes, I would, too; you wouldn't give fifty." Throughout the evening, the conversation returned to the sale of the farm. At the same time, the parties were drinking whiskey. Eventually, Zehmer wrote up an agreement, on the back of a restaurant check, for the sale of the farm, and he asked his wife, Ida, to sign it-which she did.
When Lucy brought an action in a Virginia state court to enforce the agreement, Zehmer argued that he had been "high as a Georgia pine" at the time and that the offer had been made in jest: "two doggoned drunks bluffing to see who could talk the biggest and say the most." Lucy claimed that he had not been intoxicated and did not think Zehmer had been, either, given the way Zehmer handled the transaction. The trial court ruled in favor of the Zehmers, and Lucy appealed.
ISSUE Can the agreement be avoided on the basis of intoxication? Decision No. The agreement to sell the farm was binding. Reason The court held that the evidence given about the nature of the conversation, the appearance and completeness of the agreement, and the signing all tended to show that a serious business transaction, not a casual jest, was intended.
The court had to look into the objective meaning of the words and acts of the Zehmers: "An agreement or mutual assent is of course essential to a valid contract, but the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of mind."
WHAT IF THE FACTS WERE DIFFERENT? Suppose that the day after Lucy signed the agreement, he decided that he did not want the farm after all, and Zehmer sued Lucy to perform the contract. Would this change in the facts alter the court's decision that Lucy and Zehmer had created an enforceable contract? Why or why not?
IMPA CT OF THIS CASE ON TODAY'S LAW This is a classic case in contract law because it so clearly illustrates the objective theory of contracts with respect to determining whether an offer was intended. Today, the objective theory of contracts continues to be applied by the courts, and the Lucy v. Zehmer decision is routinely cited as a significant precedent in this area.

Question 25

Termination of the Offer. Chernek, the sole owner of a small business, has a large piece of used farm equipment for sale. He offers to sell the equipment to Bollow for $10,000. Discuss the legal effects of the following events on the offer. (See Agreement.)
1. Chernek dies prior to Bollow's acceptance, and at the time she accepts, Bollow is unaware of Chernek's death.
2. The night before Bollow accepts, a fire destroys the equipment.
3. Bollow pays $100 for a thirty-day option to purchase the equipment. During this period, Chernek dies, and Bollow accepts the offer, knowing of Chernek's death.
4. Bollow pays $100 for a thirty-day option to purchase the equipment. During this period, Bollow dies, and Bollow's estate accepts Chernek's offer within the stipulated time period.

Question 26

Alexander v. Lafayette Crime Stoppers, Inc.
Court of Appeal of Louisiana, Third District, 28 So.3d 1253 (2010).
www.la3circuit.org/opinions.htm
FACTS In 2002, several Louisiana women were murdered, and the Multi Agency Homicide Task Force was established to investigate the murders. Investigators believed one individual had committed these murders and referred to this person as the "South Louisiana Serial Killer." In April 2003, the Baton Rouge Crime Stoppers (BRCS) began publicizing a reward offer in newspapers, television stations, and billboards regarding the South Louisiana Serial Killer. A short time later, Lafayette Crime Stoppers (LCS) also publicized a reward offer. Both offers promised to give rewards for information leading to the arrest of the killer, included a telephone number to call with information, and stated that the offers expired on August 1, 2003. Dianne Alexander was attacked in her home, but her son chased the attacker from the property. Thanks to the Alexander's assistance, the suspect-who was also being investigated as the possible serial killer-was subsequently arrested and indicted. On August 14, 2003, when Alexander sought to collect the advertised reward, LCS told her that she was not eligible to receive it. Alexander and her son sued LCS and BRCS in a Louisiana state court to recover the amount of the awards-$100,000 and $50,000, respectively. BRCS and LCS (the defendants) asserted that Alexander and her son (the plaintiffs) had not complied with the "form, terms, or conditions" required by the reward offers because they did not provide information to Crime Stoppers via the tipster hotline before August 1, 2003. The trial court granted the defendants' motion for summary judgment, and the plaintiffs appealed
ISSUE Did the Alexanders communicate their acceptance of the reward to the offerors before the expiration date?
DECISION No. The Louisiana appellate court affirmed the trial court's judgment granting the defendants' motions for summary judgment.
REASON The court reviewed the offers presented in press releases by both crime-stopper organizations and found that the offers were irrevocable because they specified a period of time for acceptance. Such an offer is accepted when acceptance is received by the offeror or someone authorized to receive acceptance on the offeror's behalf. Although Alexander and her son admitted that they had not contacted either crime-stopper organization before August 1, 2003, they argued that they had accepted the organizations' offers by performance when they provided information to law enforcement officials. The court disagreed, however, finding that while the plaintiffs provided information concerning the serial killer to local law enforcement and to the task force, neither of those parties were authorized to receive acceptance. Because the plaintiffs did not notify the offerors of their acceptance of the reward before August 1, the offers had expired.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that the plaintiffs had learned about the reward offer after the killer had already been arrested and indicted due to their assistance but before the August 1, 2003, deadline. If they had then called in their information on the tip line, would they have been legally entitled to claim the reward in this circumstance? Explain.