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c. Death or Incompetence of the Offeror or Offeree
An offer terminates if the offeror or offeree dies or becomes incompetent. This rule applies whether
C. ACCEPTANCE
Acceptance is a voluntary act (either words or conduct) by the offeree that shows assent to the terms of an offer.
Except in special circumstances, only the person to whom the offer is made can accept.
1. Unequivocal Acceptance
Unequivocal acceptance is required by the mirror image rule. An acceptance subject to new conditions or
with terms that materially change the offer (“I accept the offer, but only if I can pay on ninety days’ credit”)
may be considered a counteroffer. An acceptance may be unequivocal even though the offeree expresses
ANSWER TO VIDEO QUESTION LTR. D
Did the buyers unequivocally accept the terms of the offer that Jack expressed in this scene? Explain. No. To
2. Silence as Acceptance
Ordinarily, silence cannot be acceptance. Silence can operate as acceptance if an offeree takes the benefit
3. Communication of Acceptance
In a unilateral contract, no communication of acceptance is generally necessary, because acceptance is
4. Mode and Timeliness of Acceptance
An acceptance is timely if it is made before the offer is terminated.
a. The Mailbox Rule
Acceptance is effective when it is sent by whatever means is authorized by the offeror. This is the
mailbox rule.
b. Authorized Means of Communication
Specific means can be stated in the offer or authorized by facts or by law. If an offeror specifies an
ENHANCING YOUR LECTURE—
CONTROLLING THE TERMS OF THE OFFER
The courts normally attempt to “save” contracts whenever possible, but sometimes it is impossible to do so. Two
common reasons that contracts fail are that (1) the terms of the offer were too unclear or indefinite to constitute a
binding contract on the offer’s acceptance and (2) the acceptance was not timely. If you are an offeror, you can control
both of these factors: you can determine what the terms of the future contract will be, as well as the time and mode
of acceptance.
INCLUDE CLEAR AND DEFINITE TERMS
If a contract’s terms are too unclear or indefinite, the contract will fail. Unless a court can ascertain exactly what
the rights and duties of the parties are under a particular contract, the court cannot enforce those rights and duties.
results, any ambiguous provision may be interpreted against the party that drafted the contract (see Chapter 13).
SPECIFY THE TIME AND MODE OF ACCEPTANCE
Problems concerning contract formation also arise when it is unclear whether an acceptance is effective. To avoid
such problems, you should take some precautions when phrasing the offer. Whether your offer is made via the
Internet, fax, express delivery, or mail, you can specify that the offer must be accepted (or even that you must receive
the acceptance) by a certain time, and if it is not, the offer will terminate. Similarly, you can specify the mode of
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CHECKLIST FOR THE OFFEROR
2. Specify in the offer the date on which the offer will terminate and the authorized mode of acceptance. For
example, you can indicate that an acceptance, to be effective, must be faxed to you at a specific fax number by a
specific time or date.
II. Agreement in E-Contracts
Disputes arising from contracts entered into online concern the terms and assent to those terms.
A. ONLINE OFFERS
1. Displaying the Offer
2. Provisions to Include
3. Dispute-Settlement Provisions
These include a forum-selection clause, which indicates a court or jurisdiction in which a dispute would be
B. ONLINE ACCEPTANCES
1. Click-On Agreements
A click-on agreement occurs when a buyer, completing a transaction on a computer, is required to indicate
2. Shrink-Wrap Agreements
A shrink-wrap agreement is an agreement whose terms are expressed inside a box in which computer
hardware or software is packaged. In most cases, the agreement is not between a seller and a buyer, but
between a manufacturer and the user of the product. The terms generally concern warranties, remedies,
and other issues associated with the use of the product.
286 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
a. Shrink-Wrap Agreements and Enforceable Contract Terms
Courts often enforce shrink-wrap agreements, reasoning that the seller proposed an offer that the
buyer accepted after an opportunity to read the terms. Also, it is more practical to enclose the full
terms of a sale in a box.
b. Shrink-Wrap Terms That May Not Be Enforced
If a court finds that the buyer learned of the shrink-wrap terms after the parties entered into a contract,
the court might conclude that those terms were proposals for additional terms, which were not part of
the contract unless the buyer expressly agreed to them.
ENHANCING YOUR LECTURE—
AVOIDING DECEPTION IN SOFTWARE SALES
Sometimes, businesspersons who include shrink-wrap licenses with their products may have some terms
elsewhere, such as on a disk or on a download page of the Internet. Not including all of the terms in the shrink-wrap
agreement, however, can lead to problems—as one software producer learned when the state of New York brought an
action against its company for fraud.
THE LAWSUIT AGAINST NETWORK ASSOCIATES, INC.
Network Associates, Inc. (NA), develops and sells software, including Gauntlet, a software firewall product, via the
Internet. NA included on its disks and on its Internet download page—but not in its license agreement that
accompanied its products—a restrictive clause.
When Network World Fusion, an online magazine, published a comparative review of firewall software products,
brought an action against NA for fraud.
THE FRAUD ISSUE
According to the New York court hearing the case, NA’s restrictive clause misled customers and was thus
deceptive. First, the license agreement stated that it contained all of the terms of the agreement. Therefore, the rules
and regulations listed in the restrictive clause appeared to be independent of the license contract. This could mislead
purchasers of the software because they might believe that the restriction was created by some other entity, such as
the federal government.
For these reasons, the court concluded that the restrictive clause was deceptive and constituted fraud. The court
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FOR CRITICAL ANALYSIS
What is the difference, if any, between reading a disputed clause as part of a shrink-wrap agreement and accessing
it through a link as part of a click-on agreement?
3. Browse-Wrap Terms
Browse-wrap terms, which can also occur in an online transaction, do not require a user to assent to the
terms before going ahead with the deal. Offerors of these terms generally assert that they are binding
without the user’s active consent. Critics argue that a user should at least be required to navigate past the
terms before they should be considered binding.
SPECIAL EXHIBIT—
Online Acceptances
The following illustration summarizes some of the principles of online acceptances involving shrink-wrap
agreements, click-on agreements, and browse-wrap terms discussed in the text.
CLICK-ON AGREEMENT
Contract terms that appear on
SHRINK-WRAP
AGREEMENT
BROWSE-WRAP TERMS
Contract terms on a Web site
ARE THESE TERMS PART OF A CONTRACT BETWEEN THE
PARTIES?
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C. E-SIGNATURE TECHNOLOGIES
The text discusses three common methods for creating e-signatures.
D. STATE LAWS GOVERNING E-SIGNATURES
Most states have laws governing e-signatures, although the laws are not uniform. The Uniform Electronic
Transactions Act (UETA), issued in 1999, was an attempt by the National Conference of Commissioners on Uniform
E. FEDERAL LAW ON E-SIGNATURES AND E-DOCUMENTS
F. PARTNERING AGREEMENTS
Through a partnering agreement, a seller and a buyer agree in advance on the terms to apply in all transactions
III. The Uniform Electronic Transactions Act
The UETA removes barriers to e-commerce by giving the same legal effect to electronic records and signatures as to
paper documents and signatures.
ADDITIONAL BACKGROUND—
“Electronic Signature”
The Uniform Electronic Transactions Act (UETA) —a draft of legislation proposed to the states by the National
Conference of Commissioners of Uniform State Laws and the American Law Institute—provides a definition of
“electronic signature” (or e-signature) that can be used by the states that enact the UETA. The following comments
accompanying the draft of UETA 102(8) presented for the states’ adoption explain the definition.
7. “Electronic signature.”
The idea of a signature is broad and not specifically defined. Whether any particular record is “signed” is a question of
fact. Proof of that fact must be made under other applicable law. This act simply assures that the signature may be
accomplished through an electronic means. No specific technology need be used in order to create a valid signature.
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record. The act of applying a sound, symbol or process to an electronic record could have differing meanings and
effects. The consequence of the act and the effect of the act as a signature are determined under other applicable law.
However, the essential attribute of a signature involves applying a sound, symbol or process with an intent to do a
legally significant act. It is that intention that is understood in the law as a part of the word “sign”, without the need for
a definition.
This Act establishes, to the greatest extent possible, the equivalency of electronic signatures and manual signatures.
The purpose is to overcome unwarranted biases against electronic methods of signing and authenticating records.
Therefore the term “signature” has been used to connote and convey that equivalency. The term “authentication,”
used in other laws, often has a narrower meaning and purpose than an electronic signature as used in this Act.
However, an authentication under any of those other laws constitutes an electronic signature under this Act.
The precise effect of an electronic signature will be determined based on the surrounding circumstances under [UETA
109(b)].
circumstances, however, the person adopted a process which the circumstances indicate s/he intended to have the
effect of getting the goods/services and being bound to pay for them. The adoption of the process carried the intent to
do a legally significant act, the hallmark of a signature.
Another important aspect of this definition lies in the necessity that the electronic signature be linked or logically
associated with the record. In the paper world, it is assumed that the symbol adopted by a party is attached to or
located somewhere in the same paper that is intended to be authenticated, e.g., an allonge firmly attached to a
promissory note, or the classic signature at the end of a long contract. These tangible manifestations do not exist in the
electronic environment, and accordingly, this definition expressly provides that the symbol must in some way be linked
to, or connected with, the electronic record being signed. This linkage is consistent with the regulations promulgated
A. THE SCOPE AND APPLICABILITY OF THE UETA
The UETA applies only to e-records and e-signatures relating to a transaction (an interaction between two or
more people relating to business, commercial or governmental activities).
1. The Parties Must Agree to Conduct Transaction Electronically
2. Parties Can “Opt Out”
3. The UETA Does Not Apply to All Law
The UETA does not apply to laws governing wills or testamentary trusts, the UCC (except Articles 2 and 2A),
the UCITA, and other laws excluded by the states.
B. THE FEDERAL E-SIGN ACT AND THE UETA
If a state enacts the UETA without modification, the E-SIGN Act does not preempt it. The E-SIGN Act does
preempt modified versions of the UETA to the extent that they are inconsistent with the E-SIGN Act. Under the E-
SIGN Act, states may enact alternative procedures or requirements for the use or acceptance of e-records or e-
signatures if (1) those procedures or requirements are consistent with the E–SIGN Act, (2) the state’s procedures
do not give greater legal effect to any specific type of technology, and (3) if the state adopts the alternative after
the enactment of the E-SIGN Act, the state law must refer to the E-SIGN Act.
D. THE EFFECT OF ERRORS
If the parties agree to a security procedure and one party does not detect an error because it did not follow the
procedure, the conforming party can avoid the effect of the error. If the parties do not agree on a security
E. TIMING
An e-record is sent when it is properly directed from the sender’s place of business to the intended recipient in a
form readable by the recipient’s computer at the recipient’s place of business that has the closest relation to the
transaction (or either party’s residence, if there is no place of business). Once an e–record leaves the sender’s
control or comes under the recipient’s control, it is sent. An e–record is received when it enters the recipient’s
processing system in a readable form—even if no person is aware of its receipt.
IV. International Treaties Affecting E-Contracts
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ENHANCING YOUR LECTURE—
HOW CAN YOU FIND AND
USE ONLINE CONTRACT FORMS?
Before the printing press, every contract form had to be handwritten. Since the advent of printing, however, most
standard contract forms have been readily available at low cost. Now the Internet has made available an even larger
variety of contract forms, as well as other legal and business forms.
WHERE TO OBTAIN ONLINE CONTRACT FORMS
The ‘Lectric Law Library has a collection of forms at www.lectlaw.com/form.html. The site includes forms for the
assignment of a contract, a contract for the sale of a motor vehicle, and many others. In addition to actual forms, there
are comments on how the forms should be used and filled out. Another excellent online resource for various types of
forms is FindForms, at www.findforms.com.
A special Web site for small-business owners is www.lawvantage.com/index.shtml. Some documents are free;
others require a fee or an annual subscription. Many law firms post legal forms, including contract forms, on their
forms.lp.findlaw.com and scroll down the screen to “Other Form Resources.”
CHECKLIST FOR THE ONLINE SELLER
1. When looking for a contract form appropriate to your business, “shop around” for a form that most closely meets
your needs.
2. Consider customizing any standardized contract form that you use to ensure that it will cover all of the
contingencies that you deem important.
3. When using a standardized contract form, make sure that you provide for a means of acceptance—for example, by
including a box stating “I accept” or “I agree.”
4. Consider posting your own customized contract forms on your Web site for prospective customers or others to
use.
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TEACHING SUGGESTIONS
1. Concepts in the area of the law covered in this chapter that students have difficulty with include:
a. Advertisements are usually not valid offers. Emphasize that it is the indefiniteness of their terms (and the
unfairness that might result from enforcing every advertisement as an offer) that prevents most
advertisements from being effective offers.
2. Discussing firm offers provides an opportunity to have students study a statute—UCC 2–205—carefully. Point out
that if any element of UCC 2–205 is lacking in a situation, there is no firm offer and that it will lapse within a reasonable
time by itself unless consideration is given to keep it open.
3. Students may find it helpful, when confronted with difficult points of law, to combine or reduce the points into
short statements. For example, the mailbox rule may be phrased as:
4. Review the terms of sample shrink-wrap agreements and click-on agreements with the class, and discuss how fair
or objectionable the students find the terms. Have they readily agreed to such terms in the past? How likely are they
to agree to such terms in the future, at least without reading them?
6. In reading and studying cases, including the cases in this chapter and particularly including those that involve
complex circumstances, your students may find it helpful to keep in mind that generally a case can have only one of
three results:
Cyberlaw Link
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DISCUSSION QUESTIONS
1. In the context of an offer, how is intent and its seriousness determined? Serious intent is determined by what a
2. Why must a contract have “reasonably definite terms” and how “definite” must the terms be? A contract must have
3. How do the parties terminate an offer? The parties can terminate an offer by: (1) revocation, (2) rejection, or (3) a
counteroffer. Revocation is withdrawal of the offer by the offeror. Generally, an offer may be revoked any time before
acceptance, even if the offeror agreed to hold it open, but revocation is effective only on receipt (thus a letter of revocation is
not effective until the offeree receives it). Revocation can be express (“I withdraw my offer”) or implied by conduct inconsistent
with the offer (property that would be the subject of the contract is sold to a third party). Revocation of an offer made to the
general public must be communicated in the same manner in which the offer was communicated. An offeree may reject an
offer, expressly (“I don’t need what you’re selling”) or impliedly (by conduct showing an intent not to accept). Rejection is
effective only on receipt. Asking about an offer (“Is that your best offer?”) is not rejection, but an ambiguous response may be
4. Who may accept an offer? Only the person to whom the offer is made can accept it unless: (1) the offer is an option
5. What is unequivocal acceptance? Unequivocal acceptance is acceptance that adds no new terms or terms that
6. Why is a court likely to enforce a shrink-wrap agreement? A court is likely to enforce a shrink-wrap agreement partly
7. On what reasoning might a court refuse to enforce a shrink-wrap agreement? A court may reason that a buyer
8. Is a court likely to enforce a click-on agreement? Yes, unless the agreement is objectionable on grounds that apply to
9. When does the UETA apply, and what is its effect? The UETA supports all electronic transactions, but it does not create
10. Can parties to a contract that would otherwise be covered by the UETA choose to waive its provisions? Yes, contracting
ACTIVITY AND RESEARCH ASSIGNMENTS
1. Have students bring current catalogs, advertisements, classified advertisements, and direct mail advertisements to
class. Tell them to be prepared to discuss which are offers and which represent preliminary negotiations.
3. Have students bring to class examples of shrink-wrap and click-on agreements and review them in class. What terms
are they likely to object to, once they have examined the agreements more closely?
EXPLANATIONS OF SELECTED FOOTNOTES IN THE TEXT
Footnote 3: The American Association of the Advancement of Science (AAAS) maintains Science NOW, a daily
Internet news service, and publishes Science, a scholarly journal. An ad on Science NOW asks for “news tips.” Erik Trell, a
professor and medical doctor, submitted a manuscript in which he claimed to have solved a famous mathematical problem,
popularly known as Beal’s Conjecture. AAAS decided that Trell’s manuscript was neither news nor a solution to Beal’s
Conjecture, and declined to publish it. Trell filed a suit in a federal district court against AAAS, alleging breach of contract. Trell
asserted that the Science NOW ad was an offer, which he had accepted. The defendants filed a motion to dismiss. In Trell v.
CHAPTER 11: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 295
American Association of Advancement of Science, the court dismissed the complaint. Science NOW’s ad for “news tips” was not
an offer, but an invitation for offers. “Advertisements are not offers—they invite offers. Likewise, responses to advertisements
are not acceptances—they are offers. At best, it was Trell’s submission of the manuscript that was the offer, which Trell clearly
Could the Science NOW ad be construed as an “offer of reward”? Trell made this argument. The court stated simply,
however, that this was “unpersuasive and inapplicable to the solicitation for news tips. There is simply nothing in the Amended
Complaint which could reasonably be construed to support a holding that this advertisement was an offer of prize or reward.”
What would have been the purported prize? There is an offer of a cash prize of between $5,000 and $70,000 for a solution to
Beal’s Conjecture, but this is offered by an individual with no affiliation to AAAS or the other defendants
Besides breach of contract, Trell charged the defendants with fraud, misappropriation of property, breach of fiduciary
duty, unfair competition, conversion, and conspiracy with intent to defraud. What might have been Trell’s motivation for all of
these charges? Is this a reasonable basis for a lawsuit? Discuss. Trell might have been motivated by feelings of hurt over the
Should the court have made an exception to the rule applied in this case for an ad posted on the Internet? Why or why
not? No, because, as the court stated, there is “no distinction requiring a different analysis or result merely because the
advertisement was . . . communicated over the internet as opposed to through television, radio or newspaper advertisement.”
Yes, because the Internet is a more “personal” medium than the other sources that the court cites and its postings are more
readily taken to heart, or more reasonably construable as “offers,” and “accepted.”
Footnote 16: When an Internet user searches on Google using key words that an advertiser has identified, an ad
appears. If the user clicks on it, Google, Inc., charges the advertiser. The terms for this arrangement between Google and the
advertiser are displayed online in a window with a scroll bar. A link to a printer-friendly version of the terms is at the top of the
window. At the bottom of the page, viewable without scrolling, are the words, “Yes, I agree to the above terms and conditions,”
What other click-on, or click wrap, agreements have courts held to provide reasonable notice? Adequate notice was
held to be provided when users had to click “Accept” to agree to certain terms to subscribe and an admonition in capital letters
was presented at the top of the agreement to read the agreement carefully, even though a thirteen-page agreement appeared
in a scroll box with only portions visible at a time and a forum selection clause was located in the final section and presented in
lower case font. Forrest v. Verizon Communications, Inc., 805 A.2d 1007 (D.C.Cir. 2002). Reasonable notice was held to exist
when a user had to agree to specific terms to install software, the agreement appeared in a small pop-up window in the same
font-size as words in the computer’s own display, and with the arbitration clause located at the end of the agreement. In Re
RealNetworks, Inc., Privacy Litigation, __ F.Supp.2d __, 2000 WL 631341 (N.D.Ill. 2000). Reasonable notice of terms was held to
296 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
occur when a user had to click “I agree” before proceeding with a registration process and the agreement was presented in a
scrollable window, even though a forum selection clause was presented in lower case letters in the last paragraph of the
agreement. Caspi v. Microsoft Network, L.L.C., 323 N.J.Super. 118, 732 A.2d 528 (App.Div. 1999).
With respect to click fraud, which was the heart of Feldman’s claim in this case, what circumstances might suggest
unethical behavior by Google? A lack of ethical behavior might be found if Google actually knew that there were fraudulent
clicks or at least had the capacity to determine which clicks on an ad were fraudulent, did nothing to prevent click fraud,
charged an advertiser for fraudulent clicks, and failed to investigate an advertiser’s complaint regarding click fraud. These
circumstances would likely support imposing legal liability as well. In this case, with regard to Google’s knowledge and capacity,
Feldman did “not contend that Google actually knew that there were fraudulent clicks, but allege[d] that click fraud can be
ANSWERS TO ESSAY QUESTIONS IN
STUDY GUIDE TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION
BY HOLLOWELL & MILLER
1. What is an offer? What are the elements necessary for an effective offer? An offer is a promise to do or refrain from
2. Are shrink-wrap and click-on agreements enforceable? A shrink-wrap agreement is an agreement whose terms are
expressed inside a package that contains computer hardware or software. The terms usually focus on warranties, remedies, or
other issues related to the product’s use. A court is likely to enforce this agreement partly because from a business perspective,
it is more practical to enclose the full terms of a sale in a package rather than, for example, to read them over a phone while
taking an order for a product. The court might explain that the seller proposed an offer the buyer accepted after an opportunity
CHAPTER 11: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 297
REVIEWING—
AGREEMENT IN TRADITIONAL AND E-CONTRACTS
Shane Durbin wanted to have a recording studio custom built in his home. He sent invitations to a number of local
contractors to submit bids on the project. Rory Amstel submitted the lowest bid, which was $20,000 less than any of
the other bids Durbin received. Durbin then called Amstel to find out the type and quality of the materials that were
1. Did Amstel’s bid meet the requirements of an offer? Explain. A bid can be an offer if it contains all of the requisite
2. Was there an acceptance of the offer? Why or why not? To create a contract, an offer must be accepted
3. Suppose that the court determines the parties did not reach an agreement. Further suppose that Amstel, in
anticipation of building Durbin’s studio, had purchased materials and refused other jobs so that he would have time in
his schedule for Durbin’s project. Under what theory discussed in the chapter might Amstel attempt to recover these
costs? When individuals rely on promises, as Amstel would have done in this scenario, and the reliance is considered to
4. How is an offer terminated? Assuming that Durbin did not inform Amstel that he was rejecting the offer, was the
offer terminated at any time described here? Explain. Yes, Durbin asked about better quality tiles; until that issue was
DEBATE THIS:
The terms and conditions in click-on agreements are so long and detailed that no one ever reads one. Therefore,
the act of clicking “Yes, I agree.” is not really an acceptance. The terms and conditions included in click-on agreements
have become so detailed, confusing, and most importantly, long, that no one would ever take the time to read one.
Knowing, though, that one is unable to purchase or license a product or service purchased on the Internet without
298 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, TWELFTH EDITION