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Business Law Chapter 12 Homework Timing Erecord Sent When Properly Directed

Page Count
9 pages
Word Count
6053 words
Book Title
Business Law: Text and Cases 14th Edition
Authors
Frank B. Cross, Kenneth W. Clarkson, Roger LeRoy Miller
14 UNIT THREE: CONTRACTS AND E-CONTRACTS
  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. Therefore, as an offeror, make sure that the terms of your offer are sufficiently definite to
constitute a binding contract if the offer is accepted. A statement such as “Quantity to be determined later”
may allow the offeree, after acceptance, to claim that a contract was never formed because the quantity term
was not specified.
Another reason an offeror should make sure that the offer’s terms are clear and definite is that if a
contract results, any ambiguous provision may be interpreted against the party that drafted the contract.
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 acceptance. In online offers, you can indicate that to accept the offer, the user must
click on a certain box on the screen If you make an offer and want the acceptance to be faxed to you, make
sure that you clearly indicate that the acceptance must be faxed to you at a given fax number by a specific
time, or it will not be effective.
CHECKLIST FOR THE OFFEROR
1. Make sure that the terms of the offer are sufficiently clear and definite to allow both the parties and a
court to determine the specific rights and obligations of the parties. Otherwise, the contract may fail for
indefiniteness.
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.
CHAPTER 12: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 15
A. ONLINE OFFERS
1. Displaying the Offer
Terms should be conspicuous and clearly spelled out. On a Web site, this can be done with a link to
a separate page that contains the details.
2. Provisions to Include
Subjects that should be covered include
Acceptance of termsa mechanism by which an offeree can affirmatively indicate consent
(such as an “I agree” box to click on).
Payment, including taxes.
3. Dispute-Settlement Provisions
These include an arbitration, or other form of alternative dispute resolution, clause.
a. Forum-Selection Clause
A forum-selection clause indicates a court or jurisdiction for the resolution of a dispute.
b. Choice-of-Law Clause
A choice-of-law clause designates the law of a certain jurisdiction to resolve a dispute.
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 his or her assent to be bound by the terms of an offer by clicking on a button that says, for
example, “I agree.” The buyer does not have to actually read the terms to be bound.
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 a computer screen,
SHRINK-WRAP
AGREEMENT
Contract terms expressed in
a document inside a product
BROWSE-WRAP
TERMS
Contract terms on a Web
site that need not be actively
THE PARTIES?
16 UNIT THREE: CONTRACTS AND E-CONTRACTS
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.
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.
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 problemsas 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 pagebut not in its license
agreement that accompanied its productsa restrictive clause.
The restrictive clause provided that anyone installing the Gauntlet software accepted the terms and
conditions of the license agreement in the box and urged users to read the license before installing the
software. The clause also stated, among other things, that the customer “will not publish reviews of this
product without prior consent from Network Associates.” The problem was that the license agreement in the
box stated that the agreement contained all of the rights and duties of the parties. How, then, did the
restrictive clause apply to the sale?
When Network World Fusion, an online magazine, published a comparative review of firewall software
products, including NA’s Gauntlet, without NA’s permission, NA protested. Ultimately, the state attorney
general of New York brought an action against NA for fraud.
THE FRAUD ISSUE
CHAPTER 12: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 17
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 ordered NA to stop including the clause in its software. The court also ordered NA to reveal “the
number of instances in which software was sold on disks or through the Internet containing the above-
mentioned language in order for the court to determine what, if any, penalties and costs should be ordered.”a
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.
C. FEDERAL LAW ON E-SIGNATURES AND E-DOCUMENTS
In 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act to provide
that no contract, record, or signature may be “denied legal effect” solely because it is in an electronic
form.
1. E-Signature Technologies
An e-signature is “an electronic sound, symbol, or process attached to or logically associated with a
2. Exclusions
Some documents are excluded: from the E-SIGN Act, most notably documents governed by
Articles 3, 4, and 9 of the UCC.
D. PARTNERING AGREEMENTS
Through a partnering agreement, a seller and a buyer agree in advance on the terms to apply in all
transactions subsequently conducted electronically. These terms may include access and identification
codes. A partnering agreement, like any contract, can prevent later disputes.
III. The Uniform Electronic Transactions Act
18 UNIT THREE: CONTRACTS AND E-CONTRACTS
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 Instituteprovides 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. One’s voice on an answering machine may suffice if the requisite intention is
present. Similarly, including one’s name as part of an electronic mail communication also may suffice, as may
the firm name on a facsimile. It also may be shown that the requisite intent was not present and accordingly
the symbol, sound or process did not amount to a signature. One may use a digital signature with the
requisite intention, or one may use the private key solely as an access device with no intention to sign, or
otherwise accomplish a legally binding act. In any case the critical element is the intention to execute or adopt
the sound or symbol or process for the purpose of signing the related record.
The definition requires that the signer execute or adopt the sound, symbol, or process with the intent to sign
the 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.
CHAPTER 12: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 19
information as part of a process which will result in receipt of the goods or services. When the customer
ultimately gets to the last step and clicks “I agree,” the person has adopted the process and has done so with
the intent to associate the person with the record of that process. The actual effect of the electronic signature
will be determined from all the surrounding 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.
A. THE SCOPE AND APPLICABILITY OF THE UETA
The UETA applies only to e-records and e-signatures relating to a transaction (an interaction be-
tween two or more people relating to business, commercial or governmental activities).
The UETA does not apply to wills or testamentary trusts, transactions covered by the UCC (except
Articles 2 and 2A), and applications of 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 preempts 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
Those procedures or requirements are consistent with the E-SIGN Act.
The state’s procedures do not give greater legal effect to any specific type of technology.
C. HIGHLIGHTS OF THE UETA
The parties must agree to conduct transaction electronically. This agreement may be implied by the
circumstances and the parties’ conduct (for example, giving out a business card with an e-mail address
on it). Consent may also be withdrawn.
1. Attribution
20 UNIT THREE: CONTRACTS AND E-CONTRACTS
2. Authorized Signatures
3. 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 procedure, other state laws determine the effect of the mistake. To avoid the
effect of an error, a party must
4. Timing
An e-record is sent when it is properly directed from the sender’s place of business to the in-
tended recipient in a form readable by the recipient’s computer. Once an e-record leaves the
sender’s control or comes under the recipient’s control, it is sent.
IV. International Treaties Affecting E-Contracts
International organizations have created their own regulations for global Internet transactions.
The United Nations Convention on the Use of Electronic Communications in International Contracts of
2005 provides standards to determine an Internet user’s location and to give the same legal effect to
electronic records and signatures as to paper documents and signatures.
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.
CHAPTER 12: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 21
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.
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.
4. Consider posting your own customized contract forms on your Web site for prospective customers or
others to use.
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 pre-
vents most advertisements from being effective offers.
2. Discussing firm offers provides an opportunity to have students study a statuteUCC 2205carefully.
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:
The mailbox rule applies only to express, bilateral, properly communicated acceptances, which are
effective when sentunless (1) the offer says that the mail cannot be used, (2) the offer is an option
rejects first and then accepts, whichever gets there first is effective.
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?
5. You might point out that the UETA supports all e-transactions, but it does not create rules for them. Also,
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:
The plaintiff proves his or her side of the case and wins.
Cyberlaw Link
How might the mailbox rule apply in the context of contracts entered into over the Internet? Why
are uniform laws like the UETA necessary? Does it make any difference if these uniform laws are not
enacted in every state? How should the law be applied to a dispute arising from a deal that involves
parties in different countries?
DISCUSSION QUESTIONS
1. In the context of an offer, how are intent and its seriousness determined? Serious intent is determined
2. Why must a contract have “reasonably definite terms” and how “definite” must the terms be? A
contract must have reasonably definite terms so that a court can determine if a breach has occurred and can give an
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
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 contract (in which case the right to exercise the option is generally considered a contract right and is
5. What is unequivocal acceptance? Unequivocal acceptance is acceptance that adds no new terms or terms
that materially change the offer (“I accept the offer, but only if I can pay on ninety days’ credit”). Under the mirror
6. Why is a court likely to enforce a shrink-wrap agreement? A court is likely to enforce a shrink-wrap
7. On what reasoning might a court refuse to enforce a shrink-wrap agreement? A court may reason that
8. Is a court likely to enforce a click-on agreement? Yes, unless the agreement is objectionable on grounds
9. When does the UETA apply, and what is its effect? The UETA supports all electronic transactions, but it
10. Can parties to a contract that would otherwise be covered by the UETA choose to waive its pro-
visions? Yes, contracting parties can waive or change for their contract any or all of the UETA provisions (except for
ACTIVITY AND RESEARCH ASSIGNMENTS
1. Have students bring current catalogs, advertisements, classified advertisements, and direct mail adver-
tisements 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?
EXPLANATION OF A SELECTED FOOTNOTE IN THE TEXT
Footnote 5: Gyabaah was hit by a bus owned by Rivlab Transportation Corp. Gyabaah filed a suit in a
New York state court against the bus company. Rivlab's insurer offered to tender the company’s policy limit of $1
million in full settlement of Gyabaah’s claims. On the advice of her attorney Jeffrey Aronsky, Gyabaah signed a
In Gyabaah v. Rivlab Transportation Corp., a state intermediate appellate court affirmed. There was no
binding settlement because the release was not delivered to Rivlab or its insurer, who were thus not informed that the
offer had been accepted. In other words, the lack of communication was fatal to Aronsky’s claim of a settlement.
Assuming that the offerors had not included an expiration date for their offers and could revoke them
at any time, what actions would be required for an effective revocation? In these circumstances, to revoke the
Why did the court conclude that the parties in this case were not bound by the settlement and release
documents signed by Gyabaah? The court concluded that the parties in this case were not bound by the settlement
CHAPTER 12: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 25
was acceptance of the offer otherwise communicated to defendant or its carrier.”
Why did Aronsky fail to deliver the signed documents to Rivlab or its insurer? National Casualty
tendered Rivlab’s $1 million policy limits to settle the suit filed by Aronsky on Gyabaah’s behalf. Aronsky explained
What is the most likely reason that Gyabaah did not wish to settle the case with Rivlab or its insurer
according to their terms? Gyabaah later testified that she signed the release because she felt “pressured” to do it.
But she did not state what the pressure consisted of or what professional misconduct, if any, on Aronsky’s part might
If Aronsky had informed Rivlab or its insurer that Gyabaah had agreed to the settlement, would her
later “change of heart” have been sufficient to set aside the agreement? No, because Gyabaah’s acceptance of

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