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PowerPoint Slides to Accompany
CONTEMPORARY BUSINESS AND
ONLINE COMMERCE LAW
5th Edition
by Henry R. Cheeseman
Chapter 8
Nature of Traditional and
Online Contracts
Slides developed by
Les Wiletzky
Wiletzky and Associates
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
A contract is an
agreement that is
enforceable by a
court of law or
equity.
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
8-2
Introduction (1 of 2)
 Contracts are the basis of many daily
activities
 They provide the means for individuals
and businesses to sell and otherwise
transfer property, services, and other
rights
 Without enforceable contracts, commerce
would collapse
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
8-3
Introduction (2 of 2)
 Contracts are voluntarily entered into by
parties
 The terms of the contract become private
law between the parties
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8-4
Legally Enforceable Contract
 If one party fails to perform as promised,
the other party can use the court system
to enforce the contract and recover
damages or other property
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8-5
Parties to a Contract (1 of 2)
Every contract involves at least two parties:
 Offeror – the party who makes an offer to
enter into a contract
 Offeree – the party to whom an offer to
enter into a contract is made
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8-6
Parties to a Contract (2 of 2)
Offer
Offeror
Offeree
Acceptance
Offeror makes an
offer to the offeree
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Offeree has the power
to accept the offer
and create a contract
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Elements of a Contract (1 of 2)
Agreement
 There must be agreement
between the parties
 This requires an offer by
the offeror and an
acceptance of the offer by
the offeree
 There must be mutual
assent by the parties
Consideration
 The promise must be
supported by a bargainedfor consideration that is
legally sufficient
 Gift promises and moral
obligations are not
considered supported by
valid consideration
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8-8
Elements of a Contract (2 of 2)
Contractual Capacity
 The parties to a contract
must have contractual
capacity
 Certain parties, such as
persons adjudged to be
insane, do not have
contractual capacity
Lawful Object
 The object of the contract
must be lawful
 Contracts to accomplish
illegal objects or contracts
that are against public
policy are void
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8-9
Defenses to the Enforcement of a
Contract (1 of 2)
 Genuineness of Assent
 The consent of the parties to create a
contract must be genuine
 There is no real consent if the consent is
obtained by:



Duress
Undue influence
Fraud
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8 - 10
Defenses to the Enforcement of a
Contract (2 of 2)
 Writing and Form
 The law requires that certain contracts be in
writing or in a certain form
 Failure of these contracts to be in writing or
be in proper form may be raised against the
enforcement of the contract
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8 - 11
The Evolution of the Modern Law of
Contracts
 Classical law of contracts – parties were
free to negotiate contract terms without
government interference
 Modern law of contracts – parties may
negotiate contract terms subject to
government regulation
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8 - 12
Sources of Contract Law (1 of 2)
 The Common Law of Contracts
 Contract law developed primarily by state
courts
 The Uniform Commercial Code (UCC)
 Comprehensive statutory scheme that
includes laws that cover aspects of
commercial transactions
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8 - 13
Sources of Contract Law (2 of 2)
 The Restatement of the Law of
Contracts
Compilation of model contract law principles
drafted by legal scholars
 The Restatement is not law
 However, lawyers and judges often refer to it
for guidance in contract disputes

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8 - 14
Objective Theory of Contracts
 Holds that the intent to enter into an
express or implied-in-fact contract is
judged by the reasonable person
standard
 The subjective intent of a party to enter
into a contract is irrelevant
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8 - 15
Uniform Computer Information
Transaction Act (UCITA)
 Establishes uniform legal rules for the
formation and enforcement of electronic
contracts and licenses
 Addresses most of the legal issues that
are encountered while conducting ecommerce over the Internet
 It is a model act that is the basis for the
creation and enforcement of cyberspace
contracts and licenses
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8 - 16
Classifications of Contracts:
Formation (1 of 4)
Bilateral Contract
 A contract entered
into by way of
exchange of
promises of the
parties
 “A promise for a
promise”
Unilateral Contract
 A contract in which
the offeror’s offer can
be accepted only by
the performance of
an act by the offeree
 “A promise for an act”
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8 - 17
Classifications of Contracts:
Formation (2 of 4)
Express Contract
 An agreement that is
expressed in written
or oral words
Implied-in-fact
Contract
 A contract where
agreement between
parties has been
inferred from their
conduct
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8 - 18
Classifications of Contracts:
Formation (3 of 4)
Quasi-Contracts (Implied-in-Law
Contracts)
 Allows a court to award monetary
damages to a plaintiff for providing work
or services to a defendant even though no
actual contract existed between the
parties
 Intended to prevent unjust enrichment and
unjust detriment
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8 - 19
Classifications of Contracts:
Formation (4 of 4)
Formal Contracts
 Contracts that require
a special form or
method of creation




Contracts Under Seal
Recognizances
Negotiable
Instruments
Letters of Credit
Informal Contracts
 No special form or
method is required for
their creation
 Fully enforceable and
may be sued upon if
breached, e.g.:



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Leases
Sales Contracts
Service Contracts
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Classifications of Contracts:
Enforceability (1 of 2)
Valid Contract
 Contract that meets
all of the essential
elements to establish
a contract
 Enforceable by at
least one of the
parties
Void Contract
 A contract that has no
legal effect
 Neither party is
obligated to perform
 Neither party can
enforce the contract
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8 - 21
Classifications of Contracts:
Enforceability (2 of 2)
Voidable Contract
 Contract where one
or both parties have
the option to avoid
their contractual
obligations
 If a contract is
avoided, both parties
are released from
their contractual
obligations
Unenforceable
Contract
 A contract where the
essential elements to
create a valid
contract are not met
 However, there is
some legal defense
to the enforcement of
the contract
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8 - 22
Classifications of Contracts:
Performance
Executed Contract
 A contract that has
been fully performed
on both sides
 A completed contract
Executory Contract
 A contract that has
not been fully
performed by one or
both parties
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8 - 23
Equity
A doctrine that permits judges to
make decisions based on fairness,
equality, moral rights, and natural
law.
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8 - 24
The United Nations Convention on
Contracts for the International Sale of
Goods (CISG)
 Applies to contracts for the international
sale of goods
The buyer and seller must have their places
of business in different countries
 Both of the nations must be parties to the
convention, or
 The contract specifies that the CISG controls

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