Business Its Legal Ethical and Global Environment 11th Edition Jennings Solutions Manual

Business Its Legal Ethical and Global
Environment 11th Edition Jennings

Solutions Manual
Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/business-its-legal-ethical-and-global-environment-11th-edition-jennings-solution
s-manual/
CHAPTER 11
CONTRACTS AND SALES:
INTRODUCTION AND FORMATION
For up-to-date legal and ethical news, go to mariannejennings.com.
LECTURE OUTLINE
Use opening CONSIDER 11.1 to pique students' interest.
11-1 What is a Contract? (See PowerPoint Slide 11-1)
 Definition
 Set of promises for breach of which the law gives a remedy

 Defined in Restatement of Contracts – American Law Institute
 Helps Businesses with Planning
11-2 Sources of Contract Law (See PowerPoint Slide 11-2)
11-2a Common Law
• English common law

• Summarized in Restatement (Second) of Contracts
 Developed by American Law Institute

 Followed in most states
• Applies to contracts with subject matters of land or services
Examples: Mortgage, lease
11-2b The Uniform Commercial Code (UCC) (See PowerPoint Slide 11-3)
• Common law is not uniform from state to state

• ALI and National Conference of Commissioners on Uniform State Laws drafted it
• First appeared in 1940s
• Adopted in part or whole in all states
• Article II governs contracts for the sale of goods
• More liberal than common law
• Reformed/revised again in 2003
• UCC versus Common Law – case determinations often required
203
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use
as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning
management system for classroom use.
204 Part III Business Sales, Contracts, and Competition
See PowerPoint Slide 11-4.
CASE BRIEF 11.1
Accessory Overhaul Group, Inc. v. Mesa Airlines, Inc.

994 F.Supp.2d 1296 (N.D. Ga. 2014)
FACTS: Accessory Overhaul Group, Inc. (AOG) provides commercial aircraft component testing, overhauling,
and certification services for Mesa Air Group, Inc. (“Mesa”) and its subsidiary, Mesa Airlines, Inc. AOG
submitted a bid to Mesa for work on its planes, which Mesa accepted in the fall of 2007.
AOG began performing work for Mesa in October 2007, and the next month the parties executed a
memorandum of understanding (MOU). The MOU provides that it “shall remain in effect until the execution
of the Contract by the Parties or its termination as described herein.” From 2007 to 2012, AOG serviced and
maintained Mesa's wheels, tires, and brakes.
In January 2010, Mesa filed for bankruptcy protection, and the bankruptcy court deemed AOG a “critical
vendor.” Mesa continued its commercial relationship with AOG, and on January 14, 2010, the parties executed
a critical trade agreement (CTA). The CTA broadly defined the parties' relationship during Mesa's bankruptcy
case.
Sometime in 2011, after Mesa had emerged from bankruptcy, the parties resumed negotiations of a more
detailed contract. AOG's president, Ron Byrd, worked with Scott Johnson, Mesa's senior director for
maintenance and engineering technical administration, to draft the contract.
Byrd and Johnson exchanged several drafts of an agreement. On November 21, 2011, Johnson sent Byrd an
email, stating that he had updated the pricing per AOG's request and that he had included with his email “a
soft-copy version as well as the PDF.” Johnson then stated, “If you're good, please sign and return. Then, I'll
route through our contract signature process here at Mesa.” Byrd signed and returned the document that day.
On January 3, 2012, Johnson informed Byrd that the document had “hit a snag” in the finance department.
Mesa's senior vice president of finance had “rejected” a term dealing with late fees, and Byrd agreed to the
removal of that term.
In March 2012, Johnson presented the November 21 document to Mesa's president, Michael Lotz, for his
review. Lotz refused to sign the contract.
On May 9, 2012, AOG met with Mesa to discuss a rate increase. AOG unequivocally told Mesa during the
meeting that if the rate did not increase, it would cease work with Mesa right away or “pretty quickly.” Mesa
responded that it was going to put the wheel, tire, and brake work back out for bid immediately.
That same day, Mesa issued a new request for proposals on the wheel, tire, and brake maintenance work. AOG
bid on the work at its increased rate. By the end of June, Mesa had chosen a different vendor, and on June 30
Mesa removed Mesa's aircraft from AOG's servicing.
AOG sent Mesa invoices seeking over $3.4 million. Mesa refused to pay the invoices on the basis that the
November 21 document is not a binding contract.
AOG filed suit and Mesa filed a motion for summary judgment on AOG's claims.
ISSUE: Was the contract governed by UCC or common law?
Chapter 11 Contracts and Sales: Introduction and Formation 205
DECISION: The contract is not governed by the UCC. Whether the UCC or common law applies depends on
whether the parties' relationship predominantly involved goods or services. AOG performed repair services,
and while those services may have involved goods, the primary purpose of AOG's work was to service the
wheels, tires, and brakes of their aircraft.
In repair-contract cases, which typically involve goods and services, courts look to the “fundamental nature of
the transaction.” “The primary purpose of a repair transaction is not to sell or purchase parts, but to change or
improve the item and return it to the owner. In such cases, the provision of goods is incidental, and the UCC
does not apply.”
Here, the parties' own words show that the primary purpose of their relationship was for AOG to provide
wheel, tire, and brake services to Mesa. Beginning with the MOU, the parties characterized their relationship
as a service-based one. The MOU provides that AOG would be the wheels/tire/brakes maintenance and repair
and management services provider for Mesa. Thus, the MOU set forth the “terms and conditions under which
AOG will provide such services to Mesa.” Similarly, the CTA continued the parties' service relationship.
Finally, in its complaint AOG characterizes itself as a business that “provides parts and repair and maintenance
services for commercial aircraft.” AOG also avers that it had to purchase parts from third parties in order to
repair and maintain Mesa's wheels, tires, and brakes. This practice was confirmed by AOG's CEO, who
testified that AOG bought parts from vendors to perform services for Mesa.
Answers to Case Questions
1. List the factors that the court examined to determine UCC versus common law. The language of the
parties’ agreement, the nature of the services and parts provided, and the stated purpose of the agreement.
2. Why does the court answer the UCC application question first before dealing with the contract dispute?
The issue of formation would be different under UCC vs. common law, so the court needs to know which
source of law applies.
See PowerPoint Slide 11-5 for more examples.
ANSWER TO CONSIDER 11.2: Go through the tutorial with the students. In this case, under the agreement,
DPS was obliged to sell dirt for fill at the airport project. There was delivery of the dirt, but many goods are
delivered pursuant to the terms of a contract. The court held that dirt may be cheap, but that does not change
the intent of the parties, which was the purchase and sale of dirt. Paramount Contracting Co. v. DPS
Industries, Inc., 709 S.E.2d 288 (Ga. App. 2011).
There are many similar types of Internet contracts. For example, some political consultants offer to obtain
donors for candidates. Some companies offer to solicit donations and donors for nonprofit organizations. The
key is that they are working to develop a data base and are not just selling a list of names.
 Gordonsville Energy, L.P. v. Virginia Electric & Power Co., 29 U.C.C. Rep. Serv. 2d 849 (Va. Cir. 1996)
(electricity is not goods).
 Simulados Software, Ltd. v. Photon Infotech Private, Ltd., 40 F.Supp.3d 1191 (N.D. Cal. 2014) (mass-
produced software is considered a good).
 In re Sony Gaming Networks and Customer Data Security Breach Litigation, 996 F.Supp.2d 942 (S.D.
Cal. 2014) (Internet connectivity not a good, but a service).
 Land O'Lakes Purina Feed LLC v. Jaeger, 976 F.Supp.2d 1073 (S.D. Iowa 2013) (weaned pigs are goods).
 MWI Veterinary Supply Co. v. Wotton, 896 F.Supp.2d 905 (D. Idaho 2012); 690 F.3d 1139, 78 UCC
Rep.Serv.2d 36 (10th Cir. 2012) (patents and trademarks are not goods).
 Champion Turf, Inc. v. Rice, Papuchis Const. Co., 21 U.C.C. Rep. Serv. 2d 519, 853 S.W.2d 323 (Mo.
App. 1993) (golf irrigation system is within definition of goods).
 Mogan v. Cargill, Inc., 21 U.C.C. Rep.Serv.2d 661, 856 P.2d 973 (1993) (wheat considered goods).
 Bohle v. Thompson, 8 U.C.C. Rep.Serv.2d 897, 78 Md. App. 614, 554 A.2d 818 (1989) (sale of standing
timber is sale of goods).
 Aslakson v. Home Sav. Ass'n,, 6 U.C.C. Rep.Serv.2d 35, 416 N.W.2d 786 (Minn. App. 1987) (mobile
homes are goods).
 TK Power, Inc. v. Textron, Inc., 433 F.Supp.2d 1058 (N.D. Cal. 2006) (high frequency battery chargers –
court held that the predominant factor was development and installation of the battery chargers, so it was a
common law subject matter).
 Wixon Jewelers, Inc. v. Di-Star, Ltd., 218 F.3d 913, 42 U.C.C. Rep.Serv.2d 94 (8th Cir. 2000) (diamonds
are goods).
 Flanagan v. Consolidated Nutrition, L.C., 627 N.W.2d 573 (Iowa Ct. App. 2001) (livestock are goods).
 Weil v. Murray, 161 F.Supp.2d 250, 44 U.C.C. Rep.Serv.2d 482 (S.D. N.Y. 2001) (Degas painting is
goods).
 Dantzler v. S.P. Parks, Inc., 40 U.C.C. Rep.Serv.2d 955, 1988 WL 131428 (E.D. Pa. 1988) (purchase of
ticket to amusement park ride is not transaction in "goods").
 State v. Cardwell, 38 U.C.C. Rep.Serv.2d 1158, 718 A.2d 954 (1998) (concert tickets are goods).
• Article 2A – Leases (See PowerPoint Slide 11-6)
 Addendum to UCC
 Covers leases of goods (long-term leases such as car leases)
 Adopted in most states
• E-commerce contract law: Uniform Computer Information Transactions Act (See

PowerPoint Slide 11-7)
 Uniform Computer Information Transactions Act (UCITA)
 Not widely adopted yet (Virginia and Maryland)

 Governs transactions in software
 Governs shrink-wrap and click-wrap contracts
11-3 Types of Contracts
11-3a Bilateral Versus Unilateral Contracts (See PowerPoint Slide 11-8)
• Bilateral: Both parties promise something in exchange for the other party’s promise
Example: You promise to pay back money with interest and the bank promises to loan you
the money
• Unilateral: One party promises something in exchange for performance
Example: “Drive my car across the country and I’ll pay you $500 plus expenses”
FOR THE MANAGER’S DESK − A UNILATERAL TATTOO: Discuss the case, the radio station, the
response, the role of humor in whether an offer exists.
11-3b Express Versus Implied Contracts (Quasi Contracts) (See PowerPoint Slides 11-9 and 11-10)
• Express contracts are written or oral agreements

• Implied contracts are nonspoken, nonwritten understandings
Example: When you go into a doctor’s office, you have an implied contract to pay her for
her services even though you may not sit down and organize the details
• Law implies a contract where one does not exist to prevent unjust enrichment
• Minors’ contracts for necessaries are enforced in quasi contract since they are voidable
11-3c Void and Voidable Contracts (See PowerPoint Slide 11-11)
• Void contract is one to do something illegal or against public policy – neither side can
enforce
• Voidable contracts are contracts in which one party has the right to end the contract
Example: Contracts of minors are voidable
11-3d Unenforceable Contracts
• Procedural problem precludes enforcement

• Statute of frauds
11-3e Executed Versus Executory Contracts (See PowerPoint Slide 11-12)
• Executed contract is one in which the promises under the contract have been performed
• Executory contract is one that has been entered into but not yet performed; can be partially
executory/executed if one side has performed
11-4 Consumer Credit Contracts
11-4a Discrimination in Credit Contracts
• The Equal Credit Opportunity Act (See PowerPoint Slides11-13, 11-14, 11-15)
 Passed to be certain credit was awarded on applicant’s merits and not on extraneous
factors such as age, sex, race, color, religion, or national origin
 Cannot consider
 Marital status
 Receipt of public assistance income
 Receipt of alimony or child support
 Plans for children
 Spouses have rights to individual credit applications

 Penalties
 Actual damage plus punitive damages of up to $10,000

 Can also recover higher damages in class actions
CASE BRIEF 11.2
A.B. & S. Auto Service, Inc. v. South Shore Bank of Chicago

962 F.Supp. 1056 (N.D. Ill. 1997)
FACTS: A.B. & S. Auto Service is owned by Jerry Bonner, an African-American. Bonner, on behalf of A.B.
& S., applied for a loan at South Shore Bank. The application asked for a personal history and Bonner
revealed an extensive arrest record. The loan officer approved the application, but the committee denied it
based on his criminal record. South Shore Bank has made at least three business loans to applicants with
criminal records, at least one of whom was an African-American. Bonner filed suit under the ECOA.
ISSUE: Was South Shore’s denial a violation of the ECOA?
DECISION: The denial was based on a criminal record, not race. There was a legitimate business reason for
the denial.
1. What, according to Mr. Bonner's expert, is the impact of considering criminal records of applicants? Did
the evidence support the expert's testimony? There is disparate impact on African-Americans when banks
examine criminal records as part of the credit process because they have more criminal records and, he
asserts, would be denied more loans. No, the evidence showed the bank made loans to those with criminal
records after following a thoughtful process.
2. Is the use of a criminal record in making a decision to extend credit a violation of the ECOA? Explain.
No, a criminal record is a valid concern and the SBA requires it. A criminal record reflects character and
integrity.
3. Do you think a criminal record is an indication of character? Explain. Have students discuss the role of
previous criminal activity in business decisions. The SBA does see the two as related. Have them discuss
whether the nature of the crime and their age at the time of the crime is important.
11-4b Subprime or Predatory Lending (See PowerPoint Slide 11-17)
• Market was very active before the 2008 financial market collapse
• Lending agreements tended to be one-sided and contain high interest rates and default
triggers that easily took hold
• Result is extensive web of federal and state regulations for subprime lending and predatory
lendings – Dodd-Frank and a new consumer bureau within the Federal Reserve
11-4c Credit Disclosures
• The Truth-in-Lending Act (TILA) (See PowerPoint Slides 11-18 and11-19)
 Part of Consumer Credit Protection Act
 Purpose was full disclosure

 Elaboration and forms are found in Regulation Z
 Consumer Financial Protection Bureau (CFPB) is new agency created under Dodd-
Frank
• Will be housed in Federal Reserve

• Will be funded by the Federal Reserve
11-4d Controlling Credit Card Contracts
• Credit cards for those under the age of 21 (See PowerPoint Slide 11-20)
 Under CARD, credit terms offered must last for at least one year
 Written applications required
 Limits on line-of-credit increases
 College and university solicitation restrictions
• Liability limitations (unauthorized use) (See PowerPoint Slide 11-21)
 Liability limitations – not liable for more than $50 of unauthorized use if certain
conditions met
 Notification requirements
• Unauthorized credit card use and the chip
 As of 2016, merchants who do not require consumers to use a chip credit card will not
be entitled to reimbursement for any fraudulent transactions
 The goal of the switch to chip credit cards is to eliminate thieves' ability to create
fraudulent credit cards
• Transfer terms
 Transferring credit balances is now regulated in detail

 Limits on changing terms on the transfer of balances
 Limits on changes in interest rate on balance
11-5 Formation of Contracts (See Exhibit 11.1 and PowerPoint Slide 11-22 for overview)
11-5a Offer (See PowerPoint Slide 11-23)
• Parties
 Person who makes offer = offeror

 Person who receives offer = offeree
• Must have language that indicates intent to contract vs. negotiation
 Not just inquiry

 More than negotiation
 Courts use an objective, not a subjective, standard
 Examine language
 Examine circumstances
 Examine the actions of the parties
CASE BRIEF 11.3
Leonard v. PepsiCo
210 F.3d 88 (2d Cir. 2000)
FACTS: John Leonard saw an ad for a Pepsico promotion program that involved saving Pepsi Points in order
to obtain merchandise such as hats, jackets and other personal items. The ad showed a young man getting a
Harrier Jet with Pepsi Points and then taking the jet to school. The screen blinked the number of Pepsi Points
for items shown and when the jet appeared, the screen blinked 7,000,000 points.
Leonard saved the Pepsi Points and the cash equivalent and tried to redeem them for the jet and Pepsi refused.
Leonard filed suit alleging that Pepsi’s ad was an offer which he accepted. Pepsi said the ad was not an offer.
DECISIONS BELOW: The court granted summary judgment to Pepsi.
ISSUE ON APPEAL: Did Pepsi’s ad constitute an offer?
DECISION: No. The ad was a joke. There were rules and instructions that went along with the ad. And the
contract would have had to have been in writing and it was not.
1. When does the court think an offer was made? Leonard says that Pepsi made an offer through its ads
promoting Pepsi Points and what those points could be redeemed to obtain. The depiction of the Harrier
Jet with the number of points was an offer he accepted by obtaining that number of points and its
equivalent. However, the court says that Leonard made an offer by sending in his points and the check
and making the demand for the jet, an offer that Pepsico was free to accept or reject.
2. Why is whether the ad is funny an important issue? If the ad is humorous, it proves that subjectively there
was no intent to contract. The idea of a teen flying such a serious craft or landing it at school is patently
absurd and makes it unlikely that a serious offer was made.
3. Will Mr. Leonard get his Harrier jet? Why or why not? No, he doesn’t get the jet. The ad was not an
offer, Pepsico did not accept the agreement, the ad was humorous and there was a problem with the statute
of frauds anyway.
ANSWER TO CONSIDER 11.3: The language in this true offer is definite, but the intent is unclear from the
opening language: “We are prepared” to make an offer is not indicative of a present intent to contract. The
parties in this case had an ongoing dispute about whether an offer was made.
• Certain and definite terms (See PowerPoint Slide 11-25)
Common Law UCC

parties subject matter
subject matter quantity
price parties
payment terms
performance times
Under the UCC, the court can consider industry custom and course of dealing in
determining whether terms are sufficient.
ANSWER TO ETHICAL ISSUES (Anticipating Morality): Go through the examples listed such as Lance
Armstrong and Paula Deen and discuss the problems the companies would experience as a result of their
conduct. Negotiations on these clauses can be difficult because the problems are difficult to anticipate. For
example, athletes have social lives, but bar-room brawls can result. Hewlett-Packard includes in its code of
ethics a provision that prohibits employees from engaging in behavior that results in bringing ridicule, negative
publicity, or loss of business.
• Communication to offeree (See PowerPoint Slide 11-26)
 Offeree cannot accept offer that never arrives

 Ads are invitations for offers – not offers
• Termination of an offer by revocation
 Can be revoked any time prior to acceptance (See PowerPoint Slide 11-27)
 Exception is option
 Offeror is paid to hold offer open
 It is a separate contract for time
 Second exception is UCC merchant’s firm offer
 Offer by merchant signed in writing states it will be kept open (irrevocable) for
period stated (maximum of three months)
• Termination of an offer by rejection (See PowerPoint Slide 11-28)
 Offeree indicates “no”

 Rejection by changes in terms – counteroffer; see example
BUSINESS PLANNING TIP (Docketing): You need to docket due dates so that contract rates are not lost.
ANSWER TO CONSIDER 11.4: December 30 – Hancock letter to Houston Dairy, $800,000 loan, 9 1/4
percent, 7-day acceptance limitation, and cashier’s check for $16,000. January 17 – Dairy sends acceptance
and $16,000 to Hancock. January 23 – check sent for deposit. January 28 – closing terms arranged. January
30 – Houston Dairy contracts for 9 percent loan from a bank. Houston files suit for breach. There was no
contract. Failure to accept on time resulted in counteroffer by Houston. Hancock was free to accept or reject,
but had not communicated acceptance. Houston Dairy v. John Hancock Mutual Life Insurance Co., 643 F.2d
1185 (5th Cir. 1981).
 Termination by counteroffer – UCC (See PowerPoint Slides 11-29 and 11-30)
 Section 2-207 (See PowerPoint Slides 11-31 and 11-32 and Exhibit 11.2 to
summarize rules)
 Changes to UCC (adoption has been nil because of concerns about how the
changes would work) change the impact of 2-207 and battle of forms
 Nonmerchants – addition of terms in acceptance does not equal a counteroffer;

acceptance results but additional terms aren’t part of contract
Example: A: I will sell you my white Ford Torino for $450. B: I accept. Throw
in new seat covers. Contract for Torino without seat covers results.
 Merchants – battle of the forms; invoices and purchase orders sent back and forth –
no matching terms
• Acceptance with additional terms = contract

• Additional terms are part of contract unless:
▪ Material – price, warranties (immaterial = shipment or payment terms)

▪ Offer limited – “This offer is limited to these terms”
▪ Objection to new terms
 UCC changes to 2-207
• What contract terms were became very confusing

• New rule is applicable to merchants and non-merchants and is the “terms later”
section – if the parties agree on subject matter, the terms can come later
ANSWER TO CONSIDER 11.5: The trial court ordered Schulze to submit to arbitration. In the present case,
Tree Top’s agent, Brady, had sent a confirmation form containing the same arbitration provision to Schulze in
each of the previous nine transactions he brokered between the two parties. Schulze had ample notice that the
tenth confirmation would be likely to include an arbitration clause. To prevent the clause from becoming part
of the contract, Schulze needed only to give notice of objection within a reasonable time. As a matter of law,
inclusion of such a clause in the tenth confirmation was not “unfair surprise.” Therefore the addition of the
arbitration clause was not a material addition to the contract, under the test used in Illinois law. The judgment
of the district court was affirmed. Schulze and Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709 (7th Cir.
1987).
Colorful aftermath for students: Schulze and Burch still manufacture “Toastettes,” and its name can be found
on the box.
CASE BRIEF 11.4
C9 Ventures v. SVC-West, L.P.

202 Cal.App.4th 1483, 136 Cal.Rptr.3d 550 (Cal. App. 2012)
FACTS: On July 3, 2007, SVC-West, L.P. (SVC) did time-share presentations at hotels and ordered helium
tanks quite often for balloons. SVC placed a rush order with C9 Ventures (C9) for eight helium-filled tanks
used to inflate festive balloons. C9 accepted the order and later that day delivered the tanks.
On the reverse of the invoice was an indemnification provision requiring SVC to indemnify C9 for any loss
arising out of the use or possession of the helium-filled tanks. C9 later picked up the tanks, and, weeks later,
SVC paid the invoice. SVC had obtained helium-filled tanks from C9 on prior occasions.
The invoice was on a single piece of paper, on the reverse side of which was a section entitled
“INDEMNITY/HOLD HARMLESS” (boldface omitted), which stated in part: “Customer agrees to
indemnify[,] defend and hold harmless C9 … from and against any and all liability, claims, judgments,
attorneys fees and cost of … every[ ] kind and nature, including, but not limited to injuries or death to persons
and damage to property, arising out of the use, maintenance, instruction, operation, possession, ownership or
Rental & Decor of the items rented, however cause[d], except claims or litigation arising through the solo [sic]
gross negligence or willful misconduct of C9….” The reverse side of the invoice also included a section
entitled “LEGAL FEES,” which provided, in essence, that in an action to enforce “this Rental & Decor
Agreement,” the prevailing party would be entitled to recover attorney fees. Before then, C9 had presented the
same or similar invoice to SVC ten times, but had received the signature of an SVC employee only six times.
SVC never attempted to substitute its own form agreement for C9’s form.
C9 typically delivered the tanks in the morning when no SVC guests were present, but on July 3, C9’s
employee, Ernesto Roque, did not arrive at the SVC premises to make the delivery until about 5:00 P.M.
Roque asked SVC employee, Zayra Renteria, where to place the eight helium-filled tanks. Renteria, who was
expecting the delivery during her shift, instructed Roque to bring the tanks up to the mezzanine level of the
resort, at which point she would inform him where to place them. Roque wrote the following on the invoice,
“[N]obody would sign all running around in lobby nobody knew who . . . After accident nobody got
signatures.” Roque stacked five to seven tanks against the walls next to the service elevator. He was in the
process of bringing up another tank when a young boy, whose parents were attending the time-share
presentation, ran up to the tanks and hugged one of them, pulling it over. The tank, which was about five feet
tall and weighed 130 pounds, fell on the boy’s hand. He was hospitalized and underwent surgery for his
injuries.
DECISION BELOW: SVC and C9 each paid the boy’s family to settle a lawsuit brought to recover for his
injuries. C9 filed a cross-complaint against SVC to enforce the indemnification provision on the back of the
unsigned invoice. The trial court found for C9 and SVC appealed.
ISSUE ON APPEAL: Is the indemnification provision on the back of the unsigned invoice enforceable against
SVC?
DECISION: The question here would be is the indemnification provision on the back of the unsigned invoice
enforceable against SVC? SVC and C9 entered into an oral contract when C9 accepted SVC’s Chapter 14 for a
full discussion of those defenses. For Example, a party to a telephone order for eight helium-filled tanks.
Under section 2-207, additional terms proposed in an acceptance or confirmation may become terms of the
contract in certain situations. The oral contract between SVC and C9, however, was a lease of personal
property (the helium-filled tanks), and not a sale of goods under the California Uniform Commercial Code.
The terms on the back of the unsigned invoice would have become part of the parties’ oral contract only if
SVC agreed to those terms. SVC did not agree to those terms by course of dealing or course of performance, or
under basic contract law.
However, even if this were a transaction in goods governed by the California Uniform Commercial Code, then
the issue turns on whether SVC is a merchant. If SVC is not a merchant, the terms of the invoice are
considered to be mere proposals for additional terms, which SVC did not accept. However, an indemnification
provision is deemed a material alteration to an agreement as a matter of law, so an indemnification provision
on the back of the invoice would not, under section 2-207, become part of the contract between SVC and C9.
1. Why is it important to determine whether the contract involved a sale or lease of goods? Because under
the UCC there would be rules of acceptance of additional terms that would control whether there is
liability.
2. Is the indemnification clause material? Yes, it would be material unless there was a pattern of acceptance
of that clause in other contracts and on other paperwork from other contracts.
3. Would it be important to know if SVC is a merchant? Why? Because the rules are slightly different for
acceptance with additional terms between merchants than they are for those who are not merchants. The
contract is formed with the additional terms (unless they are material, objection is made or there was a
limited offer) when there are merchants and without if non-merchants involved.
ANSWER TO CONSIDER 11.6:
1. Result for nonmerchants: contract for the bike. No tire pump. Result for merchants: contract for the bike
with the tire pump (immaterial).
2. Result for nonmerchants: contract for the car. No repair list (FTC regs not considered here). Result for
merchants: contract for the car. No repair list (offer is expressly limited so immateriality is irrelevant).
Again, FTC regs not considered.
3. Result for both merchants and nonmerchants is no contract because of “conditional acceptance.” It is not
acceptance. It is a counteroffer and a rejection.
FOR THE MANAGER’S DESK − PRELIMINARIES/DRAFTING CHECKLISTS: Go through the

preliminaries and drafting checklist. (See PowerPoint Slides 11-34 and 11-35)
• Termination by offer expiration
 Time for offer expires

 Every offer expires (lapses) after a reasonable time
11-5b Acceptance: The Offeree's Response (See PowerPoint Slides 11-36, 11-37 and 11-38)
• Offeree’s favorable response – must be communicated to offeror

• Acceptance by stipulated means
 Use means stipulated, then mailbox rule applies

 Don’t use means stipulated, then counteroffer and rejection
 Timing
 Mailbox rule if same means or stipulated means used

 Arrival if different (slower) method used
 If nonstipulated means used, it is a counteroffer and a rejection
See Exhibit 11.3 and PowerPoint Slide 11-39.
• Acceptance with no stipulated means
 Can use any methods of communication

 Same or reasonable method of communication gets you the mailbox rule
CASE BRIEF 11.5
Kass v. Grais
887 N.Y. S.2d 578 (N.Y. Div. One 2009)
FACTS: Loryn Kass (plaintiff) made an offer to purchase land from David Grais and others (defendants).
Twenty minutes after she revoked her offer, she received a FedEx package that included all the signed
documents from Mr. Grais for the sale of the land to Ms. Kass. Mr. Grais filed suit seeking to enforce their
contract on the grounds that the mailbox rule applied and that his acceptance of her offer occurred when he
sent the FedEx package, thus making the acceptance effective before her revocation.
DECISION BELOW: The trial court granted summary judgment to Ms. Kass. Mr. Grais appealed.
ISSUE ON APPEAL: Does the mailbox rule apply to FedEx deliveries? Was there an acceptance before the
revocation?
DECISION: No, there was no acceptance because the parties’ terms provided that there was only
communication UPON RECEIPT and there had been no receipt prior to her revocation.
Answers To Case Questions
1. Is this a stipulated means offer? Explain why or why not. Yes, it is a stipulated means offer because the
terms specified how the parties were to communicate with each other and what counted as communication,
which was receipt only.
2. Why does the language change the mailbox rule? The parties always have the ability to override the
provisions of the law on acceptance and timing because those rules are in place to take care of situations
when the parties do not agree.
3. Does the court decide the issue of FedEx delivery and the mailbox rule? The court does not decide the
FedEx issue directly because of the terms of the parties’ agreement – that issue will have to wait for
another case when there is not a stipulated means to determine whether the mailbox rule applies to
overnight deliveries.
11-5c E-Commerce and Contract Formation (See PowerPoint Slide 11-41)
• Same requirements
• Methodology varies
• Acceptance is by point and click
• Must show an understanding that there is a contract
CASE BRIEF 11.6
Home Basket Co., LLC v. Pampered Chef, Ltd.

55 UCC Rep.Serv.2d 792 (D. Kan. 2005)
FACTS: Greenbrier (GBC) sold goods to The Pampered Chef (TPC). The process was that TPC e-mailed
GBC an offer. GBC would go to TPC’s website and order. GBC would accept purchase terms. There was a
pop-up on the terms. Disputes arose between the two parties and GBC filed suit in Kansas. TPC moved to
dismiss because Kansas was the improper forum under the contract. The question boiled down to whether the
parties could go forward with the court litigation or whether the additional term of arbitration applied and they
had to go forward with the arbitration.
ISSUES: Did the TPC website terms apply to TPC? (Hence, the venue issues.)
DECISION: The court held the terms on the site (including venue) were part of the contract and GBC was
subject to them. So, the court litigation could not go forward because the additional terms had been agreed to
and so the case had to go to ADR.
1. Describe the ordering process between the two parties. TPC stated terms. GBC went to TPC website to
enter information. GBC accepted terms. Contract/order proceeded.
2. Does it matter to the court that neither side ever signed a written agreement? No, under the new UCC, a
record is all that is necessary. Electronic transactions are valid.
3. What responsibility does the court impose on those who use websites for contracting purposes? The court
makes it clear that we must read and understand point and click terms because we are bound by them. You
are bound by those terms if you continue performing under them.
11-5d Consideration (See PowerPoint Slides 11-43 and 11-44)
• Distinguishes gifts from contracts

• What each party is willing to give up for the other:
A – $17,000 – Car Dealer

A – car
• The bargained-for exchange
ANSWER TO CONSIDER 11.7: Yes, the failure to pay meant the contract ended. Consideration must pass
for continuing validity of contract. Tragically, Kenner lost the right to Star Wars toys, not realizing their
popularity would grow again.
• Unique consideration issues
 Charitable subscriptions are enforceable even though detriment is one-sided

 Reliance (promissory estoppel) provides element of detriment for contracts not yet
begun
ANSWER TO CONSIDER 11.8: There was offer and acceptance, but no consideration for the additional
amount. Even if Fulkins signs, the agreement lacks consideration. Tretorn is not entitled to an additional $600
without something more. Fulkins could sign and then refuse to pay – contract lacks consideration and cannot
be enforced.
11-5e Contract Form: When a Record is Required (See PowerPoint Slides 11-45 and 11-46)
• Common law statute of frauds

• Types of contracts for a record
 Real property
 Contracts that can’t be performed in one year
 Contracts to pay the debt of another
Example: Officers for a corporation
• UCC statute of frauds
 Contracts for sale of goods for $5,000 or more
ANSWER TO CONSIDER 11.9:
1. All land contracts must be in writing; amount or price is not the issue – it is land.
2. Contract is for services; it is less than one year; need not be in writing; amount is irrelevant.
3. Goods less than $500 ($5,000, new UCC); need not be in writing.
4. Promise to pay the debt of another – must be in writing.
5. Good; costs over $500 ($5,000, new UCC); must be in writing.
CASE BRIEF 11.7
Sununu v. Philippine Airlines, Inc.

792 F.Supp.2d 39 (D. D.C. 2011)
FACTS: Because of financial setbacks, Philippine Airlines (PAL) wanted to renegotiate its aircraft leases,
including those it had with World Airlines (WA). WA refused to negotiate with PAL. PAL retained John
Sununu, the former Governor of New Hampshire and the former Chief of Staff to President George H. W.
Bush and Sununu’s partner, Victor Frank, to try their hands at a renegotiation. Sununu and Frank sent a
contract proposal to PAL, which included a proposed “success fee” of $600,000 if they persuaded WA to
accept a modification of the lease contract. PAL gave Sununu and Frank a verbal go-ahead, but did not sign the
proposed contract. PAL then sent a contract with terms that were different from what Sununu and Frank had
proposed. The PAL terms included a success fee of 4 percent of savings on the aircraft leases if Sununu and
Frank were able to reach a settlement that met two very detailed settlement offers PAL had put into its contract
proposal. Because they were so busy with contract renegotiations, Sununu and Frank did not review the PAL
agreement and simply signed the contract.
Sununu and Frank were able to successfully renegotiate the lease contract with WA, saving PAL $12.8 million
on the lease payments. PAL refused to pay Sununu and Frank their success fee of $520,000 because the actual
settlement they had negotiated with WA did not meet the very specific contract terms that PAL had put into the
signed written agreement. Sununu and Frank filed suit against PAL to collect their fee on the basis of several
contract theories.
The litigation went into a nine-year holding pattern while PAL endured financial reorganization proceedings in
the Philippines. After re-emerging from bankruptcy, PAL moved to dismiss the complaint. This Court granted
PAL's motion on the breach of contract claim but allowed discovery to proceed on unjust enrichment. PAL
now moves again for summary judgment.
ISSUES ON APPEAL: Is there a contract and, if so, what are its terms and why?
DECISION: Judgment for PAL. Sununu and Frank conferred a benefit on PAL through their efforts to
persuade WA to negotiate with PAL; and PAL accepted and retained the benefit for the renegotiated lease.
There can be no claim, however, for unjust enrichment when an express contract exists between two parties. A
court awards relief based on quasi-contractual principles, implying by law a contract, only where one did not
exist in fact. The court stated:
To grant PAL’s summary judgment motion is not to condone its conduct. The airline can rightly be
accused of stinginess for enforcing the formalistic terms of the contract in spite of the plaintiffs’
earnest efforts on its behalf…. PAL may have violated Sununu and Frank’s trust, but it did not violate
the law. … Sununu and Frank seem to have done their best to serve their client, but they made a
reckless bet by trusting PAL. They were accustomed to handshake deals in which personal
relationships count for more than legal documents, so they made little effort to put their understanding
with PAL on paper. When they ran into a client who didn’t play by the same rules, they paid the price.
The lesson is one that should be taught in law and business schools across America: When in doubt,
write it out.
1. What is the significance of the rescission argument? The court held that you cannot say that a contract was
rescinded and then try and make a claim under that same contract. In DC, you cannot partially rescind a
contract – you either have a contract or you do not.
2. Is there a contract? Explain why or why not. There is a contract, but it was not the contract Sununu and
Frank wanted – they lost out on payment because they did not meet the very specific terms that had signed
and agreed to.
3. Evaluate PAL's ethics in this situation. It seems that Sununu and Frank were snookered although they did
the work and got the lease amounts reduced. PAL took advantage of a complex and ongoing situation to
slip in different terms and get the service of renegotiation for a much cheaper price for the consultants.
• Exceptions to the statute of frauds
 Performance
 Parties finish contract
• What form of record is required?
 Need not be one formal document – can be pieced together and can be electronic
 Merchant’s confirmation memorandum
 One side verifies contract

 Summarizes oral agreement
 Signed by one side – enforceable against both (unless there is objection after it is
mailed)
11-5f Writing and E-Commerce: The Uniform Electronic Transactions Act
• Electronic contracts (See PowerPoint Slides 11-48 and 11-49)
 Allows for the identification of electronically transferred documents using encryption

technology
 Digital signatures help authenticate users
 Uniform Electronic Transactions Act (UETA)
 Law in 47 states plus District of Columbia

 Governs contracts formed over the Internet
 Electronic Signatures in Global and National Commerce Act of 2000 (E-sign)
 Federal law
 Mandates recognition of electronic signatures
 States cannot deny legal effect to e-signatures
CASE BRIEF 11.8
Rosenfeld v. Basquiat
78 F.3d 84 (2nd Cir. 1996)
FACTS: Michelle Rosenfeld, an art dealer, alleges she contracted with artist Jean-Michel Basquiat to buy
three of his paintings. The works that she claims she contracted to buy were entitled Separation of the K, Atlas,
and Untitled Head. Ms. Rosenfeld testified that she went to Mr. Basquiat’s apartment on October 25, 1982;
while she was there, he agreed to sell her three paintings for $4,000 each, and she picked out three. Mr.
Basquiat asked for a cash deposit of 10 percent; she left his loft and later returned with $1,000 in cash, which
she paid him. When she asked for a receipt, he insisted on drawing up a contract and got down on the floor
and wrote it out in crayon on a large piece of paper, remarking that someday this contract would be worth
money. The handwritten document listed the three paintings, bore Ms. Rosenfeld’s signature and Mr.
Basquiat’s signature, and stated, “$12,000—$1,000 DEPOSIT—Oct 25 82.” Ms. Rosenfeld later returned to
Mr. Basquiat’s loft to discuss delivery, but Mr. Basquiat convinced her to wait for at least two years so that he
could show the paintings at exhibitions.
After Mr. Basquiat’s death, the estate argued that there was no contract because the statute of frauds made the
agreement unenforceable. The estate contended that a written contract for the sale of goods must include the
date of delivery. From a judgment in favor of the estate, Ms. Rosenfeld appealed.
ISSUE ON APPEAL: Was the crayon receipt a sufficient writing?
DECISION: Yes. It was complete evidence of a contract.
1. Why was the contract required to be in writing? It was a contract for goods for over $500.
2. Did the contract comply with the statute of frauds? Yes, the contract was enough to satisfy the statute of
frauds.
3. Does a writing that does not comply with the statute of frauds make the alleged contract void? No, a
contract not in compliance with the statute of frauds is not void, just unenforceable. Parties can choose to
honor it.
 Merchants' confirmation memoranda
CASE BRIEF 11.9
Brooks Peanut Co., Inc. v. Great Southern Peanut, LLC

746 S.E.2d 272 (Ga. App. 2013)
FACTS: Brooks Peanut is a peanut shelling company operating in Samson, Alabama. Great Southern Peanut,
LLC (GSP) is a competing peanut sheller. Because there is no established peanut commodities market, peanut
shellers and other businesses handling peanut products often use brokers to buy and sell peanuts. Typically, the
broker's fee is paid by the seller. Mazur & Hockman, Inc. (M & H) is a broker used by both Brooks Peanut and
GSP.
In mid-September 2010, Barrett Brooks, president of Brooks Peanut, called Richard Barnhill and Jay Strother,
peanut brokers with M & H, and asked them to find peanuts for his company to buy and to have delivered to
his shelling facility. Brooks requested that Brooks Peanut not be identified as the buyer when M & H contacted
potential sellers. M & H solicited offers from several peanut shellers, including GSP, and conveyed them to
Brooks. After reviewing the offers, on September 20, Brooks asked Strother to communicate a counteroffer to
GSP's manager, Doug Wingate. Specifically, the counteroffer was an offer to buy 3,168,000 pounds of 2010
crop medium runner shelled peanuts for $.4675 per pound, to be delivered monthly throughout 2011.
According to Strother, Wingate accepted the counteroffer that same day, September 20. After Wingate
accepted these terms, Strother revealed that Brooks Peanut was the buyer. According to Strother, Wingate
“sighed” upon learning that a competitor was involved in the transaction; however, he did not reject the deal.
Wingate testified that, although he initially accepted the deal, he declined to consummate it when he learned
that Brooks Peanut was the buyer.
On the same day, M & H prepared and then faxed to GSP and Brooks Peanut a written confirmation of the sale
of peanuts. The confirmation stated: “We confirm a Sale and Purchase Transaction as described below[.]” The
confirmation was printed on M & H letterhead and listed the names and addresses of the seller and the buyer,
as well as terms covering price, quantity, quality, crop year, delivery schedule, and payment method. Spaces
for the seller's contract number and the buyer's purchase order number were left blank. The confirmation stated
that “[t]his confirmation is subject to the following condition[ ]: Seller's contract and Buyer's purchase order to
follow [.]” Next to the term “Quality,” the confirmation noted that the “American Peanut Shellers Association
Trading Rules” applied to the transaction. The confirmation was signed by M & H's Strother.
GSP and Brooks Peanut each received the faxed confirmation from M & H. GSP did not issue a contract and
Brooks Peanut did not issue a purchase order. After Strother sent the confirmation to GSP and Brooks Peanut,
he continued communicating with the parties to finalize the logistics of the deliveries. For example, on
September 21, he told Brooks that GSP had offered to haul the peanut loads. They also discussed increasing
the monthly shipments, but Wingate stated that he wanted “to stay at 6 loads a month on the [B]rooks [Peanut]
contract for right now[.]”
GSP did not raise any objection to the fax confirmation until late January 2011, almost four months after M &
H sent it. Wingate testified that he “did not see the need” to object to the confirmation. Beginning in January
2011, GSP took the position that, despite the confirmation, GSP and Brooks Peanut had not entered into that
particular transaction because Wingate had rejected the sale when he learned that it involved his company's
competitor, that M & H was not authorized to confirm the sale or to send the confirmation, and that a condition
precedent had not occurred because GSP had not issued a written contract.
M & H had routinely brokered thousands of peanut sales between other peanut companies, shellers, and
manufacturers using the same form of trade confirmation. GSP had sold peanuts to Brooks Peanut in June
2009 and April 2010 and that their agreements were memorialized solely by M & H sending the parties
confirmations substantially similar to the one issued this time.
The trial court concluded that GSP had a defense of the statute of frauds as a matter of law. Brooks Peanut
appealed.
ISSUE: Is there a valid contract under the merchant’s confirmation memo provision or does the statute of
frauds bar the contract from being enforced?
DECISION: The confirmation memo was sufficient to constitute evidence of a contract between the parties.
The confirmation memo contained the information needed for the contract to go forward. Also, the parties
continued to behave as if there was a contract and they were ironing out details and no one indicated any
objection to the contract.
Answers To Case Questions
1. What does this case teach us about our responsibilities when we receive a confirmation memo? You have
to pay attention to what comes to you via mail or fax and if you object to the terms you must respond
immediately, and you cannot continue to behave as if the contract is ongoing.
2. Explain the agency question and what works in favor of the memo being valid. The confirmation memo
came from the outside broker so the question is whether the broker had the authority to send the
confirmation memo. The jury will determine this question, but there is the evidence of their prior dealings
and commercial practices that seem to work in favor of the agent having the authority to do so.
See Exhibit 11.4 and PowerPoint Slide 11-52 to summarize formation.
• The effect of the written contract: parol evidence (See PowerPoint Slide 11-53)
 Once a contract is reduced to final form and it has no ambiguities, cannot introduce
evidence to contradict it
 Exceptions are fraud, other defenses
 Modifications are not included
11-6 Issues in Formation of International Contracts (See PowerPoint Slide 11-54)
11-6a CISG – UCC for the World
• Adopted in 1980
• United States has adopted
• Party Autonomy Still Controlling in International Contracts
11-6b Payment Issues in International Contracts
• Terrorism
• Bill of lading for payment
See PowerPoint Slides 11-55 and 11-56 to cover tips for international contracts.
Cover Exhibit 11.5 on pitfalls in international contracts.
CASE BRIEF 11.10
Intershoe, Inc. v. Bankers Trust

571 N.E.2d 641 (N.Y. 1991)
FACTS: Intershoe (shoe importer) entered into a transaction with Bankers Trust for Italian Lira. There was
confusion: Intershoe said it wanted to purchase. Bankers Trust says the written agreement stated they were
selling.
DECISION BELOW: The trial court ordered a trial on whether it was a sale or a purchase.
ISSUE ON APPEAL: Could extrinsic evidence be used to contradict the term of the written agreement?
DECISION: No. The agreement is clear and parol evidence could not be used to contradict the terms of the
agreement.
1. Describe the transaction, the parties, and who sold what to whom. Transaction was one for currency
exchange. Intershoe and Bankers Trust were the parties. Intershoe was the seller. Bankers Trust was the
buyer.
2. Is the memo a final writing? Yes, the memo is in final form.
3. What dangers would the court introduce if orders such as this were contradicted by oral testimony?
Instability of currency market; no reliance on written agreements are risks of oral testimony being allowed.
4. Did someone fail to read a document carefully before signing? Does the parol evidence rule allow "failure
to read" as a defense? Parol evidence will preclude the oral testimony. “Failure to read” is not a defense
to contracts.
11-6c Risk in International Contract Performance: Force Majeure
• Clause that covers risk from political fallout, war, unforeseen closures of canals and
shipping routes
• Excuses performance
ANSWER TO CONSIDER 11.10: Parties should build in clauses for terrorist acts in international contracts;
obtain insurance; have back-up plan. NOTE: This caution was in the 5th edition; the September 11th disaster
makes such precautions more relevant and necessary now.
BIOGRAPHY: FACEBOOK CONTRACT FORMATION AND INTERNET AND LITIGATION

HISTORY
Legal obligations are the kinds of promises that courts will enforce – you have met the elements of a contract.
However, during the course of negotiations and before execution of an agreement, we do obtain information from
the other side, we do have opportunities, and we put them in a weaker position if we do not perform the services
agreed upon. There are those who say that Mr. Zuckerberg stole the idea for Facebook, but ideas really cannot be
patented – there must be something more to patent. However, Mr. Zuckerberg executing on his idea made it
impossible for the Winklevoss twins to go forward with their idea, which was very similar to what Facebook became
– that is, they were creating a social network site and Zuckerberg created his site even as he kept putting them off for
the services he contracted to perform. The ethical issues of unfair advantage and false impression, are examples of
the possible ethical issues in his conduct. Some would say Mr. Zuckerberg snookered them. Some would say that
he took their idea, which was small and made it worldwide, something they were not prepared to do or visionary
enough to see.
ANSWERS TO CHAPTER QUESTIONS AND PROBLEMS

1. The discussion of UCC versus common law has us examine the following:
• The cost of goods versus the cost of service in the contract.

• The role of the seller in performing the contract.
• The nature of the service component.
In this case, the cost of the carpet is clearly the largest part of the contract price. Even though the buyer
wanted the carpet installed (rather than just delivered to her home), the installation is incidental to the
purchase itself. The contract was made for the purchase of the carpet, a good, and the agreement to install
the carpet was then tacked onto the contract. Goods such as carpet were intended as part of the UCC to
have full warranty protection. The contract is covered by the UCC. Pittsley v. Houser, 875 P.2d 232
(Idaho 1994).
2. Cantu was hired as a special-education teacher by the San Benito Consolidated Independent School
District under a one-year contract for the 1990–91 school year. On Saturday, August 18, 1990, shortly
before the start of the school year, Cantu hand-delivered to her supervisor a letter of resignation, effective
August 17, 1990. In this letter, Cantu requested that her final paycheck be forwarded to an address in
McAllen, Texas, some fifty miles from the San Benito office where she tendered the resignation. The San
Benito superintendent of schools, the only official authorized to accept resignations on behalf of the
school district, received Cantu’s resignation on Monday, August 20th. The superintendent wrote a letter
accepting Cantu’s resignation the same day and deposited the letter, properly stamped and addressed, in
the mail at approximately 5:15 P.M. that afternoon. At about 8:00 A.M. the next morning, August 21st,
Cantu hand-delivered to the superintendent’s office a letter withdrawing her resignation.
This letter contained a San Benito return address. In response, the superintendent hand-delivered that same
day a copy of his letter mailed the previous day to inform Cantu that her resignation had been accepted and
could not be withdrawn.
The sole legal question presented for our review is the proper scope of the “mail-box rule” under Texas law
and whether the rule was correctly applied. . . . Cantu contends . . . that the trial court erred in ruling that
the agreement to rescind her contract of employment became effective when the superintendent deposited
his letter accepting Cantu’s resignation in the mail. Cantu argues that, under Texas law, an acceptance
binds the parties in contract on mailing only if the offeror has sent the offer by mail or has expressly
authorized acceptance by mail. There was no express authorization for the school district to accept
Cantu’s offer by mail. The question presented is whether authorization to accept by mail may be implied
only when the offer is delivered by mail or also when the existing circumstances make it reasonable for
the offeree to so accept.
The aphorism “the offeror is the master of his offer” reflects the power of the offeror to impose conditions
on acceptance of an offer, specify the manner of acceptance, or withdraw the offer before the offeree has
effectively exercised the power of acceptance. However, more often than not, an offeror does not expressly
authorize a particular mode, medium, or manner of acceptance. Consequently, particularly with parties
communicating at a distance, a rule of law is needed to establish the point of contract formation and allocate
the risk of loss and inconvenience that inevitably falls to one of the parties between the time that the offeree
exercises, and the offeror receives, the acceptance. See 1 Arthur L. Corbin, Contracts, § 78 (1963).
As Professor Corbin notes, courts could adopt a rule that no acceptance is effective until received,
absent express authorization by the offeror; however, the mailbox rule, which makes acceptance
effective on dispatch, closes the deal and enables performance more promptly, and places the risk of
inconvenience on the party who originally has power to control the manner of acceptance. . . . “Even
though the offer was not made by mail and there was no [express] authorization, the existing
circumstances may be such as to make it reasonable for the offeree to accept by mail and to give the
offeror reason to know that the acceptance will be so made.” . . . In short, acceptance by mail is
impliedly authorized if reasonable under the circumstances.
The Restatement approves and adopts this approach: an acceptance by any medium reasonable under the
circumstances is effective on dispatch, absent a contrary indication in the offer. Restatement(Second) of
Contracts §§ 30(2), 63(a), 65, 66 (1979). In addition, the Restatement specifically recognizes that
acceptance by mail is ordinarily reasonable if the parties are negotiating at a distance or even if a written
offer is delivered in person to an offeree in the same city. . . . The same standard, viz., whether the
manner of acceptance is reasonable under the circumstances, governs offer and acceptance in commercial
transactions under the Texas Business and Commerce Code. (Uniform Commercial Code § 2–206.)
The request or authorization to communicate the acceptance by mail is implied in two cases, namely: (1)
Where the post is used to make the offer . . . (2) Where the circumstances are such that it must have been
within the contemplation of the parties that according to the ordinary usages of mankind the post might be
used as a means of communicating the acceptance . . .
Texas courts are directed by statute to consider whether acceptance by mail is reasonable under the
circumstances in commercial transactions . . . § 2.206. . . . We hold that it is proper to consider whether
acceptance by mail is reasonably implied under the circumstances, whether or not the offer was
delivered by mail.
. . . It was reasonable for the superintendent to accept Cantu’s offer of resignation by mail. Cantu
tendered her resignation shortly before the start of the school year – at a time when both parties could
not fail to appreciate the need for immediate action by the district to locate a replacement. In fact, she
delivered the letter on a Saturday, when the Superintendent could neither receive nor respond to her
offer, further delaying matters by two days. Finally, Cantu’s request that her final paycheck be
forwarded to an address some fifty miles away indicated that she could no longer be reached in San
Benito and that she did not intend to return to the school premises or school-district offices. The
Commissioner of Education and district court properly considered that it was reasonable for the school
district to accept Cantu’s offer by mail. . . . Judgment affirmed. Cantu v. Central Education Agency, 884
S.W.2d 565 (Tex. App. 1994).
3. The decision was reversed. Mrs. Downing’s action was in negligence but not under UCC Article 2. The
fitting of dentures is a professional service, not a sale of goods. Mrs. Downing has a cause of action in
negligence, so she has not lost a means of recovery. These are professional services with full negligence
coverage as opposed to making professionals merchants. Cook v. Downing, 891 P.2d 611 (Ok. Ct. App.
1995).
4. a. Acceptance (under mailbox rule) was effective on September 4. Revocation (effective upon receipt)
arrived after acceptance (too late). Contract on September 4. Same answer under UCC and common
law.
b. UCC – Faster or reasonable method on September 3 – contract that day. Different method but it was
still received before rejection. Under common law, contract on September 4 effective upon receipt.
c. UCC – Acceptance by reasonable means effective on September 3 (mailbox rule). Contract on
September 3. Common law – acceptance effective upon receipt or September 5; however, revocation
was received prior to acceptance, no contract under common law.
5. Section 2-207 does not apply because there was no acceptance unless Mace agreed to the additional terms;
it was a conditional acceptance. Expressly conditioned terms are a counteroffer, not a 2-207 terms
proposal. Mace Industries, Inc. v. Paddock Pool Equipment Co., Inc., 339 S.E.2d 527 (S.C. 1986).
6. Keis Distributors (plaintiff) withdrew from the agreed-upon distribution areas and Northern Distributing
(defendant) purchased some of Keis's inventory. Northern offered to pay the contract amount of
$69,476.60 but Keis claimed that it was owed $118,021.81. The dispute centers around whether there
should be an offset of returnable deposits paid.
As a result of the parties' failure to resolve their differences, Keis (plaintiff) filed suit. In our view,
however, there is nothing in the record beyond surmise, conjecture and unsupported conclusory allegations
to support defendant's claims that plaintiff acted fraudulently (see, Buffalo Structural Steel Corp. v. Elsand
Steel, 159 A.D.2d 849, 850, 553 N.Y.S.2d 65). Defendant's assertions are simply too uncertain to defeat
summary judgment in plaintiff's favor. Defendant did not substantiate its claims by documents or other
evidentiary proof (see, Fine Arts Enters. v. Levy, 149 A.D.2d 795, 797, 539 N.Y.S.2d 827). In support of
its contention that plaintiff's sales figures were inflated due to transshipping, defendant offered only a
comparison between plaintiff's 1993 sales figures and defendant's lower 1994 sales figures. In our view,
this discrepancy alone was insufficient to support a claim of fraud.
There was also no evidentiary proof offered concerning the claim that plaintiff falsely stated that it had
franchise/equity agreements. In this regard, we note that the negotiations were conducted by
“sophisticated, counseled parties dealing at arm's length” (Chimart Assocs. v. Paul, 66 N.Y.2d 570, 574,
498 N.Y.S.2d 344, 489 N.E.2d 231). Although defendant claimed that the existence of such agreements
was crucial, it admittedly made its March 23, 1994 offer without obtaining copies of such agreements. In
addition, although defendant presented proof that one of the manufacturers, Genesee, had terminated its
franchise/equity agreement with plaintiff in 1991, there was no proof that plaintiff falsely told defendant
that such an agreement was still in effect. In addition, as plaintiff points out, the expired franchise/equity
agreement between it and Genesee specifically provided that it was “personal to [plaintiff] and may not be
assigned, transferred or subcontracted by [plaintiff]”. Even defendant's averments concede that the selling
distributor (here plaintiff) will only “lobby” the manufacturer to appoint the buying distributor (here
defendant) to the franchise/equity agreement. Thus, there was no proof that a sale by a distributor carried
with it any guarantee that the new distributor would be appointed by the manufacturer as the latter's
exclusive agent under a franchise/equity agreement.
Finally, plaintiff submitted proof that defendant had actually been appointed by Genesee as its distributor
prior to defendant's making its March 23, 1994 offer. Defendant, therefore, failed to assemble and lay bare
affirmative proof to establish that the alleged fraud was real and capable of being proven at trial (see, Jabs
v. Jabs, 221 A.D.2d 704, 704-705, 633 N.Y.S.2d 616, 617). We are also of the view that further discovery
would not aid defendant in this regard. Plaintiff has objected to several of defendant's discovery demands.
The disputed documents, however, even if ultimately provided to defendant, bear no relation to
defendant's claim of fraud.
We do, however, agree with Supreme Court that issues of fact exist with respect to plaintiff's causes of
action for an account stated. For example, there is a factual issue as to whether the purchase was to be
made without any adjustments based on deposits or was intended to include subsequent deductions for
such deposits. It is simply not clear from the submitted invoices what the parties intended to include in the
quoted prices. Thus, the intent of the parties on this issue must be determined by extrinsic evidence and
triable issues of fact are present, precluding summary judgment (see, Kane Mfg. Corp. v. Partridge, 144
A.D.2d 340, 341, 533 N.Y.S.2d 948; Mayland v. Craighead, 144 A.D.2d 344, 346, 533 N.Y.S.2d 946; see
also, Conopco Inc. v. Wathne Ltd., 190 A.D.2d 587, 593 N.Y.S.2d 787, supra).
(1) letter from buyer to seller transmitting offer to buy and specifying quantities, brands and prices, which
was accepted by seller, was binding contract even though letter suggested that counsel meet to work out
“wording of the final details”; (2) buyer had not established that there was industry custom to treat letters
of sort sent to seller as preliminary; (3) buyer had not established that seller had fraudulently
misrepresented volume of sales of products; (4) buyer had not established that seller had fraudulently
concealed lack of franchise/equity agreements under which manufacturer would be required to use buyer
as distributor for buyer's area; and (5) trial court had not abused discretion by staying discovery until after
preliminary conference was held. Keis Distributors, Inc. v. Northern Distributing Co., 641 N.Y. S.2d 417
(App. Div. 1996).
7. The court found that there was not discrimination. We conclude that being a felon is not a personal
characteristic similar to those enumerated in the Act; the lending institution had legitimate business
reasons justifying its decision—the repayment of the loan and making a return on its equity investment;
and the potential consequences of allowing such a claim would improperly involve the courts in second-
guessing a lending institution's expertise in determining loan and investment criteria. The case was
technically one based on the Unruh act because it was commercial lending, but the principles are the same
as those for the ECOA. Semler v. General Electric Capital Corporation, 196 Cal. App. 4th 1380 (2011).
8. The court held the program explanation did not create a contract, even with the merchandise catalog. In
Alligood v. Procter & Gamble, the court evaluated the specificity requirement as applied to advertisements
and solicitations. The court determined that an advertisement printed on boxes of Pampers diapers
informing customers that they could collect attached "Teddy Bear Points" and redeem them to save money
on merchandise in the separate "Pampers Baby Catalog" was not specific enough to form an enforceable
contract. Even considering the advertisement and the catalog together, no enforceable contract was formed
because the essential terms of the promotion were not specific. Collectively, the catalog and the
advertisement on the package were an invitation to consumers to order from the catalog, which could be
revoked by the company. Alligood v. Procter & Gamble Co., 594 N.E.2d 668 (Ohio App. 1991).
9. Judgment for Meadors for $2,406,522.60. A unilateral contract is composed of an offer that invites
acceptance in the form of actual performance. For example, in the case of a reward, the offeree accepts by
performing the particular task, such as the capture of the fugitive for which the reward is offered. In this
case the offer contained in the Interdependency Memo set out specific percentages of provisions that
would go into the bonus pool, and required that the pool be distributed annually. It was sufficiently
definite to constitute an offer. Meadors was responsible for the production of the Dillard’s account, and
was entitled to the bonus promised in the memo. Meadors put Combined in touch with Dillard’s
Department Stores and on March 24, 2000, Dillard’s and Combined executed a five-year agreement
whereby Dillard’s employees could purchase life, disability, and other insurance policies through
workplace enrollment. When Meadors did not receive bonus-pool money generated by the transaction, he
sued his employer for breach of a unilateral contract. The employer’s defense was that the memo was not
sufficiently definite to constitute an offer. Aon Risk Services Inc. v. Meadors, 267 S.W.3d 603 (Ark. App.
2007).
10. Yes, Enersyst is correct. Oral extrinsic evidence cannot be used to contradict the terms of an otherwise
valid, unambiguous agreement. The promise on the repair for the first oven should have been in writing to
be enforceable. Nation Enterprises, Inc. v. Enersyst, Inc., 749 F.Supp. 1506 (N.D. Ill. 1990).
CONTRACTS, ETHICS, ECONOMICS, & THE LAW: LYING TO EACH

OTHER – AN EFFICIENT WAY TO CONDUCT BUSINESS?
Discuss the following issues with the students:
1. Why is transparency important for markets to function efficiently?

2. What would the construction market look like if everyone inflated prices?
3. Why is Trump’s edition a problem for pricing?
4. Is there misrepresentation in Trump’s conduct?
5. Does this pricing open the door for increasing costs?
INTERACTIVE/COOPERATIVE LEARNING EXERCISES

1. Have students choose a company with which to enter into a hypothetical contract. Then, using the “For
the Manager's Desk” on page 389-390, have them do a background check, etc. on the company.
2. Have students draft a contract to sell a bicycle.
SUPPLEMENTAL READINGS
Alces, Peter A., “The Moral Impossibility of Contract,” 48 WM. & MARY L. REV. 1647 (2007).
Alces, Peter A., "They Can Do What!? Limitations on the Use of Change-of-Terms Clauses," 26 GA. ST. U.
L. REV. 1099 (2010).
Barnes, Wayne R., “Toward a Fairer Model of Consumer Assent to Standard Form Contracts: In Defense of
Restatement Subsection 211(3),” 82 WASH. L. REV. 227 (2007).
Barton, Daryl L., “The Uniform Commercial Code,” 82-MAY MICH. B.J. 25 (May, 2003).
Becher, Shmuel I., “Behavioral Science and Consumer Standard Form Contracts,” 68 LA. L. REV. 117
(2007).
Bender, David, “Internet Click-Wrap Agreements,” 734 PLI/PAT 231 (January – March, 2003).
Boss, Amelia H., “The Future of the Uniform Commercial Code Process in an Increasingly International
World,” 68 OHIO ST. L.J. 349 (2007).
Byse, Clark, “Introductory Comments to the First-Year Class in Contracts,” 78 BOSTON UNIV. L. REV. 59
(1998).
“CISG-AC Publishes First Opinion,” 15 PACE INT'L L. REV. 453 (Fall 2003).
Crespi, Gregory Scott, “Is a Signed Offer Sufficient to Satisfy the Statute of Frauds?,” 14.80 N.D. L. REV. 1
(2004).
Dickens, Robert Lee, “Finding Common Ground in the World of Electronic Contracts: The Consistency of
Legal Reasoning in Clickwrap Cases,” 11 MARQ. INTELL. PROP. L. REV. 379 (2007).
DiMatteo, Larry A., Lucien Dhooge, Stephanie Greene, Virginia Maurer and Marisa Pagnattaro, “The
Interpretive Turn in International Sales Law: An Analysis of Fifteen Years of CISG Jurisprudence,” 24
NW. J. INT'L L. & BUS. 299 (Winter 2004).
Dinunzio, Peter, “Karl N. Llewellyn: How Icelandic Saga Literature Influenced the Scholarship and Life of an
American Legal Realist,” 39 CONN. L. REV. 1923 (2007).
Duhl, Gregory M., "The Ethics of Contract Drafting," 14 LEWIS & CLARK L. REV. 989 (Fall 2010).
Franks, Johnni L., “Promoting or Frustrating the Statute of Frauds?,” 8 T.G. JONES L. REV. 35 (2004).
Hancock, William A., “A Checklist for Drafting Purchase Order Terms and Conditions,” 9 CORP.
COUNSEL’S QUARTERLY 16 (1993).
Hill, Eva, "M&A Negotiations Leading Lawyers on Structuring Transactions, Negotiating Agreements, and
Addressing Management Concerns, M&A Negotiations With High-Tech Government Contractors," 9
2010 WL 3628970 (2010).
Hillman, Robert A. and Robert S. Summers, “The Best Law School Subject,” 21 SEATTLE UNIV. L. REV.
735 (1998).
Hoellering, Michael F., “How to Draft an AAA Arbitration Clause for International Business,” 47 ARB. J. 44
(1992).
Huey, Nathan A., “E-Mail and Iowa's Statute of Frauds: Do E-Sign and UETA Really Matter?,” 88 IOWA L.
REV. 681 (March, 2003).
Katz, Avery Wiener, “I Mean What I Say, I Think: The Danger to Small Businesses of Entering Into Legally
Enforceable Agreements That May Not Reflect Their Intentions,” 104 COLUM. L. REV. 496 (March,
2004).
Kimble, Joseph, “Plain English: A Charter for Clear Writing,” 71 MICH. B. J. 1302 (1992).
Kreitner, Roy, “Fear of Contract,” 2004 WIS. L. REV. 429 (2004).
Lavers, R. M., “CISG: To Use or Not to Use?,” 21 INT’L BUS. LAWYER 10 (1993).
Lee, Dwight R. and Richard B. McKenzie, “How the Marketplace Fosters Business Honesty,” BUSINESS
AND SOCIETY 5 (1995).
Markovits, Daniel, “The No-Retraction Principle and the Morality of Negotiations,” 152 U. PA. L. REV. 1903
(June, 2004).
Monahan, Marie Adornetto, “Survey of Illinois Law: Contracts – The Disagreement Over Agreements: The
Conflict in Illinois Law Regarding the Parol Evidence Rule and Contract Interpretation,” 27 S. ILL. U.
L.J. 687 (Summer, 2003).
Nimmer, Raymond T., “Electronic Contracting: Legal Issues,” 14 JOHN MARSHALL J. OF COMPUTER &
INFORMATION LAW 211 (1996).
Overby, A. Brooke, “Our New Commercial Law Federalism,” 76 TEMP. L. REV. 297 (Summer 2003).
Pattison, Patricia and Daniel Herron, “The Mountains are High and the Emperor is Far Away: Sanctity of
Contract in China,” 40 AM. BUS. L.J. 459 (Spring, 2003).
Reed, Chris, "Online and Offline Equivalence: Aspiration and Achievement," 18 INT'L J.L. & INFO. TECH.
248 (2010).
Reuveni, Erez, “On Virtual Worlds: Copyright and Contract Law at the Dawn of the Virtual Age,” 82 IND.
L.J. 261 (2007).
Rizzo, Mario J. and Douglas Glen Whitman, “The Camel's Nose is in the Tent: Rules, Theories, and Slippery
Slopes,” 51 UCLA L. REV. 539 (December, 2003).
Robertson, Melissa, “Is Assent Still a Prerequisite for Contract Formation in Today's E-Conomy?,” 11.78
WASH. L. REV. 265 (February, 2003).
Rosas, Roberto, “Comparative Study of the Formation of Electronic Contracts in American Law With
References to International and Mexican Law,” 26 HOUS. J. INT'L L. 63 (Fall, 2003).
Rusch, Linda J., “Is the Saga of the Uniform Commercial Code Article 2 Revisions Over? A Brief Look at
What NCCUSL Finally Approved,” 6 DEL. L. REV. 41 (2003).
Smiley, Michael S., “’Where Do We Start, Professor?’ An Approach to Starting and Navigating Article 2 of
the Uniform Commercial Code,” 40 IDAHO L. REV. 133 (2003).
Smits, Jan M., “Law Making in the European Union: On Globalization and Contract Law in Divergent Legal
Cultures,” 67 LA. L. REV. 1181 (2007).
Stephens, Corneill A., “Escape From the Battle of the Forms: Keep It Simple, Stupid,” 11 LEWIS & CLARK
L. REV. 233 (2007).
Steverson, Janet W., “I Mean What I Say, I Think: The Danger to Small Businesses of Entering Into Legally
Enforceable Agreements That May Not Reflect Their Intentions,” 7.7 J. SMALL & EMERGING BUS. L.
283 (Summer 2003).
Stuart, Luke L., “Electricity and UCC Article 2: A Regulatory and Contractual Pyramid of Mismatched
Liabilities,” 40 UCC L.J. 2 Art. 4 (2007).
“Ten Obstacles to a Negotiated Agreement and How to Overcome Them,” 44 PRACTICAL LAWYER 47
(1998).
Wang, Minyan, “The Impact of Information Technology Development on the Legal Concept – Particular
Examination on the Legal Concept of ‘Signatures',” 15 INT'L J.L. & INFO. TECH. 253 (2007).
Watnick, Valerie, “The Electronic Formation of Contracts and the Common Law ‘Mailbox Rule’,” 56
BAYLOR L. REV. 175 (Winter 2004).
Weinberg, Shelley Rice, “Enforcing Oral Agreements: Words are More Powerful Than You May Think,” 7
CBA RECORD 20 (1993).
Wile, Philip H., Kathleen Cordova-Lyon and Claude D. Rohwer, “Estoppel to Avoid the California Statute of
Frauds,” 35 MCGEORGE L. REV. 319 (2004).

Business Its Legal Ethical and Global Environment 11th Edition Jennings Solutions Manual

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Its Legal Ethical and Global Environment 11th Edition Jennings Solutions Manual

Uploaded by

Copyright:

Available Formats

Business Its Legal Ethical and Global

Environment 11th Edition Jennings

For up-to-date legal and ethical news, go to mariannejennings.com.

11-1 What is a Contract? (See PowerPoint Slide 11-1)

 Set of promises for breach of which the law gives a remedy

 Helps Businesses with Planning

11-2 Sources of Contract Law (See PowerPoint Slide 11-2)

11-2a Common Law

• English common law

 Developed by American Law Institute

• Applies to contracts with subject matters of land or services

Examples: Mortgage, lease

• Common law is not uniform from state to state

See PowerPoint Slide 11-4.

CASE BRIEF 11.1

Accessory Overhaul Group, Inc. v. Mesa Airlines, Inc.

ISSUE: Was the contract governed by UCC or common law?

Answers to Case Questions

See PowerPoint Slide 11-5 for more examples.

• Article 2A – Leases (See PowerPoint Slide 11-6)

• E-commerce contract law: Uniform Computer Information Transactions Act (See

 Uniform Computer Information Transactions Act (UCITA)

 Not widely adopted yet (Virginia and Maryland)

11-3 Types of Contracts

11-3a Bilateral Versus Unilateral Contracts (See PowerPoint Slide 11-8)

• Unilateral: One party promises something in exchange for performance

• Express contracts are written or oral agreements

11-3c Void and Voidable Contracts (See PowerPoint Slide 11-11)

Example: Contracts of minors are voidable

11-3d Unenforceable Contracts

• Procedural problem precludes enforcement

11-3e Executed Versus Executory Contracts (See PowerPoint Slide 11-12)

11-4 Consumer Credit Contracts

11-4a Discrimination in Credit Contracts

 Spouses have rights to individual credit applications

 Actual damage plus punitive damages of up to $10,000

See PowerPoint Slide 11-16.

CASE BRIEF 11.2

A.B. & S. Auto Service, Inc. v. South Shore Bank of Chicago

ISSUE: Was South Shore’s denial a violation of the ECOA?

Answers to Case Questions

11-4b Subprime or Predatory Lending (See PowerPoint Slide 11-17)

11-4c Credit Disclosures

• The Truth-in-Lending Act (TILA) (See PowerPoint Slides 11-18 and11-19)

 Part of Consumer Credit Protection Act

 Purpose was full disclosure

• Will be housed in Federal Reserve

11-4d Controlling Credit Card Contracts

• Liability limitations (unauthorized use) (See PowerPoint Slide 11-21)

• Unauthorized credit card use and the chip

 Transferring credit balances is now regulated in detail

11-5a Offer (See PowerPoint Slide 11-23)

 Person who makes offer = offeror

• Must have language that indicates intent to contract vs. negotiation

 Not just inquiry

See PowerPoint Slide 11-24.

CASE BRIEF 11.3

DECISIONS BELOW: The court granted summary judgment to Pepsi.

ISSUE ON APPEAL: Did Pepsi’s ad constitute an offer?

Answers to Case Questions

• Certain and definite terms (See PowerPoint Slide 11-25)

Common Law UCC

• Communication to offeree (See PowerPoint Slide 11-26)

 Offeree cannot accept offer that never arrives