Business Law Text And Cases 13th Edition By Kenneth – Test Bank

ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER

1A. Offer
A bid can be an offer if it contains all of the requisite elements: a serious, objective intent on the part of the offeror and an offer communicated to the offeree in certain, definite terms compre-hensible to both parties. Amstel’s bid met the requirements His intent appeared to be that of a serious, reasonable offeree; the terms were sufficiently definite; and the bid was communicated to Durbin. If the price, materials, and start date were left open, these factors might be sufficient to question the status of the bid as an offer.

2A. Acceptance
To create a contract, an offer must be accepted unequivocally. Durbin questioned the materials included in the bid and asked about the possibility of substituting different acoustic tiles and dis-cussed a starting date. Although this does not constitute an acceptance of the offer, neither is it a rejection. His questions were inquiries, not a rejection of the bid. Durbin’s later call to say that he had changed his mind, however, was a rejection.

3A. Theory
When individuals rely on promises, as Amstel would have done in this scenario, and the reliance is considered to form a basis for contract rights and duties, under the doctrine of promissory estoppel (or detrimental reliance), the party who has reasonably relied on the promise can often obtain some measure of recovery.

4A. Termination
Yes, Durbin asked about better quality tiles; until that issue was settled, because it likely changed the price, a contract was never formed, so Durbin had the right to cancel the deal. The contract was still being negotiated because Amstel wanted information about alternative materi-als, which affected the price. Failure to settle that matter means the offer was never accepted and either party had the right to walk away.

ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER

The terms and conditions in click-on agreements are so long and detailed that no one ever reads the agreements. Therefore, the act of clicking “I agree.” is not really an acceptance. The terms and conditions included in click-on agreements have become so de-tailed, confusing, and most importantly, long, that no one would ever take the time to read one. Knowing, though, that one is unable to purchase or license a product or service pur-chased on the Internet without clicking “yes” means that everyone just clicks “yes.” That is far from what we normally believe is voluntary assent. Indeed, the choice is all or nothing—accept all terms and conditions or do not buy from us.

There appears to be no acceptable alternative to click-on agreements when buying a good or service on the Internet. No company would ever eliminate the click-on agreement from its e-commerce system because it would be exposing itself to even more potential law-suits. The reason such click-on terms and conditions are so numerous is specifically to avoid frivolous and expensive lawsuits. As a result, ultimately, overall costs are lower for e-commerce, and therefore consumers pay lower prices in general.

ANSWERS TO ISSUE SPOTTERS IN THE EXAMPREP FEATURE
AT THE END OF THE CHAPTER

1A Fidelity Corporation offers to hire Ron to replace Monica, who has given Fidelity a month’s notice to quit. Fidelity gives Ron a week to decide whether to accept. Two days later, Monica signs an employ¬ment contract with Fidelity for an¬other year. The next day, Monica tells Ron of the new contract. Ron immediately sends a letter of acceptance to Fidelity. Do Fidelity and Ron have a contract? Why or why not? No. Revocation of an of¬fer may be implied by conduct inconsistent with the offer. When the corporation hired someone else, and the offeree learned of the hiring, the offer was revoked. The acceptance was too late.

2A Applied Products, Inc., does business with Beltway Distributors, Inc., online. Un-der the Uniform Electronic Transactions Act (UETA), what determines the effect of the electronic documents evidencing the parties’ deal? Is a party’s “signature” necessary? Explain. First, it might be noted that the UETA does not apply unless the parties to a contract agree to use e-commerce in their transaction. In this deal, of course, the parties used e-commerce. The UETA removes barriers to e-commerce by giving the same legal effect to e-records and e-signatures as to paper documents and signatures. The UETA it does not include rules for those transactions, however.

ANSWERS TO BUSINESS SCENARIOS AND BUSINESS CASE PROBLEMS
AT THE END OF THE CHAPTER

12-1A. Agreement
(Chapter 12—Page 242)
For an offer to exist, the offeror must show a definite intention to make and be bound by the offer. Invitations to trade or negotiate or mere statements of inten¬tions to enter into a contract upon further bargaining do not constitute offers but are instead preliminary ne¬gotiations. Thus, any attempted acceptance would not bind the parties to a contract as there is no offer in exist-ence to be accepted. Sullivan stated only a price from which to bargain further, not an intention of a definite commitment to sell at $60,000. There is no contract between Sullivan and Ball.

12-2A. Offer and acceptance
(Chapter 12—Page 249)
(a) Death of either the offeror or the offeree prior to acceptance automati¬cally termi-nates a revocable offer. The basic legal reason is that the offer is per¬sonal to the par¬ties and cannot be passed on to others, not even to the estate of the deceased. This rule applies even if the other party is unaware of the death. Thus, Schmidt’s offer terminates on Schmidt’s death, and Barry’s later accep¬tance does not constitute a contract.
(b) An offer is automatically terminated by the destruction of the specific subject mat-ter of the offer prior to acceptance. Thus, Barry’s acceptance after the fire does not constitute a contract.
(c) When the offer is irrevocable, under an option contract, death of the of¬feror does not terminate the option contract, and the offeree can accept the offer to sell the equipment, binding the offeror’s estate to performance. Performance is not personal to Schmidt, as the es-tate can transfer title to the equipment. Knowledge of the death is imma¬terial to the offeree’s right of acceptance. Thus, Barry can hold Schmidt’s estate to a con¬tract for the purchase of the equipment.
(d) When the offer is irrevocable, under an option contract, death of the of¬feree also does not terminate the offer. Because the option is a separate con¬tract, the contract survives and passes to the offeree’s estate, which can exercise the option by acceptance within the op-tion period. Thus, acceptance by Barry’s estate binds Schmidt to a contract for the sale of the equipment.

12–3A. Online acceptance
(Chapter 12—Page 252)
Anne has entered into an enforceable contract to subscribe to E-Commerce Weekly. In this problem, the offer to deliver, via e-mail, the newsletter was pre¬sented by the offeror with a statement of how to accept—by clicking on the “SUBSCRIBE” button. Consideration was in the promise to deliver the news¬let¬ter and in the price that the subscriber agreed to pay. The offer-ee had an oppor¬tunity to read the terms of the subscription agreement before making the con-tract. Whether or not she actually read those terms does not matter.

12–4A. SPOTLIGHT ON CRIME STOPPERS—Communication
One of the requirements for an effective offer is communication, resulting in the offeree’s knowledge of the offer. One of the requirements for an effective ac¬ceptance is also communica-tion—in most situations, the offeror must be notified of the acceptance. In a unilateral contract, the full performance of some act is called for. If acceptance is evident, notification may be un-necessary, unless of course the offeror asks for it.
In this problem, the offer consisted of a reward. To obtain the reward, an of¬feree was asked to provide information regarding the “South Louisiana Serial Killer” to the Baton Rouge Crime Stoppers (BCS) via a hotline. Alexander did not comply with the terms of this offer, and thus the offerors were not bound to pay her. She provided information to the police related to the arrest and indictment of the killer. But there was no indication in the offer that the police were the offerors or that they were authorized to receive acceptance of the requested infor-mation on behalf of the offerors.
In the actual case on which this problem is based, Alexander filed a suit against BCS to obtain the reward. The court issued a judgment in favor of the defendants.

12–5A. BUSINESS CASE PROBLEM WITH SAMPLE ANSWER—Offer and acceptance
The reviewing court stated that “ * * * the traditional contract approach is * * * consistent with our statutory scheme and precedent. [Iowa gambling law] refers to gambling contracts and pro-vides that such contracts are legal if permitted under [gambling law]. * * * We must, therefore, employ traditional contract principles to analyze whether a contract requiring payment of Black-ford’s winnings has been formed under the facts of this case. ‘All contracts must contain mutual assent; mode of assent is termed offer and acceptance.’ ‘An offer is a ‘manifestation of willing-ness to enter into a bargain, so made as to justify another person in understanding that his as-sent to that bargain is invited and will conclude it.’(quoting the Restatement of Contracts (Sec-ond). We determine whether an offer has been made objectively—not subjectively. ‘The test for an offer is whether it induces a reasonable belief in the recipient that [the recipient] can, by ac-cepting, bind the sender.’
“In making an offer, ‘the offeror is the master of his offer; just as the making of any offer at all can be avoided by appropriate language or other conduct, so the power of acceptance can be narrowly limited.’ As master, the offeror may decide to whom to extend the offer. According to the Restatement,
(1) The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance.
(2) An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance.’
“In this situation, Prairie Meadows is the offeror. It makes an offer to its patrons that, if accepted by wagering an amount and the patron wins, it will pay off the wager. Simply stated, the issue is whether Prairie Meadows made an offer to Blackford. Because Prairie Meadows has the ability to determine the class of individuals to whom the offer is made, it may also ex-clude certain individuals. Blackford had been banned for life from the casino. … Under an objec-tive test, unless the ban had been lifted, Blackford could not have reasonably believed he was among the class of individuals invited to accept Prairie Meadows’s offer. The jury found that the ban against Blackford had not been lifted, and, therefore, Prairie Meadows had not extended him an offer to wager. Because there was no offer to him, no contract could result.” Court of appeals is reversed; trial court judgment affirmed.

12–6A. Shrink-wrap agreements
(Chapter 12—Page 253)
Yes. A shrink-wrap agreement is an agreement whose terms are expressed inside the box in which the goods are packaged. The party who opens the box may be in¬formed that he or she agrees to the terms by keeping whatever is in the box. In many cases, the courts have en-forced the terms of shrink-wrap agreements just as they enforce the terms of other contracts. Sometimes, the courts reason that by including the terms with the product, the seller proposed a contract that the buyer accepted by using the product after having an opportunity to read the terms.
The packaging of TracFone’s phones contained language that restricted the use of the phones to TracFone’s network and prohibited tampering or altering the software in the phone. The phones were sold subject to the condition that the buyer agreed to this term, which was printed on the shrink-wrap packaging. Thus, an enforceable contract existed between TracFone and Bequator (the buyer) with respect to Bequator’s use of the 18,216 phones that it bought. Bequator breached this contract by altering the software in the phones.
In the actual case on which this problem is based, the court held that Bequator was liable for breach on the reasoning stated above.

12–7A. Online acceptances
(Chapter 12—Page 252)
No. A shrink-wrap agreement is an agreement whose terms are expressed inside the box in which the goods are packaged. The party who opens the box may be in¬formed that he or she agrees to the terms by keeping whatever is in the box. In many cases, the courts have en-forced the terms of shrink-wrap agreements just as they enforce the terms of other contracts. But not all of the terms presented in shrink-wrap agreements have been enforced by the courts. One important consid¬eration is whether the buyer had adequate notice of the terms. A click-on agree¬ment is formed when a buyer, completing a transaction on a computer, is required to indi-cate his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, “I agree.”
In Reasonover’s situation, the confirmation e-mail sent by Clearwire was not adequate notice of its “Terms of Service” (TOS). The e-mail did not contain a direct link to the terms—accessing them required clicks on further links through the firm’s homepage. The written, shrink-wrap materials accompanying the mo¬dem did not provide adequate notice of the TOS. There was only a reference to Clearwire’s Web site in small print at the bottom of one page. Similarly, Reasonover’s access to an “I accept terms” box did not establish notice of the terms. She did not click on the box but quit the page. Even if any of these refer¬ences were sufficient notice, Reasonover kept the modem only because Clearwire told her that she could not return it.
In the actual case on which this problem is based, the court refused to com¬pel arbitration on the basis of the clause in Clearwire’s TOS.

12–8A. Acceptance
(Chapter 12—Page 249)
Judy’s reply was effective, and Judy and Kristy had an enforceable binding contract—Kristy’s offer did not limit its acceptance to one exclusive mode. Thus, Judy was entitled to an order of specific performance.
Acceptance is a voluntary act by the offeree that shows assent (agreement) to the terms of an offer. The offeree’s act may consist of words or conduct. The acceptance must be une-quivocal and must be communicated to the offeror. A means of communicating acceptance can be expressly authorized by the offeror or impliedly authorized by the facts and circumstances surrounding the situation. When an offeror specifies how acceptance should be made, express authorization exists, and the contract is not formed unless the offeree uses that specified mode of acceptance. If the offeror does not expressly authorize a certain mode of acceptance, then acceptance can be made by any reasonable means.
In this problem, Kristy’s offer did not limit Judy’s mode of acceptance. Kristy could have used language like “You must reply to Bruce Townsend to accept this offer,” or “You can accept this offer, if at all, only by responding to Bruce Townsend.” This language would have made clear that Judy could accept the offer only by replying to Townsend. But Kristy’s offer only re-quested that Judy “please respond to Bruce Townsend”—the offer did not include words of limi-tation. And Kristy did not otherwise make clear through her words and associated conduct that a reply to Townsend represented the exclusive mode of acceptance.
In the actual case on which this problem is based, Judy filed a suit in a Montana state court against Kristy and obtained an order of specific performance. On Kristy’s appeal, the Montana Supreme Court affirmed, according to the reasoning stated above.