1. Business Law with UCC Applications,13e Written Contracts and Cyber-Commerce Chapter 11 McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 11-2 Learning Objectives 1.Identify the goals of the Statute of Frauds. 2.Identify those contracts that must be in writing. 3.List the information that must be in the writing. 4.Explain the Standard Construction Rule. 5.Discuss the Parol Evidence Rule.

3. 11-3 Learning Objectives 6.Explain the exceptions to the Parol Evidence Rule. 7.Explain the Best Evidence Rule. 8.Discuss the Equal Dignities Rule. 9.Explain the problems associated with cyber-commerce. 10.Outline the latest cyber-commerce statutes.

4. 11-4 Question? What law requires certain contracts to be in writing to be enforceable? A.Hoax rule B.Statute of deception C.Statute of fraud D.Trickery rule

5. 11-5 The Statute of Frauds Statute of Frauds –the law that requires certain contracts to be in writing to be enforceable.

6. 11-6 Contracts that Must Be in Writing 1.Contracts that cannot be completed within one year. 2.Contracts transferring real property rights. 3.Contracts for the sale of goods of $500 or more.

7. 11-7 Contracts that Must Be in Writing 4.Certain contracts entered into by executors and administrators. 5.Contracts by one party to pay a debt of another party. 6.Contracts in consideration of marriage.

8. 11-8 Contracts Transferring Real Property Rights This provision covers the sale of land Also covers trusts that are created by one party to possess and control the land for the advantage of a third party, the beneficiary.

9. 11-9 Question? What is the exception to the rule that contracts for the sale of land must be in writing? A.Equity land grab B.Equitable estoppel C.Landici stumppel D.Veni veci landici

10. 11-10 Contracts Transferring Real Property Rights Part performance (equitable estoppel) –An exception to the rule that contracts for the sale of land must be in writing –applies when a person relies on an owner’s oral promise to sell real property and then makes improvements on the property or changes his position in an important way

11. 11-11 Contracts for the Sale of Goods of $500 or More Under the UCC, contracts for the sale of goods (moveable items) for $500 or more must be in writing to be enforceable Four exceptions

12. 11-12 Exceptions 1.Oral contracts between merchants when a written confirmation has been received by one party and not objected to by the other party. 2.Specially manufactured goods that cannot be resold easily. 3.Admissions in court. 4.Executed agreements.

13. 11-13 Certain Contracts Entered by Executors and Administrators Neither an executor nor an administrator is personally liable for the debts of the decedent’s estate. Executors and administrators must pay the debts of the estate out of the assets of the estate, not out of their own pockets.

14. 11-14 Certain Contracts Entered by Executors and Administrators Thus, any promise to pay the debts of the estate using the executor’s or the administrator’s own funds is unenforceable without a writing.

15. 11-15 Contracts by One Party to Pay a Debt Incurred by Another Party A promise made by one party to pay another person’s debts, if that person fails to pay the debt, falls within the statute and must be in writing to be enforceable. Guaranty contract or collateral contract Guarantor, cosigner, obligor

16. 11-16 Contracts by One Party to Pay a Debt Incurred by Another Party Under the primary objective test (also referred to as the leading objective test and the main purpose test), if the promise to pay another party’s debt is actually made to obtain a gain for the guarantor, there is no need for a writing to enforce the promise.

17. 11-17 Question? A _____________ involves two people who are planning marriage and who agree to change the property rights they possess by law in a marriage. A.Premarital contract B.Prenuptial agreement C.Premarital agreement D.Post-nuptial agreement

18. 11-18 Contracts in Consideration of Marriage Refers to promises made by parties before marriage, in which they accept additional obligations not usually covered in the marriage vows. Prenuptial agreement –involves two people who are planning marriage and who agree to change the property rights they possess by law in a marriage

19. 11-19 The Contents of a Writing Elements of a writing Terms of the agreement Identification of the subject matter Statement of the consideration promised Names and identities of the persons to be obligated Signature of the party sought to be bound to the agreement

20. 11-20 Legal Rules for Written Contracts The standard construction rule The parol evidence rule The best evidence rule The equal dignities rule

21. 11-21 The Standard Construction Rule Standard construction rule –guides the entire interpretation process by directing the interpreter of a contract to determine the principal objective of the parties in the making of the contract Principal objective –the primary or main goal that the parties hoped to accomplish by entering the agreement in the first place.

22. 11-22 The Parol Evidence Rule Parol evidence rule –evidence of oral statements made before signing a written agreement is usually not admissible in court to change or contradict the terms of a written agreement.

23. 11-23 Exceptions to the Parol Evidence Rule Will not apply when unfair and unjust decisions might result from its application If a written agreement contains a typographical or clerical error the court will allow oral evidence as to the true intent of the parties

24. 11-24 The Best Evidence Rule Best evidence rule –the courts generally accept into evidence only the original of a writing, not a copy

25. 11-25 Question? What provides that when a party appoints an agent to negotiate an agreement that must be in writing, the appointment of the agent must also be in writing? A.Parol evidence rule B.Primary estoppel C.Secondary estoppel D.Equal dignities rule

26. 11-26 The Equal Dignities Rule Equal dignities rule –provides that when a party appoints an agent to negotiate an agreement that must be in writing, the appointment of the agent must also be in writing

27. 11-27 Signature Requirements Written agreements should be, but need not be, signed by both parties. Parties should use their usual signatures, that is, the signatures used in other matters in the regular course of business.

28. 11-28 Signature Requirements A facsimile signature will be acceptable on a contract if the contract states that facsimile signatures are valid. Uniform Facsimile Signatures of Public Officials Act

29. 11-29 Witnesses and Acknowledgments Witnesses are required in the signing of a will and sometimes a deed, but in most other documents, their signatures are at the option of the contracting parties. To ensure that no misunderstanding will arise as to the acceptance and signing of a written agreement, the use of witnesses is advised.

30. 11-30 Witnesses and Acknowledgments Certain official documents require the owner’s signature and an acknowledgment by a notary public that the signature was the person’s free act and deed. The notary witnesses the signing of the document and then acknowledges this act by signing the document and adding the official seal to it.

31. Signature Requirements Figure 11-1 The signature for an incapacitated person bears a witness’s name 11-31

32. Signature Requirements Figure 11-2 The signature (X) of a person who does not know how to write has been witnessed. 11-32

33. 11-33 Verification Problems How to avoid the problem of verification Adding a term that delays the creation of the contract until the identities of the parties can be verified by some means other than computers. Customize the verification process for each contract individually. Digital signature

34. 11-34 Offer and Acceptance Online Certain terms should appear in an online agreement package: 1.payment procedure 2.a limitation on the remedies that can be used by the parties 3.refund policies 4.the return process

35. 11-35 Offer and Acceptance Online Certain terms should appear in an online agreement package: 5.dispute settlement instructions 6.the applicability of cyber-signatures 7.liability disclaimers 8.provisions relating to the offeree’s manner of acceptance

36. 11-36 Cyber-Commerce Legislation The E-Sign Act –states that if the parties to a contract have voluntarily agreed to transact business electronically, the cyber-contract that results will be just as legally acceptable as a paper contract.

37. 11-37 Question? What establishes the same type of legal parity between electronic records and paper records as does the E-Sign Act? A.The Uniform Computer Information Transactions Act B.Uniform Electronic Transactions Act C.Fair and Accurate Credit Transactions Act D.E-Sign Act

38. 11-38 Cyber-Commerce Legislation The Uniform Electronic Transactions Act –establishes the same type of legal parity between electronic records and paper records as does the E-Sign Act.

39. 11-39 Cyber-Commerce Legislation The Uniform Computer Information Transactions Act (UCITA) –focuses on contracts that involve the sale or lease of computer software, computer databases, interactive products, multimedia products, and any other type of computer information.

40. 11-40 Question? What prohibits merchants from using credit card receipts that show anything other than the last five credit card numbers? A.The Uniform Computer Information Transactions Act B.Uniform Electronic Transactions Act C.Fair and Accurate Credit Transactions Act D.E-Sign Act

41. 11-41 Cyber-Commerce Legislation The Fair and Accurate Credit Transactions Act (FACT) –prohibits merchants from using credit card receipts that show anything other than the last five credit card numbers –Receipts also cannot display credit card expiration dates