For free initial consultation, call (858) 674-6177.
Mr. Himelstein is a San Diego attorney who helps clients to provide
legal protection for their intellectual property associated with the
internet and computer software and hardware and assists them in
general business matters.
This document provides some fundamental legal issues involved in contracting. It describes some contract formation issues (mutual assent, offer, acceptance, rejection, counteroffer, revocation, and consideration) and some defenses to contracts.
Contract Formation.
The two essential requirements to form a contract are mutual assent and consideration. The mutual assent required does not mean the "meeting of the minds," for this implies what a person is thinking rather than what is outwardly manifested. It is what a party objectively demonstrates, not what a party may subjectively be thinking.
Mutual assent is manifested in an offer, acceptance, and consideration. An offer is an indication by one party (offeror) of a willingness to enter into a contract with another party (offeree) on some specific terms. A valid offer creates a power exclusively in the hands of the offeree such that all that is needed to form a contract is acceptance. If one or more of the terms are missing from the offer, a court may supply those terms. Acceptance is an unequivocal indication that the offeree agrees. Consideration is legal detriment bargained for in exchange, i.e. agreeing to do something which you have no legal obligation to do or agreeing not to do something which you have a legal right to do.
Note that it is not necessary to have a written contract in order to have a contract. Typically the difficulty with an oral contract is the problem of proving a contract existed or the problem of proving what the terms are. See below for more information on written versus oral contracts.
Once an offer is made it remains open until there is an acceptance, a rejection, a counteroffer, a revocation, a lapse of time, a death or insanity, or the destruction of the subject matter. Once an offeree rejects an offer, the offer is no longer open. If the offeree provides a counteroffer, this usually also is considered a rejection. While an offer remains open, the offeror can revoke the offer by any act or word which expressly or by implication states that the offeror is no longer willing to enter into a contract. An offer may contain a time limit after which the offer is closed or else the offer terminates after a reasonable time, whatever that may be under the circumstances. If either the offeror or the offeree dies or is rendered incompetent, the offer terminates. Finally, if the subject matter of the contract is destroyed, the offer terminates.
Defenses
Some of the defenses to contract formation are claims of improper formation: there was no valid offer, no valid acceptance, or no valid consideration. Some other defenses follow:
Statute of Frauds refers to a statute which requires certain contracts to be in writing to be enforceable. Its original purpose was to prevent the unscrupulous from claiming a contract was orally formed when in fact none was formed. The typical Statute of Frauds includes contracts which involve the sale of land, certain guarantee or surety contracts, and contracts which by their own terms cannot be performed within one year from the date of its formation. In addition the Uniform Commercial Code (UCC) Chapter 2, which applies to contracts for the sale of goods having a price of $500 or more, requires a writing. Web site services and software services by themselves are not covered under UCC 2. Web sites and software sold off-the-shelf would be governed by UCC 2. A contract to purchase computer hardware which also included some custom design or graphics or software may also be governed by UCC 2, and thus require a writing.
A contract in which fraud, duress or undue influence was involved is not void but may be voidable by the party wronged.
A contract which for some reason is against public policy is void.
A mutual mistake as to a material part of a contract may provide grounds for either party to rescind or for a reformation. Sometimes a unilateral mistake will allow for rescission.
Sometimes promises which do not satisfy the requirements of an offer are enforceable as if a contract was formed.
The legal information contained above is informational in nature and cannot be considered legal advice. Every situation has its own factual context and cannot be judged without that context.
For free initial consultation call (858) 674-6177.
This web site is a work in progress. Some parts are knowingly incomplete; other parts are known to need revisions. Certainly, the future will reveal the need for further additions and revisions.
Last update of this sub-page September 10, 2009 by David B. Himelstein.
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