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Case Studies on Contracts and Regulations in E-commerce

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Lamar Smunt, eccentric millionaire, sends Casimir Roginsky who is a famous portrait artist, a letter offering to pay Roginsky $500,000 to do a portrait of Lamar’s mother. Roginsky sends back a letter that says: “I’ve had the misfortune of seeing your mother and would need $750,000 before my artistic sensibilities would allow me to undertake such a harrowing project.”

Three hours later, after reflecting upon the sad state of his finances, Roginsky telephones Lamar and says: “I’d be delighted to paint your lovely mother. Destroy my letter without reading it. It was sent by mistake.” Lamar disregards Roginsky’s instructions and reads Roginsky’s letter when it arrives. He becomes enraged at the insult to his mother and refuses to allow Roginsky to do her portrait. Roginsky files a breach of contract suit against Lamar.

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According the record, Roginsky will not have the chance to be successful in his law suit. In this case, Lamar is an offeror who made the offer that he will pay Roginsky $500000 to do a portrait of Lamar’s mother. Roginsky is an offeree who will perform the offer. “The person who makes the offer is called the offeror and the person to whom the offer is made is called the offeree” (offer, chapter 10, page 184). A contract between Lamar and Roginsky will not happen because Roginsky’s action is considered as a rejection of Lamar’s offer.

Offer and Acceptance

To consider requirements of an offer, Lamar is defined as an offeror because he has satisfied the conditions for an offer to be effective. Lamar promised to pay Roginsky $500000 for the purpose of portrait his mother. That indicates Lamar’s present intent to contract. Thus, Lamar’s offer is valid. “The intent to enter into a contract is determined using the objective theory of contracts” (objective Intent, chapter 10, page 184). Moreover, Lamar’s offer was not clear for Roginsky in the time to decide whether to accept or reject the offer. There is an implied terms. Although the common law required an exact specification of contract terms, reasonable certainly exist in this circumstances. (The Restatement of Contracts, chapter 10, page 185). Furthermore, both Lamar and Roginsky have the communication. They used email as a means of communications. Base on three elements of offer’s requirement, Lamar’s offer was effective.

According to the definition “Only the offeree has legal power to accept an offer and create a contract” (Who can accept an offer, chapter 10, page 190), Roginsky can accept an offer and create a contract because he is an offeree who will be in direct perform Lamar’s offer.

When Can an Offer Be Accepted?

Since Lamar’s offer is valid, that offer can be accepted. There is no decline for Roginsky to answer that offer because it was an implied terms (The Restatement of Contract).

When Can an Offer Be Revoked?

Lamar can revoked his offer any time. In fact, Lamar revoked his offer when Roginsky wanted to get paid $750000 for his artistic sensibilities. He said he had the misfortune of seeing Lamar’s mother. This hurt Lamar’s feelings when Roginsky insulted his mother. As soon as Roginsky received a letter from Lamar, Lamar’s offer will be effected.

The Mailbox Rule

The common law of contracts verifies that the mailbox rule happens when the offeree use an authorized means of communication to dispatch the acceptance. Roginsky sent back a letter after he received a letter form Lamar. This committed that they used “a letter” to communicate. Thus, the first letter Roginsky sent back is considered as a rejection letter.

Roginsky tried to change the condition of Lamar’s offer when he said that seeing Lamar’s mother is a misfortune and he needed to receive $750000 instead of $500000. This conflicted with Lamar’s offer. If Roginsky required $750000, Roginsky will have to be in another offer with Lamar because Lamar just promised to pay $500000 in the original offer. Roginsky also couldn’t change anything in this offer since he wasn’t an offeror. Until Roginsky’s first letter was sent, his acceptance would be effective when Lamar received it even if it was improperly dispatched. “If an offeree first dispatches a rejection and then sends an acceptance, the mail box rule doesn’t apply to the acceptance” (Time of Acceptance, chapter 10, page 192). Therefore, there is a good reason to say that Roginsky failed in Lamar’s offer.

Traditional Acceptance Under the Rule and a More Modern View Under the Uniform Commercial Code

In traditional contract law, an acceptance must be the mirror image of the offer. However, Roginsky attempted to change the terms of Lamar offer. Roginsky sent a letter as stated in the offer. It implied an intent that he is rejecting the offer instead of being bound by its terms. “To meet the mirror image rule, the offeree must accept the terms of the offer without modification” (Mirror image rule, chapter 10, page 191). In this situation, Roginsky’s acceptance constitutes a counteroffer.

Under the Uniform Commercial Code (USS), the mirror image rule applies to modern commercial transactions. When Lamar and Roginsky have a dispute, the court will apply the mirror image rule to deny that the contract is created between them. The record shows that Roginsky’s acceptance doesn’t match exactly with Lamar’s offer and Roginsky didn’t start implementing yet. Roginsky’s letter to increase $250000 with Lamar’s initial offer is implied authorization. This is permitted by section 30 of the Restatement (Second) of Contracts. “By any medium reasonable in circumstances” (Mode of Acceptance, chapter 10, page 192). In some circumstances, the UCC in section 2 allows to form a binding contract even if there are some differences between the terms of the offer and terms of acceptance. However, Lamar has the right to revoke his offer anytime if he uses a letter as a revocation.

Conclusion

Based on the analysis above, there is no contract that exists between Lamar and Roginsky because Roginsky’s acceptance is considered as a rejection since he changed the offer terms.

Wombat entered into an oral employment contract with Tony’s Toy Company. Tony’s has orally agreed to hire Wombat for 3 years as a district manager. Wombat quit his job, sold his house, and moved his wife and five children to another state in order to start the new job. One month later, Tony’s informed Wombat that things weren’t working out and that his job was terminated.

According the Statute of Frauds, an oral contract exist when the performance of the contract is possible within the one year. (One-year rule, chapter 14, page 235). In the case of Wombat and Tony’s Toy Company, Wombat and Tony entered into an oral employment contract for 3 years which conflict with one-year rule. Thus, this oral contract isn’t valid. To enforce this contract, it would have to be in writing because it exceeds the one-year rule.

If this contract is unenforceable under the Statute of Frauds, it can be considered as an oral contract. The requirement to form a valid oral contract include 4 elements: Offer, Acceptance, Consideration and a lawful object. The record showed that Tony is an offeror who made the offer to Wombat who will perform the offer. Wombat accepted Tony’s offer and he worked for a month already. Tony promised to give Wombat a new job in the new state and in exchange, Wombat has to quit his previous job and move his whole family.

That determined that consideration was given before their contract could exist. In addition, this contract is absolutely legal by law. Therefore, Wombat can claim Tony for his damage since Tony breached their 3 year oral contract. Wombat totally has enough evidence to sue Tony because he is a legal employee in Tony’s company.

“An employee whose employer breaches an employment contract can recover lost wages or salary as compensatory damage” (Employment contract, chapter 16, page 270). Wombat’s damages define that he lost his previous job and became unemployed now. He also has to move to another state incurring moving costs and his financial situation can’t cover his family. Tony has a responsibility to compensate for Wombat’s damage.

There are ethical considerations that apply to this case because an oral contract can create multiple problems for both parties. Wombat and Tony are both determined that their version of the terms are following the rules. The cost for this law suit is very expensive and should be considered. Under the Statute of Fraud, this verbal contract isn’t valid. “A verbal contract isn’t worth the paper it’s written on (Samuel Goldwyn, chapter 14, page 233).

However, this contract is defined as valid under the oral law. Therefore, the best way to resolve this situation is for Wombat and Tony to continue with this oral contract and Wombat has to perform as a term of contract or Tony will indemnify Wombat for his damage as a worthy cost.

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