BUS 206 Module 5 Contract Formation Assignment Example

Contract Formation in Online Bookings and Gift Certificates

[Student Name]

Southern New Hampshire University

BUS 206: Business Law I

Module Five Assignment

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Contract Formation in Online Bookings and Gift Certificates

Introduction

About 80 percent of the company's rides are sold through its website, where customers choose a date, enter passenger details and pay. Another 12 percent are sold as gift certificates, many in December, and the rest through hotel packages. In 2025 two disputes raised the question of what contracts the company actually has with its customers. A customer who canceled two days before her flight demanded a full refund, saying she never agreed to the company's policy of a 50 percent refund for cancellations within seven days. And the parents of a seventeen-year-old who booked a sunrise flight for herself asked for a refund after she changed her mind. This paper applies the elements of contract formation to the company's booking process, its gift certificates and these two disputes.

Offer and Acceptance

A contract requires an offer, an acceptance, consideration, capacity and a legal purpose (Mallor et al., 2022). The website's listing of flights and prices is generally treated as an invitation to deal rather than an offer, because the company cannot fly unlimited passengers on every date. The customer makes the offer by completing a booking, and the company accepts when its system sends a confirmation email. Courts judge agreement from the outside, by how a sensible observer would read what each side said and did, setting aside what either secretly meant (Lucy v. Zehmer, 1954). A reasonable customer receiving a confirmation with her flight details would understand that a deal had been made.

Consideration

Consideration is what each party gives in exchange for the other's promise. The customer pays the ticket price, $219 per person on weekdays and $249 on weekends, and the company promises a flight on the chosen date, weather permitting. Both sides give something of value, so consideration exists. The weather condition matters: because the company keeps the right to cancel for weather, its promise is conditional, but it is not illusory, since the company must fly if conditions allow and must rebook or refund if they do not. A promise that let the company cancel for any reason at all would be different, and a court might find no real commitment on its side.

The Cancellation Policy

The company's cancellation policy appears on a separate page reached through a link labeled terms at the bottom of the booking page. Customers are not asked to read it or to agree to it before paying. Courts have refused to bind users to terms presented this way. One federal appeals court held that people who downloaded software were not bound by license terms sitting below the download button, since a reasonably careful user would not have noticed them and was never asked to agree (Specht v. Netscape Communications Corp., 2002). The company's booking page has the same weakness. A court could well find that the cancellation policy was never part of the customer's contract, leaving her entitled to a full refund or at least to a rebooked flight.

Capacity

The second dispute turns on capacity. In New Mexico, as in most states, a person under eighteen is a minor, and contracts with minors are generally voidable at the minor's option. The seventeen-year-old's booking was a valid contract that she may disaffirm before reaching eighteen or within a reasonable time after. A balloon ride is not a necessity, so the exceptions for food, shelter and medical care do not apply. The company must refund her payment. It also should not have accepted her booking without a parent's approval, which its own policy requires before any minor flies, and the booking system had no field that would have caught her age.

Gift Certificates

The company's gift certificates state that they expire one year from purchase. Federal law, adopted in 2009 as part of credit card reforms, generally prohibits gift certificates and store gift cards sold to consumers from expiring sooner than five years after they are issued or last loaded, and requires expiration terms to be clearly disclosed. The company's one-year term is therefore unenforceable, and it should honor any certificate less than five years old. The certificate's other terms, such as a weather rescheduling rule, are part of the contract only if they appear on the certificate or are clearly disclosed at purchase.

Contract issues and fixes

Recommendations

The company should redesign its checkout so that customers must check a box stating that they have read and agree to the cancellation policy, with the policy shown in a scrolling box above it. The confirmation email should repeat the key terms. The booking form should require a birth date and route bookings for anyone under eighteen through a parent's approval. Gift certificate terms should be changed to a five-year expiration and printed on every certificate. These changes cost little and convert terms the company assumed it had into terms a court would enforce. For the two current disputes, the company should refund the seventeen-year-old's booking in full and offer the canceling customer a choice between a full refund and a rebooked flight with a small credit. Insisting on the 50 percent policy would invite a complaint the company would probably lose, and the cost of goodwill lost would exceed the $110 at stake.

Conclusion

The company forms valid contracts when it confirms bookings, but its cancellation policy is probably not part of them because customers are never asked to agree to it. A minor's booking can be undone, and its gift certificate expiration violates federal law. A redesigned checkout and revised certificate terms would fix each problem, and both disputes can be settled now at little cost.

References

Lucy v. Zehmer, 196 Va. 493, 84 S.E.2d 516 (1954).

Mallor, J. P., Barnes, A. J., Bowers, L. T., & Langvardt, A. W. (2022). Business law: The ethical, global, and e-commerce environment (18th ed.). McGraw-Hill Education.

Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002).