Introduction to Contract Law
A contract is a legal binding between two companies, businesses or parties that unites them in an agreement which is protected by law. A contract between the parties can be created verbally, in writing, by conduct or by all these means.
And this contract becomes a valid contract if it has all the essential elements described as follows: It is important to mention that contract is enforceable only if all these elements are present in the contract.
ESSENTIALS ELEMENTS OF A BUSINESS CONTRACT AND THEIR IMPORTANCE:
i). Offer and acceptance: Offer is the starting point of the contract. In order to create contract there must be a definite and well-defined offer by one party (which will show willingness of the offeror for an action) and clear acceptance of the same by the other party. While making an offer the offering party may specify the time limit for validity of the offer but even if it’snot specified, the offer will be valid for a logical time period, until accepted or cancelled by the offering party.
The acceptance of the offer and that means full acceptance to what is being offered not partial (partial acceptance is a counter-offer, which invalidates the contract), validates the offer to transform it into a contract.
Though all the elements must be present to create a contract, but offer and acceptance make the basis of the contract or it actually lays the foundation of the legal agreement between the parties.
ii). Intention to create legal relationship: A contract requires that the parties aim/propose to enter into a legally binding agreement: i.e; the parties entering into the contract are willing to create legal relations and fully understand that the agreement can be enforced by law. If a contract has been signed between two parties, then one party will be able to sue the other if it does not fulfill the contractual provisions.
iii). Competency or ability to get into a contract: The law does not give everyone the liberty to enter into a contract; rather certain specific qualifications are prescribed to achieve the competency to get into a contract. To be legally competent to enter into contract one must be of the age of majority (should not be minor), having sound mind and has not been disqualified by any law.
iv). Free consent: Free consent is an essential element of a valid contract. It is inborn for any agreement that all the parties must agree to a common goal. To create a valid contract, mere consent is not enough, rather the consent must be free consent according to law: A free consent is not caused by, coercion, undue influence, fraud, misrepresentation and mistake.
v). Lawful Consideration: In order for a contract to be binding it must be held up by valuable consideration. Consideration is what each party gives to the other as the agreed price for the other’s promises. Usually the consideration is the payment of money but it need not be; it can be anything of value including the promise not to do something, or to refrain from exercising some right. Money, goods and services are the most common examples of consideration.
vi). Lawful Object: The object of an agreement must be valid. Object is the purpose or design of the contract. For example, if a building is hired to setup a business, say private hostel, the object of the contract is to run a private hostel.
vii). Possibility of performance: If the agreement is about ac action which is legally, physically or practically impossible, then it cannot be enforced by law. So if an agreement fails to satisfy the legal requirements, it cannot turn into a contract, rather a void agreement.
viii). Not declared void or illegal: The agreement though satisfying all the conditions for a valid contract must not have been expressly declared void by any law in force, in the country.
IMPACT OF DIFFERENT TYPES OF CONTRACT:
1). Unilateral Contract: In a unilateral contract the offering party makes a promise in return of specific act by the accepting party. For example a sum of money may be offered by the offeror in return of provision of information by the other. If the offeree gives acceptance, then this act is enough to get the parties into legal binding or contract. This contract is also termed as a one-sided contract wherein only one party (offeror) assumes the obligation under the contract.
2). Bilateral Contract: In bilateral contracts both the parties make promises: the offeror promises to do an act in return of the promises of the acceptor. For example; sale of goods or services. In bilateral contract, both the parties are bound to fulfill the terms of the agreement.
3). Speciality Contract: It is a formal contract, used in various business transactions; such as: lease of property and in partnership deeds. In this, both the parties sign a written contract as a documentary proof of the contract and both must retain the copy of the contract.
4). Standard Contract: When two companies enter into an agreement to do business together, the agreement is sealed and documented to form a standard contract. For example; two insurance companies can get into an agreement; they would be legally bound and can sue each other in case of breach of contract.
5). Verbal Contract: It is based on verbal communication of the contracting parties but it is not documented or there is no formal evidence of the contract. So these contracts may give rise to disputes and cannot be challenged legally, in absence of evidence.
6). Written Contract: In written contract, the terms are clearly expressed and agreed upon by the contracting parties, at the time of contract formation. The written contract is signed by both the parties as documentary evidence for the legal binding.
7). Implied Contracts: As the name implies, the terms in this contract may not be clearly expressed in words but it comprises of the obligations arising from the agreement. For this contract there is an act or conduct of a party that legally binds them and court implies the contract depending on the nature of the conduct. This may be implied in case of renewal of contracts between two contracting parties.
8). Simple Contract: The contracts must be kept in written form so that both the parties fully understand the terms of the contract, which may give them a legal protection in case of breach of the contract or damages caused by the contracting party. It might be in written or verbal form.
9). Void Contract: It is not a valid contract at all. It has no legal effect and it is not enforceable. An example is the one where the subject of the contract is illegal.
10). Valid Contract: A valid contract contains all essential elements of a contract, thus is legally binding and enforceable (as explained in detail).
Meaning and effect of different types of terms in a contract.
Terms are the promises the parties make to one another as part of the contract. The terms therefore determine the rights and obligations of each party to the agreement.
- Express terms. These are promises specifically made by either of the parties at the time of the contract and it becomes part of the contract.
- Implied terms: Implied terms are promises which are not specifically agreed by the parties, they may not even have been mentioned or considered, but which are nonetheless presumed to be part of the contract. Terms may come to be implied into contracts, either by Parliament under a statute or by the courts.
It is well established that a contract may be subjected to terms that are sanctioned by the custom, whether commercial or otherwise, they have not been expressly mentioned by the parties. .
3. Conditions and Warranties: Contract terms have either been classified as ‘conditions’ or ‘warranties’ for the purpose of deciding what remedy is available to the ‘innocent’ party in the case of a breach.
4. In nominate (intermediate) Terms: According to this approach, the ‘innocent’ party will only be able to terminate the contract if the effect of the breach was to deprive him of substantially the whole benefit of the contract.
5. Exclusion clauses: Many contracts include a term by which one party seeks to limit financial claims against it in the event of loss or damage to the other party, or to exclude itself from legal liability altogether. Exclusion clauses are subject to control by both the courts and statute, to prevent abuses.
Barker and Clive Solicitors
January 25, 2015
Subject: Legal issues and laws involved in online purchase of goods.
Hope that this letter finds you in good spirit. I am writing to you in response to your letter wherein you have inquired about the legal issues involved in online purchase of a set of DVDs on Team-building training.
I have studied your matter and want to inform that Under the Consumer Contracts Regulations your right to cancel an order starts the moment you place your order and doesn’t end until 14 days from the day you receive your goods.Once the contract is cancelled, any credit agreements entered into at the time of the contract are cancelled as well. A number of laws give consumers a legal right to cancel contracts in specific transactions within a short time after the consumer signs the contract, and without giving the seller or other party a reason or having to show “legal cause.”
In order to cancel, the buyer must sign and date the cancellation notice, which must state that the buyer is canceling the contract. The buyer should send the notice to the seller by certified mail, return receipt requested, at the address that the seller has given in the sale documents. The buyer should keep a copy of the notice for his or her own records, and to be able to prove that the notice was given and what was said. Since you e-mailed Classic Training to cancel the order in less than an hour, then your order may be cancelled by virtue of law.
Direct Training invited you with their advertisement showing the price £75 for the DVD set. Law considers the price tag as an invitation for you to make an offer to purchase the item at that price. The offer was clear, definite and explicit and there was nothing to negotiate, then your acceptance completed the contract on the terms specified by Direct Training at the time you placed the order. However, if the price advertised on the website turns out to be incorrect, then they do not have a legal commitment to complete the sale: By law an advertised price is not a contract of sale, so the seller can refuse to complete the transaction if the price has changed, in likelihood that advertised price was not deliberately misleading.
If there is an obvious error in a price displayed, the supplier will not be bound by that price if the supplier corrects the error and informs the consumer of the correct price before the sale is concluded. The supplier is not obliged to sell the goods to the consumer at the patently incorrect price. Since Direct Training corrected the error and informed you via e-mail, they are not bound by law to sale the DVD set on the erroneous price. So, its better not to expect any favor as it is unlikely that any action will result in compensation; especially as technically the product was not sold.
After having discussed the legal issues in detail, it would be more practical and advisable if you let the order completed with Classical training instead of direct training. It would at least save £10 to the company.
Hope that the letter has addressed the right legal concerns.
Barker and Clive Solicitors
January 25, 2015
Dear Lan Page,
I am writing you with reference a letter from an apprentice’s mother. Asad’s mother wrote about the details of the apprenticeship they entered with Mr.Abdul Bashir. The apprenticeship signed between Mr. Abdul Bashir and asad legally binds them into contract for a period of three years. As per law, the training contract legally binds Asad and Abdul Bashir for the term of the apprenticeship (3 years). The standardized contract terms define the obligations of apprentice. Moreover, if Mr. Abdul Bashir is offering apprenticeships for quite some time now, it must have also been signed/approved by a regulatory body, by approving the given terms and conditions. As long as everything within the contract is agreed upon and signed and dated by both parties, it is legally binding.
2). When two companies enter into an agreement to do business together, the agreement is sealed and documented to form a standard contract. The prominent advantage is that minimum risks are involved and reduce legal costs. The standard contracts also provide greater certainty regarding the contract terms, providing clear legal specification and protection to both the parties. It saves time and costs by leaving little room for negotiations.
The main disadvantage of the standardized contract is the Boilerplate. It is what has been deliberately missed out of the contract. So, winning a dispute would not bring any advantage if the person issuing the contract has deleted the part that says the loser in litigation will pay the winner’s attorney fees. Another problem with boilerplate is the section that says disputes will be resolved by arbitration instead of a lawsuit.
Price fixing is another disadvantage of standardization of contract: prices are made part of the standardization.
Language problem is a major disadvantage. Use of some words may change a simple proposal to an obligation. Just as specified in Clause (a) of the standardized contract Asad signed in apprenticeship.
The standardized contract inherently favours the issuing party. Like it favous Mr. Abdul Bashir being the employer and issuer of apprenticeship terms.
Would be waiting for your take on the same.
Barker and Clive Solicitors
January 25, 2015
Vicarious liability occurs in case of breach of any term or part of the contract by an employee acting on behalf of the company; thus the owner of the company will be held liable. Same rule applies in the case of various contracts and business dealings. As per definition of Winfield, Liability arises from the breach of the duty, as fixed by law. Thus indirect responsibility lies on Hotsafe Ltd as a result of inability to carry out the service by one of the employee of the company; the breach of the duty calls for compensation of unliquidated damages.
Legal liability in this case arises as a result of breach of contract that you have entered into with Garside. The damages occurred to Garside are the result of negligence. And negligence has significant affect in business contracts. As per business contract signed between your company and Garside, your company was obligated to carry out the service as per schedule. As per law, if a party to a contract suffers loss for the negligent act of the other, the plaintiff is entitled to seek relief for the negligence. The presumed negligence in this case is satisfying the four conditions for the award of damages.
- Your company was bound to perform the legal duty.
- Failed to perform that duty;
- The plaintiff (Garside) suffered an injury or a loss;
- The negligent act is the proximate cause of the injury.
You will have a defense against this negligence only if the negligence act also has some contribution on part of Garside, depending upon his share in this negligence. But this can only be investigated on court’s order.
Another defense would be to show that you have taken all reasonable steps to ensure the prevention of such acts or omissions therefore providing a statutory defense. If you are having in place an up to date policy, a code of conduct, responsibility division and fixing, implemented trainings, and clearly communicated policies to all the employees of Hotsafe Ltd. In this case , any incident resulting due to negligence of an employee should be followed by a strict action against the employee. This may save the company against any serious damage claim.
I hope that this would give the necessary legal perspective on the issue and you get out of it with the appropriate measures.
- http://ncllive.com/sites/default/files/Documents/Manual of HND Aspects of Contract and Negligence in Business – Final_0.pdf
- http://www.acquisition.gov/far/html/Subpart 22_4.html
- http://www.contract/Importance Of The Essential Element Law Contract Essay (1).mht
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