Commercial Contract Law in the United Kingdom - Essay Example

Commercial contract law Introduction A contract, also known as an agreement is a legally enforceable agreement between two or more parties. The agreement outlines the roles and obligations of each party in the agreement. The United Kingdom has systematic contract laws to help in the enforcement of such agreements. The laws consist of both common and statutory laws with each providing articulate ways of approaching every unique case1. The English contract law provides an explanation to every feature of the agreements thereby providing courts with a clear blueprint for use in the resolution of conflicts that may arise from such engagements. Commercial engagements are among the most common forms of interactions in any social set up. Contract laws are therefore vital in the formation of the business agreements. According to the commercial contract law in the United Kingdom, a contract is always as simple as an agreement between an individual and a milkman. Such agreements often have the milkman’s commitment to supply milk regularly and the individual’s commitment to pay at a specified date. Additionally, any sale of a product from a shop or convenient store in the country is a contract often enforceable by the courts owing to the level of engagements between the parties in the agreement and the consideration the two exchange. The enforcement of a contract is subjective to the terms and uniqueness of the agreement, which influences the roles of each party in the agreement. The statutory laws in the United Kingdom provides for the investigation of the agreement in order to determine the roles of each party and the extent of their violation of such agreement. The unique features of a contract are an offer, consideration and acceptance. Such are the basic features of a contract that a court of law investigates in its attempt to establish a breach. “The mirror image rule” guides the formation of a contract since it influences both the offer and acceptance. An offer refers to the proposition that a party makes to the other. The offer must have a similar value and require a commitment from the other party. Acceptance of the offer implies the acceptance of the terms as stated by the party making the proposition. The acceptance should not vary the terms of the offer. Consideration on the other hand refers to the substance of value the two parties exchange in the agreement. A consideration makes the contract enforceable. It refers to either the money or service the two parties exchange in the agreement. Considerations help distinct a contract from a promise. The courts enforce the contract law with the view to protecting the consideration the parties exchange in the agreements. In commercial law, a consideration remains vital in contract laws. Parties in commercial transactions attach a significant value to the consideration they exchange. Such is therefore an important feature of the agreements the courts consider in order to settle any conflicts arising from the contracts2. An offer, consideration and acceptance are therefore the basic features that formalize an agreement. The intention by the parties to create a legal contract is yet another fundamental feature that helps form contracts. The courts will always investigate the intention of each party in the contract. This helps resolve the conflicts since it investigates the uniqueness of the expectations of each party. The current commercial contract laws in the United Kingdom coupled with the existing statutory are sufficient in addressing the unique conflicts that may arise from such engagements. Furthermore, the United Kingdom is a common law jurisdiction. This implies that its contract law shares numerous similarities with the contract laws in such countries as New Zealand, Australia and the United States. Such is a vital feature that provides the English justice system with a large pool of legal reference when addressing the unique conflicts that may arise in the enforcement of contracts. As stated earlier, a contract is an agreement between two or more parties. The agreements always seek to protect the interests of each of the parties in the contract. In commercial contracts between two businesses, the law must always protect the interests of both the parties3. The English contract law strives to achieve this through the following features of the law that are unique to the country. Key among the commercial contract laws in the United Kingdom is the Privity of contract. The parties in the contract only enjoy the ability to enforce the contract. The two businesses in the contract are the only parties that may enforce the contract. Such is a vital provision that ensures that the businesses protect their own interests in any transactions. Either business that feels deprived by the commitment of the other in the contract can enforce the contract by suing the other in a court of law. The provision limits the enforcement of a contract to the two businesses only. As such, any third party company or individual who may have transacted business by any of the two businesses and feels deprived in a contract must settle their grievances with the company. Such third parties cannot enforce the contract despite the uniqueness of the deprivation. Consideration is the second feature in the contract law that helps protect the interests of the businesses in a contract. As explained earlier, consideration refers to the substance of value that two or more parties trade in a contract. Key among the provisions of considerations is the need for the considerations, obligations or promises to be mutual. This outlines the nature of the engagement of the businesses even as they transact a business. The mirror image rule influences the nature of the consideration. The acceptance of an offer should not interfere with the terms of the contract. This ensures that the two businesses remain faithful to the terms of the contract, which safeguard their interests. Business ventures exist to make profits. This implies that their every engagements promise them profitability. By accepting the terms of a contract, a business seeks to enhance its profitability since a business would only do so after ensuring that the deal is profitable. The enforcement of a contract and the consideration in such cases safeguards the interests of each business by protecting them from any form of exploitation by the other party in such arrangements. Besides being mutual, considerations must always be current. This implies that the court will investigate the consideration for the current cases without digressing into past considerations. Considerations make agreements legally enforceable. Additionally, the commercial contract laws in the United Kingdom and in any other country dictate that a consideration must have an economic value. The terms of a contract, helps safeguard the economic interests of the parties in the contract. As such, the distribution of the consideration must be equal a feature that validates the mirror image rule that businesses observe in the creation of contracts4. Another vital feature in the contract laws in the United Kingdom is the exceptions to the rules guiding the use of past considerations. As explained earlier, in English contract law consideration remains limited to their currency. However, the same law provides a number of exceptions to the application of the rule. The Bill of Exchange Act 1882 is among the most influential laws in the United Kingdom that exempts the rules in the application of past considerations. The act makes it legal for courts to use past considerations in antecedent debts. This implies that a previous obligation or debt is a valid consideration for a bill of exchange. Lampleigh v Braithwait5 provided a precedent of an exemption to the application of the rules of past considerations. The exemption arises from the understanding that when a company seeks services from a second party, the company must always pay regardless of the timing. In this context, the act that requires remuneration is in the past but the performing party remains entitled to payment. As such, the courts must consider the terms of the agreement and the past considerations of the case in order to understand the case and dispense justice effectively. In both of the above cases, the exemptions are unique to the cases and helps safeguard the interests of the businesses in a contract. The application of the exemptions remains limited to the uniqueness of every case. The courts must use precedents and the many statutory laws to determine the fair and just judgment in such cases. The judgments always protect the businesses from any form of exploitation by the other party in the contracts. English contract law provides for a number of formalities that help mitigate any form of conflict that may arise from the enforcement of contracts. The formalities provide a legally recognized structure of the contracts coupled with evidence to enhance the enforcement of the contracts in order to limit the harm a party may suffer from the contract. The parties may sign contracts as deeds. However, there is no legal provision that compels the parties to. Additionally, contracts may be written or verbal. The English contract law has systematically abolished the need for signing, sealing and delivery of contracts as deeds before enforcement6. Verbal contracts are complicated and always require the consideration of various features. The same applies to contracts made through telephone conversations. Among the disadvantages of “orally agreed” contracts, include the fact that either party may easily misremembered or misunderstand the terms thereby causing underperformance. The English contract law therefore advises that while verbal contracts are legal, the parties should always condense the conversations into short notes detailing the most vital features of the contracts. After condensing the telephone or verbal conversations into a written note, the party must send the notes of the contract to the other party who must agree with the terms and sign them whenever possible. This way, it becomes easy to enforce the contract owing to the existence of a physical evidence that enhances the enforcement of the terms of the contracts in a court of law. Despite the existence of the above formalities that provide for verbal and telephone contracts, which must not exist in written form, the English contract law provide for unique contracts that must exist solely in writing. Such are special contracts whose structure and process of creation involves high risks. Key among such contracts are those with guarantees. A guarantee is a third party in a contract who promises to assume responsibility in case the other party defaults a loan. Such are complicated contracts that must have detailed structure in writing outlining the role and commitment of each party in the contract. This way, the court can easily summon the responsible individual thereby compelling them to meet their obligations as set in the terms of the contract. Other contracts that must exist in writing are those regarding the use of land or the transfer of ownership of land among other types of property. Such contracts elicit interests from various quarters and therefore likely to have numerous conflicts that require effective resolutions7. Business organizations are independent entities with separate legal capacities. The principle of separation in the justice system for example separates a company from its owners. As such, a company is a legal entity that can transact independently and take responsibility of its transactions. This implies that businesses enter into contracts as legal entities. The English contract laws recognize a company as a legal entity with the capacity to transact as such. The English contract laws provide for specific individuals considered authorized to transact and append authorized signatures in the formation of contracts between businesses. A solicitor, manager or a company director are among the individuals authorized to transact on behalf of a company. Their signatures and role in the creation of a contract shows the involvement of the business. Such requirements help protect businesses from creating contracts with fraudsters who may impersonate others or fail to take responsibility. Contracts remain contentious issues in business. Companies outsource services and seek funding from various businesses. Such engagements involve transactions that have monetary value. They may therefore result in major financial loses in case of an elusive party. The contract laws in the country require effective details to help in the resolution of any conflicts thus safeguarding the investment of any business. Among the basic requirements of the details is in the identity of both the businesses and authorized signatories. The name is a fundamental feature in a contract that may provide a chance for exploitation in a court tussle. Parties in a contract must always use accurate names and have company logos and seals wherever necessary to help with the identity and proof. This helps prevent cases of misrepresentation. XYZ Fashions for example is different from XYZ Fashions Limited. The consideration of such features in a court case may acquit a party from taking liability thereby causing massive financial loses for the other party in a contract8. In conjunction with the identity concern, capacity is yet another fundamental concern that the English contract law considers in resolving conflicts in contracts. The law outlines number of individuals who lack the capacity to create contracts. Such individuals include minors, mentally unstable individuals and drunks. Minors refer to people under the age of eighteen. While the court may compel such people to pay for such “necessary items” as foods stuffs, drinks and clothes among others businesses must not always form detailed contracts with such individuals. As explained earlier, the sale of an item is a form of contract, which they above individuals may enter with a company given the unique nature of such transactions. However, the English contract law considers detailed contracts with such individuals null and void owing to the incapacity of such individuals to meet their legal obligations. “Battle of forms” is an equally contentious issue in the resolution of conflicts arising in the enforcement of contracts. Battle of forms arises in a scenario where the companies in a contract strive to employ “standard terms”. Standard terms concerning the flow of finances among other resources in a company may influence the nature of either company’s commitment to the terms of a contract thereby causing conflicts. According to the English contract laws, the company that communicates last in exchange of terms of the contract influences the terms. The law recognizes and incorporates the standard terms of such companies in the resolution of any conflicts that may arise in the implementation of the contract. The Unfair Contract Terms Act provides courts with the ability to eliminate unfair terms of a contract thereby creating a fair level for both parties in a contract. This introduces the concept of exclusion clauses, which provides reprieve for aggrieved parties in case of breaches. The terms of a contract must always provide a remedy for the breach9. The provision for remedy in case of a breach cushions either party. According to the contract law, the courts may not enforce any clause in the terms that limit the liability especially in cases of serious breaches of a contract10. The English courts for example readily strike down any clause in a contract that limits liability in the event of either a death or injury in the implementation of a contract. Parties must always accept liability in case of breaches and compensate both injuries and deaths arising from the terms of the contract. Conclusion In retrospect, the English contract law provides effective consideration to the various features of contracts with the view to providing effective resolution to any form of conflict that may arise in the enforcement of contracts. The current statutory laws are adequate in protecting the interests of two or more business that create a contract. The laws for example stipulate the various ways of resolving breaches thereby cushioning any party in a contract from incurring financial losses owing to the shoddy works by the other. Contracts are serious legal agreements between businesses. They have financial values and may therefore cause loss of such vital resources as human, time and finances. The English contract law therefore provide for ways of resolving such conflicts. A breach of a contract refers to a scenario where a party in the contract fails to perform their obligation as stipulated in a contract. Such causes loss of resources to the other party in a contract. The contract laws provide the non-breaching party with an opportunity to outline a reconciliatory basis since the precedence is for the courts to encourage the parties to resolve the breaches. The court mediates in such resolutions. However, in cases of serious breaches the non-breaching party may repudiate the entire contract and even seek financial compensation for the wasted resources. Bibliography Bar, C. ., In Drobnig, U., & Alpa, G. (2004). The interaction of contract law and tort and property law in Europe: A comparative study. München: Sellier. Blum, B. A. (2007). Contracts: Examples & explanations. Austin: Wolters Kluwer Law & Business. Fung, D. Y. K. (1999). Pre-contractual rights and remedies: Restitution and promissory estoppel. Petaling Jaya, Selangor, Malaysia: Sweet & Maxwell Asia. Helewitz, J. A. (2010). Basic contract law for paralegals. Austin [Tex.: Wolters Kluwer Law & Business. McKendrick, E. (2014). Contract law: Text, cases, and materials. London: Oxford University Press. Cases Welby v. Drake [1825] Foakes v Beer [1884] UKHL 1 Lampleigh v Braithwait [1947] KB 130 Hughes V Metropolitan Railway Co. (1877) Ajayai V Briscoe [1964] D & C Builders V Rees [1965] Manufacturing Co. V Tungsten Electric Co. Ltd [1955] 1 WLR Read More