Aspects of Contracts in Business - Assignment Example

Aspects of Contracts in Business Task Q1 Essential Elements of a Valid Contract Intention to create legal relationship Contracts or agreements between two entities are usually associated with the derivation of terms and conditions, which form and guide their contract with each other. Each party promises the other on what to do inorder to maintain healthy and legal relationships. Green Pharma is a British pharmaceutical company, which has many contracts with its suppliers, vendors, employees, banks, employees and other parties. Courts expect Green Pharma to form legal relations with other parties rather than forming mere promises, which are prone to breach. Legal relations among business entities enable courts to enforce laws that protect the rights of each participating party (Emerson 2009, p. 34). Offer Offer is very important in contracts because it shows the willingness of parties to enter into an agreement. When a business entity offers its promise under certain conditions, the other party must accept the conditions and in turn give an offer in order to form a contract. Offers are very crucial because they create an avenue for contracting parties to enter into a legal relationship leading to acceptance (Emerson 2009, p. 34). Acceptance Acceptance is another important element of a contract that makes parties agrees to the terms of the offer. When a business gives an offer to the suppliers through an advertisement, it shows that, the business accepts the contract (Emerson 2009, p. 35). If the suppliers do not accept the offer despite the favourable conditions associated with it, the contract is deemed invalid. Legal laws guiding acceptance of the granted offer requires that there should be proper communication so as to satisfy the both parties. Consideration In contracts, each party will feel considered if it gets something in return after giving its promise. Consideration is an important element of contracts because the contracting parties receive promises, which makes them feel represented in any agreement. Consideration for a promise makes legally binding contracts rather than gratuitous contracts that cannot be protected by the courts (Emerson 2009, p. 36). Capacity to contract Contracting parties ought to be adults in order to form valid contracts. In addition, the parties should compose of people with full mental capabilities such that they are not mad (Emerson 2009, p. 36). Certainty Agreements between companies are considered certain when they are apparent to the basic terms of a contract. If the contracting parties are unaware of the legal requirements of contracts, they are likely to form invalid contracts, which are not easily enforceable (Emerson 2009, p. 37). Q 1.2: Types of Business Contracts Sales Contracts Sales contracts comprise of the terms of sale of services and products between companies and individuals. They contain the type of sale, seller’s details, buyer’s detail, prices, methods of payment and more (Emerson 2009, p. 39). Employment contract It is an agreement between employees and the employers on the nature and purpose of creating the terms of employment relations. Terms of an employment contract include the schedule, wages and the duties and rights of the employers and the employees (Emerson 2009, p. 39). Marketing contract It is an agreement that allows companies to sell their products or services at a certain price in selected geographic regions (Emerson 2009, p. 40). Licensing contracts They transfer legal rights to individuals. The agreement allows individuals to use patents and trademarks, which are the products of the copyright owners (Emerson 2009, p. 41). Distance selling of goods can lead to serious legal impacts to the buyers or sellers. Despite the provision of contracting parties’ details, online trading is prone to breach of contract. The courts might not be able to enforce the contracts because they do not comply with the terms of valid contracts. It is justifiable to render the agreements made online gratuitous because the parties tend to form contracts, which leave out some important elements of a contract (Emerson 2009, p. 42). Q 1.3: Express and Implied Terms Contractual terms in a business contract refer to the statements that form the contract itself. There are two types of terms, which include implied and express terms. In most cases, the implied terms become more sensitive than the sensitive than the express terms. Express terms are usually agreed upon by the parties either in written form or orally. Agreements made in written form bear signs of both contracting parties (Emerson 2009, p. 50). Therefore, every business entering to a contract is bound by the express terms. On the other hand, implied terms are not mentioned by the contracting parties, but, are implied through operation of state laws. These terms are implied by law, fact, custom and trade usage by the courts of law. The courts assume that implied terms apply when parties have not applied those terms in their contract, but, it was necessary during formation of a contract. Another aspect of courts dealing with implied terms is that they assume the parties should have included certain terms in the business contracts, for example, terms ensuring provision of goods of satisfactory quality (Emerson 2009, p. 52). Lawyers dealing with implied terms face difficulties because the new terms established were not created in the first stage of contract development. In case one of the parties feels misrepresented in the court, he/she can demand his/her rights claiming that the terms were not written in their business contract. On another hand, express terms are clearly defined and, therefore, create enough evidence of any breaches of contract (Emerson 2009, p. 54). Task 2 Q 2.1 (a) Green Pharma’s take to advertise the new cream has been made as an invitation to treat, but, not an offer. The company would be supposed to sell to all vendors who come to the showroom because they have only created the invitation to treat instead of an offer. The company seems that they made such a treat in order to sell cream to a group of vendors, and this is impractical. When Mr. Khan, a vendor, placed a larger order for the cream in the showroom, the company should have accepted the offer, instead of dropping it. Of course, the decisions made by the Green Pharma’s management team are relevant, but, it breaches the contract initially made through the advertisement (Emerson 2009, p. 58). Therefore, the company can face charges because of failing to accept Mr. Khan’s offer and instead rendering it outdated. In other words, Green Pharma has violated the terms of a contract required for implementation by the law. Q 2.1 (b) In a situation whereby my boss, Tania promised me that she would increase my salary after preparing a good report, it is not possible to enforce that promise. In the first place, preparing an important report took place before Tania placed her promise. The consideration to make a report was done in the past is, therefore unlawful because I have given nothing in return for her promise.Since Tania’s promise is unenforceable, the court cannot,therefore, protect me in times of breach of contract. The contract is invalid because the parties involved does not present offers at the same moment (Emerson 2009, p. 60). Q 2.1 (c) The courts cannot enforce the contract in the case whereby I usually get a lift from my colleague because I contributed in buying petrol. Although we agreed on that issue, it remains unenforceable because the agreement was made in a social context. The contract was not intended to establish a legal relationship because my colleague, and I are work friends.Both of the parties did not have the intention to form a legal contract, and this makes the contract unenforceable (Emerson 2009, p. 61). Q 2.2 Alban, a business development manager of the Green Parma bought a car from Brenda’s Garage Limited. The ‘Landmaster’ car was meant for business activities, but, not for personal use. In that deal, Alban entered into an agreement with the garage owner. They agreed that Alban would claim for maintenance in case the car had defects within a period of three months. Alban incurred costs in replacing some essential items that were defective after the three-month period. It is evident in this case that, the garage owner did not breach the express terms of the contract. However, the garage owner seemed to exclude the liability after a period of three months. The case brings out some aspects of implying new terms in order to ensure Alban is compensated for the cost incurred in repairing the vehicle. Section 14(2) of the Sales of Goods Act 1979 stipulated that goods supplied ought to be of satisfactory quality (Emerson 2009, p. 63). It, therefore, means that Alban can sue the garage. If Alban contracted as a consumer, he is likely to get compensated by Brenda’s garage because the court can imply some favourable terms. Q 2.3: Effect of breach of conditions, innominate terms and warranty Q 2.3 (a) If a company such as the Green Pharma breaches the contract made with the vendors, the vendors can refuse performance and claim damages. Breaching of conditions also includes termination of contracts, which will make the vendors to escapes and fail to order goods from Green Pharma. Such a trend can affect the company’s sales. Warranty is of lesser importance as compared to conditions of a contract. When Green Pharma breaches the warranty, the vendors can only claim for damage, but, not leveraging the whole organization. Innominate terms are made by lawyers by checking how serious; the breach affected the innocent vendors. If the breach turns out serious, the vendors can only get full compensation by repudiating the contract (Emerson 2009, p. 71). Q 2.3 (b) In business contracts, there is an exclusion clause that can allow a company such as Green Pharm to exclude its liability after a specified time. An exclusion clause can only become effective if the contract incorporates the clause itself, which is then signed by all contracting parties. Task 3: Contractual and tortuous liability Q 3.1 Terms of contracts determine the nature of liability in a contractual relationship. Usually, after entering into a contract, companies define the obligations that ought to be followed. The liabilities of each party are determined in the initial stage of forming an agreement. Tort, on another hand, is imposed by the law operations. In tort, liabilities are not agreed upon by members, like the contractual relationship. The operations of law include the principle of duty of care. Duty of care is demonstrated in the day-to-day situations, for example, in hospitals, where nurses and doctors owe the duty of care to the patients. The bus drivers, as well, owe the passengers a duty of care. Additionally, machinery’s users in a construction site owe a duty of care to the passers-by (Emerson 2009, p. 80). The rule of causation suggests that a breach cannot be considered to cause damage if the damage occurred without the defendant breaching the duty. The court of laws will consider damage to have been caused by the breach of contract if there is a low possibility of damage occurring on its own. The remoteness principle allows tortfeasors to escape liability of compensating the victim of the breach. In other words, those people who commit a tort can only pay what is considered unforeseen (Emerson 2009, p. 90). Q 3.2 Companies or individuals are liable for any damages arising because of their ordinary negligence or gross negligence. Companies ought to avoid negligent acts because they can be litigated by the victims in a court of law. Similarly, individuals entering into contracts with businesses are liable of their negligent deeds. Liability to negligence is related to the duty of care. For example, an organization such as Green Pharma should not fail to warn the vendors on the negative side-effects of their creams and lotions. If the organization disregards the responsibility of taking care of the visitor, it remains vulnerable to litigations due the negligence. The torts committed by the employees due to negligence make the employers liable to their misconducts, as well. In other words, breaching of duty to care makes the offender liable to any damage that arises. Q 3.3: Torts in employment In organizations, the employers can be held vicariously liable for torts committed by their workers. For torts to be considered liable to the employers, the tortfeasor must be a registered employee to the organization. Employers cannot be held accountable for torts committed by agents or other external contractors. The employees must also commit the torts during the employment period so as to make it possible for litigation of the employers. Employers are liable for employees who perform unauthorized acts as long as they appear in the course of employment. For example, a bus driver who knocks someone down while trying to overtake a rival bus will make the employer liable for his/her actions (Emerson 2009, p. 95). Task 4 Q 4.1 (a): Levels of duty of care A learner driver should provide duty of care to passengers similar to that of experienced drivers. This is because he/she is covered by the insurance and, therefore, safety to road users is very important (Emerson 2009, p. 99). Chinese herbalist will not be on the same level with an England-based doctor because the herbalist does not hold herself as a certified practitioner. Also, her clients make choices to use her medicine rather than visiting NHS hospitals. A junior doctor ought to deliver services to patients the same way the experienced doctors do. Otherwise, he/she can be litigated if he/she gives improper medication to the patients (Emerson 2009, p. 101). Q 4.1 (b) In a situation whereby Green Pharma hires an electrician who then makes faulty repairs, the company would be liable for any damages that can occur in the future. However, the company can transfer the liability to the electrician if it proves that they checked professional capabilities of the electrician before hiring him. Otherwise, the company will be responsible for the visitor’s injuries because it breaches the duty of care (Emerson 2009, p. 103). Though the visitor is an independent contract, Green Pharma should provide protection to the visitor when he is under the company’s premises. Q 4.2 (a) John, a van driver in Green Pharma took his television for repair in the nearby town. Unfortunately, he parked the car carelessly. The car moved off and injured a pedestrian. In this case, Green Pharma is held responsible for the pedestrian injuries. Though the driver was not authorized to perform his businesses used the company’s car, he was employed by the company. The law of contracts will require the company to compensate the victim because the accident was performed by its employee who was in the course of employment. Q 4.2 (b) In the case involving Robert, a security guard in Green Pharma, there are lots of potentially vicarious liabilities of the organization. Once the company’s head office ordered the guard to keep order and provide security by force, it seems that he got the opportunity to revenge against the intruders because he stabbed Mr. Mattis on his back the following night. In this case, if the intruder decides to litigate the company, the head office cannot escape the liabilities of Mr. Matis injuries. In the first place, the company had authorized the harassment of intruders and, therefore, made a path for animosity. Secondly, Robert is one of their employers who committed the tort during his period of employment. It, therefore, means that the company cannot transfer the liability to anyone; instead, it should compensate the victim, in case of litigation (Emerson 2009, p. 110). References List Emerson, R W 2009, Business law, Hauppauge, N.Y., Barrons Educational Series. Read More