Different Types of Business Agreements - Essay Example

In order to get a clear understanding of different types of business agreements, and key elements in the formation of valid contracts, it is imperative to begin by giving a definition of the term contract. “A contract is an enforceable agreement between two (or more) people where one person offers to do something and another person accepts that offer,” (http://www.paralegaladvice.org.za/docs/chap12/02.html). Koffman L & McDonald E. (2007:1) also define a contract as, “a legally enforceable agreement giving rise to obligations for parties involved.” Simply put, if you promise that you will do something for another person and in return, that person agrees to pay you, then you and that person have made a contract. A contract can be in verbal or written form but the most important thing is that there would be an agreement especially between two parties involved. There are different types of business agreements where two or more parties agree to enter into a business contract. For instance, when a seller and buyer agree to exchange goods or services for something, then they have entered into a contract. A good example can be drawn in a scenario where the seller agrees to sell a car to the buyer who also agrees to buy. By virtue of reaching an agreement to proceed with the transaction, it can be noted that a contract has been formed. Another form of business contract involves exchange of services for something. For instance, a supplier of potatoes can enter into an agreement with a restaurant owner where he promises to pay for any delivery of the potatoes. These would have entered into a contract. There are various key elements required for the formation of a valid contract. The most important thing in the formation of a valid contract is that there must be an agreement between the parties involved. The contract must clearly state what each person is expected to do in terms of the contract and there should be seriousness in the agreement which ought to be definite. Vague terms such as “I will do this for you in the future” are not allowed in the contract as they are not legally binding hence difficult to enforce in the court of law since there would be no seriousness in the agreement. Another important thing in the signing of a contract is that there should be mutual understanding between the two parties involved so as to avoid unnecessary conflict in the future. Each party is expected to be very clear about the terms and conditions of the contract other wise it may be invalid if the other party involved is not aware of the contents of the agreement. Forming an agreement is based on the notion that each party is aware of the contractual obligations to fulfil which are legally binding. A contract should not be on the basis of gaining advantage over the other person involved in the agreement. Another key element for the formation of a valid contract is its legality. A valid contract ought to conform to the norms and values of the society. For instance, if a person promises to steal a car to get payment in return, then this contract is null and void since it is against the societal norms and values. The parties entering into a contract should have the legal power to do so. In any given scenario, minors may not enter into a valid contract with adults since it would be against the law. People who are mentally insane or excessively drunk or drugged may also not enter into a valid contract as the chances of not understanding the terms of the contract would be very high which would render it invalid. It may also be impossible to enter into a contract when something being sold is no longer available. For example, a seller agrees to sell a car and a buyer agrees to buy it but it is unfortunately stolen before the signing of the agreement, then it is impossible for the contract to be enforced because the car is no longer there. Once a contract has been made and both parties involved are aware of the contractual obligations to fulfil, this becomes legally binding and is enforceable in the event of breach of that contract by the other party. A law suit can be filed in the event that the other person involved in the contract has breached the terms and conditions of the agreement. The judiciary is the final arbiter of disputes among different people hence it would be legal to file a lawsuit against a person who breaches a contract. For example, if a supplier of stationery fails to deliver the goods as per agreement with the buy, the buyer can sue the supplier since the agreement signed would be legally binding where all the parties involved ought to respect their contractual obligations. New technology can also impact on the formation of contracts as well as applying the law with the agreements formed. During the contemporary period, the forces of globalisation have made it possible to conduct business across borders with the aid of the use of computer communication technology such as the internet. A buyer agrees to buy something online then proceeds to make a payment for the transaction to take place, then the parties involved would have entered into an agreement. However, the most notable problem with enforcing an agreement done online is a result of the fact that it may be difficult to determine the authenticity of the agreement. Computer scams are very common during the contemporary period where a lot of people have lost their hard earned money to bogus dealers who sell non existent products on the internet. A given scenario can be drawn for case involving travel agents who claim to assist with travel documents to different parts of the world. The unsuspecting traveller can then enter into this agreement then makes a payment for the travel documents to be processed. In most cases, such kinds of agreements fail to materialise and that bogus travel agent disappears. If this person cannot be located, then it can be very difficult to enforce this agreement. Against this background, it can be noted that it is very important for the parties involved determine the authenticity of any agreement that may be entered into. It can be noted that this is one example where new technology can negatively impact on enforcing agreements done online which cannot be authenticated. Therefore, it is very important that the parties intending to enter into an agreement should be able to verify the authenticity of the agreement before rushing into making premature payments for otherwise non existent goods and services. The rules of intention in a contract posit to the effect that the parties who agree to enter into a contract do so voluntarily without any jurisdiction or form of coercion. Two parties who enter into a contract often freely do it where there is no undue pressure on the other side by the other party. It can be undoubtedly argued that something that has been made freely is enforceable in the event of failure to fulfil the contractual obligations as prescribed in the agreement. The guiding principle in the formation of the contract is that both parties involved are intentionally aware of the agreement they would be making. When people are not forced to enter into any agreement, then there is every reason for them to honour their contractual obligations as a way of frustrating the other party which is illegal. Rules of intention are in themselves very important since they set the tone of the agreement going to be made which ought to be mutually understood by both parties involved. It is very important for the contracting parties to have appropriate legal capacity to enter into a binding agreement. A contract is something that is binding and legally enforceable hence the need to have legal capacity in order to be legible to enforce the agreement should there be any form of misunderstanding or in the event that the other party has breached the contractual obligation. Justice delivery is designed in a fashion that would ensure fairness to all the parties involved where there is no one who is disadvantaged by the application of the law. In this particular case, people who do not have the legal power to enter into a contract are minors. These are young people below the age of 18 years. Any person below this age who enters into a contract without the consent of the parents cannot by law keep that contract. Indeed, if he or she is 18 years and above, then it is possible to sue for damages. The law is very clear and any person who may enter into an agreement with a minor may loose the case in the event that there has been a breach of the contract on behalf of the minor. A person can only enter into a contract with a minor on behalf of the parent or an adult person. Mentally ill people or those excessively drunk have no legal power to enter into a contract with a sane and sober person. It is because of the reason that their state of mental capacity cannot be trusted to make informed decisions compared to the partners they would be intending to enter into an agreement with. Entering into a contract with these people would be at own risk since they do not have the legal power to agree on something of substance such as signing a legally binding contract. In this case, it can be noted that it is inappropriate to enter into an agreement with someone who does not have the legal capacity since it is impossible to enforce such an agreement. Over and above, it can be noted that a business contract is a legally enforceable agreement between two or more parties where promises of exchange of value for something are made. There are different types of business agreements where two or more parties agree to enter into a business contract. For instance, when a seller and buyer agree to exchange goods or services for something, then they have entered into a contract. On the other hand, the key elements required for forming a valid contract involve the following aspects: agreement, mutual understanding as well as legality in order for the contract to be enforceable. New information and communication technology also has a bearing on the agreements entered into as noted above. References Koffman L & McDonald E. (2007), The Law of Contract, 6th Edition, Oxford University Press. Available from: http://books.google.co.za/books?id=8JtwkQrAC_kC Accessed 15 April 2010 Consumer law- What is a contract? (N.D.). Available at: http://www.paralegaladvice.org.za/docs/chap12/02.html Accessed 15 April 2010 Read More