Importance of a Contract Law - Essay Example

Contract law The purpose of this essay is to address the legal issues in the case of Churton and Silver with regard to their unpaid loan with Rick It Merchant Bankers, Ltd. For this essay I shall be discussing the legal viewpoints of contract law that surround the circumstances of the case at bar, and will advice Risk It on their legal rights. As the facts of this case state, Churton and Silver contracted with Risk It for a loan with a fixed payable term and interest rates. The first instalment had been adequately paid, but due to financial problems, Churton and Silver foresaw a difficulty in meeting their future loan obligations to Risk It. Churton and Silver were able to inform Risk It of the situation, who agreed to amending the loan agreement by postponing the payment of the principal due for 1 year, and waived all interest payables. However, due to financial problems of its own, risk It now wishes to enforce the original loan agreement against Churton and Silver, and the latter refuse citing the limitations on what they may pay and the ill effects full payment would do in damaging their business enterprise. Prior to formulating the legal advice I would present to Risk It, it is important to first outline the various legal concepts. In the case at bar, there is clearly a contractual obligations, voluntarily undertaken by both parties. Commonly this is considered a bilateral contract, which imposes upon both parties certain obligations that they agreed upon. Here, Risk It agreed to loan the money to Churton and Silver, who in turn agreed to pay the loan based on the agreed terms. Although the facts make no mention as to the manner in which Risk It agreed to amending the terms of payment of the loan as per the difficulty in financial situation of Churton and Silver, there is really no difference as to whether or not the agreement to amend the terms is in writing or not. Despite the common sense, contracts can be legally binding even if not reduced into writing, and have the same effect as if it were on paper. Thus, the acts of Risk It in agreeing to change the terms of the loan is binding upon them, and they can no longer renounce that change or deny it otherwise. This is a key concept of contract law, that contracts are formed through an agreement consisting of an offer and acceptance, a valuable consideration, and the intention of the parties to create a contract. Further assuming that all the necessary requisites of a valid contract are also present in the case at bar, there is no need to delve into the complexities of the form, parties’ capacity to contract, consent freely given, and legality of the subject matter or purpose of the contract. Seeing as this is a clear contract of loan, all things should be in order. With all that said, it is clear that the only advice I can make to Risk It is for them to follow the amended loan agreement that they had made with Churton and Silver. The changed terms, and waived interest became binding in them from the moment it was made, offered and accepted by the parties. They can no longer renounce or go against that agreement, or they put themselves at risk of legal suit for the remedies due to breach of contractual obligations by Churton and Silver. It is necessary to state that the remedies for breach of contractual obligations include the award of monetary damages by the courts, and a petition for specific performance. The former is the assessment of monetary sum to be given by the offending party to compensate for the injury that would be suffered by the breach of contract. This could be a relief sought against Risk It if they try to enforce the original loan agreement instead of the amended one that would inevitably cause great damage and injury to the business enterprise of Churton and Silver. The other remedy is what I feel would be most applicable to Risk It should they need to apply it against Churton and Silver. Specific performance is a relief sought to compel the other party to comply with their contractual obligations. Although Risk It needs the money immediately, they still have to wait for the proper time and under the circumstances that they alreadyy agreed upon before. It is noteworthy to state that in common law, there exist a common law remedy of mitigation of loss of damage, which should be mentioned in this case. This remedy dictates that it is the duty of every plaintiff to mitigate his loss and do his best not to increase the amount of damage done. One of the rules of this remedy state that the plaintiff may recover loss incurred in taking reasonable steps to mitigate his loss. However, plaintiff must also take steps to minimise the loss resulting from the breach by taking all reasonable steps available to him. If he fails to do so, then he cannot recover anything in respect of that extra loss. I feel that this is applicable in this case because of the fact that the agreement to amend the terms was only four months before Risk It stated that it was experiencing financial distress. This information should already have been known long before the time that Churton and Silver approached them with their own financial problems. Therefore, as a financial institution, Risk It should have known that it was at risk of its own problems, and should not have bound itself by contract in generously changing the terms and waiving all interests due. To summarise, through examination of the facts of the case and the applicable principles of U.K. law on contracts, the advice I can give to Risk It is that despite their dire financial straits, they must adhere to the terms and conditions of the contract they knowingly and wilfully entered into with Churton and Silver. Works Cited: Tufal, Asif. “Contract Law.” 07 April 1997. LawTeacher.Net. 8th September 2005. . Read More