Business Law and the Legal Environment - Essay Example

New Project Introduction The world of the 21st century is moving ahead on the lines of fast change and rapid development. It is important to highlight that the technological advancements, that has been happening in the domains of mobile connectivity as well as high speed internet are acting as strong catalysts which are facilitating the forward development. Because of this development, the world has become a well connected digital entity. The rising penetration of the internet and other advanced forms of connectivity are providing easy access to information to masses present in various markets around the world. Because of the easy access to information, masses around the world are getting more aware and becoming more demanding in nature. The rising demands are creating the perfect opportunities for firms and organizations to launch new products and services, which will expectedly fulfill the demands of the masses. With the rising number of alternatives emerging in the markets, the market level competition is rising on a steady basis. Because of the increase in competition, the lifecycle of products and services offered by the firms are getting increasingly reduced. In order to design a competitive edge in a fast moving marketplace, firms and organizations are looking forward to reduce the lead time that is needed to launch the new products and services in the marketplace. It has to be highlighted that for the reduction of lead time, the time to manufacture the products and the services has to be reduced. Organizations in the developing as well as developed markets, in order to reduce the lead time as well as develop efficiency in their manufacturing process, are increasingly outsourcing the manufacturing process to the various manufacturing specialists, who can provide a faster delivery of the products and services at a competitive cost. These outsourcing of operations by organizations to other firms and domain specific specialists, are negotiated in the form of contracts. In the world of business, it is important to mention that apart from the outsourcing contracts, organizations around the world often enter into contracts in the form of service level agreements (SLAs), sales contracts, employment contracts as well as general business contracts so as to generate business efficiency and develop mutually beneficial competitive edge in the marketplace. In the process of designing of the contracts, a series of clauses are added so that the contract remains beneficial for both the parties. This particular assignment intends to focus on the fact if it is ethical and legal for the people and parties involved to cancel the contracts if they are not generating any significant financial value from the contracts. Detailed Overview of Contracts From the theoretic point, contracts are legally enforceable agreements, which can lead to the generation of obligations for the involved parties (Beatty and Samuelson, 231). A contract is considered valid if it comprises the four essential elements. The first element is the necessary capacity of the parties to honor the contract. The second element is the mutual agreement and acceptance related to the terms and conditions mentioned in the contract. The third element of a contract is that the parties involved under the contract will be associated in exceed of promised values to each other. The final element of a contract that can be recognized as valid is the legal angle of the entire subject matter (Emerson, 81 - 82). Under the framework of a contract, the involved parties are expected to assume their roles mentioned in the contract. It is necessary to highlight that though there are no prescribed rule for the parties to get associated with each other in the form of a contract, but once they do get associated, the parties are legally bound to honor the obligations (Koffman and Macdonald 1). It is necessary to bring into focus that contracts between two parties can be of either the spot term or the long term. Spot contracts are often made over standard components, purchase of capital goods as well as variable rate finances. The long term contracts are usually made in the case of customized components, capital goods financing as well as fixed rate finance (Kay 54). For a firm, contracts can be of different kinds. A lease contract signed by a firm can be either of properties or of equipments (Inc.com, “Leasing Property”). Property leases are sometimes referred to as commercials leases and are generally applicable for rents of building, lands and or spaces. An equipment lease is applicable for high as well as moderate value equipments. Sales contracts are normally a bill of sales which leads to legal transfer of a particular property or material. Employment contracts are offered by firms to the employees, which normally describes the terms and conditions for their employment (Wiley, “Kinds of Business Contracts”). Service level agreements (SLAs) are firm specific service contracts where the range and mode of service will be fully defined. Licensing agreements is a kind of contract, where the firm holding the license rights, provides a legal right to another person for the usage or selling of a particular product or service (Huntington, “Different Types of Business Contracts”). Ethical aspects related to contract cancellation While evaluating the option of contract cancellation from an ethical point, focus has to be given on the concepts of rule utilitarianism and act utilitarianism. The concept of rule utilitarianism highlights that cancelling a contract is a bad idea as in the long run, the benefits associated with keeping or maintaining the contract far outweighs the benefits of breaking the contract. Under the rule utilitarianism concept, the focus is often given to a specific set of actions as compared to a specific individual (Smart 12). However, experts feel that it is a classical theory which also considers that it is immoral for people to lie in regards to their performances or deeds. On the other hand, the act utilitarianism highlights that the action of every individual should be subjected to utilitarianism test. When faced with a temptation to break the contract, the party often weighs the potential benefits and negatives associated with it (George, 45). Talking on this note, it has to be stated that when a party feels that by being in a contract with another party, he or she is not generating any significant financial gains, then he or she will be naturally tempted to withdraw or cancel the contract. Under such a circumstance, the party feels that the benefits of breaking the contract are higher than maintaining the contact. As a result, the party is likely to act accordingly and thereby break the contract. Legal aspects related to contract cancellation While discussing legal aspects related to contract cancellation, it needs to be highlighted that the contracts are often bound by legal principles. In the United States, the legal framework governing different kinds of contracts provides the room for cancellation of contracts on various issues. Section 2-106 reveals that the termination of a contract can happen by either or both the parties, in the event of a breach of the terms and conditions highlighted in the contract. The legal framework provides the parties involved with the power to cancel an agreement if there is an issue of non performance involved. Section 235 of Second Restatement reveals that the inability to perform particular services to the desired and expected levels by a party, as highlighted in the contract agreement provides valid grounds to the other party to cancel or withdraw the contract. The legal framework governing the contracts in the US explains that non performance of any kind, minor or major, defective as well as absence from performance can create valid grounds for withdrawal of contract. It has to be highlighted that the legal framework’s understanding of the nonperformance in the US is very much similar to civilian concept of faulty as well as unsatisfactory behavior (Klass, 180-181). In the event of a scenario, where a party cannot gain any significant financial value from the contract, and no other external forces are into effect, there are significant chances of non performance of the other party involved in the contract. As a result, this provides a valid ground for a party to cancel or withdraw a contract on the grounds of non performance of the other party. Conclusion On a concluding note, it can be stated that the actions of cancelling a contract can be justified from both the ethical as well as legal standpoint. On the ethical front, it can be said that a party by following the act utilitarianism concept, can move forward to withdraw the contract. The logic behind such an action by the party can be explained by the fact that the party feels that the benefits of breaking or withdrawing the contract with the other party are higher than the benefits of maintaining it. On the legal aspect, it can be stated that the party by categorizing the inability to generate significant financial gains from a particular contract as non performance of the other party involved in the contract, under the absence of other external influences can move forward to withdrawing the existing contract. Works Cited Beatty, Jeffrey and Samuelson, Susan. Business Law and the Legal Environment, Standard Edition. USA: South Western Cengage Learning. 2013. Print. Emerson, Robert W. Business Law. New York: Barrons Educational Series. 2009. Print. George, Richard T.De. Business Ethics. India: Dorling Kindersley Pvt. Ltd. 2011. Print. Huntington, Marie. Different Types of Business Contracts. N.d. Web. 27 March 2014. Inc.com. Leasing Property. N.d. Web. 26 March 2014 Kay, John. Foundations of Corporate Success: How Business Strategies Add Value. US: Oxford University Press. 1993. Print. Klass, Gregory. Contract Law in the USA. Netherlands: Kluwer Law International. 2010. Print. Koffman, Laurence and Macdonald, Elizabeth. The Law of Contract. US: Oxford University Press. 2010. Print. Smart, J.J.C. Utilitarianism: For and Against. UK: Cambridge University Press. 1998. Print. Wiley, Carol. Kinds of Business Contracts. N.d. Web. 27 March 2014. Read More