The Law of Contract - Coursework Example

Name: Lecturer: Course name: Course code: Date: Introduction to Commercial Law It is important to build the contractual legal of a board through an explanation of the contract made between the bank and the business. This will assist in making an informed decision on joining the Maurice and Blackburn litigation. A contract legally binds two or more parties. It can be written or verbal. Breach of contract can lead to payment of damages and compensation in monetary values. Fundamental Components of a Contract As parties enter into a contract, there has to be a proposal of the contract by the parties which is acceptable to all of them which should be communicated regularly. The parties should be willing to nurture a legal relationship between them (Wang, 2007). a) There has to be definite statements of the offer on what is to be done. Letters of intention, expression of interest and ball park interest are not offers.A case example of an offer is Harvey v Facey [1893] AC 552 Privy Council. Facey received a telegram from Harvey asking if he would sell Facey a Bumper Hall Pen at the lowest price. Facey replied that the lowest price for Bumper Hall Pen was E900. In this case, there was no contract between Facey and Harvey since Facey gave an indirect answer to question and that the price was just additional information to offer. Termination of offer happens when, 1) The time expires when the parties accept the offer. 2) Time in reasonable circumstances elapses. 3) Offer withdrawn before acceptance. 4) The death of the person giving the offer. 5) The death of offeree. An invitation to treat happens when people invited to make offers, but in itself, it is not an offer. The agreement with the bank was an offer and not an invitation to treat hence it is legally binding. An example is Patridge v Criteden (1968). As a business, it has the legal basis to file litigation since it states the offer with the bank and does not have a condition that renders it lapsed. b) Acceptance can be verbally written or inferred, depending on the choice of the person making the offer. A party can only accept the offer without any attached conditions; otherwise it is taken as a counter offer. The acceptance has to be communicated by both parties. There is a written form of acceptance between us and the bank without other conditions attached. Hence, the bank is wrong to charge us unreasonable fee. c) As parties enter into a contract, they acknowledge the fact they are entering into a legally binding agreement, though it might not be stated that the parties do not understand that legal consequences that follow. In a case whereby the parties involved agree not to be legally bound, it has to be stated so for it to be acknowledged by a court of law. In the agreement, the bank and us did not in any way state that the agreement does not have legal grounds for litigation (Latimer, 2009). d) There has to be a valuable consideration in support of the contract to be binding. When benefits accrue, one party fulfils a promise in return of a promise from the other party. e) There has to be legal in the form of agreement for it to be recognized by the law, unlike a case where there is an agreement over an illegal offer. In common law, the following situations can lead to illegality of a suit. 1) Contracts which defraud the government of tax collection. 2) Contracts that promote prostitution and activities leading to social decay. 3) Contracts leading to the prejudice of justice administration. 4) Contracts that tend to in one way or another encourage corruption. 5) Contracts that put the public safety at stake. 6) Contracts that compromise the status of marriage. 7) Contracts that put restrictions on trade. A case example of Esso petroleum V Harper’s Garage [1968] Restraint of trade is when two parties agree that one of them will conduct trade in a restricted manner with other persons not party to the contract. 8) Contracts in the case of employment that does not protect employees IP. In the situation of Maurice Blackburn suit, there is the legality in the subject matter since it does not fall in any of the categories of illegality. The business should thus join in the litigation. There is a legal basis for litigation since the case meets all the four elements of a contractual agreement between the bank and us. Hence we have a right seek claim in the Maurice Blackburn Suit. We have previously noted that a contract has to be done strictly according to the terms of the agreement made. A shortcoming in the performance of a contract can be regarded as a breach of contract and can attract some action which in the form of a penalty (Alderson, 2005). A penalty cannot be regarded as an assessment of damages. Only the recovery of the damages incurred is permitted in a court of law. In this case, the bank has not incurred any damages that it seeks to be recovered. The court of Law will treat this as a liquidation of damages and will thus approach it three general ways. 1) If a debt has to be paid, and the sum agreed upon as damages is more that the debt itself, then the court of Law will treat that as a penalty. 2) If the guarantee of the payment of a particular value of money is an ambivalent value, then this is liquidation of damages and not a penalty. 3) If a contract has more that one promises and a fixed amount is payable on the breach of any promise, then the amount is as penalty. Honor and dishonor fees are charges that a bank account surcharges for lacking enough funds to make payments, or when it is over withdrawn (Gibson, 2006). Bank overcharge is not legitimate, because under common law, interest is unacceptable on lent money or labor claim or the price of sold items. To illustrate this, the following examples are considered. John has a balance of $ 200 at his bankers, though it is a loan it does not have interest unless under special arrangements. If John buys goods from Peter at a price of $500 and given a 3 month credit and John does not pay Peter at the end of this time, peter waits for three months again and sues John. Peter can only get $500 back; interest can be sought indirectly by the promise of a rebate on the invoice price. Finally, let us consider an example where John works for peter at a salary of $400 and not paid for a month. According to the law he cannot ask for interest. By law, a debt of a certain amount sued, allow judges to litigate on two conditions; if at a certain time a written document exists that specifies how the debt is to be paid. If a debt of a certain sum of money has not been paid, and a written demand given to the debtor, that interest charged from the time of demand until the time of payment takes effect (Baron, 2006). In the first situation, the judge may give interest from the time when it is payable and in the second case from the time of making a written demand. In the case of Maurice Blackburn, there is no written condition made on a claim or a written demand for payment. Hence, the bank has no contractual basis to charge late payment fees, and dishonor fees on the business engendering a contractual legal basis for the plaintiff claim in this case. Undue influence is a situation whereby a person has some advantage or is insincere or acts in a manner that is quite overreaching. It can be presumed that the complainant has to proof that their existed a form trusted relationship between the two people and that one party misused the friendship to lure the other party into entering into contract freely. In this case, it is presumed that the bank acted with undue influence by charging the business fees. It had public trust which it abused by charging high fees (Pendleton, 2003). Privity of Contract Only the parties involved in a contract have the mandate to sue and be sued. In this case, where a beneficiary is a third party then a court of law may look for an agency or a trust which will then help to overcome the legal challenge. This case is a horizontal privity. A vertical privity is involves two different parties having independent contract between one of the parties and other parties. Since a privity of contract exists between the bank and business, then there is a legal basis for the litigation. Considering that Maurice Blackburn litigation meets all the legal requirements, and the fact that there is no written agreement that the fees are a form of penalty. Seeking claims encourages the board to join the litigation owing to the contractual legal basis of the bank. Conclusion A contract is a legal agreement. Hence, it binds two or more parties who agree to subscribe to the terms of the contract. Such an agreement can be in written or verbal form. Consequently, a breach of contract can lead to payment of damages and compensation in monetary values. Therefore, it is important to build the contractual legal of a board through an explanation of the contract made between the bank and the business. This will assist in making an informed decision on joining the Maurice and Blackburn litigation. The law of contract embodies comprehensive disciplines of consumer transactions, business, and commerce. Specific law has also paved way for development of a number of commercial entities such as: negotiable instruments, banking, bankruptcy, consumer credit, debtor and creditor, landlord-tenant, mortgages, contracts, real estate transactions, sales, and secured transactions. Works Cited Barron, M. Fundamentals of Business Law. 5th edition, McGraw Hill: Sydney, 2006. Print Gibson, Andy. Commercial Law in Principle. 3rd edition, Law Book Co: Sydney, 2005. Print Latimer, Paul. Australian Business Law. 28th edition, CCH: Sydney, 2009.Print Pendleton, Wayne & Vickery, Roger. Australian Business Law: Principles and Applications. 4th edition, Prentice Hall: Sydney, 2003. Print Wang, Hua, The International Student Guide to Business Law. Law Book Co., Sydney, 2007. Print Alderson, Peter. Legal Dictionary for Australians. 2nd edition, McGraw Hill: Sydney, 2005. Print Read More