Business law comprises of various areas, which are studied in business schools and law schools curricula. Business law rules the issues that affect business operations. Also, it addresses the establishment of new businesses as well as the aspects that arise as the existing business interacts with other companies, the government, as well as the public. Understanding business law’s role in the legal systems plays a key role in aiding to perceive businesses as separate entities from their employers and owners. Consequently, they are subject to regulations and legal rules, which are designed to offer each participant a fair chance to succeed in the marketplace. Business laws’ enforceable systems benefit not only the national economy, but also the global economy in addition to offering more effective transactions (Keenan & Riches, 2007). This essay offers a summary of the law of contracts.
A contract can be defined as an agreement between parties or people, which offer rise to obligations that are recognized or enforced by law. There are three fundamental elements in creating a contract: consideration, agreement and contractual intention. The first requirement of the contract is for the parties to reach an agreement. An agreement can be attained when a party makes an offer, which the other accepts. An offer is a willingness expression to contract on the specified terms created with the aim that it is to become binding once the addressed person accepts (Abbott & Pendlebury, 2002).
There must exist an objective intent manifestation by the offeror in order to be bound by the offer in case the other party accepts it. An offer can either be addressed to a specified group of people, a single person or to the whole world at large. Also, the offer might be expressly made by conduct or word. However, the offer has to be differentiated from an invitation to treat, through which an individual fails to make an offer but instead invites the other party to make the offer. Whether a statement is an invitation or an offer to a treat relies mainly on the intention against which it is made (MacIntyre, 2008).
An acceptance is regarded as the unqualified and final assent expression to the offer’s terms. In this case, there must also exist an objective manifestation through the recipient of the offer. The offer has to be accepted according to its exact terms if it intends to create an agreement. An offer might be accepted through conduct. Consequently, acceptance possesses no legal impact till it gets communicated to the offeror. The common rule states that a postal acceptance takes effect once the acceptance letter has been posted. However, postal rules will not be applicable if it gets excluded by the offer’s express terms. Additionally, an offer that needs acceptance in order to be communicated in a precise way can be accepted in that way (Kelly & Holmes, 2005).
When acceptance happens through instantaneous means as mail, then it will take effect at the place and time of receipt. Communication cannot take effect as an acceptance when it tries to vary the offer’s terms. In such occurrences, it is a counter-offer that the original offeror can either reject or accept. The making of a counter-offer in a contract amounts to the original offer’s rejection. It is vital to differentiate a mere request from a counter offer. Also, an offer can be revoked any time prior to its acceptance. However, such revocation has to be communicated to the offeree. Once the offer is accepted, then the parties have reached an agreement. It is the basis for the contract; however, it is not adequate in itself to create legal obligations (Slorach & Ellis, 2007).
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In business law, a general rule states that a promise is not binding unless consideration supports it. Consideration is regarded as something of value that is offered for a promise. Consideration is needed to make the promise implementable in a contract and has to be satisfactory. Even though a promise possesses no contractual force, consideration must be added to it in order to become adequate. Nominal consideration is deemed sufficient. Conversely, the consideration for a promise has to be offered in return for a promise. The promise has to offer the consideration. Consideration might be satisfied whereby the promise suffers detriment at the request of the promisor. Similarly, consideration might move from the promisee devoid of moving towards the promisor whereby the promisee confers gains on third party at the request of the promisor (Keenan & Riches, 2007).
An agreement, even though it is supported through consideration, cannot become a binding contract if it is made lacking an intention towards creating legal actions. It implies that the people or parties involved in the contract have to intend their agreement in order to become legally binding. The majority of social arrangements do not sum to contracts since they are not intended to become legally binding. An agreement that is made to be subject to contract or a comfort letter is unenforceable. Normally, the words counteract any contractual intent; thus, the parties engaged in the contract are not bound till formal contracts get exchanged. The common rule is that contracts may be made informally. The majority of contracts may be formed orally. In some cases, neither written nor oral communication is needed at all. The stated implies that an informal promise exchange can be legally valid and binding as a written contract (MacIntyre, 2008).
The contents of the contract are extremely vital. The contract terms can be grouped to implied terms and express terms. Express terms are set out by the parts in their agreement. The parties might record their conformity and the terms of the contract on at least one document. Such terms can be integrated through reference to the contract. On the other hand, the contract might be contained in at least one document even if one does not refer expressly to the other. The master contract places the majority of the underlying terms that the parties are addressing meanwhile specific terms are dealt with in individual contracts. Integration without express reference relies on the parties’ intention, determined according to the agreement objective test. Once the express terms become identified, interpretation is needed (Kelly & Holmes, 2005).
The document that sets the agreement of the parties has to be interpreted objectively. The begging point for ensuring the objective implication is through the words applied by the parties interpreted in accordance to their implication in conventional application. The approval evidence rule suggests that evidence might not be declared to contrast, challenge or invigorate a written document. Consequently, once a contract has been put down in writing, there exists a presumption that such writing was intended to encompass all the contract terms and neither party may depend on extrinsic evidence, not in the document. Such presumption is rebuttable. Extrinsic evidence can be admissible when the written document was initially not intended to set all the terms agreed by the two parties (Abbott & Pendlebury, 2002).
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A contract might comprise of terms that are not expressly stated; however, they are implied because the party intend to, or by usage or custom or the operation of the law. The implied terms are the terms that are not set out expressly in the contract, but which the parties intend to include. There are two tests that govern the implied terms. One of such tests is the officious bystander. This test implies that terms are obvious that its insertion go without saying. The other option test for implication is business efficacy in which the contract could be unworkable minus the term. In this test, terms can be implied if the contract will not work without the terms. However, the term may not be implied if it conflicts the contract’s express terms. The terms that are implied in law are the terms imported through the law operation when their parties have the intention to include them or not. In some contracts, the law seeks out to impose a set of terms that are standardized as a regulation. The majority of terms in law that are implied are in statutory form. More considerable terms can be implied from the relationship’s nature between the parties (Abbott & Pendlebury, 2002).
There are various ways in which a contract can end. One way is though expiration. It implies to a contract that comes to an end according to its terms either due to a fixed date of expiry or there exists a right to terminate the contract. Termination of a contraction can occur when there is a breach of contract. A breach of contract happens when a party, without any lawful excuse, refuses or fails to perform the contract, or incapacitates or performs defectively. Defective performance occurs when a party or person promises to do something but does differently in regard to quality, time, or quantity. An anticipatory breach happens when a party repudiates or disables itself from performing the contract before its due performance (Keenan & Riches, 2007).
Termination of breach is a remedy whereby the injured party is released from the performance obligations due to the non-performance or the defective of the other party. A breach of contract offers the party injured the alternative to terminate the contract or to claim and affirm further performance. Termination arises where there is the impossibility, repudiation and significant failure to perform. A contract can be voidable or void if a mistake occurs. Mistakes are classified to various forms: common mistake, unilateral mistake and mutual mistake (Slorach & Ellis, 2007).
Under the frustration doctrine, a contract can be discharged when, after its creation, an unpredictable event happens that makes contract performance impossible, essentially different or illegal from what was initially contemplated. Frustration can occur when the frustrating event is created through one party’s fault. Frustration discharges parties from future performance duties. Damages are aimed at compensating the injured party due to a breach of contract. In order to establish a claim to significant damage for breach of contract, the party injured has to show that the loss is too remote; actual loss was created through the breach, and the loss is recognized as offering an entitlement towards compensation. Damages are on the basis of loss to the claimant. A court may restrain a party in the contract from committing a breach through injunction. These injunctions might be interlocutory designed to regulate the parties’ positions pending on the hearing of the dispute. An injunction cannot be granted when the effect is indirectly or directly to compel the defendant to perform acts in which the plaintiff would have obtained specific performance order (Kelly & Holmes, 2005).
Business law evaluates issues that affect business operations. This essay has offered a summary of the law of contracts. In the contract, there must be an objective intent manifestation by the offeror in order to be bound by the offer in case the other party accepts it. An acceptance is regarded as the unqualified and final assent expression to the offer’s terms. The general rule states that a promise is not binding unless consideration supports it. Consideration is regarded as something of value that is offered for a promise. An agreement, even though it is supported through consideration, cannot become a binding contract if it is made lacking an intention towards creating legal actions. The contents of the contract are extremely vital. The document that sets the agreement of the parties has to be interpreted objectively. On the other hand, a contract might comprise of terms that are not expressly stated; however, they are implied because the party intends to, or by usage or custom or the operation of the law. There are ways in which a contract can end such as expiration and termination. Under the frustration doctrine, a contract can be discharged when, after its creation, an unpredictable event happens that makes contract performance impossible, essentially different or illegal from what was initially contemplated. Damages are aimed at compensating the injured party due to a breach of contract.