The Essential Elements of a Contract in a Business - Essay Example

?Aspects of contract and negligence in a business Task1: Question The elements of a valid contract include; offer and acceptance, competent persons and having legal capacity who exchange, consideration to create, and lastly, mutuality of obligation (Walston-Dunham, 2008: 417). As result, every valid contract has particular characteristics. If at all any of them are absent, the enforceability of the agreement then comes into question. Most importantly, every contract must have two or more parties that provide some act or benefit does not have the legal right to be the recipient. All contracts must involve (a) at least two parties, (b) parties who have the legal capacity, (c) a manifestation of all the parties in the contract, (d) finally, a consideration that supports legal and enforceable promise. Having the legal capacity means that the individuals are adults and have mental competence. The law is relatively settled if the competent adults are bound by the terms of the contract. Considering the case of Wohoo and Provident Solutions (PS), it involves corporate organizations. A company has the capacity to enter into contractual relations , but such type of relations are only binding on the companies if those acting on behalf of the company do so with express or implied authority of the company, something which was fulfilled by both Wahoo, PS and Clive Software Limited. The essential elements of a contract include: offer and acceptance, free consent, contractual capacity, intentions to create legal relations, illegal and void agreements, and lastly considerations. Considering the case of Wohoo Wholesale and Provident Solutions, when PS sub-contracted Clive software on the recommendation of Wohoo to provide software systems, they did so because previously they provided software of very high standard. But since the software installed by Clive brought numerous problems to the organization, Wohoo refused to pay PS for 40 computers in the process with holding 58 computers and five servers as it claims for compensation of the losses incurred by the faulty software installed. This clearly shows that all the essential elements of a contract are not in place. In this context, there is no consideration as there is no price paid for the promise of the other party. Since consideration does not exist, the court is likely to question its adequacy. The court is to intervene because one of the parties, Wohoo has exhibited duress or unconscionable conduct. Typically, courts will not weigh the adequacy of the consideration as long as the consideration is established to be sufficient, with sufficiency being defined as the meeting test of the law; adequacy is the subjective fairness or equivalence. The contract between Wahoo and PS is questionable although the problems emanated from Clive Software (Chen-Wishart, 2007: 212). The manifestation of assent by all the parties that are in agreement signifies acceptance in some way. Therefore, both Wahoo and PS were aware of the status of Clive’s products by accepting it as a sub-contractor. Since the objective standard was met, it means that there is proof that the assent was met. By Wahoo with holding 58 computers and 5 severs narrows down to the elements of an assent. This is because the parties need to come to some meeting of the minds about the terms of the contract. Since the three parties entered into a contract and one or two elements failed to be fulfilled the contract is considered to be null and void. This is because of the unconscionable conduct and misleading conduct of both Wahoo and Clive Software affects the enforceability of the contract. To the effect that the contract is considered as void, the parties should be put back to their original positions (Walston-Dunham, 2008: 420-423). Task 1: Question 2 Every business should be aware of standard form of contracts. These are agreements that make use of standardized, the non-negotiated provisions that are usually in the preprinted forms. They are also known as “boilerplate contracts,” “contracts of adhesion”, or "take it or leave it" contracts (Sales, 2011:53). Examples of standard from contracts include insurance policies and contracts with government agencies. Whilst these types of contracts are not illegal per se, there exists a great deal of possibility for unconscionability. The terms which are not negotiable by the consumer are usually portrayed in a fine print. They are drafted in a fine print that is drafted by or on the behalf of one of the transaction’s party. The party that has the superior bargaining power is the one that routinely engages in such type of transactions. In standard form the business to consumer contracts fulfills a very important role in the efficiency of mass distribution of services and goods. This is because these contracts have the potential to reduce the costs of transactions by removing the need of negotiating the numerous details of a contract each time a service is utilized or a good or a product is sold. Moreover, in practice, standard form contracts are drafted by the corporate lawyers who are far away from where the transaction between the underlying vend or and consumer takes place. The lawyers are instructed to construct them in order to minimize the firm’s liability and not necessarily to implement the manager’s competitive decisions (American Bar Association,2007: 35-37). Also, some contracts are written by an industry body and distributed to the firms in that sector; this reduces the ability of the consumers to shop around and increases the homogeneity of the contracts thus mitigating the effects of competition on the content of contracts. As a result the presence of the business owner is required. The business’ owner knowledge in standard form contracts will eliminate the danger of accepting unfair or the unconscionable terms where these artful drafters of such contracts presents to the consumers with more attractive terms on the visible terms of most interest to consumers, like price and quality, yet slip one-sided terms benefiting the seller invisible, fine print clauses that are least likely to be read or understood by consumers.  Express terms are those terms that have been specifically mentioned and agreed on by the parties at that particular time the contract was made. On the other hand, implied terms are terms which were specifically agreed upon by the participating parties, but which has to do with custom of the business. Statements made during contractual negotiations could either be mere representation or terms. Therefore, for a statement to become an express term of the contract depends on the parties’ intentions. Therefore, in considering the existence of intention of the parties the court may consider: the written court, knowledge and expertise of the parties and importance of the statement to the party. Furthermore, an exclusion clause is a clause that exists in the contract excusing a party to the contract of liability in the situations covered by in it. They are used to absolve company’s liability when they will otherwise be too at risk to do business (Koffiman & MacDonald, 2007:56-57). Task 1: Question 3 A contract is an agreement that has a lawful object entered into voluntarily by two or more parties, each of whom has the intention of creating one or more legal obligations between them. According to Miller and Jentz (2009:198) assert that to enter into a contract, the parties must follow the named steps below. Enquiry; this is done by gathering information regarding the contract to be entered. Moreover, information regarding the organization must be properly harnessed. Next is credit assessment; we should have sufficient information about the organization’s finances and what is about to be financed. Offer; when the request for finance has been granted, the offer is to be accepted within a given time limit for the conditions of the contract to be valid. Fourthly is acceptance; the acceptance form must be signed by an authorized signatory in the organization of the customer. This marks the formal entry into the contract. Next is delivery; once the acceptance form has been signed, delivery can take place from the supplier to the customer. Approval; the customer is to confirm the goods or services or any other item in the contract was delivered safely and checks if it is in the agreed condition. Lastly, payment; this signifies the fulfillment of the requirements of the contract. Task 1: Question 4 The contractual terms can either be warranties, conditions or innominate. It is vital for parties to correctly identify which terms and conditions and which are to be warranties. In case there is a breach of contract, it is important to establish which type of term has been breached so as to determine the remedy available. Conditions According to Mothersole and Ridley (1999: 365) argue that the terms of contract are not the same or of equal weight. Conditions are the most important terms. Condition is a major term of the contract that goes to the root of the contract. If a condition is breached, then the innocent party is entitled to end the contract and claim the damages. By affirming the contract and suing for the damages, one can pursue other remedies like injections or specific performance. In the this context, by Wahoo allowing PS to sub contract the repair of computer software, one condition that it was to meet was the use of safe parts to replace faulty parts. Therefore, by Clive Software choosing to utilize subpar replacements, Wahoo may choose to regard this as a breach of an essential condition and sue Clive Software for the damages suffered, or even decide to terminate the contract. Warranty Are the less important terms in a contract, thus not central to the existence of a contract. Ultimately, if warranty is breached the innocent party might claim the damages but can not repudiate the contract. The remedy for warranties is financial compensation for the loss and damages suffered. For example when Wahoo with holds the 58 computers it demands compensation for the losses incurred but it cannot terminate the contract it has with PS. Also, cars are usually sold with a 12-month warranty. But legally, the word warranty covers any type of contractual promise. The usual legal remedy is damages. Innominate terms: looks into the effect of the breach and questions if the innocent party to the breach was actually deprived of the whole benefit of the contract. Only if was the innocent party substantially deprived of the whole benefit, will they have the ability to treat the contract as at an end. This approach introduces the element of uncertainty, making it hard for legal advisers to advise their clients the likely remedy for a particular breach (Mothersole & Ridley, 1999:377). Therefore, an innominate term is one which could be a warranty or a condition depending on the seriousness and nature of the breach. Consequently, in the event of a breach termination of a contract depends on background of circumstances, the industrial practice and the intention of the other parties (Ascentsia Law Corporation, 2012). Task 2: Question 1 Every owner of the business should strive to limit liability for contracts and torts. Tort is actually a personal injury law. The best example of tort is negligence. If an individual commits a tort, the person is legally liable to the aggrieved party. Therefore, the aggrieved party can sue for monetary damages against the party who commits the tort. The major areas of liability under tort and contract are to ensure that the entities must be structured and properly funded in order to limit the exposure to the liability. Therefore, proper funding and structuring of a business is not sufficient. This is because some assets remain vulnerable within the business entity. However, even the limited liability corporations must be operated properly, in a manner that preserves limited liability that has been granted by law. Significant exceptions to limited liability exist in terms of contract and tort liability. When an exception applies, the limited liability is lost making the business’ owners to have unlimited personal liability for the debts of the business. On the other hand, with proper planning these exceptions can successfully be avoided. The first is to comprehend clearly the nature of contract law. By avoiding the exceptions to limited liability for contacts and torts, the small business owner will be able to preserve his/her legally guaranteed protections, thereby securing personal assets outside the business. Moreover, the small business owner can under take actions to limit this limited liability as well as protecting the assets of the business. A careful comprehension and application of the authority of under contract law, and the pitfalls that can result from torts and contracts, goes along way forward in ensuring maximum asset protection for the business. According to Miller (2012:76) argues that most of the small business owners blissfully operate their businesses unaware that they have great exposure to liability through contracts or torts. These are acts whose outcome results in a lawsuit or settlement forcing the payment of monetary damages. Most of them are under the illusion that by forming corporations they will be protected from liability. Reality sets in when a financial disaster strikes. By this time, it would be too late to take corrective measures Difference between liability under tort and contract Torts damages usually want restore the party to original as best they can before commission of the tort. Unlike tort damages which are punitive damages to punish, contract damages under expectations damage, want to put them in a position of where they would have been had the contract been performed. Also, the reliance damages for depending on the contract that was breached, and lastly, law of contracts damages does not punish or deter breach of contract. While in tortuous claim the defendant may not be having the previous transaction or the relationship with the claimant, in contractual claim, the claimant and the defendant must be parties to the contract. Task 2: Question 2 The principles of liability in negligence in business activities Tony Smith was the site foreman where John worked with other seven colleagues. John was subject of bullying from Nathan Parker. Tony does not take action though he is aware of the bullying. Bob Jones found John trying to commit suicide and he got a mild heart attack from the sight of blood oozing out from John’s mouth and nose. Though he rang the ambulance it arrived 3-times late its scheduled time and by the time they reached there John was dead. However, had it arrived in 20 minutes as per the guide response time, John would have had a 50/50 chance of survival. Under tort law, if a person personally commits a tort, that individual is liable to the injured party. This is true regardless of whether the person was acting as an agent for another party at the time the tort was committed, the principle would be liable as well. In this case Tony Smith, by being the supervisor of the ABC Construction Ltd. The company is also liable for the damages caused to Bob Jones and the death of John. However, if an agent commits tort while carrying out the principle’s business, the principal is automatically liable for the agent’s tort under the doctrine referred to as respondeat superior. In this case, ABC of which Nathan is an employee and the ambulance company are both liable for the death of John Rodgers. Following the principles of tort; the law gives various rights to persons. When the right is infringed, the wrong doer is liable in tort. Moreover, when tort is committed like in the case of Jones and John, the remedy is action for damages such as compensation for the damages. Firstly, John’s family and his dependants should sue for compensation from ABC Construction Company. Jones is also to sue for compensation to cater for the medical costs in treating the mild heart and depression. Moreover, Nathan Parker should be arrested and charged for aiding in a loss of life and also breaching the employee’s code of conduct by bullying John Rodgers. However, before suing for loss and damage, you must have the proof for the loss you want to claim the damage. Therefore, through civil litigation, if an individual proves that another person acted negligently to cause their injury, they can actually recover damages to compensate for their harm. In this case Tony Smith, ABC Construction Company, Nathan Parker, and the ambulance company can all be sued for their specific levels of negligence. As a consequence, proving a case of negligence potentially entitles the injured plaintiff to compensation for harm to their body, mental well-being and financial status. The ABC Construction company can also take legal action against supervisor Tony Smith for negligence while in the companies. He failed to take action while he was aware that John Rodgers was being bullied. It must be shown that the particular acts were the cause for the loss or damages sustained, for the defendant to be held liable. Damages are compensatory in nature. The awards should be sufficient enough to put back the plaintiff in the position he/she was before the defendant’s negligent act. Task 3: Question 3 Peter Mathews an engineer for Top Tooling Pls was obliged to respond to calls from Sideline Automation Ltd. One day, by fixing a climate control system in Sideline that was provided by Frozone Plc, it resulted in losses to the Sideline Company. According to Giliker (2010) asserts that the doctrine of vicarious liability operates within the law of torts. Vicarious liability defines the circumstances under which an individual is liable for the damages of another without express authorization. Therefore, vicarious liability is a form of strict, secondary liability that emerges under the common law’s doctrine of agency, respondeat superior; the responsibility of the superior for the actions of their subordinates, or in a wider sense, the responsibility of any third party that has the right, duty and/or controls the activities of the violator. The employers are ultimately vicariously liable under the doctrine of respondeat superior for the negligent omissions or acts by their employers in the course of the employment. For the actions to be considered within the course of employment it must be authorized or be connected with an authorized act to be considered a mode, though an improper mode of performing it. The employer Top Tooling authorized Peter to go ahead and repair the climate control system. It is therefore held responsible for damages that occurred at Sideline Ltd. This is because for the employer to be held liable, the wrong must be committed within the course of employment. Edwards, Edwards, and Wells (2008:100) found out that the employer is only able to avoid liability in this situation when it is shown that the employee acted on a frolic of his own. As a consequence, to determine if vicarious liability exists, we it must be established whether the act complained of was committed in the course of the employment, and secondly, if the act is reasonably incidental to the employee’s employment duties. In this context, Top Tooling Company is held liable for the loss of ?100,000 of stock in Sideline and the distortion of the warranty by the Frozone Plc. Summarily, the employer is held vicariously liable where he/she ratified or authorized the tort. This is because the actions of Peter that resulted in tort were authorized by his employer. According to Smith (1999:41) argue that when vicarious liability is imposed on the employer, both the employee and the employer are held jointly liable. This applies also to the pedestrian knocked down by Peter, since he was driving the company’s vehicle. Both the employer and the employee are held responsible for their negligence that resulted in the pedestrian’s injuries. Reference List American Bar Association. (2007). Government Contract Law:. New York: Sage Publications. AscentsiaLawCorporation. (2012, August 14). Retrieved May 8, 2013, from Warranties, conditions and innominate terms?: http://www.singaporelegaladvice.com/what-are- warranties-conditions-and-innominate-terms/ Chen-Wishart, M. (2007). Contract Law. Oxford: Oxford University Press. Edwards, J. S., Edwards, L. L., & Wells, P. K. (2008). Tort Law. Mew York: Cengage Learning. Giliker, P. (2010). Vicarious Liability in Tort. Cambridge: Cambridge University Press. Koffiman, L., & MacDonald, E. (2007). Law of Contract. Oxford: Oxford University Press. Miller, R. L. (2012). Fundamentals of Business Law: Summarized Cases. Mason: CengageLearning. Miller, R. L., & Jentz, G. A. (2009). Fundamentals of Business Law: Excerpted Cases. Boston: Cengage Learning. Mothersole, B., & Ridley, A. (1999). A-Level Law in Action. Boston: Cengage Learning. Smith, D. (1999). Company Law. New York: Taylor & Francis. Walston-Dunham, B. (2008). Introduction to Law. Boston: Cengage Learning. Sales. (2011). Standard Form Contracts. Journal of Modern Law , 16 (3), 50-65. Read More