Contracts in Business and Absolute Agreement - Essay Example

Question According to the law of contract, contract has to have various elements for it to satisfy its being recognised as a contract. Therefore, a contract that is legally binding has to have such elements as; Offer An offer refers to that expression, by a person, of willingness to involve in a contract and this is coupled with particular terms to be upheld and these are by the offeror. The intent that an offeror has is that, if such an offer is accepted, then he/she gets bound by a contract. Acceptance This refers to that expression of unconditional and absolute agreement to the terms of the offer in entirety. Such an acceptance can either be in writing or oral and it must mirror the initial offer that was made. Consideration Either of the parties involved in a contract has to receive something valuable for the contract to be sealed. Therefore, in a situation where one promises a friend to give him a car and the giver refuses to eventually give the car to the friend, such a friend cannot go to court and sue him/her for not giving him that car. This is due to the fact that, the receiver of the car was not to give something of value to the giver in return to the favour. Thus, the price that is paid to the promise of the other is simply the consideration. Besides these elements, it is of essence to have a look at one of the most confusing elements of a contract that is often overlooked. That is ‘an invitation to treat’. (Smithies, 2007) Invitation to treat An invitation to treat is usually confused with an offer. This expression, “invitation to treat”, refers to the invitation or call for other persons to make an offer. Thus, some of what are usually perceived as offers is as a matter of fact, invitations to treat. Take, for instance, an advertisement for the sale of a sofa set. That advertisement is just an invitation to treat and it is upon the willing buyer to make an offer to the seller by requesting to buy the sofa. The advertising seller will in turn accept the request and this forms an acceptance of the offer. The payment for the sofa by the buyer marks his fulfillment of his part of consideration and thus, the advertising seller fulfils his consideration by delivering the sofa to the buyer. (Fuller, 2010 p180) The case to illustrate the issue of invitation to treat is as follows: Case: Fisher versus Bell (1960) Facts: This case is about a shop-keeper who had displayed a flick-knife, which had a ticket placed behind it which read “Ejector-Knife 4 shillings”. The Act of Offensive Weapons of 1959 was used to charge this shop-keeper for having the flick-knife being offered for sale. The Magistrates Court convicted him (the shop-keeper) and he appealed on a law point. He said that there can be no offer to sell, but buy only. Thus, the one who purchases makes an offer. Held: This was an invitation to treat (the display of the flick-knife for sale) and following this the Act was amended to read to say that it is an offence for a person to be found in possession or expresses intent to sell a flick-knife. (Blond and Petrillo, 2007 p208) The case provided involves HE Ltd which posted (on September 10th) an offer to dispose 10 laptop computers to GCS. The offer for sale included a price tag of ?300/Laptop and was open until September 24th. This offer for sale, as per the facts obtained from the aforementioned elements of a contract, is just an invitation to treat. GCS’s manager, Gemma called HE Ltd for an enquiry whether they would accept a 2-month credit and that signifies an offer to buy. On September 20th Bertie, HE’s manager refused to sell the laptops since the terms of sale stated otherwise and this signifies a refusal to make an acceptance to GCS’s offer. The sale of the same laptops to Argon Electronics on September 22nd shows a complete contract. Therefore, the September 23rd offer to buy by Gemma would not be valid since the contract had already been carried out. Thus, no contract had existed before between HE Ltd and GCS. Question 2 To: Whom it may concern From: XY website designers Subject: Key Factors in Setting up a Business Date: 20/11/2011 Introduction This is a report that centers on some of the major factors that one ought to know while carrying out various business operations. More specifically, the report is going to consider this under various sub-headings. This is as follow: The Process of Making a Contract from Offer to Acceptance Any given contract set in with an offer. To this an offer is of great essence to a contract because it is the starting point. It is explained to be that expression by a person of willingness to commit in a contract on certain stated terms. This gives a green light to the other party to make an acceptance to the offer as well as providing the grounds of agreement. At any given moment in time, an offer is deemed to be in existence once the offeror, in conduct or words show the objective that he/she has the intent of committing legally to the proposed terms that he/she has done. This commitment does not need further negotiations to occur. Mere communications do not always result into an offer since they may just be invitations to treat. The point of demarcation between an offer and an invitation to treat is a complex task, though. After the offer has been communicated the other steps of a contract follow. For a contract to occur there must be the step of accepting the offer. An acceptance is an expression of an agreement to the terms of offer in entirety. Thus, in other words, an acceptance is an offer’s mirror image. An acceptance can either be by conduct or in words. Note that, to seal the contract, there must be consideration. A consideration is that something of value that is given to the offeror and the offeree. The offeree may give money as part of his consideration while the offeror may deliver goods in his part. (londoninternational.ac.uk, 2011) The Variance between Warranties and Conditions A condition is that term (written or oral) which goes to the roots of the contract directly or that is very essential to the contract. If a condition is broken, then an innocent party to the contract has to consider the contract discharged and thus, this party is not bound by the contract any further. A warranty, on the other hand, is that term of contract which is subsidiary or collateral to the contract’s main purpose. Thus, a warranty is not very important to impact on the contract’s discharge. Therefore, a warranty’s breach means that the innocent party is entitled to damages after action. He/she cannot treat such a contract as discharged, therefore. To differentiate the two, there are the following illustrations: Case: Poussard versus Spiers and Pond Facts: Mrs. Poussard, an opera singer made an agreement to take part in an opera setting in from November 28th. She fell ill and she could not take part until December 4th. The opera company replaced her with another singer following this. They were only in a position to get another singer if such singer was to do opera. Subsequently, they refused Mrs. Poussard’s services after getting well and she sued them. Held: The court ruled that Mrs. Poussard had breached a contract’s condition. This was a fundamental term of the contract. Case: Bettini Vs Gye Facts: Bettini, who was in this case an opera singer made an agreement to sing in the city of London starting March 30th. He as well made an agreement to get to London 6 days prior to the concert to practice. Unfortunately, Bettini fell ill and got well just to arrive 3 days prior to the concert. He was refused to perform on the grounds that he had breached that contract. Held: The agreement with regards to practicing was just a warranty and not a term of the contract. Thus, this was not basic to the contract, but subsidiary. (scribd.com, 2011) How errors affect a Contract In a contract, the impact of a mistake relies on a mistakes nature as well as which of the parties was mistaken. There are various types of mistakes. These are with the inclusion of: Non-causal mistakes, which do not affect the contract’s validity in any way and thus, are irrelevant. Essential mistakes: those in principle mean that a contract is rendered void by their commission. This means that there lacks subjective agreement in the contract. This may be not fair to a given party to the contract who had taken the contract to be valid, though. Therefore, the contract may remain valid despite the lack of subjective consensus. A mistake in motive: this has no impact when it comes to the contract’s validity on the rules of mistake basis. The party who is mistaken may be in a position of getting other remedies using the rules that are applied to misrepresentations, though. There is also the mistake where consensus is realised on some contractual terms and here the court comes in and determines the divisibility of the contract. If divisibility exists, the terms under which consensus exists will, thus, be valid. (Bhana et al, 2009 p310) Intention to Create Legal Relations In a situation where a person has made a promise and supported that promise with a consideration, it does not necessarily mean that that promise becomes contractual. For such a contract to be deemed binding, a promise must have been made with intent for the promisor to be legally bound. Thus, one of the parties makes an expression that he/she does not have intent to be legally bound while making a promise, then it is very hard to regard such as an intention to involve in a legal relationship. In case the issue is not dealt with in the original agreement; courts, then, can make an inference to the parties’ intention. There are two types of promises to be considered here: Social and domestic agreements; and Commercial agreements. For social and domestic promises, promises are usually made between relatives and friends and thus, the assumption here is that they did not have the intent to create a legal relationship initially. The assumption is rebuttable, however, where evidence is used to displace such an issue. Here, it means that while looking at the matter from an objective point of view there was intent to bring about a legal relationship. Commercial promises, on the other hand, there is always that assumption that before involving in such relationships there was intent by the parties that they are to be bound by the agreement. However, the assumption can also be displaced by evidence in this case as well. (Salzedy and Brunner, 2004 p33) Unfair Contract Terms Act Transactions between businesses in entirety are usually under the umbrella UCTA (Unfair Contract Terms Act of 1977). Generally, all businesses may enter contracts of their choice as long as there is an agreement amongst them. Therefore, each and every of the businesses should ensure that they are contented with those contracts they agree with their counterparts. UCTA puts across several restrictions upon those terms that any given business can agree to. In specific, UCTA lays down those rules that sale businesses may utilise as exclusion clauses so as to reduce obligations in specific areas. A business that involves itself in the sale of commodities is not in a position to exclude itself from these stated liabilities: Losses that have been realised through negligence- unless doing so is deemed reasonable, Death or injury- despite the circumstances, and Defective or goods of poor quality- unless doing such is deemed reasonable. UCTA, however, does not give a precise definition as to what reasonable means. Courts will usually consider these factors: The information which was available to the parties involved while the contract was being drawn, Whether the contract in question was standard or negotiated, and Whether the purchaser possessed power to bargain for better terms. Therefore, one does not have a similar protection as what individual consumers have when he/she buys commodities for the purposes of business use. A contract with a consumer that excludes any liability in case of goods of poor quality or defective goods would automatically become void. While buying the same as a business, the purchaser ought to have known in advance the terms as well as condition he/she is assenting to. (businesslink.gov.uk, 2011) Conclusion From the findings that the research above has come up with, one can see that before involving in any business contract they are of importance. Therefore, all of the sub-headings above are vital to understand before engaging in any business contract. It is of essence to note, however, that the issues that have been discussed above are not the only ones that one must understand. There are numerous other issues that make up a business contract that one has to know prior to involving themselves in any contract, therefore. Reference list: Bhana, Deeksha et al. (2009). Student's guide to the law of contract. Edition 2. Kluwer. p310. Blond, Neil C. and Petrillo, Louis. (2007). Contracts. Edition 6, illustrated. Aspen Publishers. p208. businesslink.gov.uk. (2011). The Unfair Contract Terms Act. Retrieved 21 November 2011 http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1074405689&type=R ESOURCES Fuller, Graham. (2010). Purchasing Contracts: A Practical Guide. Edition 2. Spiramus Press Ltd. p180. londoninternational.ac.uk. (2011). Offer and Acceptance. Retrieved 21 November 2011 http://www.londoninternational.ac.uk/current_students/programme_resources/laws/subje ctguides/law_contract/contract_ch2.pdf Salzedy, and Brunner, Peter. (2004). Briefcase on Contract Law. Edition 4. Routledge. p33. scribd.com. (2011). Conditions and Warranties. Retrieved 21 November 2011 http://www.scribd.com/doc/16173667/conditions-and-warranties-ppt Smithies, Deborah. ( 2007). Contract - Elements of a Contract. Retrieved 21 November 2011 http://tutor2u.net/law/notes/contract-elements.html Read More