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Business Contract Within the course of this report, we will analyze a concept of business contract and see how it is relevant to the modern 21 st century business practices. A contract is an agreement enforceable by law. Whenever an agreement is considered as binding and obligatory by the court in the sense that whoever fails to fulfill it may be sued, that agreement is a contract. Contract is defined as a legally binding agreement made between two or more persons, by which rights are acquired by one or more, to acts as forbearance's on the part of the other or others. (Craswell, p. 32) However, some agreements are not contracts. Mere domestic agreement between husband and wife is usually not intended to be binding, and are therefore not contracts.
Contracts can be classified as any of the following: 1. Simple contract. Simple or parol contracts are by far the most common and important variety. They are informal, they can be oral or written or implied by conduct. 2.
Contract by record. These are obligations whose terms are recorded by court records. They are not true contracts, since the obligations of the parties arise independently of any agreement and solely by reason of entry upon the court records. They can be judgment imposed by the court, a legal obligation or recognizances, which could be a written acknowledgement of debt, etc. 3. Contract by deed. A contract by deed is a promise written on paper or parchment, signed, sealed and delivered (either actually or constructively) by the promise to the promisee or his agent.
It is brought about by special cases in law, which requires that a particular form shall be adopted, usually to provide better evidence of the terms and so prevent disputes. Some contracts that must be by deed are promises of gifts, conditional bills of sales, documents creating or transferring estate or interest on land, etc. Also, there are contracts, which can not be enforced; they are void, voidable or unenforceable. Void contracts: these are contracts, which is destitute of legal effect, could be on ground of fundamental mistake and the law will take no notice of it.
Voidable contracts: one which can be made void by a party at his option. Thus the party misled, whenever he chooses can avoid a contract induced by fraud. Unenforceable contracts: though perfectly valid in all other respect, lacks some technical requirement needed to make it enforceable, e. g. some necessary documents. The courts will not enforce such a contract unless and until the defect is rectified.
There are also contracts that are referred to as quasi-contracts. Sometimes the law imposes obligation of a contractual nature even where no true agreement exists between the parties. The object of such imposition is to prevent a person obtaining unjust enrichment merely because there is no contract between himself and the person seeking the courts aid. (Bonell, p. 356) There is no doubt that the most fundamental ingredient of a contract is the consensus ad -idem (meeting of mind). Before a contract is said to exist or intended, the court must have clear evidence to ascertain that the parties involved actually intended and resolved to enter into the agreement forming the subject matter of the contract. Absence of consensus makes a contract null and void e.
g. where the parties are fundamentally mistaking as to each others intentions. In addition to the existence of consensus ad-idem and before the court can determine the existence of a binding and enforceable contract, three basic elements must exist. They are offer, acceptance and consideration. (Burnham, p. 284) In other to constitute a contract there must be an offer, expressed or implied, by one person, and unqualified acceptance, expressed or implied, by the person to whom the offer is made. The law dictionaries define the term offer as a proposal to do a thing or pay an amount usually accompanied by an expected acceptance a manifestation of willingness to enter into the bargain. (Burnham, p. 316) From the definition above, an offer will constitute the first major step of committal on the part of the person (s) making it known that he shall become bound by the terms as soon as the other party has accepted his offer.
There are rules governing offers, some of them are as follows: 1. An offer may be oral, written, or implied from conduct. Thus an implied offer is made by a bus company when it sends it buses along the road and stops them at bus stops to let people get on (the people who then get on the bus are thus accepting the offer by implication). 2. An offer may be specific, i. e. to a particular person or group of persons, or general, i.
e. to the world at large. 3. The offer must be communicated to the offered before it can be accepted. 4. The offer must be definite, not vague. Thus a promise to pay more rent for a flat next year if living there proves lucky for me is a vague offer. 5.
The person making the offer must intend the creation of legal relations. He must intend that if his offer is accepted a legally binding agreement shall result. 6. Revocation of offer must be communicated either directly or indirectly. 7. An offer to keep an offer open for a specified time (an option) is not binding unless made under seal or supported by valuable consideration.
The law dictionaries define the term acceptance as the act of a person to whom a thing is offered or tendered by another, whereby he received the things with the intention of retaining it. This exercise of power conferred by an offer, by performance of an act is acceptance. (Craswell, p. 111) Acceptance can also be defined as a final expression of assent to the terms of an offer. The assent must be absolute and unqualified. There are rules governing acceptance, some of them are as follows: 1.
Acceptance may be oral, written or implied from conduct. However, if a particular method of acceptance is required the offered must accept in the prescribed manner. 2. Acceptance must be unqualified and must correspond will all the terms of the offer. A counter offer or conditional acceptance operates as a rejection of the offer, and causes it to lapse.
Similarly, a conditional acceptance causes the offer to lapse. 3. There must be active acceptance: mere passive intention to accept is ineffective. There must be some positive communication of acceptance by the offered; it would not be enough to show that offered intended to accept but died before writing a letter of acceptance. 4. Normally an acceptance is ineffective unless and until it is communicated to the offeror. 5. No one can accept an offer in ignorance of its existence, but provided he knows of the offer his motive for acceptance is usually irrelevant. 6.
A tender is a form of offer for the supply of goods or services, usually made in response to a request for tenders. 7. The acceptance of an offer must be communicated without unnecessary delay. The above attempt at defining offer and acceptance points to the fact that where they exist, there can be said to be consensus ad idem. However offer and acceptance alone can not mean the existence of a contract, there must be consideration. The law dictionaries define consideration as the inducement to a contract. (Craswell, p. 243) It is the course, motive, price or impelling influence, which induces a contracting party to enter into a contract. It also means some right, interest, profit, or benefit accruing to one party or some forbearance, determent, loss of responsibility given, suffered or undertaken by others.
Being the element of exchange in a bargain, it is expected to be something, which is capable of being valued in terms of money or moneys worth however slight. It may take the form of money, goods, a promise to marry, etc. There are two types of consideration: 1. Executory consideration: this is where the consideration consists of a promise to do something in the future. 2. Executed consideration: This is where the act constituting the consideration is wholly performed. There are rules relating to consideration, some of them are as follows: 1.
Legality of consideration. The consideration must be lawful; it should not be illegal, such as paying someone to kill another person. If the consideration is unlawful, the contract is void. 2. Consideration must move from the promisee.
That is a person seeking to enforce a simple contract in court must prove that he himself has given consideration in return for the promise. 3. More than he is already bound to do. That is, the person seeking to enhance the promise must show that he himself has undertaken some obligations to the promise. This should be beyond what he was already bound to do either (a) as part of his legal duties as a citizen, or (b) as part of a private contractual duty owed to the promise. For example, if an employee abandons his duties, for some reasons and was induced to continue with extra wages. He will not be able to sue later for the extra wages since he only did what he was already contracted for. 4.
Consideration must be real. That is, it must not be vague, indefinite or illusory, e. g. a sons promise to stop being a nuisance to his father. 5. Consideration must not be past. That is a promise made in return for past service is unenforceable.
There are however some exceptions to this rule. 6. Payment of smaller sum will not discharge a liability to pay a larger. With the forgoing one must agree that the existence of consensus ad-idem evidence by offer and acceptance is very vital for the existence of a contract. However, the enforceability of a contract depends heavily on consideration and on issues like complying with legal formalities, contractual capacity, and intention to create legal relationship. However the most important is legality of the subject matter and consideration of the contract. Words Count: 1, 677.
Bibliography Bonell, M. An International Restatement of Contract Law. Transnational Juries Publications. Irvington, NY. Burnham, S. Drafting Contracts.
The Michie Co. Charlottesville, VA. Craswell, R. Foundations of Contract Law. Oxford University Press.
Cary, NC.
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