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Business Law & Contracts

Business Law Business law encompasses all aspects of legal regulations governing business transactions. Business laws consist of a set of rules that oversee business transactions. These rules pertain to the functioning of business activities. Categories of Commercial Law. The different branches of commercial law include: Law of Contract. Agency Sales of goods. Law of Employment. […]

Business Law

Business law encompasses all aspects of legal regulations governing business transactions. Business laws consist of a set of rules that oversee business transactions. These rules pertain to the functioning of business activities.

Categories of Commercial Law.

The different branches of commercial law include:

  1. Law of Contract.
  2. Agency
  3. Sales of goods.
  4. Law of Employment.
  5. Hire purchase.
  6. Guarantee
  7. Lien
  8. Pledge
  9. Bankruptcy

LAW OF CONTRACT.

A contract is a legally binding arrangement that imposes rights and obligations on parties and is enforceable through legal action. It involves promises, and the law provides remedies for breaches and recognizes the performance of these promises. An agreement necessitates at least two parties, an offeror who makes a proposal, and an offeree who accepts the proposal.

In simple terms, a contract is an agreement that holds legal enforceability.

A contract can be broadly defined as an agreement between parties that establishes enforceable rights and obligations.

The foundation of all contracts is an agreement, a shared “ad-Idem,” signifying the convergence of two parties with mutual intent. However, it should be noted that not every agreement qualifies as a contract. For instance, an agreement to borrow a friend’s new TV game for the weekend does not create a contract as it lacks the intention to create a legal obligation.

CATEGORIZATION OF CONTRACTS

Contracts can be classified into two types:

  1. Specialty contract or contract of the deed.

A speciality contract is formal, signed, sealed, and delivered by one party to another. Some contracts require a seal, such as property transfer or conveyance and contracts without consideration.

Essential elements of a Deed:

  1. Writing
  2. Signature
  3. Seal
  4. Delivery

 

  1. Simple Contracts:

These contracts require consideration and possess characteristics like offer and acceptance, intention to create legal relations, valuable consideration, etc. They do not require a seal as mandated by the law.

DISTINCTIVE ATTRIBUTES OF CONTRACTS

The following attributes define a valid contract:

  1. Offer and acceptance.
  2. Capacity of contracting parties.
  3. Intention to create legal relations.
  4. Genuine consent of the parties.
  5. Lawful objectives.
  6. Feasibility of performance.
  7. Clear and definite terms of agreement.

OFFER AND ACCEPTANCE

One party, the offeror, extends an offer that the other party, the offeree, accepts unconditionally. Acceptance is final and unambiguous assent to the terms of the offer. An offer signifies a willingness to be bound by specific terms and can be converted into a contract through acceptance.

CONSIDERATION MUST BE VALUABLE

A contract requires valuable consideration, ensuring a balanced exchange between parties. Consideration often involves the payment of money and represents the element of exchange in a bargain.

INTENTION TO CREATE LEGAL OBLIGATION

For an agreement to be a binding contract, parties must intend to create legal obligations.

CASE: Merrit Vs. Merrit. A man agreed to pay his wife a monthly sum after their marriage broke down, with the wife promising to discharge their mortgage. The man’s failure to fulfill his commitment resulted in a legal suit, which he lost. The court ruled that their intention was to be legally bound by any agreement they entered into.

PRECISE TERMS OF AGREEMENT

The terms of the agreement should be clear to all parties involved. These terms can be expressed or implied.

ALL PARTIES MUST POSSESS CONTRACTUAL CAPACITY

Contracting parties must have the capacity to enter into an agreement. Exceptions apply to certain groups, such as minors, aliens, mental patients, and drunkards.

GENUINE CONSENT OF PARTIES

The genuine consent of each party is essential for a contract. Consent should not be influenced by mistakes, misrepresentation, undue influence, or duress.

FORMALITIES OF A CONTRACT

Some contracts require specific forms to ensure clarity and prevent disputes. These contracts must be:

  1. Under seal
  2. In writing
  3. Evidenced in writing

LEGALITY OF CONTRACT OBJECT

A valid contract’s object must be legal, as contracts contravening public policy or involving illegal acts are void.

Examples of Illegal Contracts:

  1. Contracts for criminal activity.
  2. Contracts for public office sales.
  3. Contracts impeding justice administration.
  4. Contracts with wartime enemies.
  5. Contracts for immoral purposes.
  6. Contracts facilitating unlawful acts.
  7. Contracts with fraudulent intentions.

CONTRACT FEASIBILITY

A valid contract necessitates the feasibility of performance, ensuring that parties can fulfill their obligations. Parties can enter contracts when confident in their ability to fulfill them.

Types of Contracts

The prevalent categories of contracts within the realm of commerce include:

  1. Informal Contracts: Informal contracts lack certain fundamental elements of proof present in formal contracts, making them challenging to enforce.
  2. Formal Contracts: Formal contracts encompass several primary types, namely:
  3. Contracts Under Seal: These written contracts bear an imprinted or affixed seal, indicating their speciality nature. They don’t necessarily originate from the agreement itself.
  4. Contracts Of Record: These contracts are registered and acknowledged by the court.
  5. Oral Contracts: Contracts established through spoken communication, such as agreeing on a taxi fare. They carry the weight of formal contracts with sufficient evidence.
  6. Written Contracts: Contracts are documented with written terms, which can be either formal or informal depending on circumstances.
  7. Implied Contracts: Contracts inferred from the conduct of both parties, lacking written or oral evidence.
  8. Expressed Contracts: Contracts where both parties openly declare their intentions and terms.

 

  1. Valid Contracts: These contracts possess all necessary conditions to be legally binding and enforceable.
  2. Voidable or Void Contracts: Contracts are potentially binding but can be rejected due to missing essential elements, like signing under duress or lacking legal capacity.
  3. Void Agreements or Contracts: These have no legal effect and are unenforceable due to illegal subject matter.
  4. Executed Contracts: Contracts fully performed, leaving no further claims from the obligee.
  5. Executory Contracts: Contracts not yet fully performed, requiring additional actions.
  6. Bilateral Contracts: When parties exchange promises, forming a mutual agreement.
  7. Unilateral Contracts: Contracts where only one party is expected to fulfill their obligations after formation.

Methods of Contract Termination:

There are five methods through which contracts can be terminated:

  1. Performance
  2. Consensus
  3. Operation of Law
  4. Frustration
  5. Breach of Contract

Remedies for Breach of Contract:

In case of a contract breach, the following remedies are available:

  1. Damages: The aggrieved party can seek compensation for losses.
  2. Rescission: Parties can request restoration to their pre-contractual state in a court of law.
  3. Injunction: The injured party can secure a court-mandated order.
  4. Specific Performance: When the injured party sues to enforce the contract.

See also:

Business Capital | Capital, Credit, Profits, Turnover, Hire purchase

PARTNERSHIP: TYPES, ORDINARY PARTNERSHIP & LIMITED PARTNERSHIP

PARTNERSHIP: FORMATION, ADVANTAGES, DISADVANTAGES & CHARACTERISTICS

BUSINESS UNITS & SOLE PROPRIETORSHIP

COMMUNICATION

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