Business Law And Ethics: Contractual Problems

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Business Law And Ethics: Contractual Problems

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Question:
Discuss about the Business Law and Ethics for Contractual Problems.

Answer:

Definition of Contract:
Contract is a legal document where the parties give their consent over certain issues. The nature of the contract is that it has a binding nature (Bokor House & Smith, 2016). The rule of contract follows civil traditions and the parties to the contract accrue certain rights and duties through the agreement. Simply, contract is an agreement that is binds by law. There are certain essential elements of the contract and the parties also have to be the capacity to enter into a contract. it is the well known principle of law that the person who did not attained the majority or who has no sound mind cannot be a party to the contract (Callea, Ingusci & Chirumbolo, 2016).
In the continent of New Zealand, an agreement of contract is governed by two types of law such as legal obligations made by parties through the contractual agreement and legal provisions imposed by the court. It has been mentioned under the law of New Zealand that the contract is formed with certain obligations and for certain consideration. The terms of the contractual agreement should be predictable and clear in nature (Sherwin, 2015).

Difference between contract and other agreements:
There is a phrase under the law of contract that every contract is agreement but not every agreement is contract. There are certain differences in between the contract and agreement, which are as follows:

The contractual agreement should be enforceable by law, but ordinary agreements are not required to be bind by law.
In case of the valid contract, legal involvement is mandatory, but in case of ordinary agreement, legal involvement is not mandatory.
The nature of the contractual agreement is quite serious in nature, but not all the agreements are serious in nature. There are many agreements that can be of ordinary in nature (Griffith & Zhao, 2015).
The breach regarding the contractual agreement is more serious from the breach regarding the ordinary agreement.

Difference between simple contract and deed:
Both the contract and deed are the legal documents and they are written in nature (Gupta, Agarwal & Khatri, 2016). However, there are certain differences take place in between both the terms that are as follows:

Under the simple contract, the intention of the parties is important. Through the contract, both the parties wanted to engage themselves into legal relationships, and there is no necessity to sign the contract by certain witnesses.

On the other hand, in case of deed, there must be certain provisions regarding the signature by the witnesses in front of whom the deed has been executed and the parties to the deed have put their signature in the deed (Wei et al., 2015).

In case of simple contract, certain times have been mentioned and the terms are usually valid up to six years. Therefore, it can be stated that the party can make allegations regarding breach of contract within the mentioned period.

No time limits have been prescribed in the deed and the potential advantage regarding the deed is that the statutory limitation of the deed is more than the contract.

The deed affirms or confirms the right and interest of the person or the property and the nature of the deed are transferring in nature.

In case of contract, rights and liabilities of the parties are not transferred rather it is established through the contract and the parties are bound by the law to protect these rights and interests (Moynihan & Kroll, 2016).

Elements of valid contract:
Contract can be of three types such as valid, void and voidable. There are number of essentials ought to present in the contractual agreement to make it valid. If the requirements are not fulfilled, the contract will be considered as void. The elements of the valid contract are as follows:

Offer and acceptance:
Intention of the parties;
Consideration;
Capacity and

A contract is an agreement that narrates the rights and liabilities of the parties regarding certain things and it consists of offer and acceptance regarding the subject matter (Bamfo-Agyei, Hackman & Nani, 2015). These two terms are the traditional approach regarding the contract. According to Trietel, offer is an expression that denotes the willingness of a person regarding certain things and has an intention to bind himself legally. The offer consists of contractual intention. It has been provided in Smith v Hughes that not the intention of the party but the reasonableness of the party regarding the matter develops the offer. Nature of the contract is depending on the nature of the offer. If an offer has been made with an intention to get certain acts, the contract will become unilateral contract. the idea of unilateral contract can be demonstrated by the case Carlill v Carbolic Smoke Ball Co. Where the promise regarding the offer is exchanged, it becomes bilateral contract.
When the other party to the contract agreed upon the offer made to him, it becomes acceptance. It is important to mention that the acceptance should be derived from the party freely, that should not be derived by way of misrepresentation or coercion. The acceptance must be communicated with the offeror.
One of the essential elements of the contract is that the parties should have the intention to bind themselves legally. However, if there is an express provision stated in the contract to that effect so as to take the agreement otherwise, it will prevail that way. In case of Rose & Frank Co. v JR Crompton & Bros Ltd, it has been held that if the agreement comprised of the fact that there is no intention of the party to make contract, the same will be treated as a mere statement of facts. As the contract is an agreement enforceable by law, the parties must carry on legal intention regarding the same.
Consideration is one of the essential elements in case of valid contract. In Dunlop v Selfridge, it was held that consideration is the price that is determined by the parties to the contract to make the agreement legal in nature.
There are certain conditions regarding the capacity of the parties to the contract that is the parties must attain the age of majority or the parties should have sound mind. It is also mentioned that the parties to the contract should not be affected by bankruptcy and he should not be alien enemy in nature.
Before a contract has been made, it is important to meet all the essential elements of the valid contract. if the elements are not meet properly, the agreement cannot be treated as a legal one and will be considered as a void agreement. Under the law of New Zealand, it has been mentioned that there are certain requirements fulfilled by the parties to make the contract valid. There are six essential elements present in the contract of whom two elements are required to make the contract a valid document. The first requirement is offer and acceptance to the offer and the second element is consideration.
It is a well principle of law that unless there is an offer regarding the subject matter and the other party makes the acceptance regarding the same, an agreement cannot be treated as contract. In Carlill v Carbolic Smoke Ball Co, the principle regarding the offer and acceptance has been established. It has been mentioned in various legislation that in every contractual agreement, there shall have a provision regarding the consideration. The principle of the consideration has been proved in case of the New Zealand Shipping v Satterthwaite [1975].
Certain capacities are needed to enter into a contract or legally binding agreement. Capacity is one of the essential elements of contract. The term capacity denotes the ability of the person to enter into the contract. The capacity can be of certain types such as age of maturity, free from any mental illness, intoxicated person, bankruptcy and alien enemy.
Facts of the case is that a tour plan had been chalked out between the customer and the tour guide regarding the travel to the Australia and Phuket. The customer to the agent has mentioned the travel agent accepted certain things including the accommodation and the entertainment program and the same (Carlson, 2013). However, after booking the hotel in Phuket, it has been observed by the customer that the requirements mentioned by her are not meet properly and they claim for damages from the travel company.
The legal issue regarding the case is to determine whether the party can seek compensation from the travel agent or not.

In case of contract, intention of the parties is one of the essential elements for the validity of the contract and the mentality of the parties is to be serious for the purpose. The Contract law of New Zealand deals with the provision regarding the intention of the parties regarding to create legal relationships. When the customer stated all the requirements regarding the hotel accommodation and amusement program and the same was accepted by the travel agent, it can be observed that there is an intention of the parties to bind themselves legally (Burrows, 2015).
Contract law is governed the provision regarding the terms “offer” and “acceptance”. It means a proposal made by one party and the other parties with certain consideration have accepted the same. In this case, when the customer mentioned all the requirements regarding the accommodation and entertainment program, offer has been created in that case. When the travel agent agreed to the requirements made by the customer, acceptance is also created to the effect.
Consideration means exchange of one thing for others. It denotes certain value as against the offer and acceptance of the parties. In this case consideration cropped up when the customer had made an offer regarding the accommodation and the agent agreed to provide the same in a particular hotel, consideration made by the customer when he accepted to stay at that specific hotel.

The fact of the case is based on the capacity principle of the contract. in this case one young lady wanted to establish her business by taking loan from the bank (Lee & Park, 2017). However, as she was quite junior, the baking authority went to her mother for signing the loan agreement as a guarantor. Her mother had been suffering from the brain haemorrhage since long and is questionable capacity to enter into the agreement with the bank. The issue of the case is whether the mother of the woman has the capacity to enter into the loan agreement or not.
Capacity is one of the essentials of the contract and it can be stated that in order to enter into an agreement, the parties need to maintain all the rules regarding the terms properly. There is certain incapacities mentioned under the law among which capacity is essential (Poole, 2016). It is important that the contracting person must not suffer from any mental illness. However, in the case, it has been mentioned that the mother of the woman is suffering from brain haemorrhage and therefore, she is not able to enter into the contract.

Facts:
Michael was looking after his octogenarian father and used to make certain recommendations regarding the home affairs. He wanted to open a tattoo shop and asked his father sum of money and when his father denied providing the money, he started to create pressure on him to obtain money. After getting the money, he termed the transaction as investment.
Issue:
The main issue of the case is to determine whether the money given by the father of Michael is investment or not.
An agreement can be illegal in nature if the purpose of the agreement is not based on legal outcomes. It is important that every party to the contract will follow the legal rules and the intention of the parties must be opted to create legal relationship. An agreement that restrained the enforceable capacity of a contractual relation should be regarded as illegal agreement and to that extent, restraint to trade can be regarded as the illegal agreement. An agreement that restraint the trade will be regarded as void.
The term “restraint of trade” has been discussed under the provision of the competition law.
Facts:
The present case is based on the provision of the performance of contract and principles regarding the discharge of contract. A retirement program has been contracted to be performed on a certain day. However, the program had been postponed and it was stated by the catering service that the all the contracted amount must be given. The catering service was informed about the postponement but the caterer has not listened to it and wasted all the food.
Issue:
The main issue of the case is to determine whether Boris had to pay full to the catering service regarding the foods or not.

Advise:

Boris need not pay full to the catering service as he had cancelled the event before making the foods;
Boris can give $1,000 to the caterer as an advance regarding the standard order form.

In case of every contractual relationship, there are certain terms and conditions mentioned and that depicts the rights and duties of the parties to the contract. Contract is a legal agreement and therefore, it is the utmost duty of the parties to maintain all the rules of the contract. However, any of the parties have failed to perform his duties according to the terms of the contract; he will be alleged to perform breach regarding the contract. It is of no doubt that when a person breached the terms of the contract, the other party had to face many problems. There are certain remedies available in such case. They are as follows:

Damage: If one party to the contract has to suffer for the breach made by the other party, he can claim damage in the form of compensation. The damage can be of two types- general damage and special damage.
Specific performance: In this case, damages are given on the performance base and not in the form of monetary base.
Injunction: the other remedy is injunction. There are three kinds of injunctions- interlocutory, mandatory and prohibitory injunction.

n case of the breach of contract, certain monetary damages are to be provided to the affected parties. There are certain kinds of damage such as compensatory damage, liquidation damage, punitive damage, nominal damage and restitution (Rohwer, Skrocki & Malloy, 2016).
In case of breach of contract, court will be provided the remedy regarding the specific performance if the victim asked for the remedy. It forced the party that breached the provision of contract to perform certain acts as per the will of the victim.
Injunction restricts a party to do certain acts. There are injunctions like temporary injunction and permanent injunction.

Reference:
Bamfo-Agyei, E., Hackman, J. K., & Nani, G. (2015). Assessment of The Public Procurement Act 2003 (Act663) on Project Time Performance of Construction Projects in Ghana. African Journal of Applied Research (AJAR), 1(1).
Bokor, B. R., House, D. E., & Smith, A. B. (2016). U.S. Patent No. 9,230,237. Washington, DC: U.S. Patent and Trademark Office.
Burrows, A. (2015). Lord Hoffmann and Remoteness in Contract.
Callea, A., Urbini, F., Ingusci, E., & Chirumbolo, A. (2016). The relationship between contract type and job satisfaction in a mediated moderation model: The role of job insecurity and psychological contract violation. Economic and Industrial Democracy, 37(2), 399-420.
Carlson, M. (2013). Performance: A critical introduction. Routledge.
Griffith, D. A., & Zhao, Y. (2015, September). Contract specificity, contract violation, and relationship performance in international buyer–supplier relationships. American Marketing Association.
Gupta, V., Agarwal, U. A., & Khatri, N. (2016). The relationships between perceived organizational support, affective commitment, psychological contract breach, organizational citizenship behaviour and work engagement. Journal of advanced nursing, 72(11), 2806-2817.
Lee, S. H., & Park, C. H. (2017). Profitable and desirable corporate environmentalism in a delegation contract under incentive subsidy on abatement technologies.
Moynihan, D. P., & Kroll, A. (2016). Performance management routines that work? An early assessment of the GPRA Modernization Act. Public Administration Review, 76(2), 314-323.
Payne, S. C., Culbertson, S. S., Lopez, Y. P., Boswell, W. R., & Barger, E. J. (2015). Contract breach as a trigger for adjustment to the psychological contract during the first year of employment. Journal of Occupational and Organizational Psychology, 88(1), 41-60.
Petersen, L. A., Ramos, K. S., Pietz, K., & Woodard, L. D. (2017). Impact of a Pay?for?Performance Program on Care for Black Patients with Hypertension: Important Answers in the Era of the Affordable Care Act. Health services research, 52(3), 1138-1155.
Poole, J. (2016). Textbook on contract law. Oxford University Press.
Rohwer, C., Skrocki, A., & Malloy, M. (2016). Contracts in a Nutshell. West Academic.
Sherwin, E. L. (2015). Formal Elements of Contract and Fiduciary Law.
Wei, X., Ma, L., Zhang, Z. X., Showail, S. J., Jiao, J., & Wang, X. (2015). Understanding psychological contract breach due to labour costs reduction: Contingent upon employee sex and managerial control. Journal of Occupational and Organizational Psychology, 88(4), 679-701.

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