Contract Law Making Business Contracts

Question: Describe about the Contract Law for Making Business Contracts. Answer: The law of contract A contract is an agreement which can be enforced as per law. An agreement is formed when there is an offer made by one person (offeror) to another person (offeree) and the offeree accepts the offer made to him without bringing any variations to its terms. But an agreement can be converted into a contract when there is presence of intention of the parties to be in legal relation, the parties to the transaction must be major and the transaction between the parties must have consideration involved in it. (SLD, 2012) So, the basic elements which constitute the promises amid the parties in to a contract are: Offer An offer is the primary ingredient for formulation of a contract. It is made by an offeror to an offeree. It is the intention of an offeror which he communicates to an offeree in order to enter into contract with him. An offer in order to be considered as concluded and complete must be communicated to an offeree (Clarke v Dunraven (1897). In order to be valid an offer must be simple and clear.. Further, an offer can be made to a specific person or to the world at large (Carlill v Carbolic Smoke Ball Co[1893]. When the offers are at world a large then they are open offers and it can be accepted by anybody from the public by acting upon the same. But in case the offer is for a specific person or group of persons then such specific person is only eligible to accept the offer. (Cheshire et al, 2012) Invitation to treat An Invitation to treat is another concept which is many times confused with an offer but rather is different from an offer. In invitation to treat, the person (inviter) does not make any offer rather he invites offers from people upon his invitation. Once an offer is made to him by the prospective offeror then he can either accept or reject the same. If he makes an acceptance of offers then there is a concluded agreement between the parties (Payne v Cave(1789). Invitation normally takes place when there is advertisements, display of goods on shelf with price tag in a showroom, auction etc. (Cheshire et al, 2012) Unilateral and Bilateral offers The offers which are made by an offeror and there is no requirement of any formal acceptance to make a binding contract, then, such kind o offers are unilateral. In unilateral offers the offeree does not make a formal communication of an acceptance, rather, just acts as per the terms of the offer in order to make a binding contract (Carlill v Carbolic Smoke Ball Co[1893]. Whereas, in bilateral offers, there is mutual exchange of offers and acceptance in order to make a binding contract amid the parties. (Nicolas TW, 2016) Acceptance An acceptance is said to occur when an offer is assented by an offeree. An acceptance is one of the main ingredients in forming an agreement. If an offer is not accepted then there cannot be an agreement or a contract. An acceptance must be clear and proper in order to be valid. In order to make a valid acceptance it must move from the offeree. An acceptance by a person to whom no offer is made is no acceptance in law (Mondial Shipping and Chartering BV v Astarte Shipping Ltd (1995). Also, an acceptance is valid provided the same is made before the revocation of an offer. An acceptance can be made orally or in written form. An acceptance is said to be complete when it is communicated to an offeror by an offeree. An offeree must follow the mode of acceptance prescribed by the offeror and if no mode is mentioned then a reasonably mode is sufficient to make a binding contract. Further, if an acceptance is made via post then it is complete as soon as an acceptance is made and not otherwise. Also, an acceptance can only be made when the offeree is aware of the offer. If an acceptance is made without knowing he offer then there cannot be a valid acceptance. (Jalil A, 2011) Counter offer Further, if an offeree does not accept the offer and gives his own terms or moulds the terms of an offer prior making an acceptance then the same is termed as a counter offer. Upon making of counter offer, the original offer comes to an end and the counter offer becomes the new offer (Hyde v Wrench (1840). Now it is the new offer which is alive and can only be accepted by the old offeror in order to make a binding contract amid the parties. (Jalil A, 2011) Intention to be in legal relation In order to form a contract, apart from an offer and acceptance, there must be an intention to be in legal relation with each other by the parties. If the intention of the parties to be in legal relation with each other is not present then there cannot be a concluded contract. The intention to be in legal relation is presumed to be there in case of commercial transactions but the same is presumed to be absent in case of social and domestic relations unless the same is disapproved (Merritt v Merritt[1970]. Capacity of parties to contract The parties to a contract must have capacity to enter into a contract with each other i.e. they must be major and must be of sound mind. In case the parties are not capable then there cannot be a valid contract between the parties (Nash v. Inman [1908]. Consideration A Consideration is the value in terms of money or may be in kind which is paid to the offeree against the performance of the offer made by an offeror. It makes the promises enforceable in law. (Cheshire et al, 2012) So, all the above elements is required to make a valid contract. There cannot be a contract without these elements as each and every element is mandatory for the contract to exist. Now, various legal issues are now resolved. i. It is now analysed whether a contract was formed and if yes then who all are the contracting parties. Alan intends to sell his book. In order to do so, he posted an ad on his face book page. It specifies that he is offering his book to all of his friends who are enrolling or are enrolled in Kaplan Higher Education. He is offering his textbook and all of his notes. He offered the book and notes @ $200 and specified that any person whosoever is interested must pay him by 5th Nov 2015. Now, it is submitted that the action of Alan is a kind of invitation to treat as he never intends to make any offers rather he intends to receive offers by 5th Nov 2015. So, an invitation is made by Alan. Also, the invitation is only open to the facebook friends of Alan. Now, Bernard is Alan face book friend. On 2nd Nov 2015, he expressed his desire to buy the book but @ $150. Thus, he made an offer @ 150 to Alan. If Alan confirms the offer of Bernard then a valid contract can be made amid the two. On 3rd Nov, the offer made by Bernard was rejected by Alan. So, there is no confirmation of the offer by Alan and the offer of Bernard now stands revoked. Now, the posting of money by Bernard on 4th Nov is of no significance as the offer made by him to Alan is now stand revoked. So, communication of any acceptance without any offer is no offer at all. Charleen expressed his intention to buy the book and thus made an offer to Alan @ 200. However, Alan consent the offer of Charleen by nodding his head. However, the acceptance made by Alan was without intention as he gave his acceptance without intending to be abiding by the same. So, an acceptance without intention is no acceptance at all. Even the act of Charleen leaving the money on Alan table is of no significance. Damien though is not on the face book page of Alan had sent a message to Alan personally. He expressed his intention to buy the book and offered to make the payment by 4th Nov. He later pay Alan the required money and Alan confirmed that he will pay everything to him by 7th. So, there is a valid offer and acceptance amid the two and Damien and Alan are the two concluding parties. Now, Legal position of Bernard and remedies There is no contract that exists amid Alan and Bernard as Alan has rejected the offer of Bernard and thus here is no concluding contract. So, Bernard cannot take any legal action against Alan. Even if Alan has provided him with only the text book still Bernard cannot take any action. iii. Legal position of Charleen and remedies There is no contractual relationship amid the two because of lack of legal intention. Legal position of Damien and remedies Though no offer was made by Alan to Damien but an offer later made by Damien was accepted by Alan. So, there is a concluded contract amid the two. Alternative Dispute Resolutions Normally, the legal dispute is resolved in courts but the same are costly and time consuming. So in order to have faster resolution of disputes there are other dispute resolutions called Alternative Dispute Resolution (ADR) techniques. ADR can be done in the following ways. (Statecourts, 2016) Mediation Mediation is the procedure under which a third party (neutral person) tries to resolve the dispute between the parties without going into fault of parties but by guiding them. The main aim of the mediator is to focus on the resolution of the dispute without forcing his views or decision on either party. (Buttler S, 2016) Benefits In mediation the parties who are in dispute decide the result at the end. It saves the time which would have been taken in long litigation. The cost involved is also quite less. The parties can understand each others point of view. It can help in saving the relation between the parties who are in dispute and lead to future working and good relation among them. The parties do not approach court which in turn does not dent their reputation in market due to legal cases. Drawbacks In case the mediator is a not a lawyer then there may be issues regarding the language of the final decision of the mediator. A mediator does not provide legal advice. The parties to mediation may try to influence mediator in many ways which may influence his decision. Arbitration In Arbitration, the parties who are in dispute with each other agree over person/persons who is/are third party and neutral to the parties in dispute. The parties in arbitration are accompanied with their lawyers who present their case to the arbitrator and the arbitrator gives his decision upon the material provided before it and as per the merit of the case. The decision of the arbitrator is binding upon the parties. (Findlaw, 2016) Benefits The arbitration is cost effective as compared to litigation. The arbitrations are generally time bound and thus the decision takes much less time as compared to litigation. As both parties decide the arbitrator, so the decision of the arbitrator carries fairness for both the parties and the parties abide by same as they have faith in the person. Finality of arbitrators decision makes it most appropriate system. Simple procedure as compared to courts. The arbitration is not carried in open court so it provides confidentiality to parties. Drawbacks When the decision of the arbitrator is challengeable then the parties may move to court adding cost after arbitration. If parties approach court after arbitration then it is time consuming. Sometimes the fairness issue is there as the companies sometimes hire same arbitrator who favours them in matters referred to them. Location of arbitration can also be suffering for party as it involves more cost and time in order to approach a far destination for arbitration. There is no jury as the arbitrator is himself a judge. The arbitrators decision even if it is incorrect is very hard to appeal. Reference List Articles/Books/Journals Cheshire et al, (2012) Law of Contract. Nicolas TW (2016) The contract Law. Jalil A (2011) Clarification of Rules of Acceptance in Making Business Contracts. Vol. 4, No. 1; March 2011. Case laws Carlill v Carbolic Smoke Ball Co[1893] Clarke v Dunraven (1897). Hyde v Wrench (1840). Merritt v Merritt[1970]. Mondial Shipping and Chartering BV v Astarte Shipping Ltd (1995). Nash v. Inman [1908]. Payne v Cave(1789). Online Material Buttler S (2016) The pros and cons of mediation at:https://gjclaw.blogspot.in/2015/03/the-pros-and-cons-of-mediation.html. Findlaw (2016) https://adr.findlaw.com/arbitration/arbitration-pros-and-cons.html. The Law Teacher (2016) capacity law https://www.lawteacher.net/lecture-notes/contract-law/capacity-lecture.php. SLD (2012) Requisite elements in the formation of a contract https://singaporelegaladvice.com/law-articles/requisite-elements-in-the-formation-of-a-contract/. Statecourts (2016) overview of alternative dispute resolution https://www.statecourts.gov.sg/Mediation_ADR/Pages/Overview-of-Alternative-Dispute-Resolution.aspx.