Transcript Chap 2. CONFLICT IN THE MARKET PLACE

Chap 2. CONFLICT IN THE
MARKET PLACE
THE LAW OF CONTRACT
Has been developed over the years from
decisions of judges to regulate how
businesses should be done. It helps to reduce
conflict and ensures that business
transactions are conducted in a formal
manner.
Elements of a legally binding agreement
1. OFFER – The formation of a contract involves one
party making an offer to another party. An offer can
be made orally, in writing, by action. It must be clear,
complete and it must be communicated to the person
to whom the offer is being made.
• Offerer – person making the offer
• Offeree – person receiving the offer
• An offer can be terminated in the following ways:
– if it is rejected by the offeree
– withdrawn at any time by the offerer before
acceptance
– if the time for acceptance has expired
2. ACCEPTANCE - When the offer is accepted it is
binding on all parties. The offer must be accepted
with all its conditions. Sometimes an offer may be
accepted subject to conditions. This is called a
conditional acceptance.
3. CONSIDERATION
• This is something of value offered by a party to a
contract in exchange for something of value received.
It usually takes the form of money in exchange for
goods and services received.
4. INTENTION TO CONTRACT
• Must be the intention of the parties to create a
legally binding agreement. Personal agreements are
not legally binding, if there is an agreement by two
people to go to the cinema and one person does not
turn up, the other person cannot sue because there
was no intention to create a legal contract.
5. LEGALITY OF FORM
• A contract must be drawn up in the correct legal
form. Contracts can be oral, but certain contracts
must be written – for example hire purchase
agreements and insurance policies.
6.CONSENT TO CONTRACT
• The parties to a contract must agree to its terms. They must
both agree on what is being sold or bought and the price.
• The parties must be entering the contract voluntary; no person
should be forced into making a contract.
7. CAPACITY TO CONTRACT
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In order for an agreement to be a valid contract the parties
must have the legal right to do so. Some people do not have the
legal right to enter into contracts. These include:
Companies acting Ultra Vires – a firm’s power is said to be
limited by its objectives in the memorandum of association. If
this is breached the directors have no capacity to contract.
A person under 18 cannot enter a contract except for the supply
of necessaries (goods they actually need)
A person under influence of alcohol cannot enter into a
contractual agreement
A person of mental illness has no capacity to contract
A bankrupt person cannot enter into a contract that is legally
binding
A diplomat is a person in a position of privilege: if they break a
contract they cannot be sued or prosecuted as they can plead
diplomatic immunity.
TERMINATION OF CONTRACT
A contract can be terminated by performance,
breach, agreement or frustration
1.Performance: When the parties to the contract
have carried out their side of the contract as
agreed. Very common way to end a contract
2. Breach: One party to a contract has failed to
perform their obligations in the contract. Breach
of condition – this entitles the injured party to
abandon the contract and sue for damages. Breach
of warranty (less important clause) – allows the
injured party to sue for damages
3. Agreement: When the parties to a contract
agree to end the contract
4. Frustration: If an unforeseen event occurs and
makes the contract impossible it is terminated.
This frustration can also relate to death,
bankruptcy or lapse of time.