Business law is a very important component of law studies and mainly deals with regulation of commercial entities and also commercial transactions that can be done by such entities. Business law therefore constitutes of rules, conventions, and agreements both nationally and internationally that governs the activities of commercial entities. Business law is very wide and covers all aspects of business activities. In this discussion we shall analyze the law relating to a contract which is normally referred to as the law of contract.
The law of contract is one of the most commonly applied systems of business law as business involves exchange of goods and services from one party to another. A contract is a commercial bargain for exchange of goods and services and leads to a binding agreement between the parties involved. These kinds of agreements normally become enforceable by the courts of laws and all the parties involved in signing the agreement are under obligation to meet the requirements of the agreement made. Contracts can be entered into orally in written forms but they will still remain binding irrespective of the manner in which they are presented (Stone,2009).There are certain conditions that must be present a contract to be biding to the parties that enters such contracts. They include:
Offer and acceptance of the offer:
Business normally entails exchange of goods and services for a price and hence sellers will be making offers to the buyers with an intention of attracting them towards making purchase decisions. In relation to contracts there must be a valid offer made by the buyer either to provide goods or services or to complete the process there must be a subsequent acceptance by the buyer. When the offer and acceptance matches then a contract will be binding.
Intention to create legal relation:
All commercial contracts normally have an implied intention to create legal relations and hence all parties entering into a contract are normally presumed to have intentions to create legal relations which will make the contract a legal undertaking (Eggleston, 2001).
The good or service in question must have some considerable value. This is a very important component in business law as it helps during the enforcement the law and in determination of the appropriate compensations for breaches of the contract. The good or service which is the subject of the contract must therefore have some material value otherwise it may not be easy to enforce the law of contract.
For a contract to be binding there is need be a genuine consent between the parties involved. Consent basically refers to agreement and concurrence between the parties entering the contract and this must be specifically about the subject matter under consideration.
Possibility of performance:
This is another component of binding contract and as such parties can only enter contracts of something that can be performed. Most business activities involve selling and buying of goods and services and hence the party intending to sell must have the capacity to sell that good or service. In this regard the good must be available and must be a commodity that is legally acceptable by the laws of the land. This is the only way of avoiding fraudulent acts in contracts.
Contracts can only be entered by people who are competent and must be of the legal age. This therefore means that people of the minority age cannot enter into contracts and that contracts entered by such kinds of people will not be binding. In most jurisdictions the majority age starts at 18 years old and anybody who enters contracts at that age are considered to have the contractual capacity. The other determination of contractual capacity is the soundness of mind. An insane individual cannot therefore be purported to have entered a contract.
In the absence of the above conditions contracts cannot be binding and hence the parties may not be under obligation to honor such contracts. The contracts that meet the above standards can be enforced legally in case a breach is committed by any of the party involved. Once a contract is enforceable either party can sue for breach of the same contract which will basically mean failure to honor the obligations under the agreement.
In business law there are a number of remedies for breach of contract and as such an aggrieved party can sue for compensation or damages caused by the failure to honor the contract. According to the law of equity a party that becomes victim of breach of contract can be compensated through requirement that the defendant perform specific performance of the contract. The courts may also impose injunctions on the defendant. The law of contract therefore provides an avenue that parties engaged in business activities are able to amicably solve their disputes and provides a legal framework for the solution to the same problems.
Types of contracts:
Contract s can be broadly classified according to validity, performance and formation. In terms of validity, contracts can further be divided into voidable, void and illegal contracts.
These are contracts that have been entered into without free consent and hence they are not enforceable. Void contracts on the other hand have an element of consent but can cease to be enforceable through a court decision and according to the law. Illegal contracts are however criminal in nature especially on the subject of contract and hence they cannot be enforced.
Contracts can be entered into through expression that is done by writing or spoken words and hence they are referred to as express contracts. Contracts can also be entered into through the conduct of individuals without any verbal or written expressions. An individual who utilizes the services of a public bus will automatically enter an implied contract and is under obligation to pay for such services (Miller & Jentz, 2007).
Executory contract: This is a contract will pending obligation on the parts of all parties and hence remains valid. Executed contract on the other hand is one whose obligations have been met by all the parties involved.
Contracts are therefore a very important element of the business system and ensures smooth running of business activities. Its one of the pillars of the laws governing business activities. It also creates mutual understanding between business people and the customers in the market.
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Stone,R.(2009). The Modern Law of Contract. 7th Ed. Taylor & Francis.