Legal aspect of a business

What is a conteact?
A contract is an agreement made by two or more parties that is
legally binding or enforceable by law.
A specifc legally binding agreement between two or more people
(or parties) in which there is an agreement to do something in
return for a beneft (or consideration).

Basic Elements of contracts are

- the agreement
- the intention to create legal relations
- valuable consideration

Parties to a contract
- oferer= the party who makes the ofer
- oferee= the party to whom the ofer is made
-acceptor= the oferee who has accepted the ofer

Breach of contract
Is the falure or refusal (by either party) to undertake the
requirements to fulfl the obligations of the contract.

Characteristics Of A Simple Contract

There must be ofer and acceptance. The oferer is the party that
makes the ofer and the oferee is the person that the ofer is being
made to. There must a clear ofer and clear acceptance for a
contract to be binding. For example, if s car cleaner ofers to clean
a motorist's car for $500, that is a specifc proposal being made.
The ofer must be certain and it must also be actually
communicated to the person it I'd intended to be made to. It must
also be accepted i.e, willingly agree to it by communicating
acceptance to the oferor( the party that made the ofer)
Consideration is the price paid by one party for the promise of the
other. Thus if one party promises to provide goods or services,
something of value must be given in exchange. This may be in the
form of money, goods, services or it may be an act of forbearance.
The capacity to contract Parties to the contract must be over 18
years, of sound mind, not under the infuence of drugs or
incarcerated.
There must be no force, misrepresentation or fraud . Persons should
not be forced to sign a contract e.g. blackmail. They should not be
lied to e.g. giving the wrong year of a car. Fraud may involve
forging someones signature.
There must be an obvious intention to create legal relations .This is
based on the actions of the parties e.g. ofer, acceptance and
consideration. For example, if you ofered to was the dished tonight
for your parents and then forgot and went to be early, would you
sect your parents to take you to court for breaking your contract
with them? No!
A contract must be legal- thus, agreements made between parties
concerning illegal drugs and any other illegal activity is not a
contract.

Diferences Between A Simple & A Speciality Contract

A simple contract can be made orally, in writing or by the
implications deemed from the actions of the parties. It does not
have these key features of signing, sealing and delivery of s hard
copy to each party. A simple contract may be:
- in writing
- spoken(verbal)
- implied by conduct.
A specialty contract are formal contracts for important
transactions must be signed by the parties, sealed, for example
with a company seal and fnally it must be delivered.
Examples of specialty contracts include:
1. Mortgages and leases for over three years
2. Sale of land
3. Contracts of insurance
4. Hire purchase agreements
5. Transfer of company shares
6. Assignments of copyright

Validity of contracts
The essential elements of the formation of a valid and enforceable
contract are summarized below. A contract is valid or voidable if
one or more of the following features is lacking.
1. Ofer- this is an under taking by an oferer that s/he is bound in a
contract by the ofer if someone acceptsit . An ofer my be oral,
written or implied.

2. Counter-ofer- this is the rejection of the original ofer and has

the efect of cancelling the original ofer and replacing it with a new
ofer. This is the process buyers and sellers go through to come yo
an agreed price or agreement.

3. Invitation to treat or auction- this is an invitation for one to

purchase a commodity through bidding. The advertised price at
the beginning of the auction is not an ofer, but the bid at the
auction is the ofer. The auctioneer's request the bids is the
invitation to treat. An invitation to treat is a statement of the price
and not an ofer to sell.

4. Acceptance- this is an agreement to purchase the item for an

agreed price, for example, after carefully examining the car that
David ofered for sale, Davina fnally agrees to purchase it. Davina
has unconditionally accepted to pay the agreed price and David
has agreed to accept the agreed price. This agreement is
considered to be acceptance

5. Capacity of the parties-the parties entering into the contract

must be adults of sound mind and should not be incapacitated in
any way, for ecample , by drugs or alcohol, to prove to the law that
they have the power to enter intoma contract.

6. Legality- whatever is up for consideration must not be contrary

to the law. If the contract involves any form of immoral pursuits,
such as contracts to commit civil wrongs or crimes, or contracts
involving sexual immorality, it becomes illegal.

7. Good faith- this means that both parties should trust each other
and neither should infuence the other unduly.

8. Genuineness of the consent of the parties- there must be mutual

agreement between both parties. Each party entering into the
contract must do so with free will and should not be under any
duress. For example One cannot force someone to sign a contract
for the sale of his/her home; there must be convent to sell.