CONTRACT and MORE
CONTRACT and MORE
CONTRACT and MORE
CONTRACT
This is a legally binding agreement between two or more persons that is enforceable by law.
The difference between a contact and a social agreement is that the contract:
1) Must be enforceable by law
2) Must give rise to rights and obligations
3) Parties must have the intention and ability to create a legal relationship between them.
TYPES OF CONTRACTS
1. Simple contract
This requires no special form and may be written or oral.
2. Specialty contract
This is also called a deed or a contract under seal and must have the following
Seal
Signature of parties
Attestation by one or more witnesses
Delivered to all parties involved
E.g. Hire purchase agreements, sale of land, insurance contracts, mortgage contracts
3. A contract of record
This is a court judgment requesting parties to abide by a certain obligation.
CHARACTERISTICS OF A CONTRACT
1. Offer and Acceptance
An offer has to be made and there must be clear and unconditional acceptance.
These may be done orally, in writing or by conduct.
2. Form or Consideration
This is the price for which one party gets the legal obligation e.g. Charles offers
Mike $5,000 for his car. The money is the consideration.
3. Capacity of the parties
In the eyes of the law the parties must be able to bind themselves to a contract. E.g.
not be insane or underage.
4. Legality
The contract should not be illegal.
5. Good faith
There should be no fraud/undue influence on any party.
6. Genuineness of the consent of parties
All parties should agree and enter of their own free will.
7. Possibility
Parties must be able to carry out their side of the contract.
Principles of Business
PARTIES TO A CONTRACT
1. Offeror
This is the person making the offer.
2. Offeree
This is the person accepting the offer.
Counter Offer
This is an alternative offer made by the offeree to the offeror. However it does not have to be
accepted.
TERMINATION/DISCHARGE OF CONTRACT
1. Mutual agreement
Satisfaction
Waiver (parties give up their rights under the contract)
New agreement formed in place of old
2. Breach
One party breaks his side of the contract.
3. Performance
Contract is fulfilled.
4. Impossibility
Contract was illegal
One or both parties find it humanly impossible to comply
5. Frustration
Unforeseen circumstances cause one or both of the parties to be nable to fulfill their
obligations.
6. Death
7. Bankruptcy
8. Lapse of time -Non-performance during a specified time period.
1. Damages – The affected party can sue for damages, for example, to recover loss of
income.
2. Specific performance – the court can order that the party fulfill its contractual ibligation
by enforcing an order for specific performance.
3. Injunction – this is a court order prohibiting a party from performing an action, for
example, an imposition by the court to discontinue production of a harmful product.
4. Restitution – this involves returning any money or property already given in the contract,
so as to restore the affected party to their position before the formation of the contract.
Legal Issues
Conditions for a Valid Contract
(Oral Contracts)
The features must be present, active, enforceable or functional
Performance must be possible
Time must not lapse
No minor, mentally ill or learning disabled person should also be noted
Principles of Business
(Written Contracts)
It must have a date
It must be signed, sealed and delivered
It must be witnessed
There must be no factual mistakes in it
Performance time must not lapse
It must be legal or legitimate
Performance must be possible
It must be registered
It must be reasonable and fair
A void contract cannot be upheld in a court of law i.e. it is unenforceable (because it may
contain components that are illegal) e.g. sale of illegal drug. A voidable contract is one that has
legal effect and can be brought to court, but may be set aside because of the condition(s) under
which the contract came into being.