BUSINESS LAW

Assignment 1

(Business Law 2011)

Assignment 1

Vishaah Rasheed 25975 Diploma in Business SEM 3

Table of Contents
Introduction ............................................................................................................................................ 3 Contract ................................................................................................................................................. 3 Essentials of a valid contract ................................................................................................................. 4 2.1 Agreements: .................................................................................................................................... 4 2.2 Consensus ad idem: ......................................................................................................................... 4 2.3 Free consent: ............................................................................................................................. 4

2.4Capacity to contract: ........................................................................................................................ 4 2.5 Clarity: ............................................................................................................................................ 5 2.6 2.7 2.8 2.9 3 Lawful Consideration:............................................................................................................... 5 Lawful Objectives: .................................................................................................................... 5 Possibility of performance: ....................................................................................................... 6 Legal Formalities: ..................................................................................................................... 6 Not void by any other law: ........................................................................................................ 6

Conclusion ............................................................................................................................................... 8

Diploma In Business [ Sem 3]

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Vishaah Rasheed [25975]

(Business Law 2011)

Assignment 1

Contract is legally binding agreement

Introduction
All contacts are agreement and it is legally binding agreement, because it requires the acceptance of both parties, it is one of its characteristics, mutuality, but not all agreements are contracts because it is not legally enforceable by court, such as the agreement to go to a party. In addition to that contract is a legal document promising to provide or do something in exchange for a certain amount of money, Moreover it reaches without any monetary compensation. An agreement is to AGREE (To concur, consent or accept) to something. Furthermore a contract is simply a proof of a certain agreement. For example: When I sell L a house, we make an agreement that L gives me the full payment and I give L the house, we make a contract so that I cannot disagree with that the house is Ls now, So the contract is a proof to a agreement we had. In a different case, when I buy a coke from a shop, I agree to give the seller the amount of money the coke charges and he would give me the coke, but I do not make a contract to prove that.

Contract
Any agreement is considered to be legally binding and becomes a contract when some conditions are met. The conditions are Offer, Acceptance, intention to create legal relation and consideration. If any one of those conditions is not met then the contract is not legally binding and it cannot be enforced on the other party. A contract comprises of terms and representations. Terms are contextual statements that become binding whereas representations are statements which might induce a contract but are not terms of a contract. Contract may be terminated in following ways, through performance, breach of contract, frustration and through another contract. Moreover contract is also terminated by performance; the performance is 100% complete. If a serious term of a contract is breached then the affected party can terminate the contract. When the conditions are such that contract becomes impossible to perform then the contract is terminated due to frustration. Parties of the contract may enter into another contract with mutual consent and can terminate the previous contract. Further Contracts come into existence through agreement. Agreement, if not legally binding cannot be enforced by law. Contracts and agreements can be of various types. There are certain presumptions of Diploma In Business [ Sem 3] Vishaah Rasheed [25975]

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(Business Law 2011)

Assignment 1 intention to create legal relation in contract. It is presumed in domestic contract there is no intention to create legal relation and in business contract it is highly intended to create legal relation. On the other hand it does not have such presumption; it can be between domestic as well as business parties until they intend to be legally bound on that.

Essentials of a valid contract Contracts come in all shapes and sizes. Some are verbal, some are written, some are formal and some are informal. The use of the internet and electronic technology is also becoming increasingly common in the context of forming contractual relationships. It is, therefore, important to understand the essential features which make a contract valid, binding, and enforceable. (wiki.answers) 2.1 Agreements: In agreement two peoples are involved in two parties. One should be offer and another should be acceptance.

2.2 Consensus ad idem: Both sides should have the same mind same feeling. For example: two parties, A have 2 houses. House 1 and house 2.A proposed to sell one house to B. B accepted. A knows B can buy that house. Two parties have same feeling like that.

2.3 Free consent: I. Contract is caused by (i) coercion, (ii) undue influence (iii) fraud, (iv) miss-representation, or (v) mistake. If the contract made by any of the above four reason, at the option of the aggrieved party it could be treated as a void contract. If the agreement induced by mutual mistake the agreement would stand void or canceled. An agreement can be treated as a valid contract when the consent of the parties is free and not under any undue influence, fear or pressure so on. The consent of the parties must be genuine and free consent.

2.4Capacity to contract: Parties entering into an agreement must be competent and capable of entering into a contract. If "A" agrees to sell a Government property to B and B agrees to by that property, it could not treated as a valid agreement as A is not authorized or owner of the property. If any of the party is not competent Diploma In Business [ Sem 3] Vishaah Rasheed [25975]

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(Business Law 2011)

Assignment 1 or capable of entering into the agreement, that agreement cannot be treated as a valid contract. According to Section 11 of the Act which says that every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. So it is clear that the party must be of sound mind and of age to enter into a valid agreement which can be treated as a valid contract.

2.5 Clarity: Agreement should be clear. For example: A is selling to B fizzy drinks. In agreement there should not be write what kind of fizzy drinks, what flavors? So a sent fizzy drinks. But that is not a real fizzy drinks what B want. Because of that everything should be clear in agreement.

2.6 Lawful Consideration: An agreement must be supported by a consideration of something in return. That is, the agreement must be supported by some type of service or goods in return of money or goods. However, it is not necessary the price should be always in terms of money. It could be a service or other goods. Suppose X agrees to buy books from Y for $50. Here the consideration of X is books and the consideration of Y is $50. It can be a promise to act (doing something) or forbearance (not doing something). The consideration may be present, future or can be past. But the consideration must be real. For example If John agrees to sell his car of $ 50000 to Peter for $20000. This is a valid contract if John agrees to sell his car not under any influence or force. It can be valid only the consideration of John is free. An agreement is valid only when the acts are legal. Illegal works like killing another for money, or immoral works or illegal acts are cannot be treated as a valid agreement. So, illegal works will not come under the contract act.

2.7 Lawful Objectives: The objective of the agreement must be lawful. Any act prohibited by law will not be valid and such agreements cannot be treated as a valid contract. A rent out his house for the business of prostitution or for making bomb, the acts performing there are unlawful. Hence such agreement cannot be treated as a valid contract. Therefore the consideration as well as the object of the agreement should be lawful.

Diploma In Business [ Sem 3]

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Vishaah Rasheed [25975]

(Business Law 2011)

Assignment 1 2.8 Possibility of performance: As per section 56, if the act is impossible of performance, physically or legally, the agreement cannot be enforced by law. There must be possibility of performance of the agreement. Impossible agreements like one claims to run at a speed of 1000km/hour or Jump to a height of 100feet etc. Would not create a valid agreement. All such acts which are impossible of performance would not create a valid contract and cannot treat as a valid contract. In essence, there must be possibility of performance must be there to create a valid contract.

2.9 Legal Formalities: The contract act does not insist that the agreement must be in writing, it could be oral. But, in some cases the law strictly insists that the agreement must be in writing like agreement to sell immovable property must be in writing and should be registered under the Transfer of Property Act, 1882. These agreements are valid only when they fulfill the formalities like writing, registration, signing by the both the parties are completed. If these legal formalities are not completed, it cannot be treated as a valid contract.

Not void by any other law:

Not declared or considered void by any legal low or other country. For example, in male it is not to sell alcohol in public, but in resorts it is allowed to sell alcohol.

1. Agreement Agreement refers to meeting of minds at a certain point. Agreement may be on business views, commercial views or domestic views. If the agreement is not legally binding it cannot be enforced by law. Agreements where consent is not genuine are called voidable agreement. An agreement becomes a contract when it is made legally binding and on meeting the three conditions. When the parties enter into agreement they define the terms and conditions of agreement themselves, whereas in some specific contracts terms and conditions are implemented by Law.

Diploma In Business [ Sem 3]

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Vishaah Rasheed [25975]

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Assignment 1 2. Intention to create legal relation

3. Consideration An act of or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought and the promise thus given for value is enforceable. Executed Executor Past consideration

Diploma In Business [ Sem 3]

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Vishaah Rasheed [25975]

(Business Law 2011)

Assignment 1

4. capacity to contact 5. privities to contract

Conclusion

Diploma In Business [ Sem 3]

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Vishaah Rasheed [25975]