List and explain briefly each of the components required to demonstrate that a binding contract exists.
A binding contract comprises of certain key elements that should be fulfilled to make it legally valid. When persons approve in writing to allow the court to punish them if the defendant does not follow their contractual obligations, is binding contract. A contract where two parties are involved and takes promise to create a legal relationship.
Key elements of the contract are mutuality of obligation and includes
Basic elements of the binding contract
General elements of a contract involve proper terms or definite terms, consideration and mutuality of obligation. Meeting in the mind also termed as Mutuality of obligation is verified by an acceptance and an offer. An offer happens when an individual or party generally called offeror proposes a type of exchange with another individual also known as the offeree. Acceptance however takes place only when the offeree accepts the terms and conditions explained and made in the offer (Elliott and Quinn, 2010).
Definite terms in the contract terms mean that the terms of the contract are proper and enable the court to explore and evaluate if and when needed as per legal obligations.
Consideration on the other hand is about what the parties determined to exchange against the offer made. It should have some value.
Thus, the elements and obligations mentioned in the contract paper should be legally valid so that legal steps could be taken in case of any dispute.
Parties need specific capacity in order to create a unique binding contract. Capacity is a unique term that intimates about an individual’s ability to enter into a particular contract and the cover mental issues or problems. A contract does not happen if there is mental impairment in one of the parties and he fails to understand the terms of the contract. Mental incapacity hence plays a significant role in business and contract based decision (McKendrick, 2011).
Does a contract have to be in writing to be binding? In your answer explain whether this is the case, and further whether it is a good idea to put an agreement in writing.
Contracts could be written or unwritten, also known as verbal and non-verbal contract agreements and either way these are valid agreements. However in binding contracts it has been studied that binding contracts should be in written and then only it is considered as a valid contract agreement. Since oral contracts often lead to dispute originating from issues like lack of clarity in the record maintenance of offer, consideration and acceptance. Such vagueness in deal leads to confusion and hence it is advised that contract agreement should include written terms to eliminate problems and dispute in future.
Generally binding contract is valid only when it is in the form of written and stamped legal document. Though in general contracts, not all contracts are void or yet oral contracts are voidable and often could be rejected by either party at any time. There are several Statures of Fraud as per the present contract law. And in this respect the key aim of written contract is clear that is to ensure that any type of fraud could be avoided by implementing written contract terms. A verbal contract would lack in validation. As there are no records of terms or issues agreed upon, it is difficult to validate the content if and when any dispute crops up (Finch and Fafinski, 2014).
Thus though there are different types of contract agreement and generally all forms are legally valid, yet the oral contracts are often suggested to change it into writing so that both parties have clarity in thoughts, decision and obligations. It is easier to check signed contracts and evaluate expectations of either party in case of a breach of contract. Breach of contract lawsuits are expensive for any firm or an individual and are hence clarified under law only when there is a valid and signed contract paper.
Thus creating a binding contract help in any sort of dispute, for example, when an individual is entering into a type of relationship specifically with any customer, vendor or indulging into an independent contract, one should take the much needed steps to turn it into a valid contract type (Taylor and Taylor, 2016). In order to become a valid contract, it should comprise of following elements;
Some contracts are expected to be in the written format by the state law and these should be in writing.
What is a formal contract? Explain the ‘formalities’ of such a contract and give two examples.
A formal contract is a type of contract in which two different parties have signed and sealed agreement or papers and determined to work in a proper way as per the written or agreed terms. On the other hand the informal contract is generally unsealed. A seal is a symbol of authorisation and hence the document is valid under the law enforced by the State. While in a traditional set up formal contracts were sealed with wax and then signed conveying that the parties are bound to consider respective orders or intentions discussed in the paper.
Formal contracts are those that include a legally valid agreement in which two parties are involved and are legally binding as well as enforced by the law. Formal contract should contain an offer, acceptance as well as conditions regarding the payment as well as exchange of values or goods and services that should be delivered in the end. Thus any type of written contract is identified as a formal contract agreement formality of the contract however includes work contracts, automobile cases and signing credit card receipt on the purchase of the product or agreeing upon formal contract. Formal contracts are common in Purchase Order, Security Agreement and Bill of Sale (Duxbury, 2015).
A group of friends meet for a regular drink at a hotel every Friday night. Each contributes $2 towards a group lottery ticket, which is drawn over the weekend by Lotto company. One of the group is given the role of actually buying the syndicate ticket. When in fact a winning ticket is drawn for the group the purchaser of the ticket claims the arrangement is purely social and there is no arrangement whereby he needs to share the prize. Analyse this issue in terms of contract law.
In this certain case on playing lotto where friends meet on every Friday night and enjoy playing lotto over drink and snacks is a regular phenomenon. The lotto company earns about $2 from each player and they spend the amount to buy a ticket for the game and play on the weekend. There are different groups and each group is responsible for buying the syndicate ticket in turns. When the game ends the winner gets all money and it is his choice that if he wishes to share the amount with others in the group or not. It is a social obligation that encourages the winner to invest the money in the group members and share with them. There is no such rule regarding the sharing amount claimed by the winner. It is strictly his decision. He can share the winning amount with the group only if he decides (Halson, 2013).
Analysis of terms of contract law:
Before entering into a legal contract agreement the parties should have clear knowledge about respective terms and statement and understand the orders given by one party to the other while entering into a contract.
Terms of contract informs about the key duties of each party in relation to the particular agreement.
Two types of terms;
Express terms are generally put forward by the parties, Implied terms are studied and mentioned as per the parties intention regarding the contract and basis of law (TheFreeDictionary.com, 2017).
Terms of the contract could be wholly oral, wholly written, partly oral and partly written
Terms are different from statements which are two types in nature, representation on sate of affair and promise on something that will happen.
Case analysis and proposed solution
After going through the contracts terms and specially on oral terms that says that it is to be first judged if the statement became a promise or not. If it was not a promise then there lies no obligation. In this scenario since there was no legal notice regarding the rule of sharing the prize money and if it was even not promised or decided by the group members unanimously when the game begun that whosoever wins will share the prize money with the team as a sign of good gesture, it cannot be expected that every winner will share the money if he wins. It is a matter of choice and no promise made under the oral contract agreement terms (Lawteacher.net, 2017).
Why is it important under law to distinguish between a party who is an agent for a principal, from that of an independent contractor? In your answer explain the legal implications of each relationship.
Agency comprise of a relationship triangle that includes a principal, an agent and a third party. Generally the agency relationship takes place with the help of a contract. There are other small groups and relationship that impacts on the overall networking within the agency.
An agent is a person who has agreed to work or act in the place of also in situations replacing the principal and is subject to the principal’s control. For example an insurance agent is an agent.
Principal is that person who controls the activities of the agent. For instance the boss at work
In businesses however the principal and agent relationships are available in the form of employee-employer relationship or like an independent contractor (Grundmann, 2011).
Agents work for the benefit of the principal who controls the situation or the contract. Agent could easily replace the principal and introduce new contracts with 3rd parties when the principal is not present. Thus, huge responsibility is given to the principal regarding the entire situation management. In a company’s perspective employee receives command or orders from the boss and is expected to follow the guidelines provided and complete work as per the deadline. This is a classic example of agency relationship.
Agents duty to principal is unique and are categorised into two segments under law. These two are the Fiduciary duty and a set of general duties implemented by the agency law. The duties are though not unique for the agency, yet should be implemented and performed in a proper way by an employee towards the employer. There are several other types of duty under the legal perspective that is to be followed to ensure proper agency management and confirms that the agency performs in a smooth manner without facing any dispute or legal hassle (Harvey, 2009).
Independent contractor is an individual who generally works in order to receive payment from the employer or the person who has assigned the work. However, the independent contractor works in a professional way and enjoys flexibility such as the working condition as well as methods are not controlled by the particular employer and for other issues the employer is generally responsible. For instance, when a CPA gets paid by the client the CPA is however free to maintain records as per their preference.
Contract is thus possible under different circumstances in Australia and following the law the obligations could be met in a defined way. Australian low is influenced by the English contract law, and thus they have several similarities is terms and statutes. With time however the statues were modified to suite the need of the State and also help agencies and companies function in a proper way (Lawteacher.net, 2017). Thus, in the entire discussion the legal issues and terns are properly addressed to help in clear understanding of the topic.
References
Alexander, L. (2011). Contract law. Aldershot: Dartmouth.
Barker, D. (2007). Essential Australian law. Abingdon [u.a.]: Routledge/Cavendish.
Duxbury, R. (2015). Contract law. London: Sweet & Maxwell.
Elliott, C. and Quinn, F. (2010). Contract law.
Finch, E. and Fafinski, S. (2014). Contract law.
Grundmann, S. (2011). The Future of Contract Law. European Review of Contract Law, 7(4).
Halson, R. (2013). Contract law. Harlow: Pearson.
Harvey, C. (2009). Cornerstones of Australian law. Prahran, Vic.: Tilde University Press.
Lawteacher.net. (2017). Powers And Liabilities Between Agent And Principal. [online] Available at: https://www.lawteacher.net/free-law-essays/commercial-law/powers-and-liabilities-between-agent-and-principal-commercial-law-essay.php [Accessed 14 Sep. 2017].
Lawteacher.net. (2017). Powers And Liabilities Between Agent And Principal. [online] Available at: https://www.lawteacher.net/free-law-essays/commercial-law/powers-and-liabilities-between-agent-and-principal-commercial-law-essay.php [Accessed 14 Sep. 2017].
McKendrick, E. (2011). Contract Law.
Parkinson, P. (2009). Tradition and change in Australian law.
Read, P. (2016). Contract law. London: HLT Publications.
Shsu.edu. (2017). AGENCY RELATIONSHIPS: OVERVIEW. [online] Available at: https://www.shsu.edu/klett/agency%20et%20al.htm [Accessed 14 Sep. 2017].
Stone, R. (2013). Contract law.
Taylor, R. and Taylor, D. (2016). Contract law.
TheFreeDictionary.com. (2017). independent contractor. [online] Available at: https://legal-dictionary.thefreedictionary.com/independent+contractor [Accessed 14 Sep. 2017].
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