Contract A Business contract is legally binding agreement between two parties for an exchange of services that are of value. For a contract to be valid, an offer must be made and accepted. Using a contract in business dealings helps ensure an agreement is acted on, insofar as a broken contract could result in a lawsuit or out – of – court settlement and the payment of damages cause by the breach. The best way to avoid a dispute or potential litigation, however, is to craft a solid agreement in which you are confident and you have negotiated the best terms for your business. Essential elements of valid contract • • •

Proposal and acceptance Consideration – lawful consideration with a lawful object Capacity of parties to contract – competent parties Free consent An Agreement must not be expressly declared to be avoid Writing and registration if required by law Legal relationship Certainty Possibility of performance Enforceable by law

• • • • • •

There are three essential elements of the contract offer/proposal and acceptance, consideration and intention of the parties to create legal relations. Agreement The first essential element of binding a contract is agreement. Agreement= proposal + acceptance. The first step towards creating a contract is that one person shall show or make proposal to the other, with the view of to obtaining the acceptance of that another person to whom the offer is made. A proposal when accepted becomes promise. But not all agreements are legally enforceable. Legally enforceable – means that a court will say that is an agreement is contract.

The offer is terminated and no longer opens for acceptance in the following situations:

Rejection by offeree Slide of time Revocation by offeror Failure of conditions the offer was subjected Death of one of the parties

• •

Consideration It is one of the elements of the contract. Consideration is the legal concept of value in connection with contracts. It is anything of value in the common sense, promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, or even abstinence from a future action. If either promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense. In common law consideration it is a prerequisite that both parties offer some consideration before a contract can be thought of as binding. The law says that if there is no consideration between the both parties in a contract then there is no contract between the parties so that the consideration is very important in the business contracts. If the contract is made without the consideration the law will not support such type of contracts in the court of law so the consideration in a contract is very necessary. If an agreement is made without the consideration it will be considered as the void agreement. So there is great importance of the consideration in the contracts.

a) “On 1st March 2009 Aoran saw the nice cakes at a special price at Wing’s Café. He went in and
discussed with the shop owner, Mrs. Janet, that he was interested to buy the cake but he would like to think it for a few days. On 6th March 2009, Aoran received a letter and brochure from Mrs Janet that she as willing to sell that cakes at a very cheap price. Aoran immediately posted a letter on the same day (6th March 2009). Mrs. Janet only received the letter of acceptance on 10th March 2009. However on 9th March 200, Aoran received a fax from Mrs Janet revoking her offer to sell the cakes to him.”

Contract is an agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. The agreement can be formal, informal, written, oral or just plain understood. The case of Aaron and Miss Janet can be counted as an oral contract because between them there is no written contract. But to consider this case as a contract which can be sued in the court all major points should be included and offer should be made and accepted. If you went to the supermarket and bought something, you formed a contract. Chances are that you either signed a check or a credit card charge slip and either one constitute forming an agreement to pay for the food you purchased. Even if you paid cash, you formed an agreement with the merchant whereby the merchant promised that the goods you bought adhered to a stated or commonly recognized value. Written contracts are usually obvious. What are not as obvious are the contracts that we form when we speak with each other as in case of Aaron and Miss Janet. Oral contract is an agreement between parties that is either partly in writing and partly dependent on spoken words or that is entirely dependent on spoken words. Contracts are not valid until there is an offer and acceptance. A meeting of minds occurs when all parties agree to the material or important terms and conditions of the deal. Usually, this means that if major points such as price are not agreed upon, there is not a binding contract. On the other hand, if the major points are agreed upon, the need to work out minor details or specific contract language may not prevent a meeting of the minds. The essential problem with oral contracts is that they can be difficult to prove and enforce. The party who chooses not to honor its bargain will claim that no agreement was ever reached or insist that the agreed-upon terms was not as claimed. The case may be decided on whatever evidence is available - notes that were made at the time, witness recollections of what was said, emails, even plain common sense. This is why anything in writing, even doodle filled notepads and backs of envelopes, suddenly take on huge significance. There are instances when an oral contract is not legally binding: 1. If the agreement made regards something that is illegal in nature and that violates a local, state, or federal law, then the contract is considered void. For example you can not enforce a verbal contract that was for an exchange of stolen goods.

2. If the verbal contract is vague and does not tie down specifics, then the contract doesn’t exist. For example if you were talking with a friend and said you would like to buy a part of their record collection sometime, then there was no oral contract made. This is due to the fact that your statement of interest did not include a purchase price, exactly which records you intended to buy, or an intended date of purchase. Therefore your friend could not sue you to buy the records because no contract was made. 3. If both parties involved in the oral contract transition had a misunderstanding about the main context of the contract, then the oral contract does not exist. For example, if the oral agreement was to buy a doghouse and a purchase price was agreed on, but the exact model of the doghouse was not clarified and each party thought the contract was for a different model, then the agreement is void. Because the exact item in question was not specified and both of the contracting parties had a different product in mind, no oral contract was formed. Both parties need to be on the same page in order for the contract to be formed. Again specifics need to be detailed to make sure both parties understand exactly what is being sold for exactly how much. 4. There are transactions that require a written contract. In these cases oral contracts are not sufficient enough to be legally binding. Examples of these types of transactions are real estate transactions, credit agreements, and employment contracts that last longer than one year. Considering these instances we can conclude that the contract between Aaron and Miss Janet is not legally binding because not all terms of agreement have been considered between them. From point of Aaron it seems that they have an agreement between him and Miss Janet because she sent letter and brochure about her willingness to sell those agreed cakes at a very cheap price which looks like she is offering. On the same date Aaron posted a letter that he is agree which means he is accepting the offer. First thing we might think there is the offer and acceptance which already states about the contract however not all terms has been discussed. The main thing which could bind Miss Janet is the price for which she is willing to sell those nice cakes. But they have not agreed Aaron and Miss Janet about the price for those nice cakes. Hence, there is no consideration. And revoking of the offer by Miss Janet cannot be sued. So we can say that the contract between them is not valid and it is useless to sue the case in the court. Additionally, there is the slide of time in this case. The Miss Janet received acceptance only on 10th of March but on 9th of March she is already rejected her offer. All agreements to be valid should be on the same date or on spot.


“Mrs Janet wants to transfer the ownership of Wing’s Café to her daughter, Alice, for her 21st

birthday. As Alice will not be paying any money to her mother, her mother is worried that since there is no consideration for the transfer of her café to Alice, the transfer may be void by virtue of Section 26.”

The transfer of ownership in this case is impossible. There main reason is no agreement and consideration between Miss Janet and her daughter in this scenario. If there is no agreement about ownership transfer Miss Janet cannot transfer Wings Coffee. Consideration means some thing, which is of the some value in eye of law. It is one of essentials of the valid contract. The law will not enforce a contract unless it is made with consideration. An agreement without consideration is void. So as we said transfer of ownership by Miss Janet to her daughter is impossible as long as there is no consideration and agreement to be valid, because her daughter will not be paying any money to her mother. But there are some exceptions which do not require any considerations. c) “One evening, Mr.s Janet’s Poodle (dog) “Twinkle” went missing in the neighborhood. Mrs. Janet
was very stressed out with the whole situation and she went to hang some posters around the neighborhood that stated “Missing Poodle “Twinkle”..a reward of RM500 would be given to whoever manages to bring it back to me.” – This is the offer made by Miss Janet Her neighbor’s son, Brian saw the advertisement and he went looking for twinkle However, when Brian found Twinkle, he had a tough time to persuade Twinkle to follow him. He ended up having a few stretches on his face and neck. – This is the acceptance of the offer by Brian When Brian handed Twinkle back to Mrs. Janet, she informed him that she did not have RM500 but she was willing to give out RM100.Brian was very furious and he went over to your house (he has knowledge that you are studying Business Law at LUCT) to seek legal advice.” – This is the breach of contract

The case about advertisement with reward of 500RM for missing Twinkle where the actual amount of reward was less and misrepresented than it was written on the advertisement can be considered as a misrepresentation of fact. The false advertisement caused physical damages as a stretches on face and neck of the Brian. Which means Brian has not only been fraud by misrepresentation of the amount, moreover he ended up having a few stretches on his face and neck. In this case the contract between Miss Janet and Brian exist. Once Janet put advertisement it means she is offering and in this case her offer is reward for missing pet. If anyone sees this advertisement and accepts the rules and terms like: if they satisfied with the amount of reward, this means they agree and accept the terms. Therefore whoever finds missing

twinkle is in contract with Miss Janet. So paying less amount by Janet means she is breaching the contract. Therefore Brian can claim the case to the court. This case includes all essential elements of the contract which is legally binding. First, there is the offer made by Miss Janet and it is accepted by Brian. So there is the intention between two parties, Miss Janet is willing to reward who finds her twinkle and Brian intents to find it for reward. The most important part is consideration which in this case is reward of 500 RM. Therefore, this case is enforceable by the law. The all terms and essential parts are inside of this case. Miss Janet misrepresented material fact in this case. She promised to pay 500 RM which was the main reason that affected to decision of the Brian to find her pet. If the reward were less then it was stated on the advertisement maybe Brian would not look after the pet. And in the last paragraph after getting less amount than he expected made him furious which means he found the twinkle only to get that 500 RM. Brian was relying on it, additionally, he ended up with stretches on face and with 100 RM instead of 500 RM. Consequently, Brian has all rights to bring case to court. d) In this case what happened with Brian myself as a young boy with no knowledge about

law and considering my age I would just leave it. There are some simple factors which affects to my decision. First, as a young boy few stretches is not so harmful at least if it will not cause further infection or cause any problems with health which therefore can be additional expenditure. Second, as a young boy 100RM is even enough because I do not have any expenditure I will only spent this money for useless things. Third, from misrepresentation I do not suffer any financial things like money; I do not lose my money or anything bigger than that, just spent some time to search and just had some stretches. Fourth, bringing case to court is time consuming and nervous just for 400RM, even you will spend more of your time and nerves to collect information, to prove your position. Moreover, you will spend more money than that 400RM for the lawyer. In conclusion as a young boy I would be glad with those 100RM and just forget about it.


Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer: Get 4 months of Scribd and The New York Times for just $1.87 per week!

Master Your Semester with a Special Offer from Scribd & The New York Times