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7. Factors Affecting The Validity of a Contract  

This chapter discusses how the manner in which a contract is concluded can potentially affect its validity. Before discussing the terms and details of a contract, it is important to note that a contract may fail due to one or both parties not possessing the capacity to establish a contract. Some of the common reasons includes a mistake by one or both parties, a provision that has been misrepresented in the negotiations, or the use of undue influence or placing the other party under duress in the process of concluding the contract. Some of the reasons listed in this chapter may be common, but the emphasis here is to identify where problems may occur that could prevent the successful operation of the contract despite fulfilling the essential features discussed in the previous chapters.

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10. Ending the Contract  

This chapter discusses other ways in which a valid contract may be discharged, aside from the successful completion of established rights and duties. It also discusses possible remedies where a party breaches the contract. Under the normal rules of contract, a party is only discharged from a contract when that party has completed obligations under it. Having completed the contract each party is free of further obligations. A failure to complete the contract may lead to a breach of contract claim, although situations exist where the parties may release each other from further obligation—referred to as discharge by agreement—or the contract may have been partially or substantially performed. This chapter examines discharge through performance and agreement, how contracts may become frustrated, and the consequences and remedies following a breach of contract.

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6. Establishing the Contract: Consideration, Intention to Create Legal Relations, and Certainty Of Terms  

This chapter is a continuation of the previous one, and further discusses the essential features of a legally binding, or valid, contract. It puts particular importance on the meaning of ‘consideration’, which is what makes a promise or agreement a ‘bargain’ and, therefore, enforceable. The courts are not bound to, and will not, consider a ‘bare promise’. Parties to a contract must intend it to be legally binding, and not just be social or domestic agreement, and such contracts must contain certain terms that identify the rights and obligations of both parties. Without an understanding of these crucial elements, agreements may be concluded but they will not create an enforceable contract. Also, although a contract is enforceable by those parties to it, this right can be extended to third parties if the contract has been made for the benefit of these parties.

Chapter

Cover Introduction to Business Law

6. The Terms of a Contract  

This chapter discusses the terms of a contract. The terms are the contents of the contract. They also state what the parties’ legal duties and obligations are to each other. Terms may be written, oral, or even implied into a contract. This chapter discusses the difference between a term of a contract and a representation and the difference between express and implied terms. It considers the types of contractual terms, conditions, warranties, and innominate terms, and the distinction between them. The nature of exemption clauses and the methods used by the courts to restrict the use of such clauses and the effects on exemption clauses of the Unfair Contract Terms Act 1977 and Consumer Rights Act 2015 are examined. The chapter concludes with a discussion of restraint of trade clauses commonly found in contracts of employment, contracts for the sale of businesses, and solus agreements

Chapter

Cover Introduction to Business Law

8. Discharge of Contract and Contractual Remedies  

The discharge of a contract means that the obligations of the contract come to an end. When discharge occurs, all duties which arose under the contract are terminated. This chapter discusses the various methods of discharging a contract and the consequences of each. It considers how a contract can be discharged through agreement between the parties; the elements necessary for a contract to be discharged by performance, including the rules relating to partial performance of a contract; and the meaning and effect of the frustration of a contract. The chapter discusses the meaning of breach of contract, both actual breach and anticipatory breach, and its consequences. The remedies for a breach of contract are explored, including the rules relating to remoteness and measure of damages and the difference between liquidated damages and penalties. Equitable remedies of specific performance and injunctions are explained.

Chapter

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5. An introduction to the law of contract  

This chapter provides an introduction to the law of contract. It discusses several preliminary pre-contractual issues and explains that though most contracts do not require formalities, a number of important ones impose certain requirements and failure to comply may render the contract unenforceable. The ability of persons to enter into contracts (that is, their capacity) is also discussed where it is noted that certain persons cannot enter into legally binding contracts. The chapter also clarifies why contracts are enforced. This chapter also discusses the rules governing privity of contract and considers the role of third parties in enforcing a contractual term via statute and common law principles.

Chapter

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5. Establishing an Agreement: Offer and Acceptance  

This chapter identifies the essential features necessary in the establishment of a legally binding contract. Most contracts need not be given in writing, and a contract could be regarding as something as simple as buying a newspaper or a cup of coffee. In fact, many contracts that are established are not done so in writing, even if a receipt is received. However, each of the essential features noted in this chapter is present in forming those contracts. Before the essential features are considered, it is important to note that contracts can be established by the parties exchanging promises, or by one party promising to perform an act in return for some action by the other. In the latter scenario, the second party has no obligation to take any action unless it wishes to enter into a contract.

Chapter

Cover Introduction to Business Law

13. The Contract of Employment and its Termination  

This chapter discusses the contract of employment and its termination. It considers the difference between an employee, an employee shareholder, an independent contractor, and a worker, and the tests used to establish their status. It discusses the types of implied terms contained in a contract of employment. The chapter also considers termination of a contract of employment, examining the difference between unfair, constructive, and wrongful dismissal. It looks at claims for unfair dismissal, considering the potentially fair reasons for dismissal, the band of reasonable responses, the automatically unfair reasons for dismissal, and the remedies available where unfair dismissal has occurred. The chapter concludes with a discussion of redundancy.

Chapter

Cover Introduction to Business Law

7. Vitiating Factors  

A contract may meet the necessary formation requirements of offer and acceptance, consideration, and intention to create legal relations, but still not be binding because it lacks other necessary factors. These invalidating factors are sometimes referred to as ‘vitiating factors’. This chapter discusses statements that constitute actionable misrepresentations; the difference between fraudulent, negligent, and innocent misrepresentation; the remedies available for each type of misrepresentation; and the effect a misrepresentation will have on the validity of a contract. The chapter considers types of mistake and when a court will regard a mistake as an operative mistake rendering the contract void. It also considers how duress and undue influence may arise, the presumptions relating to undue influence, and whether the presence of duress and undue influence will make a contract voidable. Finally, the chapter considers types of contract that are illegal under statute and under common law.

Chapter

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6. The formation of the contract  

This chapter examines the legal requirements relating to the formation of a contract. It discusses the five essential elements of a contract, namely offer, acceptance (offer and acceptance are collectively referred to as ‘agreement’), certainty, consideration, and the intention to create legal relations. It analyses these individual requirements in detail and considers the courts’ approach in determining whether an enforceable contract is present or not. This chapter also explains the principles of different types of contracts, namely the distinction between bilateral and unilateral contracts, and how the normal rules of contractual formation are modified in the cases involving unilateral contracts.

Chapter

Cover Business Law

20. Ending Employment Contracts at Common Law; and Duties to Redundant and Transferring Staff  

This chapter identifies the remedy for the termination of contracts of employment through the common law claim of wrongful dismissal. It addresses situations of redundancy, and the rights of individuals and obligations on employers when the business is transferred to a new owner. Each of these measures offer protection to employees, and employers should understand the nature of these rights, the qualifications necessary for each mechanism, and the remedies available, to ensure they select the most appropriate mechanism to bring the employment relationship to an end. Before the 1960s, contracts of employment were largely dealt with by the ‘normal’ rules of contract law and were often heard by courts that hear contractual disputes. It is important to be aware of the mechanisms that will enable termination of the employment relationship without transgressing the law in order to maintain good working relations.

Chapter

Cover Introduction to Business Law

4. The Nature of the Agreement  

Offer and Acceptance

This chapter discusses the nature of contracts, the essential elements of a valid contract, and issues in contract law. A contract is a bargain, made between two or more persons, which is legally binding. The essential elements of a valid contract are the following: agreement (offer and acceptance of definite terms); consideration (a promise to give, do, or refrain from doing something in return for a similar promise); an intention to create legal relations (usually presumed in a business transaction); compliance with required formalities where applicable; and capacity to contract. This chapter discusses in detail the principal rules relating to offer and acceptance. It considers the making and termination of offers in unilateral and bilateral contracts. It explains the rules relating to communication and methods of acceptance of offers and discusses the making of contracts via the internet.

Chapter

Cover Introduction to Business Law

5. Intention, Capacity, Consideration, and Privity  

This chapter examines issues relating to contract formation. It discusses the elements of an intention to create legal relations and the presumptions relating to commercial or business agreements and domestic agreements. It considers the law relating to capacity to contract, looking at the enforceability of different types of contracts made with minors. It considers the validity of contracts made with corporations and persons who may lack capacity through mental illness or intoxication. It also explains the importance of consideration in a contract, what constitutes consideration, whether consideration provided is sufficient, and who must provide the consideration. It discusses the law relating to part-payment of debts and promissory estoppel. Finally, the chapter considers the doctrine of privity of contract, and the exceptions to the doctrine, including the Contract (Rights of Third Parties) Act 1999

Chapter

Cover Introduction to Business Law

9. The Sale of Goods and Supply of Services  

This chapter discusses the rules relating to agreements for the sale and supply of goods and services. Contracts for the sale of goods and terms implied into business to business contracts by the Sale of Goods Act 1979 are examined. The Consumer Rights Act 2015, introduced to simplify and enhance the position of consumers, is considered. The terms of contracts between traders and consumers for the sale and supply of goods, services, and digital content are discussed together with remedies for breach of contract. Rights to ownership and possession of goods, and when rights may be transferred from a seller to a buyer are explained. General rules on delivery of goods, the duties of a seller and buyer, and the remedies available for breach are discussed. Finally, the terms of business to business contracts for the supply of goods and services, hire of goods, and hire purchase are discussed.

Chapter

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25. The contract of employment  

This chapter examines the issues concerning contracts of employment. It begins by looking at how employment law disputes are resolved, namely by discussing the role of employment tribunals and the Employment Appeal Tribunal, and how they fit into the courts structure discussed in Chapter 2. The chapter than discusses the difference between employees and independent contractors, and looks at the status of several special classes of worker. An examination of the terms of the contract then takes place, including a discussion of express terms, and the terms that are implied that relate to the conduct of the employer and employee.

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9. Unfair terms  

This chapter examines unfair terms and exclusion clauses in a contract. It explains that exclusion and limitation clauses can be used by the parties to exclude or limit their liability and that they are regulated by statute and common law. It highlights the fact that an exclusion clause can only be effective if it is incorporated into a contract and if it was brought to the other party’s attention prior to the contract being formed. This chapter also discusses the relevant provisions of the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015, and ongoing efforts to clarify the law in this area.

Chapter

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18. Businesses and the Responsibility to Agents  

This chapter identifies agency relationships, their prevalence in business, and how the agency exists to bind the principal in contracts with third parties. It begins by defining agency as the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal’s legal position in respect to strangers to the relationship by the making of contracts or the disposition of property. Agencies exist in corporate organizations, sole trader, and partnership trading structures, and the law in this area applies to many relationships and is frequently seen in commercial enterprises, including high street retailers, between partners, and the directors of a corporation.

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10. Vitiating factors  

This chapter focuses on the vitiating factors in a contract, namely those that can render a contract void ab initio or voidable (the distinction between void and voidable contracts is discussed). These include misrepresentation, mistake, duress, undue influence, unconscionable bargains, and illegality and public policy. Certain vitiating factors like mistake will render a contract void ab initio whilst others such as misrepresentation will render the contract merely voidable. It also shows that contracts are not beyond challenge once formed and describes several cases where the courts have held that a contract should not be enforceable despite the validity of the contract’s formation.

Chapter

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12. Remedies for breach of contract  

This chapter examines the various remedies for breach of contract. The principal remedy is an award of damages, the main aim of which is to put the claimant in the position in which he would have been had the breach not occurred. The various types of damages are discussed, notably the distinction between expectation loss and reliance loss, and the ability to claim for financial and non-pecuniary losses. The chapter also discusses restitutionary remedies in cases where the defendant has been enriched due to his breach of contract. Finally, the chapter looks at remedies designed to ensure that persons adhere to contracts, such as specific performance and injunctions.

Chapter

Cover Business Law

23. Statutory and Common Law Regulation of the Conditions of Employment  

This chapter continues from the discussion of the obligations on employers to adhere to the Equality Act (EA) 2010 and protect their workers from discrimination and harassment, to a wider consideration of the regulation of conditions of employment. Legislation places many obligations on employers, and they are increasingly subject to statutory controls that provide for a minimum wage to be paid to workers, for regulation as to the maximum number of hours workers may be required to work, and for the protection of workers’ health and safety. In the event of an employer’s insolvency, the rights of employees are identified, and finally, the mechanisms for employers to protect their business interests in the contract of employment are considered.