Aspect of Contract and Tort in Business Essay Example | Topics and Well Written Essays - 2250 words

Aspect of Contract and Tort in Business - Essay Example The second part of the report will also outline the effect of exemption clauses in attempting to exclude contractual liability. A) What is a contract? A contract comes into existence when two or more people agree to a certain course of conduct (Hofman. 1999). The law gets involved where one party does not carry out his contractual obligations. However, not every agreement is a contract given that in order for it to be binding in law, it must comply with a number of essentials. A contract is based on agreement and in order to express this agreement, there must be among other things an offer and acceptance. Thus, legal systems that follow the English system also require some form of consideration before the contract is binding. Therefore, the General Manager of Budgburys should bear in mind that his organisation offers products which are acceptable. According to Harvey v Facey [1893] AC552, every contract consists of an offer made by one party and accepted by the other. Thus, an offer is an invitation to enter into a binding agreement (Gibson, 1988). Elements of a contract in business From the definition above, it can be noted that not every agreement is therefore a contract (Gibson, 1988). In order for the agreement to be binding in law, it must comply with with a number of essentials. ... Implied prohibition occurs when statute without expressly prohibiting an act provides a penalty for the performance of the act. It has to be observed that in business, contracts under the credit agreement must be in writing and contain certain prescribed matter (Gibson, 1988). Impliedly prohibited contracts include the sale of liquor without a valid licence. The essential in the formation of the contract is the aspect of consideration. There is need to consider the capacity of the person involved in a contract to acquire legal duties. As such contracts involving minors, drunk persons as well as mentally ill persons are considered as void. Another essential tenet of the formation of a valid contract is that the parties must communicate their intentions to each other. Hofman (1999) posits to the effect that if a reasonable offeree believes that there has been an offer, the law will likely to agree given the cornerstone of contract law theory is that contracts should protect reasonable reliance. Whether written or agreed verbally, a contract is binding and it is a reflection of what has been agreed by two parties involved. This is reflected in the case of Watermeyer v Murray 1911 AD 61 at 70. As such, if a person makes an offer without realising it but reasonable people would rely on it, then the offeror is bound. The golden rule in this case is that the offeror must not make offers which he may not be able to fulfil given that these can negatively impact on his business. Another important aspect that must be taken into consideration by Mr Budgburys is the aspect of acceptance. In this case, acceptance shows consent which is an essential part in the formation of a valid contract. Once the offer