Prince sultan university BUS 231 Table of Contents Abstract.
2 The Law of Contract 2 Introduction: 2 1. Offer and acceptance of a contract: 3 A. Offer: 3 B.
Acceptance: 4 2. Elements of a contract: 4 3. Rules of a contract: 6 4. Kinds of a contract: 9 5. The significance of a contract: 13 References. 14 Bibliography.
15 References. 15 Abstract Thisresearch covers the majority of the law of contract by explain every aspect ofthe subject and providing illustrations and brief examples. The methods thatwere used to extract the information were. First, the course book to get themain ideas and aspects of contract law.
Second, books that were researched andextracted from to reference the points. Finally, internet research for furtherexplanation and examples of the work. Furthermore, we as a group understood the requirements of the assignmentand research rules that were provided to us during the workshop conducted inclass. The main argument of this research is to show how the law of contract orthe contract itself is something that we cannot survive without in both thebusiness and legal environments. After all, this abstract is a descriptive abstractthat shows an overview of this research.
The Law of ContractIntroduction:Didyou know that traditionally, a contract was an enforceable legal document onlyif it was stamped with a seal? The historyof contract law dates back to Ancient civilizations before becoming thecontract that we know and use now. Although a contract seems like an agreementwritten on paper for individuals that are not aware of law. However, a contractis abstracted into offer and acceptance and has several elements, kinds andrules. Plus, a contract has a significant importance in legal science.
1. Offerand acceptance of a contract:Beforeexplain the offer and acceptance we have to keep in mind that every contract isan agreement but not every agreement is a contractA. Offer: We can define an offer as “Anindication of readiness to proceed in a contract with certain terms, it is made through the willingness that itshall become necessary as soon as it is accepted by the person to whom it isspoken”, As known as the “offeree”.
1 Anoffer is one of the basic elements of a contract which makes it valid. To entera contract the first thing that occurs is the offer, an offer can becommunicated by several forms such as letter, newspaper, website, Fax, Emailand behavior. Most importantly, an offer is not recognized until it iscommunicated by the offeree. In other words, the offeree must be able to reador hear the offer and know that the offer exists. In addition, there areadditional things to consider to determine the validity of the offer.
Such as,time limitation. To illustrate, some offers have an expiry date to be acceptedby the offeree before the expiration time ends. If not, therefore the offerwill not be valid for the parties. Hence, the offer can be revoked by theofferor at any time before the offeree’s acceptance. Finally.
An offer can beterminated in case of death, craziness or the termination of the thing that isoffered in the contract or a counter-offer. To illustrate, a counter offer is anew offer by the offeree as a result of undesirability of the previous offer bythe offeror. A case in point, Mr. Matt the offeror has a website selling sportcars in Riyadh, by putting the prices of the cars on the website he isbasically making an offer, If and only if to the customers see this add withthe price to satisfy the communication element. To emphasis, if there is a salegoing on in the website for a limited time it will only be for the limitedspecified by the Mr. Matt. So, if a customer comes after the sale date theywill not be able to have the deducted price even if the money was sent.
Becauseit contradicts the validity of the contract between them B. Acceptance:Acceptance can happen when an offeree agrees to all of the terms inthe contract by giving consideration. In other words, an offer is acceptedwhen all of the policies are met by giving back what is agreed on in thecontract (consideration) which is something of value like money or anythingthat seals the deal. Giving an example of acceptance, Faisal advertises his mobileaccessories business on Haraj.com, one of the products is an IPhone charger forthe price of SR 90.Then, Mohammad sees the advertisements and is interested inbuying the charger.
So, he communicates with Faisal by messaging him. Then, theacceptance of Mohamad occurs when he offers the SR 90 to Faisal which isconsidered as the consideration. 2. Elementsof a contract: Acontract is far more than an agreement among two people. There must be an offerand acceptance, intention to create a legally binding agreement, a price paid(not necessarily money can be an act or promise), a legal capability to enter acontract of your own free will, and appropriate understanding and consent ofwhat is involved. Any duress, false statements, undue influence or unconscionabledealings may perhaps make a contract illegal and void.21- Offer: the offeris considered as the core of the contract, An offer is an expression by oneindividual or group of people, or by agents on his behalf, made to another, ofhis willingness to be bound to a contract with that other on terms certain orcapable of being rendered certain.
3 An offer isn’t bound toone person it can be made also to a group of people or the whole world. Forexample, Abdullah (offeror) offers to sell Ahmed (offeree) a car, before anyagreement is reached on price Ahmed decides not to continue, at this stagethere is no legally binding contract between Abdullah and Ahmed because thereis no definite offer for Ahmed to accept until the essential terms of the offerhave been decided.2- Acceptance:Acceptance means the signification by the offeree of his willingness to enterinto a contract with the offeror on the terms offered to him by the offeror.Without an acceptance there can be no contract4 acceptance does not haveto be verbal it can be in a gesture such as a handshake.3- Consideration: Issomething of value or something bargained for in exchange for a promise, whichis both parties in the contract give up something for something5 it can be in the form ofmoney, interest, right or benefit. So long as consideration exists, the courtwill not question its adequacy, provided that it is of some value. For example,the promise to pay a candy rent in return for the lease of a house would begood consideration.
Of course, the consideration must not be illegal orimpossible to perform. 3. Rulesof a contract: Before getting to thetypes of contract each type should contain requirements or elements: 1- Agreement: which is one partyshould offer an agreement and the other one must accept.2- Consideration: it is a value promisedto convince a party to agree.
3- Contractual Capacity/ competent parties: Both parties must be competent toenter into the agreement.4- Legality: the purpose of thecontract must be legal and not agent public policy.5- Genuinenessof Assent (Arguably part of agreement): the apparent consent of the partiesmust be genuine.6- Form : the contract must beat a form such as: written, under seal …erc.
Then, there are two typesof contracts:1- UNILATERAL AND BILATERAL CONTRACTS 2- FORMAL AND INFORMAL CONTRACTSFirst one is unilateraland bilateral contract. It is promisor who makes the offer or promise toperform to whom this promise is made.It.This type can be dividedto small types so it can be more specific and avoiding the issues of gettingconfusedFirst, Unilateralcontract : it arises when an promise can be accepted only by offersperformance Second, Bilateralcontract: it arises when a promise is given in exchange for another in return.Third, Express contract:it is a contract that has been shown clearly even stated orally or written.Fourth, Implied-in- factcontract: it’s a contract the has been formed in whole or parts.
In order toestablish this type the plain tiff must have:1- Furnishedsome service to the defendant.2- Reasonablyexpected to paid from both sides (first one will pay for any service that theother side offers)3- Theopportunity to reject the services.The second type is theformal and informal contractWhich is a contract thatrequires a special method or format in order to be enforceable.Also, it can be dividedinto types:First Contract underseal: formalized writing with a special seal attached.Second, Recognizance: “An acknowledgment in court by a person that he or she willperform some specified obligation or pay a certain sum if he or she fails toperform (e.
g., personal recognizance bond).”Third, Negotiable instrument : it is a note, check orcertificate of deposit each of which requires certain formalities to bediscussed later.Fourth,Letter credit: “An agreement to pay that is contingent upon the receipt ofdocuments (e.g., invoices and bills of lading) evidencing receipt of and titleto goods shipped.
“Fifth,Informal contract: it is a contract that does not require a special format antit is the majority of contracts. In addition,these types of contract has the same rules that any party would like to do acontract has to follow . • Rulesof Interpretation: When a contract contains ambiguousor unclear terms, a court will resort to one or more of the following rules inorder to determine and give effect to the parties’ intent. 1- Insofar as possible, the contract’s terms will be given areasonable, lawful, and effective meaning.
2- The contract will be interpreted as a whole various and itsvarious provisions will be “harmonized” to yield consistent expression of intent. 3- Negotiated terms will be given greater consideration thanstandard-form, or “boiler-plate,” terms.4- A non-technical term will be given its ordinary, commonly-acceptedmeaning, and a technical term will be given its technical meaning, unless theparties clearly intended something else.5- Specific terms will prevail over general terms.6- Handwritten terms prevail over typewritten terms, which, inturn, prevail over printed terms.7- When the language used in a contract has more than onemeaning, any ambiguity is construed against the drafting party.8- An ambiguous contract should be interpreted in light ofpertinent usages of trade in the locale and/or industry, the course of priordealing between the parties, and the parties’ course of prior performance ofthe contract.9- Express terms are given preference over course of priorperformance, which is given preference over course of dealing, which is givenpreference over usage of trade.
10- Words aregiven preference over numbers or symbols. 4. Kindsof a contract:Accordingto (Gulshan & Kapoor, 2009),”when the person towhom the proposal is made signifies his assent thereto, the proposal is said tobe accepted.
A proposal when accepted, becomes a promise.” From the abovedefinition of promise, it is obvious that an agreement is an accepted proposal.The two elements of an agreement are: (i) offer or a proposal; and (ii) anacceptance of that offer or proposal”Typesof contractsContractscan be classified based on their enforceability, formation and performance. Inthe coming paragraphs, the types of contracts will be explained with theirsubcategories and the main differences. 1. Based on point of view of enforceabilityContractsmay be divided based on their cogency (Gulshan & Kapoor, 2009) as following: valid,voidable, void contracts or agreements, illegal, or unenforceable. To initiatea valid contract, it must has all the essential elements argued earlier.
If oneof the element is missing, the contract is voidable, void, illegal orunenforceable. (a) Valid contractsValidcontracts are the contracts that have all the required components and withoutthem the contract is not valid (Gulshan & Kapoor, 2009). The components are as follow: 1.Agreement. 2.Intention to create legal relationship. 3.Free and genuine consent.
4. Parties competent to contract. 5.
Lawful consideration. 6.Lawful object. 7.
Agreements not declared void or illegal. 8.Certainty of meaning.
9. Possibility of performance. 10.
Necessary Legal Formalities. (b) Voidable contractsVoidable contract is onewhich may be denied at the will of one of the parties, but until it is sodenied it remains valid and binding. Meaning the contract will be valid untilone party deny the validity or terms, otherwise the contract will be valid asthe first one. It is affected by a flaw. There are some examples for this kindof contract such as misrepresentation, fraud, coercion, undue influence (Gulshan & Kapoor, 2009). It shows that theconsent of the party who has the discretion to repudiate it was not free.(c) Void contracts or agreementsThis kind of contractshappened to be enforceable by law and totally depend on the law.
(d) Illegal agreementsIllegal agreements arethe agreements which occur between parties and they are based on criminal orimmoral nature. (e) Unenforceable Agreements (Certain contracts must be inwriting)Anunenforceable contract is neither void nor voidable contracts. This agreementcannot be presented in court since it missing evidences such as writing orStamping.
2. According to Mode of FormationThereare three main different types of contracts based on the mode of formation.There types are as follow (Gulshan & Kapoor, 2009):(a) Express contractExpress contract refer tothe contract occur when spoken or written agreement between parties. (b) Implied contractThiskind of contract is referred to the conditions of the conduct of the parties orfrom the situation of the case. (c) Quasi-contracts This contract is considered as “not acontract in certain level”.
Nointentional entering for agreement on the contract is there. A good example forthis kind is the following: delivery company deliver goods to AAA store bymistake and the store owner treat this good as his own. The AAA owner have topay for that good later. Keep in mind,the AAA owner from legal perspective, does not have to pay for the goods.
3.According to Performance (a) Executed Executed contract both parties have completedtheir corresponding duties. For example, if you agree with a painter to paintyour house and the painter completed his task and you paid his money. (b) ExecutoryExecutorycontract is the opposite of executed contract where both parties have notcompleted their assigned tasks. For example, if the painter has not painted thehouse and you have not yet paid the price, the contract is executory.(d) Uni-lateralAUnilateral Contract is expressed as one where at the time the contract isconcluded there is a commitment to do a part of one party only(e) Bi-lateralAsthe word stated, both parties are committed to do a particular job or refuse todo so at the time of contract.
5. Thesignificance of a contract:Contractsprovides a written document that shows the business associationwith the work so that no one can claim any misunderstandings, the contracts arelegally enforceable and their work is to protect each party and give each partyits right within the guidelines of the contract and they minimize risk .Contracts are one of the best ways to protect a business. Contracts aren’t jusimportant in business’s its also important in our daily life, for example :when traveling you make a contract with the airline, when the airline receivesthe payment they’ll provide you with a seat and its their part of the contractand by paying you accepted their rules and guidelines, breaking the rules andguidelines has consequences, For example: they give you a limit of 23KG’S foreach bag and you carry a bag that weighs 30KG’S in this case you’ll be finedfor a certain amount if you insisted to take the bag. One of the biggestsmistakes that people get caught in is not reading the contract especially abusiness contract, a contract should be looked at as a buying a house, when youbuy a house you know every detail in it and the same thing should go forcontracts, no one would buy a house which is semi destroyed or fully destroyed.In business contracts consists of an offer and acceptance, and consideration,these are important in a business contract because it’ll make them seriousabout their job because there will be penalties for not doing their job and theemployee wil become serious about their actions and goals.” Employment lawsthat stipulate broad conditions on the hiring and firing of employees, and thebenefits that employees qualify for aside from salaries, exist in mostcountries, but national regulations do not always provide either the employeror employee with a clear agreement. An employment contract between the businessand an employee sets out an employment offer, the responsibilities of the job,its salary and benefits, and a probation period during which the employee maybe dismissed.
A detailed contract protects both employee and employer fromspurious claims by the other party.” Contractsare important in business also because they provide security and peace of mindfor everyone in the business, For example: a written employment contract setsthe terms between the employer and the employee with regards to their responsibilities,payment and overall relationship, and the contract works as an official recordfor what the employer and the employee agreed on. A written contract isenforceable in court for a longer period than a verbal contract, writtencontracts are more efficient than the verbal contract because one party canchange their story in the court which make things a lot harder for the judgebut in written contracts the judges decision will be a lot easier because itsbased on the paper, but still this doesn’t mean that the verbal contract isn’tenforceable for example : you and a worker agree on 1000$ for repainting a roomif you paid and he didn’t paint it then you can go to the court but if hepainted it and you didn’t pay he can go to the court in both cases itsenforceable by law References Bibliography Treitel, G., The Law of Contract (10th ed), London, Sweet and Maxwell Limited, 2007, p. 8. Osama: Ref: 1.
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html4 http://www.businesslawbasics.com/chapter-18-contract-law Mohannad: References Gulshan, S. S.
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