ASPECTS OF CONTRACT & NEGLIGIENCE FOR BUSINESS

Aspects of Contract and Negligence for Business

Task 1: Essential elements of a valid contract in a business context1

Importance of essential elements for the formation of a valid contract1

The impact of different types of contract2

Terms in contracts with reference to their meaning and effect4

Task 2: Application of elements of a contract to business situations5

Application of elements of contract to the given scenario5

Application of the law on terms and advice5

Evaluation of the effect of different terms in given contract6

Task 3: Principles of liability in negligence in business activities6

Liability in Tort Vs. Contractual Liability6

Nature of liability in negligence8

How a business can be vicariously liable8

Task 4: Apply the principles of liability in negligence to situations9

Application of elements of tort of negligence and defences to the situation9

Application of elements of vicarious liability to the situation10

References12

Aspects of Contract and Negligence for Business

Task 1: Essential elements of a valid contract in a business context

Importance of essential elements for the formation of a valid contract

A contract is a legal agreement between two parties. For a contract to be valid, it must meet all prerequisites of the law, should bind the involved parties, and should be implementable in a legal court. There are five essential elements that are required for the formation of a valid contract, mentioned as follows.

Legal Competency: This means that the contract must be legally recognizable, i.e. both the parties entering into the agreement must have reached legal age. This is done in order to protect minors from possible misuse or burden of responsibility by becoming bound. Being mentally incapable or under the influence of alcohol or drugs also renders the contract as legally incompetent.

Mutual Agreement: Also known as mutual consent, this means that both the parties entering the contract must be willing (and able). The consent must be clearly stated in order to avoid misconception and confusion. The terms of the contract must be clear, free of errors, and should not be misleading. Also, if a contract is to come into existence, an offer should be made by one party and there should be acceptance from the other party/parties (Barnet 1986, pp.269-321).

Legal Objective: There must be an objective, or a purpose of a contract in order for it to be valid. The intent can be referred to as the objective. However, illegal activities such as human trafficking, child pornography, murder-for-hire, or exchange of stolen goods nullifies the contract automatically, as these activities cannot gain legal authorization.

Consideration: This refers to the payoff of the contract for both the parties involved. It can be monetary (valuable consideration) or in the form of physical items (goods consideration).

Stated Contract: The contract should be written in clear terms, in order to be clearly understood by both the parties. This is also done in order to avoid any possible conflict of interest. If such a scenario occurs and one party refuses to fulfil his/her legal obligations arising from being bound in the contract, the other party can legally force them to do ...