Contractual Relationships I
The activities for this subject will introduce you to the concepts associated with contractual relationships. Contracts are the lifeblood of any commercial organization. Good contracts save time and money, while bad contracts can lead to lawsuits, economic losses, and wasted time. These contractual concepts are essential to understand in order to protect an organization and maintain its commercial activity. Contractual relationships cover a wide range of types of business agreements. You will study the basic concepts of offer, acceptance, and consideration, along with the types of contracts and the possible remedies available should a breach of contract occur. Understanding how contracts are governed and just when a legal agreement is formed are essential to properly managing a company and protecting it from false claims. Contractual Relationships
The graduate can determine whether a contractual relationship exists and meets legal requirements. Contractual Relationships: The Basics
Dealing with contractual relationships is an integral part of a manager's responsibilities. Knowing what actions might obligate your organization is crucial to protecting the company and to maintaining legal benefits from business agreements. These concepts of contract law are found every day in the operation of businesses large and small. Once these concepts are understood, managers are able to make good decisions regarding business relationships. When you have completed this topic, you will be able to:
define the elements of a legal agreement,
recognize what constitutes a legal offer, acceptance, and consideration, •
identify when a contractual relationship has been entered into, •
describe the conditions that constitute a discharge of contract obligations, •
identify what constitutes performance under a given contract, and •
specify what constitutes a breach of a contract.
Introduction to Contracts:
In Marina del Rey, California, Cassandra sits on the sunny deck of her waterside condo-minium, sipping a mocha latte while watching spinnakers fill with the warm Pacific wind. She has just received an offer of $ 1.7 million to buy her condominium. Cassandra has decided to counteroffer for $ 1.9 million. She is in high spirits because she assumes that at the very worst she has $ 1.7 million guaranteed, and that represents a huge profit to her. Cassandra plans to buy a cheaper house in North Carolina and invest her profits so that she can retire early. She opens the newspaper, notices a headline Hard Body Threatens Suit, and turns the page, thinking that a corporate law-suit in Ohio is of no concern to her. She is mistaken and may learn some hard lessons about contract law. A year earlier, Jerusalem Steel had signed a contract with Hard Body, a manufac-turer of truck and bus bodies. Jerusalem was to deliver 20,000 tons of steel to Hard Bodys plant in Joy, Ohio. Hard Body relied on the contract, hiring 300 additional workers even before the steel was delivered, so that the plant would be geared up and ready to produce buses when the metal arrived. To help deal with the new workers, Hard Body offered a mid- level personnel job to Nicole. Hard Body told Nicole, Dont worry, we expect your job to last forever. Nicole, in turn, relied on that statement to quit her old job in Minneapolis, move to Joy, and sign an agreement with Jasper to purchase his house for $ 450,000. Based on that sales contract, Jasper phoned his offer to Cassandras real estate agent for $ 1.7 million. See Exhibit 10.1. But in the year since Jerusalem signed its contract, the price of the specified steel has gone up 60 percent. Jerusalem now refuses to deliver the steel unless the price is renegotiated. Hard Body has insisted on the original contract price. Hard Body cannot afford to buy steel at the current price, which would make its deal to produce buses unprofitable. If Hard Body receives no steel, does it have a valid lawsuit against...
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