Business Law 33-1

Topics: Contract law, Contract Pages: 2 (495 words) Published: June 22, 2013
Assignment 33-1

Issue: Will the court enforce Mouza or Fahad’s contract based on their different interpretations?

Rule 1: The agent must have acted on behalf of an identified principal who subsequently ratifies the action. Application 1: Here, Farah, who is a sales representative for Mouza’s cleaning company, acted on her behalf when making the contract with Fahad. Mouza had given Farah authority to solicit offers from customers, and also to offer up to 5% discounts. Therefore, this would act as a sign of ratification from Mouza whenever Farah engages in contracts with customers.

Rule 2: The principal must know all of the material facts involved in the transaction. If a principal ratifies a contract without knowing all of the facts, the principal can rescind (cancel) the contract. Application 2: Mouza did not know all of the material facts; since, she did not know that Farah gave Fahad a 10% discount when she was only allowed up to 5%. Moreover, Mouza did not know that Farah had allowed Fahad to pay in three installments, when Mouza expected payment to be made 30 days of delivery. Therefore, Mouza would be considered as principal who did not know all of the material facts in the contract.

Rule 3: The principal must affirm the agent’s act in its entirety. Application 3: In this case, Mouza, the principal, is considered to have ratified her agent’s act since she has given authority to her to make contracts. Moreover, Fahad’s call to Mouza might have been an act of ratification when she assured him that Farah was indeed given authority to make contracts and offer discounts, even though the amount of discount was not disclosed.

Rule 4: The principal must have the legal capacity to authorize the transaction at the time the agent engages in the act and at the time the principal ratifies. The third party must also have the legal capacity to engage in the transaction. Application 4: Mouza, acting as the principal, does have the legal capacity to...
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