January 15, 2015
In law, contracts tend to be the most studied area for business majors. It is essential part of business that business owners, managers and entrepreneurs deal with on a day-to-day basis. According to Melvin (2011), a contract is a promise or set of promises enforceable by law. So a promise made between parties that can yield consequences is nothing to play with. The potentially harmful results of these consequences is a reason enough to ask how do contracts work and how are they made. Contracts come in many forms and have to be categorized to understand their function. Some contracts have legally binding obligations while other do not. In the paper I am going to discuss three topics. First, I will analyze the elements necessary to form a valid contract between two parties. Second I will provide to primary legal defenses a party may have against forming a contract. And last, I am going to evaluate remedies for a breach of contract that a party may have against a breaching party.
Elements of a Valid Contract
The elements of a valid contract consist of four elements. The first element of a valid contract is “offer and acceptance”, these two in combination create what is called mutual assent (Melvin, 2011). These two alone do not create a valid contract. They must contain three other element to form a valid contract, these three elements are consideration, capacity, and legality. Part one of making a valid contract is the offer. An offer is a promise or commitment to do (or refrain from doing) a specified activity (Melvin, 2011). In order for an offer to have legal effect, the party making the offer must have an objective intent. Meaning that the offering party must be willing to accept the terms of their offer within reasonable means. Part two of the first element is acceptance. Melvin (2011) stated, “Acceptance is an offeree’s expression of agreement to the terms of the offer” (pg. 33).
References: Melvin, S.P. (2011). The Legal Environment of Business: A Managerial Approach: Theory to Practice. New York, New York: McGraw-Hill Irwin. David, B. (2014). Legal Defenses to Contract Formation & Enforcement. Retrieved from http://yourbusiness.azcentral.com/legal-defenses-contract-formation-enforcement-7273.html