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PACC6009 Business Law

Verbal Contracts and Written Contracts

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A contract can only be binding on the parties if it includes a valid offer and acceptance, free consent, a fair intention, lawful consideration and capacity to form legal relationship. A contract is a voluntary agreement in between people which is binding and is enforceable by law. A contract arises as per the mutual consensus in between the people.  For making a valid contract it is important to make an offer followed by an acceptance. A contract can only be formed if there is a valid offer followed by an acceptance by the other party.  A promisor has an obligation to fulfil the promise by meeting the term and conditions. In order to make a valid contract in between the parties, it is important to carry out the promise in a positive way.  The purpose behind a contract needs to be clear (McKendrick, 2014).  A contract form without a proper intention is not valid in law. These types of promises are revokable at any point of time. Any promise to perform a gratuitous activity comes under the scope of Domestic agreement.  Hence it is important to check the intention of the party behind the contract. In terms of a contract it is important for an individual to check the intention at the time of formation of a contract. This will help in creating a legal relationship enforceable by law.  This is important to create a valid contract that is enforceable by the court. It is hence important for the parties to the contract to check the intention in order to form a contract (Knapp, et al 2016).   One can only make a binding contract if the parties forming the contract have a capacity to be in a legal relationship. An incompetent party has no right to get into a contractual relationship. It is due to the fact that the individual can only form a contract through a free consent. An individual has to give a free consent at the time of the formation of the contract. In absence of this clause, the contract is said to be void. The contract includes a lawful consideration. A contract formed without a valid consideration is not enforceable by law. In order to form a binding contract, it is necessary to look after all the essential of a valid contract. These clauses will allow in formation of a contract binding all the parties to fulfil the clauses mentioned in the contract (Poole, 2016).

Formal Contracts for Enforceability

The verbal contract has the same validity as the written contract.  They are legally binding on the parties to the contract. They have the same enforceability and legal implication as the written contract. The only problem with the verbal contract is the problem in enforceability.  In case of breach of contract it is difficult to question it in court. There are few contracts that need not to be in writing which are known as implied contract. Implied contract need not to be in writing.  It depends upon the conduct of parties to the contract. It is carried out as per the conduct of the parties to the contract.  The written contract can easily be presented in the court. In case of a verbal contract any party to the contract can deny at any point of time.  It is generally accepted that the contract should be in writing in order to create enforceability. Contract that are not in writing are difficult to be enforced at future date.  A large section of the society enters into an oral contract which is based on the implicit conduct of the parties. The only problem faced under such a contract is regarding its clarity. These contracts are not clear in nature. Any related party can lie in future regarding the mentioned clause. This creates a difficulty for the court to enforce the contract in an effective way (Hunter, 2017).

• It provides both the parties to the contract with a clear vision regarding the clauses as mentioned  in the contract
• It reduces the chances of breach at future date. The parties to the contract cannot deny regarding the clause mentioned in the contract.
• One can avoid the expenses of lawsuit related to the breach of a contract (Poole, Devenney & Shaw-Mellors, 2017).
• It is enforceable by court and the party with a false intention will be afraid to deny the fact as mentioned in the contract.
• This creates awareness among both the parties to the contract.
• The right of each individual to the contract is well managed due to an availability of a written proof.
• There is no possibility to dismiss the facts mentioned in the contract.
• In case of breach, the facts can easily be proved with the written contract (Smits, 2017).

A formal contracts is made pursuant to certain legal formalities, such as in writing, registration, or notarisation; whereas, an informal contracts is made orally or in any other manner. A formal contract is a valid contract signed under a seal in between the parties. A formal contract needs to be:

• In writing
• Should be registered
• Notarized
• Approved

The enforceability of a contract depends upon the formalities as mentioned in a contract. This is important from the point of view of formation of a contract that it needs to be legally enforceable by court. A formal contract requires being enforceable by the court and including all the essential of a valid contract.  These contracts include a formal agreement in between the parties that has all the valid implication necessary. These contracts are carried on the daily basis and are of important nature in meeting the daily target. These contracts are legally enforceable and form an essential part of a contract. They are effective in nature and include all the valid essentials as mentioned in the contract.  A valid contract is a formal contract signed in between the parties and include- offer and acceptance, lawful consideration, intention, competencies and a free consent. These contracts are formed on daily basis and include- sales order, purchase order lease deed etc. It is evident from the given example that the formal contract is written in nature and are enforceable.

Social Agreements and their Enforceability

• An employment agreement made in between the employer and an employee includes all the mandatory points necessary to be followed. These contracts are formal in nature and imbibe all the essentials of a formal contract.
• A purchase order made in between the parties to the contract is a formal contract. It includes all the stipulated conditions necessary to be fulfilled. While forming a contract it is important to check the validity. The formal contract enables 100 percent validity of the document. These contracts are valid in nature (Klass, 2017).

Hence, it is clear that a contact need to be valid enough to be enforced in the court which is possible through the formal counteract. It includes all the necessary clauses important to enforce a legal document. A formal contract is valid in nature and includes all the effective measures necessary to be followed (Andrews, 2015).

The issue is related to the role of social agreement and its validity. The purpose is to check whether the contract made under social arrangement including money is enforceable or not.

A social agreement made between the parties is not enforceable by law. These contracts can easily be rebuttable by any of the party. The contractual arrangement arises after the involvement of serious elements. In order to make a valid contract it is important to incorporate valid essentials. Adequate consideration is important for performing a contract.

In the given situation there is a social arrangement in between the parties to donate a particular sum. As per the objectivity test: The purpose is to find the mutuality in between the parties. Trevey v Grubb (1982) 44 ALR 20 justifies the situation that an arrangement that involves a sum of money makes it obligatory for the party to share the sum as decided. In the given situation, the sum won in the lottery has to be shared in between the parties. This makes a valid contract enforceable by law on the objectivity basis (Clarke, 2014).

The social arrangement is enforced by the court. It is mandatory for the parties to the contract to follow the contractual implication as decided. In case of a social agreement it is compulsory for the parties to the contract to share the amount. This depends upon the seriousness of the contract and need to be followed as per the pre-decided norms.  In the given situation there is a contractual relationship in between the parties to share the sum won in a lottery. Hence it is evident as per the contractual arrangement to distribute the profit won in by the parties. The amount won need to be shared n between the parties and involve the existence of legal relationship.

A Principal and an agent share a legal relationship called as an agency. A principal appoint an agent who works on his behalf. He has to perform all the duties as designated by the principal. The law of agency is created in between the parties due to the existence of a contract. In this situation the agent has to perform all the duties as made compulsory by the principal.  The agent has to work under the authority given to him (Cross & Miller, 2008).  An agent is work as per the contract and is obligatory to perform duties till the designated time-period. This relationship is fiduciary in nature and requires utmost trust. The principal ask agent t perform duties that are necessary to be performed as made necessary. The agent acts in the behalf of the principal and has to fulfil all the major responsibilities. Any contractual based relationship where an individual permits another individual to perform an act on his behalf is called as an agency.  In addition to this, it is important for an agent to perform the duties (Collins, 2003).

The principal has a duty to perform the act as per the instructions mentioned in the contract. His agency is formed for the mentioned time in the contract. An agent has all the skills that are required for the performance of a contract. The purpose of such a contractual relationship is to attain skills and abilities of an individual. The role of an agent is to perform the duties with utmost trust (Emanuel, 2006). This typically follows the master and servant relationship where the master give instruction to the servant and it is obligatory at his part to follow all the obligations as mentioned in the contract.  The agent carries out the work in utmost faith and has a duty to perform the act in the utmost faith.  The principal-agent relationship is spoken obviously through a written contract or is implied through actions. This creates a fiduciary relationship between the parties involved. The agent acting on behalf of the principal is given tasks with the principal’s best interest as a main concern. Hence it is the duty of the agent to understand the work and to perform it according to the given instruction. This is important from the point of view of legal enforceability that makes an agency a legally binding relationship (Helewitz, 2006)

References

Andrews, N. (2015). Contract law. Cambridge University Press.

Clarke,M. (2014). International Carriage of Goods by Road: CMR. CRC Press

Collins,H. (2003). The Law of Contract. Cambridge University Press

Cross,F. & Miller,R. (2008). The Legal Environment of Business: Text and Cases — Ethical, Regulatory, Global, and E-Commerce Issues. Cengage Learning

Emanuel, S.(2006). Contracts. Aspen Publishers Online

Helewitz, J.(2006). Basic Contract Law for Paralegals. Aspen Publishers Online

Hunter, H. (2017). Modern Law of Contracts.

Klass, G. (2017). Interpretation and Construction in Contract Law.

Knapp, C. L., Crystal, N. M., & Prince, H. G. (2016). Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business.

McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).

Poole, J., 2016. Textbook on contract law. Oxford University Press.

Poole, J., Devenney, J., & Shaw-Mellors, A. (2017). Contract Law Concentrate: Law Revision and Study Guide. Oxford University Press.

Smits, J. M. (Ed.). (2017). Contract law: a comparative introduction. Edward Elgar Publishing.