Unit 48-LO1 Examine the essential elements of a valid contract-BTEC-HND-Level 4 & 5
Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business
A valid contract is a legal agreement between 2 or more people. The law says if someone breaks the contract the other person has to pay money.
A contract can be either bilateral or unilateral. If one party breaks the contract, the other side does not need to complete it. For example, if one person refuses to perform any part of a bilateral contract but gives up something equivalent without breaking the whole agreement-for example, by giving up their right to performance-the another person still has to carry out their end of the bargain.
However, as long as they don’t withhold things like food and shelter in a place where it is not possible to get them (i.e., in jail), the other person’s obligation will be discharged too.
Contracts and Agreements:
Definition of a contract
A contract is a legal document that tells you what you and the other person have to do. A lot of people think contracts are only for business, but they are important for protecting your rights and solving problems. You should never feel unsafe about making an agreement with someone else or with an organization because a contract will protect you.
The defining aspects of the law of contract e.g. relationships, obligations, a measure of damage, and remoteness of damages
A contract is an agreement that two people have. It has to be voluntary. There are some types of contracts, like where one person agrees to do something. That type of contract will not work if there is no consideration and agreement between the two parties involved in the contract. Other types of contracts might be when a person does not live up to their obligations under a contract.
Furthermore, these requirements may vary depending on the type of contract being made. Some examples include commission agreements, joint ventures, leases, and projects agreements. When you are doing a private contract, there can be different rules than if you are doing an international contract.
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Contractual relationships e.g. third party contracts
Third-party contracts are agreements between two or more people, where one of the parties is not a direct contractor with another.
A third-party contract is when there is a partnership agreement. It sets out the terms for how each person’s profit will be affected. All the partners must agree on it and it should be fair to everyone involved.
The elements of a valid contract:
The offer: revocation of the offer, counteroffer, the lapse of the offer, meeting of minds
If you want to accept the offer, but the company doesn’t want to legally extend it, then both parties should come to a meeting of minds.
If you agree, then you should sign an official agreement and if not, then any verbal agreement might lead to problems. This could happen if the agreement comes before the due date or when terms have not been met yet.
Acceptance: acceptance, subject to contract, the intention that the agreement should be legally binding
Acceptance is when someone agrees to do something. This includes agreeing to a contract that will have certain obligations in it. The person who accepts the contract can also agree with the agreement orally or in writing.
Acceptance of a contract means you accept the terms that are in the contract. You also agree that you can’t make any changes to it going forward if something has happened since you signed the contract.
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Consideration: Meaning and requirement in English law, types of consideration, past consideration, a promise to perform an existing obligation and public duty, and consideration in deeds
The consideration of a contract in English law might be considered as follows: the requirement that an agreement is supported by some value to both parties for it to be enforceable. This dates back to common law and was reiterated as recently as 2009. There are three types of consideration, namely past consideration, a promise to perform an existing obligation, and public duty.
Past consideration is when one party gives something to another person and the other accepts this with full knowledge of what has been done. It can happen if they offer a benefit because of an existing obligation or public duty. If it’s not already fulfilled, a promise to do so would also be present consideration.
Capacity and legality:
The general rule, corporate capacity to contract, ultra-vires rule, void, voidable and illegal contracts
An ultra-vires contract is a contract that goes beyond the lawful boundaries set by the company’s charter, which includes contracts with creditors.
A void contract is a contract that is unlawful or has been improperly concluded.
A Voidable Contract can be voided at will by an individual, court, or other appropriate entity.
An illegal contract does not have any enforceability as the law does not offer any protection for it within its legal jurisdiction.
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