Role Of Contract in Business

Introduction to Contract

Contract is the legal or contractual relationship which is formed between individual and party (Contract meaning, 2015). The contract binds people into lawful agreement which needs to be followed by respective parties. This report is based on different type of case scenarios. Here, in order to answer each question the facts given in case scenarios are used. This report will give detailed description regarding essential elements which firm must abide while entering into contractual relationship. Furthermore, the study will also showcase principle of liability that will be applied during the condition like negligence.

TASK 1

Essential elements for the formation of valid contract

In order to form valid contract number of essential elements are identified which needs to be fulfilled by parties. The detailed explanation of same is depicted  below:

Offer and acceptance: The contract can be considered as valid if one party will give offer to other individual to enter into specific type of legal relationship. In this respect, certain conditions are identified in which offer made by one party will lapse. One of such type of condition is withdrawal of offer before it is accepted by the party (Essential elements of contract, 2015). In addition to this, the contract will also be considered as valid when offer made by party is accepted by other individual in the same condition. The offer is of two type such as unilateral and bilateral. If the firm or individual party will give offer to the general public then it is being called by the name of unilateral offer. However, in the bilateral offer firm is obliged with regard to give performance as per the terms and conditions of the contract (Harvey v Facey [1893] AC 552). Here Facey has given offer for selling the pen to Harvey. Howver, the offer will become the counter offer when party depict some condition while getting the offer from another party.

Intention to create legal relationship: The contract formed will be considered  as void if parties do not showcase  their intention to form  legal relationship (Jones v Padavatton [1969] 1 WLR 328).  
Consideration: It is also necessary for the valid contract. Consideration is valuable item which one party promises to give to other party in return of doing something. As per Thomas v Thomas) (1842) 2 QB 85 the consideration decided contract must have some value in the eyes of law.

Capacity: The contract formed by minor will be regarded as void. Thus, in order to form valid contract parties must be major or ages above 18 years (Individual who ages above 18 years).  
Privity of contract: It is the common law of doctrine which states that third party is not entitled to take any action if parties who have entered into contract fails to fulfil specific condition of agreement (English, Cohen and Balcom, 2012). For instance A promises to B to give certain amount which will be later on given by B to C. In this condition, contract is formed between A and B. Thus, if A fails to deliver the promised amount to B at that time C does not possess any right to sue A in return of not delivering money. Thus, it can be considered as an effective situation for the privity of contract.

Case explanation

In the given case, James has given advertisement in e-commerce website for the purpose to sell high definition camera at £ 55. The act which is being carried out by James can be considered as invitation to offer (Hillman, 2012). This is because, here James is giving open offer to parties who want to purchase high definition camera from the firm. However, after seeing the advertisement Maria has given counter offer to James in which she is depicting that she will purchase the camera from James if he will sell it for £ 45. From the given case scenario, it can be concluded that there is no legal relationship formed between parties. This is because; the presence of counter offer in the given case cancels the validation of the first offer. Thus, it can be said that James and Maria do not contractually abide with each other.

Types of contract

There are different types of contract identified which are formed by parties for the purpose to enter into legal relationship. These given contracts are used by both individuals and business. The detailed explanation of the same is depicted below:

Face to face contract: It is the type of contract in which all the conditions in agreement is decided by parties through verbal communication. In this type of contract, the probability of party to get denied from the terms and conditions of contract is high.  This type of condition occurs in given form of contract because of  unavailability of valid or written  proof regarding terms and conditions (Johnson, 2013). Generally, it has been seen that the given type of contract is formed between parties who are  closer or related to each other. This is because; the face to face to contract is thoroughly based on trust. For example, A who is the good friend of B has decided to use its car for certain period of time. This can be considered as good example of face to face agreement.

Distance selling: In the given type of contract, legal relationship is being established by parties by using varied means of communication such as email and telephone etc. In this contract, the physical presence of parties is not necessary while formulating the contract. Furthermore, in the distance contract party who is giving offer to other individual will specify  certain time in which the particular party has to accept the offer. For example, online shopping can be considered  as best example of distance selling contract. It is due to the fact that in the given type of activity, both baying and selling party the type will not physically meet at the specific place.

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Written contract: It is widely used form of contract in which all the terms and conditions of contract are specified by parties in the particular document. It is the effective form of contract as this type of contract can be presented by parties in the form of evidence in the condition when one party fully denied from the terms and conditions of contract (Fontana v. Upp 128 Cal. App. 2d 205).  Here, in written contract physical presence of party is necessary (McKendrick, 2014). For example, the parties who are involved in sale of goods and trade related activities forms given type of contract. Overall, it can be said that these are being regarded as three major types of contracts which establish legal or contractual relationship between parties.
Verbal contract: It is the type of contract in which terms and conditions of contract are decided by the parties verbally. In the given form of contract, parties do not possess any evidence of their legal relationship. The type of contract is used within many independent contracting agreements.

Deeds: It is being consider as the action which needs to be performed by parties intentionally. Thus, the deeds confirms some act of parties with the help of which interest and right of properties will be passed by the parties. Here, for the parties it is very essential with regard to sign, seal and deliver the deeds to the respective party.

Inferred contract: It is the another type of contract which is agreed by non verbal conduct rather than through explicit words.

Online contract: It is similar to written contract. But, the given contract is formed by using the electronic means. Thus, in the given contract parties do not make use of some papers.

Business to business contract: The given type of contract is being made between two parties who runs their business. It is the written type of contract in which both parties make the decision about terms and conditions by gathering at one specific place.

Business to consumer contract: The given contract is made between the business and the customers. This contract is formed with an aim to save buyers from exploitation.

Different terms of contract that can be included in a valid contract

Terms are being regarded as conditions which creates legal obligations between parties (What is terms, 2015). The terms and conditions which parties specify while formulating contract are of several types. In-depth explanation of the same is depic

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