Legal Aspects of business RM ACCOUNTS ED Legal Aspects of business

Legal aspects of business CXC – CSEC Principles of Business CONTRACTS Legal aspects of business CXC – CSEC Principles of Business

A CONTRACT IS A legally enforceable (a), binding (b) agreement between two or more parties whereby something is done, or promised to be(c) done, given or promised to be given.

AN INVITATION TO TREAT IS A statement or action to persuade someone (else) to make an offer for something that you have.

AGREEMENT OFFER ACCEPTANCE A CONTRACT

A CONTRACT IS VALID ... only if all the following characteristics are present: *OFFER * ACCEPTANCE *CONSIDERATION *CAPACITY *LEGALITY *POSSIBILITY *GOOD FAITH

It can carry as many conditions as is necessary AN OFFER IS A proposal made by one party to another party. It can carry as many conditions as is necessary It must be communicated to the intended party It must be certain (no “mays” or “mights”) It can be expressed It can be implied

It must be unconditional It must specifically expressed ACCEPTANCE One’s willingness to agree to the conditions of an offer. It must be unconditional It must specifically expressed It must be certain

CONSIDERATION The price for which one party secures the legal obligation on the part of the other party. It must be valuable (good) – benefits must accrue to one and detriment to the other. It must be present - motive for benefit receivable cannot be based on a past action. It must be real - Something definable and transferrable It must be lawful Something not considered illegal in action or form It can be executed (done immediately) or executory (done in future)

CAPACITY The ability to bind oneself in a legal agreement. The following are not considered capable of binding themselves: Minors Inebriates Incarcerated Senile Addicts (under influence)

Other clauses The act must be acceptable within the law Legality The act must be acceptable within the law Possibility The act must be one that can be performed. Genuineness The consent must be by one’s ‘own free will’. Good Faith The consent must be without duress, fraud, mistake or misinterpretation.

SIMPLE CONTRACTS SPECIALITY CONTRACTS CONTRACT OF RECORD TYPES OF CONTRACTS SIMPLE CONTRACTS SPECIALITY CONTRACTS CONTRACT OF RECORD

It can be by word of mouth It can be written It can be implied A SIMPLE CONTRACT IS A simple legal agreement between two or more parties. It has no special form It can be by word of mouth It can be written It can be implied e.g. bus ticket, a hair cut, bill of exchange

It has a special form and/or format It must be signed A SPECIALITY CONTRACT IS An agreement made under seal or by deed. It has a special form and/or format It must be signed It must be sealed It must be delivered e.g. lease of land, hire purchase, bill of sale

It is non-voluntary but obligatory A CONTRACT OF RECORD A judicial order imposed on a given party by the court. It is non-voluntary but obligatory It must be handed down by the Law Court It must be written Its imposition is a penalty of refrain or fine e.g. bond of peace, restraining order, child support

DISCHARGE OF CONTRACTS Legal aspects of business

Discharge of contract…. occurs when one party (the promisor) ceases to be bound by its obligations (the promise) to the other party (the promisee). it is sometimes referred to as the termination of the contract.

Contracts are discharged by … Performance Each party fulfilled all aspects of their obligations as agreed. Breach One party fails to fulfill its obligations as promised Renunciation One party, by its actions, refuses to perform its obligation or part thereof Agreement The parties mutually waive their rights before the act was performed. Lapse of time The period (deadline) within which the act was to be performed has passed Bankruptcy The party, with the financial obligation, has no funds to complete their part Death The obligating party dies (its estate is however expected to continue, except where that obligation was a personal service).

Contracts can be frustrated… If a change in the laws (of the country) make the obligating act illegal [this is also referred to as IMPOSSIBILITY]. If a severe illness prevents the obligating party from performing the act. If a prerequisite action has not be taken, thus preventing the obligating party from performing the act. If a necessary item/object that would validate the agreement has been totally or partially destroyed.

…. Businesses enter into many contracts during a year: Agreements for short term credit (with suppliers) Selling goods on credit (to its customers) Use of cheques to pay debts Hire purchase agreements Fulfillment of purchase orders Buying plane tickets Sale/purchase of land Sale/purchase of assets Taking the taxi …etc.