Business Law Essay Example

  • Category:
    Law
  • Document type:
    Essay
  • Level:
    Undergraduate
  • Page:
    3
  • Words:
    2178

8BUSINESS LAW

Business Law

Question 1

Prior to advising Bruce whether a contractual agreement exists or not, it is necessary to analyse the situation to ascertain the existence of an enforceable contract between the two parties. The first step entails proving that the parties had reached an agreement as a prerequisite for determining whether there exists a contract; see Gulf Corporation Ltd v. Gulf Harbour Investments Ltd. A recap on the offer and acceptance conditions for a contractual agreement reveals that an agreement exists if one of the parties places an offer to either do or not do something and the offer receives an unconditional acceptance by the other party (MacMillan & Stone, 2012). The latter party should also communicate the acceptance to the party that places the offer. An analysis of the case reveals the existence of an agreement since both Alice and Bruce executed a formal contract in the acquisition and subsequent granting of the exclusive right to broadcast the 2012 Olympics. The fact that there exists a signed formal contract meets the criterion of an offer and acceptance that implies that the parties had already reached an agreement.

For a contract to be valid, understanding the meaning of the individual terms of the agreement is also necessary. As a result, the contract is invalid in the event that either one or both parties are unable to understand the legal effect or meaning of the terms of its agreement (Gisler et al., 2000). Bruce will also have contractual rights against Alice if it turns out that the former did not have any intentions to contract. As a result, it is proper to determine whether both parties intended the contract to be legally binding or not. The fact that Alice had consented to paying the sum earlier on and later changes her mind does not imply that the agreement is legally binding. There is a likelihood that the court will rule that Alice did not consider the contract to be legally binding. Since Alice’s change of mind turns out to be the bone of contention in the case, it is proper to investigate the effectiveness of the provision of good faith in the case.

Understanding the provision requires a review of the individual clauses of the agreement. Clause 1 indicates that Alice agreed to acquire the exclusive right of exploiting the licence to televise the 2012 Olympics from Bruce. On the other hand, Bruce also agreed to grant such right to Alice. Alice then agreed to televise the Olympics events and provide facilities that would be adequate for enabling overseas telecasts. Clause 3 indicates that Alice agreed to pay a sum of $3 million upon signing the formal contract. The contract of selling broadcasting rights to televise an event such as the Olympics also contains specific provisions that necessitate settling by both parties prior to referring to it as an enforceable contract. Having reached an agreement on the price is a critical step made by both parties towards making the contract enforceable. Clause 3 reveals an agreed expectation. However, Clause 4 is the origin of the issue between both parties. Even though Alice agrees to pay the stated sum in Clause 3, Clause 4 states that the amount payable is at Bruce’s discretion without any limits to the discretion.

This is a case where Alice agrees to pay a sum whose amount is unknown and in Bruce’s hand to set. Clauses 1 to 3 indicate a consideration of the contract by Alice which is a mandatory necessity for a legally-binding contract (MacMillan & Stone, 2012). However, Alice’s consideration of the contract in Clause 4 is deceptive since she does not know the exact amount to be paid to Bruce since the amount is at the discretion of Bruce. This necessitates focusing on determining the existence of the intention to contract from both parties as in CWT v. Abdul Hussain. The terms of the agreement also do not reveal a precise structure or formula of determining the amount that Alice should pay to Bruce. The absence of a clear structure of determining the amount that Alice should pay is equivalent to Alice not promising to pay anything since this can also be a probable statement from Bruce. This was responsible for Alice’s decision to fail to execute the contract after failing to agree to pay the sum stated by Bruce; see James Cook Hotel Ltd v. Canx Corporate Services Ltd. Clause 4 reveals that the parties did not intend the contract to be legally binding since it provides evidence of undefined terms of the contract. As a result, both parties do not have a clear understanding of the terms in the clause.

It is also proper to argue that the decision of Alice to grant the discretion to Bruce implies that Alice did not have an intention to enter into the contract with Bruce. The possible lack of intention from Alice to make the contract legally binding in Clause 4 contravenes one of the requirements of a formal contract (Gulati, 2011). According to the Heads of Agreement, terms similar to those shown in Clause 4 may either indicate the intention of one or both parties to either contract immediately or opt out of the contract. It is also apparent that the terms contained in the Clauses do not have any effect before the actual execution of the document. Clause 5 introduces the factors of overseas telecasters and approved sponsors in the amount that Bruce considers sufficient for Alice to pay. This tightens the nut further for Bruce. Even though Bruce can argue that Clause 5 represents an agreement to agree, it is necessary to consider the obligation of cooperation and good faith in the case (Dixon, 2005). It is evident that Bruce can only maintain the stand that the contract is enforceable if there is substantial evidence of advanced negotiations as well as proper mechanisms for resolving conflicts that may arise in the contract. Since Bruce cannot avail both requirements, upholding the bargain is inappropriate.

Question 2

In the case of Maud and Bruce, Maud presents the offer of transferring one third of the property to Bruce in the event that Bruce repairs the property. This is a case of an offer and a counter offer. It is proper to state that an agreement existed between the two parties since Bruce accepted Maud’s offer by placing a counter offer that was also accepted by Maud. As mentioned before, Maud’s offer is to transfer one third of the property under the ownership of Bruce. Bruce’s counter offer on the other hand is to repair the property. The fact that Maud refused to transfer the said proportion of the property to Bruce’s ownership following the completion of the repair exercise indicates that Maud violated a legally binding agreement as in Macfarlane v. Johnston. The mere fact that Maud accepted Bruce’s counter-offer indicates the existence of a valid agreement between both parties. The agreement is valid even though it does not exist in writing. It was the responsibility of both parties to act in accordance with the terms of the agreement to execute the contract.

The case provides an evidence of a conditional contract since Maud and Bruce subjected the offer and counter offer to certain conditions. By so doing, it is imperative that both conditions should be met before the execution of the contract’s terms. Maud agreed to transfer one third property to Bruce if Bruce repaired the property. This indicates that both Bruce and Maud accepted the offer and counteroffer respectively as in Carlill v. Carbolic Smoke Ball Company. Since Bruce met his condition, the contract is legally binding. As a result, Maud should forge ahead and execute her terms of the contract that entail transferring one-third of the property’s ownership to Bruce.

The circumstances surrounding the case also reveal the intention of both parties to make the contract legally binding. The case represents an agreement between relatives. For such agreements, it is likely that the court cannot rule that both parties had the intention of making the contract to be legally binding. The case is true with contracts between friends (Keyes & Burns, 2002). However, the objective of the court in the case will be to infer from the circumstances surrounding the case as to whether one or both parties intended the contract to be legally binding or not; see Merritt v. Merritt. To attain the objective, the court will endeavour to ascertain that Bruce had the objective of entering the contract as in Edmonds v. Lawson & Anor. From the circumstances, it is clear that Maud and Bruce were doing business as opposed to a case where Bruce would have opted to help Maud repair the property because of the existing mother-son relationship (OJEN, 2014).

The contract would not be enforceable under the law if Maud promised the return following the completion of the property repair exercise by Bruce. This is in accordance with the contract law that does not consider promises made without the consideration of an offer to be valid contracts. For the contract to be enforceable, one party should give a consideration in exchange for the promise of the other party to execute the contract. In contract law, the consideration refers to the price that the buyer or customer agrees to pay for a service or product. In the case, transferring one third of the property suffices to be the consideration that Maud agrees to pay for Bruce’s service of repairing the property. Keeping this in mind, it is proper to state that advice Bruce that the contract is enforceable. The objective of the court in this matter would be to ascertain whether the said consideration is valid or not. For a consideration to be valid it should be offered by the buyer or receiving party for the product or service following the promise made by the other party to offer the service or product as is the case in the contract between Maud and Bruce.

Bruce and Maud also had the legal capacity to enter contract at the time of reaching the agreement. The only scenario that can invalidate the contract is where Maud proves to the court that she was incapable of comprehending the contract’s nature at the time of making the offer. The court can also consider the contract to be invalid if Maud proves that Bruce understood her incapacitation to understand the terms of contract. However, this does not seem to be the case at the time of entering the contract by both parties. It is evident that Maud wanted to repair her property but did not have the necessary finances to hire the services of a repairer. Having known that Bruce, a tradesman was a competent renovator, she placed the offer having a clear conscience that she would transfer one third of the property to Bruce after the renovation exercise. This represents a case of a reasonable expectation that necessitates protection (Valente, 2010).

A consideration of the formal requirements of a contract also reveals that it is not imperative for contracts to be in written form. The implication is that oral contracts such as the contract between Maud and Bruce can also be formal contracts provided that they meet all other requirements of a formal contract. Since the contract did not entail the complete sale of the house, having a signed written notice was not mandatory. Maud reveals a case of negligent misrepresentation since she understood that she had a special relationship with Bruce even though both parties had a genuine consent towards the contract as in Simons & Anor v. Zartom Investments Pty Ltd. Finally, the fact that Bruce was party to the contract and the contract was not against the law implies that the court would find it necessary to enforce the contract following its presentation for hearing.

References

Carlill v. Carbolic Smoke Ball Company, 1983 Q.B.1 256 (1983).

CWT v. Abdul Hussain, 3 S.C.C. 562 (1988).

Dixon, W. M. (2005). An Examination of the Common Law Obligation of Good Faith in the Performance and Enforcement of Commercial Contracts in Australia.

Edmonds v. Lawson & Anor, 2000 All E.R. 31 (2000).

Gisler, M., Stanoevska-Slabeva, K., & Greunz, M. (2000, June). Legal Aspects of Electronic Contracts. In ISDO.

Gulati, B. (2011). Intention to Create Legal Relations: A Contractual Necessity or an Illusory Concept. Beijing L. Rev., 2, 127.

Gulf Corporation Ltd v. Gulf Harbour Investments Ltd, 2006 N.Z.L.R.1 21 (2006).

James Cook Hotel Ltd v. Canx Corporate Services Ltd, 1989 N.Z.L.R.3 213 (1989).

Keyes, M., & Burns, K. (2002). Contract and the Family: Whither Intention. Melb. UL Rev., 26, 577.

Macfarlane v. Johnston, 2 M. 1210 (1864).

MacMillan, C., & Stone, R. (2012). Elements of the law of contract. University of London.

Merritt v Merritt [1970] EWCA Civ 6 (27 April 1970).

Ontario Justice Education Network (OJEN). (2014). Contract Law. Retrieved from: http://ojen.ca/sites/ojen.ca/files/resources/In%20Brief_STUDENT_Contract%20Law_0.pdf

Simons & Anor v. Zartom Investments Pty Ltd (1975) 2 NSWLR 30.

Valente, D. (2010). Enforcing Promises: Consideration and Intention in the Law of Contract.