Contract Law for Business Units and New Parties


A contract is an agreement between two or more parties where one agrees to carry out a certain activity for consideration. There are different forms of contracts that can be done either orally, written, or both. It all depends on the kinds of agreements that have been entered into. The law, however, requires that the parties entering into such contracts to seek legal address to protect the parties from the consequences of non-performance. The laws on contract law differ from country to country. There are, however, general rules relating to the law of contracts that can be used by any part that is found in a position of contracting (Mulcahy & Tillotson, 2008).

The contract law has different sections that are meant to govern different sections of society. In this context, we are going to look at the different aspects that govern the contract law in relation to business units and how the same will be applicable to the parties that enter into the contract. Before a certain party enters into the contract, they need to ensure that the contract can be performed and that it will not have negative impacts on any party. It is necessary that the parties understand the legal Implications of the contracts that they are entering into.

The Essential Elements of a valid and legally binding contract and its role in a business context

Explain the different types of businesses agreement and the importance of the key elements required for the formation of a valid contract

For a contract to be considered legally binding, it should fulfil the following elements; offer, acceptance, consideration, capacity, and an intention to create legal relations. An offer is an agreed promise that the parties will be bound on in carrying out the contract. Acceptance refers to the action that is taken by the person consenting to the contract to show that the deal is appropriate. Consideration is an amount that the parties agree to compensate the person entering into the contract. According to Elliot (2007), “Capacity is a term that refers to the capability of the contracting parties to enter into a contract.” Finally, an intention to create a legal relation refers to the requirement by the law to ensure that the contracts that are being entered into can be defended by the court.

There are basically four types of business agreements that are commonly used. In a unilateral agreement, more parties will enter into hw agreement, but it is only one individual that is endowed with the responsibility of performing the task. The second type of business agreement commonly used is the bilateral agreement. In this kind of agreement, both parties that are entering into the agreement have t5he responsibility of performing the task. The third type of agreement is a specialty agreement. Specialty agreements are formal contracts that are accomplished through a deed. The other form of business agreement is a simple agreement.

This one does not involve a lot of formalities and is done verbally. Lastly, there are the standard agreements; this is usually in the form of invoices and business forms that are required when carrying out business activities. All this contracts are usually binding, but they have to fulfill all the requirements of a business contract.

Apply the rules of offer and acceptance in a given scenario considering the impact of new technology

Types of business contracts and the key requirements for their formation

There are a number of business contracts that are applicable to different establishments. An independent contractor is usually done by two independent individuals. Even though the party consenting to the contract performs the responsibility of his contractor, he is not bound by many rules (Elliott & Quinn, 2007). He is free to perform the contract at his will and not be subject to unnecessary conditions.

The basic requirements for the formation of such contracts are two independent parties that are willing and ready to enter into the contract as long as they understand the terms. Employment contracts refer to the terms and conditions that the employer sets for the employee to follow. In such a contract, there may be some terms that are basically between the employer and employees, which have to be fulfilled before consideration is given. Confidentiality contracts are agreements that involve the secrets of the company, like software that contains details of the company. The company may enter into such contracts with their employees or people with such expertise. The contract remains legal even after the relationship between the parties has been terminated.

A non-compete agreement is entered into between an employer and his employees or independent contractors to prevent them from engaging in business activities with their competitors. These contractors remain binding for a certain agreed number of years after their employment has been terminated. A sales contract is usually an agreement that is entered into by two companies where one has purchased goods from the other. The contract may be made either in written or oral. A written contract may only be needed if the cost of the transaction is about five hundred dollars.

For a business contract to be valid, there are certain conditions that need to be fulfilled. The court will not be liable for any inconveniences caused to the parties to the contract if they fail to realize and understand the basic rules that govern them. The court will always assume that when the parties enter into a contract, they already understand why they are doing so. The ability of a party to enter into a certain business contract is dependant on how much knowledge they have about such a kind of undertaking. They need to know the legal aspect of the agreement and seek any necessary clarifications.

For instance, if a business premise enters into an agreement with a distributor of certain goods, then the distributor needs to understand the terms and conditions that are applicable to him. This includes the valid period of the contract, terms of payment and quantity or frequency of distribution. Such terms should be done in writing just to ensure that they are properly understood. The contracts basically need to be formed by parties that literate when it comes to business knowledge.

Assess the importance of the rules of intention and consideration of the parties to the agreement

For a contract to be declared legally valid, the parties entering into the contract must have the ability to do that. The nature of the offer should also have the ability of being performed. The parties must also agree to the consideration that comes with the contract which should be for their benefit. As reported by Koffman and Macdonald (2007), “Some of the rules of consideration appear to be capable of producing unfair results, whilst others are perhaps out of touch with commercial practice” (p. 124).

As the sector of business requires certain rules to be followed, the rules of consideration and intention of two parties are really important to the agreement. If two parties of the agreement have different rules of intention and consideration, they should stipulate this while drawing the contract.

The contractor should ensure that the person performing the contract has consented to perform it within an agreed period of time and according to the terms specified. Parties to the agreement should not simply enter into the contract before ascertaining that they have such intentions. People may at time enter into contracts because of opportunity. However, it is necessary to take into account that one party can enforce another party to fulfil the obligation under the contract which is not signed in writing. This happens due to the fact that the contract may be oral and any factor, in this respect, can be considered as a signature. Consequently, any element that can be treated as an agreement or promise to do or give something can be referred to as a legal signature under the contract.

In this respect, the rules of intention comprise the awareness of both (all) parties under consideration of the possibility of being empowered to fulfil the obligations under the contract. Besides, the oral agreement can be legally binding as well; this requires certain conditions to be fulfilled. For instance, one party can give a promise of doing or giving something to the other party of the agreement in order to ‘obtain a benefit or obviate a disbenefit’ (Mulcahy & Tillotson, 2008, p. 92).

Moreover, the most important issue concerns the consideration of different minor details and obligations of the parties under the contract. So, the bargain or exchange should be fulfilled under the agreement (oral or written) which can be considered a legal contract regarding the fairness, contingencies, and ‘relevant principles to apply to the case’ (Mulcahy & Tillotson, 2008, p. 80).

Explain the importance of the contracting parties having the appropriate legal capacity to enter into a binding agreement

The importance of parties entering into legally binding agreements is because of protecting the respective parties who are part and parcel of the contract or agreement. An opportunity arising without thinking further about it, they enter into the agreement of which they may later on realize that the deal is not beneficial to them might hamper the interests of the parties involved in the contract (Plimpton, 2007).

It is also necessary for them to ensure that they are in capacity to enter into a contract. This will ensure that they are granted legal address in case one of the parties fails the deal. In dealing with cases that relate to contracts, the court will first have to ascertain that the parties to the contract are legally eligible to enter into such a contract. In case it is found that such parties are not eligible, the court may not be able to defend them no matter how much inconveniences and losses they have incurred.

A contract may either be express or implied. This therefore means that parties may be actually bound by a certain agreement by simply behaving in a way that will signify to the court that they are parties to it. In an implied contract, there are certain terms and conditions that are applicable to it. Such terms may either be expressed verbally or orally. There may not be any written agreements prior to performance but by one party fulfilling the obligation they are indebted to, they are entering into an implied contract. An express contract basically means that there are generally applicable conditions to certain performance which don’t need to be reminded.

It becomes obvious that an individual that comes to seek certain services will automatically need to pay for them. Such conditions are not negotiable and the parties only need to do the necessary. For example, when a person goes to the mall and picks a certain product with a price tag, he or she has implied that they are ready to pay the tagged price for the product.

Explore the significance of the specific terms in a business contract

Analyse specific contract terms with reference to their importance and impact if these terms are broken

A business contract is an agreement made between business parties to either agree on the supply of certain commodities for a considerable length of time. The terms are based on the laws that are contained in business law. It is slightly different from other types of contracts and involves the application of business laws. The parties that are entering into such a contract are expected to have knowledge about such business laws.

Considering the complexity of business units and the inconveniences that may be caused to a party in case a party absconds performing the contract, it is necessary for legal procedures to be followed to ensure that the contract is performed. Business contracts are based on certain terms that need to be followed by the parties before they consider entering into the contract. It is usually up to the parties to know and understand such terms so that they can seek for legal intervention in case one party fails them.

It is usually require that a party have clear information about the contractor or the individual offering the contract before being assigned with the contract. For instance, before a business unit agrees that a certain person should supply them with certain commodities, they need to find out and know that the individual knows where to get the commodities and that the supply will not be hindered or tampered with by any inconveniences.

The parties also need to make the contract when they are sober and ensure that they are mentally healthy to understand the terms of the contract. It is recommended that the terms be written on paper to serve as a reminder and also act as evidence in case one party claims to have had not understood the terms. The contracting parties should be mature enough to understand the implications of the agreements that they are entering into. The terms should be clear and specific to ensure that they are free from misinterpretation.

Once it has been determined that that the terms are enforceable and that both parties have agreed to the agreement, they seal and await the result that follows its performance. In case a party fails to perform according to the terms agreed, they will have to face the law and required to pay a fine or compensate the aggrieved party. The court will ascertain the party that is aggrieved and the terms through which the contract was entered into. The party that has been aggrieved may be allowed to declare the contract void and be compensated for the damages that they have been caused. The court will however treat the case according to its nature and the terms that were agreed on by the parties. The aggrieved party will also have to provide evidence that will clearly reveal to the court that the contract was not performed according to the terms that were agreed upon.

Apply and analyse the law on standard form contract

Standard form contracts are agreements that do not allow for negotiations. The contractor will place the terms on the table where by the party interested will agree to them or leave it. The party to perform the contract is not given a chance to negotiate with the contractor concerning the terms that are given to him. Even though such contracts are legal and can be addressed by the court in case one party fails the other, they may prove to be ambiguous and thus complicated.

Most of such contracts are therefore based on trust and involve a lot of risks (Koffman & Macdonald, 2007). The party that is entering into such a contract should do so with adequate information about the contractor and ascertain the ability of him or her being able to grant him proper consideration. The advantage of such a contract is that it is simple in natures and the parties are relieved on the costs that are required to go through the contracts. Most of such contracts involve company agents that have been sent to sell the products of the company. They are required to operate in the terms that they have been given and do not hence have the ability of adjusting the terms for their customers.

Standard form contracts have terms that may be written on paper. Some of these terms are lengthy and very few people go through them. Most of the people actually enter into the contracts without knowing the exact terms of the contract. The problem may however arise when the unexpected happens and the party seeks legal address. The company may remind the customer about the agreements that he signed to when he or she probably accepted the product.

The court will always assume that the customer agreed to the terms when they signed into the contract. Some of these contracts usually involve fast moving consumer goods and thus making them impossible to be enforced in a court of law. The need may however arise if complaints of similar nature are presented before they court. The court may at times move in to protect the well being of consumers by taking action against a company that supplied them with default goods.

Describe the effects of exemption clause in attempting to exclude contractual liability

An exemption clause is a term that is mostly used in contracts that limits an individual’s ability to enter into a contract. The law has set measures that are meant to limit on the use of the exclusion clause considering the effects that it usually have on innocent parties. The clause has been considered to be a means used by business units to exploit their consumers. They are made to sign contracts that they are not sure of and thus denying them the opportunity to seek legal intervention in case they realize that they had some defaults.

It is as if the consumers are made to enter into the contracts at their own risk. The exemption clause will imply that in case they find a problem with the way the contract was performed; they should not blame the company for it as they are deemed to have understood the terms. There are mainly three types of exclusion clause namely true exclusion clause, limitation clause and time limitation.

Most of the contracts that have the exemption clause limit one party of the contract from seeking legal address of the court. The party may be given a certain limit of time to report to the contractor in case they find defaults with the commodity or services provide. The time allocated may be so short that it is almost useless to the affected party. There may also be a set amount that can be granted compensation in case of loss not considering the loss that may have been incurred.

The exemption clause requires the party accepting the offer should take extra caution as there will be no compensation in case of loss. The person that is entering into the contract is expected to have clear information about the contract and the conditions that apply to such a contract. A party that has no understanding of such terms may be frustrated in case their expectations are not met.

Examine the role of the law of tort in business activities assessing particular forms of tortuous liability

Describe the nature of general tortuous liability comparing and contrasting to contractual liability

The law of tort is an essential body in the legal system that ensures that the party that has been injured or sufferer loss due to the performance of a certain contract receives compensation. The law is important in assisting victims that have suffered such even if the other party to the contract was legally justified in the contract. The law will use other legal formalities to ascertain the amount of harm that has been caused to the victim and demanding that they be compensated (Elliott and Quinn, 2007).

The law of tort can be applied in different areas of the society and the victim granted protection as long as they prove to the court that the act was done by a certain person and the loss caused can be seen. In business, the law is important in protecting parties that enter into the contract by ensuring that necessary care is taken. The court recognizes that the people that are entering into the contract deserve fair treatment and will thus not allow any party to the contract to take advantage of the others.

The nature of the tortuous liability in comparison to other contracts is that it is not based on the terms that were previously entered into by the contracting parties. In ascertaining the losses, the court may mainly refer to the terms for further clarification. It hence looks at the risks that the party to the contract was exposed to in performing it and recognizes that it was not his fault. The court will have to ascertain that the loss or injury occurred to the person during his or her efforts to perform the contract.

This may have not been part of the terms, but the court will consider that, had the party not performed the contract, then they wouldn’t be found in such inconveniences. In business, employers have the responsibility of ensuring that their employees are safe. The law on tort allows employees to seek compensation from their employers in case they incurred some injuries or losses as they worked for the employer. Once it has been proved by the court that the loss actually occurred during their duties, then the employer will have to grant them the necessary compensation.

Explain the liability applicable to the occupier of premises

The law on tort does not guarantee protection for any kind of injury caused. There are some losses or injuries made to an individual because they were a nuisance to somebody else. The injury or loss may have occurred in the efforts of the individual to protect his or her property from invasion. This is generally termed as strict liability. In such instances, no compensation will be given even when it is proved that major harm was caused.

An occupier of a business may be someone that has been appointed to take charge of the business or business premise on behalf of the owner for a certain period of time according to the terms agreed. The occupier once agreed to the terms of the contract shall be responsible for anything that happens to the business. The owner however remains with full authority over the business and is hence the one that the court recognizes as the owner of the business. The person occupying such a business is basically accountable to the owner and will therefore have no authority to take legal action against his clients or boss unless the contract is breached.

The owner may however take legal action against him in case he or she does not work according to the terms that they agreed upon. The owner may have entrusted him with various responsibilities that pertain to the premise which he will have approved to have agreed on by accepting the responsibility. In case the responsibilities are not performed as required; they will have to face the law.

Discuss the nature of employer’s liability with reference to vicarious liability and health and safety implications

It is natural that the working conditions vary from one sector of industry and science to other. Meanwhile, it is necessary consider certain principles of work under the law acts established to observe for employers and employees as a part of the health and safety implications. As suggested by Elliott and Quinn (2007), “Where vicarious performance is permitted, liability for performance nevertheless remains with the original contracting party” (p. 278).

In this respect, even if an employee acts on behalf of his/her colleague, the liability is with the one who was supposed to perform the task. However, an original contracting party is the company that hires employees and signs a contract with them to fulfil certain tasks. Regarding this, employees are responsible only for the part of work they were hired for and signed the contract respectively. Nevertheless, there are some other contingencies that should be viewed.

Problems with health and different injuries can prevent one of the contracting parties to fulfil its obligations. Certainly, this is not due to companies (as being a legal person). However, when an employee is not able to fulfil the task due to the problems with health and has a sick-leave certificate to testify that, his/her task can be fulfilled by another employee and this person (the one who performs the task) is considered liable for the work and the terms of its fulfilment.

This is due to ‘such statutes as the Health and Safety at Work Act 1974 and the Occupiers’ Liability Act 1957’ (Mulcahy & Tillotson, 2008, p. 173). In other words, these statutes defend the rights of employees and guarantee job protection.

Distinguish between tortuous liability and general tortuous liability

According to Plimpton (2007), “Strict liability is in the category of civil liability which is similar to negligence and the difference between tortuous liability and strict liability is that one can be held liable for any form of harm which can result from certain events without any fault, just because the activity falls within the line of strict liability.” Most nations have employed strict liability in various form, and events that qualify are categorised in two various forms.

There is a distinction between tortuous liability and general tortuous liability. The distinction is usually made on the capacity of an individual that is liable to compensate the other for the losses incurred. Tortuous liability is the obligation that the court requires the person that has caused injury to undertake in compensating the harmed person. The general tortuous liability refers to the obligation that both the injurer and the injured have towards the injuries caused to the party. The court may either require that the injurer pays for all the damages that have been caused or share them in a certain proportion with the injured person. All this will basically depend on the nature of the injury and how it occurred.

Explain and understand the application of the elements of the tort of negligence

The tort of negligence requires individuals to take necessary responsibility of care to ensure that their neighbours are safe. The tort of negligence is mostly applicable to household goods and products where by a company is required to ensure that the products sold to the consumers are safe. Mulcahy and Tillotson (2008) assert that, “the tort of negligence is mainly governed by four elements namely; duty of care, breach of the duty of care, the breach being proximate or a remote cause in law and the breach causing harm to the individual.”

This basically means that the court will take such breach into consideration after the above elements have been identified. In the duty of care, it is required that the company or business person takes the necessary precautions to ensure what they are producing or manufacturing is safe to the consumers. This basically means that correct standards should be measured in the manufacture of food and medicines. It is their responsibility to ensure that the right chemicals have been used and in correct measures.

Breach of that duty means, the company or individual has neglected the responsibility of ensuring that the commodities are safe for consumer use. They do it knowingly or rather don’t test their products to ensure that the correct standards. A company that may have taken the responsibility of ensuring that the products are safe can not be sued for negligence if it is found that the products were harmed due to poor storage or transportation (Plimpton, 2007).

When it comes to food products or medicines, companies are required to put the components of the product on the package so that the consumers make informed decisions when purchasing them. A consumer that is harmed by the contents of a product may not sue the company for negligence if they had taken the necessary procedures to highlight such contents on the package.

Even though the court recognizes that there are illiterate people that may not be able to understand the implication of such contents, by buying the product the consumer implies that they have a clear understanding of the same. The breach should also be on the nature in which it can be enforced at the court of law. In administering justice in a court of law, there are certain legal procedures that have to be followed. If the breach can not be ascertained legally then the aggrieved party may not be assisted by the court. The breach should also cause harm to the victim for it to be granted legal protection.

A consumer who seeks for a fault in the product and sues the company without necessary being harmed will not be compensated. The court will assume that if a certain chemical composition in a food product is not harmless, then it cannot be sued for negligence. Negligence will only be complete if the victim proves to the court that the product caused them harm. The court takes such elements into consideration to prevent consumers from exploiting companies by placing unnecessary claims on them with the hope of being compensated. These are selfish reasons that can not be entertained by the court.

Analyse the practical applications of particular elements of the tort of negligence

One practical example of the tort of negligence is a company that is involved in the manufacture of juices for sale. There are different kinds of mixtures that are used to either preserve the juice or to give it some extra flavour. A company may use a certain kind of preservative for the juice not knowing that the juice contains some chemicals that may react with the preservative and cause harm to the consumers.

After the same has been distributed to the consumers, some of them may experience stomach aches after consuming them. After carrying out medical test that will identify that the ache was due to the poison in the juice, the affected consumer can sue the company for negligence. In this case, the company will be blamed for not taking the responsibility of testing the reaction ability of the various components in the juice. The consumers relied on the expertise of the company and bought the juice with the assurance that the company has taken adequate measures to ensure that the products are safe for consumption. The company will therefore have to compensate the affected consumers for negligence as the breach satisfies the above mentioned elements.

In dealing with cases that involve breach of contract, the law ensures that both the parties to the contract take appropriate measures to stay safe. The laws are made in a fair way that will ensure that justice has been administered to both parties. The court will follow all the legal requirements in handling the cases and ensure that the judgment is fare to the parties. Such measures are usually taken to ensure that some errors are not repeated by other individuals.

Laws that relate to contract are numerous and can be confusing to individuals that may not no the specific sections that may apply to them in case of breach (Mulcahy & Tillotson 2008). Most people have not been able to seek the intervention of the court simply because they did not understand the laws on contract. Laws on contract differ from state to state and an individual will only seek address after understanding the nature of the contract and the kind of laws that will be applicable to him or her.

Reference list

Elliott, C., & Quinn, F., 2007. Contract Law. 6th ed. London: Pearson Longman.

Koffman, L., & Macdonald, L., 2007. The Law of contract. 6th ed. London: Oxford University Press.

Mulcahy L., & Tillotson, J., 2008. Contract law in perspective. 4th ed. London: Routledge.

Plimpton, L., 2007. Business contracts: Turn Any Business Contract to Your Advantage. USA: Entrepreneur Press.

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"Contract Law for Business Units and New Parties." LawBirdie, 27 Mar. 2023,


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LawBirdie. 2023. "Contract Law for Business Units and New Parties." March 27, 2023.

1. LawBirdie. "Contract Law for Business Units and New Parties." March 27, 2023.


LawBirdie. "Contract Law for Business Units and New Parties." March 27, 2023.