Unit 21 - Aspects of Contract and Business Law
P1 identify the legal criteria for offer and acceptance in a valid contract
P2 explain the law in relation to the formation of a contract in a given situation
P3 describe the law with respect to misrepresentation in a given situation
M1 analyse t...
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Unit 21 - Aspects of Contract and Business Law
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PLANT FACT SHEET
Abdulalah Al-Jobore
Understand the requirements
Types of contracts
needed to form of a valid contract
and the meaning and effect of terms Contracts nowadays are part of our day-to day life, as we are entire and involved with a
contract without even knowing we did, for example, you can found them in every day
in a standard contract transactions such as buying some vegetables or a hot chocolate to more complex
transactions such as buying a new car or signing a contract for mobile SIM. In business
world, there is a range of contractual agreements that could vast from small contracts with
a few pounds to placing order for multi-million pounds contracts. Therefore, contracts can
have many different forms and types, however the main types of contracts include:
Verbal – A verbal contract is when two or more than two individuals agree to do
something through the spoken words and therefore they will form a legal
agreement known as a verbal agreement bounding on their words. This is
frequently done between friends, family or businesses individuals who know each
Contracts other well enough to consent to be bound lawfully on a verbally expressed word
or a handshake. For example, when someone offer a service to someone verbally
When planning to run a business, it is essential that any owner will need such as cutting a tree’s leaves in exchange for having something such as money,
premises, staff, plant or machinery in order to produce and sell goods or once the offer being accepted by the other party via spoken words or handshake,
service to its target market, the users or the buyer of the product/services the then the verbal contract is now a legal contract. Although the verbal contract can
business provides. Therefore, within the business dealings including buying be difficult to prove the terms of the contracts in the event of a breach, this type of
and selling, there will be a business contract. The contract law will help the contract is legally binding.
business in order to ensure that everything is secure in terms of premises, staff,
buy equipment as well as making sure that the business trading legally. Written – Written contracts are more common contracts in the business worlds,
The main elements needed for a standard contract are an offer with acceptance, as it is more common for the different parties involved to be bound legally by the
as well as with consideration and capacity. terms and conditions of a written contract. In the contract, the details of the
contract will be written in a form of hard copy document (printed version on
Definition of a contract
A contract is a written or spoken agreement or set of promises, which is a paper) which will be signed by each party and ensure that both are having similar
compulsory law, made between two or more than individuals or companies to understanding other the agreement.
do certain things. In business, the contract is not only mere promise; it is a
valuable thing that need to make sure that there is an intention from both
parties to create a legal binding agreement between them. The parties should
plan to give something of significant worth as consideration to add value of the
agreement of promises. The first steps to form an enforceable contract is the
offer and acceptance from both parties. An example of a valid contract is a
Mobile Phone 1 contract.
, PLANT FACT SHEET
Abdulalah Al-Jobore
Standard form contracts
Legally, the impacts of the verbal and written contracts are quite the same and This type of contracts is very common contracts in the business world; it usually set by
all the parties involved must agree to be bound by the contract. However, there one person (or the company itself) with their own standards terms, which is often contain
are numerous advantages of having the contract in writing, as a hard copy, and terms that amount to custom- made offers and it should be agreed by both parties and
these advantages can be extremely useful in compare to a verbal contract and followed by an acceptance by the other party that fit the individuals business needs. It is
these include: important to be aware of the fact that when the party makes an offer, the other party must
A contract that is a well-written with clear and good standards of accept it on their own standard form contract, which mean that the other party has no say
English will helps to avoid at least the conflict between the parties in the matter. This type of contracts are common in many types of companies especially
as well as the customer complaints. If both of the parties are clear the well-known companies such as gym memberships, mobile phone companies etc. In
as to their respective rights and obligations, then it will definitely this case, the party, which will accept the offer, will not be related to the business, as it
help to minimise the litigation that could be made by one of the will not be the one who wrote the contracts with its own standard terms. This type of
parties, which therefore it can be incredibly expensive and time contract have many advantages and disadvantages, some of the advantages are as follow:
consuming. Cost reduction for both parties.
It will be easier for both parties to understand the subject matter of No need for individual negotiation.
the contract when it written in a document. It should avoid any It is easier for regular parties such as producers and suppliers who makes
disputes/conflicts between parties if the specifications of the contracts most frequently, to become more familiar with their own rights and
product/service is described in very accurate and detailed , and obligations when making a contract.
when the service provided are set out in full.
In some case, where the party is a individuals and who is not acting in the course of
Written contracts will include the specify delivery times as well as
business, the company who offer the contract must make sure that the terms are written in
the deadlines for the performance of service if needed. a plain intelligible language in order for all the parties involved can understand the
The remedies of faulty goods or inadequate performance of the contract. However, this can be considered as a disadvantage for larger business.
service must clearly be stated on the written contract. Moreover, there are many disadvantages of using standard form contracts, which include:
It will be easier for the different parties involves to put down the These contract may appears as unfair contract with only one-sided, especially
payment terms and transaction methods and details in a hard copy. when on the one of the party is a private individuals that is not acting as a
In the written contract, alternative methods of the settlement of business and the other party (the party who offer the contract) might has a
certain dispute can be provided, such as the as system of ‘’ stronger position and with the final benefit.
alternative disputes resolution (ADR)’’ to solve the dispute There are some specifics laws and regulations that control and regulating standard
without going through the courts. form contracts, and ensure that all the terms have been through a reasonableness
test. Similarly, when one of the parties is a private individual, then company must
ensure that the terms are ‘fair and reasonable’, otherwise, the contract will be
invalid and unenforceable by the company.
Most business may come to depend excessively on its standard terms, and not
attempt to negotiate with its clients and therefore will end up losing good
customers.
The standard terms must be formed as prat of the business arrangements,
therefore the other party must be aware of these terms before the contract is made,
to make sure that other party can accept or reject these terms.
2
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