WhatConstitutes a Contract?
Acontract is a legal agreement that is formed by two or more partiesand is enforceable in the court of law(Clarkson, Miller, & Cross, 2015).It can be oral, written or both or from the implied actions of theparties. For contracts to be legally enforceable, they must have thefollowing elements:
First,every contract must have an offer. One party must show an intentionto get into a contract with another. Secondly, the other party mustacknowledge and accept the offer this might be oral, written orimplied action of the party to whom the offer was made (Clarkson,Miller, & Cross, 2015).Thirdly, the parties must have had the intention to create legalrelations (Clarkson,Miller, & Cross, 2015).If this is not the case, the contract cannot be enforced.Subsequently, the parties contracting should have the capacity toenter into a contractual relationship (Clarkson,Miller, & Cross, 2015).
Also,any enforceable contract should have a consideration, the price for apromise of something (Clarkson,Miller, & Cross, 2015).The subject matter of the contract should be legal for a contract tobe enforceable the law does not permit unlawful contract to beformed. Drug dealing contract is illegal thus unenforceable. Also,there should be mutuality of obligations this commits the parties tothe contract equally without favoring a particular party, thuspromoting equality and fairness (Clarkson,Miller, & Cross, 2015).Finally, some contracts to be legally binding have to be writtenunless otherwise provided by the law (Clarkson,Miller, & Cross, 2015).
Jimand Laura visited Stan’s business with intentions to purchase acar. They tested various vehicles and settled for a blue sedan car.Furthermore, they paid a deposit of $100 to Stan to hold the sedanfor a day for them. It is clear that the actions of Jim and Lauraamount to an offer and the willingness of Stan to keep the car for aday coupled with taking the deposit, amounts to acceptance.
Thenext elements fulfilled are legality and intentions to create a legalrelationship. Jim and Laura are the buyers, while Stan is the seller.These parties are ready to be bound by legal consequences of such acontract. Also, the object matter (the car) is legal.
Also,I assume that Jim, Laura and Stan were all sane and could understandthe terms and conditions of the business deal when they wereconversing at Stan’s shop. I also assume that Laura, Jim, and Stanwere not minors or unduly influenced to agree to the terms.
Whenyou look at the issue of consideration, it is cared for the casetells us that a deposit of $100 was paid, and Laura and Jim wereready to part with $400 every month until they ultimately paid forthe car. The price that Laura and Jim prepared themselves to paybecomes the consideration for the car.
Also,the issue of mutuality of obligation was fulfilled, though partly.Stan upheld his part to keep the vehicle for a day expecting Lauraand Jim to purchase it. On the other hand, Laura and Jim paid thedeposit committing their intentions to buy the car.
Theissue which would have invalidated the contract is the lack ofdocumentation, but there are exceptions according to UniformCommercial Code (U.C.C) Article 2-201(Beatty, Samuelson, & Abril, 2015).
Thereare various contracts which must be written according to the Statuteof Frauds those of surety, beyond a year, consideration of marriage,the sale of goods at $500 or above and sale of interest in land.According to U.C.C Article 2-201, the contract would not have beenenforced as it was not written (Beatty,Samuelson, & Abril, 2015).
Theclause requires that the sale of goods’ contract above $500 to benoted. From the study case, we know that Laura and Jim were preparedto pay a monthly installment of $400 making buying price of the carabove the required $500.
Butthere is an exception to this clause, if there was a part performanceof either party. The contract is enforceable to the point where theexisting contractual agreement had been performed, beyond that it isunenforceable(Beatty, Samuelson, & Abril, 2015).
Inthe court of Law, Stan can defend his actions by claiming that heheld onto the deposit because Jim and Laura promised to buy the carand committed him to keep it for a day. If that was not the case,perhaps he could have sold it to other customers, but he didn’t,because he intended to honor a promise he made to Laura and Jim.
Acontract was formed, as I have proved that all elements of the validcontract were fulfilled. The only issue which would have invalidatedthe contract is the writing part, but U.C.C has an exception whichworked in favor of Stan. The case would have worked out differentlyif Jim and Laura informed Stan of their intention, not to purchasethe car, on their way home from his business when they made up theirminds not to go ahead with the deal.
Beatty, J. F.,Samuelson, S. S., & Abril, P. S. (2015).Introductionto Business Law(5th ed.). Boston, MA: Cengage Learning.
Clarkson, K. W.,Miller, R. L., & Cross, F. B. (2015).Businesslaw: Text and cases(13th ed.). Stanford, CT: Cengage.