business law
Khalifa627
2.PPT
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Summer 2020
Semester 2 UG 090 : OMANI BUSINESS LAW Lecture 2 : Basics of Contract Law
B.Sc. Accounting, Auditing and Finance and
Bachelor Business Administration
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Introduction
Learning Objectives
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LO 2 Apply general principles of contract, tort and agency law
Define the nature and meaning of a contract.
Apply essential elements of valid contract.
Assess the significance of contracts and contract law in business.
Determine, the nature, meaning and different types of torts.
Explain the Basics of agency.
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What is a contract?
A contract is an agreement which legally binds the parties
A contract is an agreement between 2 or more parties which is enforceable at law
Contract law = foundation of all commercial activities
Wide range of contracts:
e.g. consumer contracts , construction contracts, sale and purchase contracts
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offer &
acceptance
free
consent
Lawful Consideration
capacity
of
parties
Lawful object
Intent to create legal relstionship
REQUIREMENTS OF CONTRACT
Six basic requirements or essential elements to make a valid contract.
There must be an agreement between two parties
There must be an intention to create legal relationship between the parties
Lawful consideration
Free Consent
Capacity
Lawful object
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Agreement
Agreement
=
Offer
+
Acceptance
Agreement
There must be at least two parties in order to create a valid contract, one making the offer and the other accepting it
offer and acceptance must be valid.
The law has had down specific rules for making the offer and its acceptance, that is, it must be absolute and unconditional.
All contracts are agreements, but all agreements are not a contract. Only agreements which are enforceable at law becomes a contract.
When offeror makes a definite proposal to the offeree and then accepted by offeree and there is meeting of minds of the parties and an agreement comes into being.
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Consideration
Consideration is needed for a valid contract.
Price to be paid for the promise
May consists of money, goods, promise, suffering some detriment (e.g. forbearance to sue)
The consideration may be present or future, however it must be real.
it is value paid for a promise.
Law will not look into the adequacy of consideration.
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Genuine Consent/ Free consent
Free consent of person is required for a valid contract.
Without genuine consent the contract is invalid.
The following elements makes the contract invalid.
Misrepresentation
Duress
Undue influence
Fraud
Mistake
CAPACITY OF PARTIES
The parties to an agreement must be competent to contract. If either of the parties does not have the capacity to contract, the contract is not valid.
the following persons are incompetent to contract.
(a) Minors,
(b) Persons of unsound mind, and
(c) persons disqualified by law to which they are subject.
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MINOR
Who is a minor – a minor is a person who has not attained the age of 18 years.
Contracts with a minor are void
This rule has been established to protect younger individuals who may not fully grasp the consequences of certain contracts.
Minors are believed to lack the capacity to contract. Therefore, courts and statutes provide minors with the ability to exit the contract at the minor’s discretion
MINOR
There are certain exceptions
contracts for certain goods and services are not voidable.
Necessaries include items and services that are necessary to the minor’s health and safety, such as food, lodging, shelter and clothing. In some instances, automobiles are considered necessaries.
The minor’s and his or her parent's economic status can be considered in determining whether an item is considered a necessary.
Unsoundness may be categorized as:
Idiots – has completely lost his mental powers
Lunatic – the person losses the capacity due to the illness of brain or mental bodily distress.
Drunkards
Lunatics & drunkards can enter in to contract when they are capable of understanding the contract
Persons disqualified from contracting
Alien enemy
Insolvents- all property in hand of Official assignee.
He can enter into contract when court passes an order of discharge
Convicts – persons who are sentenced to imprisonment cannot enter into contract during that period.
Intention to create legal relations
There must be an intention among the parties that the agreement should attached by legal consequences and create legal obligations between the parties.
If no such intention is present on the part of parties, there is no contract between the parties.
Agreements of social or domestic nature do not form any legal relations between the parties so they cannot term as contracts.
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Legality
General principle: Freedom of contract – everyone is free to enter into any contract except
Those against public morality
Those against national security
Those against public interests
An agreement which is made for any act which is prohibited by law is not valid.
That is the object of an agreement must be lawful.
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Life of a contract
Contract remains
in
Existence till
It is discharged
There is breach
The End/ Questions
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