Final Paper

Elements of a Contract

Elements of a Contract

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Elements of a contract that must exist for the agreement to be enforceable

According to Morawetz (1925), there are five basic elements of the contract that must exit in order for the agreement between Fabulous Hotel and me to be enforceable. These elements are:

i. The contract must have an intention to create legal relations

For the agreement to be enforceable, the contract should be legal. This means that either the Fabulous Hotel or I can sue each other if any of the parties does not fulfill the provisions. The presumption however can be rejected if we (the Hotel and I) state that we do not want the contract to be legally binding. The contents in signed documents are bound by subsequent contract and any of the parties can withdraw even before the conclusion of the contract. The burden of proof in case of any dispute therefore remains with the one who wishes to rely on the contents of the document. If the relevant document is not legally binding, then the signing is said to be done without prejudice.

ii. The contract must express an offer

The agreement should express readiness of unconditional acceptance of the contents by the parties. The Fabulous Hotel has specified the time limit for the acceptance of the offer. It is upon me to read and understand the contents before appending the signature. The hotel cannot take my silence as acceptance. The offer should also not be an invitation to treat such as advertisement.

iii. Acceptance

It cannot be said to exist any valid contract if the person to whom the offer is addressed has not accepted the offer. This can be either orally or in written form. Both the Fabulous and I should specify and agree to the method of acceptance. However if the specification are not done, either postal or receipt rules can be used. In the postal rule, the contract is valid at the time the letter of acceptance is posted. This is regardless of whether the letter reaches me or not. In case of receipt rule, the contract is valid at the time of faxing, whether I read it or not. This is the rule also used when using email messages. Partial acceptance is said to be counter-offer and it is not part of a valid contract. Any changes to original contract document means that the party doing the changes is actually drafting new contracts. More often many of these counter-offers are done before making the final acceptance.

iv. The benefit given to the other party or the consideration

This means that the benefit or detriment to the parties should be measured in economic terms. The most common consideration is money, goods and services. However the consideration should not be adequate. In this agreement a promise of a gift for the two years which I don’t seek employment in the same metropolitan area is not enforceable. This is because it does not have the mutual exchange of consideration. In some contracts the consideration is not given. This is a form called a deed.

v. The capacity

For the agreement to be enforceable, the parties involved should not be minors or lunatics. The minors, mentally disordered and intoxicated persons do not have the capacity to enter into contractual agreements. This agreement will therefore be enforceable if by the time I entered into it, I was of sound mind and sober.

Why this contract is governed by common law or the Uniform Commercial Code (UCC)

All contracts are governed by common law and Uniform Commercial Code (UCC). The common law governs contracts involving the services, insurance, real estates, employment and intangible assets. On the other hand UCC governs those transactions with tangible goods (Epstein, 2008).

The contract between the Fabulous hotel and I is not exceptional. It is therefore governed by the common law. Specifics on acceptance of an offer, modifications, promise to keep an offer open, time to sue and terms should be clear. In the contract, any changes to the offer should be termed as a counter offer which creates a new offer and a new creator of the agreement. The modification should also require consideration. The contract, just as it is in the common law should keep the deal open. The time to sue or the statute of limitations should be well specified. Other terms such as performance time, nature of work, price and identity of the offer should be part of the contract.

With these specifications, one party can be allowed to sue the other. They will prove whether a party has a legal capacity to sue the other in case of the breach of the contract. It will also help in establishing the responsibility of the sued party. This will prevent the third party to be dragged into the mud of unfulfilled promises and will only outline those who only entered into the contract in question. Privity will therefore be established.

Circumstances in which this non-compete agreement could be unenforceable

This is non-compete agreement because Fabulous Hotel and I have agreed not to work for a competitor for two years after the conclusion of the contract. According to Shepherd (2006), this agreement may not be enforceable in certain circumstances. In fact in some states like California the non-competes can be illegal unless the business is being sold.

The first circumstance in which this agreement could not be enforceable is if there is no form of payment or consideration for the agreement. If the contract was signed after starting the employment, and no payment or benefit offered to me for signing the same, then courts can invalidate the same agreement due to lack of consideration. However, the contract will be part of my overall employment if I signed it at the beginning of the employment. This would mean that there was some fair exchange for the agreement.

The second circumstance in which this law will be unenforceable is when I work in a state which has restrictions against enforcing the non-compete agreement, even though the state where headquarters of Fabulous Hotel are enforce the agreements. In this case the agreement may not be effective. It should be noted that about one-third of the states do not enforce the non-compete agreement due to the interference of employee basic ability to work and earning income. By limiting the geographical area where I can work, the hotel should show whether such restrictions are reasonable and if they really protect them from unfair competition. Some of the states that have restrictions against the non-compete agreement are Florida, Michigan, Oregon, California, Louisiana and Alabama. In Texas though, the agreements are enforceable but the employer needs to prove whether the agreements are necessary in preventing unfair completion from the new employer. In California, the employer also need to show whether protecting the trade secrets is proprietary and therefore should be kept secret.

It is due to this reason that some employers have been liable to employees for illegal termination for refusing to sign a non-compete agreement. They have been found liable for damages by enforcing such agreements. These two circumstances therefore could make this non-compete agreement to be unenforceable.

References

Epstein, A. (2008). Contract law fundamentals. Upper Saddle River, NJ: Pearson Education, Inc.

Morawetz, V. (1925). The elements of a contract. Place of publication not identified.

Shepherd, J. (2006). Making and breaking noncompete agreements. Boston, MA: Massachusetts Bar Institute.