0101the Law Of Contract
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  • 1. The law of contract
  • 2. Contract • An agreement which legally binds the parties • You contract with someone – When you buy a house – When you buy from a shop – When you start working in a company Page 50
  • 3. Different types of business agreement • Employment contracts • Buying and selling goods • Renting or buying a property • Franchise agreement • Export or import of goods • Use of software licensing agreement • Sub-contracting agreement, etc
  • 4. Elements of a contract • Agreement – The rules of offer and acceptance • Consideration – The obligations assumed by each party must be supported by consideration by the other party • Intention to create legal relations – Intention of their promises to be legally binding • If one of the three elements of contract is absent, there is no contract • Page 51
  • 5. Validity of a contract • Form – Written or oral • Genuine consent – No misled into a contract • Capacity – E.g. limited by age • Content – Must be complete and precise in its terms • Legality – Illegal contracts are not enforceable legally • Page 52
  • 6. Invalid contract- Page 53 • Invalid contracts may be – Void • A void contract is not a contract – Voidable • A party may void (i.e. to terminate his contract) – Unenforceable • It is valid contract • But, if either party refuse to perform the contract, the other party cannot compel him to do so
  • 7. Importance of key elements • A valid contract is one contain certain key elements. • A contract without key elements may become an invalid contract. • An invalid contract may be: – Void: The parties are not bound by it. – Voidable: A party may terminate at his option. – Unenforceable: It is a valid contract but if either party refuses to perform the contract, the other party cannot compel him to do so. • In case of a invalid contract, an organization may not recover, for example, property that was transferred to a third party. Both time and money may be lost dealing with an invalid contract. • It is therefore important that key elements are required for the formation of a valid contract.
  • 8. The life of a contract • A valid contract will remain in existence until discharged in one of the following ways – Performance – Breach of contract
  • 9. A binding contract is formed when • There is an offer by the offeror, and • There is an acceptance by offeree • Offer and acceptance can be in – Oral form or – In writing Page 55
  • 10. Invitation to treat • Where a party is initiating negotiation, he is said to have made an invitation to treat – It is an indication that someone is prepared to receive offers with the view to forming a binding contract – It is not an offer itself • E.g. – Auction sales – Advertisements – Exhibition of goods for sale – An invitation for tender Page 57
  • 11. Discuss • Activity 2, page 59
  • 12. Termination of an offer • By – Being accepted – Counter-offer – Lapse of time – Rejection – Revocation by offeror – Failure of a condition – Death of one of the parties
  • 13. Discuss • Explain briefly the different types of agreement – Give and explain 5 – 7 different types of business agreement E.g. Employment contract – This is the agreement between employee and employer for the terms of employment. Terms usually include salary, working hours ………………..
  • 14. Discuss • Explain the importance of key elements required to formulate a valid contract 1. What are the key elements required to formulate a valid contract? – page 51 2. What will happen to the contract if these key elements are absent? – page 52, 53 3. How will that affect contracting parties? 4. Conclusion