This document provides an overview of legal aspects of contracts. It defines a contract as a legally binding agreement between two or more parties where something is promised to be done. The key elements for a valid contract are offer, acceptance, consideration, capacity, legality, possibility, and good faith. It also describes different types of contracts such as simple contracts, specialty contracts, and contracts of record. Finally, it discusses how contracts can be discharged through performance, breach, renunciation, agreement, lapse of time, bankruptcy, death, or frustration. Businesses enter into many contracts on a regular basis for activities like obtaining credit, selling goods, hire purchases, and more.

1. RM ACCOUNTS ED
Legal Aspects of business

2. CONTRACTS
Legal aspects of business
CXC – CSEC Principles of Business

3. A CONTRACT IS
A legally enforceable (a), binding (b)
agreement between two or more
parties whereby something is done, or
promised to be(c) done, given or
promised to be given.

4. AN INVITATION TO TREAT IS
A statement or action to persuade
someone (else) to make an offer for
something that you have.

5. AGREEMENT
OFFER
ACCEPTANCE
A CONTRACT

6. A CONTRACT IS VALID ...
only if all the following characteristics are present:
*OFFER
* ACCEPTANCE
*CONSIDERATION
*CAPACITY
*LEGALITY
*POSSIBILITY
*GOOD FAITH

7. AN OFFER IS
A proposal made by one party to another party.
It can carry as many conditions as is necessary
It must be communicated to the intended party
It must be certain (no “mays” or “mights”)
It can be expressed
It can be implied

8. ACCEPTANCE
One’s willingness to agree to the conditions of an offer.
It must be unconditional
It must specifically expressed
It must be certain

9. CONSIDERATION
The price for which one party secures the legal obligation on the part of the other
party.
• It must be valuable (good)
– benefits must accrue to one and detriment to the other.
• It must be present
- motive for benefit receivable cannot be based on a past action.
• It must be real
- Something definable and transferrable
• It must be lawful
Something not considered illegal in action or form
• It can be executed (done immediately) or executory (done in future)

10. CAPACITY
The ability to bind oneself in a legal agreement.
The following are not considered capable of binding
themselves:
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Minors
Inebriates
Incarcerated
Senile
Addicts (under influence)

11. Other clauses
• Legality
• The act must be acceptable within the law
• Possibility
• The act must be one that can be performed.
• Genuineness
• The consent must be by one’s ‘own free will’.
• Good Faith
• The consent must be without duress, fraud, mistake or
misinterpretation.

12. TYPES OF CONTRACTS
SIMPLE CONTRACTS
SPECIALITY CONTRACTS
CONTRACT OF RECORD

13. A SIMPLE CONTRACT IS
A simple legal agreement between two or more parties.
•It has no special form
It can be by word of mouth
It can be written
It can be implied
e.g. bus ticket, a hair cut, bill of exchange

14. A SPECIALITY CONTRACT IS
An agreement made under seal or by deed.
It has a special form and/or format
It must be signed
It must be sealed
It must be delivered
e.g.
lease of land, hire purchase, bill of sale

15. A CONTRACT OF RECORD
A judicial order imposed on a given party by the court.
It is non-voluntary but obligatory
It must be handed down by the Law Court
It must be written
Its imposition is a penalty of refrain or fine
e.g. bond of peace, restraining order, child support

16. DISCHARGE OF
CONTRACTS
Legal aspects of business

17. Discharge of contract….
occurs when one party (the promisor) ceases to be
bound by its obligations (the promise) to the other
party (the promisee).
it is sometimes referred to as the termination of the
contract.

18. Contracts are discharged by …
• Performance
• Each party fulfilled all aspects of their obligations as agreed.
• Breach
• One party fails to fulfill its obligations as promised
• Renunciation
• One party, by its actions, refuses to perform its obligation or part thereof
• Agreement
• The parties mutually waive their rights before the act was performed.
• Lapse of time
• The period (deadline) within which the act was to be performed has
passed
• Bankruptcy
• The party, with the financial obligation, has no funds to complete their
part
• Death
• The obligating party dies (its estate is however expected to continue,
except where that obligation was a personal service).

19. Contracts can be frustrated…
• If a change in the laws (of the country) make the obligating
act illegal [this is also referred to as IMPOSSIBILITY].
• If a severe illness prevents the obligating party from
performing the act.
• If a prerequisite action has not be taken, thus preventing the
obligating party from performing the act.
• If a necessary item/object that would validate the agreement
has been totally or partially destroyed.

20. ….
• Businesses enter into many contracts during a year:
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Agreements for short term credit (with suppliers)
Selling goods on credit (to its customers)
Use of cheques to pay debts
Hire purchase agreements
Fulfillment of purchase orders
Buying plane tickets
Sale/purchase of land
Sale/purchase of assets
Taking the taxi
…etc.