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Chapter 5

Chapter 5,6,7,8,9 MCS.docx

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Marketing and Consumer Studies
MCS 3040

Chapter 5 An Introduction to ContractsIntroduction to Contract LawA contract is an agreement between two parties that is enforceable in a court of lawoContains an agreement which is composed of an offer and terms must be complete deliberate meaning both parties must want to enter into the agreement voluntary between two or more persons supported by mutual consideration can be oral or writtenOnce a contract is created it permits both parties to reply on the terms they have negotiated and plan their business affairs accordingly oGoverned mostly by common law judgemade lawsContract law allows participants to create their own rights and duties within a framework of rules that a judge will later enforce if called upon to do soLegal Factors Creating the ContractCommunication oCompanies will communicate with a number or businesses in order to determine who can give their company the most favourable termsoCommunication in the form of contractual negotiations is automatically laden with legal meaning Thus it is important for the businessperson to know when simple business communications turn into legal obligationsoObjective Standard Test is the test based on how a reasonable person would view the matter regarding if an offer and acceptance had occurred when communicatingBargaining PoweroThe greater ones bargaining power the more favourable terms one will be able to secureoContract law is bound by Equal Bargaining Power which is the legal assumption that parties to a contract are able to look out for their own interests Legal Factors Enforcing the ContractBusiness RelationshipsoTime and time again businesses may breach the contract in their dutiesoContract law does not focus on the longerterm relationship and the expense and uncertainty of litigation are also reasons to avoid a fullblown legal conflict between partiesEconomic RealityoIt is not always the best economic decision for a party to keep a commitment and sometimes businesses will buy out of their contract if they can find a better more profitable oneChapter 6 Forming Contractual RelationshipsThere are 4 basic elements of a contract An agreement offeracceptance complete certainty deliberate intentions to create legal relations is present and it is supported by legal considerationAn AgreementOfferAcceptanceAn OFFER is a promise to perform specified acts on certain termsSecond to an offer is Invitation to Treat which is an expression of willingness to do business it has no legal consequence because essentially there is no contractoRetail stores relate to this through advertisements as they are invitations into the store and the goal is to ensure the customer makes an offer to purchase the advertised goodsThe Standard form contract is a take it or leave it contract where the customer to a standard set of terms that favour the other side common in car rentals borrowing moneyBest thing is to readunderstand the contract before signing itoA contract is formed onlywhen a complete offer has been made and accepted by the other sideoThe person who makes the offer is called the OFFEROR the person to whom an offer is made is the OFFEREEAn offer can be terminated in many ways includingoRevocation an offeror can revoke his offer at any time before acceptance simple by notifying the offeree of withdrawalAn Option Agreement is an agreement where in exchange for payment an offeror is obligated to keep an offer open for a specified time common in real estate oLapse the expiration of an offer after a specified or reasonable period
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