Business Law Ch. 5 Notes.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Philip King

Business Law Ch. 5 Notes Chapter 5  Contract: an agreement between two parties that is enforceable in the court of law  7 elements of a contract: o Agreement: composed of an offer to enter into a contract and an acceptance of that offer o Complete: an agreement must be complete, that is, certain o Deliberate: both parties must want to enter into a contractual relationship o Voluntary: freely chose and not involve coercion or other forms of serious unfairness o Between two or more competent persons o Supported by mutual consideration: each party must give something of value in exchange for receiving something of value from the other party o Not necessarily in writing  Once a contract is created, it permits both parties to rely on the terms they have negotiated and plan their business affairs accordingly  The rules governing contracts are based on common law for the most part  Through a contract, the business enterprise can enter into any kind of binding agreement it chooses  Contract law is facilitative: it 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 so  Contracts can be one shot deals or long standing  Legal Factors in Creating the Contract (Business Context) o Communication  Through informal contact or through a general inquiry made to a supplier  Automatically laden with legal meaning  Important for the businessperson to know when simple business communications crystalize into legal obligations  Objective standard test: the test based on how a “reasonable person” would view the matter o Bargaining Power  Negotiating parti
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