Management and Organizational Studies 2275A/B Chapter 5: Business Law Ch. 5 Notes.docx

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Document Summary

Contract: an agreement between two parties that is enforceable in the court of law. 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: communication. Through informal contact or through a general inquiry made to a supplier. 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: bargaining power.

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