Corporations And Associations Cases Materials: Understanding Contracts, Formalities, Independent Contractors, And More

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A contract is something more than a mere agreement created between two or more persons. Therefore, there are certain elements that should be present in order to make a contract binding on the parties. In this regard, it is required that there should be an offer made by one party to the other one, the same should be accepted by the other party and similarly it should be the intention of the parties to enter legally binding relationship. There is also a requirement of a price paid. It may not be in the form of money (Re McArdle, 1951). The parties should also have the legal capacity to create the contract of their own free will (Crown Lands Comrs v Page, 1960). The parties should enter the contract after properly understanding it. On the other hand, the consent of the parties is appreciated if there is any undue influence, duress or false statements due to which the contract could become illegal and void.

1. Offer: an offer should be made by one party to the other.
2. Acceptance: the offer should be accepted by their party exactly on the same terms. The introduction of new terms amounts to a counteroffer.
3. Consideration: the promise made by the parties and the contract should be supported by the valid consideration.
4. Mutuality of obligations: Both the parties under the contract should accept their obligations imposed by the contract.
5. Capacity: the parties should have the legal capacity to enter the contract

Most of the contracts can be either in writing or created orally and still these contracts can be enforced by the law. However there are certain particular elements that are required by the law to be in writing in order to be legally enforceable (Baxt, Fletcher and Fridman, 2008). On the other hand, it is difficult to enforce oral contracts. The reason is that in case of oral contracts, there is no real record present regarding the offer, consideration and the acceptance of the parties. Still it is important to be aware of the types of contracts that need to be created in writing for being legally enforceable. Generally the contracts that needs to be created in writing for the purpose of being legally enforceable are the contracts that are related when certain debts, real property, regarding money over a particular amount. On the other hand, when it is not required by the law that every good contract should be writing, the other elements that are necessary for the purpose of creating a legally enforceable contract should be present in any case (Harris, Hargovan and Adams, 2013). In this way, the bottom line in this regard is that while generally the parties entered into transaction in good faith, a well-drafted contract created in writing  provides the best protection that may be available to the parties in case of a dispute. Ideally, it is advisable that an attorney should be contacted before drawing or entering into a contract. However, the smaller the sum involved in the contract and the simpler the contract, there is less need of written contract. In this way, it is clear that it is not necessary that a contract should have been created in writing in order to be legally enforceable. However there are certain types of content that are required by the law to be created in writing for the purpose of being enforced by the courts. However, it is a good idea to put the agreement in writing because in such a case it becomes easier to establish the terms of the contract (Sweeney, O’Reilly and Coleman, 2013). On the other hand, in case of an oral contract, difficulties may arise in establishing the terms of the contract

Requirements for Creating a Legally Enforceable Contract

A formal contract can be described as a contract in which the parties have sealed the document under seal. On the other hand, in case of an informal contract, it is not signed under seal. In this context, a seal can be described as any impression that has been created by the parties to the contract on the document. Traditionally, this was done in wax, mentioning the intention of the parties that they will be bound by the contract. Only the parties to the sealed documents are considered to be the persons who have the rights under such contract. Therefore, only the persons who were the party to the contract can be considered as liable under it (Miller, and Cross, 2012). On the other hand, nearly all of the contracts that are made today are informal contracts. However the legitimacy of the contract is not dependent on the fact if the contract is formal or informal. In both cases, the contract is considered as binding, provided that the other elements that are necessary for creating a legally enforceable contract are present. Generally, a formal contract is created by a greater authority like a corporation or the government.

 The two examples of a formal contract include:-

• Negotiable instrument
• Letter of credit

In this case, a group of friends contribute $2 each to purchase a lottery ticket and one person from the group actually purchase is the ticket. When the winning ticket is wrong for the group, it is claimed by the purchaser of the ticket that the arrangement was the only social and he is not required to share the prize money. In such cases, the law contract requires that one of the elements that are required to make a contract legally binding is the intention of the parties. Hence in such cases it is required that it should be the intention of the parties that the obligations imposed by the contract should be enforceable by the law (Lens v Devonshire Club, 1914). The key to the interpretation of the contract is to give effect to the intention of the parties as mentioned in the agreement between the parties. For this purpose, generally the intention of the parties has to be ascertained objectively (Balfour v Balfour, 1919). For this purpose, the court is required to consider the words used by the parties in the agreement; the actions of the parties in accordance with the agreement and the circumstances related with the agreement. After considering all the facts, if it can be concluded by any reasonable person, that it was the intention of the parties to create legally binding contract, such a contract with the enforced by the court. Another significant role in this regard is the plain meaning rule. According to this rule, when a clear and unequivocal contract is present, the contract will be enforced by the court. According to the plain terms of the contract that have been mentioned on the base of the document and the court is not required to consider extrinsic evidence or to interpret the language used in the contract.

A business owner may hire two the people, Agents and independent contractors. Although he appears to be a simple matter of delegation but from a legal perspective, there are several other implications present. The employees who are hired to work under the command of their own that fall under the integrity of agents. On the other hand, hired help for completing temporary or recurring tasks fall under the category of independent contractors. In order to differentiate between the two, the court will consider the level of control that the employer has over the person hired. If the business woman had outsourced to some work to an individual or another company specializing in that line of work, most probably, the individual will be treated as an independent contractor, particularly if such person has great discretion in completing the work. On the other hand, if a person is hired on a recurring basis and if that person has less discretion to complete the work, most probably the person with will be considered as an agent.

1. An agent is required to act in accordance with the supervision of control of the principal.
2. An agent has to follow the instructions given by the principal.
3. The acts of agents are binding for the principal

1. An independent contractor is required by the law to follow the terms of the contract.
2. An independent contractor uses his own equipment, labor, machines and material.
3. The independent contractor does not have the capacity to bind the employer

References

Baxt, R, Fletcher, K &Fridman, S 2008, Corporations and associations: cases and materials, 10th edn, LexisNexis, Butterworths, Sydney, New South Wales

Harris, J, Hargovan, A & Adams, M, 2013, Australian corporate law, 4^thedn, LexisNexis Butterworths, Chatswood, New South Wales

Miller, and Cross. "Chapter 11: Contract Law." Business Law: Text and Cases. By Clarkson. 12th ed. Mason: Cengage Learning, 2012. 210

Sweeney, B, O’Reilly, J & Coleman, A, 2013, Law in Commerce, 6^thedn.2015, Australian Corporations Legislation, LexisNexis Butterworths

Case Law

Balfour v Balfour [1919] 2 KB 571

Crown Lands Comrs v Page [1960] 2 QB 274

Lens v Devonshire Club (1914) The Times December 4

Re McArdle (1951) Ch 669