Business Law Lecture Notes PDF

Chapter 1 The Law of Contract  1-What is meant by a contract A contract is an agreement between two or more parties for the purpose of obtaining a certain consideration (The situation created after implementing all the terms of the contract then advantages and gifts are completely...

Chapter 1 The Law of Contract  1-What is meant by a contract A contract is an agreement between two or more parties for the purpose of obtaining a certain consideration (The situation created after implementing all the terms of the contract then advantages and gifts are completely exchanged between the parties. Ex (selling goods – rental equipment – insurance – employment - …….)  2- What are the elements of a contract There are three elements of a contract and they are as follows : 1. Consent 2. Object 3. Cause  Consent (agreement) In basic terms, consent is the understanding that the parties have of the contract. Both parties in the contract must give their consent voluntarily. If there are certain mistakes, or if one party attempts to deceive or pressure the other, consent will not be considered voluntary or genuine. It Is the corresponding and correlative intentions of two parties. It Is also formulated as mutual rights and obligations. The Intention is a complete , clear and direct will of both parties to create or to participate in a binding agreement.  The object of a contract : It is the subject matter of the contract. All things which are not outside the commerce of men , including future things , may be the object of a contract. Ex: property , car. Contracts without object are illegal. Also object invalidates the contract if it is contrary to law, morals, good customs, public order or public policy.  The cause of a contract The cause of a contract is the objective and juridical reason for the establishment of a contract. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good customs, public order or public policy  3- Manners by which a contract can be made Written (legally binding agreement between two or more parties and it sets out the responsibilities of each party. They also create clear terms to minimize the risk of conflict ) Oral (Contracts that are made orally are enforceable under certain circumstances, but are problematic even where permissible. If the parties to the contract remember the agreement differently, it can be difficult if not impossible for a party to prove what the actual agreement was) Non-verbal ( an implied contract is yet still legally binding contract that exists based on the behavior of the parties involved or on a set of circumstances ) Electronic contract ( is an agreement made online that creates a mutual obligation between two parties and is enforceable under certain legal requirements )  4- The intention to create legal relations 1) The expressed or implied Intention : – Is the moral essence of the contract. – Must be expressed as a written term, but if it’s implied intention, it’ll be presumed. – Presuming the intention is done by the judge during evaluating the legal claim introduced by the plaintiff asking the court to enforce the defendant to implement his contractual obligations. – The presumed intention in the commercial contract is rebuttable. The rebuttable intention: can be denied and proved false, by the party who denies his intention went to be legally bound by any contractual obligations toward the other party. 2- The existence of the Intention a) The Eligibility: The ability to perform the legal action and the ability to incur all its impacts, even to incur fines. So , when ever any individual has the eligibility to participate in a legal relationship , then he is capable to be a party in a contract, and is legally valid to carry out obligations and obtain rights The Eligibility depends on two conditions: 1. SOUNDED MIND: not suffering any mental disorder 2. Of age 21 years old ; the age of a majority or rationality, before that age the individual is a minor not capable to participate in such legal relationship unless by a guardian. b) Legality : The contract subject is legal and to achieve a legal purpose , i.e. the subject of the contract isn’t criminalized by the criminal law. Ex selling drugs C) Privacy of Contract The intention of the parties goes directly to render all the advantages rights and obligations exclusively limited to them. Never extends to any one who isn’t a party of the contract, even if he was the beneficiary of that contract. Ex Broker  5- Formation of a contract The contract is an agreement –Agreement that combines the intention of the parties –Then, the intention of each party must be declared and communicated to the other one. So the contract starts initially by: –A proposal is announced as an offer –That offer is Introduced by an offeror –The offer must faces an acceptance –The acceptance is done by an offeree  A. The Offer The Creation of the Offer : Expression of willingness to have a contract on specified terms An offer must be Clear: All details are known by the offeror Complete: How each detail is performed as a practical implementation of the offer's details Final: to defined the margin of the negotiation with the potential offeree  Termination of the offer 1) By act of parties : A) Rejection :The offeree rejects the offer Expressed or implied Implied Rejection –If the Offeree makes a counter offer which is entirely identical to the subject of the proposed offer –If the Offeree makes a conditional acceptance Which is directly related to the method of implementing the offer by the offeror B) Revocation : The offer can be withdrawn at any time before an acceptance takes place. If an acceptance took place before withdrawing then the offer cannot be withdrawn 2) By operation of Law A- Lapse of time -The Passage of the time ; The time interval for acceptance is expired -The offer is suspended on a condition ;The offer is suspended on a condition that isn’t fulfilled. B-Death of incompetency of one of the parties C-supervening illegality D-Discharge by frustration  B- Acceptance Definition : Expression of willingness to contract on specified terms , prescribed previously by the offeror( Correspondent ) Ex: an owner is offering his apartment for 100,000 LE and requires the payment to be made 5 installments , then , a guy who wants to accept the offer agrees up on the price ( 100,000 LE ) but wants the payments to be made on 6 installments.  The place of the Contract If the offeror is located at the same country of the offeree then such country is the contracting place. But if both are located at different countries then the country where the acceptance is received is contracting place.  6-Classification of terms of a contract 1)Expressed and Implied terms : -Expressed terms : They are written terms , agreed on by both parties Ex : When the contract stipulates that the seller must deliver the car to the buyer. Here it is an expressed term that obliges the seller to deliver the car to the buyer. -Implied terms : They are unwritten terms , assumed to be agreed on , applied by the court. Ex : If the tenant stayed in the rental unit after the agreed time has been ended and did not declare any intention for departure and the agreed rent is paid , then this is considered that the tenancy contract has been renewed for another term. 2)Conditions and warranties : -Conditions : are the fundamental terms of a contract. Ex: Delivering the sold car to the buyer is a condition. Legal effect : Breaching the conditions arises the right for the other party to : a)terminate the contract b) and claim damages -Warranties : are less important terms of a contract. Ex :Yearly maintenance for the sold car is a warranty Legal effect : Breaching the warranties arises the right for the other party to claim damages ONLY (without requesting the termination of the contract ) 3) Rights and Obligations : Any contract must formulated of rights and obligation. Ex : The rights and obligations of the 2 parties in a car sale contract. Buyer’s right : receive the car Buyer’s obligation : pay the price Seller’s right :receive the money Seller’s obligation : deliver the car to the buyer  7- Validity of the contract -A contract may contain defects when being formulated ,which may lead to certain legal effects. -In the following we will present these “defects” and the “legal effect” of each of them : 1.Mistake/Error : - A fault consent done by a party without the interference of the other one. Ex : X bought a bag that appeared original to him by fault ,then discovered that it’s fake and its real price is away far from the price he paid. -Legal effect : the contract is voidable , which means , it may be considered void by court only if the damaged party requests the contract void. In other way , if the damaged party does not request the contract void , then , it remains valid. 2) Misrepresentation : -A false statement done by a party to induce the second party to enter in to a legal relation. Ex : the seller is the one who persuaded the customer that the bag is original. -Legal effect : the contract is voidable , which means , it may be considered void by court only if the damaged party requests the contract void. In other way , if the damaged party does not request the contract void , then , it remains valid. 3) Violence (duress) : - Is pressure exerted upon a person to coerce that person to perform an act they ordinarily would not perform. -This pressure can be classified in to two main types , and accordingly, the legal effect will differ. A - Moral : ( indirect ) An indirect pressure done on a party to make him enter in to a legal relation. Ex : X informs Y that if he will not sign the contract , he will be laid off (fired). -Legal effect : the contract is voidable , which means , it may be considered void by court only if the damaged party requests the contract void. In other way , if the damaged party does not request the contract void , then , it remains valid. B - Physical : (direct) A direct pressure done on a party to force him to enter in a legal relation. Ex : X points a gun at Y’s head to force him to enter a legal relation. - Legal effect : the contract is void , as if it did not happen from the beginning at all.