Any agreement between businesses or individuals in which both parties agree to some terms is called a contract (Liuzzo, 2010). The agreement can take three forms such as oral, written, or implied. This analysis will dwell on oral contract. According to Liuzzo (2010), Oral contracts are contracts made by word of a mouth. That means that two parties make a verbal agreement in order to accomplish a given transaction. When one party to a contract fails to honor terms of an agreement, there is a breach of contract.
The following is an example of a breach of an oral contract. Suppose, a restaurant owner and the tomatoes dealer verbally agree that the tomatoes dealer should deliver two boxes of tomatoes after two days at 9.00 am. The restaurant owner is to pay $30 for the product when delivered. However, it happens that on the day when the tomatoes are to be delivered, there is a spectacular rise of the tomatoes price in the spot market. Due to this rise, a box of tomatoes sells at $30. The tomatoes dealer resorts to sell his tomatoes on spot and, as a result, fails to deliver the promised order to the restaurant owner. However, the restaurant owner wanted two boxes of tomatoes in his restaurant. Thus, the restaurant owner is forced to buy two boxes of tomatoes in the market on that particular occasion for $60. The restaurant owner, therefore, seeks for legal advice at this stage after the tomatoes dealer failed to honor the agreement.
Rights of the restaurant owner
The owner of the restaurant has the right to claim for compensation due to the breach of the contract by the tomato dealer. The tomatoes dealer breached the contract willfully. The restaurant owner will demand money for compensation to what he would have enjoyed in case the tomatoes dealer faithfully delivered the two boxes as had been initially agreed (Martin, 2006). The value of money that the restaurant owner can claim will be given by the difference between what he paid for two boxes on the spot market and the amount of money he would have paid in case the tomatoes dealer honored their agreement. The owner of the restaurant has the right to demand for other expenses that he might have incurred during the replacement. Such expenses may, for instance, be the fare used to reach the market to purchase the tomatoes.
Types of damages
Direct damages
The owner of the restaurant suffered this direct harm as a direct consequence of the breach of a contract. In the above example, this is equally to the difference in price calculated above (Liuzzo, 2010).
Incidental damages
These are damages suffered by the restaurant owner because of making the replacement. In this example, the incidental damage is the fare.
The contract above contains the following elements (Martin, 2006).
Offer and acceptance
The contract contains an offer by one party to another party whom then accepts the offer. In the above example, the restaurant owner offered to pay the tomatoes dealer $30 for two boxes and the tomatoes dealer accepted to supply two boxes of tomatoes.
Consideration
The contract is exchanged for this value. In the above case, the consideration is tomatoes, which will be gained by the restaurant owner and money, which will be gained by the tomatoes dealer.
Performance
This is the action expected to be taken by the two parties in regard to the contract. Substantial performance occurs when the non-breaching party may recover the damages caused by the breach while inferior performance may occur when the non-breaching party may either rescind the contract and recover restitution or affirm the contract and recover damages (Martin, 2006).
In conclusion, it is clear that any contract that is binding must contain elements such as offer and acceptance, consideration and so on. The analysis has also shown that if a contract is breached, the innocent party may claim for compensation due to the damages caused.
Reference List
Liuzzo, A. L. (2010). Essentials of business law. New York: McGraw-Hill Higher Education.
Martin, E. (2006). Law: oxford dictionary of law. London: OUP.