Introduction
A contract is an agreement between two or more parties that is legally enforceable. A contract has some important elements such as an offer, acceptance consideration and consent. An offer is an expression of readiness to contract on explicit set of terms that is prepared by the offeror with the intension that if the offer is accepted, the offeror becomes bond by the contract. A contract does not necessarily occur whenever there is an agreement between people. A contract takes place when people engage into a legally binding agreement. When parties enter into a binding agreement, it should be clear and the circumstance of engagement should be explicit. Commercial Contracts should have a reputable consolidation to establish an enforceable agreement. However, the law considers that social agreements are not enforceable. For instance, an agreement between two siblings is mainly a casual agreement, but not a legally binding contract. Nonetheless, some social agreements are legally enforceable. In such cases, the person requires to proof that the parties involved meant to engage in a legally binding contract ((Kubasek, Browne, Herron, Giampetro-Meyer, Barkacs, Dhooge & Williamson, 2012)).
Identify the elements necessary to form a contract
There are four essential elements in a contract, an offer, consent, acceptance and consolidation. An offer is a proposition from the offeror. After the acceptance of an offer, the offeror receives consideration, which is the price for the value of the offer. Consideration can take the form of money, some right, some forbearance or anything of value. A court will consider a contract binding as long as there is a consideration. A contract is essential in enforcing an agreement. However, it is imperative for people to be aware that not all people have the capacity to engage in a contract. For instance, contracts of the following people are problematic; minors, mental impairment, prisoners and bankrupts. Entering into a contract should result from free will and proper comprehension of the terms of engagement (Burton, 2008).
A legally binding contract exists only in instances when essential element of proper consent is present. The ultimate consequence of declaring that the offeror did not offer proper consent when entering the contract may lead to compensation of the guilty party or the contract becomes void. According to the case scenario presented in the case study, the following elements were present in formation of the oral contract. There was an offer and acceptance of the offer, which are essential elements of a contract. In addition, a monetary consideration accompanied the acceptance. Finally, there was consent from both parties about the terms and conditions of the contract. The following is how transaction unfolded during the contracting period: Paul and Priscilla Petersen accepted an offer from Danny Davidson to purchase a single-family home. After consent from both parties, Paul and Priscilla Petersen paid a consolidation of $ 250,000 to Danny Davidson who was a fraternity brother to Paul and a long-term friend. Therefore, the contract is valid because all elements essential for an enforceable contract are present.
Paul and Priscilla prove for Breach of Contract
Mistakes may affect a proper consent. False statements may occur because of fraudulent, innocent and negligence. Innocent misrepresentation result from unintentional mistakes. However, an innocent misrepresentation can result a serious false statement, where the court can declared the contract void. This occurs when the false statement is a condition of engaging into the contract. In such a case, the wronged party is at liberty to rescind. Negligent misrepresentation occurs when one of the parties in the contract has a special duty of care to the other one because of his special skills and where the accused person was ought to exercise his special skills on behalf of the wronged person. Lastly, the third instance is fraudulent misrepresentation that occurs when the accused makes a false statement knowingly (Burton, 2008).
Paul and Priscilla Petersen may not be able to prove all the claim of the breach of the contract. They will be able to prove that Danny Davidson failed to inform them about the boundary dispute with his neighbor (fraudulent misrepresentation). However, it would be difficult for them to prove that Danny Davidson withheld the information about the subsiding soil when engaging into the contract (innocent misrepresentation).
Danny defenses
Danny Davidson will defend himself by claiming that he was not aware about the condition of the soil when engaging in the contract (innocent misrepresentation). He can support his claim by claiming that during initial landscaping, he never experienced soil subsidence problem or if it was present, the contractors who he had contracted for landscaping did not inform him. However, Danny Davidson will have a difficult time proving why he never disclosed about the boundary problem in the contract (fraudulent misrepresentation).
Remedies for Paul and Priscilla
Some contracts will become non-binding because of one or more of the following mistakes. For instance, a non-binding contract occurs when a blind person or an illiterate person signs a false document after being misinformed about the content of the document because of his/her condition. However, a contract will be binding for anyone who signs a document being aware that it is a contract, but fails to read its terms and conditions. The contract bounds such a person and is not entitled to plead mistake. False statements may make the contract non-binding. The court may make the contract void in case there is a false condition that made one party to engage in the contract. The party responsible for making the false statement is required to pay the wronged party monetary damage to compensate for the damage caused in engaging in the contract. For less serious false statements, the court recognizes the agreement as legitimate, but the wronged person is then free to reject the contract and get compensation for the damage incurred. In some cases where one party has incurred some looses because of a false statement given, the court recognizes the contract as legitimate and the guilty party is required to pay the offended party monetary compensation to cater for the damage caused because of the false statement (Burton, 2008).
Paul and Priscilla Petersen have two options to make a choice. They may opt to go ahead with the legal proceedings and claim for compensation for the damages incurred because Danny Davidson’s breach of contract by holding important information that was a condition for engagement (fraudulent misrepresentation). If they can succeed to prove the fraudulent misrepresentation, the court can make the contract void and order Danny Davidson to pay for all resulting damages. In addition, the court may recognize the contract as legitimate, but require Danny to pay for the damages caused.
Whether there was a Fraudulent Instance
The writer points a fraudulent misrepresentation and particularly in the case where Danny failed to disclose about the boundary dispute, he had with his neighbor. However, the party should not engage in another contract. Danny should compensate Paul and Priscilla Petersen the incurred damages and promise to help them resolve the boundary issue and take care for the resulting fees.
ADR
Instead of pursuing legal lawsuit, Paul and Priscilla Petersen may contemplate using alternative dispute resolution to resolve their problems because of the existing long-term friendship between Paul and Danny. Alternative Dispute Resolution is more appropriate in this case. ADR will help to ensure the continuity of Danny and Paul long-term friendship even after resolving the prevailing dispuute. However, Paul and Priscilla Petersen should consider arbitration form of ADR, which is enforceable.
Principles used
The two parties transacted on a friendly-based principle. The party should instead have engaged in a written agreement and involve suitable professionals to give them appropriate advise about the best way forward to pursue the deal. For instance, Paul and Priscilla Petersen should have contacted appropriate institution and established any boundary dispute prior to signing the contract, as well as engage an engineer to evaluate the condition of the house and the soil before sealing the deal.
Recommendations
The researcher will make the following recommendations for people anticipating in engaging in real estate contracts:
- Engage in a written contract.
- Invite professional to assess and authenticate the condition of the property under consideration.
In conclusion
People can engage in verbal or written contracts. However, because of any eventuality, it is advisable for parties to engage in written contracts with all the terms and conditions well stipulated. This is essential in amicably resolving any future disputes. Parties should ensure that they give correct statements when engaging in contracts to avoid unnecessary costs that accompany sue of breach of contract. Nonetheless, in case of any arising disputes, parties should try to solve their disputes through ADR mechanisms to avoid incurring heavy expenses associated with legal lawsuits, as well as sustain good relationships that will facilitate future business transactions.
Reference List
Burton, S. (2008). Elements of Contract Interpretation. New York: Prentice Hall.
Kubasek, N. K., Browne, M. N., Herron, D. J., Giampetro-Meyer, A., Barkacs, L. L., Dhooge, L. J., & Williamson, C. (2012). Dynamic business law (2nd ed.). New York, NY: McGraw-Hill/Irwin.