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Fundamentals of Business Law Essay

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Updated: Mar 22nd, 2021

Draft a memo fully analyzing and discussing why there is or is not a valid contract

In my opinion, there is no valid contract between Doe and GIANT Pharmaceutical Company. In business law, a contract is valid only when there is a mutual or comprehensive agreement between the involved parties and in most cases arrived at by written agreements (Turner, 2006). In this case, conversation over the telephone could not qualify as a legal business contract as there was no agreement done by writing between the two parties. Hence, Doe was not bound to the GIANT in any contractual form.

In the making of a contract, two dependent parties meet and lay down their terms to each other in an effort to induce entering into a contract in the case of mutual contract agreements that involve two parties only. However, there are high chances of disputes arising before the contract is arrived at, whereby terms are adjusted to favor the opposition party and others discarded when seem to manipulate either of the party (Carvan, 2002). In the case of Doe and GIANT, Doe gives an annual salary of $500,000 as his term, but Stein quotes $ 300,000 as his considerable salary payment to him. Consequently, Doe feels insulted and drops the conversation due to aggression.

However, this could not mark the end of negotiations, as disputes are part of the making of a contract because disputes are part of the peripheral statements made in the process of arriving at the real contract (Barron, 2006). In the Australian Business Law, statements that are made in the making of a contract are in no way recognized as a part of the term of a contract as in the business where bargaining for the buying price is considered as a process of determining the buying price.

Vermeesch and Lindgren (2005) tell the following legal case that happened in a commonwealth nation and I find it relevant to this case. Business law is universal in the commonwealth nations and hence most cases are handled equally among commonwealth nations as far as business law is concerned. A construction company tendered for a government contract for the construction of a modern university. The tenderers were supposed to wait for a period of three months before the winning bidder was determined.

Barely a month after the tendering, a private manufacturing company invited construction companies for tendering for the construction of a modern production line. This construction company bid for the tender and it was supposed to take three weeks before the winning bidder was determined. Fortunately, this company won the tender, made a lucrative contract with this company, and ventured into construction immediately.

Immediately after three months were over, the government, through the ministry of public works, announced the winning bidder who fortunately happened to be the construction company that had earlier won the tender for a private company. Unfortunately, the construction company did not have the ability to handle the two projects simultaneously because of the low labor force, expertise, and machinery and instead opted to drop the government’s contract.

However, the company opted to risk taking the two projects, but the time limit was shorter than required for achieving high quality and quick growth for a construction company with two lucrative ongoing contracts. Hence, the managers decided not to take the two projects as training grounds, but instead drop the government’s contract as no other company would have agreed to work in conjunction with it in the project as that would result in a violation of the law of the contract.

Unfortunately, the government seemed reluctant to drop the case and threatened to punish the construction company for violation of a contract. The managers were greatly astonished by the government’s response as they had pre-assumed the matter to be easy for them. Worst still, the government moved to court and sued the company for its attitude towards its contract. The construction company sought legal advice for its action and found that it was not in contract with the government, but needed to have informed the government through the writing of its dropping of the tender before the three months grace period, in which the winning bidder was to be determined (Vermeesch & Lindgren, 2005).

The court determined the case and the construction company was found to have violated the contractual law by making an application for the tender that was far beyond its capability. A huge fine was imposed, as the government was to resume the process of determining the best bidder among the tenderers. The above case is equally similar to the Doe and GIANT’s case, but Doe, who is the tenderer, goes for the lucrative contract assuming that the matter between GIANT and him is over (Vermeesch& Lindgren, 2005).

Looking critically into the case, Doe is free to make his own choice as he did not make any written agreement with GIANT as is required by the law of contracts (Ciro & Goldwasser, 2006). However, GIANT believes it has a right to force him to move its way because of the letter of agreement that got to Doe’s desk late. The contract is not valid as the agreement, which GIANT believes to have written, was based on a peripheral statement over the phone and no written document could be used as evidence. Therefore, GIANT has no grounds for forcing Doe to move its way under the law of contracts.

Then assume that there is a valid contract, and fully analyze and discuss the remedies that might be available under that contract

With regard to the law of contracts, the agreement between Doe and GIANT is a form of collateral contract that is not done in writing, but as a promise, which then forms the basis for a legal contract that could be recognized by the law. Assuming there was a valid contract between Doe and GIANT, of which there was not, there are serious consequences to either of the parties as far as reputation, career, and business, are concerned (Gibson & Fraser, 2007).

To begin with, Doe is a world’s living legend for his breakthrough in the invention of a cure for the common cold, through which he is a Nobel Laureate. Hence, many pharmaceutical companies would like to be associated with such a figure for business among other reasons. Regardless of his personality and reputation, GIANT, through perceiving him as an ordinary individual has a right to take legal measures against him for violation of a contract (Crosling & Murphy, 2000).

The contract goes for four years after which then he would either fail or renew the contract as is required by law. By failing to renew, Doe shall be free to move to MARK or any other company of choice. GIANT’s thorough conviction that Doe has breached the contract could take him to court and sue him for the same. On the other hand, Doe would be required by law to drop his contract with MARK as a default requirement after which then other requirements are imposed.

Depending on the hearing of the case, the court determines other legal punishments on the offender (Keyzer, 2002). Doe in this case, which would include proceeding to work with GIANT for the next four years or a huge fine and cancellation of a contract with GIANT, in which case he would be allowed to proceed to work for MARK. In either way, both parties would lose in either their reputation or business.

In case of the case being ruled against Doe and required to drop off his contract with MARK, GIANT initially would have won, but lost in the long-term business. An employee is the most crucial element of a business, and hence their rights should not be violated under any circumstances in a democratic and capitalist nation. Doe would have felt humiliated by GIANT and most probably would never offer his best for the success of GIANT, but rather long for the ending of the contract or termination of the same, but whichever comes first of the two. In such a case, GIANT would lose in both business and reputation perspectives as competitors would take advantage of Doe’s situation to humiliate GIANT.

In addition, Doe would react negatively to the decision of the court, claiming the violation of his rights, and instead seek protection from professional bodies, which in most cases would impose sanctions on the GIANT. In such a case, GIANT would lose tremendously as it would be perceived as an agreed company managed by dictators and more so does not adhere to the international labor rights and requirements (Garrett, 2001). Australian constitution allows professional bodies to issue sanctions on the institutions that do not adhere to their professional requirements; hence, Doe has the right to seek protection for the professional body of pharmaceuticals. Some of the remedies of such sanctions would include the pharmaceutical license being revoked or GIANT’s products banned from entering some markets.

On the other hand, if the court rules against Doe, demands that he pays a fine, and proceeds to work for the MARK, GIANT too would have lost in the case. Most probably, MARK, would pay the fine and publicize the matter in an effort to create a bad reputation for GIANT in the market. This scenario would happen because a business increases chances of survival and high-profit makings only when it manages to overcome stiff competitors (Griggs et al., 2003), and in this case, GIANT and MARK are stiff competitors in the pharmaceutical industries.

However, business managers ought to be prudent and focused on the objectives of their business. Doe’s case has serious negative consequences for the company regardless of the ruling or validity of the contract and hence it needs to be dropped before the matter worsens. By dropping the matter, the business would retain its competitive advantage over MARKS and so be in a better position to work hard to overrun the performance of MARK, whom Doe, a pharmaceutical guru, is working for. In addition, Doe would consider GIANT upon the expiry or termination of its contract with MARKS, which would serve as a gain for competitive advantage for the company. As a legal advisor, I would advise GIANT to ignore the action but instead embark on improving skills for quality production and target larger markets.

Reference List

Barron,L. (2006). Fundamentals of business law. North Ryde, NSW: McGraw-Hill.

Carvan, J. (2002). Understanding the Australian legal system. Sydney, NSW: Law Book Company.

Ciro, T., & Goldwasser, V. (2006). Law and business: text and tutorial. Melbourne, Victoria: Oxford University Press.

Crosling, M., & Murphy, H. (2000). How to study business law. Sydney, NSW: Butterworths.

Garrett, M. (2001).Correcting your drafts. Melbourne, Victoria: Oxford University Press.

Gibson, A., & Fraser, D. (2007).Business law. Melbourne, Victoria: Pearson.

Griggs, L., Clark, E., & Iredale, I. (2003). Managers and the law. Sydney, NSW: Thomson Publishers.

Keyzer, P. (2002). Legal problem solving: A guide for law students. Sydney, NSW: Butterworths.

Turner, C. (2006). Australian commercial law. Sydney, NSW: Law Book Co.

Vermeesch, R., & Lindgren, K. (2005).Business law of Australia. Chatswood, NSW: Butterworths.

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