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It is important for our team to have a clear focus on what should be done when signing a contract, given that we have identified our first client. Understanding these elements will make it easy for us to avoid any future litigation that may arise due to the poor execution of the contract. The following are the six elements of a contract, and each of them is very critical in developing a legally binding agreement with the client.
The first element of a contract is an offer. An offer refers to what one party is willing to give in exchange for a product or a service that is expected from the other party. According to Albaric and Dickstein, any of the two parties can make an offer based on the prevailing circumstances (41). A good example can be our client offering our legal firm a certain amount of money in exchange for the legal services that are to be offered. Sometimes there may be a counteroffer, especially in case one party feels that the value of the offer made is below the value of the product or service to be delivered.
In case the other party is convinced that the offer made is fair enough, then there will be an acceptance. Acceptance refers to commitment by the second party to deliver goods or services as per the terms and conditions stated in the offer (Cross, Miller, and Cross 33). For instance, if our client made an offer to pay our firm $ 250,000 for the services that we shall deliver, and then if our firm communicates back to the firm agreeing to the terms, it shall be considered an acceptance. Acceptance can be communicated orally or verbally.
The offer and the acceptance can only be considered legally binding if they involve the exchange of goods or services which are of value. Both parties must be seen to benefit from the offer and acceptance made (Schwenzer, Hachem, and Kee 84). For instance, it may be suspicious if our client offers our firm $ 250,000, and all we do is to congratulate them for having a lot of resources. Unless it can be proven that through such actions, we are adding value to them, the contract may not be valid because we shall not be offering any value in return.
The entire process of making an offer and acceptance should be based on mutual obligation. It should not arise from mistakes, fraud, or any other form of coercion. None of the parties should feel forced to be a party to the contract. For instance, in case our firm uses any form of threat or blackmail to force the client to make a generous offer, then if the client can prove that such were the circumstances under which the contract was signed, then it can be nullified. The agreement should be made voluntarily.
Competency and capacity
The parties involved in signing the contract must have competency and capacity. It means that our client and members of our team who shall be involved in this contract should be of legal age. They should also be of sound mind when signing the contract. As McKendrick puts it, the parties must have the capacity to be legally responsible for their actions (43).
The contract must be made in writing or orally as long as future references can be retrieved. In most cases, the contract is written and signed by both parties for future reference. If it is made orally, there must be a neutral person who acts as a witness in the entire process (Singleton 64). All these six elements of a contract must be present for it to be admissible in a court of law.
Revelations Perfume and Cosmetics Inc. v. Prince Rogers Nelson
Revelations Perfume and Cosmetics Inc. signed a contract with Prince Nelson which stipulated that Prince will endorse all the new products of this firm as a way of promoting sales. In return, Prince would be entitled to some amount of the profits generated from the sale. When the company introduced new line products, Prince deliberately failed to make the endorsement as per the acceptance signed in the contract. The court awarded Revelations Perfume and Cosmetics $ 3.9 million for loss of profits (DiMatteo and Hogg 81). However, no further punitive measure was taken against Prince for the breach of the contract.
I believe the outcome of the case was fair. Prince had made a commitment, and the cosmetics company had relied on that commitment when it invested heavily in the new product. It was, therefore, a breach of the contract made for him to fail to undertake the tasks he had promised before. The failure led to a loss of profit for the cosmetics company. I strongly agree with the judgment that was made by the court. The company was compensated for the loss of profit resulting from the unfulfilled promises of the music started. This was the amount of money the company would have made if the breach had not occurred.
Albaric, Cristelle, and Marianne Dickstein. International Commercial Agency and Distribution Agreements: Case Law and Contract Clauses. Austin: Wolters Kluwer Law & Business, 2011. Print.
Cross, Frank, Roger Miller, and Frank Cross. The Legal Environment of Business: Text and Cases : Ethical, Regulatory, Global, and E-Commerce Issues. Mason: South-Western Cengage Learning, 2009. Print.
DiMatteo, Larry A, and Martin Hogg. Comparative Contract Law: British and American Perspectives. New York: Cengage, 2016. Print.
McKendrick, Ewan. Contract Law: Text, Cases, and Materials. Oxford: Oxford University Press, 2012. Print.
Schwenzer, Ingeborg, Pascal Hachem, and Christopher Kee. Global Sales and Contract Law. Oxford: Oxford University Press, 2012. Print.
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Singleton, Susan. Commercial Agency Agreements: Law and Practice. London: McMillan, 2014. Print.