The Description of the Contract Between PrintCo and Worldnews Case Study

Identification of all of the elements of a contract in detail

Offer and Acceptance – PrintCo offers to sell 15 printing presses for One Hundred Thousand Dollars ($100,000) per unit. An offer reflects the expression of the willingness to undertake a bargain offered by another party to justify the offer and show that the item for sale is invited and the offer will be concluded. In this case, the offer was made to Worldnews, a company based in New York. Worldnews agreed to the offer and decided on the last price of One Million Five Hundred Thousand Dollars ($1,500,000). It is imperative to note that acceptance of the item for the offer may take place in many ways. It reflects the Worldnews’ assent to the terms thereof made by the PrintCo of Germany in a way that is required or welcomed by both parties. It is noteworthy that acceptance must maintain the terms of the offer between Printco and Worldnews. That is, no changes in terms are expected and any such changes may lead to cancellation or rejection of the offer. Therefore, any change in the offer implies a counteroffer between PrintCo and Worldnews, which both parties must accept before they can proceed with the sale.

Mutual Agreement – The parties agree to use the UN Convention for Contracts for the International Sale of Goods (CISG). This is mutuality of obligation between PrintCo and Worldnews, which is also referred to as ‘meeting of the minds’. PrintCo sent one of its employees to New York to meet the Worldnews CEO and agree over the deal on January 1, 2013. Mutual agreement shows that both parties had a mutual understanding and consent to expression of their agreement on the sale of printers. PrintCo and Worldnews had to agree to the sale of 15 printers (same items), in a similar sense and at the same time. The purpose of a meeting for a mutual agreement is to obtain an agreement, and therefore contract offer and acceptance are considered based on the objective attributes of what PrintCo representative and CEO of Worldnews said, rather than their subjective thoughts. In other words, any unexpressed subjective state of mind between PrintCo and Worldnews representatives does not constitute part of an agreement and is therefore invalid. In this regard, communication acts, and circumstances of communications involving the sale between PrintCo and Worldnews are vital for determining mutual assent. The offer is expected to be expressed and specific. Likewise, Worldnews is also expected to demonstrate obvious and explicit approval of sales agreement conditions highlighted in the offer. In case any of the parties contests a mutual agreement, the determination of the availability of a contract between PrintCo and Worldnews would be based on facts. Therefore, if it is determined that a party reasonably relied on the conduct of the other party to conclude, in this case then the outcome of the review would be considered under the law. PrintCo and Worldnews must also agree on the essential elements of the contract. Nevertheless, PrintCo and Worldnews may decide to agree on certain specific contractual terms, determine that they are to be a part of an agreement, and leave other contractual issues to be discussed later. On this note, organizations must consider a complete agreement that covers every contractual term and condition. This should be the norm and best practice. In some instances, a primary term may be left open for forthcoming negotiations and the agreement may be void as a contract because what can be enforced was left out. In addition, when a contract or mutual understanding between PrintCo and Worldnews differs substantially from the initial offer, then the offer is open for a court battle. Further, if any part of the negotiation appears to be leaning toward the last agreement but some constituents differ substantially from the offer, then that term should be removed from the offer. Finally, if the element in reference is vital to the provision of goods or services, then both parties should consider a new offer that accounts for that element.

Consideration – Worldnews consented to the last price of One Million Five Hundred Thousand Dollars ($1,500,000) but maintained that the contract must bear a clause highlighting that the meeting for any disagreement emanating within the contract should be mediated using New York law. In addition, PrintCo agrees that it will supply the printers by February 1, 2013. print and Worldnews have also agreed to incorporate a “CIF clause” in the contract. PrintCo has no prior business activity in New York and consequently, asked Worldnews to pay through a letter of credit. Consideration is a vital component of any valid and binding contract. It accounts for benefits or detriment to parties. In this case, PrintCo and Worldnews have agreed on CIF clause, arbitration using New York law, and payment is done through a letter of credit and goods must be delivered by February 1, 2013. Consideration, therefore, has consisted of both parties’ interests, benefits, rights, and responsibilities. Both parties are expected to fulfill their consideration and incur the necessary costs or bear responsibilities. In this case, there is no monetary consideration required.

Competent Parties – it is assumed that PrintCo and Worldnews are legal businesses that can enter into a contract. The company must be competent, as well as legal to engage in business and seek contracts. In addition, both representatives of the companies are of sound mind and legal age.

The legality of Purpose – PrintCo and Worldnews contract does not violate both laws of respective countries. The legality of purpose shows that the intent of the contract does not violate the law and therefore the contract is a legal undertaking. On the contrary, if both parties had based the contract on the illegal provision of printers, then the contract would not be binding between PrintCo and Worldnews because the purpose for which the contract is based is illegal. Thus, the certainty of the subject matter should be clear. That is, the terms of the contract should be sufficient to ensure that any disputes can be understood and obligations of PrintCo and Worldnews are determined through a court.

Proper Form – PrintCo, and Worldnews entered into a contract, but no details are provided. It is however imperative to note that contract in writing can also be oral. This is necessary to determine assurance of the contract subject matter. On this note, terms would be legally binding and they could be relied upon to determine obligations of PrintCo and Worldnews. The general principles about the indefiniteness of material terms and conditions of a contract are grounded on the idea that any party cannot agree to an offer to form a contract unless all components of the contract are logically clear. Therefore, PrintCo and Worldnews must agree on important conditions of their agreement to allow a court to implement it. All elements of the contract must be individually evaluated to ascertain their material terms. In most circumstances and as a common principle, an initiative taken merely to undertake a negotiation for a contract afterward equally cannot result in an implementable contract. For instance, it was not clear how PrintCo and Worldnews reached their contract. Nevertheless, parties can agree on some elements of a contract and consider them to be a part of an agreement but still leave out some parts of the contract to be agreed upon later. In addition, parties may leave out certain terms of the contract and assume that they are not essential. In this case, the courts may use implied terms to maintain the enforceability of the contract in case of a possible legal battle. In addition, a court may also decide to uphold a contract by identifying and providing missing elements in a contract. In such cases, courts may decide to validate elements of transactions instead of dismissing the case. However, a court cannot invent a contract where parties never had one. Further, they cannot introduce or delete essential terms. The decision to provide or imply missing aspects of the contract depends on the courts, but they must also evaluate certain facts of the contract and transactions. Time and place of performance are vital in any contract and may be supplied or implied by a court of law.

Conclusion

Both sides’ arguments will focus on the breach of contract and potential remedies. While the details of this contract are scanty, it is possible that PrintCo breached components of the contract. For instance, the company has increased pricing, it can no longer meet the initial agreed-upon date of delivery, and one of the printers is seriously damaged. Contract breach constitutes a failure to meet some or all components of the contract without any valid legal reasons as PrintCo had done. PrintCo failed to perform its obligations in a way that violated the initial standards of the agreement in terms of costs, time, and status of the printers upon delivery. On the other hand, Worldnews also failed to understand or assume that certain elements of the contract were not important. That is, the contract was final and therefore it would not require additional conditions related to delays, extra costs, and damaged printers. In addition, PrintCo had to ensure that its name is correctly spelled on the Insurance certificate before it is released.

In this contract, PrintCo is wrong for breaching all material terms of the contract. The company could have absorbed related costs, delays, and damaged printers. On this note, Worldnews is right and thus it should seek legal remedies. One may argue that the breach is minor because PrintCo did not deliver its bargain as promised. Nevertheless, Worldnews received the products at additional costs, time, and damaged machines. It is not clear whether the final contract indicated that “time is of the essence” to show that deadlines are firm and final. However, a specific date of delivery was agreed upon without a reasonable period for delays. This may be considered a minor breach of the contract. In this case, Worldnews, the non-breaching party, must still meet the requirements defined by the contract and pay for the goods. Nevertheless, it may sue PrintCo to recover damages associated with increased costs, delays, the damaged product, and possible lost profits because of delays.

Under the CISG provisions, both PrintCo and Worldnews have remedies. PrintCo, as the seller, has the rights to remedy based on the delays (Nachfrist Period). Hence, the request for additional time is valid because it is reasonable. The CISG strives to ensure that parties adhere to their contact. Worldnews, as the buyer, also has a right to remedies. Failure of PrintCo does not necessarily result in immediate contract termination. Avoidance applies and therefore, Worldnews can avoid payment. Hence, it may only pay for valid goods and adjust prices.

It is also imperative to recognize that CISG does not determine the validity of the contract, the legal capacities of the parties, contract misinterpretation, and failure to observe consideration.

The letter of credit will ensure that Worldnews pays for the shipped printers, eliminate risks while PrintCo can determine payment date, but not in this case because of the spelling mistakes. Worldnews will only pay for printers once documents to support the letter of credit have been verified. In addition, Worldnews can determine the delivery period and reduce the case of pre-payment before delivery of goods.

The parties agreed that any disputes that may arise could only be solved using the New York law. Therefore, parties are most likely to resolve their disputes in New York using the rule of law there, which could favor Worldnews but not PrintCo.