The logle Envaurmental of Business

5 pages (1250 words)

The Legal Environment of Business

Introduction The business environment in which activities are conducted is largely complex but for a long time has been characterized by agreements and negotiations, sometimes between businesses and individuals. Therefore, the essence of this research paper is to look at the features that characterize contracts.

The way in which a contract is made by the process of offer and acceptance

Offer and acceptance is one of the common contract methods in existence today. Two parties are involved; the one providing an offer (offeror) and the one accepting or agreeing to the offer (offeree). As a first step, legal contracts require both parties to agree on the subject of the contract (Goldman and Sigismond 2010). After that, the parties agree for appropriate way the contract can be made. The process now enters into negotiation process where the offeror make an offer (promise) to the offeree (promisee). It is always required that when this takes place, the offer in the context should be seriously intended, be definite and well communicated to the promisee. Serious intention is the key to make the contract legally recognized, since without serious intention, the contract is regarded as a less binding agreement (Goldman and Sigismond 2010). An offer becomes legally accepted when it is devoid of subjective intentions such as secret inner feelings by the offeror. In most cases, the court to legally recognize offer and acceptance contract, the parties are required to have intentions that are clear and objective in nature. Moreover, the terms expressed in the agreement should be definite in nature, where specific aspects such as price, time, quantity, and quality should not be vaguely expressed. In addition, the offer must be communicated clearly between the parties involved especially the promisee who has to understand the contents of the agreement before accepting. Lastly, the process should reflect a regally recognized invitation process among the parties and not done through coercion (Goldman and Sigismond 2010).

The difference between warranties and conditions

Contract whichever type or nature is generally perceived to be either a warranty or condition. In most cases, understanding whether a contract is warranty or condition may be problematic but the courts usually establish the rules of construction of contracts that in most cases are used to resolve ambiguities. Therefore, are certain specifics, which can be looked upon, and help in differentiating warranty from condition. First difference between the two arises from the purpose, which they serve. Condition usually constitutes stipulation aspects that are necessary to the primary purpose of contract of sale (Geet and Deshpande 2008). On the other hand, warranty constitutes stipulations that are collateral in nature (subsidiary) to the main purpose of contract of sale (). Another difference is brought about by the issue of breach. When a condition is breached, the party that is aggrieved has the right to sue for damages and also enjoy the right to repudiate the contract (Geet and Deshpande 2008). On the other hand, when warranty is breached, the part that is aggrieved only enjoys the right to sue for damages and not right for repudiate. Further, when a condition is breached, it is sometimes treated as breach of warranty and the same cannot be applied to warranty when it is breached. Lastly, condition goes direct to the root or core of the contract, while warranty does not go direct to the root of the contract (Geet and Deshpande 2008).

How mistake may affect a contract

Contracts may be appealing at first instance they are created and may be viewed to be fine without mistakes. However, unlike the common and general mistakes, contract mistakes exhibit unique feature in that it has to do largely with mistaken assumptions that are related to contract formation (Miller and Hollowell 2010). In many of the cases that involve contract mistakes, the courts sometimes face great difficulties in identifying and justifying a mistake that may in turn invalidate a contract. However, even in this dilemma, the courts classify two types of contract mistakes: mistakes resulting from judgment of market conditions; and mistakes of fact. Only mistakes of facts have legal significance and as a result can lead to a contract being termed void. Moreover, regarding mistakes of fact, they can occur in two forms; unilateral and bilateral mistakes (Gillies 2004). Unilateral mistakes are committed or initiated by one of the parties involved in contract while bilateral mistakes may originate from both parties in a contract. These two types of fact mistakes may have some impacts as far as the contract is involved. For instance, unilateral mistakes in most cases when they occur do not afford the mistaken party any form of right of relief from the contract (Miller and Hollowell 2010). As such, the contract generally is enforceable. Nevertheless, there exist two situations when exception may be accorded: when the other part had knowledge that mistake would be made; and also if the error (mistake) did not come about as a result of intentional failure or negligence (Miller and Hollowell 2010).

The meaning of intention to create legal relations

Contracts are normally seen to be legally accepted when there is clear intention, which can further be established by the court on the parties involved in the agreement. Intention is seen to be the first and vital requirement that should characterize an offer in an agreement for contract to be achieved. In most cases, courts usually advocate and require that intention in contract should be devoid of subjectivity that advance personal beliefs, assumptions or position of the offeror (Miller and Cross 2007). Intention to a contract should be objective in nature whereby all parties should act and operate on a balanced scale with adequate information and communication, and also adequate understanding of terms. In most cases, legal relation to intention is that, a contract is legal when is determined by what a reasonable person in the offeree’s position conclude the offeror’s words and actions means. As a result, contracts based on anger, jest or undue excitement do not qualify test of seriousness and objectivity of intent and are therefore not legally binding (Miller and Cross 2007). At the same time, contracts that offer is based on opinion is not legally binding since no evidence of intention can be established in such scenarios. Furthermore, in establishing the legal recognition of intention in contract process, the courts normally highlight and bring out aspects of preliminary negotiations, which in most cases do not account for offer that a contract may be based on. In such cases, preliminary negotiations are regarded to constitute invitation to agreement process and therefore lack tenets of intentions to be legally recognized.

The key points of the Unfair Contract Terms Act (UCTA)

This Act was established and legislated in 1977 by the parliament of United Kingdom. The Act plays vital role of regulating contracts in the country where in some cases it limit the operation and legal extend of some contracts. This Act operates on all forms of contracts that different businesses in the country undertake and one of the fundamental vision of the Act is to limit the applicability of disclaimers and liability (Scott, Black and Cranston, 2000). As an Act, UCTA aims to address two major broad theme-areas of; negligence and certain contractual terms. With regard to negligence, the Act defines and postulate on the nature of breach of any kind that originate from implied terms of a contract. In such cases, UCTA, terms of contract normally take reasonable care or exercise reasonable skill in the performance of a contract and of any common law duty to take reasonable care or exercise reasonable skill (Scott, Black, and Cranston, 2000). At the same time, UCTA posits that, no business, either by reference to any contract term or notice given to persons generally or to particular persons, excludes or restricts its liability for death or personal injury resulting from negligence. As an Act, UCTA has been regarded to have some impacts as far as contracts are concerned. Apart from preventing exclusion or restriction of liability, UCTA also prevent making liability or its enforcement subject to restrictive or onerous conditions, and prejudice of affected parties (Scott, Black, and Cranston 2000).


Contracts have emerged as formal agreements in which modern day business is conducted. The research has been able to establish various aspects and features of contracts. However, in most cases, fuzziness in understanding and interpreting contract remain the role of court and other legal mechanisms.

Reference List

Geet, SD & and Deshpande, AA 2008, Legal aspects of business, Nirali Prakashan, Mumbai, viewed 04 December 2011,

Gillies, P 2004, Business law, Federation Press, Sydney, viewed 04 December 2011,

Goldman, AJ & Sigismond, WD 2010, Business law: Principles and practices, Cengage Learning, OH, viewed 04 December 2011,

Miller, RL & Cross, FB 2007, The legal environment today, Cengage Learning, OH, viewed 04 December 2011,

Miller, RL & Hollowell, WE 2010, Business law: Text & Exercises, Cengage Learning, OH, viewed 04 December 2011,

Scott, C, Black, J & Cranston, R 2000, Cranston‘s consumers and the law, Cambridge University Press, London, viewed 04 December 2011,