Elements of a Contract

Antoinette Harrell

BUS 670: Legal Environment (MOD1822B)

Instructor: Kimberley Stock-Foster

June 18, 2018

Introduction

Contracts may be one of the most attractive but gray areas that should be approached with diligence by the people who are involved in them. For instance, one should engage their lawyer before signing the contract so that they may understand all the terms that are stipulated in the contract. The lawyers can know and determine things that would otherwise be opaque to any ordinary person. They also know where to begin. They would also have the capability of determining the loopholes that may be existing in the contract that would get an individual out of the non-compete for the term agreed on. All agreements that should be favorable for all the individuals and everything in them should be met there and then thus enabling a person to be at ease and free to do what they may be willing to do. This essay analyses and describes the five elements that are contained in a contract that should be in existence so that the contract may be enforceable. It also explains why the agreement of employment is governed by the Uniform Commercial Code or the common law. Lastly, the essay examines two circumstances whereby this non-compete assignment would be enforceable.

In all the legal standards a contract should be able to meet five elements for it to be termed as enforceable. Such elements include an offer, consideration, and acceptance to the offer, legality for the agreement to be enforceable and capacity. All these elements are utilised by the courts when they want to determine whether a contract is valid or not. This is something that is crucial and should be within the contract because when they are not available then it would be difficult for the court to determine whether the contract is valid in the first place (Seaquist, 2012). There should be occurrence of all the elements. When these elements miss in the contract then it is said to be void. In a contract the person who makes the offer is referred as the offeror while the person who is bestowed with the power of declining or accepting the offer is referred as the offeree. This serves as the initial stage of the contract since each party may change some aspects of the contract in the process. The two parties are involved in discussions and communications so that they come to an agreement. An agreement should occur before the other elements are involved. The next element is acceptance and there should be clarity when it is being stated in the agreement so that it may be valid. Without the acceptance then it would be difficult for the two parties to continue with the agreement since they are left in a stationary motion until the offeree accepts the terms of the offer. The third element is consideration. All the parties to a contract should offer something of value that acts as the inducement for the other party to enter into a contract. This exchange of values is referred as consideration by the law. The value that is exchanged does not necessarily mean that it is currency (Brandeis University, 2018).Rather it may encompass some promise of performance of an act that one is obliged to do by the law. It may also be a promise to refrain from an act. Courts analyse whether the agreement gets support by sufficient consideration through focusing more on the promises that the offeree makes of performance than those made by the offeror. Comment by Kim: Words in this green are quotes and closely paralleling paraphrases from the textbook. Comment by Kim: Words here in this green are quotes from https://contracts.uslegal.com/elements-of-a-contract/consideration/

For a contract to be enforceable then there should be a degree of capacity and competency. A natural person who agrees to enter into a contract should have the complete legal capacity to have some liability for the duties or terms that they agree to undertake. However, some individuals who are not liable to the duties of a contract include the mentally incapacitated, minors and the intoxicated people (Seaquist, 2012). The assumption by the law is that the minors are too naïve, inexperienced and immature to negotiate to terms that are equal with the adults and thus they are protected by the courts from being held responsible for entering into contracts unwisely. Another element that makes a contract to be enforceable is the writing requirement. Not all contracts require writing so that they may be legal but in almost all the states legislature there is the enactment of a law that states that some types of contracts should be in writing for them to be enforceable. Comment by Kim: Words here in gray are quotes from https://contracts.uslegal.com/elements-of-a-contract/competency-and-capacity/ Comment by Kim: Quotes from https://contracts.uslegal.com/elements-of-a-contract/writing-requirement/

Generally, the principles of contract law are understood and applied across the United States. Common law and Uniform Commercial Code (UCC) govern contract laws. Common law is concerned with the contractual transactions that involve services, real estate, employment, and intangible assets. UCC is concerned with the governing of contractual transactions that involve tangible objects and goods. UCC and Common Law have some differences that are distinct and it is essential for people to understand and know them when they are involved in transaction contracts. The contract between Fabulous Hotel and the head chef is mainly governed by the common law. This is because it is a contractual transaction that involves employment. Another reason why the contract is governed by common law is that Common law involves arrangements that apply all the elements for a deal to be enforceable. In the case of the employment contract between the head chef and the hotel these elements are in existence and they include such things as offer, acceptance and consideration. Such requirements are more stringent in these contracts as compared to the contracts governed by UCC. Common law contracts also involve acceptance to the offer. The acceptance should act as the mirror image of the offer so that they make up a valid acceptance. This means that there should be some similarity between the offer and acceptance (lumenlearning.com, 2018). If the approval is not similar to the proposal then it fails to meet the acceptance’ requirements and thus it does not add up to formation of a valid contract. In the scenario, it is evident that the head chef had already signed the contract meaning that he agreed to the terms of the agreement. Comment by Kim: Words here in yellow are quotes from http://www.assetprotectionattorneys.com/Legal_and_Business_Counsel/Contract_Formation_and_Review/Uniform_Commercial_Code_UCC_Contacts_vs_Common_L.aspx Comment by Kim: Words in purple are quotes from https://courses.lumenlearning.com/workwithinthelaw/chapter/formation-and-types-of-contracts/

There are various circumstances under which the non-compete contracts may be unenforceable. A non-compete will be termed as unenforceable or invalid when there are no limitations in geographical scope. These questions inquire whether the terms of the restrictions are reasonable when the geographical distance is concerned. For instance, if this particular contract held some statewide restrictions, then the court would hold the deal as invalid. In the businesses that are not limited by geographic scope, there is a likelihood of the court enforcing some restrictions on the physical business locations as well as restrictions on acquiring and soliciting the clients of the other party. Another circumstance when a non-compete contract would be unenforceable is when there are no limitations in time. Courts often inquire about the time duration of the restricted covenant and whether it is reasonable given the circumstances. There are time lengths that are placed in many self-drafted non-compete agreements that may be unreasonable (Jackson, 2014). For example, when one is operating a café and the agreement holds that the applicable person cannot run a competing business for one year will have the likelihood of being enforced by the court, unlike a deal that puts a time restriction of three or more years. Comment by Kim: Words here in this green are quotes and closely paralleling sentences from https://www.linkedin.com/pulse/20140929151034-19959056-4-reasons-why-your-non-compete-agreement-probably-isn-t-valid

References

Brandeis University. (2018). Fundamental Elements of a Contract | Brandeis University. Retrieved from https://projectmgmt.brandeis.edu/resources/articles/fundamental- elements-of-a-contract/

Jackson, J. (2014). 4 Reasons Why Your Non-Compete Agreement Probably Isn’t Valid. Retrieved from https://www.linkedin.com/pulse/20140929151034-19959056-4-reasons- why-your-non-compete-agreement-probably-isn-t-valid

lumenlearning.com. (2018). Common Law and Uniform Commercial Code Contracts | Work Within the Law. Retrieved from https://courses.lumenlearning.com/workwithinthelaw/chapter/formation-and-types-of- contracts/

Seaquist, G. (2012). Business law for managers. Retrieved from https://content.ashford.edu/: https://content.ashford.edu/