Case study

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Casestudy

BusinessContract

FrankUnderwood runs a food concessions business called “House of Cards”.He bids for the provision of food concessions at St. Mary’sUniversity and wins the bidding process. He enters into negotiationwith Zoe Barnes, an agent of the university. The signed a documentwhich contained the agreements during the negotiations. Despite theagreement, Frank Underwood refuses to sign the formal contractbecause the price is too high and the draft contract containsadditional terms which were not contained in the previous agreement.Thus, while the preliminaries negotiations were agreed upon, therewas no acceptance of the offer and thus the university has nocontractual rights.

Acontact is a legal agreement between two or more individuals orentities which is aimed at providing the parties with legalprotection. However, there are specific requirements that should bemet if the contract can be legally valid. Some of the basic aspectsof a contract include parties, parties’ consent, object andconsideration. The parties in a contract include the individuals orentities involved in the contract, which may not include minors orpeople with mental disabilities. The contract should clearly identifythe parties in the contract, including their names, addresses anddescriptions. A legally valid contract should consent between theparties. The consent should be mutual, free and communicated clearlybetween the parties. This means that the consent should not beobtained under duress, undue influence or fraudulently. Consent isvalid if both parties reach the same agreement. The contact is notvalid if the object being agreed to is not well defined. The subjectof the contract should be lawful and possible to define. For example,a contract to perform an illegal activity is not legally enforceable.Consideration means that the parties involved in the contract shouldbenefit from the agreement (DiMatteo, 2013).

Therefore,a contact is legally valid and can be enforced legally if all theparties in the contract are in agreement. In business contract, thismeans that one party has made an offer while the other party hasaccepted it. Secondly, something of value has to be exchanged betweenthe parties involved, resulting into mutual benefit. While somecontract needs to be in writing, not all contracts should be inwritten format. In some jurisdiction, contracts lasting for more thanone year should be in written form (Boundy, 2010).

Todetermine whether SMU had contractual rights against the House ofCards, it is important to look at all the requirement of a legallybinding contract. Although it may seem obvious, all the partiesinvolved in a contractual agreement must agree on all the issues inthe contract. However, there is a thin line between preliminarydiscussions that set the tone for the contact and full agreement thatleads to a formal contact. This is very evident in St. Mary’sUniversity and House of Cards case. Although both parties were inagreement during the preliminary discussions, they failed to agree inthe content of the draft contract. However, the law clearly defineswhen a contract exists. This is essential in determining borderlinecases.

Basically,a contract exists if one party makes an offer and the other partyaccepts. This can be done orally or in writing. Majority of contractsthat occur on day to day activities are not written. For example,when someone takes a car to the mechanic for a routine maintenance,the mechanics make an offer which the client can accept or reject. Itthe client allows the mechanics to precede with the job, he hasaccepted the offer, although the client can bargain to reach anagreeable offer. On the other hand, if the offer is accepted, but theclient expects the client to do an extra job on the car, in additionto routine maintenance, there is no contract unless there is anagreement (Boundy, 2010).

Inorder to determine borderline cases, determining when an acceptanceof offer occurs is critical. In the case of St. Mary’s Universityand House of Cards, it is clear that the acceptance of offer occurswhen the House of Cards signs a contract formulated by theuniversity’s lawyers. Although there was a preliminary agreementbetween the House of Cards and the university agent, it did notamount to a contractual agreement. In some cases, an offer is notquickly accepted and a party may require time to consult or seek fora more beneficial deal. However, this was not the issue in this case.The two parties had made preliminary agreements but the House ofCards rejected the draft contract because it contained elements thatwere not agreed between the two parties. House of Cards and the agentsigned the agreement of negotiations as evidence that negotiationstook place and what was agreed upon. It is evident that this was notthe contract. Additionally, during the drafting of the contract,lawyers included some elements that were not agreed upon duringpreliminaries negotiations. This means the provisions of the draftcontract were not agreeable between the two parties. Consequently,the university does not have contractual rights against House ofCards. This is because the House of Cards did not accept the offer bythe university.

References

Boundy,C. (2010). Businesscontracts handbook.Burlington, Vt.: Gower Pub.

DiMatteo,L. (2013). Commercialcontract law: transatlantic perspectives.Cambridge: Cambridge University Press.