The Importance and Utilization of Contracts

Wilson Alston
MBA 610 - Business Law
Professor Saheed Dahar
Sunday, February 01, 2015
Southern New Hampshire University

Abstract
This paper will explore the formation, the everyday business decisions made, the principles and misconceptions of a contract. I will present two cases of law that will support my stance on the importance of contracts and why they are used in every aspect of business. I also will speak briefly on non-competition agreements and how they differ from standard contracts. My research will consist mostly from the course textbook, internet articles and supporting cases that were held in a court of law.

“A verbal contract isn’t worth the paper it’s written on” – Samuel Goldwyn

Introduction In the world of today, our society, past and present, has always performed business by the use of contracts. For instance, the Declaration of Independence, which our nation proudly prides itself of, exemplifies a contract. The day that you purchase your first car, and sign the bill of sale or lease, is a contract. Not to mention, making a calculated pledge to donate money for a charity can also possibly be a contract, which will be explained soon after. A verbal or written agreement between two or more parties for which something is obtained, a service or product, is a contract. In contract law, the definition of a contract is “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” (Twomey & Jennings, 2013) However, in order for a contract to be enforceable due to breach or non-compliance, it must be written. A contract should have five elements for an agreement to be constructed properly, and most importantly, legal. First and foremost, both parties must be fully compliant and in good health. Everyone involved should have a clear understanding of the agreement and should be aware of any wrongdoing. On the other side, if proven that either party who breaches the agreement was a minor or not competent, the agreement could be null and void in a court of law. Next, the subject matter must be clear and legal. As a contract is being produced but by windfall has intentions of being performed illegally or having goods obtained criminally, by law, it would also be annulled. Subsequently, legal consideration must be provided and collateral shall be presented. Collateral is needed to guarantee that both parties will have something to lose if the agreement does not come full circle. It gives incentive to all parties involved to assure all details of the contract be executed according to plan. Last but not least, mutuality of agreement & obligation are the last two elements needed to perfect a contract. In an agreement, something has to be offered to make both parties engage in the deal. Without the product or service, no offer can be made to solidify the arrangement.

Law & Business Decisions There are significant areas of contract law that impacts every business, small and large, on a regular basis. In business, whether it may be company or a corporation has employees that each follows a set rules and guidelines. Many companies form a code of conduct to explain all parameters of what the employer expects, such as, the behavior necessary to provide a clean, stable working environment, positive attitude with other co-workers and respecting chain of command. In exchange, the employer can assure your safety, protection and your compensation of work. Careers are divided by two forms of employment, salaried and hourly. Most salary workers are required to sign an employment compact to clarify how much they will be paid on an annual basis, their specific job duties, and the required performance. The employment compact serves as a contract between both parties, employer and employee, which directs as an important business decision to help protect each other.