Managing Contract Issues in Business

A contract represents an official agreement between two or more parties. It can either be oral or written. A valid contract has six elements which include an offer, acceptance, and consideration, intention to create a legal relation, certainty, and capacity. An offer initiates the process of making a contract, and it stipulates what needs to be done or delivered. Acceptance of an offer is the second element that indicates a commitment to deliver the contract within the conditions set out. Consideration refers to what the other person would get for delivering the contract. Certainty requires that terms and regulations be clearly stipulated and well understood by the parties involved. The parties entering into the contract should have the legal capacity of making a valid contract which requires them to be of age and sound-mind (Scott & Schwartz, 2003).

Failure to properly scrutinize the contract may expose the company to possible litigations and penalties for breach of contract. The terms of delivery of the products and the payment plan may affect the operations of the company. Another risk may regard quality and specifications of the part delivered mismatching the required parts.

Contracts of a sale of goods in the United States are governed by two laws: the common law and the Uniform Commercial Code. The common law contains governing laws for contracts dealing with real estates, services, insurance, intangible assets, and employment. On the other hand, UCC deals with contracts involving goods and tangible objects. Under the common law, a counter offer is taken a rejection of the initial contract unlike in the UCC where a counter offer may be considered a change and still form a binding contract. The terms of a contract under the common law require a description of the quantity, price, performance time, nature of work,  and identity of an offer be availed to make a contract valid. Under the UCC, only quantity is a must have in the terms. A contract modification of contract requires a consideration which is not mandatory under the UCC (Putman, Ghice, & Ramesh, 2016). It is important to understand and distinguish which law to follow in entering the contracts as it determines the manner in which the contract will be delivered.

BANK LEUMI USA, Plaintiff, v. David EHRLICH, et al., Defendants.

The case was filed by Bank Leumi USA (BLUSA) and sought a declaration on contractual limitation on its liability in relation to brokerage accounts of David Ehrlich, Enrique, Sara Goldstein, and Angela Tykocki who were the defendants is valid and enforceable, to remove the liability in contract or tort for losses that defendants suffered for their purchase and that BLUSA had no obligation to refund the amounts spent by defendants on purchase of Bonds. The case was brokerage accounts that the Defendants had opened in BLUSA and suffered losses through trades in these accounts. The defendants claim that the plaintiff (BLUSA) breached the contract by disclosing their confidential banking information. The court found out that these claims were covered under common law and not federal law (Bank Leumi USA, Plaintiff v. David Ehrlich et al. Defendants, 2015). The court granted the motion by BLUSA.

References

Bank Leumi USA, Plaintiff v. David Ehrlich et al. Defendants, No. 12-cv-4423 (AJN). (United States District Court, S.D. New York March 23, 2015).

Putman, C., Ghice, P., & Ramesh, A. (2016). CISG v. UCC: Key Distinctions and Applications . The Business and Management Review .

Scott, R., & Schwartz, A. (2003). Contract Theory and the Limits of Contract Law. Yale Law School Legal Scholarship Repository .