The Legal and Regulatory Environment of Business

Part 1

The situation of sophisticated businesspeople can best be understood upon the review of the concept of unconscionable contracts. The primary goal of the principle of unconscionability is to rescue from hard bargains those who are largely disadvantaged in their dealings with sharp and sophisticated trader. The principle of unconscionable contract helps in the understanding of the nature of the transactions by categorizing them into; commercial and consumer transactions (Mallor, 1986). The commercial transactions are well catered under the unconscionable contracts. In consumer transactions, the parties involved are regarded as sophisticated traders. The general assumption under this is that the sophisticated traders are able to take care of themselves in terms of looking out of their own contract interests. Sophisticated traders should be held to their bargains. These parties not protected under Consumer Fraud Act. This because they parties are believed to be experienced, skilled and with equal bargaining power. Such consumers need to be made accountable for their bargains as they cannot make a claim of having been victimized into making the purchase by fraudulent and deceptive means. (Adelman & Linder, 2010).

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Ethical Standards

The case introduces an ethical dilemma that needs to be dealt with. The two positions in this case are; whether it was is ethical for Cem and Hakan to attempt to back out of their purchase agreements and get their money back and get their money back and was is ethical for 845 UN not to pay Cem and Hakan their money back. It is first important to consider how the situation got there. The purchase agreement was clear that if the purchaser defaulted, the 25% down payment would be kept by 845 UN as liquidated damages. Cem and Hakan pulled out of the purchase after the 9/11 terrorist attack.

Using the Ulitarianism approach that indicates that the best decision is the one that produces the greatest good and does least harm, it was unethical for Cem and Hakan to back out from their agreement, for this would have affected 845 Un company that had already indicated that these units had been sold. On the other hand, it was ethically right for 845 UN not to pay Cem and Hakan as this decision produces more good. The virtue approach to decision making indicates that virtues are dispositions and habits that help people act in a manner that reflects their highest potential of our character would lead to the same conclusion, in this case the action and Cem and Hakan cannot be regarded as an act of virtue. The risk that Cem and Hakan used as a reason for pulling out of their purchase agreement originated from the external environment that was not under the control of 845 UN. The two business had enough time and even had the attorney represent them in the negotiations which implied that they could have carried out risk analysis and considered such factors.

It was ethically correct for 845 UN to fail to repay the 25% down payment to Cem and Hakan based on the enforcement of the liquidated damages clause. The clause met conditions for the enforcement of liquidated damaged. Restatement 2d contracts 356 indicates that damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in reference to the anticipated loss due to the breach and difficultness in proofing of loss. The UCC 2-718 indicates that the breach by either party may be liquidated in the agreement that the amount is reasonable in light of the anticipated or actual harm caused by the breach (Mc Kenna, 2008). Using the two sets of law, it is justifiable for 845 UN not to make return the down payment as Cem and Hakan had defaulted and that amount was reasonable.

Part 2

Negotiation and Contract Formation

The process of negotiation is carried out with an aim of attain the following objective; maximizing the possibility of getting a good deal/agreement, to get into an agreement that will help fulfill its intended purpose, how to attain a lasting contract, and how to get into an agreement that will lead to subsequent negotiations (Tomlinson & Lewicki, 2015). The process of negotiation involves making of offers and counter-offers between the parties engaged in the process of contract formation. The initial terms provided by the offeror make up an offer. When the accepter requests for change in one of the terms, this is regarded as a counter-offer. The process of negotiation ends when the offeror and acceptor are in agreement of the terms of a contract. This is when the acceptance of the offer takes place.

The commencement of binding contract can be determined through the doctrine of offer and acceptance. The rules of offer and acceptance draw the line of a binding contract and differentiates it from any other type of relationship. As per these rules, contract formation is initiated by the offeror who makes a proposal or an offer. The offeree then accepts the terms as provided in the terms of the offer. The exact moment of formation of a binding contract is the when the offer that has been established by the offeror with certainty and in completeness is accepted by the offeree (Pannebakker, 2013).

In case of a conflicting language in the buyer’s purchase order and a seller confirmation, the sellers’ confirmation language controls the terms of that will be used in the contract. This may fail to apply if the form directly contradicts the terms in the buyer’s order wherein such as case the disputed terms would have to be renegotiated. This situation in regarded as a battle of forms that happens in a typical business scenario where a purchaser submits a purchase with standard unreasonable terms and seller acknowledges with equally unreasonable terms.

Under the UCC 2-207 can offer a solution when an issue of different language in buyers and sellers purchase order differs. The law here indicates that a definite expression of acceptance sent within reasonable time is regarded as an acceptance despite additional terms being indicated. The additional terms are to be taken as proposals for addition to the contract. In commerce between merchants are take to be terms of contract unless the offer directly limits direct acceptance of the offer or it alters the offer in material terms. This implies that in a contract of sale of goods then the additional terms are regarded as acceptance and thereby the contract is regarded as binding (Shaw, 1975).

Part 3

Socialism and Capitalism

The issue distribution of resources in a country where the most a country’s resources are held few wealthy individuals at the expense the majority impoverished citizen can better be understood using the principles of socialism and capitalism. In the capitalism perspective, ownership of private property and ownership of industries is allowed for individuals. This lead to creation a gap between the rich who own and control capital resources and the poor. On the other hand, socialism, refers to the concept where an individual is not allowed to have ownership of capital resources but the community collectively has control over these resources. The adoption of either capitalism or socialism economic factors is affected by a number of factors such as the historic antecedents of the people, the availability of wealth and natural resources in the economy, the political will of the people and the level of instability in method of governance.

One strategy that may be used for the redistribution of land from the few wealthy individuals to the poor might be through legislative process where laws are made governing the change in the economic model adopted by the nation. Such laws would govern the possession of the land owned by private individuals to government owned. Karl Marx had indicated that between a capitalist and communist society is a period of revolutionary transformation. This transition period involves a class struggle in an effort to bring out the radical changes. In this period, there need to be enacted laws that would allow for the restriction of all forms of private ownership for the factors of production and allow for the transformation of these resources into property of the society.


Adelman, M., & Linder, J. (2010). Courts Curtail the Application of the Consumer Fraud Act to Consumer Transaction . Association of Corporate Counsel.

Mallor, J. P. (1986). Unconscionability in Contracts Between Merchants. SW LJ40, 1065.

Mc Kenna, J. F. (2008). Liquidated damages and penalty clauses: a Civil law versus Common law comparison. The Critical Path, Spring.

Pannebakker, E. (2013). Offer and Acceptance and the Dynamics of Negotiations: Arguments for Contract Theory from Negotiation Studies. Erasmus L. Rev.6, 131.

Schumpeter, J. A. (2010). Capitalism, socialism and democracy. Routledge.

Shaw, B. (1975). UCC § 2‐207: Two Alternative Proposals for Change. American Business Law Journal13(2), 185-198.

Tomlinson, E., & Lewicki, R. (2015). The Negotiation of Contractual Agreements . Journal of Strategic Contracting and Negotiation .

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