Contractual Law in your Business

The wonderful part of being an American is that you can choose what you want to be, where you want to go, and how you make your money. The American economy is set up in such a way that any person with a good idea can improve their circumstances and become the next “big thing.”

When starting a business sometimes in is necessary to induce the help of others, also known as a business partners. Anyone who reads the new will know that our world is full of business partnerships that go south because of misconduct or breach of contract. This type of action can be very harmful to both parties; however in the event that it does occur, here are a few things you should know that might help you protect yourself.

Contracts:

A contract is a special agreement between two parties. In order for something to be a legally binding contract it must consist of five elements.
1. Agreement
a. The two parties involved must have a specific agreement on something.
2. Consideration
a. The promise (or agreement) must be supported by a bargained-for consideration that is legally sufficient.
3. Elements of Contract
4. Lawful object
a. Can’t be a contract to do something illegal
5. Contractual Capacity
a. Neither of the party members can be either drunk, insane, or a minor.

Contracts do not necessarily have to be signed in order to be legal and binding. Some contracts can be made void by the Clause of Mistake.

Clause of Mistake:

This means that during the negotiating of a contract if false information is given on either side there could be means enough to void the contract. There are two types of mistake. The first is unilateral mistake, and the second is mutual mistake.
- Mutual mistake is when both parties enter into a contract under false pretenses
- Unilateral mistake is when only one person has the false pretense of a contract.
Clause of mistake can void a contract, however if not handled correctly it can do more harm than good.

Misrepresentation:

Misrepresentation is where one party enters into a contract purposefully under false representation. Misrepresentation is characterized by these four principles.

1. The wrongdoer made a false representation of material fact.
2. The wrongdoer intended to deceive the innocent party.
3. The innocent party justifiably relied on the misrepresentation.
4. The innocent party was injured.

If any of these things occur in your contract with another you may be entitled to a voided contract. If you contract is void and you decided to sue you are entitled to certain damages. There are three types of damages.
o Compensatory
Award damage as if contract hadn’t been broken
o Consequential (foreseeable)
damages you can estimate
o Punitive (punishment)
Damaged amount for outright lying to the person and contracting under false pretenses