Business Law: Contracts
Though the commonness of contracts in the business environment is taken as given, their significance in everyday activities is habitually overlooked. Surprisingly, almost all activities that people undertake, such as online shopping, apartment leasing, and goods delivery, among others, are regulated by contract rules. People, companies, or entities might enter into binding contracts. In the case study, Sam Stevens agreed verbally to supply 1000 units of his invention to a chain store. He also informed his landlord Quinn about his invention, and he wished him luck. However, Sam has received an eviction notice from Quinn, claiming that his invention is disrupting other tenants’ quiet enjoyment. The chain store has also sent him a letter, demanding that he delivers the promised 1000 units of his invention immediately. Extensive analysis shows that there are many elements of contracts that will determine whether Sam should be evicted and whether he is legally bound to supply the units as demonstrated hereafter.
In the given case, various elements must be present to prove that a valid contract exists between Sam and the chain store. The four elements are mutual assent, consideration, contractual capacity, and legal subject matter (Kubasek, Browne, Herron, Dhooge, & Barkacs, 2012). The element of mutual acquiescence would be reasoned to exist if there was an offer made and an acceptance seen. In the case study, the contract may be valid since Sam made a verbal acceptance of an offer to deliver 1000 units to the chain store. The second element, consideration, would be said to exist if there was a discussion of or agreement on what Sam would receive in return for delivering the promised 1000 units. The case does not mention any form of compensation or payment for Sam’s work, which might make the contract unenforceable. The element of contractual capacity would be considered to exist if both parties had the legal ability to enter into a binding contract. Since there is no demonstration of Sam or the store manager being incapable of entering into a binding agreement, it can be assumed that both parties had the contractual ability. The last element of legal subject matter provides that, to be enforceable, all binding agreements should be neither unlawful nor in contradiction to the public policy. Both parties’ interest is the invention, which can be stocked in stores and which, as per the description, is neither legal nor against public funding.
If indeed a contract exists between Sam and the chain store, there are other reasons not discussed in the case that may render the contract invalid. First, the element of contractual capacity requires one to understand the terms or words of the contract (Kubasek et al., 2012; Burnham, 2011). Under this element, several aspects may render the contract invalid. First, if either of the two parties was under the influence of drugs or alcohol when they made the agreement, the contract might not be valid. Another reason would be if Sam were a minor when he agreed to supply the 1000 units. Further, in case Sam was coerced into agreeing to supply the units, then the contract might be invalid. Additionally, if either Sam or the store manager suffered from any psychological deficiency, then the contract may be rendered invalid. The element of consideration also provides that all contracting parties should gain something from the contract (Burnham, 2011). Even though he verbally agreed to provide the 1000 units, the validity of the contract might be revoked if the manager did not promise any return from which Sam would benefit.
In the absence of a valid contract between Sam and the chain store, a quasi-contract or elements of promissory estoppel may be present. Also referred to as an implied-in-law contract, a quasi-contract is a contractual obligation enforced by the court to preclude unfair enrichment of a party at the expense of the other (Kubasek et al., 2012). In the case study, a quasi-contract may be deemed to exist if the following facts are true. First, if a benefit was conferred by the claimant upon the defendant, the quasi-contract might hold. Furthermore, if the defendant appreciates and knowingly accepts the benefit, as well as if the defendant’s retaining of the benefits under the situations is unfair, the quasi-contract may hold (Kubasek et al., 2012). In the case study, there was no mention of possible benefits for Sam; no goods were delivered, and Sam retained no benefits from the company. As such, the chain store would not prevail on a quasi-contract claim. On the other hand, promissory estoppel is a legal execution of an unenforceable agreement due to one party’s unfavorable dependence on the contract (Burnham, 2011). The principle might apply if one party made a promise with full understanding that the other party would rely on it. In fact, the other party does rely on the promise, and the only way to avoid an injustice would be to enforce it. In the case study, Sam did make a promise to send 1000 units, and the chain store relied on it. The chain store could also enforce this promise because, even though there was no consideration in the two parties’ verbal agreement, Sam did make a promise. In this case, the chain store would prevail on claims based on promissory estoppel.
A contract also defines the rights and obligations of both the landlord and the tenant. The defining agreement might be verbal or written. Landlords have the duty to ensure that all tenants enjoy peace and quiet in their environment. Thus, they have a right and obligation to evict tenants who do not follow the rules and regulations agreed upon in the contract (Kubasek et al., 2012). Tenants are also obliged to ensure that their neighbors enjoy a quiet environment. In the case study, some facts demonstrate that Sam has breached the contract. First, Sam’s new barking invention was making much noise, which made other tenants complain to the landlord. Consequently, Sam may have violated his duty to promote peace in the surroundings. Second, the landlord is obliged to keep the apartments quiet and peaceful, yet Sam’s device was violating the tenants’ quite enjoyment. Lastly, Sam can be said to have breached the contract because he invented a product for sale in his apartment, yet this was prohibited by the contract. On the other hand, some facts may support that Sam is not in breach of the contract. First, as mentioned earlier, he had informed the landlord about his invention, and Quinn had even wished him luck. The good luck gesture could have implied that it was okay for Sam to work on the product from home. Second, Sam had not sold any of his products so technically, he was not conducting any business. Based on the rights and obligations, Sam’s landlord has no grounds to evict him since he has not entered into any contract with the chain store. There is no consideration between him and the company. As such, he is not carrying out any business from the apartment. If Sam had made any deal with them, then the landlord would have had the right to evict him.
If Quinn tries to evict him, Sam might raise some defenses. First, he may argue that he is yet to sell or deliver any of his products to the store or that he did not agree on any form of payment. As such, the argument that he is conducting business from the apartment does not hold as the contract between him and the chain store is not valid. Second, he may argue that the landlord did, indeed, know about his business as he had specifically informed Quinn about his invention. Since Quinn had wished him luck, Sam can argue that he had landlord’s consent to make and test his invention in the apartment and that he may have entered into an implied contract with him. If Quinn were against the idea, he would have let him know the very first day when Sam told him about it. Therefore, he is not in breach of any contract.
In conclusion, contracts are of great value. If entering into an agreement, one needs to be keen on the elements that make a contract valid. Consideration, legal object, capacity, and mutual consent are the four main elements that people should watch for to ensure that the contract they enter into is valid. Further, it is important for one to be aware of quasi-contracts and promissory estoppels, which are contracts that are used when valid contracts do not exist. As demonstrated in the case study, contracts affect people’s everyday activities. Thus, one should be careful before entering into any formal or informal contract.