LAW

Law

Law

The law of contract is a set of rules governing the relationship, content and validity of an agreement between two or more persons (individuals, companies or other institution) regarding the sale of goods, provision of services or exchange of interests or ownership. While this is a wide definition it does not cover the full ambit of situations in which contract law will apply. The reason for this is due to the vast number of examples in which contracts can arise in everyday life.

Contracts, corporate buy-outs, mergers and other business matters can become very complicated and time consuming for both sides. It may take months or even years to hammer out all of the details surrounding a proposal. Meanwhile, creditors and stockholders may start to wonder if the 'other side' is genuinely interested in completing the process. This is the reason many company representatives draw up a 'letter of intent' early in the negotiating stage.

A letter of intent is a document which spells out the general plans of an individual or company involved in a business deal. If a large company plans to buy out a small manufacturing plant, for example, a letter of intent might contain a specific date for the proposed sale to take place. A letter of intent might also include plans for expansion or downsizing staff levels or rehiring employees. It is not the same as a legal contract, but an official letter of intent can be treated as a demonstration of good faith.

One of the major reasons for seeking a letter of intent from the other party is to provide investors with tangible proof of the deal or potential takeover. It is not unusual in the business world to make or receive numerous offers for lucrative deals or contracts. Most of these informal maneuvers never materialize into real agreements. Having a letter of intent allows a company to arrange for additional financing or report the new development to employees and stockholders.

Contract law has been more formally defined as a promise or set of promises which the law will enforce. Another definition and a somewhat competing view, is that a contract is an agreement giving rise to obligations which are enforced or recognized by law. Either definition confirms the involvement of the law by way of enforcement, suggesting that should there be an infraction or breach of the terms of the agreement then the aggrieved party may seek recourse via the Courts. As is noted above, a contract can arise is a plethora of scenarios; from buying a loaf of bread in the corner shop, to the sale of a house. It is unsurprising therefore that certainty is needed before the Courts will intervene to enforce any agreement(Downes, 2007 ). The law of contract has confirmed the basic foundations of any contract, regardless of its complexity and substance that it must contain to make the agreement enforceable in law.

There must be an offer and this must be accepted to make an ...