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Posted: August 16th, 2022

The Law of Contract

The Law of Contract
Question 1: The law of contract is founded on the overarching concern for fairness
A contract is a legal agreement that two people, or even more, may enter into with a common objective in mind. However, these parties may lay down certain terms and conditions that each of them must adhere to as indicated presentation 1 (BUS-393-CLASS-1-LEGAL-RISK-AND-LEGAL-DISPUTES) specifically slide 11. If one or all of them fail to meet the objectives or break the terms of agreement, the contract may be considered to be void or terminated. In some instances, if valuable resources were part of the contract, the issuers may require the issued to return them. However, returning such resources may be difficult if they have been utilized to their completion. As a result, the issuers may be forced to involve a third party in solving their disputes and if he or she fails, a court of law may be involved as well.
From the understanding of the law of contract, any contract should not only be based on the availability of the terms of agreement but also operate within the clauses of the jurisdiction’s laws. If it meets the legal laws set in the country, the contract should be fair for both parties involved in setting it up. In signing of the contract between the involved parties, as mentioned in the introduction section, various terms and objectives are defined for the contract term (Stone & Devenney, 2017). Additionally, the parties involved do agree that a certain product, valuable resource, and/or material will be exchanged from one party to the other while payments are made. A third party may be involved in the witnessing of the sealing of these contracts if it is a must. Fairness, thus, plays a key role in the completion of the agreed contract as well as its terms. The contract must come to a completion when every material and/or agreed resources have been exchanged as it was required. Here, both parties must be fair to meet the demands of the other party as well as making sure that all terms are not violated while their businesses are being conducted.
On the other hand, fairness may be breached if one party fails to deliver the required resources and/valuables to the other parties after he or she has benefited with the payments. Or, in another way, one party may deliver the required valuables but stand a chance of breaking several terms of the contracts. In either case, the contract may never be complete as one factor or the other has been broken (O’Sullivan, 2018). The third party that was once involved in the agreement may be called to ensure that fairness is installed in the breached contract. If he or she fails, a court of law may be involved where the party that breached the contract may be sued. In addition, the court may use two ways to bring fairness in the contract. First, it may be forced to follow the terms of the agreed contract and fine the breaching party for breaking the law of contract. Secondly, the court of law may consider revising the business conducted by the parties if they are fair to one another or not. For example, a contract between two parties for selling a 1 hectare piece real estate in the upcountry at a value of $120 million may sound extreme. Therefore, the law court may be forced to rule in favor of the buyer as the contract does not make sense as well as being unfair to one party. In summary, the above statement is true as all contracts must be conducted by ensuring both parties are fairly treated and served.
In addition to the lecture classes that we have had, I have been enlightened to the point of noting that contracts must be agreed upon based on the mutual understanding. For example, in the lecture presented by presentation 6 (BUS-393-CLASS-6-CONTRACTS-3), there are terms and conditions that both parties must agree to set. For example, in slide 7, it was noted that a term may be a length of how long the contract will run. Several conditions may be implemented as well including monthly or daily update of the progress of the signed contract. This way, both parties will adhere to the set rules and terms. Take, for example, a contract between two parties where a supplier will be supplying a seller with goods on credit for a certain period of time. If the supplier fails to keep his promise, the seller may conclude that he or she was unfair to him for not keeping his or her word. Thus, the contract may cease to exist. As indicated by slide number 9, the seller may sue the supplier for damages that he or she caused him or her. This is because the supplier failed to keep up with his or her word as agreed while signing the contract. Thus, the above statement is correct as every party must be fair to the other in order for the contract to be legit. As we learned and as it was presented in the same presented under slide 14, fairness must be reached even in the beginning of the contract. Here, the parties involved must be fair to one another while they are setting the terms. For example, it can unfair for a supplier to be told to offer goods on credit but receive his or her payments after one financial year. Such contracts may never exist. Thus, the above statement is true as every contract, that is to live, must be based on fairness between the parties involved.
Question 2: Martha, Mr. & Mrs. Ames, and Kelvin Smith’s loan contract case
To start with, there are a number of issues that arise in the loan case above. First, Kelvin Smith failed to inform Mr. & Mrs. Ames that the failure to pay the allocated $40,000 loan to their daughter, Martha, would result in their house being seized since it was used as a loan security. The term loan security, as Kelvin should have explained to the involved parties, is the asset or assets that are used to cover for a particular loan that have a similar monetary value to the loan. Hence, such assets can be sold or auctioned by the loan creditor if the debtors fail to pay their loans over the allocated time. Instead of informing them this fact, Kelvin just told them that nothing would come of the loan or happen to their house.
Secondly, the loan should have been given to Mr. & Mrs. Ames since it was their account and security being used to fund for the loan. If a case arises, Mr. & Mrs. Ames can sure Kelvin Smith for seizing their asset for a loan that they never received. Thirdly, Kelvin should have informed Mr. & Mrs. Smith that signing the mortgage papers meant that they are able and willing to sacrifice their house should the loan repayment fail to be met by the debtor. Instead of telling them this, Kelvin went ahead and lied to them that such signing was a traditional and normal way for the loans applicants. Finally, Mr. & Mrs. Ames have the capability of filing for a manipulation into a contract that they were not fully willing to enter into. This fact is because Kelvin lured them by a 4.5% loan rate with a mortgage without asking them if they would wish to issue another asset as a security to the loan.
On the argument side, Mr. & Mrs. Ames have the legal right to sue Kelvin Smith for manipulating them into signing into a contract with knowledge gaps. For instance, they were informed that nothing would happen to their home as the loan was very secure only to see the TD Bank seizing their home. Secondly, they would argue that they were manipulated into a contract without being asked if they would offer another asset as a security for the loan. This argument may be viable particularly if they have other types of assets such as motor vehicles, land, and running businesses. Finally, Mr. & Mrs. Ames can argue that they never received the loan directly to their hands and it may be difficult for them to fund a loan they never received. This point is very legit as there is no record of the loan cash being transferred to their business or personal loans. As a third party in solving this case, I would consider these arguments as they are very true.
Likewise, Kelvin Smith may present his arguments like the following. To begin with, he was humbly approached by Mr. & Mrs. Ames for a loan product that would be issued to help their daughter run her gym business, Martha’s Gym. Thus, he prepared a good secured loan with a solid base for the two parents that would return an interest rate of 4.5%. Secondly, Kelvin may be allowed to indicate that, after working with Mr. & Mrs. Ames for over 35 years, he assumed that they were very capable of understanding all loan requirements as well as repercussions if such loans went unpaid. Thirdly, Kelvin can claim that he, as required by the TD Bank, all business or personal loans must be secured by a valuable asset that is of equivalent value to sum of the loan or of a higher value. This is because such assets may be sold and/or auctioned by the bank to retain its loan amount in case the loan borrower fails to pay the loan. Finally, he, Kelvin, may present an argument that he gave them, Mr. & Mrs. Ames the loan’s terms and conditions’ documents to sign. At this stage, he expected them to read and understand the terms before signing them as a way to accept them. Additionally, he never forced either of them to sign the papers as they did it willingly to save their daughter’s business.
There are various legal principles of a contract that may apply to this case. These principles include offer, acceptance, consideration, the contents of the contract, and all the formalities aligned in sealing a contract deal (Stewart, Swain, &Fairweather, 2019). To start with, both Mr. & Mrs. Ames and Martha were presented with a loan product of $40,000 that they had requested. It seems that all the parties, including Kelvin, were okay with it. Secondly, Mr. & Mrs. Ames gladly accepted the offer by signing the loans terms and conditions’ papers (Hagendorff, Lim, & Nguyen, 2019). Thirdly, a consideration was included in this contract where their house was to act as a loan security instead of the Martha’s business’ assets. Fourth, all the contents of the contract were presented on the table while the contract was being sealed. For example, Martha was to receive the loan while Mr. & Mrs. Ames were to fund for the loan’s security. Finally, all the considerations of the loan contract, such as disbursement of the loan to Martha’s relevant accounts, were all settled. Thus, the case becomes easy to solve as Mr. & Mrs. Ames accepted the terms of the loan as well as Martha receiving the loan. Hence, it will be okay if the house is seized after Martha failed to pay the loan. This case can be linked to the 2010 Canada vs General Electric Capital case (Courts of Canada, 2018). Therefore, the house should be seized as they gladly accepted the loan offer by signing the terms and conditions’ papers. In addition, Kelvin’s side had a misrepresentation of information. Here, as we studied in lecture presentation 5 (BUS-393-CLASS5-CONTRACTS-2), a similar case of misrepresentation of Wallace versus Shawn, emergence of wrong information after a contract has been signed is solved as a breaching of contracts. Furthermore, this argument results in the ability of Mr. & Mrs. Ames suing Kelvin for rescission plus damages as indicated in slide 11. This fact is because Kelvin was negligent to offer complete information.
Question 3: Janet and Alphonse Owens’ versus Charles Conlin case
Liabilities
To begin with, the contract between these two parties was based on the completion of the Owens’ house in accordance with the design, specifications, and price as well. However, Charles Conlin failed to meet the set terms of the contract by causing the following faulty liabilities. First, Conlin did not complete the proposed house on the specified time for construction. Secondly, he, as well as the constructors, failed to deliver the proposed designs of the house as it was originally planned as per the agreement. Thirdly, Conlin did not meet the British Columbia Building Code as, after Alphonse assessed the house, it was structurally unsound where the center was dropping. To be precise, Janet wanted a see-through fireplace to be placed in the junction between the living and dining room, a design that was wrongly installed. Thus, the smoke in the building could not be eradicated due to lack of relevant air vents. In addition, another case arises where the Owens are forced to terminate Conlin’s contract and hire a new contractor, John Fraser. In the new contract, the Owens incurred a new cost of $450,000 even after paying $400,000 to the old contractor. This fact introduces a new breach to the original contract as the budget went past the originally agreed $750,000 price tag. Finally, despite the Owens having a 100% confidence in Conlin’s work, Janet Owen was abused by the Conlin and made to undergo depression due to the house’ design errors. In many ways has Conlin breached the contract and such allegations qualify for him being sued in a court of law to pay for the damages and breach of contract that he caused to the Owens.
Valuing claims
To start with, Conlin has caused the Owens to exceed their budget by an extra of $100,000. This fact is seen after he, Conlin, is forced out of the construction and John becomes the new contractor. This amount should be refunded to the Owens either in full or by dividing the expense between him, Conlin, and the Owens. This reason is because Conlin might have used the original $400,000 in paying the site constructors as well as attaining building materials. Secondly, Conlin made the Owens consume more time out of their proposed new home. Thus, he must be responsible for violating this agreement and paying them, the Owens, their losses in terms of the period past the construction deadline (Lu, Zhang, & Zhang, 2016). Thirdly, the final house that Conlin delivered to the Owens had several structural defects. This reason forced the Owens and John to dismantle the structure and rebuild new air vent system as well as the see-through fireplace. Even though Conlin argued that he could fix it with only $400, he should be made to pay the $10,000 that was incurred in the new complete reconstruction of the fire place. Finally, Janet Owen started suffering mental disorders that resulted from being stressed of their new home. Furthermore, she was abuse by Conlin of being ugly causing her to undergo mental torture. As a result, Conlin should be subjected to the payment of all medical bills that Janet may incur when visiting a psychologist. An example is the breach of contract relating to this case is the Anglia Television Ltd versus Reed 1972 case (Burrows, 2018). Conlin should refund the newly incurred extra costs either partially or fully to the Owens based on the agreements they may make. Also, Conlin should cater for the re-design and reconstruction fees as well as Janet Owen’s medical fees.
As we studied in our lecture, particularly in presentation 5 (BUS-393-CLASS5-CONTRACTS-2), misrepresentation of data, in slide 12, results in being sued for damages in information. Conlin indicated that he would complete the house at a specified time and with the specified design. The Owens, as a result, have the ability to sue Conlin for lies and damaging the terms of the said contract. Additionally, Conlin caused frustration to occur to Janet Owen. This is because her hope to see the fireplace in the middle of the house was never met on time. As we saw in the presentation 6 (BUS-393-CLASS6-CONTRACTS-3), frustration, in slide number 23, occurs when performance is impossible to happen. Thus, the Owens have a legal right to sue Conlin for this frustration. In addition, as we saw in presentation 4 (BUS-393-CLASS-4-CONTRACTS-1), a contract with so many errors cannot be long lived as witnessed by the Dickson versus Dodd’s [1876] 2 Ch. D. 463 (C.A.). Once the contract was rejected the Owens, the life of such a contract ceased to exist. It is this rejection that resulted to the acceptance of new contract between the Owens and John as stated by slide number 21.

References
Burrows, A. S. (2018). Contract, Tort and Restitution – A Satisfactory Division or Not?.In Restitution (pp. 3-53).Routledge.
Courts of Canada. (2018, April 9). Canada vs. General Electric Capital. November 2010. Retrieved from https://tpcases.com/canada-vs-general-electric-capital-november-2010/
Hagendorff, J., Lim, S. S., & Nguyen, D. D. (2019).Trust and Bank Loan Contracts.Available at SSRN 3183155.
Lu, W., Zhang, L., & Zhang, L. (2016).Effect of contract completeness on contractors’ opportunistic behavior and the moderating role of interdependence.Journal of construction engineering and management, 142(6), 04016004.
O’Sullivan, J. (2018). O’Sullivan and Hilliard’s the Law of Contract.Oxford University Press.
Stewart, A., Swain, W., &Fairweather, K. (2019).Contract Law: Principles and Context.Cambridge University Press.
Stone, R., & Devenney, J. (2017).The modern law of contract.Routledge.

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