Corporation: Business And Corporation Law

Question:
Discuss about the case study Corporation for Business and Corporation Law.
 
 
Answer:
Introduction:

According to law, a contract or agreement between individuals in which either of the parties can lawfully compel the performance of the other is known as enforceable agreement (Alan & Robert, 2003; p. 25). This means that the agreement or contract carries the force of law behind it. The courts can also become involved in enforcing contracts, with the inclusion of having a portion declared void. In the situation presented, Jane has simply made Jack an offer without stating a price limit of how much it should sell for. Therefore, the contract is rather open and it is Jack who is to decide whether or not to accept the offer. Moreover, he is not obliged by law to fulfill the particulars of this contract or act upon it.

Jane has made an offer to give her Lotus Super 7 sports car to Jack. She has not stated any price in terms of how much the car should go for. However, Jane has only stated the market value of this type of car in good condition. Given these facts, this type of agreement or contract is an unenforceable one even though it is still considered valid. Therefore, a legal entity cannot compel one or both parties to act on it or fulfill its terms and conditions since there is a public policy or statute making it unenforceable (Leigh, 2001; p. 74).  

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Jane may not succeed in selling her Lotus Super 7 sports car to Jack especially if Jack finds the offer unfavorable. Moreover, Jack is not legally liable to fulfill the terms and conditions of this particular agreement because it is only the market value which has been stated. On the other hand, Jack may counteroffer this offer by offering a lower price than the $25,000 for the sports car since he has already accepted it.

 

 
Jane offers to sell Jack her Lotus Super 7 sports car for $25,000. The market value for this type of vehicle in good condition is around $25,000. Jack accepts.
 
Issue
 
The issue here is whether or not an enforceable agreement is present when Jack accepts the offer.
 
Rules
 
As already indicated, an enforceable agreement is that which either parties can lawfully induce the performance of the other. In this case, there is an enforceable agreement because Jane has not only offered a selling value for her Lotus Super 7 sports car, but has also indicated the market value for this type of vehicle in good condition. In addition, Jack has accepted to fulfill the terms of this agreement. This means that he has been legally obliged to act on the contract, lest he be held liable for breach of contract.

Application/Analysis

Jane made an offer for her Lotus Super 7 sports car at $25,000. Notably, this price is similar to the market value of the vehicle in good condition. Jack has accepted the offer. One may conclude that the vehicle was in good condition because of the similarity in prices. Therefore, Jane would get value for her sports car and would not go at a loss.

Conclusion

Given the fact that this particular contract is enforceable, Jack would be held liable for breach of contract if he fails to honor its terms. Jane is also offering the vehicle in good condition and this is perhaps the reason why Jack has accepted the offer.

Jane offers to sell Jack her Lotus Super 7 sports car for $2,500. The market value for this type of vehicle in good condition is around $25,000. Jack accepts.

Issue

The issue here is whether or not an enforceable agreement is present when Jack accepts the offer.

Rules

In this case, the contract is enforceable. Jane has offered to sell her Lotus Super 7 sports car at a much lower value than its market price. This is an attractive price for any potential buyer. However, a contract or agreement, oral or written, may be difficult to enforce unless the terms therein can be evidenced or are admitted by the parties involved (Mather, 1999; p. 76). Once Jane has accepted payment or Jack has accepted delivery of the sports car covered by the oral contract, it makes the agreement valid even in a court of law.

 
Application/Analysis

Jane has offered to sell her vehicle to Jack at a lower price than that of its market value. Jack has accepted, making the contract valid. Looking at these facts, the parties involved are not only competent individuals who have the lawful capacity to contract, but have also agreed to the terms laid therein. There is also mutuality of obligation. Notably, Jack has apparently made a counteroffer and received a lower price than the vehicle’s market value. Jane has accepted the counteroffer and is willing to fulfill the terms of the contract.

Conclusion

If this was a court case, Jack would not prevail because he has already accepted the offer made particularly after making the counteroffer. It may be assumed that the vehicle is not in good condition and thus cannot be offered at its market value. This means that Jack has accepted to receive the Lotus Super 7 sports car at the value being offered by Jane, and will make the necessary repairs or alterations himself. Failure to pay for the vehicle may result in a legal suit.

A shipbuilder had contracted to build a tanker for North Ocean Tankers. The contract was in US dollars and didn’t contain any provisions for currency fluctuations. Approximately halfway through construction of the ship, the United States devalued its currency by 10%. As the shipbuilder stood to make a loss on the contract, it demanded that an extra US$3 million be paid or it would stop working. The buyer reluctantly agreed under protest to pay, as he already had a charter for the tanker and it was essential that it be delivered on time. The buyer didn’t commence action to recover the excess payment until some nine months after deliver. Will the buyer succeed in recovering the excess?

Issue

The issue here is whether or not the buyer will succeed in recovering the excess.

Rules

In the case presented, the buyer will not succeed in recovering the excess payment because it is considered to be void. A contract made not more than nine months or 180 days before the judgment against the buyer became uncollectible between the buyer and shipbuilder in which the former had a financial interest. If the tanker has experienced normal wear and tear, then the buyer shall be liable to the shipbuilder for the full amount the former paid for the contract (Beaston, n.d.; p. 43). Otherwise, the buyer shall only be liable to the shipbuilder for the market value of the tanker. From what can be deduced in the case presented, the contract did not include any provisions regarding currency fluctuations. An unexpected incident which was the devaluing of the currency by 10% was observed. This meant that the shipbuilder would incur losses on the initial contract. A contract between the shipbuilder and the buyer pursuant to which the latter has paid or agreed to pay the money to the former, and where the shipbuilder has not yet carried out the obligations under the contract, makes this effort uncollectable. The buyer in this case reluctantly agreed to pay for the loss incurred by the buyer following the currency devaluation. However, he did not proceed to recover the excess payment until some one hundred and eighty days after delivery.

 
Application/Analysis

The facts of the case are that a shipbuilder had contracted to build a tanker. In the agreement, there were no provisions with respect to currency fluctuations. Nevertheless, a fluctuation did take place and the shipbuilder refused to continue working on the tanker until he was paid an extra amount of money. Legal contracts or agreements seeking to offer clarity and certainty for parties involved require that certain components be agreed upon before being lawfully enforceable. These elements include parties, property, and price. The additional payment for the loss incurred was not included in the original contract and therefore meant that it would be determined by the purchaser’s word-of-mouth or promise (Slawson, n.d.; p. 90). There was no ‘wholly acceptable’ price or provisions for currency fluctuations in the contract. Moreover, there was no objective mechanism laid out in case of such incidents while the shipbuilder was building the tanker. The buyer was coerced into making the extra payment because he/she had a deadline to beat. Notably, he pursued the recovery of the excess payment nine months after the tanker had been delivered to him.

According to the law, despite the misunderstanding in between the fulfillment of the contract terms, the shipbuilder managed to complete the construction of the tanker and deliver it on time. He did not breach the contract. However, the buyer was late in pursuing this particular issue and thus rendered the recovery of the excess amount void. The buyer had an opportunity to cancel the contract with the shipbuilder when the currency fluctuated, but he did not. By law, when the shipbuilder communicated his disinterest in continuing to build the tanker for the buyer, he was indirectly breaching the contract. But since the buyer was willing to reluctantly cater for the loss incurred, the contract was not terminated (Bakan, 2004; p. 45). Notably, failure by the shipbuilder to carry out the obligation to provide the buyer with the necessary conditions within the time established by the contract and lack of proof of readiness of the tanker for shipment, constitute the shipbuilder’s failure to perform as per the contract. This condition is admitted as reasonable claim for the recovery of excess payment made by the buyer and the penalty founded on that payment.

 
Conclusion

Looking at the case presented, it has been established that the buyer will not succeed in recovering the excess payment. If this was a court case, it would be found that the shipbuilder has no case to answer and is not liable for anything. The fact of the matter is that the buyer made an effort to recover the excess nine months after delivery of the tanker. This means that the agreement of the contract had already been fulfilled despite the brief misunderstanding following the currency fluctuation. The shipbuilder did not breach the initial contract despite there being no knowledge of future occurrences. For recovery of excess payment in a contract to take place, there needs to be a number of conditions for instance the pursuance is made prior to the nine months deadline. Recovery can also be made if the contract was breached, and only partial fulfillment of the original contract was completed. The buyer can also be successful in recovery of payment if he/she had opted to terminate or cancel the initial contract at the point when the shipbuilder requested for additional payment following the currency fluctuation (Muchlinski, 2007; p. 77).

Recovery of excess payment would be made possible if this payment was made under fraudulent circumstances. However, the shipbuilder was quite clear about his condition despite the fact that the terms of the contract had not yet been fulfilled. The initial contract was binding and considered valid. Therefore, any payment that would be made in the course of the contract period would also be considered lawful. Moreover, the factors necessary for a contract to be considered valid or legal were present, for instance consent, acceptance, offer, consideration, contractual terms, and capacity (Seidl-Hohenveldern, n.d.; p. 97).  When changes were made in the course of fulfilling the contract, the buyer did not refuse to pay the extra charges. There was no fraud, carelessness, favoritism, collusion, or misrepresentation in this particular case. That is why the buyer will not be able to recover the excess.

 
References

Alan, S., and Robert, S, E., 2003. ‘Contract Theory and the Limits of Contract Law’. The Yale Law Journal, 113(3).

Alan, S., and Robert, S, E., 2010. ‘Contract Interpretation Redux’. The Yale Law Journal, 119(5).

Andrew, R., 2005. ‘The Limits of Voluntariness in Contract’. Melbourne University Law Review, 29(1).

Bakan, J., 2004. The corporation: The pathological pursuit of profit and power, New York: Free Press.

Beaston, J. E. ., and Friedman, D. E., n.d. Good Faith and Fault in Contract Law. USA: Claredon Press.

Buckley, F, H., 2005. Just Exchange: A Theory of Contracts. London: Routledge.

DiMatteo, L, A., n.d. Contract Theory: The Evolution of Contractual Agreement. USA: Michigan State University Press.

Kreither, R., 2007. Calculating Promises: The Emergence of Modern American Contract Doctrine. USA: Stanford University Press.

Leigh, B., 2001. “Freedom of” or “Freedom from”? The Enforceability of Contracts and the Integrity of the LLC. Duke Law Journal, 50(4).

Mather, H., 1999. Contract Law and Morality. Westport, C,T: Greenwood Press.

Muchlinski, P., 2007. Multinational enterprises and the law. 2nd Edition, Oxford: Oxford University Press.

Omri, B-S., and Bernstain, L., 2000. ‘The Secrecy Interest in Contract Law’. The Yale Law Journal, 109(8).

Posner, E, A., 2003. ‘Economic Analysis of Contract Law after Three Decades: Success or Failure?’ The Yale Law Journal, 112(4).

Randin, M, J., 2012. Bipolerate: The Fine Print, Vanishing Rights, and the Rule of Law. Princeton: Princeton University Press.

Seidl-Hohenveldern, I., n.d. Corporations in and under international law, Cambridge, UK: Grotius.

Slawson, D., n.d. Binding Promises: The Late 20th Century Reformation of Contract Law. Princeton: Princeton University Press.

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