Concluding contracts
Yvonne Harvey, Contributor

It is so good to be with you all once again. This week, we will conclude our study of the topic 'Legal aspects of a business: contracts'. At the end of the lesson, there will be a past-paper question for you to do. There will also be some multiple-choice questions. To answer these, you will have to recall information from the last three weeks.

Types of contracts

SIMPLE CONTRACTS

Simple contracts may be oral, written or simply implied by the conduct of the parties. They are the most basic contracts and do not require any deed or document. An implied contract is one which is not written. It is understood. For example, when you travel by bus or taxi, it is implied that you must pay the fare. We make simple contracts every day of our lives.

SPECIALTY CONTRACTS

Specialty contracts are also known as formal contracts or contracts under deed or seal. These must all be in writing and be signed by all the parties concerned. Signing means that each person must affix a signature to the document. These contracts must also bear a seal, which is a raised design that cannot be erased. In addition, a specialty contract must be delivered and it is customarily witnessed. Delivery of the contract means that all parties must have a copy of or must have at least seen the contract. Examples of specialty contracts include contracts for sale and lease of land, house or other property mortgage contracts and hire-purchase agreements.

CONTRACTS OF RECORD

Contracts of record are obligations imposed upon someone by a court, ordering him or her to do or not do something. For example, a court might instruct a business to cease trading. This type of contract includes the court placing an injunction on the building of a house or some other building. When a man is ordered by the court to support his child, this is also a contract of record.

Questions

Colin signs a rental-lease agreement to pay Janet $10,000 per month for 12 months for her house. At the end of the 11 month, Colin decides not to pay the rent for the last or 12 month of the contract. He said since he has paid one month's deposit, Janet should keep that for the rent. Janet informs Colin that 'the contract states that the deposit should be returned in full or in part at the end of the 12th month, depending on the terms and conditions of the contract. Janet decides to take Colin to court.

(a)(i) Define the term contract. (1 mark)

(ii) Identify the category of contracts into which a lease agreement falls.
(1 mark)

(b) Identify four requirements of a contract. (4 marks)

(c) Advise Janet whether or not she would succeed in a court of law. (3 marks)

- CXC January 1999

Choose the best answer in each of the following questions.

1. Contractual capacity means that

A. there is the ability or capacity to perform obligations.

B. there is a legally binding contract.

C. the contract can be void or voidable.

2. An article in a shop window without a price tag, which is there as a means of advertising, can be:

A. an offer for sale.

B. an invitation to treat.

C. a window decoration by the shopkeeper.

D. an acceptance by the shopkeeper to accept offers from the public.

3. A legally binding contract does not exist if:

A. there is an offer and an acceptance.

B. both parties do what they promised.

C. there is some form of consideration.

D. there are two offers.

4. Terminating a contract can be achieved by all of the following ways except:

A. mutual agreement by both parties

B. completing performance.

C. taking unilateral action.

D. the death of one party.

5. A specialty contract can best be described as one which:

A. is written out very clearly.

B. is signed, sealed and delivered.

C. has a lot of conditions attached to it.

D. is typed out only in capital letters.

Answer to multiple-choice questions

1. A

2. B

3. D

4. C

5. B

That is it for this week. Remember to do additional reading on contracts from your textbooks. It would also be good if you could also practise some other questions on the topic. Bye for now.

Billionaire Sir Richard Branson (right) is also quite the comedian as he jokes with Earl Jarrett (centre), general manager of Jamaica National Building Society, and Leon Mitchell, an executive at the company, at a function hosted recently by the Mona School of Business at the Ritz-Carlton hotel in Montego Bay. The event, which began on November 28, was held under the theme 'Threats of Global Upheavals and Economic Crises: Stimulating Stability through Innovation and Creativity'. - Contributed

Yvonne Harvey teaches at Glenmuir High School.