Business Contract: A Legal Agreement for Financial Obligations - Essay Sample

Introduction

The contract is a prominent feature in business transactions. A business contract is an agreement between two or more persons to fulfill their respective obligations that are often financial in nature. Contracts can be simple verbal agreements between individuals to complex formal agreements that require people versed in the law to interpret their financial implications on the involved parties (Schwartz & Scott, 2003). In the United States and many other parts of the world, the nature of business is a major determining factor of the legal principles that are applied not only in entering into a contractual obligation but also in resolving the disputes that may arise out of the contract. In the case study, Acme Fireworks is a business organization that sells fireworks in retail. Understanding the legal framework of operation, type of employment contract to give employees, and the need to abandon sole proprietorship is essential to assessing the viability of the company in the new line of business.

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Common Law, Uniform Commercial Code, and Acme Fireworks

Acme Fireworks is a business organization engaged in the selling of fireworks, and this takes place in the form of retail. When a business sells products in retail, it means that potential customers can acquire and use them for the purposes they may choose fit based on their needs. Acme Fireworks has installed displays of fireworks as a marketing strategy for the current and potential customers visiting their premises. However, the Acme Fireworks the owner has indicated that the company has received inquiries from large business organizations for fireworks displays. This means that the request to display fireworks is a new line of business. Since it is a different business altogether, it is critical to understand the right legal principle to apply to the engagements of Acme Fireworks with the new clients.

Determining whether common law or Uniform Commercial Code will govern the contracts involving the new line of business requires that the nature of the business is examined to assess where the category within which it will fall. The law of contract stipulates that contracts are governed by common law if the involved transactions are related to services, real estate, intangible assets as well as employment engagements. The fundamental aspect of this legal principle is that the items covered are not moveable or cannot be felt in most cases. The Uniform Commercial Code (UCC) is was an enhancement of the common law and deals with transactions that involve items that are moveable such as car leases, and this was meant to facilitate and ease commerce across the states(Tepper, 2011). Based on the requirements and provisions of the two laws mentioned above, the case of Acme Fireworks can be categorized under common law. The reason for this categorization is that, although the company's primary business is to sell fireworks in retail, the new demand by large businesses to display fireworks entails a service in that the customers do not consume the physical product but the display.

Formation of Contract and Five Elements of a Valid Contract

Offer

An offer is a promise to do something for somebody. It can be done through writing or word of mouth, depending on the nature of the business and persons involved (MacMillan & Stone, 2004). In the context of the case of Acme Fireworks, an offer was made as seen in the inquiries made by the large businesses regarding the possibility for the company to extend its display from the premises. Therefore, the engagement satisfies that first element of a business contract.

Acceptance

Once the offeree has received an offer, they need to acknowledge that they are aware of the matter formally. The acknowledged should be related to the subject matter of the offer. Communication affirming that the offer has been made and that the offeror is capable of doing something as a request by the offeree; such a situation constitutes acceptance. A critical aspect of the acceptance is that once the two parties must acknowledge the offer for it to be considered as an agreement regardless of whether the agreement is enforced or not (Bayern, 2013 MacMillan & Stone, 2004). In the context of the case study, Acme Fireworks an offer was made and accepted; the owner of the has indicated that he has received inquiries to display fireworks and he has accepted the offer since he communicated to the inquirers about the price per display of fireworks. Therefore, the owner of Acme Fireworks has entered into an enforceable contract.

Consideration

Consideration implies something in return the agreement has been reached. This is to say that once both parties have reached an agreement, then it is assumed that is something they exchange with each other. Consideration must be lawful for it to be enforceable. The promise is usually in exchange for a compensation which is monetary in the context of business (Hart & Moore, 2008; MacMillan & Stone, 2004). If John sells his house to Peter and the latter promises to pay $100, 000 in amount, then the amount agreed is the consideration for Peter and the house as the consideration for John. In the case under review, the owner of Acme Fireworks accepted the offer and informed the large businesses about costs relating to labor, insurance, and actual service. The consideration for Acme Fireworks' owner is the money to be paid for the three highlighted items and the large business take the display of fireworks as the consideration.

Capacity

Capacity to contract means that a person is legally capable of entering into a contract as well as can discharge the contract. The requirements here include having attained the majority age, sound mind, and also the overall competency to perform the actions required in the agreement. A contract between a minor and a person of unsound mind is voidable under the law (MacMillan & Stone, 2004). Regarding the Acme Fireworks case study, the contract is enforceable because it involves an individual who has been run the business for two years now. Although there is lack of clear information about the age and state of mind, the owner can be termed a person of sane mind because he managed to deliberate with the businesses about the costs and price per display of fireworks. Since he has been running the business for two years, he cannot be considered as a minor because he received a licensing to conduct the business. Therefore, the contract is enforceable.

Legality

A contract is legal to the extent that it involves legal activities. Legality implies that both parties must not be included in activities that are prohibited by the law as they engage each in effecting the consideration in the contract (MacMillan & Stone, 2004). If a narcotics buyer, for instance, fails to pay the seller, the latter cannot sue for compensation because the transaction involves illegal activity. Selling and displaying of fireworks is a legal activity, and the interest from large businesses affirms this position. Thus, the contract is enforceable in case of a dispute.

Personal Liability to Acme Fireworks if a Spectator is Injured During a Fireworks Display

Personal liability arises under the tort of negligence. The breach of this tort holds when one party fails to do what is reasonable within their power to avoid liability as a result of injury to third parties. For one to sue against negligence, the plaintiff must prove that the defendant had a duty to the plaintiff and failed to take the necessary precaution leading to physical harm such as injury, death or damage of property (Owen, 2007). In the case study, Acme Fireworks can be held personally liable during the display of fireworks if a spectator is injured if they failed to take appropriate caution to inform the spectators that it is for their safety if they stand at a safe vantage point when the fireworks are ignited. The company may also be sued if it fails to educate the clients and their employees about the danger of harm the display of fireworks may cause so that these businesses can in turn institute caution in their display grounds. However, the company may not incur liability if the measures of precaution are ignored by the spectators or the management of the businesses. Under such circumstances, it is not possible to prove that the proximate cause of the injury was a result of the failure by Acme Fireworks to instill necessary caution to avoid harm during the display of the fireworks.

Employment Types and Relationship Relevant to Agency and Acme Fireworks

Permanent/Full-Time Employees

Employees that fall under the above category attend work regularly and work for mutually agreed hours per week as specified in the employment contract. The affiliation of the employee with the employer is permanent in the sense that it will terminate on retirement or any other circumstances that may be specified in the contract agreement (Casale & Perulli, 2014). The advantage of this type of employment is that employees are assured of their future. Such assurances enable both the employers and employees to plan in long-term, which can, in turn, help the two parties enhance their economic status. At the same time, employees enjoy various leaves, including compassionate leave, sick leave, annual leave, and parental leave(Casale & Perulli, 2014). For Acme Fireworks, having permanent employees can be beneficial as the company begins a new line of business of displaying fireworks. The company can also benefit from the current healthcare law, which requires that small businesses like Acme Fireworks get subsidies to finance premiums for their employees. Employees having insurance cover will reduce the liability the company is exposed hence reduction of potential losses.

The disadvantage of full-time employment is that the company incurs additional costs to give benefits to employees. Medical insurance requires company contributions, which increases expenses for the employer. Employees who go on a leave of whatever kind cost on the company in the form of lost labor-hours (Casale & Perulli, 2014). In the case of Acme Fireworks, having additional permanent employees can challenging because the company has not been in business for a long time hence the expense is an issue of concern if profitability is to be sustained. The other demerit for adopting permanent employment can also be detrimental as the company will be forced to provide benefits for permanent contracts which may not be viable at the current operation standards of the company.

Part-Time Employees

The employees falling under this category attend work for a specific period of the day. Most usually, these employees work for fewer hours compared to permanent employees. The typical element of part-time employees is that they are guaranteed some hours per day. The advantage of this type of employment on the part of employees is that one can engage in other self-development activities, such as attending college while working, thereby encouraging flexibility. However, it can be challenging for businesses that want to make long-term plans (Casale & Perulli, 2014). If Acme Fireworks adopts part-time employment, it means that it provides specific hours for employees to work at the organization. Such a decision can give the company the freedom to manage their expenses as they plan about growth. The disadvantage with this is that part-time employees may not be reliable since they may be held up engaging in other activities outside working hours. This can undermine the labor needs of the company.

Casual Employees

These employees work on an irregular basis as per the demands of a given job arise if the amount of work at a given time increases the demand for casual employees. Therefore, casual workers have no obligation to accept offers of work or attend the...