A contract is considered to be a promise or agreement that is made between two or more parties and which can be enforced by the courts. A business contract is often established in cases where parties are dealing with things that are business related as seen in the case of Acme Fireworks, the retailer that sells fireworks, places the fireworks on the ground, and performs a large aerial display of fireworks, and the big businesses. However, for the contract to be valid, it must have the key elements that include consideration, offer, acceptance, legality, and capacity so that it can be enforceable. Before the business enters into a contract with the business, it is vital that it understands the body of law that will govern the contract.
The Body of Law that Will Govern the Contracts
When dealing with contracts, Acme Fireworks needs to understand the body of law that would govern them ( Burnham, 2012). Generally, there are two bodies that include the common law of contracts and the Uniform Commercial Code or UCC. Understanding where the contracts will fall is vital because it would have a difference in the outcome of a dispute that may arise in the contract. It means that it can result in a difference between modifying or discharging the contract, collecting punitive damage, and having the ability to sue for any form of breach of contract. In the case study, the law that would govern the contracts with the business is the common law because it deals with insurance, employment, real estate, intangible assets, and services. Acme Fireworks has received inquiries from businesses that want it to create various fireworks displays on a regular basis, which is a service that needs to be provided under the common law. The contract cannot be governed by the UCC because it does not involve the transaction with tangible objects and goods.
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Formation of a Contract
For a contract under the common law to be enforceable, it needs to meet the essential elements that include an offer. The first element of an enforceable and valid contract is the offer. An offer is considered to be an agreement or promise that is vital to ensure that there is a contract. However, in this case, the businesses did not give an offer but made inquiries. The inquiries by the businesses are considered to be an invitation to treat where they are inviting Acme Fireworks to make an offer and thus, is not intended to be binding. Acme Fireworks has been invited by the businesses to bid for the contract through the process of calculating the pricing of the display. It means that an offer has been made by Acme Frameworks which is valid because it involves at least two parties and all the parties are legally capable of entering into the contract. Both parties in the contract understood that an offer was being made and the expectations in terms of the price of the service and the form of service that would be performed. The next element of a valid contract is acceptance of the offer that has been made.
Acceptance of the offer from the businesses in the case study is vital in making sure that there is a valid contract ( Jones, 2015) . The offer that was made in the case study has been accepted by the businesses which are proven by the fact that no other negotiations have been made after agreeing on the cost of the fireworks. However, for a legal contract to be valid and enforceable, there need to be other elements apart from an offer and acceptance because it is vital to have consideration.
Consideration is a vital element of any contract because it is where a person is giving something back in return. It is an exchange that is often made between the promisor and the promise. Consideration is vital in making sure that a contract is legally valid. In the case study, the businesses ordered the creation of some fireworks displays regularly. By making the orders the businesses are agreeing to make a certain payment per display. The cost per display that includes insurance, the service that involves setting off the ordered fireworks, and skilled labor is the consideration. Apart from consideration, the parties need to enter into the contract on a voluntary basis. It means that they need to have the intent to create the legal relations.
The intention to create the legal relations is a crucial element and a necessity in making sure that there is a valid contract. An agreement is not a contract and is not legally enforceable without a common intention between the parties. In this case, there is the intention of entering into the contract by both parties. The intention by the businesses is seen from the fact that they have made inquiries about the services that are being offered by Acme Fireworks . The intention to create the legal relation is also seen from the fact that the businesses accepted the offer from Acme Fireworks . On the other hand, the intention to create the legal relation by Acme Fireworks is seen from the fact that they responded to the invitation to treat by giving an offer.
Finally, a valid contract is made when the parties to the contract have the capacity to do so ( Poole, 2014) . In this case, the parties to the contract are businesses that are operating legally and thus have the capacity to enter into the contract. Considering the fact that all the main elements of the contract have been met in the case study then the owner has been able to form a contract with the business that is legally binding and can lead to legal actions in case of any breach.
Personal Liability to Acme Frameworks if a Spectator is Injured
Performing the fireworks automatically attracts a level of personal liability to the company because there is the risk that a spectator might be injured by a stray firework. The employees from the company who would be involved in the setting up of the fireworks display would be considered to be agents of the Acme Fireworks, the principle in the scenario. It means that there is the existence of an agent and principal relationship in this scenario where the agent acts on behalf of the principle. Any action by the employees affects the principle who in this case is Acme Fireworks. The liability is more likely because as the principle, Acme Fireworks has the duty and responsibility to ensure safety, indemnification, and compensation. It has the responsibility of making sure that its skilled labors are well trained so that they can give the expected services safely. It is worth noting that as agents, skilled laborers cannot be held liable to any spectator who is injured by any stray firework if they are working within their employment guidelines. However, the level of liability is also dependent on the various types of employment and relationships that are relevant to agency law.
Employment Types and Relationships that are Relevant to Agency Law
Currently, Acme Fireworks has fifteen employees and it anticipates that it would need to hire new workers. However, the company estimates if the fire displays contract does not continue then it would not have the funds to pay the new employees. For this reason, the company needs to analyze the various types of employment, their relationships in relevance to agency law, their advantages, and disadvantages. The different employment type includes full-time employees, part time employees, contractors, and temporary employees.
Full-time employees are workers of a company who are engaged in the company on a full-time basis. These employees act as the agent of the company and their actions affect the organization. The advantage of full-time employees is that they are able to understand the rules and regulations of the company and thus are able to work as expected by the employer. Currently, Acme Fireworks has fifteen full-time employees working for it and the disadvantage of having this type of employees is that any action that they take can make the company be liable because they are considered to be agents of the company.
The second type of employees is the part-time employees or temporary workers who are crucial for the company because they often help when the work demand increases as seen in the case scenario ( Rush, 2006). The advantage of these employees to Acme Fireworks is that they will be able to meet the current demand from the businesses. It means that Acme Fireworks will be able to meet its current demand and at the same time will be able to save on unnecessary cost that it would incur if it keeps the employees after the end of the contracts. Another advantage of having these employees to the company is that they are expected to comply with the obligations, policies, and rule of the company, meaning that they will be able to perform the work as expected by the company. However, the disadvantage of having these employees is that they may lack the motivation to work because they often have limited company benefits like sick time, unemployment compensation, health benefit, vacation, and paid holidays.
The company may also need temporary employees at it implements the contract to ensure that the absence of an employee does not lead to a breach of the contract. Temporary employees are often known as temps and are often hired to cover the absent employees such as those who are on maternity or disability leave. It is worth noting that the current of the contract of creating fireworks displays has the risk of injury and thus there is a need for the company to consider temporary employees. The advantage of these employees to the company is that they can fill any gap in the company’s workforce and act as an agent, thus ensuring that there is no breach of contract. In addition, they help the company save the costs of breaching the contract with the businesses that may result from the absence of an employee. These employees can also work part-time or on a full-time basis. However, the company will have to pay the employment agency more than what is given to the employee. In addition, there is the risk that the company might face harassment and discrimination challenges and other claims because they may be treated as a threat by permanent employees.
Finally, there are contractors which the company can employ and pay the on the basis of the job done. It means that the advantage is that the company will not incur any unnecessary extra costs. However, Acme Fireworks will need to pay their tax and will be liable for their actions because they are considered to be agents of the company.
Form of Business
Acme Fireworks operates as a sole proprietor meaning that it is owned and run by one person. Considering the current operations of the company, it should not operate as a sole trader because of the fact that such entities have unlimited personal liability. It means that in the case of any liability from injury due to the fireworks then the owner will cover all the losses, compensation, and financial losses even if it means that the owner will need to use personal assets. In addition, this form of business is not good for Acme Fireworks because of the inability of a sole proprietor to raise enough cash. It is a concern for the company considering the fact that its business is expanding which means that soon it will need more capital. Currently, the company is afraid that if it takes up more employees then it may not be able to pay them. Finally, a sole proprietorship is often in charge of everything in their business, but, have limited knowledge in other areas of the business.
The best business entity for Acme Fireworks is a partnership which will ensure that there is enough capital for the business from the partnership contribution ( Ryder, 2012). The partnership also ensures that there are different kinds of knowledge from the different partners who have different skills and knowledge.
Contracts have become vital in the day to day operations of businesses. In many cases, contracts are considered to be agreements that are made between two or more parties and which can be enforced by the courts. A business contract is often established in cases where parties are dealing with things that are business related as seen in the case of Acme Fireworks, the retailer that sells fireworks, places the fireworks on the ground, and performs a large aerial display of fireworks, and the big businesses. In this case, the contract covers all the elements of a valid contract and thus it is enforceable. It means that the company is liable for any breach of contract by its employees. In addition, the employees of the company act as agents meaning that there is the existence of an agent and principal relationship in this scenario where the agent acts on behalf of the principle. Any action by the employees affects the principle who in this case is Acme Fireworks. The liability is more likely because as the principle, Acme Fireworks has the duty and responsibility to ensure safety, indemnification, and compensation. The liability of the actions of employees makes it vital for the company to analyze the different forms of employees and how they affect the company. Considering the expansion that is seen in the business, it also needs to consider the form of business that it operates because sole proprietorship is not effective in the case study, More specifically, the business needs to consider operating a partnership to get more capital, knowledge, and to reduce the level of liability to the owner.
Burnham, S. J., & Kraynak, J. (2012). Contract law for dummies . Hoboken, N.J: John Wiley & Sons.
Jones, L. (2015). Introduction to business law .
Poole, J. (2014). Textbook on contract law . Oxford: Oxford University Press.
Rush, J., & Ottley, M. (2006). Business law . London: Thomson.
Ryder, N., Griffiths, M., & Singh, L. (2012). Commercial law: Principles and policy . Cambridge: New York.