Business law Coursework Example | Topics and Well Written Essays - 2250 words - 1

Business law - Coursework Example It may further bring about complex situations. There must be certain elements present in a valid contract which are: 1. An offer. 2. Acceptance that must have taken place from the corresponding party which would further constitute to mutual understanding between both parties. 3. A promise by the principal party to perform steps ahead that would constitute to the contract 4. A consideration must take place 5. Terms and conditions must be set in order to fulfill the promises made 6. Performance While the above mentioned can be simply called the requirements for a valid contract, however these are the essentials towards constituting or calling a contract effective and in force. Once all these requirements have successfully and rightfully been carried out, we can be sure that the contract is now lawfully in force. The past has left us with numerous amounts of examples and precedents that reflect on contract being voidable under certain circumstances. Elements that constitute a contract v oidable are as follows: 1. Misrepresentation 2. Mistake 3. Duress and undue influence We will discuss each element in turn describing the impacts of each upon the validity of the contract. Misrepresentation is a false statement of fact made by one party to another. This is not included in the terms of contract. However, somehow induces the other party to enter into the contract and create a binding force between both parties. This misrepresentation, which can be done in a number of different ways, makes the contract voidable. It also gives the other party the right to rescind the contract or claim damages. A person who has been misled can however take up amongst a number of different options in order to rescind this contract. 1. Refuse to carry out his undertaking, 2. Refuse to carry out the function of specific performance, 3. Can decide to have the contract set aside by taking up means of rescission. Adding to such circumstances, the misled party can claim for damages.    Misrep resentation can be mainly of three types, being fraudulent, negligent and innocent misrepresentation. Fraudulent misrepresentation is when the truth is deliberately concealed by the party in order to constitute the contract. As Lord Herschell defined in a very famous case, Derry vs Peek1, fraudulent misrepresentation being one where a false representation is made knowingly, without belief in the truth and recklessly. If the misrepresentation is that of fraudulent nature, the contract is considered void and the misled person can sue for damages for deceit. Negligent misrepresentation is a false statement made where the person who is making the statement had no reasonable grounds for believing it to be true and did not believe in it. A common example defining negligent misrepresentation is Hedley Byrne v Heller.2 In this case Hedley happened to be an advertising company who had asked for information from his banker regarding the clients’ banker (Heller). The information asked f or was regarding its clients’ financial position. Heller went on giving a report to Hedleys’ banker that reflected a strong financial position of the respected client. This report was given with a â€Å"without responsibility† clause. The report was given to Hedley by his banker. There was no such contractual agreement or relationship between Heller and Hedley as well. Hedley went on making decisions keeping in mind the report and went on experiencing a financial loss. The reason