A contract is a legally binding promise or an agreement between two or more parties that the law will enforce. A legally binding contract should be written and signed by all parties. In our scenario, Barbara and Sam had a written contract. There are principles and basic elements of a valid contract; these are the offer, acceptance, mutual obligation and consideration. An offer is a promise that is, by terms and conditions or a return on the promise in exchange for the promise or its performance (Badiou, 2001). It is the willingness to enter into a contract bargain which should contain terms, mode of communication of the offer, termination period and a prospective offeree. Acceptance is an expression of assent to the contract’s terms and conditions. It is made by the offeree as requested by the offeror. The offeree must know the offer and manifest an intention to accept it unconditionally.
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Consideration is a legal agreement between the promisee and promisor to exchange his or her promise. One promise is valid for the other party to accept the consideration; which means a valid contract requires the exchange of consideration (Jones, et all, 2005).
A contract should be mutually binding. This is where promises constitute the consideration in a bilateral contract. If the terms and conditions allow one party to cancel the contract, then there might be no consideration because of lack of mutuality of obligation (Smith, 1952).
An ethical issue is what determines what is good or bad, fair or unfair, noble or ignoble and right or wrong. It is about morality, the good life, the life worth living or life that is satisfying. Ethics are the norms that should be complied with in the society. Ethical principles and morals examine the problems that arise in the business environment (Badiou, 2001). It was unethical for Sam not to comply with the terms of contract with Barbara the potential buyer of the real estate, this amount to a breach of contract. A breach of contract is a legal agreement which binds the parties to the contract which is not honored by one or more parties for non performance or failure of a party to perform in accordance with the promise made when entering the contract.
In a case of Sophomore Women Soccer, player Emily Hairston and her father James Hairston filed a lawsuit against both SMU and the Mustangs women soccer coach, Brent Erving claiming fraud and breach of contract. Emily was recruited to the soccer team by Erving when she was in Highland Park High School and promised her a full ride scholarship covering costs of tuition and housing if she joins SMU (Smith, 1952). After three weeks of classes, she was informed that she was owed $ 25000 to cover first semester tuition costs which she said it was against the contract; but SMU said they only promised her to pay $ 17000. On hearing the case, the judges found out that SMU and Erving had breach the contract and had to compensate the damages and required to perform exactly as specified in the contract (Jones, et all, 2005).
When the contract agreement is breached, there is a cause of action to be taken or remedies. Barbara should file a law suit against Sam the sales person in a court of law for breaching the contract. The remedies for a breach of contract between Barbara and Sam are:
- Specific performance – this is a court order requiring performance done exactly as specified in the contract or by the agreement they entered (Jones, et all, 2005).
- Reformation – this is where the terms of the previous contract can be reviewed and changed to reflect what the parties actually intended.
- Rescission – the contract is cancelled and both parties are excused for further performance and any money advanced is returned.
- Punitive damages – the court of law can order the offender to pay certain amount of money to the offended party as a punitive action against him or her. This is to deter others from breaching the contracts in future.
- Compensatory damages – this is where the money is reimbursed to the offended party of the contract to gather for the costs incurred in the preparation of the contract, for instance the legal fees (Smith, 1952).