Part One
This contract is made between Starch Enterprises, AL Ain, Abu Dhabi, UAE, and Wheat International Group (WHG), AL Ain, Abu Dhabi, UAE.
The Wheat International Group agrees to deliver 100,000 kilos of brownies to Starch Enterprises, which is a company specializing in selling of gluten free products, provided that it had an operable kitchen for the gluten free brownies to be made. In consideration, Starch Enterprises agrees to pay Wheat International Group a deposit of AED 50,000 for the delivery and a contract was signed by both parties on March 1, 2015.
This contract was signed on March 1, 2015, at Starch Enterprises in AL Ain, Abu Dhabi, UAE.
Starch Enterprises
Starch Enterprises
Wheat International Group
Wheat International Group
Part Two
For a contract to be enforceable by law, there must be certain elements evident in the agreement. One of the elements is offer and acceptance. For any contract to be valid, there must be a proposal made by the offeror and accepted by the offeree.the offer must be definite and certain, communicated to the offeree in a clear manner and made with a serious intention that the offeror will be bound by it despite what may happen at a future date.
By making an offer certain and definite, the offeror specifies all the terms and conditions of the agreement and the offeree uses proper communication to respond to the offer (Abdallah, Darayseh, & Waples, 2013, p.43). The Uniform Commercial Code declares that any uncertainty with respect to specific terms not included in the agreement does not necessarily invalidate a contract.
Another important element that must be available in an agreement is a mutual agreement by the contracting parties. The parties contracting must have full understanding of each other and the agreement should be beneficial to both parties if it is to be rendered valid. Both parties must show the genuineness or reality of engaging in the contract.
A contract will be declared voidable if the agreement of either of the parties is obtained through fraud, undue influence, duress, misrepresentation, mistake or if the contract is unconscionable or of adhesion. Therefore, the parties must be willing to mutually agree if they want the agreement to be valid.
Consideration is the other important element that must be evident for a contract to be valid. Each party must be willing to give up something of value in terms of a promise. A valid consideration must have certain characteristics such as legality, adequacy, and possibility if performance. In any case, a valid contract does not exist if the consideration made by either of the parties is illegal. In the case of adequacy, the promises made in a contract must be fair to both parties.
In addition, the promise must not be impossible to perform. Another important element of an agreement is the competency of the parties involved. A competent party must be of legal age, normal mental capacity and is considered by the law to be capable of understanding the meaning of the contract. In addition, a competent party must have the contractual capacity for the contract to be valid.
The fifth element of a valid agreement is that the contract must have a legality of purpose. In this case, the intentions of the contract must not conflict with the law or violate it at any time. The parties to the agreement might be legally competent and reach an agreement, but the law may decide not to enforce it because it is contrary to the interest of the public. An agreement examined to have an illegal purpose is usually void and unenforceable. Moreover, usurious and unlicensed agreements are also not enforceable by the law.
The other requirement for a valid contract is known as proper form. Any enforceable contract must not only be presented in writing, but also follow a predetermined form such as appending of signatures of each party. Generally, some contracts must be expressed in writing while others may either be presented in writing or not. Hence, the parties involved in a contract must adhere to the right form of expressing the agreement in order to be rendered valid.
The above elements are evident in the contract between Starch Enterprises and Wheat International Group. For instance, both companies have the intellectual capability to engage in the contract and therefore emerge as competent parties to the agreement. A mutual agreement for both parties is also evident (Abdul, 2011, p.12). In this case, Starch Enterprises wants to produce gluten free products for people that develop allergies after consuming wheat with an aim of making a profit after sales while Wheat International Group intends to sell the brownies to earn money. The element of offer and acceptance is also evident in the contract.
Wheat International Group promises to deliver 100,000 kilos of brownies to Starch Enterprises at a quoted price of AED 50,000 which Starch Enterprises accepts. However, due to the large nature of the order, Starch Enterprises decides to pay AED 50,000 as a deposit and both parties agree to the terms by signing the contract. In addition, the contracts between the two firms is legally binding because none of the activities violates the law, hence, the agreement has a legality of purpose. The element of consideration is also evident. Starch Enterprises agree to pay the quoted amount of AED 500,000 and also provide a fully operable kitchen for the gluten free brownies while Wheat International Group agrees to delver the 100,000 kilos of brownies.
Part Three
The fact pattern in the scenario can be altered to make the contract defective. One of the changes is that both firms fail to use a proper form in the signing of the agreement. Such an agreement requires writing to be enforceable (Baker, & Krawiec, 2006, p.733). The need to present the contract in writing is to avoid future disagreements and also it is a requirement of the law for such a big contract to be in writing. In addition, the agreement is in a partial payment status which indicates that Starch Enterprises has a serious intent of buying the commodity and hence the contract is enforceable.
Another change that can be made to make the agreement defective is in mutual agreement. In this case, Starch Enterprises did not define the terms in which it would repay the whole amount it was required to pay to WHG. This could cause complications in the future, making the contract voidable. Another change that would make the contract defective is during offer and acceptance. In this case, WHG should have specified the duration which the Starch Enterprises should repay the whole amount. The offer was not then specified clearly and this could lead to later disagreements rendering the contract voidable.
Part Four
The Wheat International group had a specified term for deciding to increase the price of the brownies. WHG informed Starch Enterprises of its intentions to increase the prices due to a valid reason. The firm, though reluctant, agreed to the terms given by WHG because it had started supplying the product to its customers. On the other hand, Starch Enterprises violated the terms of the initial contract (Athias & Saussier, 2010, p.26).
Before price adjustment, the firm had agreed to offer WHG an operable kitchen for the gluten free brownies to be made. In this case, Starch Enterprises violated the terms of the contract and hence it became voidable or defective. The firm offered a substandard kitchen with an aim of saving money. The end result of this action was customers’ complaints of increased gluten in the brownies. The Wheat International Group was justified to refuse the refund to Starch Enterprises because it had not fulfilled its terms as agreed (Badenfelt, 2011, p.570).
There are various remedies that may apply in the case above. The customers may sue Starch Enterprises for compensatory damages for the effect on their health (Scalise Jr, 2007, p.750). The customers must, however, determine the damage done to them for the compensation to be done. After determination of the claim for fairness and adequacy, the court should demand the firm to compensate the customers.
In addition, the court could use an injunction to protect WHG from refunding the money to Starch Enterprises. Another remedy that could apply in this case would be specific performance. In this case, the court will order Starch Enterprises to perform as it had been agreed in the contract. The brownies were unique and could not be offered by any other company and hence Starch Enreprise was liable for specific performance (Shavell, 2005, p.831).
References
Abdallah, A. A.-N., Darayseh, M., & Waples, E. (2013). Incomplete Contract, Agency Theory and Ethical Performance: A synthesis of the factors affecting owners’ and contractors’ performance in the bidding construction process. Journal of General Management, 38 (4), 39-57.
Abdul Quium. (2011). A Guidebook on Public-Private Partnership in Infrastructure. Bangkok: Economic and Social Commission for Asia and the Pacific. Retrieved from http://ppp.worldbank.org/
Athias, L., & Saussier, S. (2010). Contractual Flexibility or Rigidity for Public Private Partnerships ? Theory and Evidence from Infrastructure Concession Contracts (pp. 1 – 34). Retrieved from http://ssrn.com/abstract=828944 orhttp://dx.doi.org/10.2139/ssrn.828944
Badenfelt, U. (2011). Fixing the contract after the contract is fixed: A study of incomplete contracts in IT and construction projects. International Journal of Project Management, 29, 568 –576. doi:10.1016/j.ijproman.2010.04.003
Baker, S., & Krawiec, K. D. (2006). Incomplete Contracts In A Complete Contract World. Florida State University Law Review, 33, 725 – 755.
Scalise Jr, R. J. (2007). Why No” Efficient Breach” in the Civil Law?: A Comparative Assessment of the Doctrine of Efficient Breach of Contract. The American Journal of Comparative Law, 721-766.
Shavell, S. (2005). Specific performance versus damages for breach of contract: An economic analysis. Tex. L. Rev., 84, 831.