Business Law questions A what are 4 elements of contracts B

Business Law questions: A) what are 4 elements of contracts? B) Explain the objective theory of contract give 2 examples C) What is the most significant different between a verbal contract and written contract D) homer offer to paint Moe\'s tavern for $200 all due on completion. Moe accept the contract is verbal, before homer begins the job or incurs any coast, Moe calls and say he can\'t pay $200 and wants out the deal. Homer sues , What does Moe have? Who wins? what are the damage? if any

Solution

Objective theory of contract means mutual assent between the parties whose acts and behaviors can be judged by any reasonable person. Stated more simply, contract formation depends on what is communicated and not what is thought by any person involved in the contract.This means a reasonable person examining the contract determine that the terms of the contract were realistic.

Examples of Objective theory of contract

X owns a TV valued for $ 5000, Y asks X if he would sell the TV to him, X has no plans to sell the TV, however he says that he would sell the TV for $500 to which Y agrees. Later X says he was kidding and that he never intended to sell the TV. In this case Y cannot force to sell the TV since the value is not reasonable. This value cannot be understood by a reasonable person a valid, hence objective theory of contract cannot be fulfilled.

The most famous example of this in business contract law is the “Pepsi Harrier Jet case”.

In this case Pepsi offered a Harrier Jet in a TV commercial against the points raised through the bottle caps.

The ad said that the jet could be obtained for 7 million points. The main method of obtaining Pepsi points was to drink Pepsi brand soda and redeem points from bottle caps; however they also allowed points to be purchased for ten cents each.

Mr John Leonard tried to take advantage of this excellent business opportunity.

The normal cost to obtain a Harrier jet was in excess of $23 million dollars.However if he redeemed the points and collected it,it would cost him $ 700,000.So he collected the same from his friends and relatives. After raising money from friends and family, Leonard bought 7 million Pepsi points. Based on this he demanded the Jet from Pepsi

In response, the company wrote him a letter giving him free coupons and a letter which claimed that business contract law did not oblige the company to provide the jet because it was an inappropriate claim and this advertisement was obviusly,meant to be humorous and entertaining.

Leonard said that when Pepsi did not reward him with the jet it had violated the law of contract. He claimed that by mailing in the points he had accepted their offer, and gave the 7 million points as consideration to claim the jet.

This claim was rejected by court stating that business contract law had not been violated because \"no objective person\" could have believed in good faith that the offer was serious.

Due to the outrageous nature of the advertisement, the law of contract was determined to not have been violated. Business contract law is bound by a reasonable person test, i.e. this offer was obviously not realistic for any reasonable person.

Verbal vs Written contract-

The term ‘verbal contract’ refers to any contract which is expressed in words or only discussed orally. Its terms can be extremely difficult to enforce. Both parties involved in the contract may have a hard time to engage in legal action if something goes wrong unless there are witnesses to the spoken agreement.

A \"written contract\" refers to a document that covers an agreement entered into by two parties. The parties involved might be people or organizations, but their identities will be specified on the contract. For written contracts to be valid and binding they need to be signed by both parties. For some written contracts, witnesses might also be required.

Homer offer to paint Moe\'s tavern for $200 all due on completion. Moe accept the contract is verbal, before homer begins the job or incurs any coast, Moe calls and say he can\'t pay $200 and wants out the deal. Homer sues , What does Moe have? Who wins? what are the damage

Since the contract entered is verbal and not written Homer cannot sue Moe. Moreover Homer has not suffered any loss or not incurred any cost as well hence Moe is not liable to any damage. Hence in this case Moe would win.