Effect of Law on Business Analysis

The law is one of the governing aspects of society and thus when it comes to transactions transacted within the business; the law has the power to affect such transactions. An example will include;

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The employment contract

This is an agreement entered into between the employer and the employee at the commencement of the period of employment and stating the exact nature of their business relation specifically what compensation the employee will receive in exchange for specific work done.

The main focus of the employment contract is wages for the work done and the essential terms which will include dismissal in case of a breach of the contract or holiday pay rights, the place of work, and pension scheme. An employment contract is a form of contract in the business relationship has the force of the law when it comes to implementation.

Sale agreement

This is a contract where the seller transfers or agrees to transfer the property in the good to the buyer for an exchange of money. The goods may be ascertained or unascertained goods and the parties agree on the manner in which the goods shall be delivered, in what state the goods shall be during delivery, and the mode of payment that shall be used.

A hire purchase agreement

This is a business transaction where the owner of the goods hires the out to the hirer and gives them the option to purchase the goods. The option to purchase may or may not be exercised and there is no contract until the option to purchase is exercised.

Contract Law

Consideration is in the case of CURRIE VS CURRIE {1875}, L.R Exch 153 was defined as some right, interest, profit, or benefit accruing to the one party or some forbearance detriment, loss or responsibility given, suffered, or undertaken by the other. This means that a person must show that he has done something or given something in return for the promise of another.

But despite the fact that there may be an offer that has been accepted and that consideration has been provided, the court may still not recognize an agreement as a legally binding contract if they feel that there was on intention of the parties involved to create a legal binding contract.

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In the case of JONES VS PADAVATTEN [1960]2 All E.R. 166, the defendant was a divorcee with a young son and had a good job with an embassy in Washington. The plaintiff was the plaintiff’s mother. The mother wanted her daughter to go to London and become a barrister thus she offered her a monthly allowance. The daughter reluctantly agreed to give up her job and move to London. Sometime later the two fell apart and the mother sought possession of the house but the daughter resisted that the agreement was a contract giving her legal enforceable rights. The court of appeal in rejecting the daughter’s defense considered that what had been agreed was an agreement based on good faith than a rigidly binding contract.

In this case, none of the parties had the intention when they came to the agreement to form a binding contact despite the fact that offer, acceptance, and consideration were in the agreement. The fact that the aspect of consideration was present failed to make the agreement binding as a contract shows that the intention of the parties is more weighty when determining the validity of the contract.

Tort Law

A tort is simply a civil wrong. The comparison between tort and contract law can be brought out in the tort of negligence and duty of care. In the leading case of DONOGHUE VS STEVENSON [1932] 562, 1932, S.C elaborates this better.

Donoghue with her friend went into a café and ordered an iced drink the owner of the café brought the order and poured part of the ginger drink into a tumbler, Donoghue drank her friend lifted the bottle to pour they noticed that the bottle had the remains of a snail and Donoghue complained of stomach ache.

Since Donoghue had not ordered the drink there was no contract between her and the owner of the café. The contract was between her friend who had not drunk the ginger beer and the café owner. Ginger drink was no a dangerous drink thus the manufacturer had not misrepresented it.

In the case, there had to prove that there had been a contract and that because of the contract the plaintiff had suffered loss under the law of contract.


Strict Liability v. Negligence by Hans-Bernd Schäfer and Andreas Schönenberger.

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Contract Law: General Theories by Richard Craswell.

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