Legal Aspects of a Business

Question 1

what is a contract

definition and concept

Answer 1

A contract is a legal agreement with specific terms between two or more people or entitites, in which there is a promise to do something in return for a valuable benefit known as consideration.

Question 2

types of contract

Answer 2

• simple
• speciality

Question 3

characteristics of a simple contract

Answer 3

• can be oral, written or implied by conduct
• Offer and acceptance,
• competence of parties - both parties must be competent to form a contract
• intention to create legal relations - contract is enforcebale if parties enter into agreement that they see as being legal
• consideration something of valuse is exchanged by both parties in a contract

Question 4

characteristics of a specialty contract

Answer 4

• written
• Signed by both parties
• sealed with a stamp or company sealand
• delivered to the other party

Question 5

conditions under which offer and acceptance are
communicated

Answer 5

Concepts of offer and acceptance
* may be written or verbal
* offer is a statement or proposal by one party to another, establishing his or her willingness to enter into a legally binding agreement. The basis of the offer will help to form the contract
* acceptance is the act of agreeing to take up )accept) a offer.
* it must be absolute and unqualified (i.e. the oferee cannot add new terms)
* has to be communicated to the offeror by word of mouth or in writing
* must also be in the mode set out in the offer e.g. in form of a signature

Question 6

ways by which contracts may be terminated or discharged

Answer 6

(a) Concepts of discharge
* contract remains in existence untithe point a twhihc it is terminated or discharged

(b) Types of discharge.:
* discharge by performance - when the terms of a contract are successfully completed by both parties

(c) Methods of discharge:

(i) performance - all parties perform their part of the bargain. Complete performance occurs when every term in the contract has been discharged.

(ii) breach- occurs when one party fails to carry out their part of the contract. The wronged party can sue for damages.

(iii) agreement - parties may agree to discharg a contract even though all of the terms have not been met; both parties satisfied with what has ben achieved.

(iv) impossibility- contract discharged because it is impossible to complete

(v) lapse of time - contract can bae descharged if it is not enforced within the time set for it to be completed.

(vi) death- contract discharged as a result of the death of one of the parties

Question 7

why documentation is necessary in business transactions

Answer 7

The importance of record keeping in a business, including its value in
* satisfying requirements for taxation and auditing.

Question 8

principles upon which insurance is based

Answer 8

(a) pooling of risks;

(b) subrogation;

(c) proximate cause;

(d) indemnity;

(e) utmost good faith;

(f) contribution; and,

(g) insurable interest.

Question 9

various types of insurance policies

Answer 9

• Types of insurance policies:
• life and
• non-life

Question 10

how insurance facilitates trade

Answer 10

the value of insurance coverage in lowering the risks associated with business.