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A contract is a legally binding agreement that can be written, oral, or implied, with various types including simple, specialty, and contracts of record. Key characteristics include offer and acceptance, consideration, and legality, while contracts can be terminated through performance, agreement, breach, frustration, or lapse of time. Additionally, documentation is crucial in business for proof and dispute resolution, and insurance policies play a significant role in reducing risk and facilitating trade.

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Vandasia Foster
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8 views4 pages

Pob?

A contract is a legally binding agreement that can be written, oral, or implied, with various types including simple, specialty, and contracts of record. Key characteristics include offer and acceptance, consideration, and legality, while contracts can be terminated through performance, agreement, breach, frustration, or lapse of time. Additionally, documentation is crucial in business for proof and dispute resolution, and insurance policies play a significant role in reducing risk and facilitating trade.

Uploaded by

Vandasia Foster
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Concept of a Contract

●​ A contract is a legally binding agreement between two or more parties.​

●​ Can be written, oral, or implied by conduct.​

4.2 Types of Contracts

1.​ Simple Contracts – formed orally, in writing, or implied; needs consideration.​

2.​ Specialty Contracts – written and sealed (signed, witnessed, and stamped); does not
need consideration.​

3.​ Contracts of Record – court judgments, not common in business.​

4.3 Characteristics of a Simple Contract

●​ Offer and acceptance​

●​ Intention to create legal relations​

●​ Consideration (something of value exchanged)​

●​ Capacity to contract (age, sound mind)​

●​ Legality (not illegal)​

●​ Must be possible to perform​

4.4 Characteristics of a Specialty Contract

●​ In writing​

●​ Signed, sealed, and delivered​


●​ No need for consideration​

●​ Legally binding when executed under seal​

●​ Often used for leases, mortgages, and deeds​

4.5 Offer and Acceptance Communication

●​ Offer: Clear expression to be bound if accepted.​

●​ Acceptance: Must be unconditional.​

●​ Acceptance must be communicated:​

○​ Verbal, written, or by conduct.​

○​ Via postal rule: acceptance is effective when posted.​

○​ Via instant communication: acceptance is valid when received.​

4.6 Ways Contracts Can Be Terminated/Discharged

1.​ Performance – both parties fulfill obligations.​

2.​ Agreement – mutual decision to end.​

3.​ Breach – one party fails to perform.​

4.​ Frustration – impossible to perform due to unforeseen events.​

5.​ Lapse of Time – contract expires.​

4.7 Apply Principles of Simple Contract to Cases

●​ Apply rules of:​


○​ Offer and acceptance​

○​ Consideration​

○​ Legal intention​

○​ Capacity​

○​ Example: A minor’s contract may be void unless for necessity.​

4.8 Importance of Documentation in Business

●​ Serves as proof of transaction​

●​ Aids in accounting, auditing, and legal issues​

●​ Used for reference and dispute resolution​

4.9 Business Documents and Their Purpose

1.​ Quotation – price estimate.​

2.​ Invoice – bill for goods/services.​

3.​ Receipt – proof of payment.​

4.​ Purchase Order – request to buy goods.​

5.​ Delivery Note – confirms delivery.​

6.​ Statement of Account – shows amount due.​

4.10 Principles of Insurance

1.​ Utmost Good Faith – full disclosure.​


2.​ Insurable Interest – policyholder must benefit from subject insured.​

3.​ Indemnity – restore loss, not profit.​

4.​ Contribution – multiple insurers share claim payout.​

5.​ Subrogation – insurer can recover costs from third party.​

4.11 Types of Insurance Policies

●​ Life Insurance – pays on death or after maturity.​

●​ Health Insurance – covers medical expenses.​

●​ Motor Insurance – covers vehicle accidents (third party or comprehensive).​

●​ Property Insurance – covers damage/loss to buildings and contents.​

●​ Marine Insurance – cargo, ship, and freight coverage.​

●​ Fidelity Guarantee – protects against employee dishonesty.​

4.12 How Insurance Facilitates Trade

●​ Reduces risk of financial loss​

●​ Encourages investment and expansion​

●​ Protects against unexpected events​

●​ Provides confidence in transactions​

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