Aspects of Contract and Negligence for Business: Task 1

Heavenly Holidays Ltd comes out as a business entity, which owns a chain of hotels on the south coast. In this case, the company faces difficulties concerning some its contracts. This report will provide appropriate legal analysis of the contract issues affecting the operations of the company.

Business Systems

Contracts refer to agreements between persons or other legal entities in which one party agrees to execute a service or offer a good in exchange for the payment of money or other goods and services. Nevertheless, an agreement to do something is not necessarily binding (Dale, 2013). From this perspective, it is a binding contract if an individual or business entity agrees to make an exchange of valuable items inclusive of the goods, services, and money. Furthermore, it is even more binding if one party executes their obligation under the agreement in the expectation that the other entity will execute their obligations. It is valuable to note that a binding contract must incorporate the essential elements of a contract while also requiring capacity, as well as legal purpose (Dale, 2013).

These essential elements include mutuality of obligation (offer and acceptance) and definite terms and consideration. In the absence of the capacity and legal purpose, the agreement or contract between two entities or individual might not be binding. In the case of Heavenly Holidays and Business Systems, the agreement or engagement on the procurement of the computer services had elements of the contract (acceptance and offer) but lacked capacity and legal purpose. Categorically, it is essential to note that Heavenly Holidays did not enter into a binding contract with Business Systems, thus not liable for failing to adhere to the ‘terms of the contract.’

Budget Builders

Heavenly Holidays did employ Budget Builders to execute the construction of the Seagull Inn at an agreed cost of ₤2 million. According to the terms of the contract, there was an obligation for Budget Builders to complete the project by 31 March this year. Nevertheless, following five months of work, the project had fallen behind, which did force Budget Builders to approach Heavenly Holidays to explain financial difficulties towards completion of the project. In this context, Heavenly Holidays did offer to pay Budget Builders an additional ₤100,000 as a ‘bonus’ to facilitate completion of the project.

This context generates the concept of the ‘intention to create legal relations.’ ‘Intention to create legal relations’ plays a critical as the basic ingredient of any valid contract in many jurisdictions across the globe. From this perspective, ‘intention to create legal relations’ is a part of elements in the contract (McKendrick, 2014). From a definitional perspective, ‘intention to create legal relations’ refers to an intention to enter a legally binding agreement or contract, thus one of the necessary elements in the formation of a contract. The concept consists of readiness of a party to accept the legal sequences towards entering into an agreement (McKendrick, 2014). In this context, it is essential to note that contracting parties will be obvious to enter a serious contract.

In the absence, ‘intention to create legal relations’ it would be impossible to enforce the contract as legal and binding. From this perspective, the essence of ‘intention to create legal relations’ binds Heavenly Holidays Ltd by its promise to pay ₤100,000 to budget builders for the completion of the work on time. The initial agreement did integrate a fee of ₤2 million for the completion of the project on time. On the other hand, because of financial implications, the company did demonstrate intentions to create legal relations with the Budget Builders, thus bound by the promise to pay ₤100,000 towards completion of the project.

Besides, the promise by Heavenly Holidays Ltd to pay ₤10,000 Budget Builders as a ‘bonus’ is binding because of the existence of an intention to create legal relations. For the ability of the Budget Builders to complete, the work on time and effectively, it is essential for Heavenly Holidays to execute its obligation of the contract through adhering to the intention to create legal relations, which is a critical element of a contract. In addition, there is a presumption or intention to be legally binding regarding the general rules concerning commercial, as well as business relations.

In this context, it is essential to consider the concept of an ‘honor clause.’ According to this perception, it follows that an agreement, which expressly provides that it is not to be justiciable, or it is a mere ‘honor’ clause would not generate a legally enforceable contract. Categorically, the ‘honor’ clause is an agreement, which is binding in honor only, thus entities will be honorable in their dealings and so on. Nevertheless, there is no contract generated whereby the business entity can answer to any legal question if there is a mistake towards the completion of the project. In most cases, such contracts are stated ‘this agreement shall be binding in honor only.’ In such instances, Heavenly Holidays would not have any legal obligation to pay ₤100,000 to the building company because of its failure to plan effectively and efficiently towards completion of the project.

Daniel Johnson

In this instance, action by Daniel Johnson did cause the company to lose substantial profits through cancelling a booking he made for himself and his girlfriend at a very short notice. Because of the late cancellation, the suite did lie empty for the entire weekend. Nevertheless, David Johnson is 17 years old. One of the elements of a contract is capacity. From this perspective, capacity indicates that an individual is legally able and capable of entering into a contract. Some of the critical things, which make a person legally able to enter into a contract, include age, as well as the state of mind. Initially, it is valuable for an individual to be of the age of maturity (Araneda-Fuentes, Lustosa, & Minner, 2015). From a legal perspective, the age of maturity is 18 years old and above. Nevertheless, there are instances, which a minor can enter into a contract, particularly if the contract is for things necessary to sustain life such as food and housing. Since the contract between Heavenly Holidays Ltd and Daniel Johnson did involve things, which are necessary for sustaining life such as food and housing, the company can insist that he pays cancellation charges concerning the booking he did make.

John Davis

In this incident, the company did receive a complaint from John Davis concerning the experiences of a holiday, which he and his family took at the hotel the previous month. In his complaint, Davis did highlight two critical issues: requirement of a pass to use the tennis court and swimming pool and food poisoning because of failure of the hotel to adhere to the hygiene standards, as well as serving food, which was well past its sell by date. In determining this situation, it is valuable to make a distinction between a condition and warranty. In the first instance, a condition refers to an indication that a requirement or event should be performed before completion of another action (Cotutiu, 2015).

On the other hand, a warranty refers to an assurance by the seller to the buyer concerning the state of the product, which demonstrates that the prescribed facts are genuine (Appleman, Appleman, & Holmes, 2014). In this context, John Davis is not entitled to a full refund of the cost of his holiday. The first complaint is invalid because there were no stipulations on the use of the tennis court and swimming pool in the hotel. In the second instance, there was no warranty, which would indicate his entitlement to a full refund of about the cost of his holiday.

Mary Simpson

Mary Simpson did break her leg by tripping over a pile of towels, which one of the house cleaners carelessly left on one of the staircases. Besides, there was damage to her car when one of the hotel employees reversed a van accidentally into the space in which her car was parked. The booking conditions of the company indicate, “the hotel does not accept liability for the death of, or injury to, any customer, howsoever caused.’ In addition, near the exit of the car park, there is a notice, which states, “cars parked at owner’s risk.’ These stipulations indicate that Heavenly Holdings Ltd is not liable potential complaints from Mary Simpson concerning her injury and the damage to her car.

References

Appleman, J. A., Appleman, J., & Holmes, E. M. (2014). Excuses for Nonpayment and     Defenses to Actions for Premiums (Vol. 5). Appleman on Insurance Law and Practice.

Araneda-Fuentes, C., Lustosa, L. J., & Minner, S. (2015). A contract for coordinating       capacity decisions in a business-to-business (B2B) supply chain. International             Journal of Production Economics, 165, 158-171.

Cotutiu, A. (2015). The Essential Conditions for the Validity of the Contract of Carriage. Journal of Legal Studies, 16(29), 48-55.

Dale, R. (2013). 7.3. 3 Is there consideration for the contract?. Equity & Trusts: Text, Cases,        and Materials.

McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press.

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