Commercial Law

Introduction

A legal document that binds at least two parties together is known as a contract and it is an essential tool when it comes to business or commercial transactions (Tabalujan & Du, 2012). Anyone can make a contract once he or she is above the age of 17, i.e. 18 years old and above. People who are younger than the age of 18 are considered to be minors and the only way possible in order to make a contract is if the business or commercial transaction involves necessaries that the minor’s life depend on.  

A contract does not necessarily have to be written out black and white on paper. The only reason as to why most contract are written or typed out on paper is that it serves as a hard copy record for the involved parties to refer to in order to make sure obligations agreed upon in the contract are performed accordingly (Chandran, 2009).

The formation of a contract usually consists of four important aspects. Firstly, there is legal capacity where in order for the contract to be valid and in force, the involved parties have to be mentally sound, not under the influence of anything that may hinder cognitive functions and he or she has to be above the age of 18. Just failing to comply with any one of these three sub-items will render the contract invalid. Secondly, there is agreement which is the willingness for one party to accept the terms and conditions set out by the other party. Without the acceptance of the offer, there is no contract. Thirdly, there is consideration, which takes into consideration a benefit from the fulfilment of the contract, like for example, payment of monies in exchange for good or services. Lastly, there is intention, which requires the involved parties to agree with one another that they will be bound together contractually. Such an intention is usually implied implicitly and it is not compulsory for them to explicitly declare their intentions (Tabalujan & Du, 2012).

Additional things to note with regards to contracts is that sometimes agreements between family and friends are considered to be domestic and social agreements respectively and are therefore presumed as non-legal binding agreements under the law. To convert such non-legal agreements into legally binding agreements (Chandran, 2009). One can either create an enforceable contract between the domestic or social parties involved or create the agreement under the context of commerce. This is due to the fact that so long as a trade is present in the transaction that is profit-oriented, the agreement is automatically presumed under the law that is legally binding.

The case between Alan, Bernard, Charleen and Damien

Based on what was discussed earlier, we can see that Alan and Charleen are siblings and Alan and Bernard are friends and therefore agreements between them will be classified as a domestic and social agreement respectively. Damien on the other hand, is a friend of Bernard who does not know Alan personally until he heard about Alan’s intention to sell his textbook and his exercise book of handwritten notes. However it is not correct to assume that a contract only exists between Alan and Damien. Because the sale of the textbook and exercise book is considered to under the context of commerce, therefore making the agreement between Alan and Bernard to be legally binding as well (Gilson, Sabel, & Scott, 2015). As there is an agreement to transfer property in goods – in this case, Alan’s textbook and exercise book of handwritten notes, to the buyer – Bernard and/or Damien at a price – which is defined as money consideration under SGA (The Statutes of the Republic of Singapore, 1999).

Charleen, being a student taking her GCE ‘O’ Levels that current year, put her as a minor being either 16 or 17 years old. Since a minor can only enter into a contract if the transactional item is a necessary and without the item, her life’s survival will be jeopardised, there was no contract formed between Alan and Charleen. Because any agreement Charleen has with Alan pertaining to the transaction and trade of the textbook and exercise book will not be valid as a contract because of the reason she is a minor. This is true not only under common law, but also under the SGA (The Statutes of the Republic of Singapore, 1999).

The contract of sale can be made between the buying and selling parties either through a written agreement, or through verbal discussion, or a combination of both. On top of that, it can also be implied through the conduct, mannerism and behaviour between the parties (Tabalujan & Du, 2012). Between Alan and Bernard, there was a written agreement between them when they exchanged messages between themselves which originated from Alan’s initial message on his Facebook wall indicating that he wishes to sell his textbook and his exercise book of handwritten notes to current and future students of Kaplan Higher Education. Between Alan and Bernard, there was a written agreement between them when they exchanged text messages via Short Message Service (SMS) after Damien was able to get Alan’s handphone number from Bernard.

As per general law governing contract discussed in the earlier section of this essay, with regards to contracts of sale, the element of capacity of the involved parties is the same – involved parties must not be insane, must not be intoxicated and must not be a minor.

The goods that he wishes to sell is considered to be an existing good under SGA as it was under his ownership when the offer to sell was created. Therefore the price at which Alan can set for the sale can either be through discussions and negotiations as they form the contract together, or using a method stated within the contract made between Alan and the eventual buyer of the textbook and exercise book of handwritten notes (The Statutes of the Republic of Singapore, 1999). Since Alan has already set the price at $200 and has also rejected Bernard’s initial negotiation attempts to buy the book at a lower price, the price set has been stated and fixed within the contract as how it appears on his Facebook wall message.

The formation of contract and the respective contracting parties

When there is an offer present that is matched with an acceptance, only when this happens will there be a formation of a contract (Tabalujan & Du, 2012).

For a contract to be legally binding and before an acceptance can be formed, there must first be an offer to be accepted. An offer is where a party expresses terms and conditions which will result in another party to be willing in accepting those terms and conditions and following the acceptance be bound by it and be obligated to fulfil them to the letter (Treitel, 1999).