Categories
Business Management

Contract Creation and Management Project

Contract Law

The simulation involving Non Linear Pro and Quick Takes Video raises a number of issues on contract formation and the binding nature of contracts. Further, it also raises the issue of the implications of contract violation and the concept of express agency. Non Linear Pro is suing Quick Takes Video for not paying the three month lease on equipment Quick Takes claims was nonfunctional and it barely used for 1 month. Regardless, of whether or not the equipment functioned, Quick Takes failed to follow the correct legal procedure, and by doing so, forfeited their right to claim damages. Instead of following the right procedure and first highlighting the breach of contract by Non Linear Pro, through the provision of nonfunctional equipment, before withholding payment, Quick Takes disregarded procedure and simply withheld payment.

It is quite clear, based on the simulation that it is possible to be the aggrieved party within a contract and still be subjected to a law suit, especially if the existing valid contract is not properly terminated. Proper termination can only be achieved through mutual consent or through adjudication in the courts. The second and perhaps most significant issue that arises from the simulation is that of express agency. Quick Takes Video, through its informal arrangement with Janet, had made itself vulnerable. By assigning her various purchasing and procurement tasks on behalf of the company, such as ordering and signing for supplies, Janet gained implied authority. Even though she thought she was signing a delivery note of sorts, her signature on the contract is valid. This is because it can be assumed that Janet was acting on the basis of the implied authority accorded to her by the partners, in a manner similar to that that allows her to procure and sign for supplies.

Furthermore, during the negotiations regarding the contract, Hal mentions to the salesman that he can make arrangements with Janet, implying that she had contracting authority on behalf of the two owners. This essentially makes the contract she enters into with Non Linear Pro on behalf of Quick Takes a valid contract. The issue that comes across, is that of vulnerabilities that may accompany implied authority. On the basis of the experience of Quick Takes, it is quite clear that there is a need to clearly outline the boundaries of implied authority, or delegated authority. When it comes to contractual agreements, proprietors must expressly state the limits to their representatives’ authority to negotiate on behalf of the company. Other than clearly outlining such an issue, companies must also make it known to other entities they do business with the extent of the representative’s authority to negotiate and sign contracts on behalf of the company. Making it known who has final contracting authority and who does not, is also essential when it comes avoiding frivolous suits arising from invalid contracts entered into on behalf of the company, by individuals not mandated to do so.

The simulation therefore, in addition to highlighting the importance of honoring contracts regardless of how unfair they may be, also focuses on the concept of implied authority, and the lack of clear guidelines as to how much authority employees have to negotiate on their behalf. This creates a dangerous loophole that can easily be exploited in cases of a dispute between the two entities.

References

The Nature of Agency. Simulation