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Business and Corporate Law: Application of Contract Law and Breach of Contract

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Introduction:

Joey Joystick was approached by Great Games Pty Ltd for an internship for designing a game which afterwards benefited the company and helped it to gain some prestigious awards. Due to this they later approached it for a 3 year contract with the clause of not undertaking any design activity for any other company during the contract period. Also it included that joey can also not participate in any design activity within Australia for any gaming or entertainment purpose and for this he was given the salary that a senior designer usually receives . After 2 years he was approached by CAN a film company to design for them with an appealing starting salary which was 5 times that GG Pty Ltd was giving him.

Common Employment Contract Laws and Rules:

Great Games Company made some clear contract with Mr. Joey and it wants to stop him from joining Company Animated Films Inc. When a company engages with an employee, a common law contract is made. It is usually written and state, federal laws will certainly be applied to comply with the conditions. It is a legally binding agreement between two or more parties (Rachel, 2013).[footnoteRef:1] Once it is created, both the parties are obliged to do their part. If any of the parties fail to do so, they call it as “in breach of contract”.This might include factors like misrepresentation, outside influence etc. [1: Rachel S. Arnow-Richman, ‘Mainstreaming Employment Contract Law: The Common Law Case For Reasonable Notice Of Termination’ [2013] SSRN Electronic Journal.]

The process of making a Contract:

  • Formation: there are 5 elements for the formation of a contract. They are:
  • Agreement : This happens between the both parties.
  • Consideration: Bargaining for one’s own interest.
  • Capacity: Whether it fits between the laws or community and federal standards.
  • Intention: Maintenance of legal relations
  • Certainty: Duration and completion of the contract,

When a contract is made, it includes some factors and some of those are discussed below:

  • Acceptance: Agreement happens when it is accepted and this has been communicated to the party offering. Once itr has been accepted it becomes legally binding for both parts.
  • Counter offers: It may not be straightforward and sometimes an offer may be met to the law which is a ’counter offer’. In terms of law this might be a request by the employee for extra pay or other related benefits from the employer.
  • Intention to do the contract: For a contract to be enforced legally, the parties must have intention to give rise to legally binding obligations (Richard,2013).[footnoteRef:2] [2: Richard Stone, Contract Law (Routledge, 2013).]
  • Express terms and implied terms: In employment law there is an implied term that says the employees will put the business interests of the employer before their own personal interests.
  • Termination: Termination of the employment contract is a complex area of the law. It is largely dealt with by state and federal industrial laws for many years(Sarah,2015).[footnoteRef:3] The state and federal industrial relations tribunals have established a comprehensive structure of law surrounding unfair redundancy and dismissal. [3: Sarah Bankins, ‘A Process Perspective On Psychological Contract Change: Making Sense Of, And Repairing, Psychological Contract Breach And Violation Through Employee Coping Actions’ (2015) 36(8) Journal of Organizational Behavior.]

Managing a Breach of Contract:

The main remedies for a breach of contract are: Damages,Specific Performance and Cancellation and Restitution.

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Damages: Payment is the most common remedy for a breach of contract(Roger,2016).[footnoteRef:4] There are many kinds of damages, including the following: Compensatory damages, Punitive damages, Nominal damages,Liquidated damages etc. Award of damages is known to be the easier and common method for breach of contract as one party seeks compensation for the financial losses it faced due to the breach . [4: Roger Bernhardt, ‘Purchaser’s Damages For Breach Of Contract’ [2016] SSRN Electronic Journal.]

Specific Performance:

If damages can not be adequate as a legal source of remedy, the non-breaching end may ask for an alternative remedy named specific performance. It is best described as the breaching end’s court-ordered performance of duty under the contract

Cancellation and Restitution:

A non-breaching party may cancel the contract and go to sue for restitution if it has given a benefit to the breaching party.

Application of Contract Law in the Breach of Contract:

An employment contract creates obligations that are to be fulfilled by the sides who are in the agreement. One party’s failure to satisfy any of its contractual obligations is known as a ‘breach’ of the contract. A breach can occur when a party fails to perform in accordance with the terms of the agreement. A breach of contract will usually be specified as either a material breach or an immaterial breach determining the appropriate legal remedy. When a breach of contract occurs , both of the parties wish to have the contract enforced on its terms, or try to recover for any financial harm caused by it. If a dispute arises and informal attempts at resolution fail, the next step possibly is a lawsuit. Courts and formal breach of lawsuits are not the only options for people involved in contract disputes. The parties can agree on a mediator to review a contract breach or may agree to binding arbitration of a contract dispute. When the total payable is excess of the probable damage, then it is called penalty. If the contract mentions a payable amount at a certain date, then the additional number is named as penalty. This is because the delay in work is unlikely to cause damage to the employer side.

Conclusion:

Mr. Joey is bound to work under Great Games Pty Ltd for 3 yearsAccording to the duration of the contract and meanwhile Joey can not join another company. After two years of the contract, Joey went CAN for an illegal agreement. As Joey has not completed the 3 year term under GG Pty Ltd, it can sue or file for lawsuit to prevent Joey from joining CAN. Moreover, GG was paying Joey higher as a beginner from the start which was beneficial for him and Joey agreed on obliging to the contract, so, if he tried to break it , it may be referred to as the breach of contract law. Also , Great Games can further renew or extend the contract via suggesting new salary or job benefits as he is an excellent employee.

References:

  1. Arnow-Richman, Rachel S., ‘Mainstreaming Employment Contract Law: The Common Law Case For Reasonable Notice Of Termination’ [2013] SSRN Electronic Journal
  2. Bankins, Sarah, ‘A Process Perspective On Psychological Contract Change: Making Sense Of, And Repairing, Psychological Contract Breach And Violation Through Employee Coping Actions’ (2015) 36(8) Journal of Organizational Behavior
  3. Bernhardt, Roger, ‘Purchaser’s Damages For Breach Of Contract’ [2016] SSRN Electronic Journal
  4. Stone, Richard, Contract Law (Routledge, 2013)

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Business and Corporate Law: Application of Contract Law and Breach of Contract. (2022, July 14). Edubirdie. Retrieved September 29, 2022, from https://edubirdie.com/examples/business-and-corporate-law-application-of-contract-law-and-breach-of-contract/
“Business and Corporate Law: Application of Contract Law and Breach of Contract.” Edubirdie, 14 Jul. 2022, edubirdie.com/examples/business-and-corporate-law-application-of-contract-law-and-breach-of-contract/
Business and Corporate Law: Application of Contract Law and Breach of Contract. [online]. Available at: <https://edubirdie.com/examples/business-and-corporate-law-application-of-contract-law-and-breach-of-contract/> [Accessed 29 Sept. 2022].
Business and Corporate Law: Application of Contract Law and Breach of Contract [Internet]. Edubirdie. 2022 Jul 14 [cited 2022 Sept 29]. Available from: https://edubirdie.com/examples/business-and-corporate-law-application-of-contract-law-and-breach-of-contract/
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