UNIT 202 – BUSINESS LAW

LECTURER NAME

DR.MOHAMMED

TOPIC NAME

Consideration of a contract for an offer letter to an employee from an

organisation

Submission Date: 21/11/2013

Student Name: Bhupesh Mamtani

Student ID : 869805

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EXECUTIVE SUMMARY

This report will help us understand the importance of a contract and its main

elements. In this regard we have taken, as a contract, a job offer letter from an

organisation (Redington Gulf) to a potential employee. We will see what the phases

of a contract are and what are the elements that keep the parties to a contract bound

to each other. This report will explain us the role of a contract to keep a professional

relationship stable.

We have discussed the phases and terms of a contract, the subject matter on which

the contract is based. We will understand how differences between the parties can be

resolved by using proper corrective measure and how a contract can be kept stable

using effective contact management practices.

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TABLE OF CONTENTS

Description Page No.

EXECUTIVE SUMMARY 2

INTRODUCTION 3

OFFER AND ACCEPTANCE PHASE 5-6

SUBJECT MATTER OF THE CONTRACT 6-8

CONDITIONS AND WARRANTIES 8-9

DISPUTES IN CONTRACT 9

CONTRACT MANAGEMENT PRACTICES 10

CONCLUSION 11

REFERENCES 12

APPENDIX 13

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INTRODUCTION

Redington Gulf is a reputed regional distributor in the Middle East and Africa,

holding distributing agencies of various brands such as Hewlett Packard, Asus,

Canon, Acer, etc... It started its operations as a trader for HP products in Jebel Ali,

Dubai in 1997 emphasizing on excellent customer service and pricing. Later it

expanded into various GCC and African markets and acquired the tag of ‘Regional

Distributor’ post 2002.

The company has a strong brand portfolio and sound distribution channels and

logistics to cater to its ever growing market base. It believes that efficient customer

service is the key to maintaining a strong customer base.

Redington Gulf is one of the most desired career spots for many aspiring youngsters

and experienced professionals. The organisation chooses a potential employee after

looking at his past experience and analyzing his various intellectual abilities, to

ensure if the candidate can help the company achieve its objectives.

In this report we are going to discuss the different phases of a contract, considering a

job offer letter to an employee from Redington. In this case the potential employee is

the offeree and the company is the offeror. This report will show us what the

importance of a contract is and what role a contract plays to keep a professional

relationship stable. We will learn about the types of terms used in a contract.

Further, the report will enlighten us on the importance of managing the contract

efficiently.

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[1] OFFER AND ACCEPTANCE PHASE

This is the initial stage in formation of a contract. In simple terms, an ‘arrangement’

proposed by one party to another, if accepted by the second party it forms a contract.

Acceptance of the offer by the second party implies that the second party agrees to

the terms and conditions of the arrangement and would like to start the relationship.

If the second party is uncomfortable with the terms and conditions stated in the

contract, it can reject the offer.

Usually, an offeror communicates the offer to the offeree, and expects it to reply to it

through a particular medium of communication within a specific period of time,

failing to do the same may make the offer void.

In our case, the offer is for employment by an organisation to a potential employee.

If the potential employee accepts the offer, both the parties (organisation and

employee) will be bound by the terms stated in the contract. The organisation has

clearly mentioned the salary intended to be paid and other vital information. The

terms stated in the contract and accepted by the employee will help the management

to take action in critical situations in the relationship of the two. If the employee

breaches the terms of the contract, the organisation can take legal action against him

since no clause states the method to tackle such a situation. The contract also states

the responsibilities of the organisation towards the employee.

“If an employee begins work, then later signs the written employment agreement,

the employee may only be bound by the oral and implied common law terms of

employment and not by the written terms of the contract. To avoid this, an offer of

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employment could be conditional upon the signing of a written agreement”. (Corry,

2007)

If the potential employee agrees to the terms, he may sign the offer letter and

communicate it to the employer. In case the employee doesn’t consent with certain

term(s), it may negotiate with the employer or simply reject the offer.

[2] SUBJECT MATTER OF THE CONTRACT

Subject matter, in general terms, is the product or service for which a contract has

been established between two parties. The parties exchange the product or service

for mutual benefit, i.e. one party offers something to another party in return for

something else. In this case, the subject matter is the professional labour service

provided by the employee to the organisation in return for remuneration. The

employee, after a month’s service to the firm, expects to receive the agreed amount

of remuneration at the end of every month. Also the employee is entitled to other

perks and benefits as decided in the contract. The employee is directed to work as a

‘Credit Coordinator’, this job of the employee is the subject matter of the contract

[Appendix 1 Clause Number 1]. The provision of service by the employee has been

priced at a reasonable rate mutually agreed upon by both the parties.

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PROPRIETORY RIGHTS

Property is something that holds value and is owned by an individual or a group of

individuals and the owner[s] holds the proprietory rights towards it. It maybe land,

building, information, knowledge, etc.

Property can be divided into two: (1) Real Property and (2) Personal Property

Real property is any piece of legal land. It may have been improvised with fixtures,

buildings, etc. Which further adds value to the property.Since a piece of land can be

put to many uses; the value of such real property generally appreciates over time.

The owner of such property can put it to any use as he/she requires.

Personal property is any such property which is not real property. There are two

types of personal properties:

1. Tangible Property, which can be touched, felt and is movable. Eg. Cars,

Machinery, Etc... In the case of many tangible properties, their value depreciates

over time due to wear and tear.

2. Intangible Property, which cannot be seen, touched or felt. But it holds a value.

Eg: Negotiable Instruments, patents and other intangible assets.

Another category of personal property is Intellectual Property [IP]. Intellectual

property is basically a legal right regarding an intangible property. It is not capable

of being possessed or occupied like tangible properties.

In context of our report, the organisation also holds an intellectual property in the

form of internal information of the organisation which is supposed to be kept

confidential and private. The contract clearly states that the employee is expected to

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keep the private internal information of the firm to himself and under any

circumstances should not leak out any such information to any outsider to the

organisation. Any leaked confidential information may prove to be fatal for the

business operations of the firm or defame it. Appendix 2 states it.

[3] CONDITIONS AND WARRANTIES

Terms of a contract are the building blocks of the relationship to be established

between two parties. They form the basis on which the contract has been accepted.

Terms must be clearly expressed in the contract to be properly understood by the

offeree and helps to stabilize the relationship in case of turbulence. Properly

expressed terms also help the intervening administration (eg. Court) to analyse the

contract and provide accurate judgment in case of any dispute.

“The importance of the distinction between a condition and a warranty is that a

breach of a “condition” normally entitles the innocent party to terminate the contract

and claim damages; while the breach of a “warranty” normally entitles the innocent

party to only claim damages”. (Jamac, 2012)

All the terms of a contract do not hold equal importance. Some are highly essential;

breaching them may result in the contract being terminated and the guilty party

being sued for damages. Such terms are called Conditions. Some terms are not so

important and just play a supporting role to keep the relationship dispute free. Their

breach doesn’t result in the contract being terminated; only the injured party gets

compensated for damages. Such terms are called Warranties. Conditions are terms

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which penetrate to the root of the contract, whereas warranties are subsidiary to

them.

The condition of the contract is given in Appendix 3.

The warranty of the contract is given in Appendix 4.

[4] DISPUTES IN CONTRACT

Since a contract involves two different individuals or parties, disagreement may

arise between them due to conflicting ways of thinking. When two parties have

different opinions over the same thing, clashes take place between them. Sometimes

disputes arise because one party didn’t fulfill their commitments or acted in a way

which was beforehand directed by the other party as negative. Differences during the

course of a contract are inevitable, but remedies/methods to tackle such disputes are

necessary to be decided upon by mutual agreement before initiating the contract.

Remedies and procedures to solve disputes help to quickly resolve the differences

and resume the contract in case it is not terminated.

Since in the given contract no such clause is stated that is intended to solve any

differences between the parties, the parties will seek legal action in case of any

dispute.

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[5] CONTRACT MANAGEMENT PRACTICES

A contract between two parties is the force binding them together and directs them

towards their roles and responsibilities throughout the period of their relationship.

Since a contract holds so much of importance, it’s highly essential to carefully

construct and maintain it through mutual agreement of parties. The terms of the

contract and other essential elements should be carefully put into place through

healthy discussion between the parties. Any updation or amendment in the contract

during its course should be amicably done with the consent of both the parties. Thus

proper care should be taken towards the creation, execution and

updation/amendment of the contract. This is known as Contract Management.

Effective and efficient contract management practices are very critical throughout

the life of the contract, because unnecessary disputes and differences only add to the

loss of time and money. “Many provider organisations are losing millions of revenue

dollars each year because their systems and administrative processes do not

efficiently and effectively monitor and enforce contract terms”. (Lohman, 1999)

Contract management ensures that both the parties fulfill all their obligations that

they agree to while initiating the contract and the employee receives all the benefits

assured to him by the employer , in case of an employment contract.

In the case of the given contract, if there is no good contract management in place,

any dispute will lower the productivity of the employee and lead to loss for the

organisation and inturn not meeting their overall goals on time.

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CONCLUSION

In this report, we took into consideration a job offer letter to understand the

importance of a contract and its main elements. We discussed the different phases

of a contract.

There should be a party to offer something and a second party to accept the offer.

Here, potential employee was the offeree and the company was the offeror. The

report showed us the importance of a contract and what role a contract plays to keep

a professional relationship stable. There should be a subject matter for which a

contract is being made. The terms of a contract play an important role in guiding it

in the right direction. We learnt that differences between the parties are inevitable,

but there should be a proper arrangement to solve such differences. Also, the

contract should be properly managed to achieve its main objectives.

This particular organisation should introduce a clause to solve a dispute between

them and an employee. Also effective and efficient contract management practices

should be devised to guide the contract accurately.

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REFERENCES:

Corry, D. (2007). Contracts prevent employers from getting burned in hot markets. Canadian HR Reporter, 20(11), 9. Retrieved from http://search.proquest.com/docview/220807796?accountid=9653

Jacmac, (2012), Condition Vs Warranty in a Contract, [Online], available athttp://www.jacmac.com.au/uploaded/News/publications/201204_Condition_vs_Warranty_in_a_Contract.pdf [12-11-2013]

Lohman, P. 1999, "Optimizing revenues through effective contract management", Healthcare Financial Management, vol. 53, no. 9, pp. 35-7.

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APPENDIX

APPENDIX 1 [CLAUSE NO. 1]

Your present assignment will be that of Credit Coordinator. The company may

however reassign and/or transfer you to any other similar position within the

company or any of its subsidiary or associate companies.

APPENDIX 2 [CLAUSE NO. 8. d]

During the terms of your employment with the Company or at any time thereafter,

you shall not use or disclose to any other company, firm or organisation or person

any information concerning the secrets, business or affairs of the Company nor do

commence any act prejudicial to the interest of the Company.

APENDIX 3 [CLAUSE NO. 2]

You shall be employed for an initial period of three months from the date of joining,

which shall be termed as probation period. After successful completion of this

period, your services shall be confirmed for a period of Two (2) years from the date

of joining. This period can be extended with mutual agreement.

APPENDIX 4 [CLAUSE NO. 7]

In case you resign from the company before completing two years from the date of

joining, the company is liable to deduct two months’ fixed component from the dues

payable to you against the expenses incurred on visa, work permit, recruitment,

training, etc.

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