Business law principles and applications

Business Law

The situation described refers to contract law. For a contract to be valid, there are several elements that must be present. The contract must have mutual consent, offer and acceptance, mutual consideration, performance, good faith and it must be legal (Larson, 2003). Most of those elements are present in this situation.

In this situation, there was no legal offer. The legal mechanics of this deal would be that B. makes an offer to a for the box of nails. In this situation, B did not make an offer to a. In order for an offer to have taken place, B would have needed to offer some form of consideration to a for the nails. That did not happen. Therefore, B is correct. No legal offer was made, therefore there is no legal contract. There are exceptions granted to this doctrine with regards to some service contracts, but for a contract involving the sale of goods this is not the case.

There is the further question of an established market price for nails. The trade history between a and B. may come into play. If the two have an ongoing relationship, and B. typically orders from B. with specifying the price and simply pays the market price, then a would have grounds to argue that an offer was made and therefore a contract did exist. A would have to establish this relational history between the two parties in order to make this claim.

Without this history, B's agreement to buy without setting a price cannot be considered to be an offer as there is insufficient consideration. B could reasonably argued that the prior discussions were negotiations, but did not constitute assent because no price had been agreed upon. However, if in the past a history had been established wherein B. ordered without stating a price and subsequently accepted the goods and paid market price, then in this situation a could reasonably have assumed that he was entering into a contract with B; that B. intended his agreement to purchase constituted assent to a contract. In this situation, the contract would be implied by conduct.

B may have the opportunity to argue that if he does not accept the goods, then his conduct does not imply a contract. In prior situations, his acceptance of the goods implied the contract by conduct but this situation differed in that he did not accept the goods. Ultimately, this would come down to the court's interpretation of whether a reasonable person in the position of the offeree would have understood that the offeror intended to be bound. For example if at some point in the relationship B. had stated clearly to a that no contract existed until the goods had been received, then a in this case would have no reason to believe that a contract existed in this case.

In this situation, if the nails were not yet delivered to B, and history showed that B's conduct implied a contract only when the nails were accepted, then no contract exists. B has effectively canceled the agreement by waiving the deal prior to a's delivery of the consideration. It is unlikely under the circumstances described that a contract would exist between a and B. In this situation. It is possible that a could prove the existence of the contract, but highly unlikely.