POB Term 3

• A contract is a legally binding agreement between two or more parties.
• Legally binding means that the terms and conditions of the contract are enforceable by law.
• Characteristics of a contract: Offer, Acceptance, Agreement, Consideration, Legality of form, Intention of create legal relations, Certainty, Capacity, Possibility of performance and Free consent.
• Consideration in contracts means that the value of the contract or the benefit to be derived as a result of entering into the contractual agreement .
• Legality of form in contract means the act, action or activity, being agreed to must be legal and lawful.
• Intention to create legal relations in contract means parties involved must be aware that contracts have legal consequences.
• Certainty in contract means that the terms and regulations must be clearly stated in the contract to assist and aid everyone's awareness and understanding.
• Capacity and Possibility of performance in contract means that the parties involved must be able to carry out the activity agreed to.
• Free consent in contract means that you have the right to agree into signing the contract.
• The three main types of contracts are: The Simple Contract, The Specialty Contract and The Contract of Record.
• The Simple Contract: these contracts can be entered into verbally, written or implied by your very conduct.
• The Specialty Contract: this contract posses special feature such as being signed, sealed and delivered.
• Sealed in contract : if a company or organization is issuing the contract, then the company's logo or trading symbol must appear on the contract.
• Signed in contract: the signatures of all the parties involved in the contractual agreement must appear on the contract as proof that they agreed to the terms and conditions of the contract.
• Delivered in contract: each party must have a copy of the contract to use as proof that a transaction / contraction has taken place.
• The Contract of Record: this type of contract is issued by a court of law to encourage / force a type of behavior from a person a person.
• Termination of a contract refers to the completion or ending of a contract.
• Breach of contract refers to the situation where a party of parties fail to execute the act, action or activity that was agreed to in the contract.
• Ways of Termination a Contract: Court Order, Completion, Lapse of Time, Inability to Perform, Death and Breach of Contract.
• Resolution for Breach of contracts: 1) Damages, a sum of money to compensate for loses incurred, and 2) Order by the court, instructing specific parties fulfill the contractual obligation and do what is expected of them.
• Documentation provides evidence of what was done in business
• The importance of record keeping in business - TIRKB is the abbreviation
• TIRKB - 1) Records provide of setting out the details of quotes, orders or prices, quantities and types of goods.
• TIRKB- 2) Records give details of when goods will be delivered, have been delivered, how much money is owed and how much has been paid for the goods supplied.
• TIRKB- 3) Records help a business to keep track of its dealings with other businesses.
• TIRKB- 4) Records are also important to be kept for audit purposes.
• TIRKB- 5) The authorities will need to see records to ascertain that tax dues are being paid.
• The Documents use in trade: Inquiry (asking letter), Quotation, Price list, Catalogue, Order form, Advice note, Invoice, Delivery note, Credit note, Statement, Payment, Receipt (bill).
• Inquiry- An inquiry/ request into the goods that a company is offering.
• 2) Quotation/ Price list/ Catalogue- A document setting out the details of goods that can be supplied, at what prices and under what terms of sale.
• 3) Order form- An order for the good OR a document that a buyer giver the seller telling them what they want to buy.
• 4) Advice note- advices when the good would be sent and how it will be sent; eg. by sea, air, etc.
• 5) Delivery note- sent with the goods usually in the form of a pro forma invoice and signed by the person receiving the goods. OR A note the seller sends together with the sent items indicating the details.
• 6) Invoice/ bill of sale- sets out the details of goods such as quantities, prices and the total amount due. OR A note a seller sends to the buyer giving all the details of the sale.
• At the end of the invoice are the symbols E & OE which means E- errors and O- omissions, E- excepted
• 7) Pro forma invoice- shows what the final invoice looks like. It is used when the seller is still discussing the sale but cannot send an official invoice since the final details of the sale has not been confirmed.
• 8) Credit / Debit note- sets out the details of over payment or under payment.
• Credit note sets out details of under payment and Debit note sets out details of overpayment.
• 9) Statement- set at the end of the month giving details of documents sent by the seller and balances owing / any payment made.
• 10) Payment- Part payment or full payment to settle amounts owing on the statement.