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Business Law

Part 1 Status of Contracts
Select two of the scenarios below and explain the contractual issues and possible outcomes.

� Wally contracted to sell his home to Wendy for $295,000. Before the deal closed, Wilson offered to
purchase the house for $315,000. Wally accepted Wilson�s offer and refused to sell the property to
� Nathan agrees to paint Ned�s single story home for $2,000. Ned realizes that he will not enough
funds to pay Nathan, so he transfers his rights under the agreement to his neighbor, Nancy, who has a
three story home. Nancy calls Nathan to let him know that Ned assigned the contract to her and requests
that Nathan pain her house for $2,000.

Part II

Select two of the following topics, explain them, and provide a relevant example that does not appear in
the textbook:

�Compensatory damages
�Consequential damages


Status of Contracts




Status of Contracts

Part I

The law of contract postulates that an offer becomes a binding agreement once the seller and
buyer reach a consensus. In this respect, the Wally is bound by the law of contract to sell the
house to Wendy. However, given that the deal had not be finalized, it means that there is no
written contract and as provided by Cross and Miller (2014), a verbal contract could easily be
easily escaped; with Wally providing that he had not entered into the contract yet.

The transfer of burden and obligations stipulated in a contract is not allowed and Ned therefore
has no right to transfer the painting contract to Nancy (Miller, 2011). In order for a transfer to be
done, the parties in the contract must both be involved and provide consent, in which case
Nathan did not consent on the change. Furthermore, the initial contract involved a single storey
and transfer of the contract insinuates that the terms of contract have changed from one to three
storey, increasing Nathan’s obligation without increasing the compensation.

Part II

Compensatory damages refer to charges that a court issues through a civil action to compensate
the plaintiff for loss, injury or detriment resulting from another individual’s unlawful conduct
(Miller, 2011). An example is where the parties enter into a contract to provide goods and upon
delivery the buyer cancels the order. The buyer should then be required to pay for compensatory
damages in terms of time and transport costs incurred, as well as lost opportunity to sell to
another willing buyer.


Consequential damages are used to demonstrate damages resulting from a contractual party’s
failure to meet their part of the obligation. This may also include actions outside the contract that
result from failure to accomplish (Cross and Miller, 2011). An example is where an individual
gets into a contract to purchase a house within a given time but fails to fulfill the promise. If the
seller was relying on the money to pay off the mortgage but fails due to unavailability of money
and the house is auctioned, consequential damages are experienced.



Cross, F. B. & Miller, R. L. (2014). The Legal Environment of Business: Text and Cases.

London: Cengage Learning, 2014

Miller, R. L. (2011). Business Law Today: Comprehensive: Text and Cases. London: Cengage


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