In the start up of any business, legitimacy is central to the execution of business. The law is an essential tool in making any business transactions authentic and it continues doing so even after startup. Friel, (2000, p.5) explains that a contract has the purpose of defining the limitations within which business is carried out. Consequently, both parties are expected to navigate their behaviors and relations within the contract as it is actually legally binding. During contract formation, bargains are made on the types of exchanges to be executed and their consequences.
The elements of contract which are mutual consent, offer and acceptance, mutual consideration, performance and good faith, all amount to an agreement which is legally enforceable (Larson, 2003). The failure of adhering to legal contracts amounts to contractual liability and the consequential risk of law suits. Thus, the manager must be conversant with the terms of contract in order to avoid liability or even law suits which can be detrimental to the business.
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