Fundamentals of Business Law

Running head: FUNDAMENTALS OF BUSINESS LAW
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Fundamentals of business Law
Name
Institution

FUNDAMENTALS OF BUSINESS LAW 2
A contract is an agreement between two parties who are bound by the terms and
conditions in the contract. A contract’s validity depends on elements such as offer,
acceptance, and consideration inter alia. Business entities can create and enter into
business contracts with other parties since they have the capacity to do so. For instance, in
sole proprietorship, the owner of the business can create contracts as a person while
entities whose liabilities are limited like limited liability companies can create contracts as
a legal person but through a representative. Corporations can be regarded as legal persons
as they can sue and also be sued and in the event that there is a breach of contract, the
corporate is held liable and not an individual. The case is quite different in partnership, in
which one partner can create a contract on behalf of the other but the terms of the contract
bind both partners. Therefore, business entities can create and enter into contracts and
depending with the type of entity, either the business or an individual can be held liable in
the event there is breach of contract.
 Sole proprietorship.
The sole proprietor who is the owner of the business can create and negotiate a contract
with any party without seeking authority to do so from any person. The sole proprietor is
personally responsible for all contracts formed with the business.
The decision-making is expeditious since the owner of the business does not have to
consult anyone when creating a contract and this is an advantage to the business. The owner
of the business bears the liability solely unlike other entities of business where owners are
protected from liabilities incurred by the business.
The sole proprietor approves and signs the contracts of the business.
The sole proprietor has the opportunity to choose what is best for the business when
signing the contract without getting contradictory opinions on the same. The sole proprietor is
solely liable for damages resulting from the contract (Ding, 2009).

FUNDAMENTALS OF BUSINESS LAW 3
The sole proprietor is liable for any damages resulting from the contract solely and not the
business.
Sole proprietor can easily enter into a contract of sale but as an individual and be bound by
the terms of the contract. This is a limitation to the sole proprietor since the sole proprietor
bears the loss alone unlike in other business entities.
 Partnership
Partners collectively create and negotiates contract since partnership itself does have any
individual existence.
The advantage of this entity in relation to contract creation and negotiation is that the
partners have a collective power and wider range of resources giving them best contracts to
choose from. The disadvantage lies on the part of decision making as it may take both
partners a long time while trying to reach an agreement on contract to be created.
The Partnership Acts of most states allow an individual partner to sign agreements on
behalf of the partnership in most cases (Morse, 2015).
The advantage of this is that if one partner is missing the other partner can sign on behalf
of the business. The disadvantage is that a partner can sign into the contract a term that the
other party may not be ok with.
The partners are individually responsible for any liability associated with the contract
since the partnership liability is limited. The partners are jointly and severally responsible for
any liability that may arise from a contract.
The advantage of this is that they can share the burden of loss while the disadvantage lies
on a partner bearing a loss for a mistake done by the partner.
Partnership has the ability to enter into contract of sales and any of the partners can
represent the partnership in the contract.