Situation: Contractual situation

Hi, welcome to the twenty first day of The Leads Intellectual challenge: a 30-day challenge with Fatai Kareem. If you would like to know more about signal situation, read the twentieth day challenge here.

Today, he will be discussing another type of situation known as contractual situation. Why do businesses use terms and conditions for their offering? Why do businesses use invoice? Why do you sign terms and conditions form? 

Well, understanding contractual situation will enable you to understand how you can relate better with other people. What is contractual situation? 

Contractual situation is a situation that involves an agreement between two or more parties on a common ground, which leads to an exchange of values that satisfy the needs of each party. This situation occurs to protect the rights and satisfy the need of two or more parties involve in a contract, transaction or business. Therefore, it ensures that the interest of each party is considered by seeking their consents to the conditions governing their relationship or affairs.

This is a situation that results into trouble when the consent of one party is not earned before engaging in relationship with him/her. Likewise, when the purpose or conditions governing their affairs are not well understood and agreed upon by both parties. Also, when these conditions are violated after they have agreed upon them. And, when the mistake or carelessness of one party results in loss or damage for the other party.

This situation follows the rule of common understanding, a concept proposed by Fatai Kareem, that states that when two or more people have a similar understanding or intention about a phenomenon or their relationship, a consensus is likely be reached while their relationship is likely to be built on clarity, purpose and accountability. That is, both parties need to understand the purpose of engaging with one another and agree on the terms and conditions governing their affairs, and are accountable to one another. This will ensure that possible problem or conflict of interest involving their relationship would have been solved before it comes up.

Clarity, simplicity, understanding, confidentiality, purpose, accountability, responsibility, integrity, objectivity are some of the virtues that lead to an effective contractual situation. Examples of contractual situation include:

• the relationship between a seller and a buyer.

• the relationship between an employer and an employee.

• the relationship between partners in a business.

To put an effective contractual situation in place,the following steps maybe useful:

•  Define the purpose of the situation. What problem will it solve when it occurs? What opportunity will it create when it occurs?

• Determine the common ground to be agreed upon by parties that will be involved. This is enable both parties to the basis of their agreement.

• Determine the right and duties of each party. This will enable the parties to who is responsible for what, who is to be accountable for what is done, and the right they have.

• Determine the terms and conditions that will govern your affairs. This will enable the parties to know the dos and don'ts of their engagement, and be bound by such terms and conditions. This must be documented and signed.

• Seek the consent of each party with clarity, accountability and purpose. This will ensure that nobody is forced to do what he/she is not willing to do. This can be in form of signature. 

• Determine the control measure. This will enable that any party that fails to perform his/her duties, or breach the terms and conditions of their engagement, is called to order.

Case study

1.  Smart and Funny agree to start a business and share the profit or loss equally. Smart provides the larger portion of the capital. They make huge amount of profit. Smart gives 30 percent of the profit to funny claiming that he provides the larger portion of the capital. Funny claims that they have agreed to share the profit equally, which Smart denies. Elder intervenes and asks for a written agreement between them, which they do not have. How can this situation affects both parties? How can an effective contractual situation help to prevent issue like this?

2. Vol, out of ignorance, agrees to terms and conditions of a website. After few minutes of visiting the website, all his personal information are accessed and used to commit a crime. He denies such a conduct, but disappointed when shown that he gives his consent to those that used his information to commit the crime. What could Vol have done to prevent this kind of situation?

Disclaimer: All names used are for illustration purpose.

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