Contracts, or agreements to provide business transactions, are an important part

Question

Contracts, or agreements to provide business transactions, are an important part of Business, in general. What are the advantages of the level of certainty that a contract can create? What would happen to commerce if agreements were not enforceable? How, if you believe so, does a basic understanding of contract principles, or the law, help one business person when compared to another business person who lacks that basic understanding? Would it lead to more lawsuits or fewer lawsuits? Does it even matter?

Explanation / Answer

Answer: The certainty created by the contracts reduces risks that are associated with uncertainty. This helps in building confidence which improves the performance. With lower levels of risks encourages both the parties to work without fear. If agreements were not enforceable in commerce then it may lead to the rise in trade disputes which can result in severe loss to the commerce and related activities. The confidence level between the trading parties will reduce and the overall morale for doing trade will go down. Such situation will increase the number of lawsuits and confidence in business will reduce.

The knowledge of the contract principles or laws can help a person in avoiding into entering a situation of fraud. When a person understands these principles and laws then he is able to make better sense of the terms and conditions mentioned in the contract. So he does not have a misconception and misunderstanding about what the terms in the contract actually mention. On the other hand if a person does not have this knowledge then he may misunderstand the terms of contract and can be easily cheated.

Knowledge of the contract principles or laws results in lower number of lawsuits as it creates clarity and removes the chances of misconceptions and disputes. Each party clearly understands that what is expected from him and this avoids lawsuits.

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