ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA

2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas 4217

(043) 757-4445 / (043) 757-5944

COLLEGE DEPARTMENT

Learning Module
In
REGULATORY FRAMEWORK AND LEGAL
ISSUES IN BUSINESS
(SY. 2021-2022)

Prepared by:
PAULYN MARIE R. BATHAN
 ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA
2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas 4217
(043) 757-4445 / (043) 757-5944

WEEK 7

I. Lesson Objectives

At the end of this module, you will be able to:

1. Define business ethics

2. Identify the common traits of effective ethical programs in business

3. Differentiate the two moral philosophy.

II. Read and Learn

PLEASE TAKE NOTE OF THE TERMS/WORDS WITH THE RED FONT COLOR.IT WILL BE
INCLUDED IN YOUR MIDTERMS.

Definition of a contract
- Contract are enforceable agreement between the parties,
- One generally accepted definition of a contract is a promise or a set of promises enforceable
by law.

Elements of a contract
1. Mutual assent
2. Capacity to contract
3. Consideration
4. Legal Purpose

Sources of Contract Law

1. State Common Law
2. State Statutory Law

⚫ Word Contract is often used to describe a written document, many contracts are not in
writing and yet are enforceable.

TAKE NOTE:
Bilateral Contracts vs. Unilateral Contracts
A bilateral contract involves two promises and two performances while unilateral
contract involves one promise, followed by one performance, which then triggers a second
performance.
 ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA
2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas 4217
(043) 757-4445 / (043) 757-5944

TAKE NOTE:
1. An express contract is created when the parties have knowingly and intentionally agreed on
the promises and performances.
2. An implied contract is one in which the agreement or reached by the parties' actions.
3. The law permits quasi-contracts to be enforceable where one party suffers losses as a result
of another party's unjust enrichment.

TAKE NOTE:
- When a contract has the necessary elements, it is said to be a valid contract.
- Void contracts are agreements that have not been formed in conformance with the law from
the outset of the agreement and thus, cannot be enforced by either party.
- A voidable contract is one that one party may, at its opinion, either disaffirm or enforce.
- An unenforceable contract is one that meets the elements required by law for an otherwise
binding agreement, but is subject to a legal defense.

Formal and Informal Contract

1. Formal contract is one that meets one or more specific requirements of construction.
Example: Negotiable instruments
2. If a contract is not required to be under seal by statute or required to possess a certain form
or language, it will be considered an informal contract.

Executed Contracts and Executory Contracts

1. An executed contract is a contract that is completed.
2. An executory contract is one that is not yet completed.

Types of Remedies for Breach of Contract

1. Compensatory Damages
2. Specific Performance
3. Injunction
4. Rescission
5. Liquidated Damages
6. Nominal Damages

1. Compensatory Damages
An award of compensatory damages is the most common of the legal remedies for
breach of contract.

The calculation of compensatory damages is based on the actual losses you have
sustained as a result of the breach of contract. They typically fall into two categories:
expectation damages and consequential damages.

a) Expectation Damages
Expectation damages—also referred to as general damages—are those that directly result
from the breach of contract.

For example, imagine a company that provides bus tours enters into a contract to buy a bus for
$100,000. However, the seller backs out of the contract and refuses to sell the bus. The bus
 ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA
2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas 4217
(043) 757-4445 / (043) 757-5944

company finds another seller with a similar bus, but they won’t take less than $110,000. In that
case, the expectation damages would be $10,000—the difference between the contract price
and the amount the company had to pay another seller for the same product.

b) Consequential Damages
Consequential damages are those that flow as a natural consequence of the breach.

Consequential damages often comprises profits that a company lost as a result of the breach.

In the case of the bus example, imagine it took an extra week to secure the new bus.
As a result, the tour company had to turn away 1,000 customers that would have each paid $50
for a bus tour. In that case, the company could likely recover consequential damages for the
$50,000 they lost in ticket sales.

Often the breaching party will attempt to avoid paying consequential damages by
claiming that they are too speculative or that they are not foreseeable. Also, sometimes parties
to a contract may limit or preclude either party from recovering consequential damages. An
experienced attorney can help you combat these arguments and maximize your damages
award.

2. Specific Performance
Specific performance is a type of remedy for breach of contract in which a court orders the
breaching party to perform their end of the bargain.

Monetary damages are typically favored over specific performance as a remedy for
breach of contract. However, specific performance may be available when monetary damages
won’t adequately compensate you. For example, they may apply to a contract for something
that is unique and can’t be easily replaced.

In the bus example above, monetary damages would be sufficient to compensate the
tour company for its loss. But imagine that the new bus had been used previously by a famous
singer. The tour company wanted to use the bus for tours of the singer’s home town. In that
case, the tour company could argue for specific performance rather than monetary damages
because no other bus would be comparable to the one it contracted to buy.

3. Injunction
Injunctions serve a similar purpose as specific performance. The difference is that with
specific performance, the court orders a party to do something. With an injunction, the court
often orders a party not to do something.

An injunction may be permanent or temporary. Temporary injunctions are often

ordered while litigation is pending to prevent potential damage. For example, in a lawsuit that
concerns a breach of a noncompete contract, a court might order the defendant to cease the
allegedly competitive activity until the lawsuit is resolved. A permanent injunction, as the name
suggests, is permanent. A judge may issue a permanent injunction as part of their final ruling in
a lawsuit.
 ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA
2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas 4217
(043) 757-4445 / (043) 757-5944

4. Rescission
Rescission allows a nonbreaching party to cancel the contract as a remedy for a
breach. Rather than seeking monetary damages, the nonbreaching party can simply refuse to
complete their end of the bargain. Rescission puts the parties back in the position they would
have been in had they never entered into the contract.

However, to justify rescission, the breach must be material. That means that it has to go to the
heart of the contractual agreement.

For example, imagine that you contract to provide catering services for an event. The contract
requires the other party to pay half the contract price by a certain date, but they never pay.

Since payment goes to the heart of the contract, you would be justified in rescinding the
contract and refusing to provide the catering services.

5. Liquidated Damages
Liquidated damages are a specific amount the parties agree to in the contract as compensation
for a breach.

Contracts often use liquidated damages provisions where it might be difficult to

calculate the correct amount of compensatory damages.

Real estate purchase agreements and construction contracts commonly rely on

liquidated damages. They might be a specific sum, such as the amount of the earnest money
on a purchase contract. Or they could depend on a formula, such as a certain amount of
money for each day a deadline is not met. Partnership agreements are also likely to include
liquidated damages provisions.

Although courts typically uphold liquidated damages clauses, they may disregard them
if the amount of liquidated damages is drastically smaller or greater than the value of the actual
harm the plaintiff has suffered.

6. Nominal Damages
A court may award nominal damages as a legal remedy for breach of contract when
the plaintiff cannot support their claim for compensatory damages. With nominal damages, the
court recognizes that a breach of contract occurred, but no harm can be calculated.

While receiving nominal damages may feel like a pyrrhic victory, the plaintiff does get
the benefit of the ruling in their favor. This may be simply a moral victory, or it may pave the
way for the plaintiff to pursue another type of legal action. If the contract has an attorney fee
provision, an award of nominal damages may also enable the plaintiff to seek their attorney
fees from the defendant.
ICT-ED INSTITUTE OF SCIENCE AND TECHNOLOGY LIPA
2/F Mercedes Bldg. P. Torres St. Lipa City, Batangas 4217
(043) 757-4445 / (043) 757-5944