Introduction To The Law Of Contract
A contract is an agreement between two parties which creates rights and obligations to perform that can be enforced at law. It can be oral or written.
Five essential elements
- Agreement: There must be an agreement (where an offer has been made and it has been accepted). The agreement between the parties, meeting of the minds, is called consensus ad idem.
- Consideration: Something of value must be given in exchange for the promise or set of promises.
- Intention to create a legal relationship: The parties must have intended to create a legally enforceable agreement
- Capacity to contract: Parties must have legal capacity to enter into a contract
- The contract must be enforceable and therefore not void, voidable, or illegal.
Form of a contract
A contract, whether oral or written, can be valid and effective as long as it fulfills the essential elements of a valid contract. Written contracts have the advantage of ensuring that all that was agreed was recorded down and therefore not forgotten. There is a human tendency to forget parts of the contracts that was oral.
Contracts which by Statute Must Be in Writing
According to law of Britain, there are contracts which by statute must be in writing. We list the main ones here.
- Bill of sale. This document must not only be in writing but it also has to be written in a certain form. Otherwise, it is void (that is, as if it never existed). See Bill of Sale Act 1878
- Contract for the sale of land. They must be in writing and must be signed by or on behalf of both parties (Law of Property (Miscellaneous Provisions) Act 1989)
- Bill of exchange or Promissory Note. They must be made in writing (Bills of Exchange Act 1882)
- Consumer Credit Agreement. These agreements, such as the hire purchase or loan agreement, must be in writing and signed by both parties (Consumer Credit Act 1974).
- Contract of Marine Insurance. Such contracts are void unless made in writing in the form of a policy (Marine Insurance Act 1906).
Contracts Which by Statute Must either be in Writing or Evidenced by Writing
Contract of Guarantee. This contract must be either in writing or evidenced by it (Law Reform (Enforcement of Contracts) Act 1954. In a contract of guarantee, a person agrees to “answer for the debt, default, or miscarriage of another person”. A promises the other party to the contract with B that if B does not pay the debt, he will.
Creating a contract
- The agreement
- Offer
- Communication of the Offer
- Termination of offers
- Acceptance
The agreement: Agreement is one of the requirements for a valid contract. Avalid contract cannot not be reached by the parties withoutagreement, that is, “consensus ad idem”. The agreement has
got two keysub-elements, offer and acceptance.
Offer: An offer as an expression of willingness by one party (the offeror) to contract made with the intention that it shall become binding one the two parties as soon as it’s accepted by the offeree. The offer may be in writing, by conduct, or words. An offer need not be to only companies. An offer can be made to an individual person, company, organization or even to the world at large.
We have some forms of offers:
- Offer to a specified person either orally or in writing. E.g., I want to sell to you my car at 2,000 pounds cash.
- Offer can be made to the world at large as in the case of Carlill v Carbolic Smoke Ball company [1893].
Communication of the Offer
An offer must be communicated for it to be accepted. An offeror must communicate it to the offeree. The offeree must receive the offer and either accept or reject it. If it is not accepted then it is terminated.
Acceptance of the offer
Acceptance of the offer must be absolute and unqualified. This means that the offer must be accepted with its all terms. Acceptance of theoffer can be in writing, oral (word of mouth) or defined from conduct. Silence is not acceptance case of Felthouse v Bindley [1862].
Acceptance or rejection
Termination of offers
Under English law, an offer can terminate in one of the following seven ways:
- Acceptance
- Revocation
- If it is rejected
- If it lapses
- Death of either party before acceptance
Termination of offers
- Acceptance: offer has been accepted unconditionally by the offeree and the parties have entered into a contract, then the offer has terminated. Acceptance of the offer can be in writing, oral (word of mouth) or from conduct. Silence is not acceptance case of Felthouse v Bindley [1862].
- Revocation: As a general rule, unless it is stated in the offer that the offer is irrevocable, the offer can be withdrawn by the offeror at any time before it is accepted provided the revocation has been communicated to the offeree.
- If it is rejected: The offer can be rejected by the offeree. This terminates the offer. Rejection can take two forms: express rejection or counter-offer. The offeree may seek to change the terms and conditions without rejecting express all the contents of the offer.
- If it lapses:
- Death of either party before acceptance
Invitations to treat: An offer or invitation to treat?
A qualified offer is different from invitation to treat. In the latter, a person does not make an offer but invites another or others to do so. The party making the invitation is inviting offers which he can be eitherbe accept or reject.
Common examples of invitations to treat include advertisements or displays of goods on a shelf in a self-service store. In a shop or supermarket, the shopkeeper displaying the goods marked a certain price is not making an offer but inviting buyers to make offers to him. The price on the price tag is merely an indication of the price he is likely to accept after negotiations where you make your offer. The act of removing goods off the shelf means nothing contractually but the act by a shopper of putting them down in front of the cashier constitutes an offer to buy at the named price unless otherwise stated in your offer.
