Law

Definition of Contract

A contract is a legally binding agreement by which rights are acquired by one or more persons to acts or forbearances on the part of another or others.

Essential Elements of a Contract

Offer, Acceptance, Consideration, Intention to create legal relations, and Legal Capacity.

Offer

A proposal made by the offeror to sell something (e.g., A proposes to sell B his car for $20,000).

Acceptance

An unconditional and absolute agreement by the offeree to all the exact terms of the offer, e.g., B agrees to buy A’s car for $20,000.

Consideration

The price paid for the promise, e.g., B pays $20,000 for the car.

Intention to create legal relations

Both parties must intend for the agreement to have legal consequences.

Legal Capacity

The legal ability of a person to enter into a contract, requiring them to be of sound mind and legal age.

A valid contract can…(must valid contract only be written?)

A valid contract can be in writing, spoken, or by conduct (action, pointing).

Invitation to Treat

An invitation to the other party to enter into a bargain or make an offer, usually occurring before making an offer.

Termination of an Offer

An offer can be terminated by Revocation, Lapse of Time, or Rejection.

Postal Rule

If acceptance is communicated by post, it takes effect as soon as it is posted, regardless of whether it reaches the offeror.

Unilateral Offers

In unilateral contracts, acceptance does not need to be communicated to the offeror, and performance of the act stated acts as acceptance.

Rules of Consideration

1. Consideration must be legal. 

2. Consideration must be real, but need not be adequate.

3. Consideration can be executed (present) or executory (future) but must not be past.

4. Consideration must move from the promisee.

5. Performance of an existing duty is no consideration

Void Contract

An invalid contract that has no legal effect.

Honour Clause

A clause stating that the agreement is only morally binding and not legally enforceable.

Legal Capacity Exceptions

Contracts with minors are generally unenforceable, but there are exceptions such as contracts for necessaries and beneficial contracts of service.

Minors' Contracts

Contracts generally unenforceable against minors, but adults can hold minors to adults' contractual obligations.

Objective Test for Intention

A test to determine if a reasonable person would regard the agreement as one intended to have legal relations.