INTRODUCTION TO LAW OF CONTRACT

CONTRACT

• Agreement that is written , oral inferred by conduct

• Between 2 or more persons

• Intended by them to be legally binding and enforceable by law

LAW OF CONTRACT FREEDOM TO CONTRACT

• Generally parties are free to make their own bargains

• Standard form contracts : e.g. for a mobile phone

• Implied terms : Some rules are added automatically , like product quality under the Consumer Rights Act 2015

• Banned Clauses : some terms aren’t allowed , like ones that try to avoid responsibility for injury caused by negligence 

IMPORTANCE OF CONTRACTS IN BUSINESS

• Insurance Contracts - protect against risks 

• Supplier Contracts - ensure stock and deliveries 

• Customer Contracts - cover in store and online purchases

• Employment Contracts - set terms for staff

• Service Contracts - eg) cleaning or maintenance 

• Shareholder Contracts - define rights and responsibilities 

• Building Contracts - construction and repairs

ESSENTIALS OF A VALID CONTRACT 

• Offer and acceptance – both sides agree.

• Consideration – something of value is exchanged.

• Intention to be legally bound – usually assumed in business deals.

• Formalities – certain contracts must follow legal formats.

• Capacity – parties must be legally able to contract.

• Genuine consent – no pressure or deception.

• Legality – the contract must be for a lawful purpose

BILATERAL CONTRACT

• Both sides make promises - each agrees to do something

UNILATERAL CONTRACT

• One side makes a promise

• Other side does not have to act , but if they do contract is fulfilled

OFFEROR 

• MAKES THE OFFER 

OFFEREE

• ACCEPTS THE OFFER

OFFER

• MUST BE CERTAIN AND NOT VAGUE

• MUST BE DISTINGUISHED FROM AN INVITATION TO TREAT

TERMINATION OF OFFER

• REVOCATION - OFFER IS WITHDRAWN (differ for unilateral contracts)

• LAPSE OF TIME - offer expires

• DEATH - of either party

• COUNTER OFFER - replaces original offer

• ACCEPTANCE - the offer is accepted and becomes a contract

ACCEPTANCE

• Saying ‘yes’ to all terms - no changes

• Must be a clear positive action

• Must be communicated to the offeror - unless exceptions apply

ELECTRONIC CONTRACT

• Is a website ad an offer or just an invitation to treat (i.e. not legally binding)?

• When is the contract actually formed online — at checkout, confirmation, or delivery?

ESSENTIALS FOR A LEGALLY ENFORCEABLE CONTRACT

• Capacity – parties must be able to understand and enter into a contract

• Privity – usually only those involved in the contract can sue or be sued.

• Offer and acceptance – both sides agree to the terms

• Intention to create legal relations – parties must mean to be legally bound.

• Consideration – something of value is exchanged

INTENTION TO CREATE LEGAL RELATIONS

Legal intention depends on the type of agreement:

• Social & domestic agreements

  • Usually not legal binding

  • But can be rebutted if money or formal arrangements are involved

• Business & commercial agreements

  • Usually legal binding

  • But can be rebutted if parties clearly say it’s not binding

CONTRACTUAL CAPACITY

• Someone is legally able to enter into a contract

• MAY BE LIMITED IS PERSON IS:

• A minor

• Intoxicated

• Mentally impaired

• Company acting beyond its legal powers

CONTRACTUAL CAPACITY : MINORS

• VOIDABLE : Minor can cancel these while under 18 or shortly after turning 18.

  Examples: leases, partnerships, buying shares

• Valid – These are enforceable if they benefit the minor.

  Examples: contracts for essentials, useful services

• Unenforceable – These don’t hold up in court unless they fit the other categories.

  Examples: loans, non-essential purchases

CONTRACTUAL CAPACITY

• Contractual capacity can be limited depending on who’s involved

• Minors (under 18)

Contracts may be valid, voidable, or unenforceable depending on type and benefit

• Intoxicated Persons - contracts are valid unless the person didn’t understand and the other party knew

• Mentally impaired persons - contracts are valid unless the person lacked understanding and the other party was aware or if they were legally sectioned

• Corporations - Contracts are valid unless the company acts beyond its legal powers, governed by the Companies Act 1985.

CONSIDERATION

• A contract is only legally enforceable if each party provides consideration—something of value exchanged.

• Gratuitous promises (those made without exchange) are not enforceable unless made under deed.

• The consideration must have some value, but it does not need to be adequate—the law does not protect parties from making a poor bargain.

TERMS OF A CONTRACT

Express Terms: Clearly stated by the parties.

• Oral – spoken agreements.

• Written – documented agreements.

Implied Terms: Not explicitly stated but assumed by law or practice.

• Statute – inserted by legislation.

• Courts – inferred by judicial decisions.

• Trade Custom – established industry practices.