CONTRACT LAW

CONTRACT LAW

Definition of a Contract

  • A contract is a written or spoken agreement that is intended to be enforceable by law.

  • Governs the legality of agreements between two or more parties with an intent to exchange.

  • Common examples include bills of sale, purchase orders, and employment agreements.

  • Contracts are enforceable even if made orally, provided obligations are created.

Formalities of a Contract

  • For a contract to be valid, it must contain:

    • Offer

    • Acceptance

    • Consideration

    • Intention to create legal relations

Offer

  • An offer is an expression of willingness to contract that is binding once accepted.

  • Offers can be targeted at individuals, groups, or the public.

  • Can be made in writing, verbally, or by conduct, as long as the terms are clear.

Types of Offer

  • Unilateral Offer:

    • One-sided offers, often seen in advertisements.

    • Example: Advertisement offering a reward.

  • Bilateral Offer:

    • Most common form where two parties make promises to each other.

    • Example: Negotiated sales, such as selling a car or house.

Offer vs. Invitation to Treat

  • An invitation to treat is not an offer but a preliminary indication to enter negotiations.

  • It invites the other party to make an offer that can be accepted.

Examples

  • Displaying goods in a shop is an invitation to treat; a customer making an offer to buy is an example of acceptance (Fisher v. Bell).

Advertisements

  • Advertisements can be classified as offers or invitations to treat depending on their nature.

  • Bilateral Advertisements:

    • Lead to negotiations and deals, often scrutinized like real estate sales.

  • Unilateral Advertisements:

    • A type of offer, as seen in examples like Carlill v. Carbolic Smoke Ball Company.

Tickets and Auctions

  • Tickets serve as contracts; requesting a ticket is an offer, and issuing it is acceptance.

  • Auction bids are considered offers for acceptance by the auctioneer (Payne v. Cave).

Duration and Termination of an Offer

  • Revocation: An offer may be revoked anytime before acceptance.

  • Rejection: Rejected offers cannot later be accepted.

  • Lapse of Time: An offer expires if the time limit is reached.

  • Death: The offer's viability may depend on whether it is personal to the offeror.

Acceptance

  • Acceptance is the final and unqualified agreement to the offer, essential for contract formation.

Acceptance by Conduct

  • In bilateral contracts, it can be verbal or written; in unilateral, it is often through action (e.g., completing an act).

Communication of Acceptance

  • Acceptance must be communicated unless there are exceptions (e.g., postal rule).

Consideration

  • Contracts require consideration, meaning both parties must give or do something of value.

  • Types of Consideration:

    • Executory: Future promises in bilateral contracts.

    • Executed: In unilateral contracts, consideration is completed upon an act.

Principles of Consideration

  • Must move from the promisee; need not move to the promisor.

  • Past consideration is not valid.

  • Sufficient consideration is necessary, but need not be equal in value.

Intention to Create Legal Relations

  • Parties must intend for their agreement to be legally binding; commercial agreements carry a presumption of this intention.

Domestic and Social Agreements

  • Generally not legally binding unless intended to be so (e.g., family agreements).

Ways a Contract Can End

  • Frustration: Unexpected events that hinder contract performance.

  • Termination: Various reasons, including performance, breach, impossibility, and death.

  • Vitiation: Factors like misrepresentation, mistake, duress, and illegality can void contracts.

  • Expiration: Contracts for a fixed term end when the term concludes.