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 legal elements in contracts? State, Give e.g. (Explain)  5 Elements 

Offer - A proposes to sell B his car for $20 000. 

The proposal made is a clear and certain offer that has been communicated to the offeree.

Acceptance - B agreed to buy A’s Car for $20 000. Which is an unconditional and absolute agreement to all the exact terms of the offer.

Consideration - In exchange for the car, B pays $20 000. Which is the price paid for the promise.

Intention to create legal relations - If A gave B the Car but B has not paid A, then A can sue B and the judge will legally enforce the payment or return of the car. Both parties intend for the contract to be legally enforceable.

Legal Capacity - A and B are both sober, competent, adults agreeing to be in a contract. The legal ability of a person to enter into a contract, meaning they are of sound mind and legal age.


Valid contract can be in writing/ spoken/ by conduct(action, pointing)


Offer:

An offer is a promise made by the offeror to be bound by the proposal he is putting forward to the offeree.

Offeror: Person offering

Offeree: Person receiving offer


Rules of Offer: 

  1. Offer must be clear and certain.

  2. Must be communicated to the offeree

  3. Can be made to an individual, a group, or the world at large

Invitation to treat:

An invitation to the other party to enter into a bargain or make an offer

  • (usually happens before making an offer)

  • If illegal, Can only be charged after the thing bought

Invitation to tender:

An invitation to tender is when a person asks suppliers of goods or services to quote a price.

The request to submit a tender = invitation to treat

The contractors submitting quotes = making an offer

The owner (Chee) = the offeree, who may accept any one offer or reject all of them

Respond to Request for Information:

No offer made, no acceptance, hence no agreement. Harvey v. Facey

Termination of an Offer:

Revocation – Byrne v. Van Tienhoven

  • Offer can be revoked any time before acceptance

  • Revocation only effective when received, directly from offeror or via third party

  • No binding contract till offer accepted

Lapse of Time – “Reasonable”

  • On the death of either offeror or offeree.

  • When the time limit specified in the offer has expired.

  • If no time limit is specified, after a reasonable time.

Rejection – Hyde v. Wrench

  • Happens by ‘no’, or counter offer

  • Counter offer is implied rejection of offer which destroys original offer


Acceptance:

An indication of the offeree’s consent to the offer and intention to contract.

Rules of Acceptance:

  1. Offeree must be aware of the offer.

  2. Absolute and Unqualified (follow exact terms of offer)

  3. To follow specified method as required by the offeror

  4. Acceptance must be communicated to offeror, silence does not equal acceptance

Exceptions to Communication of Acceptance:

  1. Postal Rule – Adam v. Lindsell

  • If acceptance is by post, it takes effect as soon as it’s posted.

  • Even though this acceptance may be delayed or never reaches the offeror, it’s considered to be effective the moment when it’s posted

  • Does not apply to revocation

  1. Unilateral Offers - Carlill v. Carbolic Smoke Ball Co. Ltd.

  • Acceptance need not be communicated to offeror

  • Performance of act stated will act as acceptance

Consideration:

The price paid for the promise

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 

Following rules of consideration,

  1. Illegal, contract voided

  2. Must have some value in eyes of law like money, but not love

  3. Past consideration not a consideration

  4. The promisee must furnish some consideration to bind the promisor to his promise. Then promisee can enforce the promise.

  5. If existing duty is exceeded, the extra duty  is considered as  a good consideration.

Is consideration always necessary?

Contracts must be supported by some form of consideration.

Or made under seal (made by deed)

The law will not recognise gratuitous promises unless made by deed

Agreement made under seal or by deed

  • Certain agreements need some form of formality as required by law

  • Formality- by deed or under seal meaning agreement must be in writing, stamped, sealed and delivered.

Void Contract: Invalid contract, there was no contract.

Intention to create legal relations:

Both parties intend for their agreement to have legal consequences and to be enforceable by law if one party fails to perform the promise. The agreement must be a real contract so that it can distinguish between social/domestic agreements and business agreements.  

How to test intention:

Objective test

If a reasonable man on the street would have regarded as one which was intended to have legal relations

Court presumptions of intention: 

Social/Domestic agreements have no intention

Commercial agreement has intention

Sufficient evidence of legal intention in Domestic Agreements:

  • Gave significant obligations

  • Couple separate (hostile relationship)

Sufficient evidence of no legal intention in Commercial Agreements:

  • Express written statement / express words in agreement to remove intention

  • Include Honour clause in agreement

Honour Clause: Binding in honour

  • Only morally not legally binding

  • The agreement ‘shall not be subjected to legal jurisdiction

Subject to contract

  • Present agreement not legally bound

  • Removes the legal intention of parties in agreement

Legal Capacity: 

A person’s legal ability  to enter into contracts, make decisions, and be held accountable under the law.

Have: Natural persons

  • Sane

  • Adult

  • Sober and mature

No Have:

  • Drunks

  • Minors

  • Suffering from mental impairment

Contracts made with natural persons with no legal capacity are unenforceable or voided.

Minors’ Contracts

Contract between adult and minor

Legal implication of contract with minors:

Contract between adult and minor is generally unenforceable

Legal position of contracts with minors:

  • Minor can hold adult to do adult’s contractual obligations

  • Adult cannot hold minor to minor’s contractual obligations

  • Contract not binding on the minor

  • If minor reaches 21, can choose to make contract enforceable

Exceptions:

  1. Contract for necessaries

  2. Beneficial contracts of service

Beneficial contracts of service

  • Contracts where minor obtains education or training for a trade or profession, or beneficial experience in a trade or profession.

  • Applicable to all contracts of employment that benefit the minor