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The Law of Contract (Elements of a valid contract
Agreement (Offer &…
The Law of Contract
Elements of a valid contract
Agreement (Offer & Acceptance)
Intention
Consideration
The terms of the contract must be expressed with certainty
The presence of agreement is fundamental in any contract.
It is an offer by one party and acceptance of this offer by another party.
Courts must be satisfied that both a valid offer and valid acceptance are present in whether an agreement exists
Offer
Statement of willingness
2+ parties
Statement if accepted creates a contract
Once accepted - legally bound
Verbal, written or implied by actions
Made to one person or "the world at large"
Invitation to Treat
Invitation to make an offer
Stage before an offer
Invitation to treat cannot be accepted
Offer can be accepted and contract is made
Invitation to entice or encourage 1 party to make an offer or enter into negotiations
Advertisements, price tags, goods displayed, price list, auction. quotations, brochures
Grainger V Gough 1896
court rules wine price list was an invitation to treat and not an offer
otherwise the wine list would represent an unlimited supply of wine at that price
Exception to the rule.....
Carlill V Carbolic Smoke Ball Company 1893
Advert ruled as an offer
Clear intention to "offer anyone £100 who took their product and still caught influenza" as ad said that "£1,000 is deposited with the Alliance Bank showing our sincerity in this matter"
Acceptance
Must establish offer was made, then accepted
No agreement until offer is accepted
Unqualified acceptance to all terms
Must be UNQUALIFIED & COMMUNICATED
Acceptance can be verbal, written or implied by actions/conduct
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Must be Communicated
Acceptance must be communicated back using the method they request or a method no less effective
Tinn V Hoffman 1897
court held that 'by return of post' did not exclusively mean by letter but anything in the same timeframe - no later than a letter by return of post
Exception to the rule
Unilateral contracts recognise acceptance by performance
Providing the information is considered acceptance
Inertia Selling
Selling goods by sending them to people who haven't ordered them and if they aren't returned assuming they are willing to buy them
Prohibited under consumer law
The Postal Rule
Acceptance takes place on the time, date and place of posting
'as soon as the letter is posted'
If the letter is delayed or lost (acceptance is never communicated) a valid contract is created
2 conditions:
Postal acceptance must be agreed
Acceptance letter must be properly addressed, postage prepaid, correctly posted
Can expressly require a receipt of postage as a condition before being legally bound
Termination of an Offer
-Rejection
-Counter Offer
-Lapse of time
-Withdrawal of offer
-Death of one party
-Unilateral contracts can be cancelled by notice in the same way that offer was made before performance has taken place
Intention to create legal relations
Parties must intend to create legal relations
Presence of consideration will prove intention
Commercial = assumed to be entered into with intent
Domestic/Social = presumed not to have intent to create legal relations
Presence of written agreement between friends/family is intention to create
Balfour V Balfour 1919
Court held family arrangements were not intended to be legally enforceable
Merritt V Merritt 1970
Exception made as written record is signed and kept
Commercial Agreement
Assumed to be legally binding
(includes family in commercial agreements)
Assumed to be legally binding unless otherwise stated
Must be clear evidence to suggest that the parties didn't
intend it to be legally binding
E.g. clause stating it is not legally binding
Capacity to contract
~Minors
~Drunkards
~Persons of unsound mind
Are deemed by law not to be competent to enter into contracts
Under 18's can enter into contract for necessaries when it is beneficial to them i.e. education, training, work (employment contracts)
Convicts
Historically, convicts could not enter into contracts
Criminal Law Act 1997
Convicts can have contractual rights subject to limitations
Prison rules & regulations must be adhered to
Exemption Clauses
Fundamental Breach Rule
Exemption Clause invalid if party seeking to enforce it has committed a fundamental breach, they cannot exclude a core contractual obligation.
Courts will consider intention of party and seriousness of breach
E.g. clause to avoid paying damages
Clayton V B&I Transport 1970
Frozen Scampi, delivered defrosted
Main Purpose Rule
Cannot be used for any purpose
Restricted circumstances
Cannot be used to discharge liability/responsibility
E.g. Once the goods leave the yard, no longer liable for them, goods must be delivered to the person entitled to accept the delivery under the main terms of the contract
Contra Proferentum Rule
If cause is unclear, court will adopt the meaning least favourable to the party trying to enforce it.
Unfair Terms in Consumer Contracts Regulations 1995
Onus on them to make it as clear as possible
"Clear & Precise terms"
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Consumer Legislation restricting the use of Exemption Clauses
Sale of Goods & Supply of services Act 1980
Business cannot insert clause exempting liability
Unfair Terms in Consumer Contracts Regulations 1995
EU directive to create legislation to protect consumers
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Consideration
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Consideration must be SUFFICIENT but need not be ADEQUATE
Must have economic value
Doesn't have to be equal market value
Consideration must be present and not past
Past consideration is an act followed by a promise
Consideration must be more than what that party is already legally obliged to do
Collins V Godefrey 1831
Collins was offered money to testify on behalf of Godefrey but he was already legally obliged to do so
Types of Contracts
Unilateral Contracts
Created by an offer that can only be accepted by performance
Reward or contest
Offer is to more than one party "the world at large"
Only the party making the offer is bound from the beginning
Bilateral Contracts
Reciprocal arrangement with mutual promises
Exchange of promises between the parties to both carry out an act
Most common in a business arrangement
Legally Binding
A contract is a legally binding agreement between 2 or more parties
Must be voluntary
Rights & obligations are outlined in the contract
Failure to carry out obligations can lead to breach of contract
If breached, injured party may sue
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Contents of a contract
Terms: Obligations of both parties. Comply with these or risk breach
Express Terms: Terms specifically agreed to - written/oral
Implied Provision not directly stated in contract but implied from a number of sources
Implied by Custom Pubs closing on Good Friday
Implied by Legislation minimum pay in employment contracts
Implied by the courts by looking at fact or common sense
Implied by the Constitution right to equality before the courts, therefore MD must have hearing before being dismissed
Glover V BLN 1973
Glover's right to a fair trial as guaranteed by the Constitution
Conditions/Warranties/Innominate Terms
Conditions are most important & larger terms
If breached, right to terminate/sue for damages
Warranties are less important & additional terms
but not the basis of a contract
Innominate Terms Court will decide which and appropriate remedy