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Business Law Lecture 2&3: Formation of Contracts: 3Requirements for a…
Business Law Lecture 2&3: Formation of Contracts: 3Requirements for a Contract
Offer and acceptance
Offer
Definition
: Offer is a statement by one party of his willingness to enter into a contract on certain stated terms. It may be made orally or in written or both.
Offer: Person making the offer
Offeree: Person to whom the offer is made
Offer must be communicated/ made known to the offeree
Invitation to treat(ITT) is not an offer
Display of goods in a shop window or store
Pharmaceutical Society of Great Britain v Boots Cash Chemist
Advertisement
Patridge v Crittenden
Circulars and Catalogues
Tender
Supply of Information
Termination of Offer
Withdrawal by the offeror
Byrne v Van Tienhoven (1880)
Rejection by the offeree
Rejection by counter-offer
Hyde v Wrench (1840)
Lapse of offer
Acceptance
Definition
: Offeree unconditionally agrees to the offer without changing the terms of the offer.
Acceptance must be communicated to the offeror
Mode of Acceptance
Telephone
Offeror must hear the words of acceptance
Fax
Fax is received in offeror's fax machine during office hours, even if message is not read
The Brimnes
Email
Effective at the time the email is capable of being retrieved
Electronic Transaction Act
Post
Letter of acceptance must be properly stamped and addressed. Effective once letter is posted.
Offer cannot be accepted by silence and offeror may not put a condition in his offer that silence shall constitute acceptance.
Felthouse v Bindley (1862)
Grossner Jens v Raffles Holdings Ltd (2004)
Intention to create legal relations
Commercial Agreements(Exception to legal binding agreements)
Agreement stated to be "subject to contract"
Do not intend for their agreement to be legally binding until a formal contract is drawn up and signed.
Memorandum of Understanding (MOU)
Parties do not intend to be legally bound (cannot be sued)
Letters of comfort
Indicates that the parties do not intend to be legally bound
Social and Domestic Agreements
Between friends/colleagues and domestic(family) agreements
Consideration
Definition: It means that a person will not be required by t eh law to fulfill a promise he had made unless he has obtained something in return.
Rules regarding consideration
Consideration must have some economic value
Consideration must be sufficient(economic value) but need not be adequate(equal)
Performance of an existing obligation(already promised to do sth) cannot be consideration for a further promise
Making part payment of a debt cannot be consideration for a promise to forego the balance
Unless the debtor does something that he was not previously required to do, he would have provided consideration for the creditor's promise. Eg. payment at an earlier date.
Consideration must not be past
Agreements made by way of deed(signed, sealed and delivered)(exception to consideration )
Privity of contract
Formalitites