1. Nature of contracts

• What is a contract?

  A contract is a legally binding document that recognizes and governs the rights and duties of the parties of the agreement.
• What are the 5 elements of a valid contract?

  Offer

  Acceptance

  Intention

  Consideration

  Capacity
• What are the 3 types of contract?

  Unilateral

  Bilateral

  Collateral
• What is a unilateral contract?

  A one sided contract that is created when one party pays another party to perform an action. Can come about:

  1. as a result of a reward
  2. Through advertisements
• What is one of the most important cases in the nature of contract?


  Carlill v Carbolic Smoke ball Ltd.

  A company advertized a medical cure for influenza and colds and it was stated in the advert that any person who contracts influenza, colds or any other disease after having used the ball will be paid a 100 pounds as a reward. Mrs Carlill after seeing the advert purchased the smoke balls and used it as directed, contracting influenza.

  It was held that the statement of 100 pounds as a reward cannot be intended as mere puff. it was an offer for the public to act upon.
• What are some important features of unilateral contracts?

  An advertisement is an invitation to treat. But in unilateral contracts an advertisement that requires performance of an action is considerred to be an offer. Provided the act is performed, a valid contract is performed. Acceptance must be communicated to the offeror. It is not possible to revoke an offer after the act has been completed: according to Errington v Errington & woods.
• What is a bilateral contract?

  It is necessary for both parties to perform an action. This is where both parties promise to perform an act in exchange for another party to act.
• What is a collateral contract?

  A collateral contract can be made verbally or by writing. It is secondary to the main contract. Stands independent and separate from the main contract. They care created in:

  1. Instances where collateral contracts can be made
  2. When important terms needs to be added to the main contract
  3. There are errors in the main contract which needs to be corrected
  4. The contracting parties are different.