Contract law

• Contract


  A legally binding agreement
• Essential requirements for a valid contract

  • Agreement (offer and acceptance)
  • Consideration
  • Intention to create legal relations
• Formation of a valid contract

  1. Offer

  2. Invitation to Treat

  3. Acceptance

  4. Consideration
• Offer


  A promise by the offeror to enter a contract on firm and definite terms
• Offeror


  The person making the offer
• Offeree


  The person to whom the offer is made
• An offer comes into existence when it is communicated to the offeree
• An offer can be made by anyone, even a machine
• An offer can be made to an individual, a group of people or to the world at large
• Bilateral contract


  Offeror promises something in return for a promise of something from the offeree
• Unilateral contract


  Offeror promises something to offeree in return for the performance of an act by the offeree
• Invitation to Treat (ITT)


  An indication of a willingness to start negotiations and invites the other person to make an offer, which can then be accepted or rejected
• Examples of an ITT


  • Advertising goods that are not clear and definite
  • Replying to a question giving information
  • Goods on display in a shop window or shelf
  • Auctions where the auctioneer announces the lot
  • Advertisements
• Exceptionally, an advertisement can be an offer as it has clear definite terms
• When an offer ends

  • Acceptance
  • Revocation
  • Rejection
  • Lapse of time
  • Death
• Acceptance


  Final and unconditional agreement to all the terms of the offer
• Requirements for valid acceptance

  • Positive
  • Unconditional
  • Communicated
• Acceptance takes effect when the offeror does everything reasonably possible to ensure that the message has been communicated to the offeror
• Consideration


  Something of value given in exchange for a promise
• Types of consideration


  • Executed (already carried out)
  • Executory (yet to be performed)
• Sufficient consideration


  Must be real and have some value, but does not need to be adequate
• Consideration must move from the promisee
• Doctrine of privity of contract


  A contract cannot confer rights or impose obligations on someone who is not party to the contract
• The Contracts (Rights of Third Parties) Act 1999 provides an exception to the doctrine of privity of contract
• Valid contract


  Legally binding, enforceable in law
• Essential requirements for a valid contract

  • Agreement (offer and acceptance)
  • Consideration
  • Intention to create legal relations
• Offer


  A promise by the offeror to enter a contract on firm and definite terms
• Offer


  • Made by the offeror
  • Communicated to the offeree
  • Can be made by anyone, even a machine
  • Can be made to an individual, a group of people or to the world at large
• Bilateral contract


  Offeror promises something in return for a promise of something from the offeree
• Unilateral contract


  Offeror promises something to offeree in return for the performance of an act by the offeree
• Invitation to Treat (ITT)


  Not an offer, merely an indication of a willingness to start negotiations and invites the other person to make an offer, which can then be accepted or rejected
• Examples of an ITT

  • Using words that are not clear and definite, such as "might be prepared"
  • Replying to a question giving information
  • Goods on display in a shop window or shelf
  • Auctions - the auctioneer announcing the lot
  • Advertisements
• Exceptionally, an advertisement can be an offer as it has clear definite terms
• Ending of an offer

  • Acceptance
  • Revocation (withdrawal) before acceptance
  • Unilateral contract - once performance started offer cannot be revoked
  • Rejection - offeree rejecting the offer extinguishes it
  • Lapse of time - offer can be made for a fixed period of time and then ends, or will end after a reasonable amount of time
  • Death - if offeror dies, acceptance can still take place until the offeree learns of the death, if offeree dies, offer ends
• A request for further information is not a counter offer
• Terms


  Subject matter of the contract. If term not carried out breach.
• Express Terms


  • Specifically agreed between the parties, spoken or written.
• Condition


  A major term that goes to the "root of the contract." So important failure to perform it would destroy the main purpose of contract.
• Condition breach


  1. Innocent party has a choice of: continuing with the contract, or terminating the contract (as other party is in repudiatory breach)

  2. Damages can also be claimed
• Warranty


  A minor term. Damages can be claimed, if other party repudiates the contract they will be in breach.