3 - Essential requirements of a contract Flashcards
The essential requirements of a contract
- The Agreement
- Offer
- Acceptance
- Consideration
- Privity of Contract
- Intention to create legal relations
The agreement
For an agreement to be made it must be a valid offer followed by a valid unconditional acceptance of the offer
Offer
The offeror will usually state verbally or in writing that they will be bound by the terms of the offer following a valid acceptance and that they have an intention to create legal relations
The contract will not be formed until the offereee accepts the terms in the offer
Offer - invitation to treat
this is where there is negotiation about the offer – it is an invitation for parties to make offers
Goods on Display – an invitation to treat not an offer
Simply picking up an item would not be seen as making an acceptance
A display of goods is simply an invitation to treat
Pharmaceutical Society v Boots Chemist 1953
invitation to treat
The drugs on display was held to be an invitation to treat and not an offer
Goods or services advertised in the media
The advertisement is not an offer but an invitation to treat to buy what is advertised.
The exception to this rule is if the advertisement is made where a reward will be paid.
Partridge v Crittenden 1968
He was advertising wild birds for sale – (criminal offence to sell wild birds)
However it was an invitation to treat and not an offer
unilateral offer
those where the claim on the advert is relied upon
counter offer
If an offeree decides they would like to change the terms of an offer ie. Put the price up then this is called a counter offer
A counter-offer ends the original offer and becomes a new offer.
The counter offer can be accepted or rejected
Hyde v Wrench 1840
W offered to sell his farmland to H for £1,000 and rejected H’s counter offer of £950, selling to someone else for the full £1,000
communication of offers
An offeree cannot accept an offer that has not been communicated to them.
Clearly it would be impossible to accept an offer if the offeree has not knowledge of it
Taylor v Lair 1856
T had commanded L’s ship but decided on the voyage that he would resign and just work as normal crew.
On his return to England he tried to claim wages – wasn’t able to as he has not communicated his offer and therefore there was no contract.
acceptance
offer must be accepted by the offeree and that acceptance communicated back to the offeror. This changes an offer into an agreement
Acceptance must -
Mirror the offer
Not change the terms of the offer
Be communicated properly back to the offeror
Unconditional acceptance
Making enquiries about the offer may not amount to a counter offer and therefore may not be taken as rejecting the original offer
Communication of acceptance
- The acceptance of the offer has to be communicated back to the offeror
- Only the offeree can make the acceptance
- “silence” does not amount to acceptance
- An acceptance can be carried out in any way. However if a specific way is requested then this must be carried out
postal rule
– the acceptance is valid as soon as it is posted and not when it is recieved
this is an acception to rule in which the acceptance cannot be valid beore it reaches the offeror
doesnt apply to text, fax ect
Electronic Commerce Directive 2000
where a contract is created through electronic means, an offer is made when a consumer makes or sends an order
Adams v Lindsell 1818
D wrote to C offering wool and asked for acceptance via post. D letter was incorrectly addressed and was late. C accepted the offer but D had already sold to someone else because of the delay. Court held that the contract was valid as soon as it was sent
consdieration
dun;op v selfirdge 1915
‘an act or forebadance of one party, or promise is the price for which the promise of the other is bought’
usually pertains to price, must pay the price that was stated
rules for consideration
- Consideration must be sufficient
- Consideration need not be adequate
- Past consideration is not legally enforceable
- Consideration must move from the claimant
- Performance of Existing Obligations
sufficient consideration
It must be real, be tangible and have some value
Ward v Byham 1956
The father an illegitimate child agreed to pay £1 per week to the mother to keep the child happy and healthy. The father then refused to pay. He argued that he shouldn’t have to pay as the mother should keep the child healthy. Judges decided that there was consideration
Consideration need not be adequate
Courts are not interested if the agreement is a bad or good one. They are more interested in the freedom of the contract
If there is no duress then the courts will enforce the agreement
Past consideration is not legally enforceable
– if a voluntary agreement is in place with no mention of payment. Then a later agreement is unenforceable
Rule in Lampleigh v Braithwaite 1615
exception to the past concidration rule – this is where a service has been requested and there is a reasonable implication that a payment be made, even though it is not explicitly stated in the agreement
Consideration must move from the claimant
Only the person(s) providing the consideration can sue
The only time a 3rd party can sue is under Contract (Rights of Third Party) Act 1999 if:
* The contract expressly allows it
* The contract gives a benefit of some sort to the 3rd party
Performance of Existing Obligations
If a party is under an existing obligation to carry out something, they cannot use that promise as consideration for a new agreement
Collins v Godefroy 1831
Police officer claimed he was entitled to a payment for giving evidence in a court case. Court refused to enforce this as it was part of his job
exitsing obligation
privity of contract
Generally a contract is only enforceable by the parties privy to the contract
However if a benefit is bestowed from such a contract onto a third party then the rule is unfair
exceptions to privity of contract
- Statute
- 3rd party trust
- Restrictive covenants – Tulk v Moxhay 1848
- Agency – The Eurymedon 1975
- Collateral contracts – Shanklin Pier v Detel 1951
- Application of s56 of the Law of Property Act 1925 – Beswick v Beswick 1968
Contract – Rights of Third Parties Act 1999
The Act requires that the 3rd party is expressly identified in the contract by name, or as a member of a class, or answering a particular description
Intention to create Legal Relations
both parties intend to be legally bound by the terms of the contract
Social and domestic agreements – presumptions that they is no intention to create legal relations l
Merritt v Meritt
They divorced and agreed that he would pay a monthly amount so that she could pay the mortgage. He then agreed that he would transfer the house soley to her name.
Later he refused to do so
When parties are separating there is a presumption that there is an intention to create legal relations and not just a social relations
Commercial or business arrangements – l
presumption that there is an intention to create legal relations – unless there is a rebuttal
Wilson v Burnett 2007
3 women had gone to Bingo – one women had two prize of over £100,000
The other two women said they had agreed before hand to share any wining’s equally
The women that one refused to
On appeal held that this was a social agreement and not a business one and that the chat the women had before hand did not mean that there was an intention to create legal relations and therefore there was no contract.
inention to create legal relations
