Intro/ formation of a contract Flashcards
Definition of a contract
A legally binding agreement between two or more parties.
3 things a contract does.
- A contract creates and defines obligations.
- The obligations bind the parties to the agreement.
- Based on the principle of consent.
‘Freedom of contract’ classical theory of contract law:
Parties are free to contract with whomever they like, on whatever terms they wish, and the court will be reluctant to interfere with this agreement.
Deeds
Formalities must be met, and this is the reason why it will bind the parties (but no requirement of ‘consideration’).
‘Simple contracts’
Not contained in deed, must be supported by consideration, no formal requirement.
Bilateral contracts
Both parties have obligations under the contract, mutual exchange of obligations/ promises.
Unilateral contracts
Binding on one party, only one party has obligations following the performance of an act.
Three key elements of a contract:
a. Offer + Acceptance = Agreement
b. Consideration = Test of enforceability
c. Intention to create legal relations = Binding contract.
The objective test
Look at the words of conduct of the parties from the perspective of a REASONABLE MAN.
Storer v Manchester City Council, Lord Denning MR.
‘In contracts, you do not look into the actual intent in a mans mind. You look at what he said and did.’
Gibson v Manchester City council (1979)
The words ‘may be prepared to sell’ displayed no contractual intent.
Storer v Manchester City Council (1974)
The ‘agreement for sale’ has held to be an offer (which the claimant accepted).
3 Statements that define an offer
- Statement of intent to be bound.
- On terms which are certain.
- Which upon acceptance forms a binding contract.
Invitation to treat
Inviting offers, a declaration that the party is open to the negotiation process.
2 Ways the courts distinguish between an offer and an invitation to treat?
- Objective test of the parties intention.
- The use of ‘presumptions’.
