Module 7, Part One - Contracts (Form & Formation)

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Contracts

Back 1

A contract is a promise or a set of promises made between parties that the law will enforce

The law takes an objective standpoint when considering whether or not a contract exists

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For a contract to be enforceable by law, there must be:

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Enforceable contract appears to exist if:

1. an Intention to create legal relations

2. Offer & Acceptance

3. Consideration

Can be found defective if these are absent:

4. Capacity to Contract

5. Genuine Consent

6. Legality

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1. Intention to create legal relations

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For a contract to exist, the parties must have the apparent intention that if one party does not perform their obligations under the agreement, the other will have the opportunity to use any available remedy to force the defaulting party to perform or pay the injured party compensation

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Two pointers that help decide if the intention to create legal relations is present:

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1. Evidence: what the parties actually do, write or say

2. Situation in which the statement is made: events leading up to the statement may be used to identify the intention

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Presumptions

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Courts will presume there was no intention to create legal relations between:

- close family members

- more distant family members

- friends or acquaintances in a social setting

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Agreements made 'subject to contract'

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An agreement stating these words or 'subject to the parties entering into a formal contract' will not normally be found by courts to be enforceable because there words express an intention that the parties do not intend to be legally bound by their agreement

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2. Offer

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Offer is a proposal to contract - if accepted, completes the contract & binds both parties to the contract

Offeror is a person who makes an offer

Offeree is the person who the offer is made to

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Withdrawal (Revoke)

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A person making an offer can withdraw (revoke) it at any time before acceptance - once notice of the withdrawal is received by the other person, the person can no longer accept it.

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Tenders

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Tenders are usually advertised when an organisation wants work done or goods supplied & is seeking proposals from anyone interested doing the work or supplying the goods

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Are Tenders an invitation to treat?

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Yes! Anyone who answers the notification will be making an offer to the organisation, it is then up to them to decide whether they accept, dont accept or make a counter-offer

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Termination (End) of the Offer

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1. Acceptance

2. Rejection

3. Lapse

4. Withdrawal

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Invitation to Treat

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Invitation to negotiate a deal - they are not intended to create legal intentions however invite offers

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Request for supply of information

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When one person is requesting information & the other is supplying it

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Advertisements

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Classified legally as invitations to treat however can be written in a way that is more than an invitation to treat

- Was the intention indicated by the advertiser?

- Any promise to be legally bound to anyone meeting the criteria stated in advertisement

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Continuing offers

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When the offer remains open for some time & maybe accepted repeatedly

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Auctions

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Is where people auction stuff off & people bid on it

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Acceptance

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When a person accepts an offer made by way of communicating that they assent to be legally bound by an agreement

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Postal Acceptance Rule

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If a contract is made by post, acceptance occurs on the posting of acceptance

Doesn't apply to withdrawal, withdrawal of an offer is applied once received

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Counter Offers

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An offer that seeks to introduce new terms into an arrangement being proposed - a counter offer cancels the original offer

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Cross Offers

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Where both parties make offers that are identical in terms - either one could accept the offer & a contract would be formed

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Consideration

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The idea that a person will do something & another person will do something in return

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Examples of Consideration

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- Pay money

- Provide goods & services

- Provide something of real value

- Give up something of value

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Executory Consideration

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Promise made in return for a counter promise not yet performed

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Executed Consideration

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Where the consideration is given upon the making of the contract