contract law 1.docx

7/24/2019 Contract Law 1.docx

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Table of Contents

Introduction......................................................................................................................................1

Task 1...............................................................................................................................................1

Task 1.1. Explain the importance of the essential elements required for the formation of a valid

contract.........................................................................................................................................1

Task 1.2. Discuss the impact of different types of contract.........................................................2

Task 1.3. Analye terms in contracts !ith reference to their meanin" and effect......................1#

Task 2.............................................................................................................................................1$

%onclusion.....................................................................................................................................1&

'eference.......................................................................................................................................1&

(i)lio"raphy..................................................................................................................................1*


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Introduction

%ontract la! is an area of the la! that relates almost exclusively to )usiness transactions. +oods

are )ou"ht, sold, and moved )y !ay of contract- employees are hired under contract- land and

)uildin"s are developed, )ou"ht, sold, financed or leased under contract- )usiness risk is reduced

)y the contract of insurance- and, indeed, many )usinesses, such as partnerships, are )ased on

contracts. In a sense, contracts represent the foundation of most commercial activities, and

consequently, contract la! represents one of the most important areas of )usiness la!.

A contract may )e defined as an a"reement made )et!een t!o or more corporations or persons

that the courts !ill enforce. %ontract la! differs from many other areas of the la! in that the

parties need only follo! the principles set out in the la! to create their o!n ri"hts and duties that

the courts !ill then enforce. In some respects, the parties create their o!n la!/ that they are

o)li"ed to follo!.

Task 1

Task 1.1. Explain the importance of the essential elements required for the formation of a

valid contract

There are six elements in a valid contract:

1. Intention to create legal relationship:

An intention to create a contract that is le"ally )indin" is an essential first step in

contract formation.There is a presumption at la! that promises in a )usiness contract are intended to

)e )indin", a presumption !hich does not exist for contracts of a social nature.0 Example In the sale )in at arrads Department tore, 4ichael discovers a

pair of shoes that are cheaper than else!here in the store. 5pon presentin" the

shoes at the counter the sales attendant discovers that the !ron" price ta" has

)een placed on the item. arrads Department tore can refuse to sell the shoes

)ecause 4ichael is simply makin" an offer. arrads are entitled to re6ect the

offer on discoverin" the mistake on the price ta". 7o contract is formed in the

a)sence of acceptance.Advertisements are not enforcea)le promises )ut rather invitations to do )usiness

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2. ffer

An offer is a tentative promise to perform su)6ect to a certain condition or conditions

5ntil it is accepted, an offer is not enforcea)le

An offer must )e communicated )y the offeror to a specific offeree, since an offer is not valid

until it is received )y the offeree

In other !ords, an offeree cannot a"ree to an offer of !hich he or she is una!are

Example:A company had a lar"e corporate )anner that !as flo!n from a fla" mast outside its

do!nto!n corporate office. Durin" a !ind storm, the )anner disappeared, and the company

decided to place an advertisement in the local ne!spaper offerin" a re!ard of 82## for its return.

(efore the advertisement appeared in the ne!spaper, an employee of another company located

near)y found the )anner and returned it to the receptionist at the corporate office. 9ater that day,

the employee noticed the re!ard advertisement in the ne!spaper and made a claim for the

re!ard.

In this case, the offer of re!ard !as not communicated to the employee until after he had

performed !hat !as required under the terms of the offer of re!ard. The employee, therefore,

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cannot accept the offer )ecause he had returned the )anner !ithout the intention of creatin" a

contract. This concept !ill )e examined more closely !ith respect to another element of a

contract, )ut for the present, it may )e taken as an example of the communication rule.

!. "cceptance

:nly the specific offeree to !hom an offer is made can accept it, and acceptance must )e

unconditional 0 on the exact terms of the offer

Acceptance must, in turn, )e communicated to the offeror in the manner specified or implied at

the time the offer !as made

The time of acceptance is !hen the offeror is made a!are of the acceptance, or alternatively at

the moment !hen the offeree places a letter of acceptance to the offeror into the mail)ox

An offer made over the Internet !ill, unless other!ise specified )y the parties, )ecome an

enforcea)le contract in the 6urisdiction !here the offeror conducts )usiness, and at the time he or

she receives the acceptance

The offeree;s action of clickin" on the click )ox containin" the !ords I a"ree/ constitutes

acceptance and the instant formation of an enforcea)le contract

Example:If the purchasin" mana"er of a corporation !rites a letter to a seller of a particular

product statin" that the corporation !ishes to purchase a "iven quantity of the "oods at the

seller;s advertised price and requests that the "oods )e sent to the corporation, the letter !ould

constitute an offer to purchase. The acceptance !ould take place !hen the seller acted in

accordance !ith the instructions for acceptance set out in the letter. It !ould not )e necessary for

the seller to !rite a reply conveyin" acceptance of the offer )ecause the offer contemplates

acceptance )y the act of sendin" the "oods to the offeror. The acceptance !ould )e complete

!hen the seller did everythin" required )y the terms of the offer contained in the letter.

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Counter#offer

A counter offer ends an offer

Anythin" less than unconditional acceptance of an offer is either a counter offer or an inquiry

A counter offer is really a fresh offer from the offeree !hich the ori"inal offeror may accept


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$ilence and form of acceptance:

ilence on the part of the offeree cannot )e construed as acceptance

There is no o)li"ation on an offeree to refuse or re6ect an offer unless there is a previous

arran"ement to that effect )et!een the parties

The form or method of acceptance may )e ver)al or !ritten, )ut may also )e )y conduct such as

a handshake, nod of the head or the raisin" of a num)ered card durin" an auction

%nilateral agreements and lapse

A unilateral a"reement calls for the offeree to actually complete or perform his or her part of the

contract as a !ay to si"nify acceptance of an offer

This performance )y the offeree takes the place of !ritten or ver)al acceptance

An offer !ill lapse !ithin a reasona)le time if no specified date for acceptance is provided, and

!ill lapse upon the death of either party

&evocation of an offer

If an offeror decides to !ithdra! an offer he or she may do so at any time )efore the offer is

accepted

The offeror must communicate the revocation directly or indirectly to the offeree

An offeree !ho !ishes to ensure an offer remains open for a specified time must create an option

a"reement !ith the offeror, either under seal or for consideration

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'. Consideration

%onsideration is the exchan"e of somethin" of value or )enefit )et!een a promisor and a

promisee

%onsideration in exchan"e for a promise of performance is often money, )ut need not )e

Alternative types of consideration include a promise )y the promisee not to do somethin", a

relinquishment of the ri"ht to sue, a delivery of "oods, or a seal affixed on a contract

"dequac( of consideration

The amount of consideration or fairness of it does not concern the courts, so lon" as the

consideration is somethin" of value or )enefit exchan"ed in return for a promise

The timin" of a discussion a)out consideration is si"nificant to )e valid, consideration must

arise out of the ne"otiations )et!een the promisor and promisee to create a contract, not out of a

pre existin" o)li"ation and not after the fact !hen performance has already )een completed

Example %ity %astin" %o. !rote a letter to %entral upply %o. offerin" to sell a used

fork lift truck for 8=,###. %entral upply %o. refused the offer )ut made a counter0offer to

%ity %astin" %o. to purchase the fork lift truck for 8>,###. %ity %astin" %o. sent a telex

in return, re6ectin" %entral upply %o.;s offer to purchase and offered to sell the fork lifttruck for 8>,2##. In sendin" the telex, the price !as mistakenly typed as 8>2#, instead of

8>,2##. If %entral upply %o. should snap up/ the offer, %entral upply %o. could not

enforce %ity %astin" %o.;s promise to sell )ecause the courts !ould re6ect the claim on

the )asis of the o)vious error in the offer. %ity %astin" %o., after offerin" the fork lift

truck for sale for 8=,### and re6ectin" an offer for 8>,###, !ould not then offer to sell the

fork lift truck for a consideration of 8>2#.

If the error, ho!ever, !as in %ity %astin" %o.;s ori"inal letter in !hich it intended to sell the forklift truck for 8=,### )ut inadvertently offered it to %entral upply %o. for 8>,### and %entral

upply %o. accepted the offer, it !ould pro)a)ly )e )ound )y the contract. In this case, the

courts !ould have no !ay of determinin" %ity %astin" %o.;s intention at the time the offer !as

made and !ould not inquire into the adequacy of the consideration.

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Tenders

A call for tenders )y a "overnment or private company communicates a request for "oods or

services and is an offer to ne"otiate a contract

Tenderers respond to the offer )y makin" )ids, and a deposit or )id )ond is often required to

underscore the commitment of the tenderer to perform if his or her )id is selected

If the tenderer selected ultimately declines to execute the contract !ith the "overnment or private

company, the deposit is forfeited

Equitable or promissor( estoppel

A "ratuitous promise is unenforcea)le due to lack of consideration

(ut if a fact is asserted and someone relies on it to his or her detriment, the person !ho made the

statement cannot later deny it

Estoppel creates a defence a"ainst a promisor;s claim for enforcement of a contract a"ainst a

promisee !hen the promisee relied, to his or her detriment, upon a "ratuitous promise from the

promisor

). Capacit( to contract

?u)lic policy dictates that, in "eneral, persons under the a"e of ma6ority, persons !ith mental

disa)ilities, and persons impaired )y alcohol or dru"s may )e una)le to appreciate the nature of

contractual o)li"ations

%ontracts they enter may not )e enforcea)le a"ainst them- for example, impaired persons !ho

immediately repudiate a contract upon )ecomin" so)er and sho! that the other party should have

realied their lack of capacity may avoid o)li"ation under a contract

&estrictions upon capacit(

%orporations, la)our unions and )ankrupt persons may have restrictions placed upon their

a)ility to contract

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A company;s incorporatin" documents may limit the su)6ect matter or monetary limits of

contracts its officers may enter on its )ehalf

5nions may )e restricted to enterin" collective a"reements on )ehalf of employees, and an

undischar"ed )ankrupt person may only )e allo!ed to purchase necessaries

Example:endrick attended an auction sale !hile in an intoxicated state. Everyone at the sale,

includin" the auctioneer, !as a!are of his condition. @hen a house and land came up for

auction, endrick )id vi"orously on the property and !as the successful )idder. 9ater, !hen in a

so)er state, he !as informed of his purchase, and he affirmed the contract. Immediately

thereafter, he chan"ed his mind. e repudiated the contract on the )asis that he !as drunk at the

time and that the auctioneer !as a!are of his condition.

@hen the case came )efore the court, the court held that he had had the opportunity to avoid the

contract !hen he )ecame so)er, )ut instead, he affirmed it. avin" done so, he !as )ound )y his

acceptance, and he could not later repudiate the contract.

*. The requirement of legalit(

A contract !ith an ille"al purpose is unenforcea)le )y a court

imilarly, a tradesperson or professional !ho is required )y la! to )e licenced )ut !ho is not

licenced cannot ask a court to enforce a contract a"ainst a client !ho does not pay

%ontracts !hich are a"ainst pu)lic policy such as those that impair the inte"rity of our markets or

corrupt "overnance are not enforcea)le

Example:5nder the land use control le"islation in :ntario,1# any deed to convey a part of a lot

that a lando!ner o!ns that requires the consent of the plannin" authority for the severance, is

void, unless consent to sever the parcel is o)tained from the plannin" authority and endorsed on

the deed.

mheducation.com 0 %hapter 3


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,alidit(

%ontracts can )e classified accordin" to their validity into several cate"ories, !hich are

illustrated in Ta)le *.1. Bery fe! contracts are required to )e in !ritin", or to )e evidenced in

!ritin", in order to )e valid. In the latter part of this chapter, !e !ill look at these contracts.

Apart from this very small "roup, contracts made ver)ally !ill )e valid and enforcea)le )y the

la!. :)viously, it !ill )e easier to prove the existence and terms of a !ritten contract. ?ro)lems

!ill arise !hen seekin" to enforce a ver)al contract. It !ill )e necessary to decide !hich party is

tellin" the truth.


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of a contract ille"al )y statute !ould )e one that involved a restrictive trade practice.


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Implied contracts

A contract created impliedly is created not )y !ords, either !ritten or spoken, )ut )y the

conduct or actions of the parties. The conduct of the parties leads to the implication that

there is a contract.

0 Example

uanne selects a ma"aine in a ne!s a"ency, takes it to the counter and "ives the seller

money to )uy the ma"aine. Even thou"h no !ords are spoken, a contract is created

impliedly )y uanne;s actions in tenderin" payment and the acceptance of the payment

)y the seller.

0 Example

4onica hails a taxi on a street corner. (y this act, the la! implies that 4onica !ill pay the

fare and that the taxi driver !ill take her to her destination.

Huasi0contracts

A third !ay of creatin" a contract is to create it independently of the !ishes of the parties, )y

operation of la!. The term used for such contracts is quasi0contracts. The term quasicontract;

refers to the remedy provided )y the common la! that compels payment of money from one

person to another !hen 6ustice requires.


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The )reach of a minor term !hich is not a condition entitles the victim to dama"es )ut

not to rescission of the contract

A victim of a )reach of !arranty, in other !ords, must nevertheless fulfill his or her part

of the contract

reach of contract

0 Express repudiation is the refusal ver)ally, in !ritin", or )y conduct to perform

contractual duties- and anticipatory )reach occurs )efore the performance is actually due

!hen it )ecomes apparent that one party is not likely to perform

The doctrine of su)stantial performance protects a party !ho )reaches some aspect of a

contract after completin" all essential terms associated !ith its purpose from an attempt

)y the other party to avoid performance

# Implied

5nlike an express repudiation, an implied repudiation must )e discerned from the

conduct of one of the parties or from various statements he or she makes prior to the time

!hen performance is dueImplied repudiation is the most difficult type of anticipatory )reach to identifyIf a condition in a contract has )een )reached, the non performance may entitle the

innocent party to treat the contract as ended

Task 2

0 The main issues are an offer and acceptance in this situation

:ffer that means to encoura"e su)scriptions. Diane has decided to send the ma"aine to

2### !omen in the metropolitan area for t!o months at no char"e Acceptance then Diane sends them a letter statin" that if they do not !ant to )ecome

su)scri)ers they have to call the ma"aine and cancel their su)scription.

0 The acceptance is the most important issue (ecause if !omen silence and did not call to

Diane that means the !omen can not )e constructed as an acceptance or the !omen can call to

her.

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0 As the 6unior !riter for the ma"aine and a university "raduate, this sound doesn;t correct

to me. (ecause there is no o)li"ation on !omen to refuse or re6ect the offer and there is no a

previous arran"ement to that effect )et!een the parties. Therefore, the contract is no formed in

this case.

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Conclusion

The creation of an enforcea)le contract requires the parties to have an intention to create a le"al

relationship. A contract also requires a valid offer and acceptance of the offer as !ell as some

form of consideration or a sealC to )e present. 7ot everyone may enter into an enforcea)le

contract as minors, drunken persons, and persons !ith mental impairment may only )e )ound )y

contracts for necessaries and are su)6ect to special contract rules as to the enforcea)ility of

contracts a"ainst them. The su)6ect mater of the contract must also )e le"al, and if a contract is

contrary to pu)lic policy, the courts may render it unenforcea)le. %ertain contracts must also )e

in !ritin" to )e enforcea)le, )ut the courts have esta)lished a num)er of principles, doctrines, or

rules that !ill permit these contracts to )e enforced.

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&eference

ibliograph(

http://highered.mheducation.com - WILLIS - Chapter 6, [Online], Available:

http://highered!hed"#ati$n#$!/$l#%eb/&'&te!/404ht!l[23 ($ve!ber 2015]

)$hn *2010+ Business Law, $nd$n: --- .$"&e

mheducation.com - Chapter 3: Formation of a a!id Contract, [Online], Available:

http://highered!hed"#ati$n#$!/$l#%eb/&'&te!/404ht!l[23 ($ve!ber 2015]

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http://highered.mheducation.com/olcweb/system/404.htmlhttp://highered.mheducation.com/olcweb/system/404.htmlhttp://highered.mheducation.com/olcweb/system/404.htmlhttp://highered.mheducation.com/olcweb/system/404.html

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