Essential Elements of a Contract
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Contract: the elements of a contract
The first step in a contract question is always to make sure that a contract actually exists. There are certain elements that must be present for a legally binding contract to be in place.
The first two are the most obvious:
So put simply, consideration is the price paid for the other’s promise.
There are four legal maxims that apply to consideration:
The first step in a contract question is always to make sure that a contract actually exists. There are certain elements that must be present for a legally binding contract to be in place.
The first two are the most obvious:
- An offer: an expression of willingness to contract on a specific set of terms, made by the offeror with the intention that, if the offer is accepted, he or she will be bound by a contract.
- Acceptance: an expression of absolute and unconditional agreement to all the terms set out in the offer. It can be oral or in writing. The acceptance must exactly mirror the original offer made.
- A counter-offer is not the same as an acceptance. A counter-offer extinguishes the original offer: you can’t make a counter-offer and then decide to accept the original offer! But…
- A request for information is not a counter-offer. If you ask the offeror for information or clarification about the offer, that doesn’t extinguish the offer; you’re still free to accept it if you want.
- Goods displayed in a shop window or on a shelf.
- When a book is placed in a shop window priced at £7.99, the bookshop owner has made an invitation to treat.
- When I pick up that book and take it to the till, I make the offer to buy the book for £7.99.
- When the person at the till takes my money, the shop accepts my offer, and a contract comes into being.
- Adverts basically work in the same way as the scenario above. Advertising something is like putting it in a shop window.
- Auctions:
- The original advertising of the auction is just an invitation to treat.
- When I make a bid, I am making an offer.
- When the hammer falls, the winning ‘offer’ has been accepted. The seller now has a legally binding contract with the winning bidder (so long as there is no reserve price that hasn’t been reached)
- Consideration: each party to the contract must receive something of value.
So put simply, consideration is the price paid for the other’s promise.
There are four legal maxims that apply to consideration:
- Consideration must move from the promisor;
- Consideration need not move to the promisee;
- Past consideration is not good consideration;
- The consideration given must be sufficient, but it need not be adequate.
- Intention to create legal relations: if my brother offers me a lift to London, and I say I’ll contribute to the cost of the petrol and then don’t, there isn’t necessarily a binding contract that he can sue me under. If the arrangement is an informal, social one, then my offer to pay for petrol probably wasn’t made with the intention of being legally bound (see the definition of ‘offer’ above).