Understanding the Elements of a Valid Contract

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Business Law
Assignment

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Answer-1 (a)
A valid contract is formed between parties after fulfilment of certain terms
without which the parties did not have the right to enforce each other into
contractual terms. To justify the reasons regarding establishment of a
contract between Avinash and the café, it is important to evaluate
whether the elements of the contract are present or not. In order to form
a contract, a party has to make an offer to do or not do something.1 After
receiving acceptance on offer, the parties move forward in the contract.Harvey v Facey2 is a relevant case to evaluate the key terms of an offer. It
was held that the party who has request for the promise of another party
into the offer must have the motive and the objective to make sure that
after receiving the approval, it becomes effective and enforceable on
parties. Avinash made an offer when he selects a product in the self-
service machine and takes the receipt to the cashier to make the payment
in order to receive his product. Avinash was determined to make sure that
he is legally binding on the terms due to which it is valid.
A valid acceptance is the next step in a contract in which the offeree
agrees to comply with the terms given in the offer. It is considered as the
willingness of a party to comply with the offer which can be expressed or
implied based on the conduct of the offeree. In order to give a valid
acceptance, it must be communicated by the parties, and it must reach
the offeror before it is effective as held in
Entorres v Miles Far East.3 The
acceptance in this scenario was given by the cashier through his conduct
because he accepted the order and payment of Avinash. The terms of the
offer must not be changed while giving an acceptance, and in the case of
Avinash, the terms of the offer were the same.
A valid consideration is also essential to form a contract which is referred
to the bargain of the contract. The parties of a contract exchange
something of value in order to complete the terms of the offer. There are
1 Mary Charman,
Contract law (Wilan, 2013).
2 [1893] UKPC 1
3 [1955] 2 QB 327

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certain rules which are necessary to be present for a valid consideration
such as it cannot be past and it did not have to be sufficient or adequate.
The court provided that the consideration must move from the promisee
in orders to be constituted as valid as given in the case of
Tweddle v
Atkinson.4 Avinash and the café have formed a simple contract because
they did not form a legal contract in writing. The consideration was
present, and it moved from the promisee (the café) by giving Avinash the
product which he ordered. The parties that are forming a contract have to
make sure that they have the intention to form a legal contract as it is an
essential element to create a valid contractual relationship. The parties
must have the intention to make sure that they bind themselves into the
legally enforceable terms of the contract.5 This is not the case in social
and domestic agreements because the parties did not intend to legally
enforce each other.6
However, this is not the case with commercial contracts in which the
parties intend to make sure that another party did not violate the
contractual terms or else the terms of the contract are legally enforced on
them. This was established by the court in
Edwards v Skyways7 case in
which the employer asked the employee to withdraw from his pension
fund, and in return, the employee will receive the company’s contribution
in an “ex gratia” payment which would be equal to the amount of the
pension fund. However, the company did not fulfil these obligations, and a
lawsuit was filed in which the court provided that this is a commercial
contract in which the parties have the intention to bind themselves into
the terms as it was made in a business context; thus, its terms are
enforceable on the parties. The order made by Avinash was made in a
business context, and both the parties wanted to enforce the contractual
terms on each other based on which the element of intention is present.
The legal capacity of the parties is another essential element of the
contract which provides that all the legal relationship based on contract
4 [1861] EWHC QB J57
5 Jacqueline Martin,
English Legal System (Routledge, 2014).
6
Balfour v Balfour [1919] 2 KB 571
7 [1969] 1 WLR 349

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are void if they are formed with a person who is mentally challenged,
bankrupt or minor. These elements are present in the contract that was
formed between Avinash and the café. Since the essential contractual
elements are established, a binding relationship is enforced between
Avinash and the café.