Elements of a Contract and Exclusion Clause

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Business and
Company Law

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Answer 1 (a)
There are specific elements of a contract which are necessary to be
present in order to make sure that the contractual terms are effective and
applicable to the parties. In order to determine whether Avinash and the
café have entered into a contract, it is important to evaluate the legal
status of each step that will assist in determining the status of the
contract which is constructed between the parties.
The offer is the first element which is necessary to be established in order
to form a contract. It is referred to the willingness and a promise which is
made for exchanging something to get something in return.1 In
Harvey v
Facey2 case, the court provided that an offer must be promissory in nature
and the offeror must have the intention to bind by the terms of the offer
as soon as the offeree accepts the terms. In the case of Avinash, the
element of the offer was present when he selected the product of his
choice, and he brought the printed ticket to the cashier. It shows that
Avinash is willing to exchange his money in return in order to receive his
product from the café.
After receiving an offer, the second element of a contract is acceptance
which is considered as the response for the offer. In this response, the
offeree either accepts the terms of the offer or declines them.3 In other
words, the offeree shows his/her willingness to exchange something with
the party that has made the offer. The acceptance of the party can be
expressed or implied. In Avinash’s case, the element of acceptance is
present. The cashier gave his acceptance to Avinash when he accepted
the money given by Avinash to receive his product of choice. It is referred
as an implied authority since the cashier gave his acceptance by conduct
rather than spoken words or writing. In this regards, a relevant judgement
was given in the case of
Brogden v Metropolitan Railway.4 In this case,
1 Ewan McKendrick,
Contract law: text, cases, and materials (Oxford University Press,
2014).
2 [1893] UKPC 1
3 Chris Turner,
Contract law (Routledge, 2013).
4 (1877) 2 App Cas 666

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the court provided that acceptance took place because the parties agree
to terms without any objection despite communicating their acceptance.
Thus, the element of acceptance is present in this scenario.
The third element of a contract is the intention of the parties which means
that they must have the intention to bind themselves by the contractual
terms. In domestic agreements, usually, parties did not intend to legally
bind one another into a contract due to which these contracts are not
considered as valid as provided by the court in
Jones v Padavatton.5
However, in a commercial agreement, the parties have the intention of
creating a legally binding relationship which can be analysed by the case
of
Edwards v Skyways.6 In this case, the defendant and the plaintiff were
in an employer-employee relationship, and an offer was given by the
defendant to the plaintiff that he will pay him equal money through an “ex
gratia” payment if he agreed to withdraw money from his pension fund.
However, the defendant did not fulfil his obligation. The court held that a
contract is formed because parties wanted to make sure that another
party did not violate the contractual terms.7 In Avinash’s case, the
agreement was formed in a business context, and parties had the
intention to bind by the terms.
The element of consideration must be present in a contract which is
referred to something of value that is exchanged by parties of the
contract. It must be present in a simple contract which is formed in the
case of Avinash because the acceptance was given through conduct
rather than putting it in writing. It can be present or future; however, a
valid consideration cannot be past as provided in
Eastwood v Kenyon.8 In
Avinash’s case, the consideration is given by the café by supplying him
the product which he ordered. A valid consideration must have an
economic value, and it must be tangible as held in
White v Bluett.9 The
5 [1969] 1 WLR 328
6 [1969] 1 WLR 349
7 Jeffrey F. Fitzpatrick et al.,
Business and Corporations law (LexisNexis Butterworths,
2017).
8 (1840) 113 ER 482
9 (1853) 23 LJ Ex 36

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payment made by Avinash and the serving of order has an economic
value which is tangible in nature due to which the element of
consideration is present in this case. The parties’ capacity to form a
contractual relationship is also essential which means that they must not
be minor, insolvent or unsound mind which is present in the case of
Avinash.
Based on the above observations, it can be concluded that a valid
contract has formed between Avinash because all the essential elements
of a contract are present.