Assignment On Legal Principles In Formation Of Contract

Added on -2020-02-12

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Aspects of Contract and Negligence for Business1
IntroductionThe following report will be based on the relevance and on the importance of the formationand the adherence to the different business contracts and business agreements. This is2
because without following the proper guidelines and the pre-requisites of forming of abusiness contract, it is very difficult to justify and establish the validity of a particularbusiness contract. Task 1 Case Study of Peter Abraham1.1 Contract Formation and Importance of contractual elements for formation ofContractWhen two or more individuals jointly agree to enter into an agreement bound by legalprinciples a contract is formed. The contract is valid only if there are certain elements whichhave been included in its formation and the case scenario of Peter Abraham gives a thoroughunderstanding of the same. It is vital that he keeps a note of the following elements discussedunderneath in case of entering into valid contract with individuals and business organisations:Intention to create legal obligations – the parties who are willing to enter into a validcontract which can take place by the enforcement of the law must at the first place possess awillingness to enter into a contract bound by law. Such an understanding makes sense as incase any of the parties fail to meet the legal obligations indicated in the contract one of theparties can sue or be sued by the other (MacLeod, 2011).Offer – this refers to a person’s willingness to perform an act towards another who readilyand without any condition accepts thus ensuring the validation of a contract formation. Anoffer may or may not be bound by time but offers which are specified by time are preferredso that potential disputes can be avoided between the parties to the contract. In case of silenceof the acceptor the party who makes the offer cannot assume acceptance of the offer. An offercannot be considered as an invitation to treat, since the invitation to treat is merely aninvitation to offer and not an offer itself (Jewell, 2002). An invitation to treat is considered asan indication that the party is not closed to offers and an acceptance does not symbolize aagreement but can be considered as a consequent source of a contract to be made in future.As for example, displays in the shop windows, goods available at the auction, goods incatalogues etc. Acceptance – an offer is usually validated through acceptance and is normally representedorally or in writing unless the simultaneous performance and acceptance of the duties of thecontract is specifically indicated in the contract, in which case, acceptance can take place by3
conduct (Pryor, 2005). Acceptance must be clear as that is considered as the first step offraming the contract (Entorres v Miles Far East [1955] 2 QB 327 Court of Appeal). Theparties to the contract must agree upon the method of acceptance and in case of absence ofany such specifications by the party making the offer the following rules are applied: Postal rule – in case of the reasonable acceptance of postal system as the mode of offer andacceptance, then the contract shall be considered to have formed at the time when the letter ofacceptance was posted, irrespective of its status of reaching late or getting lost in transit(Revak., 2011).Receipt rule –in case an e-mail or fax has been sent as message of acceptance, it shall bedeemed valid when it is received by the offeror, even if it means that such a message has notbeen read by him at the same time. A valid contract cannot be constituted by conditional or partial acceptance and therefore istreated as a counter offer, as for example, if an offeree accepts some of the conditionsmentioned in the contract, and makes a new offer with new terms, the contract between theparties does not get validated.Consideration – in accordance with the law of contract, an agreement between two partiesremains unenforceable by law in case a valid consideration is missing (Thomas v Thomas(1842) 2 QB 85), which incidentally is measured in general economic terms, such as goods,money or services that the offeror shall receive from the recipient (Hogg et al. 2008). Ithowever need not be adequate as, if a lower price than the market price is offered by theofferor to sell a good or service, the subsequent claim of the shortfall cannot be establishedagainst the recipient in the court of law.Capacity – according to the law of contract a minor person who has not attained the age of18 years and or is unstable mentally and is under the influence of any sort of intoxicationdoes not qualify as the person having the capacity to enter into a valid contract ((Hermalin etal., 2006). Such contracts as and when are formed shall be treated as null and void and henceneither of the parties shall bear any contractual liabilities for the same. An exception howeverhas been incorporated in case the contract that has been entered into is for necessaries, wherethe party who makes provision for necessities such as clothing, food items, etc to a minor andis not reimbursed, the minor is liable to get sued for the imbursement of such necessities. 4

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