Understanding Contract Law: Elements and Validity of a Contract

Running Head: BUSINESS AND CORPORATION LAW
0
Business and Company Law
BLO5540
5/8/2019
Student’s Name

BLO5540 1
Contents
Question 1 (a)....................................................................................................................2
Issue 2
Rules 2
Application 4
Conclusion 4
Question 1 (b)....................................................................................................................5
Issue 5
Rules 5
Application 6
Conclusion 7
Question 2..........................................................................................................................8
Bibliography.....................................................................................................................10
Cases 10
Books/Journals 10
Legislations 10
Other Resources 11

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Question 1 (a)
Issue
Issue of the case is to understand the manner in which contract was made between
Avinash and café.
Rules
A contract is a legally binding agreement that gives rights and liabilities to parties with
respect to each other. A contract may be oral or written and both kinds of contracts
have the same legal effect1. Here to mention that a valid contract has certain elements
or in other words, this can be stated that these elements are requirements of a valid
contract. Starting from the very basic element, this is to state that the same is named as
an offer. An offer is a promise or will to enter into a contract in exchange for something.
In a transaction, an offer appears when a party shows his/her will to do something or not
to do something. Invitation to treat is another term, which seems similar to an offer, but
there are some differences between these two. An invitation to treat is simply an
invitation for offers and cannot be accepted similar to an offer2. Rules related to offer are
not applicable to the invitation to treat. As decided in the case of the Pharmaceutical
Society of Great Britain v Boots3, goods displayed with price in the shop are not treated
as an offer, but they reflect the invitation to treat. People are required to make an offer
against the invitation to treat and then after another person can accept that offer.
1 Smallbusiness.findlaw.com, What Contracts are Required to Be in Writing? (Web Page) <
https://smallbusiness.findlaw.com/business-contracts-forms/what-contracts-are-required-to-be-in-
writing.html>.
2 Craig Beauman and Clare Wilson, My Revision Notes: OCR A Level Law (Hachette UK, 2018).
3 Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401

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Another important term is acceptance. When a person makes an offer to someone,
another person is required to accept the same. As an offer is required to make in reply
of invitation to treat, acceptance is required to make in reply to an offer. The silence of
offeree cannot be treated as acceptance as decided in Felthouse v Bindley4. Brogden v
Metropolitan Railway5 is one of the important cases in the area of acceptance. Court
held that acceptance does not require to be expressed but offeree may accept an offer
through conduct also6. In addition to offer and acceptance, the third important element
is a consideration. Consideration is the main motivation for all the parties in the contract.
Here to say that consideration can be anything but the same consists of some economic
value. Further, a present and future consideration are treated as valid consideration 7. As
decided in the case of Chappell v Nestle8 [1960] AC 87 a consideration is not required
to be adequate. The fourth and last element of a valid contract is the intention of the
parties. It means both of the parties of the contract has the intention to develop a legal
relationship with each other and to bind each other in a legal manner, then only a valid
contract can come into the picture. This is the reason that the contracts made with
friends and family members are generally not treated as a valid contract because
parties do not have the intention to create a legal relationship. If consideration and
intention of parties to create legal relations exist in a transaction, then a contract comes
into existence as soon as offeree accepts the offer made by offeror.
4 Felthouse v Bindley [1862] EWHC CP J35
5 Brogden v Metropolitan Railway (1877) 2 App. Cas. 666
6 E-lawresources.co.uk, Brogden v Metropolitan Railway (1877) 2 App. Cas. 666 (Web Page) < http://e-
lawresources.co.uk/Brogden-v-Metropolitan-Railway.php>.
7 Mahipal Jain, Mercantile Law (Pearson Education India, 2014), 52.
8 Chappell v Nestle [1960] AC 87