The Business Law Six Elements Project

Added on -2020-02-24

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CONTRACT 2
Question 1
A contract shows a promise being made for doing something and for paying the
consideration value. In order to form a binding contract, there is a need to show that six different
elements were present under the contract. These six elements include the offer, acceptance, a
valid consideration, intent of parties, clarity of terms and contractual capacity (Clarke & Clarke,
2016). These have been further detailed below.
To form a binding contract, the first step is making an offer by one party to another. So,
one party has to offer some terms which form the basis of the contract to the other party. It is
important to differentiate in between an offer and an invitation to treat (Ayres & Klass, 2012).
This is because an offer defines an intention to create legal relations and to enter into the
contract. However, when an invitation to treat is made, it shows that the parties want to negotiate
and could enter in a contract (Andrews, 2015). The differentiation of this can be clarified through
the case of Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401 where it was stated
that the goods kept on shelf is an invitation to treat and not an offer. The adverts in the
newspaper in general are taken as an invitation to treat as was seen in Partridge v Crittenden
[1968] 2 All ER 421, unless the same contains a unilateral offer which would make it an offer as
was seen in Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 (Latimer, 2012).
Once an offer has been made, it is crucial to obtain an acceptance on the same is obtained
and the person, to whom the offer was made, has to give the acceptance. It is also important to
accept the offer as has been made without altering it, or else a counter offer is made as was seen
in Hyde v. Wrench (1840) 3 Beav 334 (Marson & Ferris, 2015). Another important aspect about
acceptance is that it has to be properly communication and a silence could not be construed as
CONTRACT 3
acceptance, as was seen in Felthouse v Bindley (1862) EWHC CP J35 (Stone & Devenney,
2017).
Consideration is the third element of the contract and in absence of valid consideration,
the contract is not binding. Consideration has to move from the promisee, has to be sufficient and
not adequate (Mulcahy, 2008). It needs to be mutually decided by the parties and needs to have
the economic value, or else the consideration would not be valid as was seen in White v Bluett
(1853) 23 LJ Ex 36. The three wrappers were held to be a valid consideration resulting in
binding contract in Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87 (Latimer, 2012).
Another requirement of contract formation is that the parties need to have the legal
capacity to enter into a contact. This means that the parties have to have sane mind and even
have a legal age. Though, for specific cases, the minors are permitted to enter into the contract.
The next requirement is for the clarity in the terms of the contract. It is important that the terms
of the contract are clear to all the parties. This is important so that the ambiguity does not result
in the contract being deemed as unenforceable (Gibson & Fraser, 2014). The last requirement in
contract formation is the intention of the parties. It is important that the parties are aware that by
forming a contract, they would become legally obligated to fulfil the terms of the contract. And
so, it is crucial that the parties have the intent of entering into lawful relationship with the other
party. Once all the six elements are found to be present in an agreement, the agreement
transforms into a legally binding contract (Lambiris & Griffin, 2016).
Question 2
A contract can be formed broadly in two manner, i.e., in written or in oral manner. In an
oral contract, the terms on which the contract is to be formed are orally spoken and an agreement

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