Contract Law: Elements, Validity, and Legal Liabilities

This article discusses the elements required to create a contract, validity of contracts, and legal liabilities of parties involved. It includes solved assignments, essays, and dissertations on Contract Law.

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Running Head: BUSINESS AND CORPORATION LAW 0
Contract law
6/26/2018
Student’s Name

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Question 1
(a) To create a contract between Shona and Raymond, some elements must have been there such
as:-
- There must be an offer whether in writing or in verbal mode (jifkins, 2017).
- Offeree must accept the offer before it is revocation by the offeror (Tepper, 2014).
- Such acceptance need be free from fraud or misrepresentation or any kind of undue
influence of a person who made an offer.
- Consideration is also a requirement to create a contract. Consideration in a contract
must be sufficient and valid (The Lawyers & Jurists, 2018).
- To create a legally binding contract, parties to an agreement must have the intention
to bind each other legally.
In the given case, details written on notice board were an invitation to treat. Shona just showed
her interest but did not make an offer. Further, nothing is mentioned about acceptance,
consideration, and intention of the parties. So in this scenario, it may state that there was no
contract in between Shona and Raymond.
(b) As mentioned above that there was no contract between Shona and Raymond, so in this way,
they both will not be liable towards each other in terms of Contract Law. Here this is to mention
that Raymond has shown invitation to treat. Shona did not make any offer, instead, she only
called Raymond to meet and discuss the books. No question of acceptance of offer could be
there in the absence of a valid offer. Raymond has stated to Shona that he will take a legal

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action against her as she breached the contract, but he cannot do so as there was no contract
in between both of them.
Further, an invitation to treat is a kind of advertisement and cannot be considered an offer.
Further, an invitation to treat does not bring any legal liabilities to parties, so Shona is not
correct in her assertion and the Raymond was not liable to deliver the books he offered.
Question 2
Here, in the given case, Ads-For-You made an invitation to treat and Shafiq by sending an e-
mail, made an offer. In the said e-mail Shafiq has mentioned his entire requirement. He received
an e-mail from Ads-For-You and he got disappointed by looking at the prices quoted by the
advertising company. Here this is to state that in contract law when offeree does not merely
accept the offer but mentioned something which has an impact on the original offer, such
acceptance termed as “counter offer” (Lexinter, 2018).
In this situation, Ads-for-You made a counter offer which was expected to be accepted by
Shafiq but he did not do the same, so no contract has established in between Shafiq and Ads-
for-You. Further, it was held in the case Felthouse v Bindley (1862) EWHC CP J 35 that silent
cannot be treated as acceptance in a contract, so in the studied case Shafiq is not liable to pay
anything to an advertising agency.

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Question 3
In the studies case, Veronica has completed a document stating that she will pay $8000 as
consideration for the renovation of his house. Veronica has mentioned in the aforesaid
document that she will pay this amount to Johnathon Harke on the event of a sale of her house.
In the contract law, it is stipulated that for a valid contract there must be a valid offer and
acceptance and consideration is also an important element (Findlaw, 2018). It was held in the
case Chappell v Nestle [1960] AC 87 that consideration must be sufficient but need not be
adequate. As in this case all the situations are satisfied for the creation of a legal binding
contract, Veronica must have paid the decided amount $8000 to Johnathon Harke according to
conditions of the contract. As she has failed to do so, Johnathon is entitled to receive this
amount form, Veronica.
Question 4
In the referred case, Chung Lee has made an offer £1.5 million for purchase a land and Katie
who is representative of the developer has agreed upon this. To enter into a contract there must
be acceptance of the offer, and by providing bank account details Katie has provided her
consent. Consideration also has decided between Chung Lee and Katie, so in this manner,
there was a legal contract between both of them.

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Here this is also significant to mention that law of agency will also be applying in this case as
Katie was acting like a representative or agent on behalf of her developer. As it is stated under
Agency law that a principal will be liable for the act of his/her agent (Kudrat, 2015).In this case,
Chung lee can bring an action against Katie as well as developer and he has entitlement over
Property.
Question 5
It was held in the case Parker v South Eastern Railway (1877) 2 CPD 416 that wherever in an
agreement or contract an exclusion clause is mentioned and the parties suffered could have an
eye on the same, then the other party will not be held responsible for any loss generated.
Here in the case, Daphne has read out the notice stating “No refunds on any goods under any
circumstances” and he also pointed out the same to Ted. So, the manager who sold the sofa
will not be held liable for breach of contract. On the other side, Ralpinda has visited seller’s
house to view the TV and after that, she purchased the same, so it may assume that she has
been made an offer to purchase the TV and it was her liability to check that whether the same is
working or not before making such offer. So, Ralpinda has no rights to return the said TV to the
seller.

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Question 6
It is common in contract law, that for a valid and legal contract, it is necessary that object and
consideration must be valid (Sehgal, 2018). A valid contract cannot be developed with an invalid
intention or objective or subject matter. In the given case, Kieran wants to buy a particular kind
of knife. At the time of entering into the contract neither she, nor the shopkeeper was able to
know that this is an invalid consideration. But later on, when after a week, Kieran visited
equipment supplier named Kung-Fu-Kit, she was informed that this is not a valid article to sell in
the UK. Now, although Kieran and supplier have entered into an agreement before a week, yet
there was a lack of enforceable contract due to the illegality of consideration. So, here it may
conclude that Keiran has not any enforceable contract with Kung-Fu-Kit.
Question 7
In the area of contract law, this is necessary to mention that in a contract there must be an
intention of the parties to impose legal liabilities on each other (Out-Law.com, 2018). As in the
given case, Aisha is making an agreement regarding conditions of marriage; this does not
create legal liabilities. Agreements which are developed in the course of love and affection
cannot be converted into a legal contract. Further, consideration is also an important element of
the contract, but here no consideration seems to be there for Saba. In the provided case, if the
agreement would have covered only part of the financial arrangement, then this could have
been a legal contract, but since other conditions such as restriction on re-marry are also there
then in this circumstance, there cannot be the existence of a legal contract.
In conclusion, it is to state that the agreement which Saba has entered with Aisha is not binding
an enforceable due to it is nature.

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Question 8
As earlier mentioned that to create a legal contract, consideration, an object of the same also
need to be legal (McKendrick, 2017). If two people agree upon to do something which is not
legal, so the agreement made in between them cannot be developed into the contract. In the
given case, Dirk and Harry planned to intercept e-mails of their flat mate and also have applied
for credit cards on their name. In addition to this, they have mutually agreed to go on a Europe
trip from the money they would get from such forgery. This is to mention here that the
consideration, they both were likely to receive was expected to proceed with an illegal activity
and for this reason; there was not any contract between Dirk and Harry.
Dirk later taken all the money and went on a trip alone, Harry is claiming his right, so in order to
answer the issue involved in this case, it may state that there is no legal contract and none of
the people is obliged to split the proceeds of their plan.
Question 9
In the given case there could be the existence of a legal contract if Naomi would not come into
known that the land she is going to purchase is already held by her grandmother. In the given
case, Naomi’s neighbor has made an offer to sell his land to Naomi for £5000 and Naomi also
been agreed upon to purchase the said land for the mentioned consideration. This is to state
that although the said agreement was on an informal paper the same is irrelevant when it
comes to the Contract Law. A Contract can even be in verbal (Pettigrew, 2012). But this is also
required that the consideration of a contract must be valid and legal.

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In this scenario, later on, it has come into the notice of Naomi that the land she is going to
purchase is already registered in the name of her grandmother. This means she was already
entitled to use that property. Now the issue is that Naomi’s neighbor is claiming to take an action
against her, so whether he can do the same or not. In order to reply to this question, it is to
mention that although Naomi was nit updated with the real entitlement of the land, her neighbor
must be aware with the same. He could not enter into a sale agreement in respect of a land
which is not a part of his property. He was pretending that subjective property belongs to him.
Further regardless the intention of neighbor, he cannot enter into a sale agreement with Naomi
for the mentioned land as it would not be valid under the law to further transfer a property which
is not owned by him. So, in order to advise Naomi, it is concluded here that there is no binding
contract between Naomi and her neighbor.
Question 10
(a) In the given case, Steven had two bikes namely Norton “Dominator” and Norton “TT Racing”
motorbike. He has offered to sell a bike stating “little beauty” to his friend Brian. Brian being a
motorbike collector accepted the said offer thinking that the same is “TT Racing” motorbike. But
later in he has come to know that Steven has sent Norton “Dominator” motorbike. In addition to
this Brian also has come to know that the motorbike he received is worth £5000 only.

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Here the issue is to check the legal situation of both the parties i.e. Steven and Brian. Here this
is to state that as stipulated under case Chappell v Nestle, that the consideration must be
sufficient and the same needs not to be adequate, so in this circumstance, it is irrelevant that
what is the exact market value of Dominator bike is. So on this basis; the subjective contract
cannot be treated as void or voidable. But on the different side, this is a case where a mutual
mistake has been done on behalf of both the parties. There can be two types of mistakes in a
contract, one is a mistake of law and another one is a mistake of fact (Laws of Business, 2018).
According to the further classification, mistake of fact can be on behalf of a single party or both
the parties.
For instance in the case of Raffles v Wichelhaus (1864) 2 Hurl & C 906] both the parties to the
case were talking about different subject matter and court held the contract void because no
reasonable person could know that both the parties are taking about which cotton as they were
using the term “The Peerless” for the same. In the given case also, both parties i.e. Steven and
Brian were using the term “Little Beauty” for the bike and therefore this is a case of Bilateral
Mistake.
(b) In the cases of mutual mistake relating to the identity of subject matter, the court tries to save
the contract. In general, in case of mutual mistakes, contracts cannot be rescind. Even in the
cases of a unilateral mistake (mistake at the end of one party), contract will not be rescind when
the mistake does not make the performance of a contract impossible.
In the given case, Steven and Brian were not clear about the identity of the bike. Where Steven
had believed that this is “Dominator”, Brian was thinking that the bike he is going to purchase is
“TT Racing” bike so he can deny paying the consideration as this is a Bilateral Mistake. In this
area, the decision given in the case of Great Peace Shipping v Tsavliris International [2003] QB

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679 is an important one to consider. In this case the defendant has cancelled a contract by
calling the same void because a mistake was there. Court held that until unless a mistake does
not make the performance of a contract impossible, the same cannot be held void or voidable.
Further, court also stated that in those cases where a common law does not provide a relief, the
equity can also not do so. Applying the provisions of Great Peace Shipping v
Tsavliris International, Brian in this case cannot ask a remedy based on equity, as under
common law also, he cannot seek any remedy cause of mistake. Further, the mistake outlined
in the case i.e. identity of subject material did not make the contract impossible to perform.
Rectification of a contract is just another aspect. This concept says that where a valid contract
exist between the parties but just because of a term and confusion about a fact in between
them, such contract not remain in original condition then rectification of a contract can be made.
However for a rectification there should be a match up of minds of parties to the contract. If both
the parties do not have same intention then court cannot give order for rectification. In the given
case, rectification of the contract can be made if Steven and Brian become agree on one part.
Question 11
(a) In the provided case, Kiran has made a misstatement stating that the motor home, she is going
to sell to Tasmin is in really good condition. She further stated that vehicle is only 3 years old
and recently been serviced. In the said services, this vehicle got brand new tyres, exhaust and
central heating system. In actual situation of the said vehicle was truly adverse. The same was
6 years old and was in a horrible condition. Although, Tasmin has informed to Kiran that she
need this vehicle for her trip on weekend and Kiran has believed that the same cannot fulfill her
purpose.

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Under Contract law, misstatement is a concept where one of the parties makes a false
statement regarding law or fact, and the basis of this statement the other party of the transaction
show his/her interest to enter into a contract. The lead purpose of misstatement is to induce
another party to enter into the contract. Misstatement is a type/branch of misrepresentation.
There are types of misrepresentation, such as innocent misrepresentation, negligent
misrepresentation and fraudulent misrepresentation (e-lawresources (a), 2018). On the basis of
kind of misrepresentation, remedies are defined to parties under Contract law. It was held in the
case of Bisset v Wilkinson [1927] AC 177 that merely opinion will not be considered as
misstatement or misrepresentation, but in the provided case statement made by Kiran were not
opinion and being the owner of motor home, she is believed to have full knowledge of true
condition of the vehicle. So, it may state that, Kiran has made a fraudulent misrepresentation as
she was aware with the actual condition of motor home, yet has told the opposite features to
Tasmin. Further this is also important to mention that on the basis of these statements Tasmin
has entered into contract with Kiran.
(b) As earlier discussed in Question 12, Kiran has made a fraudulent misstatement while selling the
motor home to Tasmin. Under the Contract Law, where one party induce other to enter into a
contract on the basis of fraudulent misstatement, such contracts become void and have no legal
bindings on the parties of the case. But there are some exceptions of this rule. According to the
decision given in the case Attwood v Small [1838] UKHL J60, claimant will not be successful in
his/her claim if he/she could have reason to get the true knowledge. In the mentioned case,
claimant purchased an estate from the defendant. Defendant has informed to claimant that the
subjective estate has potential to generate income. Claimant also made check the related
accounts by his own accountant. Later on he taken an action against defendant stating that he
has made misstatement but it was held that the claimant had reason to know the true condition

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of profitability. In the case of Redgrave v Hurd (1881) 20 Ch D 1, the claimant had reliance on
the statement of defendant and therefore he was held entitled to rescind the contract. In the
given case Tasmin had no liability to cross check the statement of Kiran and based on the
statement of Kiran, Tasmin has entered into the contract.
Decision of the case Bisset v Wilkinson [1927] AC 177 is important to state as it was held that
only opinion will not be consider as misstatement. In the given case, what Kiran has stated was
not an opinion but a misstatement regarding the facts. In cases of negligent misrepresentation,
the decision of the case Royscott Trust v Rogerson [1991] 2 QB 297 is important. It says that in
such cases, damages will be granted to the claimant according to the provisions of tort law as
negligent is more connected to tort law rather than contract law. It was held in the case of Doyle
v Olby [1969] 2 QB 158 that in cases of fraudulent misrepresentation, the claimant can rescind
the contract. Recession is a remedy that is available with innocent parties in the case of
misrepresentation. This is a state where innocent party can terminate the contract.
In the studied case, Kiran and Tasmin have entered into a sell agreement, which was in writing.
Although Kiran has made a misstatement to Tasmin about the working condition of motor home,
yet she has procured various documents to Tasmin. Proving a misstatement fraudulent is a very
typical thing to establish, therefore it is to assume that misstatement made by Kiran was of
negligent nature. In these documents, the actual age of motor home was written but Tasmin did
not bother herself to check the same. However, it was irrelevant because the issue was with
condition of vehicle not the age of the same. Sale document was not mentioned anything about
actual condition of vehicle. Applying the provisions of Royscott Trust v Rogerson, Tasmin can
ask for the damages for negligent misrepresentation done by Kiran. Further, the impact of
negligent misrepresentation will be similar to a fraudulent misrepresentation and Tasmin can
rescind the contract.

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(c) Tasmin and Kiran were entered into a contract which was in writing. The said agreement was
for the sale of motor home, registered in the name of Tasmin. In the said contract it was written
that ‘On signing this contract the buyer accepts that Liability for any pre-contractual
misrepresentation will be excluded”. It is very common in Contract Law to mention some
exclusion clause in respect of Guarantee or warranty. But it is to mention that such exclusion
cannot be if nature which overrules the basic requirements if a law.
It is general to state an exclusion clause in that contract where there is a risk involved and one
of the party mention that the same will not be held liable for any kind of future mis-happenings.
Parties to the contract introduced Such kind of clauses to safeguard their interest and to reduce
their liability (e-lawresources (b), 2018). It was held in the case L'Estrange v Graucob [1934] 2
KB 394 that whenever a person signed a written contract, the same becomes liable to follow
exclusion clause irrelevant to the fact that whether the same has read out the same or not.
Further, it was stated in the decision of the case Curtis v Chemical Cleaning [1951] 1 KB 805
that exclusion case does not work in the cases of misstatement even when a person has signed
the contract in which the said clause is mentioned. Further, decision given in the case Interfoto
Picture Library v Stilletto [1989] QB 433 that where an exclusion clause or an important term is
there, then it becomes liability of the person who want to take benefit out of it, to focus on that
term. In the given case, Kiran has made an exclusion clause which will be invalid as the same
exclude the liability of misstatement. This is not allowed in law and an exclusion clause which
has a term relating to misrepresentation will not be effective. Further, applying the principles of
Interfoto Picture Library v Stilletto, the exclusion clause was not incorporated in the contract in
actual as Kiran has not done anything further to bring that exclusion clause in the notice of
Tasmin. So, as asked in the problem scenario that what will be legal position of the exclusion

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clause, so it may conclude as the same will be invalid and Kiran cannot take the plea of the
same.
Reference
Attwood v Small [1838] UKHL J60
Bisset v Wilkinson [1927] AC 177
Chappell v Nestle [1960] AC 87
Curtis v Chemical Cleaning [1951] 1 KB 805
Doyle v Olby [1969] 2 QB 158
e-lawresources (a). (2018) Misrepresentation. [online] Available from: http://e-
lawresources.co.uk/Misrepresentation.php [Accessed on 26/06/18]
e-lawresources (b). (2018). Unfair terms. [online] Available from:
http://e-lawresources.co.uk/Unfair-terms---regulation-by-common-law.php [Accessed on
26/06/18]
Felthouse v Bindley (1862) EWHC CP J 35
Findlaw. (2018) What is 'Consideration' and How Much is Required? [online] Available from:
https://smallbusiness.findlaw.com/business-contracts-forms/what-is-consideration-and-how-
much-is-required.htm [Accessed on 26/06/18]

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Great Peace Shipping v Tsavliris International [2003] QB 679
Interfoto Picture Library v Stilletto [1989] QB 433
jifkins, J. (2017) Contracts don’t have to be in Writing to make them Binding. [online] Available
from: http://onyxonlinelaw.com/contracts-dont-have-to-be-in-writing/ [Accessed on 26/06/18]
Kudrat. (2015) Termination of Agency under Contract Act. [online] Available from:
https://www.lawctopus.com/academike/termination-of-agency-under-contract-act/ [Accessed on
26/06/18]
Laws of Business. (2018) Mistake in Contract. [online] Available from:
http://www.lawsofbusiness.com/2013/08/mistake-in-contract.html [Accessed on 26/06/18]
L'Estrange v Graucob [1934] 2 KB 394
Lexinter. (2018) Counter offers. [online] Available from:
http://www.lexinter.net/LOTWVers4/counter_offers.htm [Accessed on 26/06/18]
McKendrick, E. (2017) Contract Law. London : Palgrave, 2017
Out-Law.com. (2018) Formation of contracts. [online] Available from:
https://www.out-law.com/page-396 [Accessed on 26/06/18]
Parker v South Eastern Railway (1877) 2 CPD 416
Pettigrew, J. M. (2012) Contracts: verbal vs written. [online] Available from:
https://www.independent.co.uk/student/young-entrepreneurs/contracts-verbal-vs-written-
6297966.html [Accessed on 26/06/18]
Raffles v Wichelhaus (1864) 2 H & C 906
Raffles v Wichelhaus (1864) 2 Hurl & C 906]
Redgrave v Hurd (1881) 20 Ch D 1

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Sehgal, S. (2018) 10 Essential Elements of a Valid Contract in Business Law. [online] Available
from: http://www.shareyouressays.com/knowledge/10-essential-elements-of-a-valid-contract-in-
business-law/94753 [Accessed on 26/06/18]
Smith v Hughes (1871) LR 6 QB 597
Tepper, P. (2014) The Law of Contracts and the Uniform Commercial Code. Boston, MA :
Cengage Learning.
The Lawyers & Jurists. (2018) Consideration Must Be Sufficient But Need Not Be Adequate-
Illustrate And Explain. [online] Available from:
http://www.lawyersnjurists.com/article/consideration-must-be-sufficient-but-need-not-be-
adequate-illustrate-and-explain/ [Accessed on 26/06/18]