Formation of Contractual Relationships

This document discusses the essentials of a valid contract, including offer, acceptance, consideration, and intention to enter into a legal relationship. It also explains the court system in the UK and advises parties on which court to approach. The document provides case-based examples and explores the available remedies under contract law. It concludes with a summary of the key points.

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FORMATION OF
CONTRACTUAL
RELATIONSHIPS

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TABLE OF CONTENTS
1. INTRODUCTION………………………………………………………03
2. EXPLAIN THE VARIOUS ESSENTIALS OF A VALID
CONTRACT……………………………………………………………..03
3. EXPLAIN COURT SYSTEM OF UK AND ADVISE PARTIES TO
WHICH COURT THEY CAN APPROACH……………………………
05
4. ADVISE HILARY WHETHER CONTRACT EXIST BETWEEN HER
AND OTHER PARTIES: ELEANOR, AMY AND OLIVIA………….05
5. EXPLAIN ALL THE AVAILABLE REMEDIES UNDER CONTRACT
LAW……………………………………………………………………….06
6. CONCLUSION……………………………………………………………06
7. REFERENCES……………………………………………………………07

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INTRODUCTION
A business organization has to follow various laws in order to carry their day to day
business transactions. One of the law which is widely used while carrying on business activities
is Law of Contract. In every transaction of a business the formation of the contract take place.
This contract can be either oral or written. If any of the parties breaches such contract the party
who has suffered the loss due to such breach can approach court to claim the compensation.
While awarding the compensation the court must see that there were all the essentials of a valid
contract must be present such as offer, acceptance, consideration and intention to enter into legal
relationship etc. here in this project various essentials of the contract will be discussed.
Further various fact based problems will be examined whether the valid contract has been
formed between the parties or not. It will also be discussed that what all remedies are available to
the parties.
MAIN BODY
Explain the Various Essentials of a Valid Contract
A valid contract can be defined as “such an agreement which is legally enforceable
and is having a legal binding effect”. There are various essential of a valid contract which
should be present in the contract to make the agreement as legally binding upon the parties. If a
valid contract has been formed between the parties, if any of the party breaches the existing
contract the other party can claim the damages for such breach. While awarding the amount of
compensation the court will examine the validity of the contract by identifying that all the
essentials of a valid contract are present or not. The first essential or the first step towards the
formation of a contract is Offer(Abd Rahman, 2019). The offer can be defined as a proposal
given by one person to another for a certain thing. For instance, if Mr. A tells Mr. B that he
wants to sell his house for $100 to Mr. B, it will amount to an offer. It must be taken into
consideration that an offer should be distinguished from an Invitation to Offer. Many people get
confused between these two. It should be noted that the offer is the first thing or step towards
formation of a contract whereas an invitation to offer is a former stage after which the offer is
given(Allen and Kraakman, 2016). The first landmark judgement in which this distinction was
made was Harvey vs Facey (1893) in which the Privy Council has said that the telegram sent by

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the defendant was not an offer but an invitation to offer. In the another landmark judgement of
Carlill vs Carbolic Smoke Ball Case when the company contended that the advertisement
given by them should be considered as an invitation to offer, the court dismissed this contention
saying that their advertisement was a general offer. One of the most common example of this
invitation to offer is “any items which is displayed in any shop or showroom” will be considered
as an invitation to offer. The person or the customer who will be willing to purchase that item
must be giving offer to the shopkeeper. It must be noted that an offer should come from the side
of offeror only(Ashcroft, Ashcroft and Patterson, 2016).
After an offer the next step towards the formation of a valid contract is Acceptance of
Offer. Acceptance means that accepting the proposed offer. This acceptance can be either
express or through conduct. It is necessary that the acceptance should be communicated to the
offeror and if any mode of communication has been prescribed it must be communicated through
that mode only. It is a general rule that the acceptance will be deemed complete when it comes to
the knowledge of the offeror whereas there is an exception to this general rule when the
acceptance would be sent by the letter. In that case acceptance will be deemed complete and the
contract becomes binding upon both the parties when the letter of the acceptance has been put in
the mode of transmission. Once the letter has been put in such mode it cannot be revoked in
cases where the acceptance has been sent through postal method(Beatty, Samuelson and Abril,
2018).
The another important essential of the valid contract is Consideration. Consideration
means both the parties must exchange anything either in monetary terms or in the form of
promises. The inadequacy of the consideration does not make a contract invalid.
The parties who are forming the agreement must be having the intention to enter into a
legal relationship with each other. For instance, if a father promises his son that he will buy him
a car if he scores good in his academics. Here if later on the father denies, the son cannot
approach the court in order to enforce the agreement as neither father nor son were having the
intention to enter into a legal relationship at time when they entered into the agreement. The
landmark judgement upon this essential is Balfour vs Balfour in which one agreement was
made between a husband and a wife. Later on when the husband did not follow the agreement,
the wife approached the court. In this the court has stated that there exists no intention to enter

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into a legal relationship while doing that agreement, hence no contract was formed(Beatty,
Samuelson and Abril, 2018).
Explain Court System of UK and Advise Parties to Which Court they can Approach
As this project is related to the contract law which comes under the civil law, the courts
which are entitled to deal with the civil matters will be discussed under this project. The lowest
court in which the parties can approach is the County Court which was established for the
purpose to deal those matters which are less important and having small amount in question. The
Queen’s Bench of High Court has been conferred the power to deal with the contractual disputes
where a large amount is in dispute. The appeal from the Queen’s bench will go to Court of
Appeal. After that the appeal will lie to the Supreme Court of United Kingdom which is the
highest appellate court which was formed by Constitutional Reform Act 2005(Cartwright.,
2016).
Advise Hilary Whether Contract Exist Between her and Other Parties: Eleanor, Amy and Olivia
Case 1: As per the landmark judgement of Partridge vs Carttinden, an advertisement
should be considered as the invitation to offer. Here also the advertisement given by Hilary was
an invitation to offer on which Eleanor has given the offer by quoting a different price which was
not accepted by Hilary. Later on when the offer was made by Hilary, it got rejected by Eleanor.
Hence no contract has been made between both the parties.
Case 2: The most famous case which can be applied in the given problem is of Adam vs
Lindsell(Chandrika, 2016). In which the court has made a rule when the acceptance will be
given through postal method. As per this rule of postal method acceptance once put in the mode
of transmission cannot be revoked. So by applying the same principle on the given facts it can be
concluded that now Amy cannot revoke her acceptance as she already posted the letter.
Case 3: The facts given in this problem clearly shows that the notices which were put by
Hilary should be considered as invitation to offer and when Olivia gave offer to Hilary regarding
the purchase of the painting, it was rejected. Hence no contract was formed between both the
parties.

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Explain all the Available Remedies Under Contract Law
Compensation: In majority of the cases the court awards the compensation to the
sufferer party when the contract has been breached. Here the court while awarding the damages
will consider that loss suffered is due to the breach only and the loss was foreseeable (Jones,
2019).
Specific Performance: In many cases the compensation will not be an adequate relief.
So in such situations the court can order for the specific performance of the contract.
Injunction: If any party feels the threat that there is a possibility that the other party will
breach the contract in future, it can approach court and request them to issue injunction in order
to restricting the party to breach the contract(Smith and Williams, 2018.
CONCLUSION
By the above study it can be concluded that in every business the law of contract is being
widely used. For determining the validity of a contract the courts must consider various
essentials which must be present in the agreement such as offer, acceptance and consideration.
With the help of various case laws also it was understood that how court examine these essentials
in the real situations. Further the court system of UK was discussed and parties were advised to
approach which court. Various case based problems were also discussed and it was seen that
what all remedies are available to the parties.

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REFERENCES
Books & Journals
Abd Rahman, H., 2019. Offer and Acceptance in Islamic Law of Contract. Jurnal Syariah, 8(2),
pp.15-32.
Allen, W.T. and Kraakman, R., 2016. Commentaries and cases on the law of business
organization. Wolters Kluwer law & business.
Ashcroft, J.D., Ashcroft, K. and Patterson, M., 2016. Cengage Advantage Books: Law for
Business. Cengage Learning.
Beatty, J.F., Samuelson, S.S. and Abril, P., 2018. Business law and the legal environment.
Cengage Learning.
Cartwright, J., 2016. Contract law: An introduction to the English law of contract for the civil
lawyer. Bloomsbury Publishing.
Chandrika, M.P., 2016. A Comparative Analysis of UK and Indian Provision relating to
Intention under Law of Contract. International Journal of Law and Legal Jurisprudence
Studies, 3(4).
Fita Ortega, F., 2020. Essentials of the contract of employment.
Hodge, P.S., 2017. Judicial Development of the Law of Contract in the United Kingdom. Geo.
Wash. L. Rev., 85, p.1587.
Jones, L., 2019. Introduction to business law. Oxford University Press, USA.
Smith, D.G. and Williams, C.A., 2018. Business Organizations: Cases, Problems, and Case
Studies. Aspen Publishers.