ACNB Report: Elements, Types, Terms, and Application of Contracts

This report delves into the essential elements of a valid contract within a business context, outlining the requirements for a legally binding agreement. It explores key components like offer and acceptance, consideration, intention to create legal relations, privity of contract, competent parties, and free consent. The report then examines different types of contracts, including written, oral, bilateral, unilateral, face-to-face, and distance selling contracts, highlighting their advantages and disadvantages. Furthermore, it discusses various terms within a valid contract, such as expressed terms and conditions. The report also addresses the application of these elements and contract types in business scenarios and explores the concept of negligence within the context of contracts, supported by case studies. This report provides a comprehensive overview of contract law and its practical implications in the business environment.

ACNB
1

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
The essential elements, contract types and terms of a valid contract in business context...........3
TASK 2............................................................................................................................................6
Application of the elements of a contract in business situations.................................................6
TASK 3............................................................................................................................................9
TASK 4..........................................................................................................................................13
Case 1.........................................................................................................................................13
Case 2.........................................................................................................................................14
Conclusion ....................................................................................................................................15
References......................................................................................................................................16
INDEX OF TABLES
Table 1: Difference between Contractual Liability and Tort Liability..........................................11
2

INTRODUCTION
In order to enter successfully into a valid contract, both the parties must focus on proper
legal framework so that they can enable valid agreement (Nielsen, 2010). However, it is essential
for the parties to follow proper judicial system so that rights and duties of the parties can be
protected who are entering into the contract. Different statute laws as well as regulations framed
by the governing authorities must be abide by the parties so that they may not enter into the
illegal practices and activities. Therefore, UK government has implemented various laws and
legislation that are related with the contract and neglectful activities conducted by the parties so
that they may defend the right of innocent parties from the partial practices.
Presently, the study focuses on defining the essential elements for entering or forming a
valid contract. However, it will also focus on different types of contracts that parties may form as
well as it will also focus on different terms existing in the contract that are required by the
business parties to focus on so that they may easily perform the business practices. Furthermore,
elements and different forms of contracts are also applied for the given case scenario. In addition
to this, report will also discussed the nature of negligence by the parties within the contractual
aspect.
TASK 1
The essential elements, contract types and terms of a valid contract in business context
Essential elements
Valid contract within the business context is characterized as a binding statement among
two or more parties that may be legally enforced by the judicial system (Lawson, 2011). Valid
contract must be in the written form in between two or more parties that mainly specify the terms
and actions that have to be performed by both the parties. Despite of this, there are different
elements that need to be focused by the parties while entering into an agreement or contract.
Different elements of agreement are-
 Offer and acceptance: One of the essential elements that proposes agreement is related to
valid offer and acceptance. For instance; if an offer is offered by one party to another
party and other party accepts that offer, then both the parties are abide in the agreement.
An offer is defined as a proposal that has been given by one party to the other party so
3

that they may complete action by performing activity. However, there are different type
of offer such as
1. special offer- Under special offer it has been given to the specific or particular person.
2. Cross offer- Cross offer under which respective two parties places similar offers in the
related manner.
3. Counter offer- It is an offer that is made by the other party that is supported by the
condition.
4. General offer- This is a form of offer that is provided to the general public under which
each individual is eligible for accepting the offer.
On the other hand, acceptance is termed as a respond that is provided by other party in to
the respect of offer. Therefore, the acceptance of offer must be unconditional (Friedman, 2011).
Basically there are 5 types through which offer can be terminated that is impossibility of
performance. This situation arises if the performance that is describe in the offer is impossible to
achieve then offer can be terminated. Second situation under which offer can be terminated is if
the offer is mistaken by the offeror or the offer has been disapproved by the offeree. Third
situation under which offer is terminated is in the case of counter offer. Under this situation party
who is accepting the offer has placed condition then the offer will get cancelled. Fourth situation
in which offer can be terminated is when parties entering into a valid contract are incompetent
that is party is not in the condition to accept the offer. Lastly, the fifth situation under which offer
can be terminated is passage of time provided by the offerer that is after the completion of proper
time period the offer can get terminated.
 Consideration- Another essential element that is being required to form the valid contract
include proper consideration that is parties must be entering into the agreement must be
supported by some value or gratitude while rendering services. Basically there are 5 rules
of consideration that is consideration may not be valid for the past performance. The
consideration among the parties are not mandatory but it may be sufficient to both the
parties. The modular duty and responsibility of the individual may not be consider or
treated as the consideration. The last rule of consideration include one-sided payment of
the debt is not termed as consideration.
4

 Intention to create legal relationship: Another essential element within the agreement
includes the intention of both the parties who are entering into an agreement. Both the
parties must have intention to create legal relationship by enabling fair and ethical
practices. For instance; if, intention of both parties are not to create a legal relationship,
then there will be no contract among the parties (Beale and et.al., 2010).
 Pivity of the contract- Another element for formulating the valid contract include pivity
of contract which enables that the right of sue or claiming the damages and
compensation. This element ensure that party agreeing into the contract are entitled and
enforced to sue each other. The other party have no right to sue the parties who are in the
contract.
 Competent parties: However, parties who are engaging in a valid contract must be
competent enough so that they may enter into a valid contract. According to the law, any
person or individual who is below 18 years, with unsound mind or lunatic may not be
valid to enter into a valid contract. Person of sound mind as well as adult of above 18
years is eligible for entering into a contract and form contractual relationship. Free Consent: Another significant element that is essential for valid contract includes that
there must be free consent of each and every party. The consent is defined as a situation
where both the parties must agree upon the related things in the identical meaning.
Parties cannot entered into a valid contract if, the parties are evoked by fraud, mistake or
misrepresentation (McKendrick, 2014).
Different types of contract
There are different forms of contract under which parties may form legal relationship as
well as it is also enforceable by the law. For entering into a valid contract, parties may focus on
different types of contracts that mainly include-
1. Written contract- One of the effective type of contracts within the business context is the
written form of contract. Under written contract, parties who are entering into an
agreement are focused on forming a deed or statement that would clearly state the rights
and duties of parties that they would enact (Engler and Heyman, 2011). The advantage of
enabling written contract among the parties is that it may act as a proof to the parties that
5

they have entered into a contract and they are liable for performing activities which are
mentioned within the contract.
Advantages and disadvantages of written contract-
It is consider as most formal type of contract that are used by many businesses so that in future
they should resolve the dispute as in the written form of contract there is deed signed by the
parties who are agreeing into the contract. Despite of the advantage there is also a major
disadvantage of the written form of contract that is it consume more time and money as it
involve high paper work that sometime lead to take delay decisions.
2. Oral contract- Another type of contract that is commonly used in the business scenario is
oral contract among the parties (Fried, 2015). This form of contract is highly suitable
when parties of the contract are at the distance or are physically present at the same place.
On the other hand, oral contract can be made through telephonic conversation.
Disadvantage of oral contract is that it lacks the evidence of entering into a valid contract.
However, oral form of contract may not be advantageous in the situation where one party
does fraud with the other party and the defended party has no right to sue them as due to
lack of evidence.
3. Bilateral contract & Unilateral contract- Bilateral contract is also considered as an
effective type of contract under which parties agreeing into the contract mutually dealing
with their promises. Under bilateral contract both the parties specifies their duties as well
as role so that they may perform their actions to meet or accomplish the goals of both the
parties (Elliot and Quinn, 2009). However, this type of contract is also termed as two
sided contract under which both the parties mutually agree to perform their duties and
responsibilities. Another sort of contract includes one sided contract that is often termed
as unilateral contract. Under unilateral contract, one party gives offer but it is not
necessary or required that other party may accept the conditions that are offered by the
offeree. Example of unilateral contract includes that an individual advertises in the
newspaper and magazine to provide financial reward to the party in the program who
would return their missing products. Thus, individual who has provided offer to provide
reward is obliged to pay certain amount if it is being returned (Horsey and Rackley,
2009).
6

4. Face to face contract- This is the form of contract under which parties are present while
formulating the contracting. Under this type of contract the party quickly or instantly
response to the offer provided by the party.
Advantage and disadvantage of face to face contract
The advantage of face to face contract is that it is consider as an easiest type of contract that
result in enabling quick responses by the parties. While, the disadvantage of face to face contract
is that it may lack the proof of entering into a contract.
5. Distance selling- It is termed as the type of contract under which the parties agreeing into
the contract are not physically present to sign the contract. Thus, here it apply the postal
rule for ensuring the validity of the contract. As per this rule acceptance by the party is
said to valid if it has been communicated to the other party.
Advantage and disadvantage of distance selling contract
The disadvantage of distance selling contract is that it may result in acquiring high rate of
uncertainty and also increases the possibility of miscommunication and misinterpretation.
However, the advantage of distance selling contract is that parties can form the valid contract
without ensuring their presence.
Terms in a valid contract
The valid contract require different terms and conditions in their written agreement so
that parties may perform their duties according to terms and conditions. If the parties are failed to
satisfy the terms and condition of the contract then the aggrieved party is liable to claim for the
damages and injuries. The different kind of contractual terms are classified as follows-
Expressed terms are considered as significance terms that are entered into a contract by
the parties. These are the terms that is clearly directed and communicated mutually by the parties
of contract in oral as well as written form (McKendrick, 2008).
 Conditions- Conditions are considered as expressed terms within the contract that are
mutually agreed by the parties that need to be followed by them within the contract.
Parties in the contract are required to fulfill the conditions and if in case parties are
unable to meet the conditions and terms entered into the contract then aggrieved party is
liable to pay for the damages and compensate for the injuries (Peel and Treitel, 2007).
7

 Warranties- another form of expressed terms include warranties these are considered as
ancillary terms that are offered by the one party to the other party in the contract. In the
case if party is unable to provide warranties then offered party is in the position to
provide compensation and remedies.
 Innominate terms- it is also termed as an expressed term under which the damages are
provided after determining the effect of reach of contract.
 Representation- These are the terms that are not inserted into the contract but the parties
into the contract have discussed the terms orally while entering into the contract.
 Trader's puff- These are the terms that have no existence or any connection with the
reality situation.
Implied terms are also considered as significant terms in the valid contract as these terms are
enforced by the law and governmental authorities that is mandatory for all the parties who have
been in the contract. The main purpose for which government official enforce or impose the
implied terms in the contract is to protect or defend the rights of parties from the unethical
practices and behavior (Nielsen, 2010).
TASK 2
Application of the elements of a contract in business situations
CASE A
Case Scenario
According to case scenario, Fiona is newly qualified dentist who received letter from her
uncle which specify selling of dental equipment to her for just rs. £20,000 but due to lack
financial instrument she is unable to take the dental equipment for her uncle. She phones her
uncle but unable to receive her message. After two week Fiona arranges the loan for purchasing
the equipment and send the cheque of £20000 to her uncle. On 30th Nov. her uncle says that he
has already sold the equipment to someone else (Lawson, 2011).
Application of elements
As per the above case scenario, there is offer by the one party to another party while
acceptance is also confirmed from the other side. However, Fiona lack the finance she has ensure
counter offer to her uncle by requesting him to give time until the Christmas but he does not
reply for the statement in such case Fiona assume the silence as an acceptance but according to
8

the silence is not be consider as acceptance. However, in the situation when she has made the
counter offer to Arnold the main offer get cancelled. Thus, Arnold is not eligible for paying the
compensation.
CASE B
Case Scenario
As per the case scenario, Dunlop a Tyre manufacturer has sold the tyres at the discounted
prices to Dew a trade purchase on the written agreement that he would not further resell the tyres
at lower prices than the listed prices. But despite of the written contract Dew sell the Tyre to
selfridge and made him agrees that he would sell at the lower prices to another company
otherwise they would pay £5 in damages if they violated the agreement.
Application of elements
According to the above case scenario, Dew has breach the written agreement by selling
the tyres to Selfridge at the lower prices (Friedman, 2011). Thus, they are liable to pay the
compensation to Dunlop. However, Dunlop in such situation is accountable to breach the
contract from their end. Furthermore, by violating the written agreement he further agrees to sell
their tyres to selfridge and enters in the contract that he would not resell to the other company. In
such situation Dunlop has power to breach the contract and agreement from Dew. In the above
situation as per the Pivity of contract Dunlop is not entitled to sue the Selfridge as the contract is
between the Selfridge and Dew. However, in such scenario, Dunlop will sue or breach the
contract with Dew and furthermore, Dew will terminate the contract with Selfridge. Thus, the
third party is not eligible or not obliged to sue the Selfridge.
CASE C
Case Scenario
According to case scenario, Dan carried the improvement or reparation in the house
where he lives with his family and other three siblings. The father was the main owner of the
property that later become trust property. However, Dan and his three siblings were also consider
as the part the trustee. In the proper condition and consideration all the siblings has signed the
document that clearly states that you carried out the repairs we agree to pay the amount that is
£15000 from the proceeds of sales. Furthermore, the property was sold later but the payment to
Dan was new made by the other three sibling.
9

Application of elements
By considering the above case scenario, it can be stated that there is valid contract
between the parties that is among the siblings as they all mutually in the consideration has signed
the document that state that they will pay the certain amount of money to the executor (Beale and
et.al., 2010). In such scenario, they are liable to pay for improvement in the house. However, the
siblings are also competent enough to enter into a valid contract. Therefore, in such case siblings
will pay the due amount to Dan according to the signed document as well as Dan also
accountable for claiming the damages. However, according to the element of valid contract the
past consideration is not regarded as the ground for claiming for the past performance.
CASE D
Case Scenario
In this case, Mr. Nash who was a tailor and entered into a contract with Inman who was a
minor. He took the order to stitch 11 waistcoats for him and total expenses was £145. At the
time of payment Inman refused to pay and said that he does not require these clothes. Mr.
Nash claimed for the cost of the clothes (Lawson, 2011). After assessing the whole case, it
has been found that essential elements of the Contract Law has not been fulfilled in this
scenario. There are various essential element and out of which one element is the
capacity of the party or parties to enter the contractual relationship. The capacity of the
party excludes the minors, unsound person, etc. However, Inman was a minor and Mr.
Nash cannot make a contractual relationship with him. Thus, the contract becomes void
and he could not claim for the losses. Along with this, 11 waistcoats cannot be considered as
fundamental necessity as the father of Inman has already provided him sufficient clothes, thus
this offer is not valid in English law.
CASE E
Case Scenario
The case of SLICK CAR SALES LTD states that second hand cars are available for
the sale at lowest prices. Paul went to purchase the car and select the one for the price of
£3,995. For this aspects, a contract was formed in which car was described as 1994 Ford Mondeo
10

in Cayman Blue and the registration number is L931 AJU. The further terms has been described
as follows:1. Representation and Warranties: Those points which are discussed orally are
considered as representation and these are not included in the contractual deed. In the
case, terms such as car has a single owner and it is drove for 30,000 miles are
representation (Beale and et.al., 2010). Moreover, the statements such as full tank, radio
and road tax are considered as warranties.
Effect of failure of term
In case if the party fails to satisfy these terms, then innocent party can make the claim for
damages.2. Conditions: Those terms which are entered in a contract will be considered as
conditions. As per the case, condition is the model number 1994 Ford Mondeo of Cyman
Bluer color with the registration number L931 AJU.
Effect of Failure of term
Terms in the contract does not get satisfied than Paul can make the claim for damages
and he can also terminate the contract.3. Trader Puff: These terms does not have any link with the reality and they are used only
for attracting customers. In the given case, trader's puff can be statement such as “lowest
price for the used car”.
Effect of failure of term
These statements have no link with the reality and thus no remedy is provided to the
innocent party if they turned out to be false.
CASE F
Case Scenario
As per the given case, Jim along with his family went to Fun Park. He purchased the
ticket of parking and of Fun Park. At the entrance of parking, warning was given that parking
will be at the risk of owner and entity will not be responsible for the damages. However, this
warning was hidden by shrubs and that was not visible. Further, on the entry ticket it was stated
that company will not accept liabilities regarding personal injury or death. These both terms will
be considered as exclusion clause. Afterwards, Jim and his wife got injured by metal bar while
11

they were enjoying at Park. In this situation, case of Chapelton v Barry Urban District Council
[1940] 1 KB 532 can be refereed. In this case, it has been said by judicial person that terms
stated on the ticket will not be considered as part of the contract. Further, as per the Unfair
Contract Term Act 1977 (UCTA 1977), restriction of liabilities on personal injury is not valid.
Afterwards, his care was damaged due to crash with van of strand council. Exclusion clause
stated by parking is not visible to visitors thus it is not incorporated in an appropriate manner. By
considering this aspect, Fun Park is liable to provide damages for both the injuries of parties.
TASK 3
Negligence can be defined as a failure of taking reasonable care by a person. That person
is obliged to take reasonable care on account of other people in such situations where it is
foreseeable that other people could be harmed by their actions or omissions. Further it can also
be defined as the situation where a particular person fails to obey a duty of care (Volokh, 2010).
Moreover, the individual alone is not responsible for the injury caused but the failure of acting as
a reasonable person gives rise to the damages. In a general format, when an individual acts in a
careless manner and due to which injury has been caused by another person than under legal
principle of negligence the careless person would be legally liable for any harm which have
resulted due to carelessness (Spindler, 2011). There are 4 key principles for negligence which are
described as follows:
1. Duty of Care: This can be defined as the circumstances and relationships which have
been recognized by the law. This give rise to a legal duty to take reasonable care. If the
person who is responsible for this duty fails to perform than he is liable for the resultant
harm caused to another person (Booth, 2007). For this purpose, liable person has to pay
damages to other party who got injured or suffered losses. In certain cases, there are
exceptions to the duty of care such as when a person donates the food in good faith for
charity purpose than that person is protected from legal liability. If any one is caused
harm while consuming that food than that person is not liable. Moreover, volunteers who
are doing community work cannot be held responsible if they cause any damages to the
others. In that case, community organization will be held liable.
2. Breach of Duty: When any person fails to take extra care they are require to take than
this situation is considered to be breach of duty of care. It happens when the individual
12