Elements Required for the Formation of a Valid Contract

Elements Required for the Formation of a Valid Contract mental institutionWhen we think of either kind of duty there comes the necessity of understanding and applying the rules, principles, norms, and usages of assume. Now a day there is hardly all business traffic that does non comes within the purview of contact. So its very important to confine a clear and definite idea on the subject of signal righteousness. however, in this paper Iv tried to put across a glimpse on this subject along with its application in practical day to day to business forms in various disciplines. This piece of work entrust demonstrate the very basic and primary areas of shrink, like turn and acceptance, consideration etc, with a particular tenseness on the operation and operation of business contact. In addition, the paper contains impressiveness of understanding the principle of liability in disregard in business practices and do an effort to apply untold(prenominal) principles and p ractices in diverse business situations.Requirement 1Importance of the essential elements required for the formation of a legitimate guaranteeA take aim is the obligation between parties regarding all kind of dealings that is enforceable in effectual philosophy. So an parallelism between parties enforceable by law is a contract and never the early(a)s which are not enforceable by law. Suppose, an agreement to purchase 1-kg heroine is not enforceable by law and as such(prenominal) it placenot be a contract, exclusively an agreement for the purchase of computer is enforceable by law and as such is a contract. In this regard, we tail assembly cave in to a conclusion that all contracts are agreements, but not the vice versa.A contract between the parties disregard be createdverballyin write (including by electronic means and website)by act, be befool, conduct or inference orBy means of all or any of the above menti wizd ways.Essentials Elements of a Valid ContractTo be a contract, an agreement must fulfill the following conditionsProposal(offer) and acceptancethe parties must be competentthe take to of parties must be freethere must wealthy psyche lawful considerationthe object must be lawful andthe agreement must not evincely declare void by law.Beside the above mentioned elements the contract must be authorized possible of performance and written and registered if so required by law.However there can be special principles, terms and conditions applicable to the contract as agreed by the parties that concern ad hoc subject matters, such as employment contract, the sales agreement of moveable property, sale of immoveable property etc.The OfferOffer is the starting point from where an agreement gets life formally which ultimately may encounter the shape of a legally binding contract.Offer means the formal expression of intention or willingness of one political party to an other acute to do or to refrain from doing an act in order to obt aining the assent of the other party to such act or default. When one party signifies his willingness to other party in order to take consent of that party regarding any dealing, the party expressing such willingness is said to incur an offer and he is called the offeror and the individual to whom it is do is called the offeree . So it is clear that,the offer must be communicated to the other partyit can be revoked at any time prior to acceptance.In this point we hurl to keep in mind that some kinds of exercises involve a preliminary negotiation in which one party invite the other to make an offer. Such an stage is called invitation to treat. Such primary negotiations are an way to r individually a stage to make an offer. It is now well settled that negotiations to enter into a contract can amount to an invitation to treat but not an offer.AcceptanceAn offer when accepted becomes contract. When the person to whom an offer is do signifies his assent thereto the offer is said t o be accepted. Thus the essence of the acceptance is the assent or consent that is coming from the offeree . It simply speaks of giving ones consent to the offer as it is made by the offeror and as such it will be a valid acceptance to convert an offer into a contract. So the acceptancemust be communicatedmust be to the original proposal made otherwise it could be a counter offertakes strength on the basis of the mood of communicating the acceptance to the offeror (in postal mode- on the date posted, in circumstance of instant or electronic mode, occurs when have gotd).Competency of the PartiesThe law does not give everyone to enter into a contract kind of prescribe certain specific qualification to attain to be competent to enter into a contract. A person to be competent to enter into a contract, must be of the age of majorityof sound mind andnot disqualified from contracting by any law which he is subject.Thus negatively, the following persons cannot enter into contractminors persons of unsound mind andpersons disqualified by any law. redundant ConsentFree consent is an essential element of a valid contract. It is natural that for an agreement all parties to it must come to a common point. There are chiefly two requirements to be a consent that the consent must given-To the same thing, andIn the same sense.So if the parties So to constitute a contract even genuine consent is not sufficient, rather the consent must be free consent according to law agree upon distinct things or in different sense then this will not be treated as consent. The term thing used in the first requirement means the contents or subject matter of agreement.On the other hand, to constitute a valid contract even mere consent is not sufficient, rather the consent must be free consent according to law. That is to say, to be a free consent, that must not be caused by, coercion, un repayable influence, fraud, misrepresentation and mistake. In other words, if consent is given being af fected by any of the above elements, the consent will not be treated by the law as free consent.ConsiderationOrdinarily consideration means mean the exchange of the price. It has different legal meaning which does not restrict it only within the area of monetary compensation rather to be consideration, law required that, something is to be done, forborne, or promised at the desire of the offeror. It may even be termed as hinderance discharged or in other sense sufferings in the sense of losing something, may be that is ones energy, service, money or anything valuable.A paragraph from the book police of Contract (10thedn, Sweet and Maxwell,1999,at p.64) Professor Treitel is worth mentioning The traditional meaning of consideration concentrates on the requirement that something of value must be given and accordingly states that What the law is concentrate with is the consideration for a promise-not the consideration for a contract. So consideration is the cause of acceptance and it Must be valuable. Something must be supplied in give way of the offer of the offeror, eg. Money.Must be lawful and non gratuitous.Must not be something already paid or incurred(past consideration)Lawful ObjectIn order to exercise a valid contract the object and consideration of a agreement must have to be lawful. The object and consideration are lawful unless-It is require by law orIs of such nature that, if permitted, it would defeat the nourishment of any law orIs fraudulent orInvolves or implies injury to any person or his property orIt is regarded as immortal or against the public policy and public welfare.Enforceability in LawAlthough an agreement may have all the essential elements, it may not be a enforceable contract because of some other issues like impossibility of performance or where the agreement unduly restrains any person in his trade. So if an agreement fails to satisfy the legal requirements of a contract then that becomes nothing but unenforceable by law which cannot turn into a contract ever rather a void agreement.(P1.1). Essential elements of the contract in a given scenarioAdam, Owner of a house offers in face to face, Brad to sell his house at a certain price. Brad, accept the offer made by Adam and stomach a portion of price for the house asked by him.This is an example of a valid contract entered into by Adam and Brad for the sale of the house. In this transaction we will find all the essential elements for the formation of a valid contract. Moreover the contract is executed in a lawful manner. Here, Adam made the Offer which Brad Accepts in his Free Consent and pay Adam a portion of the Consideration (price). Both the parties are Competent to execute a contract and their Object is not also lawful. So the contract of sale of house between Adam and Brad is Enforceable in Law.The impact of different types of contractExpressed and Implied contractIf the offer and acceptance of contract are made in words, i.e, either expressed orally or in words, it is an express one. It can be of two types, i.e. Oral and Written.On the other hand when there is no formal expression of such offer and acceptance rather it is implied from the acts or omission of the parties, it is regarded as an implied contract.Valid contractAn agreement enforceable by law is a contract and is valid. That is to say, a valid contract is that agreement which fulfils all requirements of a contract as imposed by law.Voidable contractThe voidable consideration of a contract is a temporary status which has to be made enforceable by law or has to be set aside and both these are dependant at the option of the parties at one side and not at the option of the other side. The law determines at whose option it will be validated or annulled in each particular case considering the nature of voidable contract. Thus a contract cannot remain as voidable forever rather it has to be valid or void.Void contractA contract becomes void by ceasing its enforceability by law. It is not a void ab initio. Because, law says that it has to cease its enforceability and it will be void only when it will cease that enforceability. Thus, the precondition of a void contract is the costence of a valid contract and afterwards somehow its enforceability will be ceased and then it will be treated as a void contract. There may have various grounds for ceasing the enforceability of law, e.g., supervening impossibility or illegality.Unilateral and Bilateral contractIn the case of bilateral contract each party takes on an obligation, usually by promising the other for something- as for example James promise to sell something and Ben promise to buy it. By contrast an unilateral contract is one in which only one party assumes the obligation under the contract. monetary value in contracts meaning and effect1. Express termsA. What did the parties say or write?B. Are the statements of the parties terms of the contract.2. Implied termsA. Terms implied by customsIt is w ell established that a contract may be subjected to terms that are sanctioned by the custom, whether commercial or otherwise, they have not been expressly mentioned by the parties. Precedents states that in commercial transaction extrinsic evidence of customs and usages is admissible to annex incidents in written contracts, in matters with valuate to which they are silent.B. Terms implied by statuteThe translation of usages into agreement and of agreements into statutory terms is most evident in the history of the contracts for the sale of goods. Moreover the provisions of Marine Insurance Act are another example in this regard.C. Terms implied by courtsOther terms have been judicially implied in a number of transactions. Thus in Lynch v Thorne,(1956) the Court of Appeal give judgment in favor of the defendant and held that they could not imply any term that would create an inconsistency with the express language of the bargain. Such a similar position was examined by the House of Lords in Lister v Ramford trumpery and Gold Storage Company Ltd and majority of the judge gave judgment in favor of the respondent.Excluding and limiting termsThe common law is quite familiar with the practice of inserting terms excluding and limiting liabilities by one party which would otherwise be his. This situation frequently arises where a documents purporting to express the terms of a contract is delivered to one of the parties and is not read by him. A passenger receives a slate, stating the terms or referring to the terms set out elsewhere, on which a railway is prompt to carry him or take charge for his luggage. There are different view regarding such clauses. One view describes it as a promisors obligation and the other view describe it as mere defense.P1.3 Appropriate terms for a given situationAllan, buy a ticket to go to London from Liverpool. The ticket contains terms that he can carry only 10-kilo of goods and for more than that amount he has to pay extra 5 for pe r 10-kilo. This is an example of excluding clause in the contract between him and the bus company.Requirements 22.1 Practical application of the elements of contractScenarioAccording to the given problem for this assignment, the following advice has been providedAdviceIn the light of various elements of a valid contract, John McGurks first telex is clearly an offer which Collin McCellend was to accept. The general rule is that acceptance takes effect on communication and application of this rule is embodied in the cases of Entores and Brinkibon. Considering that the telex of acceptance was sent outside working hours, when should it take effect, and considering the factors mentioned in Brinkibon- intentions of the parties and standard business practice- where should the risk lie? In assessing where should the risk lie we have take into account the fact that Collin can reasonably think that his telex would be read shortly after the lunch hour was finished and to involve John to check where there is any reply from Collin. This is relevant because in other cases on communications, the court does not entertain the involve of the parties who fail to receive message because of their own fault or default(such as it was in Entores case). If Collins telex is deemed to take effect when it is sent, a binding contract between them exist at that point and this will take priority over the contract with ford. We should then consider the position if the rule that acceptance only takes effect on communication is strictly applied. The next issue in question is the communication by the other car dealer from whom Collin learnt that the car has been sold. It is clear from Dickinson v Dodds that data from third party can amount to revocation because the message from the third party is regarded as the offeror had said it himself. However the exception of this rule is that if the consultation of information is not re apt(p) there would be no revocation and the offer would be und erstood available for acceptance. But in the present case this exception is not applicable as the source is not untrustworthy and as such Collin cannot claim John to give effect to his acceptance. However Collin is still en titled to claim damages assuming a contract was made. He could only force John to sell the car to him if court granted specific performance. As the court grant specific performance of contract only when monetary compensation is not adequate to give the plaintiff proper excuse or where there is no other remedy available. Collin can be adequately compensated by money and this could be done by allowing Collin to claim the difference between the cars price and the cost of replacement i.e. more or less 2000.2.2 Law on terms in different contractsTerms of contract can either be conditions or warranties and it vary in various contracts depending on the nature and contents of the contract. Thus terms and conditions in the contract of sale of land are different from that of sale of goods. For better understanding see Terms of Contract- Meaning and Effect part of this paper in page.2.3 Evaluation of the effect of different termsThree kinds of contractual terms have normative effect and significance relative to each others namely Conditions, Warranties and Innominate terms.Conditions These are the most importance terms of contract and have skillful consequences if smashed. An innocent party can repudiate a contract and claim damages for breach of such terms. It is not necessary to mark such term as conditions in the contract and court will consider the intentions of the parties to determine such terms. See e.g. Schuler AG v Wickman Machine Tools Sales Ltd. (1974).Such terms can also be determine by statutory provisions, (e.g. Sale of Goods Act 1979, provides that certain terms relating to title to goods and quality of goods are conditions) and by the case laws, typically standard terms in commercial contracts.Warranties It is of lesser importance t han conditions and breach of such terms empower the innocent to claim damages but not to repudiate the contract.Innominate terms It can be either conditions or warranties and breach of them can be serious or trivial depending on the particular fact and conditions. Such terms was first emerged in Hong Kong Fir Shipping Co. Ltd. v Kawasaki Ltd. (1962). See also The Mihalis Angelos case, Bunge Corp. v Tradax Export SA(1981) and The Naxos(1990). Ref.1Requirement 3TortLaw of tort the law of civil wrong but every civil wrong is not tort. For a civil wrong to be tort it must contain two conditions-The remedy is common law action for unliquidated damages andThe wrong is not only if a breach of contract, breach of trust or other merely equitable obligation.Thus Winfield defines tortuous liability arises from the breach of the duty primarily refractory by law and its breach is repressible by an action for unliquidated damages. Ref.23.1 Differences between liabilities in Tort and ContractAs to the source of interest and duty The interest in tort and its corresponding duty are created by law but in case of contract they are created by the agreement between the parties to the contract.As to the nature of duty In tort duty not to violate the interest of another person is toward persons generally, not to any particular person. In contract such duty is only towards the parties to the contract and not towards any strangers.As to nature of remedy In tort damages are always unliquidated but for breach of contract liquidated damages can be claimed where specified in the contract.Others Even where unliquidated damages are claimed the principle of liability in tort and contract differ. In contract damages are of compensatory nature except in case of contract of marriage and action by trader against his banker for dishonoring his check magic spell there is sufficient balance to his credit. In tort, on the other hand, exemplary may in certain be awarded by the court.3.2 Nature of liability in NegligenceGenerally in all torts the liability is based on intentions or negligence. An act is negligent if its consequences are neither desired nor are comfortably certain but are so probable that a reasonable man would have foreseen and avoid them. Thus, in certain cases of negligence the defendant may not have knowledge of his conduct or consequences thereof, but in many cases he has knowledge of both. It is the element of desire for consequences, which can distinguish negligence from intention. In case of intention actual or presumptive desire is always there, whereas in case of negligence there can never be desire for consequences.3.3 Vicarious liability in businessVicarious liability means the liability for the wrong committed by another person. Normally, a person is held probable for wrongs committed by him but sometimes he may be held liable for wrongs committed by other persons. Common example of such liability are liability of master for acts of his servant s, done in course of employment, liability of partners for torts committed by a fellow partners, liability of wind for acts of his performer done within the scope of authority and liability of an employer for acts of an independent contractor employed by him.Thus vicarious liability in business can be found in the business practice of agency and in partnership business. In both the cases a person who is liable for any breach of contract cannot be held liable rather the person on behalf of whom he enters into contract will be liable. Thus when there occurs any wrong or breach of any contract or any part thereof by an agent acting on behalf of and within the authority of the principal, then the principal and the agent will be held liable. The same rule applies in the case of partnership business and for the wrong of a partner the fellow partners become liable subject to certain conditions and exceptions. Thus in the case of various contracts and business dealings there arises vicari ous liability.Requirement 44.1 Applications of the elements of tort of negligence and defences in different business situationsThere are certain general conditions which must be fulfilled or satisfied before a person can be held liable for any tort. Negligence is one of such essential elements and it has significant effect in the ordinary course of various business practices. However negligence can be both, an element as well as a defense in appropriate cases of business.Negligence as elementsNegligence is the wish of application of reasoning and ordinary prudence on the part of the defendant for, that he can be held liable for any damages results from such damages. In every business practice or in other words, contract it is the duty of both the parties to act and behave in a reasonable and wise manner and perform his obligation diligently. Thus as an independent tort negligence means the infliction of damage by breach of a legal duty to take care which the defendant owed to the p laintiff. This if there occurs any breach or any party suffer loss for the negligent act and omission of the other, it will entitled the plaintiff seek relief and damages for such negligent behave.As a defense, contributory negligenceContributory negligence is a special defense to an action for negligence. When any breach, damage or accidents occurs not solely due to the negligence of the defendant but also partly due to the lack of ordinary care on the plaintiffs part, the part of the negligence of the plaintiff is called contributory negligence because it also contributes towards bringing about of the consequence. The defense of the contributory negligence will fail if there is no lack of reasonable care and attention on the plaintiffs part.However the scope of the defense was already narrowed by invention of the rule of last opportunity in Davis v Mann (1842) case. It was further limited by extension of the last opportunity rule to situations where actually the defendant was not in a position to avoid the accident but he lost the opportunity because of some of fault on his part. Thus the principal case is, British Columbia Electric Rly v Loach(1916).4.2 Applications of the elements of vicarious liability in given business situationsA, is appointed as agent for B for certain activities with the authority to enter into contract of selling As car. A enters into a contract with C for selling the car for 2500. However after the compellation of the contract it is find by A that the car has certain defects which was unknown to A and hence C claims damages.In such a situation A is not liable for the act done by him as he has acted upon and within authority of B. Here not a rather B is vicariously liable and C can sue B, not for his claim.Concluding RemarksThough sources of interest in contract and tort are different yet they may co-exist or curb in the same case. In such case interest is created by the contract as well as general law. In the realm of new(a) bus iness practices contractual obligations and its breach are so much important and in this regard to get proper remedy and appropriate its very much essential to have clear and sound knowledge on contractual obligations, liabilities along with various liabilities of tort law.