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Published: Fri, 02 Feb 2018
Intention to ensure contractual obligation be performed
This act came into force on 1st September, 1872 and is called the contract act 1872. This has an intention to ensure that contractual obligation must be performed; it provides terms and conditions for the validity of the contracts but leaves the form and the conditions of contract to be mutually settled by the contracting parties.
Meaning according to the Black’ law dictionary (6th edition)
“ An agreement between two or more persons which creates an obligation to do or not to do a particular thing.”
According to Contract Act 1872 Section 2(b)
“An agreement enforceable by law is contract.”
Contract = agreement + enforceability
Essential of contract
Offer Acceptance Consideration.
A contract is an agreement, based on consensus between legal subjects with contractual capacity, which is legal, physically possible and complies with the prescribed formalities and which is reached with the intention of creating a legal obligation with resultant rights and duties.
Consensus: The parties must reach conscious agreement, with a genuine concurrent intention
Contractual capacity: The parties must be legally capable of concluding a binding contract.
Legality: The contract must be legal and may not contradict any statutory or common law rule.
Physical possibility: The performance must be determinable and possible at time of conclusion.
Formalities: The contract must abide by any formalities set by law or by the parties themselves.
In simple words a contract is made when there is an agreement with specific terms between two or more parties or entities in which there is promises to do something in return for a valuable benefit know as consideration. Since the law of contract is at the heart of the business dealings, it can involve variation on circumstances and complexities. The existence of the contract requires finding the following factual elements such as
An acceptance of that offer which results in a meeting of the minds
A promise to perform
A valuable consideration (which is in form of promise or payments in some form)
A time or event when performance must be made (meet commitments)
Terms and conditions for performance, including fulfilling promises
A business agreement is a written document signed by two or more people that contain details about the operation of business venture.
Details in Business Agreement are as follows:
The details found in a business agreement largely depend upon the type of agreement. Some items found in business agreement might be:
Hourly wage to be paid
What products will sell for?
Total cost of the job
When payments are due
The amount of time to be covered by the agreement
Work to be performed
Evaluation of work
The cost of using land or equipment that belongs to others.
How the agreement can be voided or renewed
Amount of interest to be paid
How expenses and income is to be shared
Deadline for the work
Who will provide insurance
There are many types of business agreement that we may be asked to enter into and sign at some point. In the business world most common types of agreement are confidentiality (non disclosure), service level, independent contractor, and joint venture agreements.
A non disclosure agreement is usually entered into by either two individuals or two companies who need to know certain information but need that information to remain confidential.
This can either be one sided, where only one party involved is supplying information, or mutual. The signing of the agreement, also known as a confidentiality agreement, is designed to protect both parties and by sensitive information that may be supplied to one or other of the party’s involved.
A service level agreement is not always, but most often is, legally binding. This is an agreement entered into by a customer and and provider. Essentially, the provider agrees to complete any service to a certain standard and contains common understandings of such things as warranties, responsibilities as well as the level of service. The agreement does not cover HOW that service is delivered.
An independent contractor agreement is another form of agreement that is similar in a way to a service level agreement. Again it specifies to both parties exactly what is required and expected from the independent contractor and what is not expected. Free legal forms can be downloaded from the internet and there are some good examples that will fit almost any kind of contractor agreement that one would wish to enter.
A joint venture agreement is signed between parties entering into a joint business venture. Joint venture agreements are becoming increasingly used for online business as well as more conventional businesses.
A contract has to be valid or else it will not the serve the purpose for its existence.
There is essential element that makes a contract to be valid:
They are as follows:
Proposal and Acceptance:
When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other such act is said to make a proposal.
The first step towards creating a contract is that one person shall signify or make a proposal or offer to another person, with the view to obtaining the acceptance becomes a promise.
When the person to whom the proposal is made signifies his assent thereof the proposal is said to be accepted.
Hence, a proposal becomes a promise when is accepted.
When at the desire of the promisor the promise or any other person has done or abstained from doing, or does or abstains from doing or promises to do or to abstain from doing something such act or abstinence pr promise is called a consideration for the promise.
Every has two parts
Consideration for the promise.
Consideration is the cause of the promise. It is the most essential element of the contract. As a general rule, agreement without consideration is void.
The promise for a promise in return is consideration.
3) Competent parties:
Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from ing by any law to which he is subject.
4) Free consent:
Parties to a contract must be given their consent. The parties must be ad idem, for example both the parties must agree upon the same thing in the same sense. Two or more persons are said to consent when they agree upon the same thing in the same sense. Mere consent is not enough. Consent of parties must be free, for example it must not have been obtained through coercion, undue influence, fraud, misrepresentation or mistake.
5) An agreement must not be expressly declared to be void:
A void agreement is not enforceable by law (Sec 2(g)). It has no legal sanctity. It does not give to any rights and obligations. Various agreements are expressly declared void under the Act.
6) Writing and registration:
Contract must in form of writing and registered, if so required by any law. No particular form of writing is required to constitute a contract. Intention of the parties to enter into a particular and to give effect to it must be manifest in it, in order to make it a valid contract.
7) Legal relations:
Agreements which create legal relations or are capable of creating legal relations are contracts, for example an invitation to attend a party does not create any legal relation and therefore is not a contract.
The terms of a contract should be clear. In other words, the contract must not be vague; Contracts which are vague cannot be enforced.
9) Possibility of performance:
Contracts based on impossibility of performance are not valid. The contracts must be capable of being performed.
Enforceable by law:
A contract in order to be valid must be enforceable by law which element distinguishes agreement and contract. It is enforceable by law it is contract otherwise it is an agreement. The aggrieved party should be able to obtain relief through law in the event of breach of contract. An agreement can also be inferred from correspondence exchanged between the parties.
Rules of offer and acceptance:
Treitel defines an offer as “an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed”, the “offeree”. An offer is a statement of the terms on which the offeror is willing to be bound.
The expression referred to in the definition, such as a letter, newspaper, fax, email and even conduct, as long as it communicates the basis on which the offeror is prepared to contract.
An offer should include four conditions without one of the minimum requirement of condition an offer is not seen as a offer but rather seen as an advertisement.
Rules for acceptance
There are rules while dealing with the communication of acceptance.
The acceptance must be communicated, prior to the acceptance, an offer may be withdrawn.
An exception exists in the case of unilateral contracts in which the offeror makes an offer to the world which can be accepted by some act.
An offer can only be accepted by the offeree, that is, the person to the whom the offer is made.
An offeree is not usually bound if another person accepts the offers on his behalf without his authorisation, the exception to which are found by the law of agency.
If the offer specifies a method of acceptance such as post or fax, acceptance must be by a method that is no less effective from the offeror’s point of view than the method specified.
Silence cannot be construed as acceptance
Acceptance may be inferred from conduct.
There are impacts of the new technology as mode of communication such as fax and email have become instantaneous,
The law of contract is mainly about the enforcement of promises. Not all promises are enforced by courts. To enforce a set of promises, or an agreement, courts looks for the presence of certain elements. When these elements are present a court will find that the agreement is a contract. This somewhat a artificial process.
Contract means that parties have voluntarily assumed liabilities with regard to each other. The process of agreement begins with an offer. For a contract to be formed, this offer must unconditionally accepted. Once there a valid communication of the acceptance, the law requires that certain other elements are present.
There are five basic elements to any contract:
Legality of purpose
In the given case study, There is contract enforced between David and Diana because David agreed to sell the antique vase to Diana in £400 which is to be paid by Monday.
Though Roland saw the vase but did not establish a mutual agreement with David, hence there is no contract between them.
And Sam tried to convince David to sell the vase in £400 which David did not agree to, hence there is no contract between Sam and David.
Because there was no mutual agreement that is meeting of the mind as it is a part of consideration, in that both parties agree to give up something of value that they have legal right to keep.
If Roland, Samuel and Diana were each only 14 years old there is could be no contract as they are incompetent to take their own decision as per the law.
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Each person, on entering a contract, must intend to be bound by it. This ensures that people who enter into negotiations, but never intended to be legally by them, are not trapped in a contractual arrangement.
If a person claims that they never intended to be legally by a contract the law will decide the issue on the basis of what a reasonable onlookers would understood to be the intentions of the parties. Thus if an indications and outward signs is given then you will intended to be bound in a contract but later tried to avoid the responsibilities by stating that there was no intention of getting legally bound into the contract.
The common law simplifies the issue of intention. In business contracts, it is assumed that both parties intend to be bound, where as in contracts between close friends or relations it is assumed that the parties do not intend to be legally committed.
These assumption can be reversed. There could be a contract with the friends and relation so long as you make sure that both the parties recognise that you will be bound by the contract. Whereas a business contract could be found to be invalid if it is shown that one party lacked the necessary intention.
In modern contracts intention is not often an issue but if you are entering a binding contract with a friends or relation it is as well to make it clear that it is a business relationship to avoid problems.
Under UK law, an agreement supported by consideration is not enough to create a legally binding contract, the parties also have intention to create legal relations, Often it is stated by contracting parties.
Though, it is believed that relationships do not preclude the formation of a binding contract, though to create contractual relations, there must be a clear intention on either party to be bound. Often it seems settled that in domestic agreement there is a rebuttable presumption that the parties do not have intention to create legal relations.
Since, Robert and Steve agreed on the intention to bound in a contract. Robert can go ahead and sue Steve in the court on the basis of the contract where they have even written that” either party may be sued for a breach of his obligation” and signed it.
As Steve cannot escape of liability as Robert has a proof which is signed by Steve.
The intention to create legal relations is an essential feature of Contract Law in the UK, and the existence of the intention will depend on the nature and form of the contract and the contracting parties.
“Consideration is something which is given and taken” as per section 2(d) of the Contract Act 1872.
“When at the desire of the promissory, the promise or any other person has done or abstained from doing or does or abstains from doing or promise to do or abstain from doing. Something such act or abstinence or promise is called a consideration for the promise”
Consideration is known as the price of a promise and is controversial requirement for contracts under common law. The requirement of intent by both parties to create legal relations by both the parties performs the same function as consideration would perform under common law or civil systems.
The idea behind consideration is that both parties to a contract must bring something to bargain. A party seeking to enforce a contract must show that it conferred some benefit or suffered some detriment that is recognized by law.
The following is the importance of the rules of consideration:
Meaning of valuable consideration: It has been defined as the price for which a promise is bought. Consideration itself means some right, interest, profit or benefit accruing to one party undertaken by the other. It does mean the element of exchange in a bargain, and in order to satisfy the requirement of law it must be valuable consideration i.e. something which is capable of being valued in terms of money or money’s worth.
Executory, executed and past consideration: Executed consideration is an act in return for a promise. Executory consideration is a promise given for a promise. Both executed and executory consideration is provided at the time when the promise is given, the act required as executed consideration is given subsequently. Anything which has given been done before a promise in return is past consideration.
The essential of the valid consideration are:
At the desire of the promisor
Promisee or any other person
Consideration may be past, present or future
Consideration must be real.
As Albert promised to pay £1000 extra pound to Bob if manages to fix the roof before 1st September 2008, seeing bob getting extra money John demanded the same bonus which was then reluctantly said yes too. Albert then agreed to pay Helen if he finishes the electrics early on the 23rd august 2008 so he can have some painting to be done before the auction by giving £500 extra. Ted had some spare which he used for cutting garden which he later asked Albert to pay £75 but Albert agreed to pay to him as well.
Hence, Albert is liable to pay them all as he promised and agreed to do so with Bob and John £1000, Helen £500 and Ted with £75.
Contractual term is “Any provision forming part of a contract.” Each term rise to a contractual obligation, breach of which can give rise litigation.
Status term is important as a party can only take legal action for the non fulfilment of a term as opposed to representation or mere puffs. Only statements that amount to a term create contractual obligations. They spilt into following:
Sales talk: if no reasonable person hearing this statement would take it seriously, it is a puff, and no action in contract is available if the statement proves to be wrong. It is common television commercials.
Representation: A representation is a statement of fact which does amount to a term of the contract but is one that the maker of the statement does not guarantee the truth. This gives rise to no contractual obligation but many amount to trot, for example misrepresentation.
Terms: It is similar to a representation, but the truth of the statement is guaranteed by the person who made the statement therefore giving a contractual obligation. Hence breach of contract a term may further be categorized as a condition, warranty or innominate term.
Court may take various factor into account in determining the nature of a statement which are Timing, Content of Statement, Knowledge and expertise and reduction into writing.
A term may be implied or expressed. An expressed term is stated by the parties during negotiation or written in a contractual document. Implied terms are not stated but nevertheless form a provision in a contract.
With reference to the case study where Ronald bought a van from The Van Garage Ltd believing it to be 3 years old with 30,000 miles only and with blue colour.
The Van Garage Ltd is in fault has they have misrepresented that is has given false statement of fact made to Ronald.
Misrepresentation is a contract law concept. It means a false made by one party to another party, which has the effect of including the party into the contract. If a party under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has mat constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the types of mirepresentation.
There two types of misrepresentation in contract law:
Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact makes the contract void.
Fraud in the factum focuses on whether the party in question knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of mind, and the contract is void.
Ronald has written a letter to The Van Garage Ltd explaining them that the van sold to him has been misrepresented in regards to the description and quality of it. And he has the rights to under Customers have legal protection against unfair contract terms acts as it prohibits the use of terms and limit the use of others such as:
You cannot use the standard terms in contracts restricting or excluding liability for breach of contract, providing an inadequate service, or providing goods that has been misdescribed.
Even second hand goods can be returned and asked for refund as the contract was on wrong or misleading while it was signed.
Fixing or repairing the van would not help in long term has it was not in the condition that was presented to Mr Ronald at the time of purchase. Hence he is eligible for refund as it was the misrepresentation which the contract voidable in the court of law.
As per the Sale of Goods Act, law hold your company responsible to your customer for up to Six years from the date of the purchase (in Scotland, five years from discovery of the problem). During this period, your are legally obliged to deal with any claim of breach of contract.
If Mr Ronald decides to sue The Van Garage Ltd, Ronald has to fill a small claim procedure for goods up to a maximum value of £5000. And any bad publicity is not good for the business.
As far as the document that was by Mr Ronald it invalid as per the law under the Unfair Contract Terms Act 1977 which says that as per section5 of the Unfair Contract Terms Act 1977 loss arising from defective goods cannot be excluded where goods are of a type supplied for private use or consumption.
Section6(1) Sale of Goods Act 1979 cannot be excluded
Section 6 (2) Sale o Goods Act 1979 as per the description, quality cannot be excluded against a consumer.
Under section8 substitutes the Misrepresentation Act 1967 s3 an exclusion of liability for misrepresentation must be satisfy the requirement of reasonableness.
Sometimes a party to a contract will include a term designed to exclude or limit his liability in the event of a breach of contract. Such a term might read” In the event of loss of or damage to photographs or any failure to perform the contract for any reason whatsoever, Photo Ltd is only liable up to a maximum of £50 in damages howsoever claimed”.
This could be problem if the company is the for example a big company and other is an ordinary customer like David and Janet: The parties have unequal bargaining power, so the stronger party that is Photo Ltd might be able to take advantage of the weaker party that is David and Janet.
But law does its best to level the playing field here. If Photo Ltd is trying to rely on an exemption clause, they have to show that David and Janet specifically have agreed to it at the agreement was reached.
There is also the Unfair Contract Terms Act 1977, the main provisions of which are:
Company can’t exclude liability for personal injury or death which results from your negligence.
Exemption clauses have to be reasonable. If the court thinks the term in question is unreasonable, that term may be void.
It can’t exclude liability for defective goods supplied to a consumer ( that is, a non business user)
Contracts can’t be altered unilaterally, i.e. without the agreement of the other party.
Graham, who was attending the reception but not staying at the hotel can sue the hotel if he slipped on the same piece of loose carpeting under the Unfair Contract Terms Act 1977 which suggest that a court can void the contract term which is unreasonable. The Fairytale Hotel cannot exclude liability for personal injury which is due to the result of the hotel negligence.
Tortious Liability comparing and contrasting to contractual liability:
TORT “Tortious liability arises from the breach of a duty primarily fixed by law: this duty is towards persons generally and its breach is redressible by an action for damages”
CONTRACT “Most contracts take the form of an agreement, that is to say, each party agrees to accept the promise or promises of the other in return for the promise or promises made by itself”
Both tort and contract create civil law obligations.
Breach of both give rises to an action for damages.
Civil courts have jurisdiction to hear contract and trot claims.
As a general rule contractual obligations are voluntarily undertaken but in law of Trot there is no free choice- law imposes the obligation.
A person who enters into a contractual obligation owes only a duty to the other party to the contract. In trot owe duty to everyone not use violence, not to trespass on property belonging to others, not defame them.
Generally, tortuous liability is on fault where as contractual is strict.
In trot imposed on someone who has done something should not have done or has failed to do something should have done whereas contractual liability is imposed on a person who has not done what promised to do.
In trot, it is to put claimant in the position he would have been in had the trot not happened, whereas in contractual it is the object of awarding damages if contract is to put claimant in position would have been in had contract been performed.
Liability to an occupier of premises:
The liability to visitors is covered by the Occupiers’ liability Act 1957 (deal with lawful visitors) and the Occupiers’ Liability Act 1984( deals with trespassers).
The occupier means the person in control of the land, building, premises, shop, car park and etc. The occupier might be local authority, a company, an individual or partnership.
Section (2) of the Act is quite clear, it stated “ the common duty of care is a duty to take such care as in all the circumstances of the case is reasonable to see that the visitors will be reasonably safe in using the premises for the purpose for which he is invited or permitted to be there.”
The act acknowledges that “…. an occupier must be prepared for children to be less careful that adult…..” [S2 (3)a].
Standard form contract:
According to Nayagam and Pathmavathy (2005), “ standard form construction contracts provide a basic legal framework identifying the rights, obligations and duties of the parties, establish the ambit of the powers and duties of the contract administrator.”
A standard form contract is contract between two parties that does not allow for negotiations i.e. take it or leave it. It is often a contract that is entered into entered into between unequal bargaining partners such as when an individual is given a contract by the salesperson of a multinational corporation. The customer is no position to negotiate the standard terms of such contracts and company’s representative often does not have the autonomy to do so.
Businesses often use pre-printed contracts that specify the terms of the business issuing it for example, order forms might have the standard contract terms printed on the back. If you purchase something from Amazon, the company terms are available to read, but they are not open to negotiation.
This does make commercial sense: a business can’t be expected to conduct negotiations with each of its customers and make special contract for each of them. But these standard documents are often difficult for customer to understand. They may be bound by term they don’t even exist.
Unfair Terms in Consumer Contracts Regulations 1999, which protest consumers from unfair standard terms in contracts. If court think a term is unfair, then it’s not binding on the consumer.
In this context, an “unfair” term is essentially one that puts undue burden on the consumer, or seeks to reduce statutory rights.
Strict liability makes a person responsible for the damage and loss caused by hi/her acts and omission regardless of culpability.
It is prominent in tort law (especially in product liability)
For analysis of the pros and cons of strict liability as applied to product liability, the most important strict liability can be seen in product liability.
In simple words, Strict liability makes a legal doctrine on some persons responsible for damages for their actions or products cause, regardless of any fault on their part.
In strict liability also may apply in the case of certain manufactured products. In strict product liability, who are engaged in the stream of commence of product (from manufacturer to the wholesaler to the retailer or all of them) can held responsible is the product was defective and someone was injured, but the injured person must prove the product was defective.
Defective product may be because of the bad manufacturi
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