Elements of contract

What is a Contract?

A contract is an agreement between two or more parties that’s enforceable by law.
So as for a contract to be considered valid, there must be:
1. Offer and acceptance
2. Consideration
3. Capacity
4. Consent
5. Lawful purpose

Offer, Acceptance, Consideration

In every valid contract, offer, acceptance and consideration are vital aspects.

First: a suggestion is formed that contains all of the important and relevant terms of the contract.

Second: Another party agrees to, or accepts, the offer.

Third: After the offer is accepted, something useful (an item or service) is exchanged between the parties involved within the contract. This is called consideration.

Capacity & Consent

In every valid contract, both parties must have the power , or capacity, to know the terms and nature of the contract. Each party involved within the contract must also freely consent, or agree, to the terms within the agreement. Finally, every contract that’s negotiated in Canada must have a lawful purpose or objective; in other words, no contract can violate any law.

Types of Contracts

• An express contract may be a legal agreement during which the terms are transparent and known to all or any the parties involved (e.g. a mortgage with a bank)
• An implied contract may be a contract that’s implied, or inferred by the parties’ conduct. (e.g. at a restaurant, it’s implied that after eating dinner the customer pays the bill)
• Most contracts are under seal – a proper , written contract that is signed, witnessed, and marked with a seal.
• an easy contract may be a contract that’s not under seal (verbal, written, or implied).

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Elements of a Contract

• In an offer and acceptance, the party who initiates, or makes the offer, is understood because the offeror; the party to whom the offer is formed is known as the offeree.
• In valid contract offers, there must be serious bent on the a part of the offeror.
• The offer must also contain definite terms, or details. Some terms are clearly defined while others are implied.
• When an organization or business encourages the acquisition of a product or service through advertising, this is often asking to treat. A contract occurs when the merchandise or service has actually been purchased.

Communicating & Terminating

Part of a proposal includes communicating the proposed contract to the offeree. Common methods include communicating face to face , by mail, courier, fax, and e-mail. Communication isn’t successful unless it’s received by the offeree. An offer can be terminated, or cancelled, for various reasons.
A lapse occurs when an offer isn’t accepted within a period of time and the offer ends. An offer can also be revoked, or cancelled, by the offeror before it are often accepted.

Acceptance

Similarly, the offeree features a responsibility to obviously communicate its acceptance of the proposed agreement. Offers could also be accepted using an equivalent methods of communication (e.g. mail, courier). An acceptance must occur before a specified deadline on the offer expires. The offeree may plan to make a counteroffer, which is a new offer, or amendment to the original offer. Any counteroffer ends the original offer.

Consideration:

After an offer is accepted, something useful must be exchanged between the parties who are involved in the contract. The actual value or amount exchanged between the 2 parties (consideration) doesn’t interest the courts. A contract can appear to obviously favour one side over the opposite . A court simply wants to ascertain that there’s some degree of exchange or consideration involved in the contract.

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Capacity

A contract will only be considered valid in court if the offeror and offeree had the capacity to understand what they were agreeing to. Anyone with a developmental disability, impaired judgment, or who is under the age of majority (18 or 19 years) doesn’t have the capacity to enter into a valid contract. A minor may enter into a legitimate contract if it’s considered necessary to ensure his or her health and welfare (e.g. an employment contract).
If a contract isn’t considered to be within the minor’s best interests, it is declared void.

Consent

Generally, each party during a contract must freely agree, or consent, to the contract. An offeree must completely understand the terms of the contract.
• There are some situations that may preventconsent from occurring:
– misrepresentation
– mistake
– undue influence
– duress

Misrepresentation

• Misrepresentation is a false statement about a material incontrovertible fact that is so important that it causes the other person to enter a contract. It makes genuine consent impossible. Innocent misrepresentation occurs when an individual incorrectly believes something to be true. (e.g. a sales clerk repeats a manufacturer’s false claim a few product).
• Fraudulent misrepresentation occurs when one party tries to deceive the opposite intentionally. (e.g. a person intentionally lies about his or her car in an effort to sell it.)
• Both sorts of misrepresentation allow a buyer, or offeree, to back out of a contract.

Mistake

Certain sorts of mistakes can make a contract unenforceable by law. A common mistake occurs when miscalculation is formed by both parties within the contract. (e.g. an agreement is made to purchase a product that is out of stock indefinitely). A unilateral mistake is when one party to the contract made an error , and therefore the other party knew of it but didn’t attempt to correct it. (e.g. buying a product to use for a purpose it had been not intended for; the clerk is aware the merchandise will not work for that purpose but doesn’t say anything).
A clerical mistake is a blunder caused by a clerk or store employee. Clerical mistakes often involve numbers, like incorrect prices.

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Undue Influence & Duress

When one party applies pressure on the opposite (e.g. an aggressive salesperson) to make a contract, this is often undue influence. Any contract that’s formed with undue influence lacks proper consent and will be declared void.

Duress is similar to undue influence. When one party uses threats, such as blackmail, or violence to intimidate the other party into forming a contract, that agreement would also be cancelled.

Author: Aditya Singh,
Amity Law School, Noida/ 2nd year /B.B.A-L.L.B

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