Importance of Contract Formation - Term Paper Example

 Abstract This research paper, ‘Importance of Contract Formation’, presents a clear view of what are the essential forming elements of a contract and what would be the consequences of not considering, or missing any of these elements. These elements are: Intention to create legal relationship, lawful object, agreement not expressly declared void, an offer and it’s acceptance, free Consent, legal capacity of parties to contract, lawful consideration and legal terms and formalities. The missing or not expressing any of these elements will result into making the entire contract null and void, and so not enforceable by law. Any offer, forming these elements, is legally binding. The right of the contracting parties is to get the contract fulfilled in their favor, and to perform only those acts as obligations, which are mentioned in a contract, and not more or less than that. That is how, the formation of a contract, with its essential elements, becomes very significant. Key words: contract essential breach contractual term obligation Simply defined in law, ‘a contract is an agreement or a promise, enforceable by law, which has the power and capacity to be legally binding’. It is between two or more parties. It could be oral, in writing, through electronic means, or a combination of one or more of these means of contract. Contract law is based on the principle that is expressed in the Latin phrase, ‘pacta sunt servanda’, which means, ‘agreements are to be kept’ (Wehberg, 1959). There could be many kinds of contracts such as a sales contract, a partnership contract, a mortgage contract, a rent contract or a marriage contract. Business contracts are considered to be in writing, essentially, to be legally valid. “Social contracts have long been characterized as appealing to either actual consent (e.g., Hobbes & Habermas) or Ideas (e.g., Kant & Rawls) for legitimacy. Jean-Jacques Rousseau, however, appeals to both, hence gaining the benefits of two approaches.” (Williams, 2005). Contracts have been used to shape and regularize personal and family matters also, since long. “Contract has long been used to shape and facilitate non-commercial, personal or family relations. Casebooks are replete with examples of ‘bait promises’.” (DeLong, 2009) To be enforceable by law, the formation of a contract requires some essential elements, which are as follows: 1. Intention to create a legal relationship, which mean that both or all the parties to contract must have an intention to enter into a legal relationship. This intention could be express or through conduct but it is considered better if the intention is mentioned expressly in the contract. For this purpose, an intention clause is usually added in the contract. 2. An offer and its acceptance, which must be communicated from both sides, contracting, according to the ways defined by law for the communication of offer and acceptance. The offer and its acceptance should be in clear, easily understandable and open word. The complexities and confusions should be avoided in this regard. There could be a counter offer in response of an original offer. 3. The object, for which a contract is being made, must be lawful. Nothing should be beyond or above law. The object of a contract, in no circumstances, should be illegal. 4. Consideration must also be lawful, not illegal, and must be present in a contract. Consideration is the exchange for offer. What some one or a party gives in exchange of an offer is the consideration. It may be money or articles or services as well. It also should be something permitted by law. 5. Free consent of the contracting parties is another essential element of the formation of a contract. If the parties do not show their free consent, of if any of the parties is under undue influence, coercion or any kind of pressure, or the consent is achieved through fraud or misrepresentation of facts or circumstances, or it is a mistake, at the time of the contract, then the contract is not valid. It may be void or void able in particular circumstances. 6. The next vital element for the formation of a valid contract is legal capacity of the parties to contract. This includes that the parties to contract must be legally capable to contract and should not have any legal incapacity or disability such as being minor, insane or bankrupt. 7. The agreement should not be the one that is expressly declared void by law. Above-mentioned are the fundamental elements for the formation of a contract, without which, a contract is not valid. If any one of the above elements is missing, the entire contract will be null and void and will not be legally binding. Along with the above, there are some essential terms, which must be present in a contract to let its formation be considered legally correct, and so enforceable by law. These essential terms for the formation of a legally enforceable contract are as follows: 1. The names and addresses of all contracting parties 2. Definitions and details of the terms used in the contract, according to both or all of the parties. 3. Payment provisions, such as the exact price or consideration, mode, and time of payment. 4. Description of goods or services should be very much specific, such as size, color, model and details of the offered product. 5. The time period or the term of the contract should also be clearly mentioned, and also the ways to continue further or end a contract before time. 6. Time for delivery of goods and whether it would be in parts or whole, and the means of transport for the delivery should also be mentioned. 7. Limitation of liabilities, dispute resolution, and warranties should also be present. 8. Damages in case of breach of contract must also be mentioned. 9. Attestations and signatures required according to law are also essential parts of the formation of a contract. A famous case, on the formation of a contract is Carlill vs Carbolic Smoke Ball Company, which decided that the advertisement, given by a medical company, Carbolic Smoke Ball Company, in the news paper that the damages of 100 pounds will be given to the one who used its new drug, a smoke ball, and then got the flu, is a proper offer by the company and the damages will be paid to the affected one. Lindley LJ decided, "Here is a distinct promise expressed in language which is perfectly unmistakable."(Carlill vs Carbolic Smoke Ball Company, 1893) Emphasizing on contractual terms it was explained that ‘A contractual term is “any provision forming part of a contract"’, which is an obligation and the breach of which calls forth for litigation. (Martin, 2006) The formation of a contract gives the parties to contract a right to fulfil the obligations that are mentioned in the contract only, and nothing more than that.” I shall fulfill my contract, no more nor less” (Langtry) Concluding the above, contracts could be of many kinds but all contracts must have some elements, which are essential for its formation. As mentioned above, if any of these elements is missing, the contract would be null and void. Along with this, if anywhere, these elements are present in their certain form, that would be considered a contract, and no one can deny it afterwards. The formation of a contract constitutes some rights and liabilities on the parties to contract, which have a binding force for them. The parties to contract are responsible to fulfil the terms and conditions of the contract, and they have the right to enjoy the benefits, mentioned for them in the contract, as well. That is how, the formation of a contract, is very important, as it is the base of the rights and liabilities of the parties to contract. Work Cited Carlill vs Carbolic Smoke Ball Company, (1893). 2 QB p. 256 DeLong, S. W. (2009-May 25). Contracts to Be Good: Regulating Immoral, Illegal, or Mischievous Behavior by Contract. Retrieved April 24, 2010. from http://www.allacademic.com/meta/p304129_index.html Langtry, L. (n.d.). BrainyQuote.com. Retrieved April 24, 2010, from BrainyQuote.com. Web site: http://www.brainyquote.com/quotes/quotes/l/lillielang307382.html Martin, E [ed] & Law, J [ed], Oxford Dictionary of Law, ed6 (2006, London:OUP). Wehberg, H,. (Oct., 1959). Pacta Sunt Servanda. The American Journal of International Law, Vol. 53, No. 4, p.775. Williams, D. L. (2005,April 07). Ideas and Actuality in the Social Contract: Rousseau and Kant. The Midwest Political Science Association, Palmer House Hilton, Chicago. Retrieved April 24, 2010, from http://www.allacademic.com/meta/p85653_index.html Read More