Elements that Make a Contract to Be Valid - Case Study Example

Law of Contract: A Contract can be defined as a legal binding obligation created under an agreement between two or more persons that is enforceable by law. Under this case, Alan must understand fully what a contract entails and must consider all the elements required. There are several elements that make a contract to be valid and this includes the following; there must be an offer and an acceptance, there must be an intention to create legal relations, the contract must be under deed or consideration, there must be a contractual capacity, a genuine consent which must not be obtained from mistake, fraud, duress and unconscionability and lastly the contract must be lawful. Generally, for a contract to exist and to be valid more weight is directed to the intention of creating legal relationship by all parties involved.1 Under this case of Bob versus Alan, it is evident that both parties have an intention to create a legal relationship between them. So we can say that it is enforceable contract, because of both Bob and Alan intention to create this legal relationship. Also there is an element of consideration whereby there is a price agreed upon of ₤725. It is also evident that both Alan and Bob had the contractual capacity to contract, for example, we find that Bob had a child, meaning that he had attained age of majority and that he was free to enter into contract without duress. Also both parties agreed to contract because when Alan approached Bob to purchase the item he was not forced to do so by Bob. The aspect of the nature of business being undertaken is lawful and therefore Bob and Alan were not involved in any illegal business. In this case of Bob versus Alan we can explicitly conclude that the major element of contract in question is that of offer and acceptance. There was evidenced of an offer being made by Bob through an advert in the Wormskirk Evening Gazette that read as follows; ‘Utopian Penny Red stamp, one only, ₤750 or nearest offer’. According to the rules of offer, an offer can be made to the public or to a specific person, but it cannot shape the foundation of a contract until it has been accepted by an established individual. In this case of Bob versus Alan it was immaterial to whom the offer was directed to. Such offers made through advertisement can be accepted by anyone just by acting upon them and in this case Alan responded to the advert and acted upon it. Another rule of offer is that an offer can be made orally, in writing or by conduct. Usually the person making the offer is called an offeror while the person to whom the offer is made is referred to as the offeree. Under this case of Bob and Alan, the offer was made through writing that is through an advert, however Bob made an offer orally to Alan by quoting him the price he was willing to part with the item and thus the offeror being Bob and the offeree was Alan.2 Also Alan should understand the rule of offer that it must always reflect giving rise to lawful penalties if accepted. So Alan was entitled to follow any legal procedures because Bob terminated his acceptance of the offer before Saturday as they had agreed with Alan. There is also another rule of offer that the stipulations of an offer should always be definite and free from any ambiguity in turn of phrase. This is best explained in the case below; Guthing versus Lynn, 1831 L, bought a horse from G, and offered to pay another 5 dollars for the horse if it proved lucky to him. It was held that the term ‘lucky’ was too vague to form the basis of a legally enforceable agreement. Under the case of Bob versus Alan in relation to that case is that the terms of the offer was clear and not vague in anyway and therefore it formed the basis of the contract that was created by the two parties. Another rule of offer is that it must be communicated to the concerned parties. A contract only is created when the two parties involved engage themselves in activities that no one feels that he is aggrieved by the other party. In this case both Bob and Alan communicated and they agreed on the terms of their contract. There is also another rule of offer which provides that the offeror cannot obligate the offeree devoid of his assent. Bob had sought the consent of Alan before Saturday if he could afford ₤725 or he sells the item to somebody else. Alan responded by placing a new offer of ₤700 but he later accepts to pay ₤725 on Thursday when he sent a message to Bob. If Bob had seen the message before his child deleted then he could bind Alan if he fails to pay as agreed upon in their contract.3 An offer can be accepted by an individual to whom it is specifically meant for; save for an offer prepared to the public can be accepted by anybody. An offer can either be accepted verbally, in script or by behavior and the approval should be communicated. The approval should be communicated to the offeror in such a way he approved it and the approval must also be completed within the time frame set by the offeror, and in cases where no such time is indicated, it should be within a realistic time considering the nature of transaction being carried out. Otherwise the acceptance will be deemed to be ineffective. Under the case of Bob versus Alan, Alan communicated his acceptance to Bob by sending the message to him although he did not see it, and he was able to beat the deadline of Saturday that Bob had set to be the last time that Alan should communicate his acceptance of 725 pounds. Unlike the offer, acceptance once made cannot be revoked. The moment a person expresses his acceptance of an offer, that very moment the contract is repudiated, and it does not matter whether the contract is made orally or through writing. However, a counter offer brings to an end the initial offer. According to the rules of offer, the original offer cannot be revitalized by someone to whom it was originally made even if he is ready to accept the original offer completely. Also rejection of the offer by the offeree is like counter offer because it will terminates the contract. This is best explained in the case below; Hyde v Wrench, 1840 W offered in writing to sell his farm to H for ₤1,000. H made a counter-offer of ₤950. W refused to accept the counter-offer. H then by letter agreed to pay ₤1000 which W refused to accept. H sued for specific performance. It was held that there was no contract, and specific performance could not be granted.4 Under the case of Bob versus Alan it is evident that Alan made a counter offer of ₤700 pounds which Bob refused to accept it and instead told him that he was only willing to give the item away with ₤725. So we can argue that the contract ceased to be in place immediately when Alan proposed a new consideration for the price. But he can sue for damages only if Bob received the acceptance by Alan that he sent in form of message to him. He can argue it out that he met the deadline of Saturday by sending the message on Thursday accepting the offer of ₤725. Before suing Bob, Alan should consider the letter sent by Bob withdrawing the order. Such letter indicates revocation of the offer that he has placed to Bob because he was not aware of his message that he had accepted the offer. Indeed Bob adhered to the rule of revocation by telling Alan that he had withdrawn his offer. It is also evident that Alan received the withdrawal letter on Friday morning before Bob had received his confirmation letter of his acceptance. We can therefore conclude that Alan’s acceptance letter was overtaken by events and that he is likely to lose if he sues Bob for any damages caused to him.5 However, Alan should also emphasize the importance of commercial agreements. This means that Alan can argue that Bob breach the contract selling the item to another person that is Cedric. So if Alan seeks damages in the court of law, he can prove that there was an intention to create legal relationship when he approached Bob to sell him the item. For a contract to exist, the parties can agree verbally or through writing, and through the conduct of parties involved. It is obvious that there were no written agreements but oral agreements existed as it is clear from the conversation of both Alan and Bob. Commercial agreements which are related to that of Bob and Alan can be explicitly explained in the case of below; Rose and Frank versus Crompton, 1925 The plaintiffs entered into an agreement with the defendants, whereby the plaintiffs were appointed sole agents for the sale of papers in U.S.A. The contract was for a period of three years, but the defendants terminated it without notice before expiration of the agreed period. The plaintiff sued for breach of contract. The original agreement contained a clause that, ‘This agreement is not entered into as a formal legal agreement, and shall not be subject to the legal jurisdiction in the law courts’. It was held that the agreement was not binding on the parties. For Alan to seek damages caused to him by Bob by selling the Utopian Penny Red Stamp, he should critically consider the rule of Equitable Estoppel. This law stipulates that where an individual makes pledge to another person by which he plans to achieve legal relations between them, and the promisee acts upon it, the court will treat the promise, even if it is not backed up by consideration, as obligatory on the promisor to the level that he will not be permitted to act contradictorily with it. This can be best explained in the case below;6 Central London Property Trust Ltd v High Trees house Ltd, 1947 The plaintiff leased a block of flats to High Trees House at an annual rent of ₤2,500. Owing to car conditions, the lessees were contemplating terminating the lease, so the lessors (Plaintiffs) offered to accept a reduced rent of ₤1,250 per annum. The resulting agreement was not supported by any fresh consideration, and operated from 1939 to 1945, all the flats were fully let and the plaintiffs then claimed the full rent for the last five years and for the future. The plaintiffs based their claim that the agreement to accept a reduced rent was void since it was made without consideration. The Court of Appeal held that the plaintiff’s promise to accept a reduced rent was biding and the action failed. Lord Denning held that it would be inequitable to allow the plaintiff to go on their former promise because, strength of this promise, the High trees house reduced the rent to their tenants as well. However, the court also held that the plaintiff could at any time demand the full rent again for the future tenancy, as they had received no consideration for their promise to reduce rent.7 So the defense of Equitable Estoppel to be raised by Alan is that he must prove that there existed an original agreement between him and Bob who was the promisor in this case. Conclusion: Before Alan takes the step of suing Bob, he should conclusively way his options and particularly the essentials element to a contract. It is evident that there was breach of contract between Bob and Alan but Alan should seek damages only associated with Bob selling the item before Saturday as agreed upon earlier. (1,997) References: Emanuel, S. L. (2004): Fundamental of Business Law, 4th Edition, New York, Educational Publishers pg 45-67 Gifford.K (1980) Legal Profession Law & Practice in Victoria Law Book Co, Sydney pg 34-37 Hudson. A. 2003. Equity & Trusts, 3rd edition. Cavendish London pg 23-34 Jertz, A. and Miller L. R, (2004): Fundamentals of Business Law, 3rd Edition, New York, Macmillan Publisher pg 70-79 Kam F, (1998) “The Legal Nature of the Unit Trust” Clarendon Press pg 64-76 Lawler, J. (1940.) “A short historical introduction to the law of real property.” Chicago: Foundation Press pg 20-24 Neuner, R & Carl O. (1992) Unpatentable Subject Matter, Law Journal. New York. pg 55-56 Penrose, R (2005): Road to Reality: A Complete Guide to the Laws of the Universe, New York, Longman Publisher pg 125-132 Sharswood, G. (1883) “Leading cases in the law of real property decided in the American Courts” M, Murphy: 89, Philadelphia. Pg 49-67 Read More