Key Elements of a Binding Contract - Essay Example

February 26, Tort law Key elements of a binding contract A contract is an agreement between two parties with the aim of creating legal obligations. Contracts can be void, voidable, or valid and only valid contracts can be enforced under laws of contracts. A contract must satisfy specific elements in order to bind parties to it. One of the elements of a binding contract is existence of an offer, a proposal by one party to another, indicating willingness to establish a legal relationship and to be bound by terms of the proposal should the other party accept the proposal. A proposal must further meet criteria in order to qualify as a valid offer. One of the requirements of offer is the offeror’s intention to be bound by the made proposal and elements of seriousness are necessary. Terms of the proposal must also be definite to the involved parties and the court must be able to ascertain the terms. In addition, the proposal must be communicated to the target party in order to constitute an offer. Another essential element of a contract is acceptance of the offer and this must be consistent with terms of offer and within a reasonable period. Offer and acceptance constitute an agreement (Miller and Jentz 2010, p. 208- 218). Another element of a valid contract is existence of consideration for the offered benefits. Consideration must be a valuable object, recognized by law, and can be present or be a promise to be executed in future. Parties to a contract must also have legal contractual capacity such as majority age, sound mind, and freedom from intoxicants. In addition, the subject matter of the contract must be legal, not contrary to any existing law or repugnant to natural justice or humanity (Miller and Cross 2012, p. 189- 190). Advice to Murray & Co Facts Annabel Constructions Ltd. builds residential flats. In one of its ventures, it entered into agreements with clients to complete and deliver apartments to the clients. The agreement stipulated date of delivery and included a penalty clause for any delay on delivery. Annabel contracted different suppliers for deliveries and completion of its apartments and Murray & Co. won the contract for supply and fixing of double-glazed windows. The company had however under quoted its bid, realized its inability to complete the work, and communicated this to Annabel before Annabel agreed to pay additional £ 20000 for completing the work in time. Murray the completed the work within the original schedule but Annabel Constructions refused to pay the additional £ 20000 as had been agreed between the parties. Issue The issue to be determined is whether the promised £ 20000 constituted consideration to the contract to amount to breach by Annabel. Rule A breach of contract exists if a valid contract existed but one of the parties to the contract fails to execute a responsibility, subject to agreement in the contract. Such elements as agreement between the parties, consideration that could be future, legality of subject matter, and contractual capacity of the parties must have existed. Consideration is one of the elements of a valid contract and is governed by a number of rules (Adams 2012, p. 80- 105). While the general rule provides that consideration must support an offer and that consideration must be of some value, the value being necessary but not sufficient, some offered value in exchange for e promise do not qualify as consideration. Some acts from offers are particularly not regarded to attract consideration and an example is an agreement to pay for an act that a person is already entitles to. This means that once terms are set in an agreement and consideration established, any promise to make additional payments for performance is not a consideration to the contract and can therefore not be enforced under the contract (McKendrick 2012, p. 166). The case of Stilk v. Myrick (1809) explains this. In the case, a party agree to work in a voyage for a daily consideration. Two of the co-workers absconded duty and the captain promised to increase the daily wages of the remaining workers, from wages of the workers who left, should the remaining workers perform their duty throughout the voyage. The seaman performed his role throughout the voyage but was not granted the additional payment. It was held that the original agreement bounded the seaman throughout the voyage and the ct could not attract consideration. In another case, Hartley v. Ponsonby (1857), half of the members deserted work and the remaining ones were promised, in writing, additional payments for complete performance. The courts held that the agreement was voluntary for both parties and the condition after departure of some of the workers changed the terms of the agreement and held for validity of consideration (Abbot, Pendlebury and Wardman 2007, p. 107, 108). Application The case identifies an agreement between the parties and Murray & Co.’s inability to perform the contract. Failure to perform the contract would amount to breach and this means that Annabel Constructions was entitles to services that Murray was supposed to offer. Precedent set by the case of Stilk v. Myrick (1809) therefore means that the promise by Annabel Constructions did not amount to considerations and Murray & Co. cannot pursue it. Decision in the case of Hartley v. Ponsonby further supports invalidity of the promise as consideration because there were no changes in terms of performance for Murray & Co. Further, the promise o pay the additional £ 20000 was not at Annabel Constructions’ free will but was coerced by the potential loss that the company would suffer had it failed to deliver premises to its clients. Conclusion and advice Even though a contract existed between Annabel Constructions Ltd. and Murray & Co., the promise to pay additional £ 20000 did not amount to consideration. Murray & Co can therefore not succeed in a legal suit against Annabel. Murray & Co. should therefore seek a casual agreement with Annabel or forego the promise. Reference list Abbot, K Pendlebury, N and Wardman, K 2007, Business law, Cengage Learning, Mason. Adams, A 2012, Law for business students, Pearson Education, Limited, Upper Saddle River. McKendrick, E 2012, Contract law: Text and cases, and materials, Oxford University Press, Oxford. Miller, R and Cross, F 2012, Business law, Alternate edition: Texts and summarized cases, Cengage Learning, Mason. Miller, R and Jentz, G 2010, Business law today: The essentials, Cengage Learning, Mason. Read More