Essential Features of a Contract - Literature review Example

Law of Contract Your name Course name Course instructor Date of Submission Essential features of a contract A contract refers to a voluntary, deliberate, and lawfully binding agreement between two or more competent parties. Normally, contracts are written though they might be spoken or implied, and usually have to do with employment, sale, or tenancy. In order to form a legally binding contract, the following elements ought to be present; (i) an offer, (ii) acceptance of the offer, and (iii) valid- lawful and valuable- consideration as discussed below. Rights and duties relative to the rights and duties of the other parties are acquired by each party to a contract. Nevertheless, even though all parties expect a fair benefit from the contract, it doesn’t mean that each party will benefit to an equal extent (Koffman & Macdonald, 2010, p6). Existence of contractual-relationship doesn’t essentially imply that the contract is enforceable, or that it is not void, or voidable. Even though a written contract protects all concerned parties to enforce it, contracts are usually enforceable whether in a written form or not. In order for some contracts to be legally binding and enforceable, they ought to be in writing. Other contracts whether or not the involved parties desired to enter into a contract, are assumed in, and enforced by law. According to Koffman & Macdonald ( 2010, p29), our entire economy is in regard to the freedom of people to contract and a system of laws that enforces contracts entered into freely. However, quite a number of individuals don’t know essential elements that are needed to make a legally binding contract. Even some don’t know if a contract that is not in writing is binding or not. We are used to observing contracts in writing hence numerous people think assume that a contract ought to be in a written form before it is enforced (Koffman & Macdonald, 2010, p66). Koffman & Macdonald (2010, p104) asserts that agreement is necessary to any contract. There ought to be a consensus ad idem- there ought to be a meeting of minds before there can be a contract. The two parties entering into a contract must agree on the basic terms of the contract. There ought to be an intention to enter into a legally binding contract. An objective standard determines whether the parties have reached an agreement. A determining factor will not be what each party believes the other to be agreeing to (Koffman & Macdonald, 2010, p189). Instead, it would be an objective witness, acting reasonably; looking at all of the facts pertinent to the question concludes that parties had come to an agreement on the necessary terms of the contract with the aim to develop a legally binding relationship. Hence, there will be a contract between the parties if that is the case. An agreement can be obtained in the simplest of words or conduct (Koffman & Macdonald, 2010, p247). For instance, the contract for the construction of the Queen Elizabeth- one of the largest liners during its days- was contained in a letter form the builder consisting words to the effect “We concur to construct the Queen Elizabeth for 5,000,000 pounds (Koffman & Macdonald, 2010, p263).” There are no certain words that ought to be used by the parties in order to form a contract. Nevertheless, there must be an offer from one side and acceptance of the offer by the person or party to whom the offer was made. There can be no consensus ad idem or meeting of the minds which is necessary to form a contract in the absence of an offer and acceptance (Koffman & Macdonald, 2010, p299). An offer simply refers to a statement or other indication that the person is ready to enter into a contract with another on specific terms. The offer ought to be expressed in a manner capable of acceptance without anything further needed of the individual receiving the offer other than to point out acceptance. It ought to be apparent that the individual making the offer is ready to be bound by the terms suppose the offer is accepted (Koffman & Macdonald, 2010, p321). For instance, if I make a statement to you “I will cut your lawn for $5”, this is an offer which will form a contract on acceptance. According to Koffman & Macdonald (2010, p345), the offer is supposed to be more than just an invitation to treat. This means that it is not supposed to express merely a general intention to enter into a contract and inviting an offer in keeping with the universal intention. Exhibition of the merchandize at a store with a price tag is the good illustration. The exhibition of the merchandize does not comprise an offer waiting for a client to walk in and accept the offer. Instead, it is an invitation to treat the owner of the store. The offer is made when the client presents the merchandize to the cashier and tenders the amount of price (Koffman & Macdonald, 2010, p371). The merchandize is free to accept the offer and sell the item at this point. For instance, a mischief maker has switched price tags so that the latest CD by the hottest jazz sensation is priced at $5. The store is not bound to sell the CD to you for this price when you take this to the check-out counter. In law, the store owner is entitled perfectly to say that the item is mislabeled and will not be sold at that price. On the other, acceptance refers simply to some indication by the individual receiving the offer that the offer is accepted. The acceptance ought to be clear and complete and without conditions attached. The objective witness is supposed to be able to determine that the offer has been accepted. For instance, in response to my offer to cut the lawn, your response such as “That sounds like a great deal” is not acceptance (Koffman & Macdonald, 2010, p374). Therefore, there will be no contract if I proceed to cut the lawn as a result. Nevertheless, if you say words to the effect such as “we have a deal” or “I accept”, then there is a binding contract. I will therefore have an enforceable contract under which I could collect the $5 if I then cut the lawn. Koffman & Macdonald (2010, p382) asserts that the acceptance ought to be made before the offer has expired. Nearly all offers consist of a time limit within which the offer can be accepted. An offer cannot be accepted once it has expired unless it is renewed by the individual making it. It is required by the law that the offer should be left open for acceptance for a reasonable period of time if there is not time limit by which the offer ought to be accepted. Reasonable period of time will be in regard to the particular circumstances of each case. The offer is supposed to be accepted before it is withdrawn. Unless one of the offer’s terms is that it will remain open for acceptance until a specified time, an offer can be withdrawn before acceptance (Koffman & Macdonald, 2010, p397). On occasion, the term that the law would inflict a term on the parties to keep the offer open for acceptance for a reasonable period of time can be the circumstances of the dealings between the parties. The terms of the offer cannot be changed and no conditions can be attached to the acceptance. The parties will be simply negotiating and may eventually reach agreement on the terms of the contract if conditions are attached or terms are changed. For instance, there will be no contract if your response is that you will pay me $5 to cut the lawn but next month I should cut the lawn again for the same price. Instead, you have made a counter offer of which I am free to accept or reject. Similarly, the acceptance can’t be conditional on some other events. The contract comprises a bargain. Acceptance of the offer is the bargain that has been struck by the parties- an exchange of a promise for a promise or act has been made (Koffman & Macdonald, 2010, p402). The contract is made binding by this consideration. Consideration refers to some benefit or advantage to the individual making the offer and an equivalent cost or prejudice to the individual accepting the offer. The parties alone can judge whether or not it is a good bargain and hence it is left to the parties to determine whether or not the consideration is enough. It is only required by the law that there should be enough consideration; something of value ought to be given. The consideration can’t be something given or promised in the past (Koffman & Macdonald, 2010, p412). The consideration is supposed to be a new promise or some fresh benefit exchanged for the offer in order to be valid. This is subject to courts declining to enforce an alleged contract where the consideration is not enough as to raise doubt of fraud or to make the contract unconscionable. Generally, parties have a valid and binding contract as long as the basic elements of an offer and acceptance with consideration are present. Apart from in certain special situations such as sale of land, there is no requirement that the contract be in writing. The problem is that it may prove difficult and in some cases impossible to determine accurately the terms of the contract if there in fact is a contract if the verbal exchanges of the parties are to be relied upon (Koffman & Macdonald, 2010, p432). The court cannot enforce the alleged contract if it cannot with reasonable certainty determine the terms that the parties have agreed to. It is therefore due to this fact that it is wiser to have a contract in writing even though writing itself is not assurance that the alleged contract is clear and precise. Factors affecting validity of a contract As said earlier, a contract refers to a legally enforceable agreement, whereby the parties to a contract make certain promises that are enforceable in a court of law. The elements to a contract ought to be established in order to become a valid contract. Furthermore, the parties to a contract ought to have the capacity to enter into a contract (Koffman & Macdonald, 2010, p5). Hence factors that may affect validity of a contract include: Consideration In addition to offer and acceptance, consideration ought to be present in order to make the contract legally enforceable. Consideration refers to the exchange of promises between both parties to a contract (Koffman & Macdonald, 2010, p6). Meeting of the Minds There ought to be a meeting of the minds between the parties to a contract or a mutual comprehension of the essential terms of the contract. If there has been mistake or misunderstanding as to an assumption which the contract is made, a contract may be voidable by either party. Other factor which may affect legality of an otherwise valid contract comprise of physical or emotional duress by either party- the decision of the other party is influenced improperly by the other party- and when either party misrepresents necessary terms of the contract (Koffman & Macdonald, 2010, 321). In a court of law, illegal contracts are unenforceable. A contract may be illegal according to its performance or formation. A contract that calls for acts that are criminal or against a state’s public policy is considered generally to be illegal and unenforceable. Hence, neither party may look for legal remedies to enforce the contract. Bibliography Koffman, L, and Macdonald, E, 2010, The law of Contract, Oxford University: Oxford University Press. Read More