Elements of a Contract
Contract - Elements of a Contract Contract: the elements of a contract
The first step in a contract question is always to make sure that a contract actually exists. There are certain elements that must be present for a legally binding contract to be in place.
The first two are the most obvious:
So put simply, consideration is the price paid for the other’s promise.
There are four legal maxims that apply to consideration:
For Reference: Author: Deborah Smithies, August 2007
Source:http://tutor2u.net/law/notes/contract-elements.html
The first step in a contract question is always to make sure that a contract actually exists. There are certain elements that must be present for a legally binding contract to be in place.
The first two are the most obvious:
- An offer: an expression of willingness to contract on a specific set of terms, made by the offeror with the intention that, if the offer is accepted, he or she will be bound by a contract.
- Acceptance: an expression of absolute and unconditional agreement to all the terms set out in the offer. It can be oral or in writing. The acceptance must exactly mirror the original offer made.
- A counter-offer is not the same as an acceptance. A counter-offer extinguishes the original offer: you can’t make a counter-offer and then decide to accept the original offer! But…
- A request for information is not a counter-offer. If you ask the offeror for information or clarification about the offer, that doesn’t extinguish the offer; you’re still free to accept it if you want.
- Goods displayed in a shop window or on a shelf.
- When a book is placed in a shop window priced at £7.99, the bookshop owner has made an invitation to treat.
- When I pick up that book and take it to the till, I make the offer to buy the book for £7.99.
- When the person at the till takes my money, the shop accepts my offer, and a contract comes into being.
- Adverts basically work in the same way as the scenario above. Advertising something is like putting it in a shop window.
- Auctions:
- The original advertising of the auction is just an invitation to treat.
- When I make a bid, I am making an offer.
- When the hammer falls, the winning ‘offer’ has been accepted. The seller now has a legally binding contract with the winning bidder (so long as there is no reserve price that hasn’t been reached)
- Consideration: each party to the contract must receive something of value.
So put simply, consideration is the price paid for the other’s promise.
There are four legal maxims that apply to consideration:
- Consideration must move from the promisor;
- Consideration need not move to the promisee;
- Past consideration is not good consideration;
- The consideration given must be sufficient, but it need not be adequate.
- Intention to create legal relations: if my brother offers me a lift to London, and I say I’ll contribute to the cost of the petrol and then don’t, there isn’t necessarily a binding contract that he can sue me under. If the arrangement is an informal, social one, then my offer to pay for petrol probably wasn’t made with the intention of being legally bound (see the definition of ‘offer’ above).
For Reference: Author: Deborah Smithies, August 2007
Source:http://tutor2u.net/law/notes/contract-elements.html
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Breach of Contract
Breach of contract happens quite often. Two or more parties enter into a good faith arrangement and during their relationship, one or more decide(s) for whatever non-legally valid reason not to hold up their end of the bargain. A few types of breaches are minor, material, fundamental and anticipatory. Minor breaches occur when an inconsequential portion of a contract is broken. If a minor breach occurs, parties affected may still be bound to perform as they agreed according to the contract, but may be entitled to damages inflicted by the breach. An example of a minor breach would be a landscaper and homeowner entering into a contract where the homeowner wants top-of-the-line sprinklers installed. The landscaper ignores the request and installs second-tier sprinklers, which work just about as good and have the same 10-year warranty as the other system. After discovering this, the homeowner sues the landscaper to recover the difference in cost between the two systems. The breach is non-material because, in essence, the two products are the same (made from the same materials, same warranty, same performance), but still a breach occurred, because the contract stipulated the use of a specific brand.
A material breach refers to cases where one party acts in such a way that might require the other party to incur costs in an effort to rectify the situation. Using the same example as before, instead of installing the almost identical system, the contractor installs rusty, used sprinkler lines under the guise that they are top-of-the-line sprinklers. The system does not perform at all like it should and all the grass dies. Appalled by this, the homeowner takes the contractor to court for the costs associated with having the junk system removed, new sod planted and a suitable sprinkler system installed.
The above example borders on a fundamental breach of contract. Fundamental breaches are so serious, they allow victimized parties to not only sue for damages incurred, but to escape from performance. Using the same example, if the curious homeowner observed the landscaper shoving rusty old pipes into the lawn, he may consider it a fundamental breach, refuse to pay and sue for damages.
Another form of breach is an anticipatory breach. This happens when it is inevitable that a party cannot perform as they have promised, even though the nonperformance has not yet occurred. The homeowner’s bad day just got worse when he finds out that the landscaper he hired partied too hard last weekend and is in jail awaiting a bail hearing. Even though the job was set to start on Wednesday, the homeowner can safely assume the landscaper will not be able to hold up his end of the contract and may consider it a breach. The homeowner can terminate the contract and may consider taking the wayward contractor to court. Another example of anticipatory repudiation or breach occurs when the homeowner contracts with one landscaper to install the sprinkler system within a month. After two weeks of not hearing from the contractor, he pays his neighbor to install a system. Two days later, the landscaper shows up with all his supplies and workers only to find a system already installed. The landscaper may be able to sue the homeowner for breaching the contract because the homeowner made it impossible for him (the landscaper) to perform.
Source: http://blog.lawyerahead.ca/uncategorized/breach-of-contract/
A material breach refers to cases where one party acts in such a way that might require the other party to incur costs in an effort to rectify the situation. Using the same example as before, instead of installing the almost identical system, the contractor installs rusty, used sprinkler lines under the guise that they are top-of-the-line sprinklers. The system does not perform at all like it should and all the grass dies. Appalled by this, the homeowner takes the contractor to court for the costs associated with having the junk system removed, new sod planted and a suitable sprinkler system installed.
The above example borders on a fundamental breach of contract. Fundamental breaches are so serious, they allow victimized parties to not only sue for damages incurred, but to escape from performance. Using the same example, if the curious homeowner observed the landscaper shoving rusty old pipes into the lawn, he may consider it a fundamental breach, refuse to pay and sue for damages.
Another form of breach is an anticipatory breach. This happens when it is inevitable that a party cannot perform as they have promised, even though the nonperformance has not yet occurred. The homeowner’s bad day just got worse when he finds out that the landscaper he hired partied too hard last weekend and is in jail awaiting a bail hearing. Even though the job was set to start on Wednesday, the homeowner can safely assume the landscaper will not be able to hold up his end of the contract and may consider it a breach. The homeowner can terminate the contract and may consider taking the wayward contractor to court. Another example of anticipatory repudiation or breach occurs when the homeowner contracts with one landscaper to install the sprinkler system within a month. After two weeks of not hearing from the contractor, he pays his neighbor to install a system. Two days later, the landscaper shows up with all his supplies and workers only to find a system already installed. The landscaper may be able to sue the homeowner for breaching the contract because the homeowner made it impossible for him (the landscaper) to perform.
Source: http://blog.lawyerahead.ca/uncategorized/breach-of-contract/