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Contracts
 

What is a contract?

  • A contract is an agreement between two or more parties. Contract law has been defined as a promise or set of promises which the law will enforce.
  • A contract begins with an offer. The offer is an expression of a willingness to contract on certain terms. It allows the other party to accept the offer and provides the basis of the agreement.
  • To be effective, an offer must be communicated. This is to say that there cannot be acceptance of an offer without knowledge of it.

The law of contract is a set of rules governing the relationship, content and validity of an agreement between two or more persons (individuals, companies or other institution) regarding the sale of goods, provision of services or exchange of interests or ownership. While this is a wide definition it does not cover the full ambit of situations in which contract law will apply. The reason for this is due to the vast number of examples in which contracts can arise in everyday life.

A valid contract requires: (1) an agreement; (2) an intention to create legal relations (Balfour v Balfour); and (3) consideration (unless the Contract is made by deed). Whilst each of these three requirements receives separate treatment, they must in reality be looked at together.

nb. In business matters the intention to create legal relations is presumed (Rose Frank v Compton Brothers)

When does a contract start?

  • Contract comes into existence when it is made, that is, when there has been acceptance of the offer. If offer is conditional, contract starts when condition is met unless parties agree otherwise.
  • The acceptance can be made by words or by conduct. Acceptance occurs when the offeree’s words or conduct give rise to the objective influence that the offeree assents to the offeror’s terms.

Certainty of Terms and Vagueness

  • An enforceable contract requires certainty of terms. That is to say, for an agreement to be a contract it must be apparent what the terms of the contract are. If an important term is not settled then the agreement is not a contract.
  • If the terms require further agreement between the parties because they are uncertain then the contract is unenforceable. (Scammel v Ousten)
  • If there is no consensus ad idem (agreement on identical terms) between the parties then there is no contract for the court to interpret. It is not the role of the court to create the terms of the contract for this would be to impose a contract upon the parties.
  • In some circumstances the courts will more readily imply or infer a term, this is particularly when the parties have relied upon an agreement. It may be that the agreement provides a mechanism or machinery to establish the term.
  • There is difference between a term which is meaningless and a term which has yet to be agreed,. Where the term is meaningless it can be ignored, thus leaving the contract as a whole enforceable. (Nicolene Ltd v Simmonds)

Voidable and Illegal Contacts

When a contact is illegal it cannot be enforced by a court or tribunal. A contract that exists for an illegal purpose is void, it will not be enforced by the courts. Mistakes and misrepresentations may also make a contract voidable. Assets transferred under an illegal contract cannot normally be recovered although there are some specific exceptions.

There is a difference between a void contract and a voidable contract. A void contract is not a contract because it cannot be enforced by law. Voidable contracts are considered contracts for the will not necessarily be annulled. An agreement between persons on how to carry out an illegal act will be a void contract because neither party can go to court to enforce the contract.

Are such contracts enforceable?

A general principle exists that the court will not enforce an illegal contract, but the courts will differentiate between situations where the purpose of the contract is an illegal act and where the law has been infringed by bringing into effect the terms of a contract which may be valid at the instance of the party who was unaware of the violation or who could have caused it inadvertently.  The innocent party will not in general be affected by the illegal intentions of the guilty party. This could provide them with a remedy.

This part of the law is complex and there are a lot of rules and exceptions. If you have a specific legal problem it is recommended you seek the assistance of a solicitor

   
 

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