A. The Concept of a Contract

Date: 2015-10-07; view: 468.

A contract is an agreement which legally binds the parties. Sometimes the contracts are referred to as “enforceable agreements”. This is rather misleading since one party cannot usually force the other to fulfill its part of the bargain. The usual remedy is damages. The underlying theory is that a contract is the outcome of “consenting minds”, each party being free to accept or reject the terms of the other.

The essential elements of a contract are:

That an agreement is made as a result of an offer and acceptance.

The agreement contains an element of value known as consideration, although a gratuitous promise is binding if it is made by deed.

The parties intend to create legal relations.

The validity of a contract may also be affected by the following factors.

Capacity. Some persons, e.g. children have limited capacity to make contracts.

Form. Most contracts can be made verbally (parole contracts), but others must be by deed, i.e. in writing. Some verbal contracts must be supported by written evidence.

Content. The parties may generally agree any terms, although they must be reasonably precise and complete. In addition some terms will be implied by courts, custom or statute and some express terms may be overridden by statute.

Genuine consent. Misrepresentation, mistake, duress and undue influence may invalidate a contract.

Illegality. A contract will be void if it is illegal or contrary to public policy.