Common Law – Taha

Business Agreement

Q1.Using decided case law, discuss whether or not John

has any contractual claim on the reward advertised by
Alina.

Ans. The problem arises two issues of whether Alina had made an offer or
was it an invitation to treat? It depends on the precise time at which each
contract in the case was formed. This in turn depends on the point at which
communication between the parties had taken effect.

John had sent a letter and sends a telex message to Alina confirming his
acceptance and asking for reward by him giving the required information. He
posts the letter on 29th April and it arrives at Alina’s house on 1st May.

Since this case appears to be a case of a “unilateral contract” we shall have

a look on what exactly does it mean.

In spite of the advertisement, this does not constitute to an invitation to treat,

it is a legal offer.

In one case, Hubbs v. Black, 1918, agreeing not to take a certain plot in a
cemetery was considered to be sufficient consideration. Giving a right to sue on
a "bona fide" claim has been deemed to be adequate consideration. Also, the
courts don't really work on the adequacy of the consideration. This is the
business of the parties and not a matter for judicial interference.

Some other notes on consideration:

• The consideration must be reciprocal, each party offering consideration.

• Motive is different from consideration. Your motive for contracting is your
personal reason for contracting. It may not coincide with the consideration
you are giving, or receiving, as part of the contract.
• If a consideration is already "spent" in a prior contract, a new contract
using that same consideration would be valid. In the words of one law
professor (The Law of Contract in Canada, G. Fridman): "where a
contractual duty already exists, it may be possible...to vary the original
agreement without necessarily establishing a whole new contract with fresh

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consideration on both sides." In fact, refreshing a commitment to do

something for a third party is consideration under common law.
• The consideration cannot be something or some act which is illegal,
immoral or contrary to public policy. If a certain act is punishable by some
law, then it is "illegal". An example would be a work contract to an unlicensed
electrician.

Dunlop Pneumatic Tyre Co V Selfridge And Co Ltd defines it as “an act of

forbearance of one party, or the promise thereof, is the price for which the
promise of the other is bought, and the promise thus given got value is
enforceable”.

An alternative and shorter definition of consideration is “some benefit to the

promisor or detriment to the promise”. It is important to note that it is
necessary for both elements in the definition to be present to support a legally
enforceable agreement.

Consideration can be divided into the following categories:

1. Executory consideration: is given where there is an exchange of promises

to do something in the future. Executory consideration means that the
consideration is in the form on an act carried out at the time the contract was
made.

2. Executed consideration: as may be gathered from the term, refers to

consideration that has actually been carried out, thus making the promise for
which it was performed enforceable.

3. Past consideration: does not actually constitute valid consideration

therefore no agreement resting on past consideration is legally unenforceable.

Taking this example of Alina and the two parties, in case of unilateral contract
where the offeror promises something in return of the offeree doing something,
the original promise only becomes enforceable when the offeree has actually
performed the required act. So basically in this case Alina is liable to give the
reward to John since he had the essential information regarding her vase.

The action requested does not have to be performed but once it is done then
the original promise becomes legally enforceable. Taking the same example of
Alina rewarding for her lost vase, the reward only becomes enforceable once
when the information has been conveyed to Alina.

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The concept of a unilateral contract is illustrated by reference to a classic

contract law case:-

Carlill v. Carbolic Smoke Ball Co Ltd. The defendant, Frederick Roe, the
proprietor of a medical preparation called “The Carbolic Smoke Ball’, placed an
advertisement in “The Pall Mall Gazette” Promising to pay $100 to anyone who
used the Carbolic Smoke Ball for two weeks and who, for a limited period
thereafter, contracted influenza. Mrs. Louise Carlill did both and sued to recover
her $100, as promised. In the High Court, the defenses of the Smoke Ball
Company, indeed most of the arguments, appear to have been about the facts
rather than the law. In commercial contract practice and litigation, or
arbitration over disputes, the facts are indeed often more complicated and
relevant to the final outcome than the law in question. In Carlill some of the
factual arguments were that the advertisement was not accurately reported.
The plaintiff had not relied on it in any case, had not used it properly, and had
never actually caught influenza and, if she did, never reported it to the
defendant.

The court found for the plaintiff. In the Court of Appeal, the Carbolic Smoke Ball
Co as appellants raised a number of legal points relevant to contract law:

(1) The advertisement was not an offer, but an invitation to treat. In other
words, there was no intention of making an offer;

(2) The advertisement was too vague to be an offer;

(3) An offer could not be made to the whole world;

(4) There was no consideration for the promise (whether the plaintiff herself
had actually bought the smoke ball);

(5) Where was the acceptance of the offer? In a bilateral contract the
acceptance is normally communicated. And that was not done here;

(6) The advertisement was a bet or wagering contract, in which case it would
be void as contrary to public policy.

The Court of Appeal rejected most of these arguments and held that there was
a contract. Consideration and acceptance could be found in Mrs. Carlill taking
and using the Smoke Ball for the full two weeks. It was only at the end of this
time that the promise became legally binding. The Smoke Ball Company’s offer

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could be revoked at any time until she had completed performance. The Court
of Appeal also dealt with the consideration point. Catching influenza was not
the consideration but a “condition” (sometimes called and “if” clause). (I will
pay you if a certain event happens, which you do not promise to bring about or
which is outside of your control.). Consideration was found in Mrs. Carlill using
the Smoke Ball. The Court of Appeal also found that there was an intention by
the parties to treat the arrangements as contractual. The deposit of money was
an important indicator of contractual intention. Carlill was the first case to
explicitly state a requirement of intention to create legal relations.

Law does not enforce every promise which is made. One way in which the court
limits the type of promise that they have to deal with is through the operation
of the doctrine of consideration. Law does not enforce gratuitous promises i.e.
promises given for no return, unless such promises are given by way of a
formal deed.

Under contract law, there is no contract if there is no consideration.

But consideration does not necessarily have to be quantified or quantifiable in

monetary terms. Any discernible detriment to one of the parties could be that
party's consideration.

Conclusion:

As per the analysis, it is quite clear that this is a similar scenario of Alina’s. The
advertisement she made was held to be a promise which was an offer to the
whole world and was capable of amounting to an offer of a unilateral contract.
John an ordinary person accepted the offer and was surely in contract with
Alina and had the right to claim for the reward advertised by Alina.
Communication of acceptance is not necessary in the case of unilateral
contract. John knew about the reward and he posted the letter on 29th April, so
he is obliged to get the reward.

Q2. Using case law, advice the parties concerned

whether a valid contract was formed and whether Phil
is liable to pay the three girls.

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Ans. The two possibilities here are:-

• That the agreement made to play at the wedding is taken as a

commercial agreement or

• That it is considered to be merely a social arrangement.

Candidates should emphasize the need to distinguish because of presumptions

regarding intent.

• Social agreement

• Commercial agreement

Supported by consideration is not enough to create a legally binding contract,

the parties must also have an intention to create legal relations. Often, the
intention to create legal relations is expressly stated by the contracting parties.
In other situations, the law will readily imply the intention, because of the
nature of the commercial dealings between the parties.

The presence of consideration is often indicative of the intention to create legal

relations, though there are situations where the presumption of the intention
can be rebutted, thus determining that there is no contract and no legal
liability.

In many domestic agreements, for example those made between husbands and
wives and parents and children, there is no intention to create legal relations
and no intention that the agreement should be subject to litigation.

Balfour v Balfour [1919]

• husband brought wife to England from Sri Lanka

• husband had to return but wife stayed for medical reasons

• he promised to pay her £30/month until his return

• when he failed to pay, she sued

• wife's action failed because

• no consideration moved from her

• no intention to create legally binding agreement found

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Court stated in husband/wife cases, burden of proof is on plaintiff to prove

intention to create legally binding agreement

But courts do sometimes find husband/wife agreements binding.

Merritt v Merritt [1970]

• husband left home to live with another woman

• agreed in writing to pay wife £40/month maintenance

• said if she used it to pay mortgage he would sign house over to her when
fully paid

• when fully paid, he refused to sign over house

Court of Appeal ruled that there was intention to create legally binding
agreement

Reasoning = agreement took place in response to marital breakdown

Simpkins v Pays [1955]

• defendant, her granddaughter and the plaintiff (paying lodger) regularly

took part in newspaper competition

• all contributed but entered in defendant's name

• No set arrangement re: payment of postage etc.

• when entry successful, defendant refused to share with plaintiff

• plaintiff sued for his share

Court ruled legally binding relationship as sufficient 'mutuality in the

arrangements between parties'

Conclusion

According to intention to create legal relationship Law as has been discussed,

if contracting parties don't consent to the creation of a legal relationship, the
contract is not enforceable.

The three students need a platform where they can show their talent and gain
the attention the public, that chance or platform provided by their uncle for

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their publicity. Asking for Dhs.3000 is not legal, that was the best opportunity
to get the breakthrough and to commercialize their talent.

Q3. Discuss various types of business agreements and

essential elements of a valid Contract.

Ans. A Business Agreement is a written document signed by two or more

people that contain details about the operation of a business venture. It is to
prevent the misunderstandings, to protect the rights of everyone, to keep the
people from being cheated, and to keep the people from going back on their
word.

The various types of details in a business agreement may vary upon the type of
agreement:-

• Hourly wage to be paid

• What products will sell for
• The number of treatments to be applied
• Total cost of the job
• When payments are due
• The amount of time to be covered by the agreement
• Who is to provide what in the business
• Work to be performed
• How work is to be evaluated
• The cost of using land or equipment that belongs to others
• Who will supply the feed, seed, fertilizers
• How the agreement can be voided or renewed
• Amount of interest to be paid
• How expenses and income are to be shared or handled
• Acreage or square feet involved
• Deadlines for completing the work
• Are there provisions for overtime?
• Who will provide insurance?

Given are five examples of business agreements.

There are a lot of different types of business agreements. Who can identify a
type of business agreement? A contract to buy a car is a business agreement. A

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promissory note to buy a riding lawnmower is a business agreement. Let’s

discuss some of the different types of business agreements.

Examples of Types of Business Agreements

Suggestions

Contracts are part of everyday life. Almost anything you buy, sell, borrow, loan,
rent, repair or trade involves a contract.
You make a contract when you use a credit card, rent something, buy
insurance, or hire someone to paint your house.
A contract is a legal agreement between two or more people. It spells out the
terms of the agreement. A contract can be oral or written. But it’s a good idea
to put a contract in writing. You do not need to use special forms or legal
language to write a contract.

Basic rules:

 Shop around before you make a decision. Make sure you are getting a
good buy or deal.
 Read the contract carefully. Make sure you understand it well before
you sign it. Ask for help if needed.
 You can make changes in the contract before you sign it. But the
other person must agree.
 Both of you should initial the changes when you sign the contract.
 Do not rely on spoken promises. Make sure everything is written into
the contract.
 Do not sign any contract until all the blanks are filled in.
 Make sure to keep a copy of the contract.
 Don’t rush into signing anything.

1. Understand the contract

You have the right to understand a contract before you are asked to sign it. If
there is something you don’t understand, ask for an explanation. If you have
doubts about a purchase, go home and think it over. Don't be pressured into
signing before you are ready. Statements that you must purchase today to get
a good deal may not be true.

2. Never sign a contract with blank spaces

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Cross out any blank spaces and any statements that do not apply to your
purchase.

3. Get all promises in writing

If the seller has promised you something, make sure that it is written on the
contract. If the seller won’t put it in writing, don't sign. Promises a salesperson
makes should be written on the contract.

4. Make changes on the contract before signing

If you want to add or delete something to the contract, do it before you sign.

5. Get an exact copy

Get an exact copy of the contract when you sign it. Don't let them tell you that
a copy will be mailed to you later.

Canceling a Contract
It can be very difficult to cancel a contract once you sign it, unless both parties
agree.
You have a right to cancel a contract in the following situations:

• The seller lied about the product or service.

• You never got the product.
• The contract, or the law, allows you to cancel it within a certain time
period.

Co-Signing a Contract

Sometimes, people without good credit may ask you to co-sign a contract so
they can buy something or get a loan.
Think twice before you co-sign for someone else. If you co-sign, you are
responsible for the entire debt. This means you will have to pay the full amount
if the other person doesn’t pay, even if you did not receive the goods or
services.
Before you co-sign for someone who is not your spouse, the business must give
you a notice that you will be responsible for paying the debt if the other person
doesn’t pay.

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If the transaction is conducted in Spanish, the contract and the notice must also
be in Spanish.
If the other person does not pay the debt, you can be sued and your wages and
property may be taken.
A creditor does not have to try to collect from the other person before going
after you. You may also have to pay late fees and collection costs.
If the debt is not paid on time, it will go on your credit report.

Contract

Ans. A contract is an exchange of promises between two or more parties to

do, or refrain from doing, an act, which resulting contract is enforceable in a
court of law. It is a binding legal agreement. That is to say, a contract is an
exchange of promises for the breach of which the law will provide a remedy.

Some of the basic elements of a contract include: an offer and an acceptance;

"capacity," or being of legal age and sound competence; "mutual assent," or
agreement on the terms of a contract; and "consideration," or compensation for
goods or services rendered.

By law, certain types of contracts must be in writing, but oral contracts are
valid in many situations. An oral contract may be held to exist even in the
absence of agreement as to all its terms. For example when applying for a bank
loan.

According to legal scholar Sir John William Salmond, a contract is "an

agreement creating and defining the obligations between two or more parties".

As a means of economic ordering, contract relies on the notion of consensual

exchange and has been extensively discussed in broader economic,
sociological and anthropological terms.

However, contract is a form of economic ordering common throughout the

world, and different rules apply in jurisdictions applying civil law (derived from
Roman law principles), Islamic law, socialist legal systems, and customary or
local law.
Most people in our society are involved in contractual agreements of some
kind. In most, if not all, aspects of law contracts can be found. Contracts are
involved in family law, corporate law, employment law, litigation and real
estate.

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The standard form contract is a standard document prepared by many large

organizations and setting out the terms on which they contract with their
customers. The individual must usually take it or leave it: he does not really
‘agree’ to it. For example, a customer has to accept his supply of electricity on
the electricity board’s terms; individuals cannot negotiate discounts.

Essential Elements of a Valid Contract

The law of contract affects every single transaction between buyers and sellers.
It is a legally binding relationship between two or more people that is
enforceable by law.

Essential Elements of a contract

1. Offer
2. Acceptance
3. Consideration
4. Intention to contract
5. Capacity to contract
6. Consent to contract
7. Legality of form
8. Legality of purpose

Offer: An offer is a proposal to give or do something and, when accepted,

there is
Said to be an agreement. It must be clear and may be implied by conduct e.g.
taking Goods to the checkout.

Acceptance: This is a positive unqualified assent to all terms of the offer e.g. a
house buyer makes an offer of price for a house and seller is happy to accept.

Consideration: This refers to whatever is exchanged between the parties.

-It must be real
-It need not be adequate
-It must be legal
E.g. the staff at the Beckham wedding signed a contract of silence in which the
Consideration was agreed at a €1. This was never paid which means a valid
contract did not exist.
Intention to Contract: The Person must want to create legal relations.
Therefore the parties signing a contract must know that they are entering a
legal agreement that cannot be broken.

Capacity to contract: This is the power of a natural person to enter into a

contract.
The following parties do not have the capacity to enter a contract.
1. Minors- people under 18 except for necessities e.g. food

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2. Persons under the influence of alcohol or illegal drugs

3. Persons of unsound mind.

Consent to Contract: A person must enter into a contract of their own free
will.
There should be no use of force or lies.

Legality of Form: This refers to the manner in which the contract is made. It
can be Oral (simple contract) or written. E.g. when buying a house a contract
must be written.

Legality of Purpose: This means that legally binding contracts can only be for
legal Transactions. E.g. a judge will not award compensation to a bank robber
whose getaway driver did not show up as agreed!!

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Reference

1) www.cpa.state.tx.us/procurement/pub/contractguide Legal Elements of a

contract

2) http://www.wholesaleforeclosures.com/Contract/encyclopedia.htm Contract

3) http://www.otto-graph.com/samples/3/contractlaw.html Contract Law

4) http://law.jrank.org/pages/12504/Contract-Law.html Contract

5) http://www.aboutsociology.com/sociology/Consideration_under_English_law
consideration

6) http://www.walter.gehr.net/freeconsent.html Free consent Free Consent

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