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Published by: proukaiya7754 on Apr 01, 2012
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What is a contract?
 A contract may be defined as an agreement enforceable by law between two or more persons to do or abstainfrom doing some acts, their intention being to create legal relations and not merely to exchange mutualpromises.
Essentials of a valid contract.
1. Agreement
. In order decide whether a contract has come into existence, it is necessary to establish thatthere has been agreement between the parties. In consequence it must in general be shown that an offer wasmade by one party( the offeror ) which was accepted by the other party (called the offeree).
2. Consideration.
English law will recognize a bargain, not a mere promise. A contract, therefore, must be atwo-sided affair, each side providing or promising to provide some consideration in exchange for what the offeris to provide.
3. Intention to create legal relations
. The law will not concern itself with purely domestic or socialarrangements. The parties must have intended their agreement to have legal consequences.
4. Form
. Certain exceptional types of agreement are only valid if made in a particular form, for e.g. in writing.
5. Definite Terms
. It must be possible for the courts to ascertain what the parties have agreed upon. If theterms are so vague as to be meaningless, the law will not recognize the agreement.
6. Legality.
The purpose of the agreement must not be illegal or contrary to public policy. For e.g. , thecourts would not allow a hired murderer to recover damages if his principal refused to pay the agreed price.
7. Capacity.
The parties must be legally capable of entering into a contract.
8. Genuineness of assent.
The agreement must have been entered into freely and involve “a meeting of minds
Some contracts (not all) must be evidenced in writing or made in a particular form e.g. Contract of Employment. A contract must be legal (i.e. it must not be tainted with illegality) and not contrary to publicpolicy. A contract can only be enforced if it is sufficiently complete and precise in terms. Some terms which the partiesdo not express may be implied and some terms which the parties do express are overridden by statutory rules.Both parties must have contractual capacity.Legal Capacity: Natural Person / Legal person or company
1. Minor2. Mental patient.3. Drunkards.4. Aliens.5. Undischarged Bankruptcy—Undischarged because a person who is bankrupt remains so for a limited periodof time.6. Corporations have contractual limitations because it is not a natural person.
Parties must have capacity to act (person having 18 + years)There must be genuineness of consent:(i)Both parties must give consent genuinely. Contract must not be affected by mistake. If so, there isneither consensus nor consent.(ii) There should be no misrepresentation ( telling untruth
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Duress i.e. situation where a person does physical or economic threats. (iv) Undue influence.
 An offer sets out the terms upon which an individual is willing to enter into a binding contractual relationshipwith another person. It is a promise to be bound on particular terms, which is capable of acceptance. Theessential factor to emphasise about an offer is that it may, through acceptance by the offeree, result in a legallyenforceable contract. The person who makes the offer is the offeror; the person who receives the offer is theofferee. An offer is an expression of willingness to contract on certain terms, made with the intention that itshall become binding as soon as it is accepted by the person to whom it is addressed.Offers, once accepted, may be legally enforced but not all statements will amount to an offer. It is important,therefore, to be able to distinguish what the law will treat as an offer from other statements which will not formthe basis of an enforceable contract. An offer must be capable of acceptance. It must therefore not be toovague (
(1941)). An offer may be addressed to :
a specific person, in which case it can only be accepted by that person;
a group of people, where it can be accepted by any member of the group;
to the world at large, such as where someone offers a reward for the return of a lost object.In
Carbolic Smoke Ball Co 
(1893) it was held that an offer could be made to the whole world and couldbe accepted and made binding through the conduct of the offeree.
Carlill v. Carbolic Smoke Ball Co
The company inserted advertisements in a number of newspapers stating that it would pay £100 toanyone who caught flu after using its smoke balls as directed for 14 days. The company further statedthat to show its sincerity in the matter it had deposited £1000 at the Alliance Bank to meet possibleclaims. Mrs Carlill bought one of the smoke balls, used it as directed but still caught flu. She claimedthe £100 reward but was refused, so she sue the company in contract.The company put forward a number of arguments in its defence:1.It claimed that it had attempted to contract with the whole world, which was clearly impossible. The Courtof Appeal held that the company made an offer to the whole world and it would be liable to anyone whocame forward and performed the required conditions.2.The company further submitted that the advertisement was in the nature of a trade “puff” and too vague tobe a contract. The court dealt with this argument by asking what ordinary members of the public wouldunderstand by the advertisement. The court took the view that the details of use were sufficiently definiteto constitute the terms of a contract and that the reference to the £1000 deposited at a bank was evidenceof an intention to be bound.3.The company also argued that the plaintiff had not provided any consideration in return for its promise.The court held that the inconvenience of using the smoke ball as directed was sufficient consideration.4.Finally, the company submitted that there was no notification of acceptance in accordance with the generalrule. The court held that in this kind of contract, which is known as a unilateral contract, acceptanceconsists of performing the requested act and notification of acceptance is not necessary.
The court concluded that Mrs Carlill was entitled to recover the £100 reward.
Note: It is important to identify when a true offer has been made because once it is accepted,the parties are bound. A particular situation may give the impression that an offer is beingmade, but yet in law this may be construed otherwise, for e.g. it may be considered as aninvitation to treat.
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This is where a person’s behaviour implies the offer. An offer can be made to a particular person, to a class(group) of persons or even to the world at large.In addition an offer should be distinguished, from the following:(i)
 A mere statement of intention 
 – Such a statement cannot form the basis of a contract even although theparty to whom it was made acts on it (
Re Fickus 
 A mere supply of information 
 – As in
(1893) where it was held that the defendant’stelegram, in which he stated a minimum price he would accept for property, was simply a statement of information, and was not an offer capable of being accepted by the plaintiff.
Offer distinguished from invitation to treat
Invitations to treat are distinct from offers in that rather than being offers to others, they are in fact invitationsto others to make offers. The person to whom the invitation to treat is made becomes the actual offeror, andthe maker of the invitation becomes the offeree. An essential consequence of this distinction is that, in line withthe ordinary rules of offer and acceptance, the person extending the invitation to treat is not bound to acceptany offers subsequently made to them.The following are examples of common situations involving invitations to treat:
1 (a). The display of goods for sale.
This is not an offer to sell but an invitation to make an offer to buy.The classic case in this area is
(1961) in which a shopkeeper was prosecuted for offering offensiveweapons for sale, by having flick-knives on display in his window. It was held that the shopkeeper was notguilty as the display in the shop window was not an offer for sale but only an invitation to treat.
Fisher v. Bell
 A shopkeeper had a flick-knife on display in his shop window. He was charged with offering for sale anoffensive weapon contrary to the provisions of the Restriction of Offensive Weapons Act 1959. Hisconviction was quashed on appeal.
The divisional Court of the QBD held that display of goods with a price ticket attached in a shop widowis an invitation to treat and not an offer to sell (The Restriction of Offensive Weapons Act 1961 waspassed soon after this case to close the loophole in the law.)1.(b)
the display of goods on the shelf of a self-service shop 
 – In this instance the exemplary case is
Pharmaceutical Society of Great Britain 
Boots Cash Chemists 
(1953). The defendants were charged withbreaking a law which provided that certain drugs could only be sold under the supervision of a qualifiedpharmacist. They had placed the drugs on open display in their self-service store and, although a qualifiedperson was stationed at the cash desk, it was alleged that the contract of sale had been formed when thecustomer removed the goods from the shelf. It was held that Boots were not guilty. The display of goods on theshelf was only an invitation to treat. In law, the customer offered to buy the goods at the cash desk where thepharmacist was stationed.
:Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd
Facts:Customers selected pharmaceutical good from self service counters, and paid later at the cash desk,where a pharmacist was in attendance with the cashier.
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