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Common Law Assignment 1

CASE STUDY “BUSINESS AGREEMENT”

Q1. In relation to the above scenario discuss the nature of Ali’s advertisement with
regards to rules of offer and invitation to treat.

Ans) Offer and acceptance analysis is a traditional approach in contract law used to
determine whether an agreement exists between two parties. As a contract is an
agreement, an offer is an indication by one person (the "offerer") to another (the
"offeree") of the offeror's willingness to enter into a contract on certain terms without
further negotiations. A contract is said to come into existence when acceptance of an
offer (agreement to the terms in it) has been communicated to the offerer by the
offeree.
The offer and acceptance formula, developed in the 19th century, identifies a moment
of formation when the parties are of one mind. This classical approach to contract
formation has been weakened by developments in the law of estoppel, misleading
conduct, misrepresentation and unjust enrichment

The "mirror image rule" states that if you are to accept an offer, you must accept an
offer exactly, without modifications; if you change the offer in any way, this is a
counter-offer that kills the original offer. However, a mere request for information is
not a counter-offer. It may be possible to draft an enquiry such that it adds to the terms
of the contract while keeping the original offer alive.

Unilateral contract

The contract in Carlill v. Carbolic Smoke Ball Co was of a kind known as a unilateral
contract, one in which the offeree accepts the offer by performing his or her side of the
bargain. It can be contrasted with a bilateral contract, where there is an exchange of
promises between two parties. In Australian Woollen Mills Pty Ltd v. The
Commonwealth (1954), the High Court of Australia held that, for a unilateral contract
to arise, the promise must be made "in return for" the doing of the act. The court
distinguished between a unilateral contract and a conditional gift. The case is
generally seen to demonstrate the connection between the requirements of offer and
acceptance, consideration and intention to create legal relations.

Bilateral Contract

A bilateral contract is distinguishable from a unilateral contract, a promise made by


one party in exchange for the performance of some act by the other party. The party to
a unilateral contract whose performance is sought is not obligated to act, but if he or
she does, the party that made the promise is bound to comply with the terms of the

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agreement. In a bilateral contract both parties are bound by their exchange of


promises.

Postal acceptance rule

As a rule of convenience, if the offer is accepted by post, the contract comes into
existence at the moment that the acceptance was posted (Adams v. Lindsell (1818) 106
ER 250). This rule only applies when, impliedly or explicitly, the parties have in
contemplation post as a means of acceptance. It excludes contracts involving land,
letters incorrectly addressed and instantaneous modes of communication.

Invitations to treat

An invitation to treat is not an offer, but an indication of a person's willingness to


negotiate a contract. In Harvey v. Facey, an indication by the owner of property that he or
she might be interested in selling at a certain price, for example, has been regarded as an
invitation to treat. Similarly in Gibson v Manchester City Council the words "may be
prepared to sell" were held to be a notification of price and therefore not a distinct offer.
The courts have tended to take a consistent approach to the identification of invitations to
treat, as compared with offer and acceptance, in common transactions. The display of
goods for sale, whether in a shop window or on the shelves of a self-service store, is
ordinarily treated as an invitation to treat (Fisher v. Bell) and not an offer. The holding of
a public auction will also usually be regarded as an invitation to treat.

Now in relation with the case the nature of Ali’s advertisement is not an invitation to
treat but a serious offer as mentioned in his advertisement. Ali runs a business selling
computers which is his commercial business and places an advertisement in the
newspaper which sates- ‘Once in a lifetime opportunity: a Bell Supreme; pounds 500
cash. This is a serious offer – the Bell Supreme will go to the first person who accepts
it on Saturday – valid for one day only’.

The Advertisement clearly states that it is a serious offer and whoever accepts the offer
first in morning gets the Bell Supreme. The advertisement abides all the terms and
condition of an offer. Thus it cannot be taken as an invitation to treat.

We shall now see Ali’s deals with different parties:

 In case of Bob

When Bob saw this advert in the newspaper he immediately posted a letter of
acceptance. But according to Ali’s advert postal rules does not apply in the
advertisement and hence the conditions of the advertisement are not met.
Thus there is no agreement between them.

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 In case of Cindy

As per the advertisement Cindy was the first person to be there on Saturday morning
but she offered Ali a cheque whereas his Advertisement clearly stated that he wanted
to sell the Bell Supreme for 500 cash. Thus he rejected the offer from her.
Hence so far Ali has no legal agreements with anyone.

 In case of Den

Later during the day Den comes in and offers Ali a counter offer to keep the offer
open until Monday. Ali accepts the offer and as a gesture of his intent Den offers Ali
pounds 50 which legally now makes Den the owner of the Bell Supreme.
Ali hence now has a legal agreement with Den as money as well has been exchanged
between them.

 In case of Eva

Later when Eva offered to pay Ali pound 600 cash; Ali as well accepted her offer and
decided to sell the computer to her.
Thus now there is a legal agreement between Ali and Eva as well.

Therefore Ali now has legal agreement with two parties; Den and Eva.

Q2. According to the rules of acceptance, signify when the agreement has been
constituted and who are the parties in agreement if any (offerer and accepter).

Ans) Acceptance is a final and unqualified expression of assent to the terms of an


offer. It is no defense to an action based on a contract for the defendant to claim that
he never intended to be bound by the agreement if under all the circumstances it is
shown at trial that his conduct was such that it communicated to the other party or
parties that the defendant had in fact agreed. Signing of a contract is one way a party
may show his assent. Alternatively, an offer consisting of a promise to pay someone if
the latter performs certain acts which the latter would not otherwise do (such as paint
a house) may be accepted by the requested conduct instead of a promise to do the act.
The performance of the requested act indicates objectively the party's assent to the
terms of the offer.

Communication of acceptance

There are several rules dealing with the communication of acceptance:

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• The acceptance must be communicated: Depending on the construction of the


contract, the acceptance may not have to come until the notification of the
performance of the conditions in the offer as in Carlill's case, but nonetheless
the acceptance must be communicated. Prior to acceptance, an offer may be
withdrawn.
• An offer can only be accepted by the offeree, that is, the person to whom the
offer is made.
• An offeree is not bound if another person accepts the offer on his behalf
without his authorization.
• It may be implied from the construction of the contract that the offerer has
dispensed with the requirement of communication of acceptance.
• If the offer specifies a method of acceptance (such as by post or fax), you must
accept it using a method that is no less effective than the method specified.
• Silence cannot be construed as acceptance

Now in Regards with the rule of acceptance to Ali’s advertisement:

Den and Eva were the two parties with whom Ali has a legal agreement of acceptance.
Den offers Ali a counter offer and Ali accepts it. So in Den’s case Den is the offerer
and Ali is the acceptor. As promised and agreed by both the parties; Den pays an
advance of pound 50 and Ali accepts it agreeing to keep the offer going till Monday
morning.

Even is Eva’s Case Eva is the Offerer and Ali is the acceptor. This is because Eva
offers Ali pound 600 cash and he accepts her offer. Therefore there is a legal
acceptance between them.

Q3. What is the implication of rules of consideration and intention with regards to
Ali’s conduct with all the parties?

Ans) Consideration is one of the three main building blocks of a contract in English
contract law. Consideration can be anything of value (such as an item or service),
which each party to a legally-binding contract must agree to exchange if the contract
is to be valid. If only one party offers consideration, the agreement is not legally a
binding contract. In its traditional form, consideration is expressed as the requirement
that in order for parties to be able to enforce a promise, they must have given
something for it. Something must be given or promised in exchange or return for the
promise. A contract must be "met with" or "supported by" consideration to be
enforceable; also, only a person who has provided consideration can enforce a
contract. In other words, if an arrangement consists of a promise which is not
supported by consideration, then the arrangement is not a legally enforceable contract.
Mutual promises constitute consideration for each other. ("I promise you to do X, in
consideration for which promise you promise me to do Y").

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Consideration for a particular promise exists where some right, interest, profit or
benefit accrues (or will accrue) to the promisor as a direct result of some forbearance,
detriment, loss or responsibility that has been given, suffered or undertaken by the
promisee. The consideration must be executory or executed, but not past.

Consideration is executory when a promise to do something in the future is given in


exchange for another promise to be done in the future. Consideration is executed when
a promise is actually executed, in exchange for another promise to be executed in the
future. Consideration is past when a promise has been given or executed before and
independently of the other promise. For example, I promised to take you to lunch, and
then when we got there I said "you must pay, because I have given you the benefit of
my company" This is past consideration and therefore NO consideration.

RULES OF CONSIDERATION:

• CONSIDERATION MUST NOT BE PAST

If one party voluntarily performs an act, and the other party then makes a promise, the
consideration for the promise is said to be in the past. The rule is that past
consideration is no consideration, so it is not valid and cannot be used to sue on a
contract. For example, A gives B a lift home in his car. On arrival B promises to give
A £5 towards the petrol. A cannot enforce this promise as his consideration, giving B a
lift, is past.

• CONSIDERATION MUST BE SUFFICIENT BUT NEED NOT BE


ADEQUATE

Providing consideration has some value, the courts will not investigate its adequacy.
Where consideration is recognized by the law as having some value, it is described as
"real" or "sufficient" consideration. The courts will not investigate contracts to see if
the parties have got equal value.

For consideration to be good consideration, it must be of some value, even if it is


minimal value. There is no requirement that the consideration be commensurate in
economic terms to the original promise.

Nominal consideration will suffice as good consideration for a contract; Courts will
not measure the adequacy of the consideration as it is up to the parties to decide the
subjective worth of each promise.

Thus consideration can come in any forms, a hawk, a horse or a robe. Even a
peppercorn would be sufficient.

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• CONSIDERATION MUST MOVE FROM THE PROMISEE

The person who wishes to enforce the contract must show that they provided
consideration; it is not enough to show that someone else provided consideration. The
promisee must show that consideration "moved from" (i.e. was provided by) him. The
consideration does not have to move to the promisor. If there are three parties
involved, problems may arise.

• FOREBEARANCE TO SUE

If one person has a valid claim against another (in contract or tort) but promises to
forbear from enforcing it, that will constitute valid consideration if made in return for
a promise by the other to settle the claim.

• EXISTING PUBLIC DUTY

If someone is under a public duty to do a particular task, then agreeing to do that task
is not sufficient consideration for a contract.
If someone exceeds their public duty, then this may be valid consideration.

• EXISTING CONTRACTUAL DUTY

If someone promises to do something they are already bound to do under a contract


that is not valid consideration.

The principle set out in Stilk v Myrick was amended by the following case. Now, if
the performance of an existing contractual duty confers a practical benefit on the other
party this can constitute valid consideration.

• EXISTING CONTRACTUAL DUTY OWED TO A THIRD PARTY

If a party promises to do something for a second party, but is already bound by a


contract to do this for a third party, this is good consideration.

In regards with Ali’s advertisement; both parties are under executory consideration.

The advertisement clearly shows that Ali had the intentions of creating a legal contract
and was not doing anything for social means. The intention of the advertisement was
and is valid as Ali was in the business of selling computers.

According to the situations mentioned above; the only people Ali had legal
agreements are with Den and Eva.

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Den – As agreed by both the parties Den comes in on Monday morning and asks Ali to
give him the Bell Supreme for which he had paid advance. But Ali refuses to give the
computer to him and then Den is forced to buy a computer from some other shop for
pound 800 which was pound 300 more than Ali’s offer.

Now in this case Den can sue Ali and demand for the difference he had to pay; as he
had already paid him pounds 50 as an offer of acceptance and had accepted to buy the
computer before Eva offered to buy it. Only if Den had come late according to the
promise made by him then the agreement could be dissolved by Ali.

Eva – Eva as well wanted to buy the Bell Supreme and hence offered pound 100 more
for the computer. Ali’s intention was to gain pound 100 more and so he accepted her
offer and gave her an extension to pay until Monday afternoon. But then later on
Monday afternoon Eva called Ali and refused to buy the Bell Supreme.

Now in this case Ali can sue Eva because due to her offer he did not sell the computer
to Den. And in the end could never sell the computer to either of them.

But Ali could sue Eva if Den does not come into picture. If he comes then Ali is the
one who will be in trouble because legally the Bell Supreme no more belonged to him
and it belonged to Den as he had paid pound 50 to Ali as a sign of commitment of
buying it on Monday morning.

Q4. Describe the rules regarding capacity of the parties?

Ans) Capacity of Parties

The legal ability of people or organizations to enter into a valid contract is known as
Capacity of the parties. Person entering into a contract will have full, limited, or no
capacity to contract.

Full capacity to contract:

The unlimited ability of a person to enter into a contract that is legally binding. Most
adults, including those who are illiterate, have full capacity to contract and are said to
be competent parties.

Limited capacity to contract:

The ability of a person to enter into a contract that is legally binding upon himself or
herself only under certain circumstances. For example, minors have limited ability to
contract, which means that the contract of a minor is valid only if the minor does not
disaffirm a contract entered into during his or her minority or shortly after reaching

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majority. Contracts made by minors to obtain such necessities as food, clothing, and
shelter, however, are not voidable by the minor and will be enforced against him or
her.

No capacity to contract:

The inability of a person to enter into a valid contract under any circumstances. Such
inability can arise when a person has been adjudicated insane or if he or she is an
officer of a corporation who is not authorized to execute a contract on behalf of the
corporation. Lack of capacity would also cover acts of a corporation beyond the
powers as defined in the articles of incorporation.

As per this case, there are special laws in regards with minors. But in this case none of
the parties are minors nor mentally disordered or drugged hence the rules do not apply
on any of these parties and the contract is very much legal.

Q5. Discuss the various types of business agreements and essentials for a Valid
Contract.

Ans) The various types of business agreements are as follows:-

Commercial Contracts

A commercial contract refers to a legally binding agreement between parties in which


they are obligated to do or not do certain things. Contracts may be written or verbal
and drawn up in a formal or informal way. Most businesses create contracts in writing
to make the terms of agreement clear, often seeking legal counsel when drawing
important contracts. Contracts may encompass all aspects of a business, including
hiring, wages, employee safety, leases and loans.

Consumer Contracts

The traditional English approach to contracts has been severely curtailed in the area of
consumer contracts due to the influence of the EU. Starting with the Consumer Credit
Act 1974 and progressing through the Unfair Terms in Consumer Contracts
Regulations 1999, the position in respect of consumer contracts is almost the opposite
to commercial contracts. Courts are taking an increasingly consumer protectionist
approach and will interfere in almost any contract which has resulted in unfair liability
on the consumer. Key areas to watch out for include:
• Consumer Credit. If you are offering any products on credit, it is essential that
all consumer credit laws are complied with. Even advertising consumer credit
deals in store or online requires compliance with detailed rules.

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• Unfair Contract Terms. The regime under the Unfair Terms in Consumer
Contract Regulations 1999 is weighted heavily in favor of the consumer. There
are detailed guidelines as to what is and is not an unfair term and any unfair
terms are deemed void. Special care should be taken when contracts are made
on your standard terms of business.
• Cooling Off periods. The cooling off period is a concept with which English
businesses have to become increasingly familiar. Consumer Credit agreements
and agreements affected by the Distance Selling Regulations carry prescribed
cooling off periods in most circumstances. This allows the consumer to cancel
the contract without incurring any liability for a statutory period – usually 7
days after it is signed.
• Jurisdiction. Although a jurisdiction clause is advisable in a commercial
contract, it is unlikely that this will help you in a consumer contract. The
primary jurisdictional rule is that if you are suing a consumer, you bring the
claim to them in the country of their residence. This can be altered by express
agreement however in practice such an agreement is unlikely

Construction contracts

Formal agreement for construction, alteration, or repair of buildings or structures


(bridges, dams, facilities, roads, tanks, etc.). A construction contract is distinct from a
contract to assemble, fabricate, or manufacture.

Sale and purchase Agreements (SAP)

Sale and purchase agreement is a legal contract that obligates a buyer to buy and a
seller to sell a product or service. Sale and Purchase Agreement are found in all types
of businesses but are most often associated with real estate deals as a way of finalizing
the interests of both parties before closing the deal. Sales and purchase agreements are
also found in the upper supply chains of many large, publicly-traded companies. They
are set up to help both the suppliers and the purchasers forecast demand and costs, and
become increasingly important as the size of the deals increases.

Conveyancing transactions

In law, conveyancing is the transfer of title of property from one person to another, or
the granting of an encumbrance such as a mortgage or a lien.

The term conveyancing may also be used in the context of the movement of bulk
commodities or other products such as water, sewerage, electricity, or gas.

A typical conveyancing transaction contains two major landmarks: the exchange of


contracts (whereby equitable title passes) and completion (whereby legal title passes).

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Conveyancing occurs in three stages: before contract, before completion and after
completion.

A buyer of real property must ensure that he or she obtains a good and marketable
'title' to the land; i.e., that the seller is the owner, has the right to sell the property, and
there is no factor which would impede a mortgage or re-sale.

A system of conveyancing is usually designed to ensure that the buyer secures title to
the land together with all the rights that run with the land, and is notified of any
restrictions in advance of purchase. In most mature jurisdictions, conveyancing is
facilitated by a system of land registration which is designed to encourage reliance on
public records and assure purchasers of land that they are taking good title.

Agency Agreement

An agency agreement is a legal contract creating a fiduciary relationship whereby the


first party ("the principal") agrees that the actions of a second party ("the agent") binds
the principal to later agreements made by the agent as if the principal had himself
personally made the later agreements. The power of the agent to bind the principal is
usually legally referred to as authority. Agency created via an agreement may be a
form of implied authority, such as when a person gives their credit card to a close
relative; the cardholder may be required to pay for purchases made by the relative
with their credit card.

An example of Agency Agreement:

An example of the existence of an agency agreement at issue in a 2006 court case


arose when a tennis tournament sponsor sued Venus and Serena Williams for not
participating. The sponsor argued that their father, Richard Williams, had committed
to their participation in the tournament. The Williams sisters argued that their father
did not have the authority to bind them to such an agreement. If their father did
commit the sisters to play, the issue for the court to decide is whether a valid agency
agreement existed between the Williams sisters and their father. If not, then they likely
were not bound to his agreement under the law of agency.

ESSENTIALS OF A LEGAL CONTRACT

The law of contract is part of the common law. It has not been codified into a written
Act of Parliament in any part of Australia so far. It is interesting to note that contract
law has, in fact, been codified and enacted as the Contract Act in India. However, the
Commonwealth Parliament and each of the State and Territory Parliaments have
passed laws modifying the basic common law. Examples of Acts passed are the
Commonwealth Trade Practices law and various State Acts such as the Sale of Goods
Act, Fair Trading Act and consumer protection Acts.

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A contract is basically an agreement. There are six essentials to the formation of a


valid contract. These are:

1. Intention to create legal relations.

2. Offer and acceptance.

3. Consideration.

4. Legal capacity.

5. Consent.

6. Legality of objects.

We shall take a brief look at each of these.

Intention to create legal relations

There can be no contract unless the parties intend to create legal relations. Domestic
arrangements, such as who will do the washing- up etc, are excluded because the
parties have no intention of creating legal relations.

Offer and acceptance

This means that one party must make an offer and the other party must accept that
offer. There are some interesting things to note here. It has been decided that a
supermarket is not making an offer by displaying its goods. The customer, in fact,
makes the offer to the supermarket at the check-out. An offer will lapse if you make a
counter- offer. However, a mere enquiry as to whether the other party would accept
different terms will not cause the original offer to lapse. Another interesting fact is that
a postal offer is accepted once you post the letter of acceptance. In such a case, a valid
contract will be formed even before the other party knows that you have accepted his
offer! Often these days, when you buy a shrink-wrapped product, you will find a
notice on the outside of the packet stating that breaking the shrink-wrap constitutes
acceptance of the seller's offer and all the conditions that go with it.

The terms of a contract must be communicated to a person before he accepts them.


After the contract has been made, one party cannot unilaterally impose additional
terms. For instance, if your company runs a car-park and you do not want to accept
liability for damage to vehicles parked on your yard, you must tell the motorist the
conditions of parking before he parks his car and not later, after there has been an
accident.

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Consideration

"Consideration" is the second half of the bargain. If I offer to sell you a motorcar for
$30,000, then the $30,000 is the "consideration". It is often the price paid. It is
important to note that consideration does not have to be adequate to form a binding
contract. A contract to sell a diamond ring for $1 is a valid and legally binding
contract. A mere promise is not legally binding. For example, if I promise to repair
your car for free, there is no contract as I do get anything for promising to do the
repairs. There is no consideration.

However, there is one big exception to this rule. If the promise is made in a written
document called a "deed", then the promise to do something for free is legally
binding. A "deed" is a document that is witnessed and says at its end that it is "signed,
sealed and delivered". It is interesting to note that a mere promise is legally binding in
systems of law that derive from Roman law. These are all continental European
systems such as German, French, Italian, Spanish etc. A few English-speaking
countries have systems derived from Roman law. These include Scotland, South
Africa, Zimbabwe, Sri Lanka, and Louisiana.

Legal capacity

Persons under the age of 18 years are liable only on contracts for "necessities".
Necessities would include food, clothing, housing, medical attention etc. These days,
it would also probably include a car for getting to and from work. With other types of
contracts i.e. for non- necessities, a minor either will not be bound at all or he can
repudiate the contract when he reaches the age of 18. If a bankrupt obtains credit for
more than $500, he must disclose the fact that he is a bankrupt.

Consent

There must be genuine consent to the contract. Often there will not be genuine consent
if one person is under a misapprehension as to certain fundamental facts. For instance,
if I sign a document thinking that the document is an ordinary letter when it is in fact a
Will, then the Will not be validly signed. Or suppose I contract to buy a specific
veteran motor-car from someone. However, unknown to both the seller and me, the
car had caught fire and had been destroyed. There will be no valid contract in such a
case. Or if I am induced to enter into a contract by the fraud of another, I do not have
to carry out my side of the bargain if I do not want to. Or suppose that I am threatened
with force into signing a contract, and then there will be no valid contract.

Legality of objects

Contracts to commit crimes or to engage in immoral acts are void. Contracts of


gambling are void.

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Also, contracts in restraint of trade are void if they are too wide. For instance, I sell
my business of civil engineering contractor to John. To prevent me starting up in
business again and competing with him, John insists that a clause be included in the
sale agreement stipulating that I will never again engage in the business of civil
engineering contracting. This agreement would be void. If John had insisted on a
clause that I would not engage in civil engineering contracting within a radius of 10
kilometers and for a period of three years afterwards, then that agreement would
probably be valid and enforceable. The restriction must do no more that protect the
goodwill of the business that John bought. Anything beyond that will be
unenforceable.

It is important to note that, as a general principle, contracts may be validly formed by


word of mouth as well as by writing. The popular conception that writing is necessary
to form a valid contract is erroneous. Take for instance contracts of employment. The
popular myth is that some employees have contracts and some do not. The truth is that
every employee is employed under a contract of employment. Most contracts of
employment are by word-of-mouth and are valid contracts. However, the law does
require some contracts to be in writing. Some of the more important contracts required
to be in writing are 1) sale of land and property, 2) sale of goods having a value of
more than $20 (in some States only), 3) a lease for a period of more than three years,
4) transfer of shares in a company, 5) a contract of guarantee. When a written contract
is being drawn up, it is very important that all the terms of the contract be included. It
is usually very difficult later to rely on any oral terms that are not included in the
written contract.

In general, you may assign a benefit under a contract to someone else without the
consent of the opposite party to the contract. Also, in general, you may not assign your
liability under a contract without the consent of your opposite number. For example, if
I am owed a debt of $100 by John, I can assign that debt to Tom without the consent
of John. On the other hand, if I owe John $100, I cannot assign my liability to Tom to
pay the $100 without the consent of John.

It is most important that you read every word of a contract and understand every word
before signing. In general, you will be bound by the written terms of a contract that
you have signed. This will be so even though you had not read them.

In most States, the right to sue under a contract lapses after six years. In other words,
you must commence legal action within six years of the breach of contract. An
aggrieved party can recover compensation for breach of contract. The compensation to
be recovered is the foreseeable loss arising from the breach. The Court can also issue a
decree of specific performance when appropriate. This is usually only done when the
contract is for the sale of land and the seller is refusing to go through with the sale. In
such a case, the Court can order the seller to transfer the land.

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VOID, VOIDABLE AND UNENFORCEABLE CONTRACTS

A void contract is one that is entirely destitute of legal effect.

A voidable contract is one that is capable of being affirmed or rejected at the option of
one of the parties, but which is binding on the other.

An unenforceable contract is one that is valid, but incapable of being sued upon or
proved.

Certain requisites are essential, and, if they are absent, the contract is said to be void.
By this it is meant that it has no legal effect whatever. Clearly, in such a case, there is
no contract at all, and it is a misuse of terms to speak of it as such. A transaction or
agreement cannot be void and be called a contract, so it is more accurate to say that
the transaction or agreement is void.

Examples are agreement with minor, agreements without consideration, agreements


which are in restraint of trade or marriage or of legal proceedings, wagering
agreement.

A voidable contract is not destitute of legal effect, but may be valid and binding. It is a
contract that is capable of being affirmed or rejected at the option of one of the parties.
It is binding if he chooses to affirm it, and is of no effect if he chooses to reject it. The
other party has no say in the matter.

It will seem, at first thought, that certain agreements said to be void are not so in fact.
For instance, as we shall see, an agreement may be void on the ground of mistake, or,
in a few cases, because of the infancy of one of the parties; but, if the mistake or
infancy is not pleaded in the action to enforce it, the parties will be held bound. Such
an agreement, however, is just as void as an agreement to do something which the law
forbids. The cause of nullity is latent, but this does not alter the character of the
transaction. It is void if the defendant chooses to prove it so.

If the defendant in these cases may, at his option, avoid the contract, or let it stand,
there would seem to be a certain unreality in the distinction between void and voidable
agreements; but this is not so in fact. In case of voidable agreements there is a
contract, though it is marked by a flaw; and the party who has the option may affirm it
in spite of the flaw. Where, however, an agreement is void, it falls to the ground as
soon as its nullity becomes apparent. It is incapable of affirmance. Another distinction
is in the fact that in case of voidable contracts innocent third persons, acting in good
faith, may acquire rights there under, and thereby cut off the right to avoid it; but no
such rights can be acquired where the transaction is void.

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A contract which is unenforceable cannot be set aside at the option of one of the
parties to it. The obstacles to its enforcement do not touch the existence of the
contract, but only set difficulties in the way of action being brought or proof given.
The contract is valid, but because of these obstacles it cannot be enforced.

POINTS TO REMEMBER WHILE SIGNING A CONTRACT

The following should be done and kept in mind before signing a contract:-

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 are rarely true.

Never sign a contract with blank spaces

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

Get all promises in writing

Promises a salesperson makes should be written on the contract.


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.

Make changes on the contract before signing

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

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.

These five points should be kept clearly in mind while signing a contract for anyone
and for anything.

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Common Law Assignment 1

REFERENCES

I have used the following references to complete my assignment successfully:-

 http://en.wikipedia.org/wiki/Consideration_under_English_law

 http://chestofbooks.com/business/law/Handbook-Law-Of-Contracts/Chapter-
VI-Capacity-Of-Parties.html

 http://members.iinet.net.au/~patrick6/kiss37.html

 http://en.wikipedia.org/wiki/Offer_and_acceptance

 http://dca.lacounty.gov/tsContractSigning.html

 Common Law (course book)

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