1.

1 Explain the importance of the essential elements required for the formation of a valid
contract

Contract is very necessary in business. Because contract will ensure some problem for everyone
or every organization. First, contracts provide a description of responsibilities and bind parties to
their duties. Besides, contracts can identify a time frame for duties, Contracts can secure payment.
Especially, contracts provide recourse when the relationship falters. Therefore, any company
always need a contract in the processing of them. A contract is defined as a legally binding or valid
agreement between two parties. A contract has valid if the agreement contains all of the following
elements. First, that is offer and acceptance. It has an intention between the parties to create binding
relations. Every part has consideration to be paid for the promise made and genuine consent of the
parties. The contract include legal capacity of the parties to act and legality of the agreement. In
contract, the offeror is the person making an offer and the person to whom an offer is made is the
offeree. Offer and acceptance may be made orally or in writing, or they may be implied by the
conduct of the parties.

A contract must contain certain key elements as follows:

 Agreement
 Consideration
 Intention to create the legal relation

Agreement

Agreement is an action of agreeing between the parties to make a covenant. One party bring a firm
offer and other party will accept it. Based on the rules of offer and acceptance, if both of them are
valid, it will become a valid agreement.

For example: Yesterday, I wanted to a pen in bookstore. When I looked a pen in book case. The
cost of this pen is 5000 VND. I agreed this cost, I paid 5000 VND for seller. And seller received
5000 VND. In this case, seller is the person bring offer and I paid money for seller and received a
pen. I am the person accept. It is an agreement between us.
 Offer: The offeree is the person to whom it is addressed which, an expression of willingness to
contract on certain terms, made with the intention that it shall become binding as soon as it is
accepted the person to whom it is addressed. Offer is make at least by two parties or even more.

- The general rule for valid offer:

 Intention to create the legal relationship must be had in the offer. An offer must be such
that when accepted, it will create legal relationship among the parties.
 The offer must be certain and clear to make the other parties in contract can understand
exactly what the offeror need.
 Supply of information or statement of intent will not be considered to be an offer.

For example: Ann wants organize a party and wants buy bottle of wine so Ann go to the wine
company and buy 150 bottle of wine. In this case, Ann’s offer is not a valid offer because it is too
vague for the company know exactly what kind of wine he want.

Other example: Sam call his father. Sam say: “Daddy, I want to lend your money about 1 million
VND, the longest time that I can lend it ? And his father just say : “ You have to give back my
money in 2 months” In this case, his father just supply information about the time, it not an offer
so between them, no contract had been made.

 An offer is different from an invitation to treat. There are four types of invitation to treat:
auction sale, advertisements, exhibition of goods for sale and an invitation for tender.

For example: Although, Facebook is a social media where everyone share emotion, talk together,
etc.., it also includes some advertisements. One of them is like “this macbook with 24 million
VND”. It not an offer just an advertisement

 An offer is complete only when it is communicated to the offeree.

 The offer must not contain a term that “non-compliance of the offer would amount to
acceptance”. It means that while making the offer, the offeror can’t say that if the offer is
not accepted before a certain date, it will be presumed to have been accepted.

Acceptance: Acceptance is the unqualified agreement to the terms of the offer. Acceptance may
be by express word or by action. It may also be inferred from conduct.

- The general rule for acceptance:

  Silence is not acceptance.
 The offeror can not admit that the offeree’s silence is an acceptance in contract. No
contract can be create by the silence of the partner. And there must be some act on the
part of the offeree to indicate hic acceptance.
 Unsolicited goods: Goods which are sent or services which are rendered to a person
who did not request them are not ‘accepted’ merely because he does not return them to
sender. His silence is not acceptance of them, even if the sender includes a statement
that he is deemed to have agreed to buy and/or pay unless he rejects them: the consumer
Protection (Distance Selling) Regulation 2000. The recipient may treat them as an
unsolicited gift
 Counter offer or request information is not acceptance.
 Communication of acceptance: The generally rule is that acceptance must be
communicated to the offeror and is not effective until this has been done.
 Waiver of communication: It also mean give up communicating in acceptance.
 Prescribed mode of communication
 No mode of communication prescribed
- Other rule on acceptance: Acceptance of an offer may only be made by a person authorized
to do so this will usually be the offeree or his authorized agents

Consideration: A contract is based on an exchange of promises. Each party to a contract must be

both a promisor and a promise. They must each receive a benefit and each suffer a detriment. This
benefit or detriment is referred to as consideration.

For example: Van has an Iphone 6 plus and she need money to buy an Iphone 7 Plus. She decides
to sell it in Facebook. Khanh who is her friend and wants to buy a new phone. She also likes iphone
6 plus so Khanh decided to bought it with high cost. In this case, Iphone 6 plus is consideration
for Khanh and money is consideration for Van.

- The general rules of consideration:

 Consideration is not required. In simple contracts, consideration is provided by both
parties.
 A valid consideration may be executed or executory but it cannot be past.
  Performance of an existing obligation imposed by statute is no consideration for a
promise of reward.
 Performance of some extra service other than what is imposed will be sufficient
consideration
 Consideration need not be adequate but it must be sufficient. This means that
consideration need not be of equal value to the parties but it must be some value to
them
 Forbearance, or the promise to give up something or to stop doing something can be
adequate consideration.
 Where one party’s actions lead to the need for heightened police presence, and the
police deem this presence necessary, they may also be entitled to payment.

If there is already a contract between A and B, and B promises additional reward to A if he (A)
will perform his existing duties, there is no consideration from A to make that promise binding. A
assumes no extra obligation and B obtains no extra rights or benefits.

 If a claimant does more than perform an existing contractual duty, this may amount to
consideration.
 If A promises B a reward if B will perform his existing contract with C, there is
consideration for A’s promise since he has obtained a benefit to which he previously had
no right, and B assumes new obligations.

Intention to create the legal relation:

Each parties join in the contract, they must do what the promise. If the parties do not create legal
relation, the court will not solve any problems once any parties have some troupes because it is
not a valid contract. Legal relations can be defined as the willingness to be bound by the terms of
the contract.

For example:

Where there is no express statement as to whether or not legal relations are intended, the courts
apply one of two presumptions:
 • Social, domestic and family arrangements are not usually intended by the parties involved
to be binding

• Commercial agreements are usually intended to be legally binding.

- The general rules of intention to create legal relation:

 In social and domestic agreements the law raises a presumption that the parties do
not intend to create legal relations.
 This presumption may be rebutted by evidence to the contrary. This evidence may
consist of:
 A written agreement
 Where the parties have separated or where there is a 3rd party to the agreement

In conclusion, three element includes agreement, consideration and intention to create legal
relation that are really important for a contract, because of lacking one of them, the contract will
not be created.