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Charda McLarty-Williams
UNIT 21
ASPECTS OF CONTRACT
AND BUSINESS LAW
UNDERSTAND THE LEGAL REQUIREMENTS
FOR A VALID CONTRACT

Lesson Objective

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 To identify the legal criteria for offer and acceptance
in a valid contract
How do you know that a contract
is valid?

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 Main

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elements
needed for a
valid
standard
contract
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A definite promise
with the intention that it
will become binding or
legal once the offer is
accepted. Must be
accepted on the
same term as it
was made
OFFER (AGREEMENT)
Offer

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1st part of the contract – offer made by
offeror and accepted by offeree.

Offer may be to one specific person; a

group of people or the whole world.
 Offer VS Invitation to Treat

An invitation to treat is an indication that a person

is prepared to receive offers from another person.
‘Treat’ means ‘trade’ or ‘to do business’

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Offer VS Counter -Offers

Counter -Offer is an offer that invalidates the

original offer (terms of the offer may vary)
 Offer VS Invitation to Treat

For example a car could be at the car mart with sign saying for sale
£100; however it should read £10,000 but someone had removed the
zeros.

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One cannot take £100 in
and say ‘I accept your offer’,
believing there was a contract.

£100
 Offer VS Counter -Offers

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£7,000.00 for the car
BATTLE OF FORMS

 Battle of forms – where the offeror makes an offer on

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his/her own, pre-printed standard form that contains
certain terms, and the offeree accepts on his/her own
standard form which contains different conflicting terms.
 REASONS WHY THERE COULD BE
BATTLE OF THE FORMS

 Standardform contract developed by one company

can pose difficulties in business law for another
company
Business may make an offer and acceptance on
their own forms

Standard form contacts may contain terms that are

in conflict with each other
REASONS WHY THERE COULD BE
BATTLE OF THE FORMS

 Unavoidable disputes can occur when business

relies on standard forms
 Difficulty to determine whose terms has prevailed
 Due to the conflict, there may not be a valid contract

 Sometimes there may not be a valid contract at all

 Courts will therefore take the most recent counter-offer as being

accepted by the offeror (contract will be concluded on those terms).
COMMUNICATION OF OFFER

 An offer must be communicated to the other party (usually

in writing). Verbal communication will still be valid.

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 Offer must be clear

 Individual accepting the offer must know what the terms

of agreement are.

 ‘Reward case’ – offer can be made to anyone. E.g. a

reward could be offered to someone who returned a lost
dog.
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The Formal
agreement to
accept an
offer
ACCEPTANCE

 Once there is a genuine offer, the contract is formed

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when the offeree communicates his acceptance of that
offer.

 Until the acceptance has been made, the offeror can

terminate the offer.
 THE POSTAL RULE

 Postal rules
 An acceptance is valid the minute it goes in the postbox
(regardless of whether it reaches its destination).

 Revoking the offer is only valid when its received by the

offeree.

 Proof of postage will be required

ELECTRONIC COMMERCE REGULATION
(EC DIRECTIVE) 2002

 Contracts created and send by electronic means will only be

formed when the offeror has acknowledged

 The receipt of offeree’s acceptance

CASE STUDY ACTIVITIES (SEE LESSON 1 PART 2
WORKBOOK)
 1. Fisher v Bell (1961) Case Study – explain why the
shopkeeper could not be prosecuted

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 2. John vs Pete (2013) – Identify the different types of
offers in the scenarios. Explain when revocation would
be valid to cancel contract. Assess the outcome of the
situation for both parties

 3. Butler Machine Tol. Co. vs Excell-O Corporation

(1979) – explain how battle of forms may have occurred.
Assess the impact on both parties
 Suggested answer to Fisher v Bell (1961) Case Study

Fisher v Bell (1961) Case Study

why the shopkeeper could

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Why the shopkeeper could not be prosecuted?

- having them on display in his shop was not held to be an offer, it was an
invitation to treat (inviting customers to offer to purchase them) As such, he
could not be prosecuted under the Act.
 The value
attached to

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Both parties the promise
get on the
something contract
of value out
of it
CONSIDERATION
 It must be sufficient but need not be adequate
 You will get something of value but the courts do not

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consider whether or not the amount each party gave was fair.
 E.g if you sold your car for £10, both parties would have
consideration and the contract would be valid. Even though your car
may worth £1000 that is irrelevant.
 If you gave someone your car as a gift, this would not be
a contract as you had not received any consideration.
TYPES OF CONSIDERATION
 Executed consideration –an act in exchange for a
promise

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 Executory consideration – a promise yet to be fulfilled.
 This assumes that everyone is
capable of making a contract.

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Final element to enter into a valid contract

However there are groups of people who, due to their age, or

their inability to appreciate their actions, need the law’s
protection from entering into contracts which they do not
understand.
HOW TO ASSESS CAPACITY?

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Does the person have legal capacity to enter
into an agreement?

Does the person have the legal power to enter

into a contract?
 Group Activity
 
1. Research and explain how the following groups are
protected by the law by special rules if entering a contract:
•Minors (those under 18)
•The mental disordered, drunk or drugged
 

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2. Research and summarise The Contracts (Rights of Third
Parties) Act 1999
 

3. Research what is meant by the following terms:

o Memorandum of Association
o Ultra Vires
o ‘lift the corporate veil’
o Privity to a contract