UNIT 21: ASPECTS OF CONTRACT AND BUSINESS LAW
PASS 1 & 2
Jane AKINYEBO 21107
A contract is a binding agreement between two or more businesses/people. A contract could be either written or verbal.
There are two different ways to classify contracts;
A) Broadly into:
1) Contracts by deed – A formal legal document signed, witnessed and delivered to create a legal obligation or contract.
2) A Simple Contract – Any contract which is not by deed is referred to as a simple contract, they are informal contracts which could be either written or verbal
B) Whether they are;
1) Bilateral contracts – A contract where a promise by one party is exchanged for a promise by the other. The exchange of promises is enough to render them both enforceable. Thus in a contract for the sale of goods, the buyer promises to pay the price and the seller promises to deliver the goods.
2) Unilateral contracts - A contract is one where one party promises to do something in return for an act of the other party, as opposed to a promise
In order for a contract to be legally valid, an offer by one party is accepted by the other party. There are 7 processes which are;
1. Offer -
One party must show an offer before a deal can be negotiated or agreed by the second party. An offer does not need to be made to 1 specific person. It can be made to a person, a class of people, or to the whole world.
An offer is a definite promise to be guaranteed, provided the terms of the offer are accepted. This means that there must be acceptance of precisely what has been offered. However, an offer made in response to a previous offer by the other party during negotiations for a final contract is called a counter offer.
A person can withdraw the offer that has been proposed before that offer is accepted. For withdrawal to be effective, the party who has proposed the offer must communicate to the other party that the offer has been withdrawn.
Acceptance occurs when the second party agrees with the offer by a statement or an act. Acceptance must be made clear and communicated to the first party who proposed the offer.
3. Intention to create legal relations -
Because a proposal has been made by the first party it does not mean that the contract exists, all parties involved in this agreement must intend to enter into a legally binding agreement. However the agreement does not have to be stated explicit but it would be indirected when the agreement is made. But the law says social agreements are not intended to create legal relations.
4. Consideration -
Consideration means that both parties must do something or promise to do something which they intend to be legally binding. In the majority of cases this means that one party promises to pay a price and the other party promises to supply goods or services
5. Legal Capacity –
Not everyone is entitled to enter a legally valid contract. Certain groups of people are dealt with separately, which are;
- People who have a mental impairment
- Young people –
- Bankrupts –
- Corporations –
- Prisoners –
6. Consent -
When entering into a contract the consent of each of the parties must be genuine meaning it must involve the elements of free will and proper understanding of what each of the parties is doing. The ultimate consequences of establishing that no proper consent was given to enter the contract are matters dealt with when considering remedies for breach of contract.
Proper consent may be...