The Law of Contract governs the relationship between individuals in a wide range of circumstances. Everyday actions often involve making contracts and therefore the law has simple foundations. Contract law covers everything from simple shopping to large commercial deals and case law is wide in the matters that it covers also.
Contracts are made by ordinary people in everyday situations many times a day e.g. buying a magazine, shopping, parking the car etc. Usually these events run smoothly, it is not until disputes occur that the question of a possible contract arises.
WHY DO WE NEED A LAW OF CONTRACT?
Where there is a conflict or dispute there needs to be some system to remedy the situation.
Problems may arise deliberately and dishonestly or with two honest people having different views on a situation. It is easier to ascertain what has happened if a contract is written but, often this is not the case therefore the courts have to look for an objective test of agreement.
SMITH v HUGHES (1871)
A buyer wanted “old oats” for his horse. The seller thought he wanted “new oats”. The court held (based on the evidence of intention) that the two parties had agreed a sale (“reasonable man”)
ARE ALL PROMISES ENFORCED BY LAW?
Many domestic and social arrangements between friends and family are not legally enforceable, as there is no intention for them to be legally binding. Also, the court will make sure both parties have given something for the contract to be enforceable.
THE FORM OF A CONTRACT
Apart form a few exceptions e.g. land, a contract may take any form (oral or written etc.)
THE BASIS OF CONTRACT LAW
The main aim is to ensure agreements are made in a fair way and are “fair and reasonable”.
There is case law and statute to govern contract law. Much recent contract legislation is in place to protect the consumer e.g. Sale of Goods Act 1979 (as amended) and Unfair Terms in Consumer Contracts Regulations 1994. Contract law works by limiting obligations people may impose on themselves and others.
FELTHOUSE v BINDLEY (1862)
An uncle proposed to buy his nephews horse saying that if he didn’t hear otherwise, he would assume the horse was his. It was held this could not amount to a contract without some communication from the nephew. Obligations CANNOT be imposed on another party.
FORMATION OF A CONTRACT
IS THERE AGREEMENT?
There must be “consensus ad idem” (meeting of minds) for there to be a contract. This is often difficult to prove however because evidence is required.
Through case law a pattern has evolved of finding evidence of agreement and it is by requiring parties to have communicated in some way (offer and acceptance).
THE BENEFIT OBTAINED OR “BARGAINED”
Offer and acceptance are not the only requirements for a valid contract because otherwise the law may end up enforcing “one-sided” promises e.g. I’ll give you a present of £20 next week.
The law will however enforce agreements if each party has contributed in a recognisable way e.g. £20 for a football ticket (consideration).
THE INTENTION TO BE BOUND BY THE AGREEMENT
Differentiation must be made between parties intending to be bound to create legal relations and those which are not e.g. If I offer to buy my friend a sandwich if she pays for my drink we obviously don’t intend for it to be legally enforceable in the courts.
If a child in a playground offers to sell one of his toys then it is not normally legally enforceable as normally only adults (over the age of 18) are said to have the capacity to contract.
The courts need some evidence of agreement between parties and external evidence of this can be seen in two aspects offer and acceptance. This handout will examine offer.
An offer is “An expression of willingness to...
Please join StudyMode to read the full document