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This document discusses the key elements required for the formation of a valid and enforceable contract: agreement (offer and acceptance), intention to create legal relations, and consideration. It provides examples of offers versus invitations to treat, how an offer can be terminated, what constitutes a valid acceptance, and the different types of consideration (executory, executed, past consideration). The key elements and examples are explained over multiple pages in detail.
This document discusses the key elements required for the formation of a valid and enforceable contract: agreement (offer and acceptance), intention to create legal relations, and consideration. It provides examples of offers versus invitations to treat, how an offer can be terminated, what constitutes a valid acceptance, and the different types of consideration (executory, executed, past consideration). The key elements and examples are explained over multiple pages in detail.
This document discusses the key elements required for the formation of a valid and enforceable contract: agreement (offer and acceptance), intention to create legal relations, and consideration. It provides examples of offers versus invitations to treat, how an offer can be terminated, what constitutes a valid acceptance, and the different types of consideration (executory, executed, past consideration). The key elements and examples are explained over multiple pages in detail.
Enforceable Contract Agreement (Offer + Acceptance) Intention to Create Legal Relations Consideration Must not be illegal or contrary to public policy 2 Business Law-NG-07/10 - Week 6 (A) Offer & Invitations to Treat An offer is an expression of willingness to contract made with the intention that it shall become binding on the offeror as soon as it is accepted by the offeree. A genuine offer is different from what is known as an "invitation to treat", i.e. where a party is merely inviting offers, which he is then free to accept or reject. It is not an offer because there is no intention to be legally bound. The following are examples of invitations to treat: There are 4 categories of invitations to treat - advertisements in a newspaper - display of goods on a shelf - auction sales - invitations to tender 3 Business Law-NG-07/10 - Week 6 Invitations to Treat Advertisements As a general rule, an advertisement in a newspaper is not an offer. It is an attempt to induce offers. This general rule is displaced where the advertiser by his word or conduct shows a clear intention to be bound, as is often the case in the unilateral contract. Display of Goods on a Shelf A store owner who displays goods on a shelf with the price attached does not make an offer. He is merely inviting the public to make an offer to buy the goods at the price stated. 4 Business Law-NG-07/10 - Week 6 Invitations to Treat Auction Sale The general rule is that in an auction sale, when the auctioneer invites bids, this is not an offer but an invitation to treat. When the bidder responds with a bid, he is in fact making an offer and the auctioneer is then free to accept or reject this. Invitation to Tender Generally a request to tender will be considered as an invitation to treat. Any tender document which is submitted in response to this request is an offer and the invitee of the tender is then free to accept whichever offer he chooses. 5 Business Law-NG-07/10 - Week 6 Termination of an offer
The various ways in which an offer may terminate:
6 Business Law-NG-07/10 - Week 6 Termination of an Offer (i) Revocation or withdrawal of an offer by the offeror (ii) Counter offer (iii) Lapse of time (iv) Death (v) Non-fulfilment of a condition precedent 7 Business Law-NG-07/10 - Week 6 Termination of an Offer (i) Revocation A revocation is a withdrawal of an offer. An offer can be revoked at any time before it is accepted because there is no binding contract before acceptance. An offer cannot be revoked after it has been accepted. A revocation must be communicated to the offeree to be effective (by himself or by any other source). If it is not, and the offeree accepts, there will be a contract. 8 Business Law-NG-07/10 - Week 6 Termination of an Offer Consider the following: - By letter dated 1st October, A offered to sell goods to B. - B received the offer on 11th October and immediately accepted by fax. - Prior to that, on 8th October A wrote a letter revoking the offer. He mailed this and B received it on 20th October. - Is there a contract? - Yes. The court would hold that the revocation came too late and was not effective until it had reached B. A contract was made when B faxed his acceptance. 9 Business Law-NG-07/10 - Week 6 Termination of an Offer (ii) Counter Offer Sometimes a reply from an offeree comes in the form of a new proposal, or counter-offer. It is really a new offer, which is then open to acceptance or termination in some other way (iii) Lapse of Time Where an offer is stated to be open for a specified time only, once that time expires and the other party has not responded, then the offer automatically ends. If no time is stipulated, the offer may lapse after a reasonable time. (iv) Death Where the offeror dies before the offer is accepted by the offeree, the offer is terminated. If the offer is accepted before the offeror dies, it may be enforceable against the estate if it is not of a personal nature. 10 Business Law-NG-07/10 - Week 6 Elements of a Valid Acceptance Acceptance An offeror can prescribe that the acceptance must occur in a particular manner, eg by post or hand delivered or by telephone. An acceptance to an offer is only effective if it is communicated to and received by the offeror. If something impacts upon the ability of the offeror to receive word of the acceptance, for example, because of interference on the phone line or because the offeree is unable to speak clearly, then there is no contract. Silence does not amount to acceptance. An acceptance of an offer must be absolute and unqualified.
11 Business Law-NG-07/10 - Week 6 Acceptance When a counter offer is accepted then its terms and not the terms of the original offer become the terms of the contract. Subject to Contract means that the parties do not intend to bind themselves until a formal document has been drafted and signed.
12 Business Law-NG-07/10 - Week 6 Acceptance The Postal Rule A distinction is drawn between an acceptance through instantaneous means and one in a contract by post. The post office rule constitutes the post office as an agent of the offeror. It states that when an acceptance is placed under the lawful control of the post office, it is effective even without actual physical delivery to the offeror. The postal rule applies to acceptance only and not to offers. 13 Business Law-NG-07/10 - Week 6 Acceptance Consider the following example: - A posted an offer to B on 2nd September. That letter contained a clause which stated that A expected a response by the post. - The letter was incorrectly addressed and reached B on the 5 th
September. - B sent off a letter at once agreeing to all the terms contained in the offer. - On the 8th September, A not having heard from B, sold the item to a third party. - Was there a breach of contract? - Yes, because a contract had been completed on the 5 th September when B posted the letter of acceptance. The post office was the agent of A, the offeror and had received the acceptance on his behalf. 14 Business Law-NG-07/10 - Week 6 (B) An intention to create legal relations The parties must intend the agreement to be legally binding. The law divides agreements into two groups,
(i) Social and Domestic group covers agreements between family members, friends and workmates. The law presumes that social agreements are not planned to be legally binding.
(ii) In business agreements the presumption is that the parties intend to create legal relations and make a contract.
15 Business Law-NG-07/10 - Week 6 (C) Consideration Consideration is often defined as some right, interest, profit or benefit accruing to one party or the loss, detriment or responsibility assumed by another party to the contract. Consideration is also a requirement of a legally valid contract. The basic reason for a contract; a person gives up something of value in exchange for receiving something of value through the contract. Consideration must be lawful Consideration must be sufficient but need not be adequate.
16 Business Law-NG-07/10 - Week 6 Types of Consideration Executory Consideration Executed Consideration Past Consideration
17 Business Law-NG-07/10 - Week 6 Executory Consideration This is where parties exchange promises to do something in the future A farmer promises to deliver vegetables to a restaurant, and the restaurant promises to pay for the vegetables
18 Business Law-NG-07/10 - Week 6 Executed Consideration This is where the offeror promises something once the offeree does something The promise only becomes enforceable once the offeree has done the action If Jane loses her dog and offers to pay a reward to the person who finds it, she does not have to pay until someone finds her dog and returns it to her
19 Business Law-NG-07/10 - Week 6 Executory v. Executed Executory consideration consists of two promises Executed consideration consists of one promise followed by some action
20 Business Law-NG-07/10 - Week 6 Past Consideration Past consideration does not form a valid contract Normally, consideration is given at the time the contract is made or at a later time Past consideration is where the action is performed before the promise is made This is not good consideration because the consideration must be given in return for a promise This cannot be the case if the action was performed before the promise was made