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Essential Terms for Formation of Any Contract and Issues

7259 Downloads1 I Published: 06 Jan ,2018

INTRODUCTION

Contract can be defined as a legal agreement that exists between two parties that have been formed for completing a particular task. Parties that are present in the contract are obliged to fulfill the promises that are made by them else they will be liable to pay for damages (Beatty and Samuelson, 2012). The present report has thus given emphasis on getting an explanation about essential elements of a valid contract and there importance. Focus will also be given on finding out if the terms laid by Joe and Dillon are valid or not.

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

There is a need for several elements that are required for forming a valid contract.

Offer- While forming a valid contract, there should be an offer by one party to other. Offer can be defined as a proposal which is made to a party in order to attain the consent for entering onto a contractual relation (McKendrick, 2005). In this regard, the offer should be supported by a legal objective. The guidelines can be explained in the case of Harvey v Facey [1893] UKPC 1.

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Acceptance – Acceptance in the contract can be defined as the consent of party to create a contractual relationship. The acceptance should be certain and unconditional unless it may not be considered while framing a valid contract (Kelly and et.al., 2013). For deciding the validity of offer and acceptance, case of Butler V Ex-Cell-O-Corp [1979]1 WLR 401 can be referred. Here, the acceptance can be provided only by the individual for whom the offer has been made (Contract types, 2015).

Invitation to treat - Invitation to treat that has been given by the part cannot be considered as an offer. Here, the other party should provide offer to primary party. The case held between Gibson V Manchester City Council represents ground for such contracts. Along with this, no obligations can be imposed by party in case the offer has been accepted (Wilmot and et.al., 2009).

Cross offer- Cross offers as made by parties cannot create contract as it is the exchange of offers on which there is a requirement for acceptance. Conditional acceptance is to be treated as counter offer on which there may be a requirement of further acceptance by law. In case of cross offers, one party lays down some terms in offer and asks next party to accept it. (Barnett, 2003).

Are the terms laid by Joe and Dillon valid

As per the above scenario, there has been a presence of two agreement. One is in between Dilon and Joe while the other is between Joe and PartsCo. According to the case, Dilon has put an offer to Joe for designing him three machines for the fitness centre at the amount of $2000. There was a written agreement sent to Joe by Dilon. In the agreement a clear term was made that the machines will be sold at price of $2000. But there was a note provided by Joe stating that prices cam vary due to the certain changes material cost. This term can be said as the prevailing clause for the present contract (Marsh and Soulsby 2002). On the other hand, it can be said as a counter offer made by Joe to Dilon. After few days, Joe told that the prices for machines are increased to $2500 as the online prices of the parts of material have been increased.

On the other hand, Joe was entered into a contract with PartsCo (Online site) who was offering the parts of products at no guaranteed prices. In case if the prices of material can be changed therefore, Joe was entitled to alter the prices (Kelly, and et.al., 2013). The uncertainty in the prices was represented through the prevailing clause. Hence, it can be said that Joe and Dilon have laid down valid terms. In the given scenario, offer is still not accepted by Joe because he did not provide his consent on the counter offer provided by Dilon.

Terms considered for the formation of contract with its meaning and effect

The case described in scenario one is based upon two different contracts made between two different parties. However, one party is involved in both the contracts. According to the case, first contact made between Dilon and Joe, in which Joe was offered to design three machines for Dilon's fitness centre. On the other hand, another contract was made between Joe and PartsCo, in which Joe was interested in purchasing part of machinery from PartsCo, which is an online company. Both the contracts are based on different terms that can be analysed on the valid ground. Dilon sent a written note to Joe, explaining about the terms of contract. The written statement was including term that “ The seller must sell at the original quoted prices”. The quoted price of machinery was $2000. As a counter offer, Joe has sent a written note explaining his terms and conditions.

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The written statement given by Joe stated with “The prices may increase”. Further, the terms and conditions included in the statement were showing the presence of counter offer. The terms laid down by Joe were related to the specification of other contract with PartsCo online company. In this regard, the terms of both the contacts are different but connected to each other. (Bar and Drobnig, 2004) In other words, it can be said that the terms of Dilon contract were based on the terms of PartsCo. However, Joe was involved in both the contracts. The prices quoted in both the statements were not fixed as there can be variation in both the contracts. In case if both the parties agreed to the terms and accept the offer and counter offer made by them, then only the contract can be valid. The case specifies that the prices of machinery were increased to $2500 which was valid on the ground of prevailing clause stated by Joe. On the other hand, the term made by Dilon may become invalid after accepting the counter offer of Joe. The term imposed by both the parties are valid for formation of contract.

Analysis of contract formed with PartsCo

In the given case scenario, Joe approached PartsCo for purchasing the part of machineries that are to be delivered to Dilon. On the other side, it can be said that Joe entered in a contract with PartsCo in order to fulfil the contractual terms to agreement with Dilon. The contract made between Joe and PartsCo is a distance contract as the parties were not present at the time of formation of contracts. This is because the mentioned contract was made over the mails and using online communication tools. However, PartsCo had not taken any guarantee for the quoted price of machinery parts. The statement quoted to the website of PartsCo is considered as a term. Along with this, the price quoted by PartsCo was an invitation to treat. The guidelines of invitation to treat can be referred from the case of (Partridge v Critenden (1968) 2 All ER 425). Thus, it cannot be treated as the offer made by company. The invitation to offer made to everyone is exercisable by anybody. There was a statement quoted “There is no guarantee for the quoted price” can be said as the term of contract. Joe has made an offer to purchase the parts of machinery.

The response of Joe is the evidence that he is ready to pay the increased prices, if needed. The prices for machinery was £1000 that was increased to £1500. However, Joe was agreed for making alteration in the price as the term made to Dilon was the evidence (Chandler, 2007). It can be said that the contract is valid as the parties were agreed to the terms. PartsCo was able to change the prices and the consideration for company will be £1500 at on this price the parts are offered to Joe. Further, both the parties have a legal intention to create contract. The terms made in the contract represent that Joe is not entitled to enforce the company to sell machinery part at £1500 as company has previously stated that prices can vary. However, the company has not taken any guarantee for the quoted prices so, it is eligible to modify the prices. In regard to make valid conclusion over the case, the case held between Partridge v Critenden (1968) 2 All ER 42 can be taken into consideration. It can be said that the prices of machinery parts or consideration is the major element for making decision over the case.

The clause related to price of products “There is no guarantee for the quoted price” is valid to make legal contract. Further, the prices were $1000 that have been increased to $1500 that was legal and was based on the contractual terms. Thus, it can be said that contract between Joe and PartsCo was made on contractual terms. The parties were obliged to fulfil their duties then contract is said valid. Hence, it can be said that Joe is not entitled to enforce prices of machinery.

Assessment of validity of contract between Fabian & Chloe and Fabian & Jenny

Second case scenario is based upon the case of Fabian & Chloe and Fabian & Jenny. There are two cases that are interdependent to each other. According to the given case scenario, an offer was made by Fabian to sale a computer. The offer was made through an advertisement to public. However, it can be said as an invention of offer. However, the advertisement made by Fabian is an invitation to treat that can be accepted by anyone who wants to make a contract. Anyone, who is having contractual capability can enter into the contract with Fabian. It has been seen that Chloe has put a counter offer in response to Fabian's advertisement (Beatty, 2012). Adding to put an offer, she had made a wish to pay £80 as a price for computer and she asked Fabian to provide his consent by Thursday. Based on the case scenario, it was identified that Chloe is offerer and Fabian is offeree. In this regard, to make a valid contract, acceptance of Fabian is required by Thursday. Here, Fabian has provided with several days to make his consent.

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On the other hand, Jenny was a second persona who have responded to the invention of treat made by Fabian. She made her consent through sending a letter to Fabian. On Monday morning, she saw the advertisement by Fabian. After reaching home, she sent a letter to Fabian by agreeing on buying the computer. In the same letter, she has asked for the price of computer. It was noticed as counter offer without any term and condition (Wishart, 2012). However, after some time she has changed her decision and telephoned Fabian to ignore the letter that he might receive from her. The letter was arrived to Fabian by Wednesday morning so, in this case, offer given by Jenny was not considered and it got cancelled due to time period. However, the contract was cancelled in the given time so, no one is entitled to perform their duties. As Jenny cancelled the letter over telephonic communication so, there is not any contractual liability occurred between the parties.

CONCLUSION

The report above was based on the contractual terms and conditions. Adding to this, the essential elements required for the formation of a valid contract are explained in the report. The whole report is based on two different case scenarios and their valid decision. From, the above study, it can be concluded that purpose of forming of contract law is to make valid decision over the cases and to render fair treatment to the innocent party. Hence, contract law offers fairness and transparency in contractual relationship between two parties and helpful in making decision whether contract is valid or invalid.

References

  • Bar, V. C. and Drobnig, U., 2004. The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study. Sellier, European law publication.
  • Barnett, R. E., 2003. Contracts. Aspen Publishers
  • Beatty, J. F. and Samuelson, S. S., 2012. Business Law and legal Environment. Cengage learning
  • Beatty, J. F., 2012. Legal Environment. Cengage learning.
  • Chandler, J., 2007. Negligence liability for breaches of data security.Banking and Finance Law Review, Forthcoming.
  • Kelly, D. and et.al., 2013. Business Law. Taylor & Francis.
  • Marsh, B. S. and Soulsby, J., 2002. Business Law. Nelson Thornes.
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