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73219 Downloads1 I Published: 22 Aug ,2016
Contract can be bestowed as a legal agreement among two parties with the intention to fulfill the promise. Moreover, statements created by parties under negotiation are not meant to form a part of contract while they are termed as representation. The things that are required to be fulfilled by the parties under the contract are termed as essential elements of contract. It involves different types of terms in contract i.e. express and implied terms. In the present case, express terms have been used (Beatty and Samuelson, 2012). Express terms are the statements made by parties either by words of mouth or in written and thus, the parties are intended to carry out such terms in order to create a part of valid contract.
Essential elements of valid contract
Following are the essential elements that are important to form a binding contract. These are as follows-
Offer- It can be stated as the statement in which one party is ready to deliver service or product to another party on agreed terms. Moreover, the person making offer is called as offeror and the person who is accepting thfriende offer is termed as offeree. In order to form a valid contract, there should be some offer made by one party to another. Offer is termed as proposal that is made to the other party with an aim to gain their consent to enter into a legal contractual relationship (MacMillan and Stone, 2008). However, an offer cannot be accepted by the offeree once it is terminated by the unlawful act of any party i.e. offeree or offeror. Thus, it can be stated that offer made by the offeror should be supported with a lawful objective.
Acceptance- It is defined as the consent of party with an aim to create a lawful relationship by accepting the offer. It is essential for the parties to give acceptance that should be certain and unconditional otherwise, it will not be considered as a legal contract. The offer can only be accepted by the party to whom it is actually made. In Carlill V Carbolic Smoke Bull co (1982), case is based on offer and acceptance. Thus, in such a case, situation is stated with respect to the rules of valid offer and acceptance (Bledose, 2010).
Invitation to treat- It is considered as an expression of willingness to enter into negotiation with one another with an aim that such contract will prove to be a lawful agreement at a later date. In addition, an expression that is made by one party assists another party to negotiate with the seller. However, invitation to treat given by the party will not be treated as an offer. Partridge V Crittenden (1968) is a case in which invitation to treat has been given by one party which is not considered as a valid offer (Clarkson, 2010). Furthermore, obligations cannot be bounded by the party on offeree in order to accept the offer.
Cross and counter offer- It is another essential element of valid contract. Cross offer is made by the parties but still it lacks to create a lawful contract. It is because here exchange of offer is done by both the parties but acceptance is not given by the offeree. On the other hand, conditional acceptance will be treated as a counter offer on which further acceptance is needed by the law (Kelly and et.al., 2013).
Consideration- It is a crucial element of valid contract. Consideration is considered as a benefit which is given to parties either in return for something in the form of exchange. It is a bargaining element that is done in return for a promise. However, it is not essential for parties to support the contract with financial consideration. It may consist of right, interest, profit or benefit so that other party is entered into the agreement. Also, it is applied to both the parties i.e. offeror and offeree (Mckendrick, 2012).
Competent parties- It states that the parties who are competent to enter into the contract. They should not be minor or person of unsound mind at the time of forming a contract otherwise; it will not be referred as a valid contract (Jones, 2010).
Lawful impact of mentioned clauses
The legal impact of all discussed elements of valid contract is as follows-
Offer- It is considered as the initial step in order to formulate a contract. It acts as a proposal made to other party in order to gain their acceptance (Padhi, 2014).
Acceptance- The proposal made by offeror is accepted by the offeree in order to enter into a contractual relationship. Thus, all the parties are obligated to fulfill their promises (Sweet and Schneier, 2012).
Invitation to treat- At the time when invitation to offer is made, it is the willingness of party to enter into the contract in order to make it a lawful contract. Furthermore, primary party is not obligated for accepting the offer (Middlemiss, 2010).
Cross and counter offer- In this, contractual relationship is not formulated among the parties because it is simply the exchange of offers.
Competent parties- In order to form a lawful contract, it is crucial for parties to be competent i.e. able to understand the terms of contract (Nollkamper, 2010).
Applicability of these clauses as per the facts
Dilon requests his friend
According to the given case, it can be stated that Dilon has recently started a fitness center and he is planning to enhance its stock of fitness machines. With an aim to fulfill this purpose, he asked his friend Joe who is an engineer to build three machines for him. Thus, it will be treated as an invitation to offer because it is not definite (Potter, 2014).
Price quotation by Joe
Joe has made a proposal in the form of quotation of price with an aim to gain consent of Dilon for building the machines.
After quoting the price by Joe, the next day Dilon sent a form to fill in by Joe that involves certain terms and conditions. Further, in terms it was stated that “Joe the seller of machines will need to sell the machines on the quoted price which is $2000”. Thus, such agreement will be treated as a counter offer because here, terms are laid down and further, acceptance is required by Dilon as per law (English, Cohen and Balcom, 2012).
Response of Joe
In response to this, Joe has filled the form and returned it to Dilon which contains a note regarding terms and conditions. On that note, it stated that the price might fluctuate because of the prevailing clause in contract. Later, because of the increase in price of parts, Joe informed Dilon that he needs to pay $2500 now. It will be considered as the final offer. However, the note provided by Joe will be considered as a new offer because in this note, the terms of agreement are modified. Also, the terms lay down by Joe and Dilon are valid as it is accordance with the legal provisions (Friedman, 2011). Furthermore, it is considered as the terms prevailing in the clause are reasonable because there is situation of varying in the price of parts of machine.
Likelihood of consideration of note as an offer and acceptance by Dilon
The final note which is provided by Joe is considered as a new offer because in this note, terms and conditions of contract have been altered. The note contains that price may vary and that there was a prevailing clause which means that Joe terms would likely to prevail over any other terms (Twigg-Flesner, 2013).
Clause do not assure the price
However, the terms laid down by Joe on the note is considered to be valid because it is in conformity with the legal provisions. In addition, the term prevailing in clause is reasonable because there is condition of uncertainty in the price which is quoted by Joe. It may differ as mentioned in the Joe's clause (Xu, Cheng and Sun, 2015).
Enforceable acceptance by Joe
In the given case, it can be evaluated that proposal is still not accepted by Joe because he has not given his consent on the counter offer provided by Dilon. Therefore, the acceptance of offer is essential by Dilon in order to execute a valid contract (Gibbons and Henderson, 2012).
Terms required to form the basis of contract with its meaning and effect
According to the given case, there are two different contracts formed by the parties. As the first contract is in between Dilon and Joe for developing three machines for the fitness center, another contract is in between Joe and PartsCo for buying the parts of machine. However, in the contract made between Dilon and Joe, offer has been made by Dilon to Joe for developing three machines for him. The next day, Dilon sent a form to Joe which is a written contract in which it was mentioned that Joe, the seller is required to sell the machines at quoted price which is $2000. Later, Joe filled the form and returns it back to Dilon with a note attached to it (Luik and Braun, 2012).
The note stated that the price might be increased because there was a prevailing clause in the contract and thus, Joe's terms would be prevailing at any other terms. Thus, it will be considered as the counter offer because Joe has not provided any specific acceptance. However, it has been provided a conditional acceptance. However, Dilon accepted to purchase the machine from Joe on the stated terms and conditions. In the given agreement, consideration decided by Dilon is $2000 which will be given to Joe for building the machines. Furthermore, both the parties are contacting each other in the form of written agreement of note. Therefore, it can be assessed that they possess the intention to create a contractual relationship in order to fulfill the promises that are made by them. Already, company has claimed that for enhancement in price, they are not liable (Jacobi and Weiss, 2013). Thus, increase in price by $500 will be lawful because it has been supported by the prevailing clause in the agreement which is defined among parties. Moreover, as per the above discussion, it can be stated that there is a lawful agreement among Dilon and Joe. Also, both the parties are obligated to fulfill their contractual obligation otherwise they will be liable to render compensation for the breach of contract.
Contracts formed with PartsCo
In order to fulfill the written agreement with Dilon, Joe entered into the contract with PartsCo where there is no assurance for the quoted price. Distance contract has been formed between Dilon and PartsCo. However, as per the case of Partridge V Crittenden (1968), it can be analyzed that price quoted by PartsCo is the invitation to treat. Thus, it is not considered as the offer made by the firm. In response to the quoted price, the offer was made by Joe for buying the parts of machines. However, PartsCo is not obligated to accept the offer that was made by Joe as it will be based on company's consent (Distance contract, 2015). Also, at the time of quoting price of $1000, there was a text box online that stated that company is not providing any guarantee of the price they have quoted. Thus, such clause is also valid because it is the invitation to offer and it could be uncertain.
However, in this scenario, offer has been made by Joe for the purchase of parts of machines at the quoted price $1000 which was advertised on website. Based on this offer, counter offer has been made by PartsCo through specifying that this price is not guaranteed and it may increase to $1500. However, the proposal provided by firm was accepted by Joe thus, there is a contractual relationship among parties. According to the alteration in terms, consideration should be provided to company i.e. $1500 and for Joe, it will be the part of machine which has been provided by the organization. Both the parties possess legal intention to form enforceable agreement in order to accomplish the commitment that has been made by them (Hayes and et.al., 2015).
Joe is not eligible to enforce the online price i.e. $1000 which is quoted by PartsCo as it is invitation to treat and not an actual offer. Also, it was clearly mentioned in the text box online that states that company is not liable for the increase in price. There is no assurance of the quoted price (Johnson, 2013). Business is entitled to change the terms of offer as it is not giving assurance to the party to give the parts of machine at the quoted price. Thus, Joe can give its conditional acceptance.
Invitation to treat not an offer
In the given case, it can be assessed that Fabian has given advertisement in newspaper to sell its computer for $100. However, the advertisement given is the invitation to treat and not an actual offer through which other parties are invited to purchase the computer (Regan, 2012).
Offer made by Chloe
After seeing the advertisement in newspaper, Chloe came to see the computer but she stated that she would provide $80 to Fabian. Chloe stated to Fabian that he should let her know his decision by Thursday. Thus, in such type of scenario, an offer has been made by Chloe regarding purchasing computer. Therefore, in such situation, Chloe is the offeror and Fabian is offeree (MacMillan and Stone, 2008).
Various days for acceptance
Chloe stated Fabian to let her know about his decision of selling the computer at the stated price by Thursday. Thus, on this offer, further acceptance of Fabian is required to create a lawful contract because currently, it is just an offer that is made by Chloe. Fabian has been given with several days to think upon the offer made by Chloe and to give the decision regarding selling of computer (Beatty, 2012).
Another offeree is Jeny
On the response of advertisement which was given by Fabian, another offer was made by Jenny to buy the computer. On Monday, Jenny looked at the computer and after returning to home, she made her mind to purchase the computer for the stated price. Thus, she posted a letter to Fabian by agreeing to buy the computer. However, in the similar letter, she also inquired regarding the price of computer on which Fabian is selling it (Bledose, 2010).
Jenny revocated the offer
Later, Jenny changed her mind to purchase the computer. She informed Fabian through telephone on Tuesday morning that he should ignore any letter received from her. However, at the time of conversation, Fabian had not received any letter from Jenny. On Wednesday morning, Jerry's letter of acceptance arrived. Thus, in this case, offer that is provided by Jenny will not be considered valid because it was canceled in advance before receiving the letter by Fabian. Moreover, it was offset within reasonable time period (Beatty and Samuelson, 2012). Hence, in such type of offer, it will not be considered as contractual relationship among parties.
At the time of posting a letter it is reasonable to expect a next day delivery
According to the case, it can be stated that at the time Jenny write the letter and informed Fabian about it, there is no valid contract formed because the letter will reasonably reach to the offeror within a day. This case is similar to the Entorres V Miles Far East  2 QB 327 and Morris Associates V Voyce  EWCA Civ 189. However, in both the cases, these are based on telephone communication for the acceptance of contract. Thus, for both the cases, court of law has given the decision that there should be a valid acceptance in writing and it should be communicated to the offeree. Through implementing provisions of the law in these cases, it can be assessed that the letter posted by Fabian was not arrived in reasonable time. Thus, it will not be considered for the formation of legal contractual relationship (Jones, 2010). However, in the given case, postal rule will be applied which is an exception of specific provisions of agreement.
Here, no one is bound to formulate the contract neither Chloe and Fabian or Jerry and Fabian. The letter of acceptance written by Jerry received on Wednesday morning by Fabian. Thus, viewing the revocation of offer by Jerry, Fabian posted a letter to Chloe on Wednesday stating that he is ready to sell the computer at $80. But due to delay in delivery of letter, Chloe did not receive any intimation till Saturday and now, she is not willing to buy the computer from Fabian anymore. It can be assessed that acceptance of offer by Fabian was not made in a reasonable time and it did not reached Chloe till Saturday. However, it is considered as a general phenomenon that transfer of letter takes 2-3 days normally (Kelly and et.al., 2013). Hence, Fabian should inform Chloe through telegram or telephone and confirm the acceptance regarding the offer made. Thus, the counter offer regarding cancellation by Chloe will be lapsed and delay in acceptance will not be the reason for breaching the contract. It can be stated that as per essential elements of contract, there is not lawful relationship among parties. Thus, Chloe cannot be forced by Fabian to enter into the contract.
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It can be evaluated that from the case given, supermarket is liable for the injuries caused due to patch of water on the floor as they are responsible to maintain the supermarket and there is regular slipping of individuals on that patch of water. However, they have mentioned a sign board at the entrance of the supermarket that they are not liable for any act of negligence or any injury that happens on these premises. But it is their duty to provide reasonable care to the individuals.
3.1 Contrast liability in tort with contractual liability
Tort can be referred to the wrong deed. While, tortuous and contractual liabilities are described upon varied parameters. Thus, it can be stated that contractual liability is performed at the time when there are two parties connected in order to carry out the single goal. While, in tortuous liability, no such action has been stated for parties present in the contract. Moreover, such act has been conducted among parties intentionally and also it is clear among both the parties. In tortuous liability the act carried out is unintentional. While, the terms and conditions are stated between both the parties are in contractual obligations. On the other hand in, tortuous liability no such terms and conditions are prepared (Gibbons and Henderson, 2012).
Further, through determining the case scenario, it can be identified that Holly is liable to claim for the damages from the manager of the supermarket, Tim mentions that a sign board that clearly states that they are not held liable for any act of negligence or any injury that happens on these premises. Therefore, the concept of liability in tort work here as it states that by placing any notice board they cannot avoid their responsibility. It is their duty to maintain the supermarket properly and carry out the construction work properly (Jacobi and Weiss, 2013). Furthermore, contractual liability states that the third party is held responsible for the injury suffered by anyone else and they are not directly related to the contract. It states that Tim is held responsible for the actions or injuries caused due to slipping of Holly on the floor.
It can be assessed that the sign that the supermarket displayed that they are not responsible for any action caused and injury held is not valid and thus the excuses offered by Tim for not accepting the liability is not valid because they are liable for the injuries held to Holly.
3.2 Nature of liability in negligence
Here, negligence can be stated as the failure in order to execute the care that otherwise can be undertaken in similar situations. For instance, any act of negligence can cause harm to other party. Following are the three different areas that are needed to be proved in regard to claim for liability in negligence. These are as follows-
It is essential for the defendant to follow duty of care.
Duty of care has been breached by the defendant (Hayes and et. al., 2015).
Because of breach of duty by defendant it causes harm to plaintiff.
It can be evaluated that as per the provision of duty of care, it can be assessed that the manager of the supermarket is responsible to provide proper care of the individuals visiting their supermarket. Thus, from the given case it can be stated that manager of the supermarket causes negligence and due to that Holly slipped on the floor and hurt herself. Therefore, supermarket is liable to pay for the damages in the nature of liability in negligence (Clarkson, 2010). As the manager of the supermarket has breached the duty of care and he is entitled to pay the damages to Holly.
Furthermore, Dex the husband of Holly is not entitled to make claim for negligence as he was drunk and intoxicated and willingly jump into the water. Thus, the supermarket have a defence that it was the mistake of Dex and he willingly jumps into the water because of making fun and thus they are not liable to pay damages to him.
3.3 Explaining how a business can be vicariously liable
Vicariously liable can be stated as the condition in which an individual is held liable for the actions of another person. However, in the workplace scenario, employer is held liable for the actions performed by the employees at the time of their employment. From the given case, it can be stated that supermarket is held responsible for the actions of Tim and thus they are liable to pay damages to Dex because Tim punches Dex and thus they are vicariously liable. However, Tim was working in the supermarket and thus organization is vicariously liable for the damages and injuries caused to Dex because of punch given by Tim (Middlemiss, 2010).
4.1 Applying the elements of the tort of negligence and defences in different business situations
Following are the four major tort of negligence which are as follows-
Duty of care obligation- Here, individual possess duty of care for each other. However, it was the duty of care of the supermarket to provide proper instructions regarding the maintenance and thus it should not cause any injury to the visitors. For instance, if any person got the injury then the supermarket is held responsible for the same (Bledose, 2010).
Breach of Duty of care- Here, supermarket places a sign board of they are not liable for any injury or damages to the visitors. But it is the duty of the supermarket and thus they breach it (Friedman, 2011).
Injuries caused due to breach- However, due to the breach of the contract, it causes harm to Holly as she felt on the water patch.
Here, it can be evaluated that Dex is not entitled to make a claim for negligence and thus supermarket have a defence that Dex was highly drunk and intoxicated and thus willingly jumped into the water (Beatty and Samuelson, 2012). Therefore, supermarket is not liable to pay damages to Dex. Thus, such act does not come under Occupiers liability act. Furthermore, after returning to home from Chemist shop, Holly tripped over a paving stone as it was dark. Thus, Holly is liable to claim for the damages to the local council because it was their negligence and they are responsible for the pavement. Thus, the council does not have any defence and thus they are liable to pay damages to Holly for the negligence.
4.2 Applying the elements of vicarious liability in given business situations
One of the main element of vicarious liability is duty of care. Therefore, supermarket is held under vicarious liable for Tim punching Dex because it falls under employer-employee relationship. Here, Dex is not liable to claim for the damages as he willingly jumped into the water, but Tim punches Dex and therefore, he is liable to claim damages under Occupiers liability act. Further, Holly is also liable to claim damages from local council as she slipped over a pavement stone and thus local council is vicariously liable for such actions (Jones, 2010).
From the accomplished report, it can be conferred that it is essential for parties to form a legal relationship among them. Moreover, different essential elements have been discussed such as offer, acceptance, intention to treat, consideration etc. that assists in formulating a valid contract. Thus, through evaluating the cases, it can be analyzed that offer is still not accepted by Joe because he has not provided his consent on the counter offer made by Dilon. Hence, the acceptance of offer is essential by Dilon in order to carry out a lawful contract. Furthermore, there is neither the legal relationship formed in between Jerry and Fabian nor in between Chloe and Fabian because of delay in acceptance of offer.
Books and Journals
Beatty, J. F. and Samuelson, S. S., 2012. Business Law and legal Environment. Cengage.
Beatty, J. F., 2012. Legal Environment. Cengage learning.
Bledose, A., 2010. Business law for Business Men. BiblioBazaar.
Clarkson, K.W., 2010. Business law, Text and Cases: Legal. Cengage learning.
English, S., Cohen, R. and Balcom, R., 2012. Contract Drafting and Negotiating: Pitfalls and Strategies. In CCCA National Spring Conference, Montreal.
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