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Various Elements of a Valid Business Contract

4658Downloads1 I Published: 23 Dec ,2019


In every organization, regulation and legislation plays a crucial role which it protects its business activitiesand operation from illegal and unfair activities.In order to provide protection and security to business as well as individual who are engaged in any type of agreement, government has formulated business legislation and code of conduct. The government authorities have also developed civil legislation that ensures provision related with the contractual liability and tort liability (Appleman Appleman and Holmes,2013). The following report provides deep knowledge and understanding about various elements of valid contract and its importance in the business. The entire report is bifurcated into various case scenarios and each scenario defines various kinds of legal consideration between parties who have made contract and agreement. At the end of the report, elements of vicarious liability and tort of negligence has also been addressed.

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1.1 Explanation about the essential elements of valid contract

In the context of business law, all contracts are agreement but all agreements not contract. A contract which is enforceable by law is known as the valid contract and it must possess all the essential elements. As per the UK government, a valid contract must include all elements and the parties who are involved must carry that essential element. Following are some important elements of the valid contract-

  • Proper offer and proper acceptance- According to the law of UK government, if any two parties enter into a legal contract then there must be develop a proper offer. An offer is an expression of proposal in which terms and conditions are included. The person who has developed offer for someone is known as offerer and a person to whom the offer is being made is known as the offeree (Chen-Wishart, 2012).On the other hand, while any person offeres something to another person then there must requires a proper acceptance. According to the UK government, if any person accept the offer from offerer then the acceptance must be in oral and written form in which all terms and condition must included. An offer is being followed by only legal acceptance of other parties who accept the offer.Furthermore, an offer should be accepted unconditionally because if any kind of additional terms are included by offerer then the contract is calledas a counter offer.
  • Intension to create legal relationship-As per the law of UK government, if any valid contract is made between two parties then there must be consideration to create a legal relationship among them. In addition to this, both the parties makes sure that there is not involves any another outside pressure (Stirling, Kilpatrick and Orpin 2011).
  • Capacity to enter into contract-Another major element of valid contract is capacity. It means that the party who made the offer and the party who accept the offer must have the capacity to enter into the contract.In addition to this, both the parties have age of majority and in sound mind. Furthermore, both parties should have capability to imply with the legal rights to form the valid contract.
  • Free consent-According to the UK government, while any valid contract made between the parties then there must not any kind of fraud, misrepresentation, coercion, undue influence and mistake. If the consent of both parties is not free then it will not be a valid contract.

1.2 Discussion about various kinds of contract

As per the UK government, a valid contract is a document which carries all the legal terms and condition which both parties must follow who enters in the contract. There are various kinds of valid contract which are as follows-

  • Unilateral and bilateral contract- Unilateral contract involves action and activities which is undertaken by one person or a group. Under this contract, only one party is allowed to make promise or agreement. For example, if any person has lost his dog then he can place its advertisement in the newspaper and stated that theperson who will return my dog will be getting 1000 rupees reward by me. In such kind of offer, no particular individual is bound to return the dog so it is a kind of unilateral contract. On the other hand, bilateral contract is a contract under which both the parties are responsible or obligated to fulfil their promise. It is a kind of two sided contract because both parties fulfil their responsibility to formulate a valid contract. For example, if any person enters in the restaurant and order for a meal then restaurant is bound to deliver the meal and that person is obligated to pay the bill for that meal.
  • Written and verbal contract- Written and verbal contract is a most essential ways to develop a valid contract. In the context of written contract, it is safe and because both the parties have signed the document of contract and in this document all relevant terms and condition are included. On the other hand, verbal contract is a contract in which both parties are entered into contract by using expression and spoken words. In this manner, both parties accept upon the terms and condition of contract by verbal ways.
  • Distant and face to face contract-In the context of distance contract, both parties are not physically present at the time of making valid contract. They are far from each other but connected with source of communication like mobile, internet etc. On the other hand, where both parties physically appear at a common place is known as face to face contract (Isakssonand, 2010)
  • Void and voidable contract- The contract which is not enforceable by law is known as the void contract. On the other hand, avoidable contract is that which is framed in compliance with a legal consideration.

1.3 Analysis of the various forms of contractual terms

As per the UK government, while valid contract made between two or more than two parties then there must be some kind of terms and conditions. The parties have to follow that terms and condition while they entered into the contract. Terms is referred as the set of rules, regulation and norms which charged by legal bodies, government and any other authorities. These terms largely affect the entire process of contract structure. The major objective of term is to avoid the situation of negligences, fraud and other negative and illegal activities. It aids in maintaining the consent and interest of the person who are involved in the contract. According to the UK government. There are various kinds of terms of valid contract which are as follows-

  • Expressed terms-The contract which is made by the oral and written way included express term contract. Under this term , both parties are engaged with oral and written words. This term is implemented under by the mutual consent. The major objective of this term is to provide the guarantee, warranty and condition to the individual who is going to make the contract (Murfin, 2012) For example, a amen purchase the house from its owner by 500000 and signed on the registration form which is offered by owner. It can be said that a men entered into the express contract because all elements are specially stated including offer, acceptance and consideration.
  • Implied terms-Implied terms is just different and opposite from the express contract because the terms and condition has been made by the government or any other legal authorities. In this contract, both parties are liable to follow the rules and regulation which has been determined and specified by third parties. Such kind of term are not expressed by word and written contract both parties are connected by the ultimately promises.
  • Condition- As per the UK government, condition is a clause in the contract which parties have to follow. If any parties in the valid contract may break the rules and regulation then another party have right to sue for damages against the party. The major objective of this condition is to protect individual from unfair and illegal activities and actions. In other word it can be said that condition are that terms of contract which reflected by the rules and regulation of the agreement (McKendrick, 2014).
  • Exclusion clause-According to the UK government, exclusion clause is a term in a contract that seeks to restrict the right of the parties to the contract. There are three types of exclusion clause that is true exclusion clause, limitation clause and time limitation clause. With help of this term, in the contract, illegal and unfair activities and action can be reduced.

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2.1 Application of the essential elements of contract to the case scenario

As per the given case scenario, Mary was entered into the television departmental store which name was Sales are Us with intension to purchase a new television. n this case include essential element of contract offer because on the departmental store was a television showroom which means the owner of the showroom wanted to sales its television so as he placed the board of sale of television. Mary selected a television and purchased the same. From this statement it has cleared that in this contract there is proper acceptance. So it can be said that in the above case, there is included valid contract elements that is offer and acceptance. At the time of the sales, the sales assistant informed Mary that she was expected to sign a standard form contract. So as per this statement it can be said that there is a intension to create legal relationship because the sales men offered a letter to sign under which proper terms and condition are included. Furthermore, there is also included the element of free consent because at the time of developing a contract both the parties are free that means there is not any kind of force and additional influence. However, in the behind the scene, salesmen have intension to fraud with Mary because he was misrepresented the deficit television in front of customer but as he has clear with her by provided proper terms and condition.

2.2 Application of the law on terms to the scenario

As per the given case scenario, Mary entered in the sales are us showroom and purchased a new television. While she purchased the television then sales assistant informed Mary that she was expected to sign a standing form contract. But she signed the contract without reading the contract terms and condition. After purchased the television, while she turned on then it exploded and caused serious burned to her arms. She had to be treated in the hospital and as a result of injuries she could not work for three weeks. While she came back from hospital after recovered her injuries then she went to the showroom and demanded for remedies from the owner of showroom. In addition to this, Mary demanded for the replacement of the faulty television set and asked for financial compensation for the injuries that she has suffered and the loss of income for three week. The owner of the sales are us denied both of these claims and refereed Mary to the following two clauses of the contract that she has signed. Sales are us have no liability for the replacement or repair of faulty products. In all circumstances the customer must bear the cost of either replacing or repairing any fault product. On the pother hand showroom have no liability for any death or personal injury caused by the sale or supply of fault product.

Above this statement it can be said that in the valid contract there is a express term because the acceptance and offer between the sales men and Mary was in the written form. Mary entered into the expressed contract because the elements are specially stated, including offer, acceptance and consideration. Furthermore, it can be said that the expressed kind of term includes the entire information about the condition, warranty, guarantee etc. So in the case scenario, salesmen has mentioned the condition that there is no liability of showroom if any injury or accident occurred by this television. In this statement, terms and condition has been also applied because according to the condition term, rules and regulation are mentioned in the document of contract. In this case, exclusion clause can also apply because according to the exclusion clause, unfair practices and illegal manner which eventually results in reduction of the number and forms of liability existing in the contract such types ofclauses are reasoned as partial or unfair in respect of law only when the representation of the sections are not done effectively and properly.

2.3 Evaluation of the remedies are available to Mary

As per the case scenario, Mary is not competent to get the remedies from the Salesmen or owner of the showroom Sales for are because owner has already cleared mentioned in the contract document that there is not any kind of liability of death, personal injury and damages of property from television which is purchased from the sales for us showroom. In such case, Mary can sue against the sales men by use of customer right cat 2015 under which if any goods and services by owner resulted as injured to customer then it is responsibility of owner to pay the remedies and expenses to that particular customer. In addition to this, Mary can also get remedies by act the sale of good act 1979 under which goods must be described and satisfactory quality and fir for the objective of sales and purchase.

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3.1 Contrast liability on tort with contractual liability

Following are some difference between the liability on tort and contractual liability-

  • Contractual liability- Contractual liability arise in the circumstances in which the person breaches the stated terms and condition thatare imposed within the contractual agreement. In this legal action and punishment against the parties who are involved in illegal action is limited (Sutton, 2010 ). In this contractual liability ,The remedies and compensation is provided to weaker on the basis of terms and condition.
  • Liability in tort- Liability in tort arises in the situation when parties engages in the tort of negligences and actions through which another parties get harms and injured. In this liability, the remedies are provided according to the level of the injuries and it is stated by the law.

3.2 Explanation about the nature of liability in negligences

Negligences refers to the condition under which one party ignore their liability to perform and by this another party get injure or loss. In other word it can be said that negligence refers to the aspect under which one party is unable to perform their activity and responsibility with proper care through which another party get injured and get losses. Following are some kinds of liability in negligences -

  • Duty of care- It is the most important element of negligence under which party who has injured have right to get remedies from the person who negligent the care of asses or individual. As per this element, the injured party have right to take legal action against that particular person who has ignored the care of them (Lando and Beale, 2000)
  • Breach of duty- As per this duty , it is the great responsibility of the part of company to keep secure another goods or another person while they operate something. According to this part's activities the duty of care has breached which caused injured to the claimant. It is a set of basic duty to person or company that nobody could be harm by their action and activities.
  • Remote damage- This is another most effective and important element of liability of negligence under which if applicant of the claims is able to show their physical harm and financial loss from the negligence of another party then that particular person is able to gain the compensation and remuneration from the another party (Ramanathan, 2014)

3.3 Explanation about the vicarious liability

As per the UK government, vicarious liability is a form is strict form of liability that developed under the common law doctrine agency. According to this liability, it is great responsibility of the organisation if any person get harms due to organisation activities or any employees activities. If any personnel in the company are engaged with wrong activities and action then owner of the organisation is responsible to pay the remedies and expenses to another person who get injured (Faure, 2009). This provision clearly declared that business person are to be held with the any illegal activity and act performed by their personnel. Beside this, it is utmost obligation of the owner or employer to monitor the personnels activities and action in the organisation. Following are three major elements of vicarious liability which are as follows-

  • The all action and activities of employees should be control and monitor by the employers (Giliker, 2010).
  • The actions of the employees are in control of the employers.
  • The action of negligences occurred on the basis of the right and authorities of employers.

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4.1 Application of the element of the tort of negligence to the scenario and consider the possible defence

As per the given case scenario, Paul purchased a ticket to watch a film at his local cinema film flops. He was in the process of purchasing some popcorn before the film started when an employees of the organisation accidentally poured hot coffee on his arm so as he got serious injury. After the scene, the manager of cited organisation called and it was determined that the employees was intoxicated. In this case according to the tort of negligence, the manager of the Film flop will responsible for pay the remedies to Paul because due to cited firm's employees carelessness, the said person has got serious injury so in this case manager of this film flops will pay the remedies or expenses for treatment. With the help of element of negligence, Paul have right to get remedies or expenses f for the losses. In such case, another element of negligence that is remote of damage. As per this element, if a person is able to show his losses either physical or financial then that person is expected to get the remedy or may increase reimbursement. As per this element of negligence, Paul have right to get remedies from the manager of the film flop because he is competent to show their physical harm or injuries by medical certificate to the owner of flip flop. In addition to this, in this case scenario, the duty of care can also applicable by which party who has injured have right to get remedies from the person who negligent the care of asses or individual. As per this element, the injured party have right to take legal action against that particular person who has ignored the care of them. Therefore, Paul have right to get remedies from the manager of film flop.

4.2 Application of the law on vicarious liability to the scenario

As per the vicarious liability it is great responsibility of the organisation if any person get harms due to organisation activities or any employees activities. If any personnel in the company are engaged with wrong activities and action then owner of the organisation is responsible to pay the remedies and expenses to another person who get injured (DeMitchell, 2006)In the above case scenario, The employees has not taken proper care while he served the coffee so that Paul has got high level serious injury on his arm because hot coffee put on his arm. In this case, the manager of film flop redetermined that the employees was intoxicated. In such case according to the vicarious liability, manager of the film flop have responsibility to take care about all activities and cation of employees and monitor their performance. Due to the negligences of the employees, Paul has got injured so it is responsibility to the manager to pay the remedies or experiences for treatment. In this mentioned case, both person employees and manger of film flope is responsible for the care of customer. Tenure of employment is equally practical or applicable for all workforce who are working in the corporation.


Business law is very essential aspect for the customer, employer and any organisation through which they can able to get protection and security from illegal and unfair practices. The entire project is bifurcated among various case scenario. From this report it has been concluded that according to vicarious liability if any person gets injured due to ineffective activities and carelessness of employees then the said person have right to get remedies from the organisation owner.

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Books and journals

  • Appleman. J. A., Appleman. J. and Holmes, E. M. 20131Excuses for Nonpayment and Defenses to Actions for Premiums1(5). Appleman on Insurance Law and Practice.
  • Chen-Wishart, M., 2012. Contract law. Oxford University Press.
  • DeMitchell, T. A., 2006. Negligence: What Principals Neal to Know about Awnding Liability. Amman & Littlefield Education.
  • Faure. M..2009. Tort law and economics. Edward Eiger publishing.
  • Faure, M., 2009. Tort Ims, and economics. Edward Eiger publishing.
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