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Most people will enter into many contracts in their lifetime – often without even realising it! Tenancy leases, employment agreements, bank accounts, mobile phone contracts, the purchase of goods – even
using a car park. Point to almost any activity in modern life and it is more than likely that it will involve some sort of contract.
The following principles indicate when a contract is present. Please note that this is a very broad guide only.
Offer and Acceptance
For an agreement to arise there must be an offer and that offer must be accepted. The party who offers must intend themselves to legally bound if the offer is accepted.
The courts have repeatedly held that advertisements and shop displays are not offers but rather ‘invitations to treat’. The actual offer is made when a customer sends in an order form or takes goods to the cash register for purchase.
Acceptance must be a final and absolute consent to the terms of the offer. If a person indicates that they will accept with different or additional terms, then they are making a counter-offer. Any attempt to alter the terms of the contract after acceptance will be ineffectual.
Consideration must be given by the person who has been promised something. Consideration is something of value promised in exchange for something else. When you purchase goods, for example, you give the vendor money in exchange for those goods. Contract law is not concerned with whether the consideration is appropriate or adequate. Rather, good consideration is anything that is of detriment to the promisee (the person to whom the promise has been made) or of benefit to the promisor (the person who makes a promise).
Intention to create legal relations
The third requirement of an enforceable contract is that the parties must intend to create legal relations. Where dealings are commercial, there is a presumption that the parties intended to create legal relations. On the other hand, where the parties are involved in domestic or family arrangements, there is a presumption that the parties do not intend to enter legal relations.
Does the contract need to be in writing?
Generally contracts do not need to be in writing to be enforceable. However in some circumstances, legislation requires agreements to be in writing. In particular, contracts pertaining to dealings in land are required to be in writing.
Privity of contract
Only those who are party to the contract can sue or be sued under the contract.