The Prerequisites for a Legally Binding Contract ? Essay

A contract to be legally valid,should meet 3 essential elements,which would be examined by a court as evidence of any contract. These main pre-requisites are , ? The agreement must have an offer and an acceptence: a contract is a bilateral agreement between two or more parties.

So when the offeree accepts the offer for a consideration made by the offeror, it becomes a contract. eg:-Carlill v Carbolic Smoke Ball Company [1893] Eg:James promises to sell his land to Jane for ? 10000. And Jane accepts to purchase it for that amount.Here James is the offeror ,where as Jane is the offeree or the acceptor. So this would be legally valid only if Jane accepts the offer. ?The intention behind a contract must be to create legal relations:When the parties involved do not have such intention,then those contracts are void/not valid. eg : Balfour v.

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Balfour (1919) ?Consideration:A contract to be legally valid,it should have a consideration defined by the parties to a contract.Eg:Peter wanted to attend for an important meeting and Jane promised him to drop him to the station at the right time;but Jane failed to keep her promise and ultimately peter missed his train and the meeting. Here Peter cannot sue Jane for the lost benefits which would have gained from the meeting,as this promise is informal and without consideration. A consideration is the value/price that causes a party to enter into a contract. eg:Currie v Misa (1875)Besides the above mentioned essential elements ,there are some additional requirements as well. These are; ? Capacity to contract:A contract to be valid,both parties of a contract must have capacity to contract. In general,all adults have contractual capacity.

However the law identifies following limitations,which restricts certain individuals from entering into a contract. such as, -A minor(below the age of 18 years). eg: Mercantile Union Guarantee Corporation v Ball, [1937] -A person suffering with mental incapacity or intoxication. A person without free consent(a person who has entered into a contract without his own consent because of duress/undue influence etc.

) – A person disqualified by law to enter into contracts. ? A contract shouldn’t break the law:contracts that break the law is illegal. Eg:contracts to defraud the Inland Revenue , contracts prohibited by statute,criminal contracts(a contract to smuggle narcotics etc) The terms of contract must be clear and certain: If the contract terms are vague and uncertain,then those contracts are said to be void.

Eg:Taylor v portington(1885) 2. Contractual terms can either be a warranty or a condition. And if a term of a contract proves to be untrue,the other party who has been misled , can claim for the breach of contract. The main difference between a condition and warranty is, The breach of a condition to a contract gives the right to the innocent party to terminate the contract and claim the damages. g: Poussard v Spiers and Pond (1876) Where as when a warranty is broken ,the innocent party can only sue the other party for damages and claim the damages,but doesn’t have the right to terminate the contract. eg:Bettini v Gye (1876) 3.

Exclusion clauses are also known as “exemption clauses”,An exclusion clause is a clause inserted in a contract between parties,in order to exclude or limit the party’s liability for breach of contract or negligence. And these exclusion clauses cannot be included into a contract after the contract has been made.Such exclusion clauses are void and the party cannot exlude liability.

eg:Olley v Marlborough Court [1949] There are 3 types of exclusion clauses; ?True exclusion clause: Eg: -for many products the manufacturer of the product inserts an exclusion clause which states that no replacement will be given for any breakage due to improper handling of the product. -signs at the entrance of car parks saying ‘park at owners’ risk’ . ?Limitation clause:This clauses are included in order to limit the amount that can be claimed for a breach of contract . Eg:Peter entered into a contract with Jane,according to which Jane was to supply clothes to Peter at a fixed price within 5 days and in a good condition. And this contract has an exclusion clause which states in a case where Jane fails to keep her promise,she will be liable to pay Peter ? 000. So due to this clause the liability of Jane for breach of contract is limited to ? 1000. ?Time limitation clauses:These clauses limit the time allowed to take an action for a claim. Eg:Banks usually include exclusion clauses in statements which they send to it’s customers monthly,saying that any discrepancies in it should be reported within a week.

If no complain is received within that period,the statement will be considered accurate.Like wise ,the main importance of an exclusion clause is it will help the party to a contract, -To exclude the liability or, -To limit the liability or, -To limit the time to claim for breach of contract or negligence. But in certain circumstances,exclusion clauses are not valid. that is when, -If the purpose of the exclusion clause is to exclude liability for death or personal injury resulting from negligence.

eg:Smith v Bush(1989) -If the clause was inserted after the contract was made. eg: Thornton v Shoe Lane Parking(1971)


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