The Law of ContractUnit 1

A contract is a legally binding agreement between two or more people that is enforceable by law

All contracts have several elements in common

What is a Contract?

Elements of a Contract

1. Agreement2. Intention3. Consideration4. Capacity5. Consent6. Legality of form7. Legality of purpose

Agreement occurs when an offer has been accepted

Both must be clear, complete and unconditional

They can be in writing, e.g. purchase of land or property

They can be oral, e.g. at an auction They can be implied by conduct, e.g. at a

checkout

1. Agreement

An offer is terminated if there is:A counter offerA rejection of the offerA revocation (the person making the offer backs out)

Advertisements, price tags or shop displays are not legal offers, they are an invitation to treat

If a price is wrong it can be corrected The item does not have to be sold at the

mistaken price

Invitation to Treat

In order for a contract to take place there must be a willingness and knowledge on both sides that they are entering into a contract

Example: two people arrange to go out for dinner. If one doesn’t turn up, can the other one sue?

Answer: No, there was no intention to form a contract

2. Intention

What one party gives to another There must be some sort of exchange It need not reflect the full monetary value of

the item, but it must have some measurable value

Example: Mary buys a car from Tom for €14,000Mary gets the car and Tom gets the money

3. Consideration

Persons entering into a contract must have the legal ability to do so

Exceptions: Under 18s Persons under the influence of drugs or alcohol Bankruptcy Company director who is acting “ultra vires” Diplomat can claim diplomatic immunity

4. Capacity

The contract must be made voluntarily It must not be entered into under duress Both parties must agree to what is in the

contract

5. Consent

This refers to the manner in which the contract is drawn up, e.g. oral, in writing or implied by conduct

Certain contracts must be in writing, e.g. sale of property, insurance policy

6. Legality of form

The contract must not break any laws Legally binding contracts must be for legal

transactions Agreements to commit a crime will not be

upheld in court

7. Legality of purpose

A contract can be terminated or ended in any one of four ways:1.Performance2.Agreement3.Frustration4.Breach

Terminating a Contract

Both parties carry out their side of the contract

Example: a builder builds a house and the owner pays the builder

1. Performance

Both parties agree to end the contract Example: the homeowner decides not to go

ahead with the construction of the new house and the builder agrees to cancel the contract

2. Agreement

Some unforeseen event makes it impossible to carry out the contract

Example: the death of one of the parties to the contract

3. Frustration

One party to the contract breaks an essential condition of the contract

Example: the builder stops construction before the house is completed

4. Breach

1. Rescind the contractAbandon the contract

2. DamagesThe injured party can sue for compensation

3. Specific PerformanceThe courts can order the original contract to be carried out, e.g. the builder may be ordered to complete the construction of the house

Remedies for Breach of Contract

In this topic you have learned about:

The elements in the law of contract

Four ways to terminate a contract

Remedies for breach of contract

Review of the Law of Contract